<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 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
- --------------------------------------------------------------------------------
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
American Real Estate Investment Corporation (the "Company"), through American
Real Estate Investment, L.P. (the "Operating Partnership"), a limited
partnership of which the Company is the sole general partner and in which the
Company will own an interest of approximately 48.98%, after the consummation of
the acquisitions of the following properties:
I. Szeles Portfolio:
On July 30, 1998, the Operating Partnership acquired a portfolio consisting
of five Class A office buildings (the "Szeles Portfolio") aggregating 385,457
square feet for a purchase price of approximately $40,528,000, including
closing costs, which was funded through the Company's $150 million revolving
credit facility (the "Credit Facility") and cash proceeds generated from the
sale of the Company's last remaining multi-family property (Quadrangles
Village Apartments) which was sold in June 1998. As of June 30, 1998, the
Szeles Portfolio was leased to 41 tenants. Aetna Life and Casualty occupies
more than 10% of the total leasable square feet of the Szeles Portfolio.
The properties in the Szeles Portfolio are located throughout Southern and
Eastern Pennsylvania as follows:
<TABLE>
<CAPTION>
Property Location Leaseable June 30, 1998 Year
Square Feet Occupancy Constructed
<S> <C> <C> <C> <C>
Winchester Plaza Corporate Center 3541 Winchester Road
Allentown, PA 146,000 98% 1988
Hillside Corporate Center 5001 Louise Drive
Mechanicsburg, PA 67,473 99% 1991
Corporate Center 15 4900 Ritter Road
Mechanicsburg, PA 55,074 99% 1988
Treeview Corporate Center 2 Meridian Boulevard
Wyomissing, PA 64,069 96% 1991
Executive Park 2001 State Hill Road
Wyomissing, PA 52,841 88% 1979
-------
385,457
-------
-------
</TABLE>
The sellers of the Szeles Portfolio, the Szeles Real Estate Development Company
and the Szeles Investment Company, are parties unaffiliated with the Company and
the Operating Partnership. The Company based its determination of the purchase
price of these properties on the expected cash flow, physical condition,
location, competitive advantages, existing tenancies, and opportunities to
retain and attract additional tenants. The purchase price was determined through
an arm's length negotiation between the Company and the sellers.
2
<PAGE>
The following table set forth below shows certain information regarding rental
rates and lease expirations for the Szeles Portfolio (assuming that no tenants
exercise renewal or cancellation options and that there are no tenant
bankruptcies or other tenant defaults):
<TABLE>
<CAPTION>
Percentage of Annualized Rent Annualized Rent
Year of Lease Number of Expiring Square Footage of Total Leased of Expiring Per Leased Square
Expiration Leases Expiring Leases Square Feet Leases (1) Foot of Expiring
------------- ------------------ ---------------- ----------- ---------- Leases
------
<S> <C> <C> <C> <C> <C>
1998 6 17,882 4.9% $ 276,974 $ 15.49
1999 6 44,866 12.2% 688,111 15.34
2000 9 202,444 55.2% 3,520,574 17.39
2001 8 41,450 11.3% 667,649 16.11
2002 4 27,433 7.5% 432,291 15.76
2003 2 6,306 1.7% 102,756 16.29
2004 0 --- 0.0% --- ---
2005 3 21,431 5.8% 373,548 17.43
2006 1 1,925 0.5% 32,032 16.64
2007 1 2,030 0.6% 38,256 18.85
Thereafter 1 1,078 0.3% 18,177 16.86
- ----- --- ------ -----
Total/Average 41 366,845 100.0% $ 6,150,368 $ 16.77
-- ------- ----- -------------- ---------
-- ------- ----- -------------- ---------
</TABLE>
(1) Annualized Rent of Expiring Leases, as used above, represents the monthly
contractual rental rate as of June 30, 1998 multiplied by twelve.
II. ASW Property:
On August 7, 1998, the Operating Partnership acquired an industrial building
totaling 255,000 square feet located at 5555 Massillon Road in Green, Ohio,
which was 100% leased as of June 30, 1998. The purchase price of $7,858,000,
including closing costs, was funded by the Company's Credit Facility. As of
June 30, 1998 the property was leased to two tenants, ASW Logistics, Inc. and
GE Lighting. The property was purchased from ASW Properties, Ltd., a party
unaffiliated with the Company and the Operating Partnership. The Company
based its determination of the purchase price of these properties on the
expected cash flow, physical condition, location, competitive advantages,
existing tenancies, and opportunities to retain and attract additional
tenants. The purchase price was determined through an arm's length
negotiation between the Company and the seller.
3
<PAGE>
The following table set forth below shows certain information regarding rental
rates and lease expirations for the ASW Property (assuming that no tenants
exercise renewal or cancellation options and that there are no tenant
bankruptcies or other tenant defaults):
<TABLE>
<CAPTION>
Year of Lease Number of Expiring Square Footage of Percentage of Annualized Rent Annualized Rent
Expiration Leases Expiring Leases Total Leased of Expiring Per Leased Square
Square Feet Leases (1) Foot of Expiring
----------- ---------- Leases
------
<S> <C> <C> <C> <C> <C>
1998 0 --- 0.0% $ --- $ ---
1999 0 --- 0.0% --- ---
2000 0 --- 0.0% --- ---
2001 1 105,000 41.2% 367,500 3.50
2002 1 150,000 58.8% 540,000 3.60
--------------- -------------- ----------- ---------------- ------------
Total/Average 2 255,000 100.0% $ 907,500 $ 3.56
- ------- ----- -------------- ---------
- ------- ----- -------------- ---------
</TABLE>
(1) Annualized Rent of Expiring Leases, as used here, represents the monthly
contractual rental rate as of June 30, 1998 multiplied by twelve.
III. Pioneer Portfolio:
As of the date of this filing, the Company has determined that it is probable
that the Operating Partnership will acquire a portfolio of 11 office
properties and one industrial property (the "Pioneer Portfolio") located in
Northern New York state containing 804,344 leasable square feet. The Company
anticipates closing on the Pioneer Portfolio in August 1998. As part of this
transaction, the Company and the Operating Partnership have also agreed to
acquire three additional office properties (One Park Place, Waterfront I and
Waterfront II) which aggregate an additional 530,636 square feet. The closing
of the acquisitions of One Park Place and Waterfront I are expected to occur
in September 1998. Waterfront II is to be acquired upon the completion of its
construction, which is expected in December 1998. The Company and its
Operating Partnership also have the option to acquire two additional
properties located in Rochester, New York. As of June 30, 1998, the Pioneer
Portfolio was leased to 67 tenants. Niagara Mohawk, Inc. occupies more than
10% of the total leasable area of the Pioneer Portfolio. No assurance can be
given that this transaction will be consummated as it is subject to various
closing conditions. This transaction is subject to customary closing
conditions and therefore can be no assurances the transaction will close or
that if the transaction closes the Pioneer Portfolio will perform as expected.
The purchase price of the Pioneer Portfolio, including closing costs and the
purchase price of One Park Place, and Waterfront I and II totals approximately
$131,401,000, including closing costs, and will be funded through from
the Company's Credit Facility, $16,325,000 of assumed indebtedness and the
issuance of 1,626,794 units of limited partnership interest in the Operating
Partnership. In addition, the Company may issue up to approximately 720,000
shares of its Common Stock to a lender as partial repayment of certain of the
indebtedness encumbering certain of the properties. The price at which the
shares will be issued has not yet been determined.
4
<PAGE>
The sellers of the Pioneer Portfolio consist of various entities affiliated
with Pioneer Development Company, LLC, and Michael J. Falcone, both parties
unaffiliated with the Company and the Operating Partnership. The Company
based its determination of the purchase price of the Pioneer Portfolio on the
expected cash flow, physical condition, location, competitive advantage,
existing tenancies and opportunities to retain and attract additional
tenants. The purchase price was determined by arm's length negotiation
between the Company and the sellers. After the consummation of this
transaction, Michael J. Falcone will become a director of the Company.
The following table contains a brief description of the properties to be
acquired:
<TABLE>
<CAPTION>
Property Name Location Leaseable June 30, 1998 Year
Square Feet Occupancy Constructed
<S> <C> <C> <C> <C>
5000 Campuswood Drive East Syracuse, NY 32,636 94% 1988
5010 Campuswood Drive East Syracuse, NY 72,412 92% 1989
5009 Campuswood Drive East Syracuse, NY 6,584 100% 1989
5015 Campuswood Drive East Syracuse, NY 99,476 100% 1991
One Apollo Drive Glen Falls, NY 158,000 100% 1992
400 West Division Street Syracuse, NY 38,051 85% 1992
250 South Clinton Street Syracuse, NY 183,206 99% 1991
507 Plum Street Syracuse, NY 71,449 100% 1991
308 Maltbie Street Syracuse, NY 26,221 44% 1992
1045 James Street Syracuse, NY 50,000 100% 1992
One Clinton Square Syracuse, NY 39,609 100% 1991
One Park Place (1) Syracuse, NY 290,278 79% 1981
125 Indigo Creek Drive Greece, NY 26,700 100% 1992
Waterfront I (1) 50-60 Lakefront Boulevard
Buffalo, NY 140,358 99% 1982
Waterfront II (2) 40 LaRiviere Drive
Buffalo, NY 100,000 100% N/A
===============
1,334,980
===============
</TABLE>
(1) The acquisition of the properties is not anticipated to be
consummated until September 1998.
(2) As part of the transaction to acquire the Pioneer Portfolio,
the Operating Partnership will purchase this property which
is under construction and is expected to contain 100,000
leasable square feet upon completion. This property
acquisition is anticipated to occur in December 1998.
5
<PAGE>
The following table set forth below shows certain information regarding rental
rates and lease expirations for the Pioneer Portfolio including One Park Place
and Waterfront I and II (assuming that no tenants exercise renewal or
cancellation options and that there are no tenant bankruptcies or other tenant
defaults):
<TABLE>
<CAPTION>
Year of Lease Number of Expiring Square Footage of Percentage of Annualized Rent of Annualized Rent
Expiration Leases Expiring Leases Total Leased Expiring Per Leased Square
Square Feet Leases (1) Foot of Expiring
Leases
<S> <C> <C> <C> <C> <C>
1998 6 33,311 2.6% $ 509,187 $ 15.29
1999 10 56,879 4.5% 898,084 15.79
2000 9 165,724 13.1% 2,649,491 15.99
2001 12 306,040 24.3% 5,413,380 17.69
2002 4 25,019 2.0% 377,196 15.08
2003 9 178,772 14.2% 2,809,078 15.71
2004 5 94,694 7.5% 1,552,394 16.39
2005 4 37,492 3.0% 608,579 16.23
2006 2 53,499 4.2% 832,000 15.55
2007 1 12,396 1.0% 210,856 17.01
Thereafter 5 297,721 23.6% 2,938,478 9.87
--------------- -------------- ---------------- ---------------- ------------
Total/Average 67 1,261,547 100.0% $ 18,798,723 $ 14.90
-- --------- ----- -------------- ---------
-- --------- ----- -------------- ---------
</TABLE>
(1) Annualized Rent of Expiring Leases, as used here, represents the
monthly contractual rental rate as of June 30, 1998 multiplied by
twelve.
ITEM 5. OTHER EVENTS
On August 10, 1998 the Company announced in a press release attached
hereto as Exhibit 99.1 and incorporated herein by reference its hiring of
Timothy A. Peterson as Senior Vice President and Chief Financial Officer. Mr.
Peterson was previously employed by Post Properties, Inc., where he has held
a variety of positions since 1989, including his current responsibility as
Executive Vice President of Finance.
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 Szeles Portfolio, the ASW Property, and the
Pioneer Portfolio for the year ended December 31, 1997 and the
three month period ended March 31, 1998 (unaudited) are
included beginning on pages F-18, F-22, and F-26,
respectively.
(b) PRO FORMA FINANCIAL INFORMATION.
Unaudited pro forma condensed financial information which
reflects the Company's acquisition of the Szeles Portfolio,
the ASW Property and the Pioneer Portfolio as of and for the
year ended December 31, 1997 and the three month period ended
March 31, 1998 are included on pages F-6 to F-17.
6
<PAGE>
(c) EXHIBITS
10.1 Agreement of Sale and Purchase between American Real
Estate Investment, L.P. and ASW Properties, Ltd.
along with First, Second and Third Amendments to
Agreement of Sale and Purchase
10.2 Purchase and Sale Agreement between American Real
Estate Investment, L.P. and Szeles Real Estate
Development Company and Szeles Investment Company
10.3 Contribution Agreement between American Real Estate
Investment, L.P., American Real Estate Investment
Corporation and Pioneer Properties Company of Clinton
Square, Waterfront Associates, Pioneer Indigo One
Company, Pioneer Franklin Square Company, 1045 James
Street Company, Pioneer Apollo Drive Company, Pioneer
Park One Company, Pioneer Clinton Street Company,
Pioneer Maltbie Company, 5010 Campuswood Company,
5015 Campuswood Company, 400 West Division Company,
Pioneer Day Care Company, and Pioneer Management
Services Company, LLC
10.4 Employment Agreement, dated as of August 15, 1998,
between American Real Estate Investment
Corporation and Timothy A. Peterson
99.1 Press release dated August 10, 1998
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: August 13, 1998 By /s/ Jeffrey E. Kelter
---------------------
Jeffrey E. Kelter
President
Date: August 13, 1998 By: /s/ Timothy E. McKenna
----------------------
Timothy E. McKenna
Treasurer
(Principal Financial and Accounting
Officer)
7
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
INDEX
<TABLE>
<S> <C> <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. SZELES PORTFOLIO
Report of Independent Public Accountants.....................................................F-18
Statement of Revenue and Certain Expenses for the three month period
ended March 31, 1998 (unaudited) and year ended
December 31, 1997............................................................................F-19
Notes to Statement of Revenue and Certain Expenses...........................................F-20
III. ASW PROPERTY
Report of Independent Public Accountants.....................................................F-22
Statement of Revenue and Certain Expenses for the three month period
ended March 31, 1998 (unaudited) and year ended
December 31, 1997............................................................................F-23
Notes to Statement of Revenue and Certain Expenses...........................................F-24
IV. PIONEER PORTFOLIO
Report of Independent Public Accountants.....................................................F-26
Statement of Revenue and Certain Expenses for the three month period
ended March 31, 1998 (unaudited) and year ended
December 31, 1997.............................................................................F-27
Notes to Statement of Revenue and Certain Expenses............................................F-28
</TABLE>
8
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
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
acquisitions 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, on
January 1, 1997 for purposes of the statement of operations:
- - The Company acquired the properties described in Note 1 to these pro forma
financial statements
- - The Quadrangles Village Apartments, Americana Lakewood Apartments and Other
Property Dispositions. On June 24, 1998, the Company sold Quadrangles
Village Apartments, a 510-unit apartment building located in Tempe, Arizona
for approximately $26,500,000. 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. During 1997, the Company also sold three other
directly owned and one indirectly owned multi-family residential properties
(Timberleaf, Sedona, International and Emerald Point).
- - The Szeles Portfolio. On July 30, 1998, the Operating Partnership acquired
a portfolio consisting of five Class A office buildings located in
Pennsylvania totaling approximately 385,000 square feet for a purchase
price of $40,528,000, including closing costs.
- - The ASW Property. On August 7, 1998, the Operating Partnership acquired an
industrial building which totals 255,000 square feet, located in Green,
Ohio for a purchase price of $7,858,000, including closing costs.
- - The Pioneer Portfolio. In August 1998, the Operating Partnership will
acquire 11 office buildings and one industrial facility located in Northern
New York. The portfolio has aggregate rental space of approximately
1,334,980 square feet including three office buildings (One Park Place and
Waterfront I and II) which will be acquired by the Company in September
1998 (One Park Place and Waterfront I) and December 1998 (Waterfront II).
All of the above acquisition transactions were accounted for in the proforma
financial statements 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.
F-1
<PAGE>
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 1998 The
Company Property The Company, Property Private Pro Forma Company
Historical Disposition (A) As Adjusted Acquisitions (B) Placement (C) Adjustments Pro Forma
---------- --------------- ----------- ---------------- ------------- ----------- ---------
Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in $ 206,921 $ (21,207) $ 185,714 $ 250,560 $ $ $ 436,274
real estate, net
Investment in 1,867 1,867 1,867
direct financing
lease
Investment in 4,728 4,728 4,728
management company
Cash and cash 2,994 10,251 13,245 (12,886) 359
equivalents
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 $ 237,674 $ $ $447,461
---------- ---------- ---------- ----------- -------- -------- --------
---------- ---------- ---------- ----------- -------- -------- --------
Liabilities and Shareholders' Equity Liabilities:
Mortgage notes $ 118,343 $ (16,199) $ 102,144 $ 188,344 $(17,440) $ $273,048
payable and
revolving
credit facility
Accrued 3,776 3,776 3,776
expenses and other
liabilities
Minority interest 41,225 2,203 43,428 49,330 (5,699) (D) 87,059
Shareholders'
equity:
Common stock 5 5 2 7
Warrants 685 685 685
Additional 53,506 53,506 17,438 5,699 (D) 76,643
paid-in capital
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 83,578
---------- ----------- ---------- ----------- --------- -------- ---------
Total liabilities
and shareholders'
equity $ 220,743 $ (10,956) $ 209,787 $ 237,674 $ $ $447,461
---------- ----------- ---------- ------------ --------- -------- --------
---------- ----------- ---------- ------------ --------- -------- --------
</TABLE>
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,
Historical Dispositions (a) As Adjusted
---------- ------ --------- - ----------
<S> <C> <C> <C>
REVENUE:
Minimum rent $ 5,263 $ (965) $ 4,298
Tenant reimbursements and other 444
income 478 (34)
--------- --------- ----------
Total revenue 5,741 (999) 4,742
OPERATING EXPENSES:
Property operating expenses 942 (282) 660
General and administrative 160 (16) 144
Interest 1,915 (298) 1,617
Depreciation 932 (5) 927
--------- ----------- ------------
Total operating expenses 3,949 (601) 3,348
EQUITY IN EARNINGS (LOSSES) FROM (162) (162)
INVESTMENT IN MANAGEMENT COMPANY
MINORITY INTEREST (3,617) (3,617)
GAINS ON SALE OF PROPERTY 6,880 (6,880)
--------- --------- ----------
NET INCOME (LOSS) $ 4,893 $ (7,278) $ (2,385)
========= ========= ===========
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
=========
</TABLE>
<TABLE>
<CAPTION>
1998 Private Pro Forma The Company
Acquisitions (b) Placement(c) Adjustments Pro Forma
---------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 8,901 $ $ $ 13,199
Tenant reimbursements and other 1,067 1,511
income ---------- --------- ---------- -----------
Total revenue 9,968 14,710
OPERATING EXPENSES:
Property operating expenses 2,676 3,336
General and administrative 200 (d) 344
Interest 3,930 (316) 5,231
Depreciation 1,601 2,528
----------- ---------- ---------- -----------
Total operating expenses 8,207 (316) 200 11,439
EQUITY IN EARNINGS (LOSSES) FROM (162)
INVESTMENT IN MANAGEMENT COMPANY
MINORITY INTEREST 2,031 (e) (1,586)
GAINS ON SALE OF PROPERTY
income ---------- --------- ---------- -----------
NET INCOME (LOSS) $ 1,761 $ 316 $ 1,831 $ 1,523
=========== ========== ========== ===========
BASIC EARNINGS PER SHARE $ .23
============
DILUTED EARNINGS PER SHARE $ .22
============
WEIGHTED AVERAGE SHARES OUTSTANDING
- BASIC 6,538,329
===========
WEIGHTED AVERAGE SHARES OUTSTANDING
- DILUTED 13,884,020
===========
</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 1997 1997 1998 1998
Company Dispositions Acquisitions Dispositions Acquisitions
Historical (a) (b) Subtotal (c) (d)
---------- ------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Minimum rent $ 7,732 $ (1,457) $ 12,499 $ 18,774 $ (5,738) $ 39,239
Tenant reimbursements and
other 465 1,498 1,963 (96) 4,541
--------- ----------- --------- --------- ---------- ---------
income
Total revenue 8,197 (1,457) 13,997 20,737 (5,834) 43,780
OPERATING EXPENSES:
Property operating expenses 3,112 (895) 2,380 4,597 (2,072) 10,526
General and administrative 732 732
Buyout of employment agreements,
Warrants and options 3,203 3,203
expense
Interest 3,134 (845) 4,582 6,871 (2,011) 17,324
Depreciation and amortization 909 (158) 2,619 3,370 (819) 7,209
--------- ---------- --------- --------- ---------- ---------
Total Operating expenses 11,090 (1,898) 9,581 18,773 (4,902) 35,059
EQUITY IN EARNINGS FROM
INVESTMENT
IN PARTNERSHIP AND MANAGEMENT 404 (436) (392) (424)
COMPANY
MINORITY INTEREST (876) (876)
GAINS ON SALES OF PROPERTY 4,608 (4,608)
--------- ---------- --------- --------- ---------- ---------
NET INCOME (LOSS) $ 1,243 $ (4,603) $ 4,024 $ 664 $ (932) $ 8,721
========= ========== ========= ========= ========== =========
BASIC EARNINGS (LOSS) PER SHARE $ 0.92
==========
DILUTED EARNINGS (LOSS) PER SHARE $ 0.88
==========
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 1,347,297
===========
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 2,404,004
===========
</TABLE>
<TABLE>
<CAPTION>
Other
Private Pro Forma The Company
Placement (e) Adjustments Pro Forma
------------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Minimum rent $ $ $ 52,275
Tenant reimbursements and
other 6,408
--------- --------- ----------
income
Total revenue 58,683
OPERATING EXPENSES:
Property operating expenses 13,051
General and administrative 850 (f) 1,582
Buyout of employment agreements,
Warrants and options (3,203)
expense
Interest (1,264) 20,920
Depreciation and amortization 9,760
--------- --------- ----------
Total Operating expenses (1,264) (2,353) 45,313
EQUITY IN EARNINGS FROM
INVESTMENT
IN PARTNERSHIP AND MANAGEMENT (424)
COMPANY
MINORITY INTEREST (5,729) (h) (6,605)
GAINS ON SALES OF PROPERTY
--------- --------- ----------
NET INCOME (LOSS) $ 1,264 $ (3,376) $ 6,341
========= ========== ==========
BASIC EARNINGS (LOSS) PER SHARE $ .98
==========
DILUTED EARNINGS (LOSS) PER SHARE $ .96
==========
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 6,455,332
============
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 13,503,336
============
</TABLE>
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 August 11, 1998,
the Company owned 55 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 August 11,
1998, owned approximately 58% and 55.68% 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, the Fed One
Industrial Portfolio, the ASW Property, the Szeles Portfolio, and the
Pioneer 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, the Double M Development Properties, the
Galesi Properties, the Fed One Industrial Portfolio, the ASW Property,
the Szeles Portfolio, the Pioneer 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
$5,100,000 and net proceeds to the Company of approximately
$10,251,000.
(B) Reflects the Company's recent property acquisitions as follows:
<TABLE>
<CAPTION>
Cost Consideration
---------------- --------------------------------------------
Acquisition Credit
Facility Operating
Total Purchase Borrowings and Partnership
Price Mortgage Debt Units Cash
-------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
The Galesi Portfolio $ 59,035 $ 36,547 $ 22,488
The Fed One Industrial Portfolio 11,738 11,738
Szeles Portfolio 40,528 31,000 9,528
ASW Property 7,858 7,500 358
Pioneer Portfolio 131,401 101,559 26,842 3,000
------------- -------------- ------------ -----------
TOTAL $ 250,560 $ 188,344 $ 49,330 $ 12,886
============= ============== ============ ===========
</TABLE>
F-6
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
(C) 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 price of 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 Subscription
Agreements.
(D) Adjustment to reflect the Company's 48.98% ownership of the Operating
Partnership after consummation of the Pioneer Portfolio acquisition.
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,
which resulted in a gain of $6,880,000.
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
------------ ------------- ------------
REVENUE:
<S> <C> <C> <C>
Minimum rent $ 48 $ 917 $ 965
Tenant reimbursements and other income 34 34
------------ ----------- -----------
Total revenue 48 951 999
OPERATING EXPENSES:
Property operating expenses 19 263 282
General and administrative 16 16
Interest 20 278 298
Depreciation and amortization 5 5
------------ ----------- -----------
Total operating expenses 44 557 601
------------ ----------- -----------
NET INCOME $ 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>
REVENUE
-----------------------------------------------
Acquisition Tenant
- ----------- Reimbursements
and
Minimum Rent Other Income Total
------------ ------------- -----
<S> <C> <C> <C>
101 Commerce Drive $ 61 $ $ 61
One Phillips Drive 26 3 29
GATX Properties 423 423
Double M Development Properties 350 78 428
The Galesi Properties 1,410 424 1,834
Fed One Properties 426 4 430
Szeles Portfolio 1,608 19 1,627
ASW Facility 198 2 200
Pioneer Properties 4,399 537 4,936
Proforma adjustments
----------- ----------- -----------
TOTAL $ 8,901 $ 1,067 $ 9,968
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES
-----------------------------------------------------------------------------------------
Property General Depreciation Total
Operating And and Interest and Operating
Acquisition Other Expenses Administrative Expense (1) Amortization (2) Expenses Subtotal
- ----------- -------------- -------------- ----------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
101 Commerce Drive $ $ $ $ $ $ 61
One Phillips Drive 3 3 26
GATX Properties 423
Double M Development Properties 109 109 319
The Galesi Properties 488 488 1,346
Fed One Properties 21 21 409
Szeles Portfolio 453 453 1,174
ASW Facility 18 18 182
Pioneer Properties 1,584 1,584 3,352
Proforma adjustments 3,930 1,601 5,531 (5,531)
---------- ----------- ----------- ---------- ---------- -----------
TOTAL $ 2,676 $ $ 3,930 $ 1,601 $ 8,207 $ 1,761
========== =========== =========== ========== ========== ==========
</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 interest expense on mortgage indebtedness as follows:
<TABLE>
<CAPTION>
Mortgage Amount Interest Rate (%)
--------------- -----------------
<S> <C> <C>
101 Commerce Drive $ 17,000 7.03%
One Philips Drive 7,500 7.03%
GATX Properties 8,433 7.71%
Double M Development Properties 9,357 7.71%
Galesi Portfolio 18,036 8.33% to 8.68%
Galesi Portfolio 18,511 7.25%
Fed One Industrial Properties 11,738 7.25%
Szeles Portfolio 31,000 7.25%
ASW Property 7,500 7.25%
Pioneer Portfolio 81,251 7.25%
Pioneer Portfolio 3,405 9.68%
Pioneer Portfolio 2,120 10.125%
Pioneer Portfolio 10,800 8.75%
Pioneer Portfolio 3,983 7.50%
</TABLE>
(2) To record depreciation on assets acquired and transaction
costs capitalized over a useful life of 35 years.
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 reflect additional general and administrative expense associated
with the Company's on-going management of the acquired properties.
(e) To adjust the minority interest's share of income in the Operating
Partnership. The Company owns approximately 48.98% of the Operating
Partnership after the consummation of the Pioneer Portfolio
transaction. 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 $ 14,710
Pro forma Operating Expenses 11,439
Pro forma Equity in Loss from equity investment (162)
----------------
Pro forma Income before Minority Interest $ 3,109
===============
Minority Interest (51.02%) 1,586
Minority Interest at March 31, 1998 3,617
---------------
Adjustment Required $ 2,031
===============
</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
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 below 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:
Property operating expenses 274 621 895
General and administrative
Interest 91 307 447 845
Depreciation 45 162 (49) 158
----------- ---------- ---------- ---------
Total operating expenses 410 1,090 398 1,898
Equity in earnings from 436 436
investment in partnership
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
(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>
Revenue
Minimum rents $ 9,310 $ $ 365 $ 1,704
Tenant reimbursements and other
Income 1,098 7 245
----------- ----------- --------- ----------
Total Revenue 10,408 372 1,949
Operating Expenses:
Property operating and administrative 2,935 7 278
expenses
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
=========== ============ ========= ==========
</TABLE>
<TABLE>
<CAPTION>
1997
Pro Forma Acquisitions
Northfield Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Revenue
Minimum rents $ 1,120 $ --- $ 12,499
Tenant reimbursements and other
Income 148 1,498
----------- ---------- ----------
Total Revenue 1,268 13,997
Operating Expenses:
Property operating and administrative 359 (1,199) (1) 2,380
expenses
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-12
<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>
<CAPTION>
<S> <C>
- Property management fees $ 136
- General and administrative expenses 1,063
--------------
$ 1,199
--------------
--------------
</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 $ 3,300
McBride Portfolio debt at 7.71%
- To record amortization of $500,000 of deferred financing $ 48
costs
</TABLE>
- To record interest expense on other indebtedness:
<TABLE>
<CAPTION>
Principal Interest Rate
------------- -------------
<S> <C> <C>
Dana Building $ 1,155 7.38%
Loew Properties 2,875 8.25%
Loew Properties 4,385 8.50%
Loew Properties 3,358 8.50%
Northfield Properties 3,500 7.25%
</TABLE>
F-13
<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 Lakewood Quadrangles 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:
Property operating expenses 889 1,183 2,072
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-14
<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>
REVENUE
-----------------------------------------------
Acquisition/Offering Tenant
- -------------------- Reimbursements
and
Minimum Rent Other Income Total
------------ -------------- -----
<S> <C> <C> <C>
101 Commerce Drive $ 2,788 $ 4 $ 2,792
One Phillips Drive 1,188 145 1,333
GATX Properties 1,770 1,770
Double M Development Properties 1,605 330 1,935
The Galesi Properties 5,193 1,558 6,751
Fed One Properties 1,633 22 1,655
Szeles Portfolio 6,298 76 6,374
ASW Facility 698 13 711
Pioneer Properties 18,066 2,393 20,459
Proforma Adjustments
---------- ----------- ----------
$ 39,239 $ 4,541 $ 43,780
========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES
Acquisition/Offering -----------------------------------------------------------------------------
- -------------------- Property General Depreciation
Operating And and Interest and
Other Expenses Administrative Expense (1) Amortization Total Subtotal
-------------- -------------- ---------- ----------- ---- -------
(2)
<S>
101 Commerce Drive <C> <C> <C> <C> <C> <C>
One Phillips Drive $ $ $ $ $ $ 2,792
GATX Properties 145 145 1,188
Double M Development Properties 1,770
The Galesi Properties 359 359 1,576
Fed One Properties 1,707 1,707 5,044
Szeles Portfolio 82 82 1,573
ASW Facility 1,983 1,983 4,391
Pioneer Properties 76 76 635
Proforma Adjustments 6,174 6,174 14,285
17,324 7,209 24,533 (24,533)
--------- ----------- ---------- ---------- ---------- -----------
$ 10,526 $ $ 17,324 $ 7,209 $ 35,059 $ 8,721
========= =========== ========== ========== ========== ==========
</TABLE>
Footnote explanations appear on the following page.
F-15
<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>
101 Commerce Drive $ 17,000 7.03%
One Philips Drive 7,500 7.03%
GATX Properties 8,433 7.71%
Double M Development Properties 9,357 7.71%
Galesi Portfolio 18,036 8.33 % to 8.68%
Galesi Portfolio 18,511 7.25%
Fed One Industrial Portfolio 11,738 7.25%
Szeles Portfolio 31,000 7.25%
ASW Facility 7,500 7.25%
Pioneer Portfolio 81,251 7.25%
Pioneer Portfolio 3,405 9.68%
Pioneer Portfolio 2,120 10.125%
Pioneer Portfolio 10,800 8.75%
Pioneer Portfolio 3,983 7.50%
</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 reflect additional general and administrative expenses associated
with the Company's on-going management of the acquired properties.
(g) 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-16
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATING INCOME STATEMENT
(h) To adjust the minority interest's share of income in the Operating
Partnership. The Company owns approximately 48.98% of the Operating
Partnership after the consummation of the Pioneer Portfolio
transaction. 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 $ 58,683
Proforma Operating Expenses 45,313
Proforma Equity in Loss from Equity Investment (424)
-------------------
Proforma Income before Minority Interest $ 12,946
==================
Minority Interest (51.02%) $ 6,605
Minority Interest at March 31, 1998 876
------------------
Adjustment Required $ 5,729
==================
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Real Estate Investment Corporation:
We have audited the accompanying combined statement of revenue and certain
expenses of the Szeles Portfolio for the year ended December 31, 1997. This
financial statement is the responsibility of the Portfolios' 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 of American
Real Estate Investment Corporation as described in Note 1, and is not intended
to be a complete presentation of the Portfolios' 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 Szeles Portfolio
for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
July 31, 1998
F-18
<PAGE>
SZELES PORTFOLIO
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended
1998 December 31, 1997
---------------------- ----------------------
(unaudited)
<S> <C> <C>
REVENUE:
Minimum rent (Note 2) $ 1,608,000 $ 6,298,000
Tenant reimbursements 18,000 72,000
Other income 1,000 4,000
---------------- ---------------
Total revenue 1,627,000 6,374,000
---------------- ---------------
CERTAIN EXPENSES:
Maintenance and other operating expenses 143,000 754,000
Utilities 185,000 741,000
Real estate taxes 125,000 488,000
---------------- ---------------
Total certain expenses 453,000 1,983,000
---------------- ---------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 1,174,000 $ 4,391,000
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
SZELES PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
The combined statement of revenue and certain expenses reflects the operations
of the Szeles Portfolio (the "Portfolio"), which includes five office buildings:
two located in Wyomissing, Pennsylvania, two located in Mechanicsburg,
Pennsylvania, and one located in Allentown, Pennsylvania. The Portfolio is
expected to be acquired by American Real Estate Investment Corporation (the
"Company") from Szeles Real Estate Development Co. (four buildings) and Szeles
Investment Company (one building) (the "Sellers") in August of 1998. The
Properties have an aggregate net rentable area of approximately 385,457 square
feet (94% leased as of December 31, 1997). This combined statement of revenue
and certain expenses is to be included in the Company's current report on Form
8-K, 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 a 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 of revenue and expenses during the reporting period.
The ultimate results could differ from those estimates.
The combined 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 period 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 recognition in accordance with
generally accepted accounting principles. The aggregate rental revenue decrease
resulting from the straight-line adjustments for the year ended December 31,
1997, was $24,000 and for the three months ended March 31, 1998 was $11,630.
F-20
<PAGE>
The following tenants account for greater than 10% of annual minimum rent for
the year ended December 31, 1997:
<TABLE>
<CAPTION>
Annual
Tenant Minimum Rent
------ ------------
<S> <C>
Aetna Casualty & Surety Co. $ 776,000
Aetna Life Insurance Co. $ 2,538,000
</TABLE>
The Portfolio is leased to tenants under operating leases with expiration dates
extending to the year 2007. 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 $ 6,183,000
1999 5,274,000
2000 3,213,000
2001 1,011,000
2002 216,000
Thereafter 474,000
</TABLE>
Certain leases also include provisions requiring tenants to reimburse the
Portfolio for operating expenses, taxes and utilities when the current year
expenses exceed either a base year or the previous year's expense.
3. RELATED PARTY TRANSACTIONS:
The Portfolio paid $29,000 for the year ended December 31, 1997 in lawn care
services to an affiliate of the Sellers. No amounts were paid in the three
month period ended March 31, 1998. These lawn care services are included in
maintenance and other operating expenses in the accompanying statements.
The Portfolio paid $45,000 for the year ended December 31, 1997 in repairs
and maintenance expenses to an affiliate of the Sellers. No amounts were paid
in the three month period ended March 31, 1998. These repairs and maintenance
expenses are included in maintenance and other operating expenses in the
accompanying statements.
The Portfolio paid $32,000 in rent in 1997 to a related party as
reimbursements for its costs to lease space in a building the affiliate
owned. This rent expense in included in maintenance and other operating
expenses in the accompanying statements.
4. SUBSEQUENT EVENTS:
American Real Estate Investment Corporation entered into a letter of intent
on May 21, 1998 to purchase the Properties for a purchase price of
approximately $40,528,000, including closing costs. This purchase price will
be funded by the Company's revolving credit facility and cash proceeds
received by the Company from the sale of Quadrangles Village Apartments, in
June 1998.
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Real Estate Investment Corporation:
We have audited the accompanying statement of revenue and certain expenses of
the ASW Property for the year ended December 31, 1997. This financial statement
is the responsibility of the Property'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 of American Real Estate
Investment Corporation, as described in Note 1, and is not intended to be a
complete presentation of the Property'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 ASW Property for
the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
July 7, 1998
F-22
<PAGE>
ASW PROPERTY
STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
For the Three For the Year
Months Ended Ended
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
<S> <C> <C>
REVENUE:
Minimum rent (Note 2) $ 198,000 $ 698,000
Tenant reimbursements 2,000 13,000
---------------- ----------------
Total revenue $ 200,000 $ 711,000
---------------- ----------------
CERTAIN EXPENSES:
Maintenance and other operating expenses 6,000 18,000
Land lease expense 3,000 11,000
Utilities 1,000 15,000
Real estate taxes 8,000 32,000
---------------- ----------------
Total certain expenses 18,000 76,000
---------------- ----------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 182,000 $ 635,000
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
ASW PROPERTY
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
The statements of revenue and certain expenses reflect the operations of the ASW
Property (the "Property") located in Green, Ohio. The Property is expected to be
acquired by American Real Estate Investment Corporation (the "Company") from ASW
Properties, Ltd. ("ASW") in August 1998. The Property has an aggregate net
rentable area of approximately 255,000 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, 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 Property 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 Property.
The preparation of financial statements 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 is recorded in
accordance with generally accepted accounting principles.
F-24
<PAGE>
The following tenants account for greater than 10% of annual minimum rent for
the year ended December 31, 1997:
<TABLE>
<CAPTION>
Tenant Minimum Rent
------ ------------
<S> <C>
ASW Logistics Inc. 252,000
GE Lighting 540,000
</TABLE>
The Property is leased to tenants under operating leases with expiration
dates extending to the year 2002. ASW Logistics, Inc. lease is month-to-month
and requires $21,000 in minimum rent on a monthly basis. Future minimum
rentals under noncancelable operating leases, excluding ASW Logistics, Inc.
monthly rent and tenant reimbursements of operating expenses as of December
31, 1997, are as follows:
<TABLE>
<S> <C>
1998 $ 540,000
1999 540,000
2000 540,000
2001 540,000
2002 90,000
</TABLE>
Certain leases also include provisions requiring tenants to reimburse the
Property for management costs and other operating expenses up to stipulated
amounts.
3. RELATED PARTY TRANSACTIONS:
A portion of the Property is leased to ASW Logistics Inc., an affiliate of ASW,
for a monthly minimum rent of $21,000.
4. COMMITMENTS:
The Property is obligated under a land lease agreement on the Property requiring
minimum annual payments as follows:
<TABLE>
<S> <C>
1998 $11,000
1999 11,000
2000 11,000
2001 13,000
2002 13,000
Thereafter 464,000
</TABLE>
4. SUBSEQUENT EVENT:
The Property is under a letter of intent to be purchased by the Company for
approximately $7,858,000, including closing costs. The purchase will be funded
by the Company's revolving credit facility.
F-25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Real Estate Investment Corporation:
We have audited the accompanying combined statement of revenue and certain
expenses of the Pioneer Portfolio for the year ended December 31, 1997. This
financial statement is the responsibility of the Portfolios' 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 of American
Real Estate Investment Corporation, as described in Note 1, and is not intended
to be a complete presentation of the Portfolios' 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 Pioneer
Portfolio for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
July 6, 1998
F-26
<PAGE>
PIONEER PORTFOLIO
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
For the Three For the
Months Ended Year Ended
March 31, December 31,
1998 1997
---------------- ----------------
(Unaudited)
<S> <C> <C>
REVENUE:
Minimum rent (Note 2) $ 4,399,000 $ 18,066,000
Tenant reimbursements 380,000 1,765,000
Parking income 150,000 588,000
Other income 7,000 40,000
---------------- ----------------
Total revenue 4,936,000 20,459,000
---------------- ----------------
CERTAIN EXPENSES:
Maintenance and other operating expenses 606,000 2,369,000
Parking expense 121,000 410,000
Ground lease expense 26,000 89,000
Utilities 427,000 1,756,000
Real estate taxes 404,000 1,550,000
---------------- ----------------
Total certain expenses 1,584,000 6,174,000
---------------- ----------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 3,352,000 $ 14,285,000
============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
PIONEER PORTFOLIO
NOTES TO THE COMBINED STATEMENTS 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 Pioneer Portfolio (collectively the "Portfolio"). The
Portfolio is expected to be acquired in August and September 1998 by American
Real Estate Investment Corporation (the "Company") from various partnerships
affiliated with the Pioneer Development Company LLC ("PDC"). The Portfolio
consists of 11 properties in Syracuse, NY, one property in Buffalo, NY, one
property in Greece, NY and one industrial property in Glenn Falls, NY. The
Portfolio has an aggregate net rentable area of approximately 1,335,000
square feet (93% leased as of December 31, 1997). The expected purchase price
is approximately $132 million, including closing costs. This combined
statement of revenue and certain expenses is to be included in the Company's
Current Report on Form 8-K, 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 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, 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 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 includes straight-line adjustments for rental revenue increases in
accordance with generally accepted accounting principles. The aggregate rental
revenue decreases resulting from the straight-line adjustment for the year ended
December 31, 1997 and the three months ended March 31, 1998 were $223,000 and
$95,000 (unaudited), respectively.
One tenant, (Niagara Mohawk, Inc.) had rent payments in 1997, which exceeded 10%
of the total minimum rent for 1997. This tenant's aggregate monthly rent
payments were approximately $2,062,000.
F-28
<PAGE>
At December 31, 1998, the Portfolio is leased to approximately 72 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 $ 16,840,000
1999 16,044,000
2000 14,944,000
2001 10,681,000
2002 6,620,000
Thereafter 27,435,000
</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:
PDC leases 20,126 square feet at 250 South Clinton Street as of December 31,
1997 for a minimum base rent of $418,000.
4. COMMITMENTS:
The Portfolio is obligated under ground lease agreements for 1045 James Street
and One Park Place requiring minimum annual payments through 2014 as follows:
<TABLE>
<S> <C>
1998 $ 105,000
1999 105,000
2000 105,000
2001 105,000
2002 109,000
Thereafter 1,001,000
</TABLE>
5. SUBSEQUENT EVENT:
On April 30, 1998 the Company entered an agreement to acquire the Portfolio for
a purchase price of approximately $132,000,000, including closing costs.
Pursuant to the agreement, the Operating Partnership, will acquire __ office
properties and one industrial property in August 1998 and two office properties
in September of 1998, and one office property which is under construction which
will not be completed until December 1998.
Under the terms of the agreement, the Portfolio will be contributed to American
Real Estate Investment, L.P. (the `Operating Partnership") by partnerships
affiliated with PDC in exchange for the issuance of 1,626,794 units of interest
in the Operating Partnership, the assumption of approximately $16,000,000 of
debt and cash payments of approximately $90,000,000 which will be funded
primarily by the Company's revolving credit facility.
Pursuant to the agreement, the Company has an option to acquire two additional
office properties located in Rochester, New York at a later date for
approximately $30,000,000.
F-29
<PAGE>
Exhibit 10.1
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT is made as of the 5th day of May, 1998 by and
between ASW PROPERTIES, LTD., an Ohio limited liability company, having an
address at 3200 Gilchrist Road, Mogadore, Ohio 44260 ("Seller") and AMERICAN
REAL ESTATE INVESTMENT, L.P., a Delaware limited partnership, having an address
at Plymouth Meeting Executive Campus, 620 West Germantown Pike, Suite 200,
Plymouth Meeting, Pennsylvania 19462 ("Buyer").
RECITALS
A. Seller is the tenant and Akron-Canton Regional Airport
Authority is the landlord (the "Ground Lessor") under a certain Ground Lease
dated June 15, 1995, as amended by First Amendment to Ground Lease dated October
17, 1996 and by Second Amendment to Ground Lease dated October 17, 1996 (as
amended, the "Ground Lease") with respect to land located in the City of Green,
Summit County, Ohio and Jackson Township, Stark County, Ohio. A Memorandum of
the Ground Lease has been recorded in O.R. Volume 2031 Page 1049 of the Summit
County Real Estate Records and as Official Records Imaging Number 95048698 of
the Stark County Real Estate Records, and was amended by an Amended Memorandum
of Ground Lease dated October 17, 1996 (as amended, the "Memorandum of Ground
Lease").
B. Seller has caused to be constructed on that portion of the
land leased under the Ground Lease and described on Exhibit A-1 to this
Agreement (the "Land") certain improvements, including a warehouse/distribution
facility containing approximately 255,000 square feet.
C. Buyer desires to acquire from Seller and Seller desires to
sell to Buyer the improvements on the Land and to sublease the Land, all on the
terms set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
parties agree as follows:
<PAGE>
1. Agreement to Sell and Purchase.
(a) 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:
(i) Improvements. All improvements
on the Land including, without limitation, a warehouse/distribution facility
containing 255,000 square feet, parking areas and access ways, (collectively the
"Improvements") together with all appurtenances thereto including, without
limitation, all easements, rights-of-way, and other rights and benefits
belonging to, running with the owner of, or relating to the Improvements.
(ii) Personal Property. All fixtures,
equipment, all furniture, supplies, and other unattached items of personal
property located in or on, or used in connection with, the Improvements which
are listed on Exhibit A-2 to this Agreement; and all intangible personal
property listed in items 1, 2 and 3 to Exhibit B to the form of Bill of Sale
attached to this Agreement as Exhibit B-2 and used in the ownership, operation
or maintenance of the Improvements and the Land which is owned by Seller (all of
the foregoing items of property being collectively called "Personal Property").
(b) Leasehold Estate. Seller agrees to sublease
to Buyer the Land in accordance with the terms and upon the conditions of a
Sublease Agreement to be negotiated by Seller and Buyer during the Inspection
Period (the "Sublease") or, at Buyer's option, by entry of a new ground lease
for the Land with the Ground Lessor. The estate to be created by the Sublease is
referred to in this Agreement as the "Leasehold Estate". Buyer shall advise
Seller whether Buyer shall elect to enter a new ground lease for the Land within
fifteen (15) days after the date of this Agreement.
(c) Property. The Leasehold Estate and
Improvements are sometimes collectively called the "Real Property". The
Leasehold Estate, the Improvements and the Personal Property are sometimes
collectively called the "Property".
2. Purchase Price. The purchase price (the "Purchase Price")
for the Property, subject to adjustments as provided in this Agreement, shall be
Seven Million Six Hundred Thirty Thousand Dollars ($7,630,000), and shall be
paid as follows:
(a) Upon expiration of the Inspection Period (as
defined below), One Hundred Thousand Dollars ($100,000) (such sum, plus all
interest which accrues thereon, is referred to in this Agreement as the
"Deposit") shall be paid by Buyer to First American Title Insurance Company
("Title Company"). 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
2
<PAGE>
short-term United States Government obligations having a maturity date which
is not later than the Closing Date (as defined below).
(b) The balance of the Purchase Price shall be
paid at Closing by wire transfer of immediately available funds through the
Title Company.
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 Closing is completed hereunder, the Title
Company shall pay the Deposit to Seller on account of the Purchase Price.
4. Closing. The closing of this transaction ("Closing") shall
take place at the offices of Wolf, Block, Schorr and Solis-Cohen LLP, Twelfth
Floor Packard Building, 111 South Chestnut Street, Philadelphia, Pennsylvania
19102. Closing shall commence at 10:00 a.m. on the date which is 15 days after
expiration of Inspection Period (as defined in Section 13) or as such earlier
date as Buyer may designate upon at least 5 days' notice to Seller ("Closing
Date").
5. Condition of Title.
(a) 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 the Tenant Leases (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"). The premium for the Owner's Policy of
Title Insurance will be paid by Buyer.
3
<PAGE>
(b) If Seller is unable to convey title to the
Property to Buyer at Closing in accordance with the requirements of Section
5(a), Buyer shall have the right (i) of taking such title as Seller is able to
convey with abatement of the Purchase Price in the amount (fixed or
ascertainable) of any Monetary Liens (as defined below) on the Property, or (ii)
of terminating this Agreement.
(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. Prior to the
expiration of the Inspection Period, 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 ten business (10) days after 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. 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 ten (10) business days after 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.
(d) If Seller, without the right to do so and in the
default of its obligations under this Agreement fails to complete Closing, or
otherwise defaults under or breaches this Agreement, Buyer shall have the right,
at Buyer's sole election, either (A) to be returned the Deposit plus Buyer's
reimbursable costs as hereinafter defined or (B) to specific performance and
injunctive relief without monetary damages against Seller. Reimbursable costs
are defined to include the cost of all charges incurred by Buyer for searching
title, the cost of any plans, surveys and environmental studies ordered by
Buyer, all loan commitment fees paid by Buyer and all the fees, costs and
expenses reasonably incurred by Buyer in connection with the property and
Buyer's intended acquisition thereof, which in no event may exceed $35,000 in
the aggregate.
6. Possession. Possession of the Property shall be given to
Buyer at Closing, subject only to the Permitted Encumbrances and rights of
occupancy of the Tenants (as defined below) under the Tenant Leases by delivery
of the Sublease, if applicable, and Seller's Bill of Sale in the form of Exhibit
B-2 to this Agreement (the "Bill of Sale"), and Seller's special warranty deed
as to the Improvements in the form of Exhibit B-3 to this Agreement (the
"Deed"), each duly executed and acknowledged by Seller and in proper form for
recording. If Buyer causes a survey of the Real Property to be made, then at
Buyer's option the description of the Land contained in the Deed shall be based
upon the survey.
7. Apportionments; Transfer Taxes; Security Deposits.
4
<PAGE>
(a) (i) Real estate taxes on the Real
Property; personal property taxes (if any) on the Personal Property; minimum
water and sewer rentals; base, minimum and/or fixed rental, additional rental
and other sums paid by the Tenants to the Seller prior to Closing under the
Tenant Leases; 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 utility charges paid by the Tenants directly to utility companies
pursuant to the Tenant Leases.
(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 base, minimum and/or fixed rental ("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 such Tenant, Buyer shall pay the full amount thereof to Seller.
(b) At Closing, Seller shall pay all realty
transfer taxes imposed by governmental authorities in connection with the
transactions contemplated by this Agreement.
(c) At Closing, Seller shall credit the amount
of all Security Deposits paid under the Tenant Leases, together with all
interest which has (or was required to) accrue thereon, against the Purchase
Price.
8. Representations and Warranties of Seller. Seller
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 subleases or other agreements
(collectively, the "Tenant Leases"; and each respective tenant under each of the
Tenant Leases is sometimes individually called "Tenant" and collectively
"Tenants") with respect to rights of use and occupancy of the Property in effect
are as set forth on the Schedule 1 to this Agreement.
(b) The Tenant Leases are valid and existing and
in full force and effect; the Tenants are in actual possession of the Property;
and neither the Tenants nor the Seller is in default of its respective
obligations under the Tenant Leases.
5
<PAGE>
(c) The copies of the Tenant Leases previously
delivered by Seller to Buyer 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 their respective
Tenant Leases except as expressly set forth in the Tenant Leases.
(d) None of the Tenants has asserted any claim
which could adversely affect the right of the landlord to collect base, minimum
or fixed rental or additional rental 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 any of the Tenants which has 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 completed fully performed and paid for in full by Seller.
(f) The terms of the Tenant Leases commenced and
will end on the dates specified on Schedule 1.
(g) The rents and other payments set forth 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.
(h) Except as set forth in the Tenant Leases,
none of the Tenants is entitled to any concession, allowance,
rebate or refund.
(i) None of the Tenants has prepaid any base
rental, minimum rental, fixed rental or additional rental or other charges for
more than the current month under its Tenant Lease.
(j) None of the Tenant Leases nor the rental or
other amounts payable under the Tenant Leases has 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.
(k) No security deposit has been paid by any of
the Tenants under the Tenant Leases, except as set forth on
Schedule 1.
(l) No brokerage or leasing commissions or other
compensation are or will be due and payable to any party ("Lease Broker") with
respect to or on account of the Tenant Leases or any extensions or renewals of
the Tenant Leases pursuant to any extension or renewal options contained in a
Tenant Lease.
(m) Except as expressly set forth in the Tenant
Leases, the Tenants do not have any right or option to acquire the Property or
any portion thereof.
6
<PAGE>
(n) Seller has not received any written notice
("Defect Notice") from the Ground Lessor or 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.
(o) 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
a Tenant is bound and except for the agreements listed on Exhibit C to this
Agreement (collectively, the "Service Agreements"); Seller is not in default
under the Service Agreements; the copies of the Service Agreements previously
delivered by Seller to Buyer are true and 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 C to be terminated shall be
terminated by Seller at or prior to Closing and all sums due thereunder paid in
full by Seller.
(p) 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.
(q) There are no outstanding uncured written
notices received by Seller of any violation ("Violation") of any applicable law,
ordinance, code, rule, order, regulation or requirement of any governmental
authority with respect to the Property.
(r) Exhibit D to this Agreement sets forth a
certificate evidencing the only fire and extended coverage insurance policies
("Policy") maintained by Seller with respect to the Property; the Policy is in
full force and effect and all premiums due thereunder has been paid; and neither
Seller nor (to Seller's knowledge) any of the Tenants have received any notice
from the insurance companies which issued the Policy, indicating that the Policy
will not be renewed or will be renewed at a higher premium than is presently
payable therefor.
(s) 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 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,
commission, board, bureau or agency or other governmental instrumentality.
(t) 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.
7
<PAGE>
(u) 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.
(v) There is no presently existing Violation at
the Property of any environmental law or regulation; to Seller's knowledge, no
contamination is present at the Property; and no underground storage tanks,
asbestos or PCBs are present at the Property.
(w) A true, correct and complete copy of the
Ground Lease is attached to this Agreement as Exhibit I. Except as shown on
Exhibit I, the Ground Lease has not otherwise been amended, modified or changed.
The Ground Lease is valid and existing and in full force and affect. Neither the
Ground Lessor nor Seller is in default of its respective obligations under the
Ground Lease.
(x) The Ground Lessor has not asserted any claim
that Seller is in default under the Ground Lease. No circumstance exists which,
with the giving of notice or passage of time, would constitute a default by
Seller under the Ground Lease.
(y) The rents and other payments set forth in the
Ground Lease are the actual rents and other payments presently being paid by
Seller to the Ground Lessor.
(z) No brokerage or leasing commission or other
compensation are or will be due and payable to any Lease Broker with respect to
or on account of the Ground Lease or any extension or renewal of the Ground
Lease pursuant to any extension or renewal options contained in the Ground
Lease.
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 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; Seller shall not enter into a new lease
("New Lease") or other agreement with respect to the use or occupancy of the
Real Property and/or the maintenance thereof, without prior written approval of
Buyer. Seller agrees to execute any New Lease designated by Buyer which is
approved by Seller. Each of Seller and Buyer agrees not unreasonably to untimely
withhold or delay its approval of a New Lease. If Seller shall enter into a New
Lease for a portion of the Real Property after the date of this Agreement and
prior to the Closing Date pursuant to the request or prior written approval of
Buyer, then Buyer shall, at Closing, reimburse to Seller all hard costs paid by
Seller pursuant to a written budget previously approved by Seller and Buyer for
capital improvements to the premises demised under the New Lease; and
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Buyer shall assume the obligations of the Seller, as landlord under the New
Lease, to perform capital improvements to the premises demised under the New
Lease required by the terms of the New Lease. Any New Lease entered into by
Seller after the date of this Agreement and prior to the Closing Date pursuant
to the request or prior written approval of Buyer shall be included within the
definition of "Tenant Leases".
(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 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) and Section 13.
(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 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
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(iv) a copy of any notice of Taking.
(f) Promptly after the execution of this
Agreement, Seller shall deliver for execution by each of the Tenants a written
certification which shall be prepared by Buyer (utilizing the form attached to
this Agreement as Exhibit E-1, but modified and supplemented by Buyer to reflect
the terms and provisions of each of the respective Tenant Leases) (each such
certification being herein called a "Tenant Estoppel Certificate"). Seller shall
obtain prior to the expiration of the Inspection Period an executed Tenant
Estoppel Certificate from each of the Tenants. Seller shall deliver to Buyer a
copy of each of the executed Tenant Estoppel Certificates promptly after
Seller's receipt thereof.
(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 use its best efforts
to obtain an executed SNDA from each of the Tenants. Seller shall deliver to
Buyer a copy of each of the executed SNDA as delivered to Seller promptly after
receiving such SNDA.
(h) Promptly after the execution of this
Agreement, Seller shall deliver for execution by the Ground Lessor a written
certification in the form attached to this Agreement as Exhibit E-2 (the "Ground
Lessor's Estoppel Certificate"). Seller shall obtain prior to the expiration of
the Inspection Period an executed Ground Lessor's Estoppel Certificate from the
Ground Lessor. Seller shall deliver to Buyer a copy of the executed Ground
Lessor's Estoppel Certificate promptly after Seller's receipt thereof.
10. Casualty.
(a) Seller shall maintain the Policy 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 the Policy issued by each
insurance company issuing the Policy evidencing that the Policy is in effect,
and that the Policy 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 shall deliver to Seller, upon request, a written
direction to each insurance company which has issued the Policy, directing that
Buyer's name as an additional insured party be deleted therefrom. If Closing is
completed under this Agreement, Seller shall be entitled to all rebates and
refunds of any prepaid premiums under the Policy.
(b) 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 Property is the subject of a Casualty, Buyer
shall have the right, at its sole option, of terminating this Agreement (by
notice given within thirty (30) days after receipt of the Casualty Notice from
Seller) unless, (i) the cost fully to repair or restore such damage is less than
One Hundred Thousand Dollars ($100,000) and sufficient insurance proceeds are
available fully to restore such damage, and (ii)
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the insurance company issuing the Policy has confirmed in writing prior to the
end of such thirty (30) day period that such Casualty is covered by the Policy
and that no defense to payment of the claim exists, and (iii) such Casualty may
not result in any of the Tenants terminating any of the Tenant Leases or
asserting a right to terminate any of the Tenant Leases, 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 and (v) such Casualty may not
result in the Ground Lessor terminating the Ground Lease or asserting a right to
terminate the Ground Lease. If a Casualty Notice is given to Buyer less than
thirty (30) days prior to Closing, at Buyer's option Closing shall be postponed
to a date not later than thirty (30) days after Buyer's receipt of the Casualty
Notice. If Buyer does not terminate this Agreement, the proceeds of any
insurance with respect to the Property paid between the date of this Agreement
and the Closing Date shall be paid to Buyer at the time of Closing and all
unpaid claims and rights in connection with losses to the Property shall be
assigned to Buyer at Closing without in any manner affecting the Purchase Price
and Seller shall pay to Buyer an amount equal to the deductible under the
Policy.
(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 10(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, which
approval shall not be unreasonably or untimely withheld. 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 10(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.
11. Eminent Domain. 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 promptly give written notice ("Taking Notice") thereof to
Buyer. Buyer shall have the right, at its sole option, of terminating this
Agreement by written notice to Seller within thirty (30) days after receipt by
Buyer of the Taking Notice. If a Taking Notice is given to Buyer less than
thirty (30) days prior to Closing, at Buyer's option Closing shall be postponed
to a date not later than thirty (30) days after Buyer's receipt of the Taking
Notice. If Buyer does not terminate this Agreement, the Purchase Price shall be
reduced by the total of any awards or damages received by Seller and Seller
shall, at Closing, assign to Buyer all of Seller's right, title and interest in
and to any awards or damages 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 the Property or any portion
thereof.
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12. 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 in all material respects;
(ii) no representation or warranty by
Seller contained in this Agreement shall contain any materially untrue statement
or shall omit a material fact necessary to make the statement of fact therein
recited not misleading;
(iii) Seller shall have performed all
covenants, agreements and conditions required by this Agreement (and by any
other Agreement between Seller and Buyer) to be performed by Seller prior to or
as of the Closing Date;
(iv) Buyer shall have received the
executed Tenant Estoppel Certificates and SNDA as from the
Tenants under the Tenant Leases;
(v) Buyer shall have received the
executed Ground Lessor's Estoppel Certificate from the Ground Lessor and, if
Buyer has so elected under Section 1(b), a new ground lease for the Land shall
have been executed and delivered by both Ground Lessor and Buyer;
(vi) the Ground Lease shall remain in
full force and effect; and
(vii) Buyer shall have entered a lease
with ASW Logistics, Inc. for not less than 105,000 square feet within the
Improvements in the form of Exhibit J to this Agreement (the "ASW Logistics
Lease") and Ground Lessor shall have unconditionally approved the ASW Logistics
Lease.
Seller shall use diligent efforts to cause ASW Logistics, Inc. to enter into the
ASW Logistics Lease and to obtain the Ground Lessor's written consent thereto.
(b) In the event any of the conditions set forth
in Section 12(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 to (i) terminate this
Agreement, or (ii) complete Closing notwithstanding the unsatisfied condition.
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13. Inspection Period.
(a) Buyer shall, during the period ("Inspection
Period") which shall commence as of the date of this Agreement and shall end at
5:00 p.m. on the date which is 45 days after the date of this Agreement, have
the opportunity to examine the Property, the Tenant Leases, the Service
Agreements, the Policy, the Permitted Encumbrances, the Ground Lease and any
items to be delivered by Seller to Buyer, and to conduct such other inspections
of the Property as Buyer, in its discretion, may elect. Seller shall make
available to Buyer for its review the Tenant Leases and Tenant Lease files,
construction plans and specifications, engineer reports, surveys, appraisals,
real estate tax receipts and annual operating statements.
(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.
(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) assisting Buyer in
obtaining governmental agency or other records and upon Buyer's request
communicating directly with any governmental agencies; (C) 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 (D) 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. 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 terminate this Agreement (for any reason whatsoever) on or prior to
the second business day to occur after the date on which the Inspection Period
ends.
14. Items to be Delivered at Closing.
(a) At Closing, Seller shall deliver to Buyer the
following:
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(i) The Sublease, and a memorandum
thereof duly executed and acknowledged by Seller and in proper form for
recording. (ii) The Deed and the Bill of Sale.
(iii) Assignments in the form of
Exhibits F and G, 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 and letters, 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 certificates of occupancy and all other licenses, permits, authorizations,
consents, certificates and approvals with respect to 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 in Seller's possession (together with original counterparts of such
instruments).
(v) An original counterpart of the
Tenant Estoppel Certificates and the SNDAs, an original counterpart of the
Ground Lessor's Estoppel Certificate and an original counterpart of the Ground
Lessor's consent to the ASW Logistics Lease.
(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 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) and 11.
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(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) An original executed and
acknowledged copy of the Right of First Refusal Agreement in recordable form as
provided in Paragraph 21, below.
(xi) 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 F and G respectively, of the Tenant Leases and of the Service
Agreements designated on Exhibit C to be assigned to Buyer, duly executed and
acknowledged by Buyer and in proper form for recording.
(iii) The Sublease, and a memorandum
thereof duly executed and acknowledged by Buyer and in proper
form for recording.
(iv) An original executed and acknowledged
copy of the Right of First Refusal Agreement in recordable form as provided in
Paragraph 21, below.
(v) Any other document required to be
delivered by Buyer pursuant to any other provisions of this
Agreement.
15. Time. Time is of the essence of this Agreement. In computing
the number of days for purposes of this Agreement, all days shall be counted,
including 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 the next full
business day. For the purposes of this Section 15, the term "holiday" shall mean
a day other than a Saturday or Sunday on which banks in the State in which the
Property is located are or may elect to be closed.
16. 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, except for Grubb & Ellis and Oxford Realty Services.
Seller agrees to pay all commissions and any other sums due to Grubb & Ellis by
reason of this transaction. Buyer agrees to pay all commissions and any other
sums due to Oxford Realty Services by reason of this transaction.
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17. Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
18. 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 U.S.employer identification
number is 34-1802882; and
(iii) Seller's office address is:
3200 Gilchrist Road
Mogadore, Ohio 44260
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 of Exhibit H to this Agreement.
19. 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:
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Plymouth Meeting Executive Campus
620 West Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Attention: Steven Butte
Fax: 610-834-9560
if intended for Seller:
3200 Gilchrist Road
Mogadore, Ohio 44260
Attention: Timothy P. Ziga
Fax: 330-733-5196
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.
20. 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 23, 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
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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 in which the Property is located.
(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 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 executed Deeds 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 Deeds and/or of the concurrent
obligation of Buyer to pay the Purchase Price 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 and Schedules
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.
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(j) Buyer's Exercise of Right to Terminate. If
Buyer desires to terminate this Agreement pursuant to any of the provisions of
this Agreement, Buyer shall do so by giving written notice of termination to
Seller. Upon any such termination, the Deposit shall be paid to Buyer (and each
of Seller and Buyer shall deliver written instructions to the Title Company to
pay the Deposit to Buyer); and except as otherwise expressly provided in this
Agreement, this Agreement shall be and become null and void and neither party
shall have any further rights or obligations under this Agreement.
(k) Survival. The representations, warranties
and agreements of Seller set forth in Sections 8 and 9 of this Agreement shall
survive Closing for a period of 12 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, 18, 19 and
20(j) this Agreement shall survive Closing. Except as otherwise provided in the
preceding two sentences of this Section 20(k), 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.
21. Right of First Offer.
(a) For the purpose of this Paragraph 21: the
term "Right of First Offer Parcel" shall mean all that certain tract of land
which is described by metes and bounds on Exhibit K hereto, situate in the City
of Green, Summit County, State of Ohio containing 23.557 acres; and the term
"Right of First Offer Term" shall mean the period of time commencing as of the
Closing Date, and terminating two (2) years after the Closing Date.
(b) At Closing, Seller shall execute, acknowledge
and deliver to Buyer for recording, a separate right of first offer agreement,
prepared by Buyer, acceptable to Seller (and Seller agrees that the right of
first offer agreement shall be acceptable to it to the extent that its
provisions are substantially the same as those set forth below; and Seller
further agrees to be reasonable in granting or withholding its acceptance to the
right of first offer agreement), setting forth the following terms and
provisions but subject in all events to the qualifications set forth in Section
21(c) of this Agreement (the "Right of First Offer Agreement"):
(i) Seller shall not at any time during
the Right of First Offer Term sell or convey or agree to sell or convey all or
any portion of the Right of First Offer Parcel without first having complied
with the requirements of the Right of First Offer Agreement.
(ii) If Seller shall during the Right of
First Offer Term desire to sell or convey all or part of the Right of First
Offer Parcel, Seller shall deliver to Buyer written notice (the "First Offer
Notice") setting forth the price and other material terms on which Seller would
be willing to sell the Right of First Offer Parcel. Buyer shall have fifteen
(15) days from receipt of the First Offer Notice in which to elect to purchase
the Right of First Offer Parcel pursuant to the terms of the First Offer Notice.
If Buyer elects to purchase the Right of First Offer Parcel pursuant to the
terms of the First Offer Notice, Buyer shall give to Seller written notice
thereof ("Acceptance Notice") within said fifteen (15) day period and closing
shall be held
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within 90 days after the date of the Acceptance Notice, whereupon Seller shall
convey the Right of First Offer Parcel to Buyer. At closing, Seller shall
deliver to Buyer a special warranty deed, sufficient to convey to Buyer fee
simple title to the Right of First Offer Parcel free and clear of all liens,
restrictions and encumbrances, except for those subject to which the Right of
First Offer Parcel was to have been conveyed in accordance with the terms of the
First Offer Notice.
(iii) In the event Buyer shall elect not to
purchase all or part of the Right of First Offer Parcel pursuant to a First
Offer Notice, Seller may thereafter sell the property which was the subject of
the First Offer Notice in accordance with the terms of the First Offer Notice.
If Seller has not sold that portion of the Right of First Offer Parcel which was
the subject of the First Offer Notice within six (6) months after the giving of
the First Offer Notice for a purchase price not less than 97% of the purchase
price specified in the First Offer Notice, Seller may not again seek to sell or
convey or agree to sell or convey such portion of the Right of First Offer
Parcel which was the subject of the First Offer Notice without again complying
with the terms of the Right of First Offer Agreement.
(iv) To prevent Seller from defeating the
rights of Buyer pursuant to this Agreement, Seller agrees that Seller will not
during the Right of First Offer Term accept an offer to purchase all or any
portion of the Right of First Offer Parcel together with any other property.
(v) The rights and obligations of Seller
and Buyer pursuant to this Agreement shall be binding upon Seller and its
successors and assigns, and shall inure to the benefit of Buyer and Buyer's
successors and assigns.
(c) Notwithstanding anything contained in this
Section 21, Buyer's Right of First Offer shall not be applicable to and Seller
shall have no obligation under the Right of First Offer Agreement with respect
to the sale of improvements to be constructed on the Right of First Offer Parcel
to a third party user who intends to own such improvements and to occupy
substantially all of the floor area to be constructed within such improvements,
and which are to be constructed by Seller pursuant to a contract with such third
party user for the development and sale of such improvements.
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22. 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 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.
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.
SELLER:
ASW PROPERTIES, LTD.
By: /s/ Montgomery F. Miller
Montgomery F. Miller,
Managing Member
BUYER:
AMERICAN REAL ESTATE INVESTMENT, L.P.
By: AMERICAN REAL ESTATE INVESTMENT
CORPORATION - its General Partner
By: /s/ Stephen J. Butte
Name: Stephen J. Butte
Title: Vice President
21
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS FIRST AMENDMENT is made as of the 19th day of June, 1998
by and between ASW PROPERTIES, LTD., an Ohio limited liability company, having
an address at 3200 Gilchrist Road, Mogadore, Ohio 44260 ("Seller") and AMERICAN
REAL ESTATE INVESTMENT, L.P., a Delaware limited partnership, having an address
at Plymouth Meeting Executive Campus, 620 West Germantown Pike, Suite 200,
Plymouth Meeting, Pennsylvania 19462 ("Buyer").
RECITALS
A. Seller and Buyer are parties to a certain Agreement of Sale
and Purchase dated as of May 5, 1998 (the "Agreement of Sale").
B. The parties desire to amend the Agreement of Sale on the
terms set forth in this First Amendment.
NOW, THEREFORE, for good and valuable consideration, the
parties agree as follows:
1Defined Terms. Capitalized terms which are not otherwise defined in this First
Amendment shall have the meanings ascribed to such terms in the Agreement of
Sale.
1Expiration of Inspection Period. The parties acknowledge that the Inspection
Period has expired, and that Buyer has not elected to exercise its rights under
the Agreement of Sale to terminate the Agreement in connection with the
expiration of the Inspection Period. Concurrently with the execution and
delivery of this First Amendment by the parties, Buyer shall deliver to the
Title Company $100,000 as contemplated by Section 2(a) of the Agreement of Sale.
23. New Ground Lease.
(a) The parties acknowledge that pursuant to
Section 1(b) of the Agreement of Sale, Buyer has exercised its option to enter a
new ground lease for the Land with the Ground Lessor (the "New Ground Lease").
The terms and conditions of such New Ground Lease are currently being negotiated
by Buyer and Ground Lessor. At Closing, Buyer shall pay to the Ground Lessor the
transfer fee required to be paid in connection with the entry by Ground Lessor
of the New Ground Lease with Buyer, together with legal fees to counsel to the
Ground Lessor in an amount not to exceed $2,000.
(b) Exhibit E-2 to the Agreement of Sale is
deleted and Exhibit E-2 to this First Amendment is substituted in its place.
22
<PAGE>
26. Closing. The second sentence of Section 4 of the Agreement
of Sale is deleted and the following is substituted in its place:
"Closing shall commence at 10:00 a.m. on July 23,
1998 or such other date as the parties may
mutually agree to in writing."
27. Conditions of Buyer's Obligations. Section 12(a)(vi) is
deleted and the following is substituted in its place:
"(vi) The consent of all local authorities required
to the assignment to Buyer of that certain Ohio
Enterprise Zone Amended Agreement by and among
Seller, GE Lighting Special Pack, Inc., the County of
Summit and the City of Green shall
have been obtained; and".
28. Miscellaneous.
(a) The references in Section 14 of the Agreement
of Sale to Right of First Refusal Agreement are deemed to refer instead to the
Right of First Offer Agreement.
(b) Except as expressly amended by this First
Amendment, the Agreement of Sale shall remain in full force and effect and is
unmodified.
(c) This First Amendment may be executed in any
number of counterparts, all of which shall be deemed an original as against the
party who has executed such counterpart. This First Amendment may be executed by
facsimile counterpart by the parties.
IN WITNESS WHEREOF, intending to be legally bound, the parties
have executed this First Amendment as of the day and year first above written.
SELLER:
ASW PROPERTIES, LTD.
By: /s/ Montgomery F. Miller
Montgomery F. Miller,
Managing Member
(Signatures continued on following page)
23
<PAGE>
(Signatures continued from previous page)
BUYER:
AMERICAN REAL ESTATE INVESTMENT,
L.P.
By: AMERICAN REAL ESTATE INVESTMENT
CORPORATION - Its General Partner
By: /s/ Stephen J. Butte
Stephen J. Butte,
Vice President
<PAGE>
SECOND AMENDMENT TO AGREEMENT OF SALE
THIS SECOND AMENDMENT is made as of the 23rd day of July, 1998
by and between ASW PROPERTIES, LTD., an Ohio limited liability company, having
an address at 3200 Gilchrist Road, Mogadore, Ohio 44260 ("Seller") and AMERICAN
REAL ESTATE INVESTMENT, L.P., a Delaware limited partnership, having an address
at Plymouth Meeting Executive Campus, 620 West Germantown Pike, Suite 200,
Plymouth Meeting, Pennsylvania 19462 ("Buyer").
RECITALS
A. Seller and Buyer are parties to a certain Agreement of Sale
and Purchase dated as of May 5, 1998, as amended by amendment dated as of June
19, 1998 (the "Agreement of Sale").
B. The parties desire to amend the Agreement of Sale on the
terms set forth in this Second Amendment.
NOW, THEREFORE, for good and valuable consideration, the
parties agree as follows:
29. Defined Terms. Capitalized terms which are not otherwise
defined in this Amendment shall have the meanings ascribed to such terms in the
Agreement of Sale.
30. Closing. The second sentence of Section 4 of the Agreement
of Sale is deleted and the following is substituted in its place:
"Closing shall commence at 10:00 a.m. on July 31,
1998 or such other date as the parties may
mutually agree to in writing."
31. Miscellaneous.
(a) Except as expressly amended by this
Amendment, the Agreement of Sale shall remain in full force and effect and is
unmodified.
<PAGE>
(b) This Amendment may be executed in any number
of counterparts, all of which shall be deemed an original as against the party
who has executed such counterpart. This Amendment may be executed by facsimile
counterpart by the parties.
IN WITNESS WHEREOF, intending to be legally bound, the parties
have executed this Second Amendment as of the day and year first above written.
SELLER:
ASW PROPERTIES, LTD.
By: /s/ Montgomery F. Miller
Montgomery F. Miller,
Managing Member
BUYER:
AMERICAN REAL ESTATE INVESTMENT,
L.P.
By: AMERICAN REAL ESTATE INVESTMENT
CORPORATION - Its General Partner
By: /s/ Stephen J. Butte
Stephen J. Butte,
Vice President
<PAGE>
THIRD AMENDMENT TO AGREEMENT OF SALE
THIS THIRD AMENDMENT is made as of the 30th day of July, 1998
by and between ASW PROPERTIES, LTD., an Ohio limited liability company, having
an address at 3200 Gilchrist Road, Mogadore, Ohio 44260 ("Seller") and AMERICAN
REAL ESTATE INVESTMENT, L.P., a Delaware limited partnership, having an address
at Plymouth Meeting Executive Campus, 620 West Germantown Pike, Suite 200,
Plymouth Meeting, Pennsylvania 19462 ("Buyer").
RECITALS
A. Seller and Buyer are parties to a certain Agreement of Sale
and Purchase dated as of May 5, 1998, as amended by amendment dated as of June
19, 1998 and by an amendment dated as of July 23, 1998 (as amended, the
"Agreement of Sale").
B. The parties desire to amend the Agreement of Sale on the
terms set forth in this Third Amendment.
NOW, THEREFORE, for good and valuable consideration, the
parties agree as follows:
32. Defined Terms. Capitalized terms which are not otherwise
defined in this Amendment shall have the meanings ascribed to such terms in the
Agreement of Sale.
33. Closing. The second sentence of Section 4 of the Agreement
of Sale is deleted and the following is substituted in its place:
"Closing shall commence at 10:00 a.m. on August 7,
1998 or such other date as the parties may
mutually agree to in writing."
34. Miscellaneous.
(a) Except as expressly amended by this
Amendment, the Agreement of Sale shall remain in full force and effect and is
unmodified.
<PAGE>
(b) This Amendment may be executed in any number
of counterparts, all of which shall be deemed an original as against the party
who has executed such counterpart. This Amendment may be executed by facsimile
counterpart by the parties.
IN WITNESS WHEREOF, intending to be legally bound, the parties
have executed this Third Amendment as of the day and year first above written.
SELLER:
ASW PROPERTIES, LTD.
By: /s/ Montgomery F. Miller
Montgomery F. Miller,
Managing Member
BUYER:
AMERICAN REAL ESTATE INVESTMENT,
L.P.
By: AMERICAN REAL ESTATE INVESTMENT
CORPORATION - Its General Partner
By: /s/ Stephen J. Butte
Stephen J. Butte,
Vice President
<PAGE>
Exhibit 10-2
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") is made this 26th day
of June, 1998, by and between SZELES REAL ESTATE DEVELOPMENT COMPANY
("SREDC"), a Pennsylvania General Partnership, and SZELES INVESTMENT COMPANY
("SIC"), a Pennsylvania General Partnership, both having an address of 5112
Lancaster Street, Harrisburg, Pennsylvania 17111 (collectively "Seller") and
AMERICAN REAL ESTATE INVESTMENT, L.P., a Delaware Limited Partnership, having
an address of 620 West Germantown Pike, Suite 200, Plymouth Meeting,
Pennsylvania ("Buyer").
W I T N E S S E T H
1. SALE OF PROPERTIES. Seller agrees to sell and Buyer agrees to
purchase, subject to the terms and conditions stated herein, the
following (collectively the "Properties"):
1.1 Real Property. Those tracts of land known as (a) Winchester
Plaza Corporate Center, Allentown, Township of South
Whitehall, Lehigh County, PA ("Winchester Plaza Corporate
Center"); (b) Treeview Corporate Center, Wyomissing, Spring
Township, Berks County PA ("Treeview Corporate Center");
(c) Executive Park, Wyomissing, Berks County, PA
("Executive Park"); (d) Hillside Corporate Center,
Mechanicsburg, Lower Allen Township, Cumberland County PA
("Hillside Corporate Center"); and (e) Corporate Center 15,
Mechanicsburg, Cumberland County, PA ("Corporate Center
15"), the individual descriptions of which are set forth on
Exhibit "A" , together with all buildings and improvements
located thereon, and all fixtures located thereon and owned
by Seller, and all rights, privileges and appurtenances
pertaining thereto including all of Seller's right, title
and interest in and to all rights-of-way, open or proposed
streets, alleys, easements, sidewalks and utility lines
(collectively the "Real Property" and individually a
"Building").
1.2 Personal Property. All tangible personal property owned by
Seller which is both situated on and used in connection
with the Real Property as set forth on Exhibit "A-l" (the
"Personal Property"); and
1.3 Permits and Approvals. To the extent they may be sold or
transferred, all of Seller's rights, title and interest in
and to all approvals, permits and licenses granted by the
municipal, state and federal governments or their
instrumentalities in conjunction with the construction and
operation of the
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Real Property (collectively the "Operating Approvals"). 1.4
Intangibles. All (i) tenant leases; (ii) rents and profits;
(iii) security and/or tenant deposits, including any
interest thereon; and (iv) (A) all of Seller's right, title
and interest in and to all licenses, franchises, permits
and contract rights relating to the operation of the
Properties, to the extent assignable; (B) the trade names
of the Real Property; (C) the service contracts for the
Properties; and (D) all guarantees and warranties listed on
Exhibit "Q" attached hereto (items (A), (B), (C) and (D)
are herein collectively, the "Intangible Property").
The purchase of the Properties at the Closing (as
hereinafter defined), the satisfaction or waiver of all
conditions set forth herein and the delivery of all
instruments and other documents required for Closing
hereunder are sometimes collectively herein referred to as
the "Transaction".
2. PURCHASE PRICE. The total purchase price to be paid by Buyer for
the purchase of the Properties is FORTY MILLION AND N0/100 DOLLARS
($40,000,000.00) cash in lawful money of the United States of
America ("Purchase Price") subject to an additional payment of up to
$1,500,000 in accordance with Section 2.4. The Purchase Price shall
be paid in the following manner:
2.1 Earnest Money. Upon the execution of this Agreement by
both Seller and Buyer, Buyer shall deposit FOUR HUNDRED
THOUSAND AND N0/100 DOLLARS ($400,000.00) in cash as
earnest money (the "Earnest Money Deposit") with First
American Title Insurance Company having an address at Two
Penn Center, Suite 1910, Philadelphia, Pennsylvania 19102
(the "Escrow Agent" and the "Title Company"). The Earnest
Money Deposit shall be invested by the Escrow Agent in one
or more interest-bearing accounts at the direction of
Buyer, and any interest earned thereon shall be considered
a part of the Earnest Money Deposit. Except as otherwise
set forth herein, the Earnest Money Deposit shall be
applied against the Purchase Price at Closing.
2.2 Cash at Closing. At the Closing, Buyer shall pay to Seller
in cash an amount equal to the Purchase Price (subject to
the adjustments and prorations set forth in Section 5.3
below or as otherwise provided under this Agreement) in
immediately available U.S. funds by wire transfer as more
particularly set forth in Section 5.2 of this Agreement.
2.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Buildings in the amounts set forth in
Exhibit "A-2".
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<PAGE>
2.4 Purchase Price Supplement .
(a) In the event the principal tenant of Winchester Plaza
Corporate Center, Aetna Life Insurance Company ("Aetna")
timely exercises its option ("Renewal Option") to renew the
term of its Existing Lease dated June 1, 1987 ("Aetna
Existing Lease") for a term of 5 years (pursuant to the
renewal option set forth in Section __ of the Aetna
Existing Lease), Buyer shall pay to Seller, upon the
commencement of the renewal term under the Aetna Existing
Lease), the sum of $1,500,000 in immediately available U.S.
funds by wire transfer ("Purchase Price Supplement").
(b) If Aetna does not timely exercise the Renewal Option
and if Buyer and Aetna enter into a written agreement
("Aetna Lease Extension Agreement") pursuant to which,
inter alia, Aetna and Buyer agree that Aetna shall continue
in continuous possession of the demised premises it now
occupies in Winchester Plaza after the expiration date of
the current term of the Aetna Existing Lease, then Buyer
shall pay to Seller, on the date on which Aetna commences
to pay rent to Seller pursuant to the Aetna Lease Extension
Agreement, a supplement to the Purchase Price ("Alternate
Purchase Price Supplement").
(c) The Alternate Purchase Price Supplement shall be an
amount equal to (i) the product of $300,000 times the
lesser of (I) the number of years (full or fractional) in
the fixed term of the Aetna Lease Extension Agreement and
(II) five (5) less (ii) Seller's Share of Landlord
Expenses. For the purpose of the calculation of the
Alternate Purchase Price Supplement pursuant to the
provisions of this subparagraph (c), if the premises
demised to Aetna pursuant to the Aetna Lease Extension
Agreement contains an area which is greater than or lesser
than the premises demised to Aetna pursuant to the Aetna
Existing Lease, then the figure of "$300,000" shall be
adjusted to be the product of $300,000 multiplied by a
fraction, the numerator of which fraction is the number of
square feet demised to Aetna pursuant to the Aetna Lease
Extension
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<PAGE>
Agreement, and the denominator of which is the number of
square feet leased to Aetna pursuant to the Aetna Existing
Lease. If the Aetna Lease Extension Agreement provides for
a fixed term of less than 5 years and grants to Aetna the
option to renew the term of the Aetna Lease Extension
Agreement and if Aetna exercises the renewal option, then
on the date on which Aetna commences to pay rent for the
option term, the Alternate Purchase Price Supplement shall
be recomputed as if the renewal term had been included in
the initial fixed term of the Aetna Lease Extension
Agreement and any additional Alternate Purchase Price
Supplements due by reason of such recomputation shall be
paid by Buyer to Seller.
(d) The term "Landlord Expenses" shall mean the aggregate
of all costs and expenses incurred by Buyer in connection
with the Aetna Lease Extension Agreement for: brokerage
fees and commissions; renovations and improvements to the
premises demised to Aetna; and sums and contributions paid
by Buyer to Aetna for leasehold improvements.
(e) The term "Seller's Share of Landlord Expenses" shall
mean 50% of the amount by which the Landlord Expenses
exceed an amount equal to the product of $1.00 times the
area of the premises demised to Aetna pursuant to the Aetna
Lease Extension Agreement, times the number of full and
fractional years in the fixed term of the Aetna Lease
Extension Agreement.
3. CONDITION OF TITLE.
3.1 Marketable Title. Title to the Real Property shall be (i)
good and marketable and free and clear of all liens,
restrictions, easements, claims or liens by contractors,
subcontractors, mechanics and materialmen, leases and
tenancies and other title objections except for (a) the
leases set forth on Exhibit "C" (the "Existing Leases"),(b)
the lien of real estate taxes for 1998 not yet due and
payable, and (c) such exceptions as are agreed to by Buyer
in writing (the "Permitted Exceptions"); and (ii) insurable
as aforesaid at
4
<PAGE>
ordinary rates by the Title Company pursuant to an ALTA
Owner's Policy of Title Insurance (Form B -1970).
3.2 Failure of Title. Prior to the expiration of the
Inspection Period, Buyer shall notify Seller as to the
existence and nature of any matters which Buyer asserts
constitute a failure of title as described in Section 3.1
of this Agreement. Any covenant, agreement, restriction,
easement or other matter of record as of the date of this
Agreement which is not the subject of a notice from Buyer
to Seller pursuant to the preceding sentence shall be a
Permitted Exception. If title to the Real Property cannot
be conveyed to Buyer at Closing in accordance with the
requirements of this Agreement, then Buyer shall have the
option of (i) taking such title as Seller can convey, the
unfulfilled condition shall be deemed waived and there
shall be no abatement of the Purchase Price, except that
Buyer may apply so much of the Purchase Price as is
necessary to the payment of monetary liens against the Real
Property in an ascertainable amount which Seller has not
otherwise paid or provided for; or (ii) terminating Buyer's
obligations under this Agreement, at which time Seller
shall cause Escrow Agent to return the Earnest Money
Deposit to Buyer. In the event Buyer terminates its
obligations pursuant to subsection (ii) above, there shall
be no further liability or obligation on the part of either
of the parties hereto except for Seller's obligation to
cause the Earnest Money Deposit to be returned to Buyer
whereupon this Agreement shall become null and void.
3.3 Seller is aware of an existing cross-easement agreement, as
amended ("Cross-Easement"), which benefits and burdens
Corporate Center 15 and the real property adjoining it at
4910 Ritter Road ("Shelley's Point") owned by Szeles
Building and Leasing Company. Notwithstanding Section 3.1
and so long as doing so does not cause a violation of any
land development ordinance or regulation at Corporate
Center 15, Seller shall have the right to modify the
provisions of the Cross-Easement prior to Closing so that
(i) the total number of existing parking spaces available
to Shelley's Point on the property of Corporate Center 15
shall be reduced from twenty-three (23) to fourteen (14) to
be chosen by Seller from among the existing parking spaces
under the Cross-Easement and (ii) such parking spaces shall
be dedicated to the exclusive use of Shelley's Point.
4. INSPECTION MATTERS.
4.1 Seller's Documents. To the extent Seller has not
previously done so, Seller shall, within five (5) days
following the execution of this Agreement by both parties,
make available to Buyer for inspection, true, correct and
complete copies in all material respects of the documents
relating to the
5
<PAGE>
operation and approvals of the Properties in Seller's
possession as set forth in Exhibit "E" (the "Seller's
Documents"). Buyer acknowledges that, as of the date of
Buyer's execution of this Agreement, Seller has complied
with the requirements of this Section 4.1 except for those
Seller's Documents set forth in Exhibit "E-1".
4.2 Inspection of the Properties.
4.2.1 Buyer, its representatives, agents, and consultants
shall have the right to conduct such engineering,
environmental and other studies and inspections of
the physical condition of the Properties as Buyer, in
its absolute discretion, deems necessary or
appropriate through July 7, 1998, or such earlier
date as selected by the Buyer (the "Inspection
Period"). Such studies and inspections shall be at
Buyer's sole cost and expense. Buyer's investigations
during the Inspection Period are subject to the
provisions of Section 4.2.3 hereof.
4.2.2 During the Inspection Period, Buyer, at its sole cost
and expense, shall have the right to inspect, at the
address of Seller, all of Seller's books and records
which pertain to the maintenance and operation of the
Properties for calendar years 1997 and 1998,
provided, however, Buyer shall not have access to
books and records of Seller which are of a
proprietary nature and which do not pertain in a
material way to the maintenance or operation of the
Properties.
4.2.3 In conducting its inspections and studies of the
Properties as authorized by this Agreement, Buyer
shall (i) not materially disturb or interfere with
the operation, management or use of the Properties by
Seller, Seller's agents, any tenant of the Properties
or by any of such tenant's customers, invitees or
guests and (ii) not materially damage or affect the
physical structure of the Properties. Buyer covenants
and agrees to return the Properties to the same
condition as existed prior to such inspections and
studies.
4.2.4 At any time at or prior to the expiration of the
Inspection Period, Buyer may terminate this Agreement
by giving written notice to Seller at or prior to the
expiration of the Inspection Period if Buyer
determines that one or more of the Buildings
comprising the Real Property is, in Buyer's sole
discretion, unsuitable for purchase by Buyer. Upon
such termination, Seller shall cause Escrow Agent to
return the Earnest Money Deposit to Buyer, and
thereafter Seller
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<PAGE>
and Buyer shall have no further obligations or
liabilities one to the other hereunder.
4.3 Access to the Properties. Buyer or representatives of
Buyer shall have access to the Buildings prior to the
Closing (as hereinafter defined) during normal business
hours if Buyer delivers written notice to Seller at least
forty-eight(48) hours in advance of the time Buyer desires
access to the Buildings.
4.4 Operation and Maintenance Prior to Closing.
4.4.1 Through Closing, Seller shall: (i) operate the
Properties in the ordinary course of business and
shall maintain the Properties in the same manner as
they are currently being maintained; (ii) not change,
amend or modify any agreements, approvals or
contracts related to the Properties or any part
thereof or other rights, obligations or agreements
related to the use, ownership or operation of the
Properties or any part thereof without Buyer's prior
written approval; (iii) not mortgage, pledge,
hypothecate, transfer or dispose of all or any part
of the Properties or any interest therein; (iv) not
make any alterations or changes to the Properties, or
any part thereof other than ordinary and necessary
maintenance and repairs, without Buyer's written
approval; (v) not remove any Personal Property,
except as may be required for repair and replacement
in which event, all replacements shall be free and
clear of liens and shall be of quality at least equal
to the replaced items; (vi) maintain in effect all
policies of property, casualty and liability
insurance or similar policies of insurance, with no
less than the limits of coverage now carried with
respect to the Properties or required by any of
Seller's lenders; (vii) not enter into any new
service contracts not terminable without penalty upon
Closing, or modify any existing service contract,
without Buyer's written approval; and (viii) operate
the Properties in accordance with all applicable
federal, state and local laws, ordinances and
requirements.
4.4.2 Until Closing, Seller shall not enter into any new
leases or lease renewals, and shall not modify or
amend any Existing Leases, without Buyer's prior
written consent. In the event Seller does enter into
any new leases or lease renewals with the written
consent of Buyer, Buyer shall be responsible for the
payment of (i) the cost of tenant improvements
required thereunder, if any, and (ii) leasing
commissions.
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<PAGE>
4.5 Hazardous Materials.
4.5.1 Except as has been disclosed by Seller to Buyer in
Exhibit "F", Seller represents the following: (i) to
the best of Seller's knowledge, at present there do
not exist, and at no time since Seller has acquired
the Property have there existed any Environmental
Defects (defined as a condition or conditions which
would require remediation under any federal or state
environmental law); (ii) Seller has no knowledge that
any Environmental Defects existed prior to its
purchase of the Property; (iii) there are no
aboveground or underground storage tanks located on
the Properties or any part thereof; (iv) Seller, its
agents and tenants have at all times during Seller's
ownership of the Properties disposed of all wastes,
hazardous or otherwise, generated by the use of the
Properties in accordance with applicable laws; (v)
Seller has not received any letter or other
communication, written or oral, from the Pennsylvania
Department of Environmental Protection, the United
States Environmental Protection Agency, or any other
local, state or federal regulatory agencies, relating
to the existence of Environmental Defects at the
Properties or any part thereof; (vi) to the best of
Seller's knowledge, the Properties are in compliance
with all environmental laws, rules, regulations and
ordinances; (vii) to the best of Seller's knowledge,
there are no Hazardous Substances or Hazardous Waste
on, under or about the Properties or any part
thereof; (viii) to the best of Seller's knowledge, no
Hazardous Substances or Hazardous Waste have ever
been used, disposed, transported, manufactured,
refined, handled, treated, stored, or generated at
the Properties or any part thereof by Seller, its
agents or tenants; and (ix) to the best of Seller's
knowledge, there have never been nor are there
presently any storage vessels, surface impoundments,
landfills or other types of storage facilities
containing Hazardous Substances or Hazardous Waste on
the Property. For purposes hereof, Hazardous
Substances or Hazardous Waste are defined as any
pollutant, contaminant, chemical or industrial or
toxic substance, or waste, petroleum products,
asbestos, urea formaldehyde, radon, polychlorinated
biphenyls, flammable explosives, nuclear radioactive
fuel or waste, or any other substance, waste,
material, substance, pollutant or contaminant that
may cause damage to human health or the environment,
safety or real property and/or any substance for
which the generation, manufacture, storage,
treatment, or release is prohibited or regulated
under any environmental law.
8
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4.5.2 In the event that prior acts or omissions of the
Seller have caused Environmental Defects at the
Properties or any part thereof, the Seller shall
indemnify and hold the Buyer harmless against any and
all suits and claims, whether governmental or
private, arising therefrom under any theory of law;
provided, however, that Buyer shall give Seller
written notice within thirty (30) days of Buyer's
receipt of notice of such suit or claim. This
indemnification shall include the Buyer's reasonable
attorneys' fees, payable as incurred in defending
such suits and claims. This provision shall survive
the Closing and shall be enforceable at any time.
5. CLOSING. Buyer and Seller hereby agree that the Transaction shall be
consummated ("Closing") as follows:
5.1 Closing Date. The Transaction shall close on July 31, 1998
("Closing Date") in the offices of the Wolf, Bock, Schorr
and Solis-Cohen LLP, Twelfth Floor Packard Building, 111
South 15th Street, Philadelphia, PA 19102, with title
transfer and payment of the Purchase Price to be completed
on the Closing Date as set forth in Section 5.2 hereof.
5.2 Title Transfer and Payment of Purchase Price. Seller shall
convey title to the Real Property to Buyer by special
warranty deeds upon confirmation of receipt of the Purchase
Price by the Title Company. Effective upon the delivery of
such deeds, possession shall pass from Seller to Buyer.
Buyer agrees that at the conclusion of the Closing, the
Title Company shall wire all funds due Seller to Seller in
accordance with Seller's wiring instructions.
5.3 Adjustments and Prorations. The following adjustments and
prorations shall be made at Closing:
5.3.1 Lease Rentals and Security Deposits. Seller shall be
entitled to all rents (including any accrued tax and
operating expense escalations, to the extent
applicable), charges and other revenue of any kind
attributable to any period under the Existing Leases
up to (but not including) the Closing Date. Buyer
shall be entitled to all rents (including any accrued
tax and operating expense escalations, to the extent
applicable), charges and other revenue of any kind
attributable to any period under the Existing Leases
from (and including) the Closing Date. Rents and
expense escalations or other reimbursements due
landlord under the Existing Leases
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collected prior to the Closing Date and attributable
to both Seller's and Buyer's period of ownership
shall be prorated as of the Closing Date. Uncollected
rents and expense escalations or other reimbursements
due landlord under the Existing Leases shall not be
prorated at the time of Closing, but Buyer shall
collect the same on Seller's behalf and tender the
same to Seller upon receipt. Notwithstanding the
foregoing, if the Closing Date occurs after the tenth
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 Existing 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 and Buyer shall use its best efforts to
collect the Delinquent Installment from the Tenant.
All base rents, all additional rents, operating
expense escalations and other amounts due landlord
under the Existing Leases collected by Buyer after
the Closing Date shall be retained by Buyer and
applied first on account of sums then currently due
and payable, and the balance shall be divided between
Seller and Buyer on a prorated basis reflecting the
respective periods of ownership of the Properties by
Seller and Buyer. Notwithstanding the foregoing,
operating expense escalations collected by Buyer
after the Closing Date which are applicable to
operating expenses incurred by Seller prior to the
Closing Date, shall be applied by Buyer on account of
such operating expenses and reimbursed to Seller upon
receipt by Buyer. In the event any Existing Lease has
been terminated, or the tenant thereunder has vacated
and abandoned the demised premises and sums remain
payable to Seller under the Existing Lease for
periods up to and including the Closing Date, Seller
shall have the right to pursue such tenant for any
sums due Seller by all lawful means. Seller shall
transfer to Buyer at Closing all tenant security
deposits and all interest accrued thereon and all
pre-paid rentals held by Seller under the Existing
Leases.
5.3.2 Real Estate Taxes. Real Estate Taxes shall be
prorated as of the Closing Date in accordance with
the fiscal year of the taxing authority. Seller
shall pay all real estate taxes attributable to the
Properties to (but not including) the Closing Date.
If the real estate tax rate and assessments have not
been set for the year in which the
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Closing occurs, then the proration of such taxes
shall be based upon the rate and assessments for the
preceding tax year, and such proration shall be
adjusted in cash between Seller and Buyer upon
presentation of written evidence that the actual
taxes paid for the year in which the Closing occurs
differ from the amounts used at Closing and in
accordance with the provisions of Section 5.3.9
hereof.
5.3.3 Operating Expenses of Properties. The charge for
municipal utility services for the Properties shall
be prorated as of the Closing Date. Seller shall pay
all sewer, water and other utility charges and other
operating expenses attributable to the Properties to,
but not including the Closing Date, and Buyer shall
pay all utility charges and other operating expenses
attributable to the Properties from and after the
Closing Date. Seller shall obtain readings of the
water, electric, gas and other utility meters
servicing the Property (other than meters which
exclusively measure utility consumption which is to
be paid in full by any of the tenants under Existing
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. Seller shall not assign to Buyer
any deposits which Seller has with any of the utility
services or companies servicing the Properties. Buyer
shall arrange with such services and companies to
have accounts opened in Buyer's name beginning at
12:01 a.m. on the Closing Date. The term "operating
expenses" shall only include charges for utility
services that are lienable against the Real Property,
payments due under the service contracts, and
property owners' association dues.
5.3.4 Assessments. Seller shall be responsible to pay for
all assessments levied against the Real Property
prior to the completion of Closing, by reason of work
or improvements physically commenced on the ground or
completed prior thereto.
5.3.5. Escrow Agent Fee. The Buyer shall pay any fee charged
by the Escrow Agent.
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5.3.6 Excise, Transfer, and Sales Taxes. Seller and Buyer
shall equally share all realty transfer taxes. Buyer
shall pay all recording fees imposed with respect to
the Transaction.
5.3.7 Closing Costs. Seller shall pay all charges and fees
specified herein to be paid by Seller plus attorney's
fees incurred by Seller in connection with the
Closing. Buyer shall pay all charges and fees
specified herein to be paid by Buyer plus attorney's
fees incurred by Buyer in connection with the
Closing, the title insurance premium, including all
charges for special endorsements or exclusions from
the title policy issued to Buyer (other than those
monetary encumbrances which Seller is required to
satisfy prior to closing pursuant to Section 3
hereof), and (except as provided in Section 5.3.6)
any fees or charges incurred as a result of recording
any documents pertaining to the Transaction. All
other fees or charges shall be paid in accordance
with local custom.
5.3.8 Risk of Loss. Risk of loss prior to the Closing Date
shall be borne by Seller.
5.3.9 Delayed Adjustment. If at any time following the
Closing Date the amount of an item listed in any
subparagraph of Section 5.3 hereof shall prove to
be incorrect, the party in whose favor the error
was made shall promptly pay to the other party the
sum necessary to correct such error upon receipt of
proof of such error, provided that such proof is
delivered to the party from whom payment is
requested on or before one (1) year after Closing.
5.3.10 Closing Date Adjustment. The provision set forth
above that Buyer is entitled to rent apportionments
from and after the Closing Date and that Buyer is
obligated to pay real estate taxes from and after
the Closing Date is conditioned upon Seller's
receipt of the Purchase Price by 3:00 p.m. on the
Closing Date. If the Purchase Price is not received
by Seller by the time specified in the preceding
sentence, then the apportionments set forth above
shall be made so that Seller shall be entitled to
rents for the Closing Date and Seller shall be
obligated to pay real estate taxes for the Closing
Date.
5.4 Sale Commissions.
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5.4.1 Fee. Seller shall have the sole obligation to pay to
Smith Mack & Company, Inc. ("Agent") all fees,
commissions and other charges of Agent ("Fee"), as
payment in full for services rendered in connection
with the Transaction in accordance with the agreement
entered into between Seller and Agent.
5.4.2 Reciprocal Indemnities. Seller agrees to indemnify
Buyer and hold Buyer harmless from any loss,
liability, damage, cost or expense (including,
without limitation, court costs and reasonable
attorney's fees) paid or incurred by Buyer by
reason of any claim to (i) any broker's, finder's,
or other fee in connection with the Transaction by
any party claiming by, through or under Seller,
and (ii) any commission in connection with the
Existing Leases except as provided for in Section
6.1 hereof. Buyer agrees to indemnify Seller and
hold Seller harmless from any loss, liability,
damage, cost or expense (including, without
limitation, court costs and reasonable attorney's
fees) paid or incurred by Seller by reason of any
claim to any broker's, finder's, or other fee in
connection with the Transaction by any party
(other than Agent) claiming by, through or under
Buyer.
5.5 Closing Documents. At the Closing, Seller shall deliver or
cause to be delivered to Buyer the following documents for
each of Winchester Plaza Corporate Center, Treeview
Corporate Center, Executive Park, Hillside Corporate Center
and Corporate Center 15, as required:
5.5.1 Special Warranty Deeds. Special warranty deeds
conveying to Buyer all of Seller's right, title
and interest in and to the Real Property together
with an affidavit of title substantially in the
form of Exhibit "G" attached hereto. If Buyer
shall obtain current as-built surveys for any of
the Buildings, and if such surveys, inter alia,
are certified to Seller, the deed(s) for such
Building(s) shall describe the Real Property in
accordance with such survey(s).
5.5.2 Bill of Sale. A bill of sale in the form attached
hereto as Exhibit "I" conveying all of the Seller's
right, title and interest in and to the Personal
Property (the "Bill of Sale").
5.5.3 Assignment of Permits, Approvals and Licenses. An
assignment by Seller of all Operating Approvals in
the form attached hereto as Exhibit "I-1" (the
"Assignment of Operating Approvals") with physical
delivery of all Operating Approvals within Seller's
possession.
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5.5.4 Assignment of Leases, Service Contracts, and Other
Items. An assignment by Seller of the Existing
Leases, Service Contracts, and other items in the
form attached hereto as Exhibit "J" (the "Assignment
of Leases, Service Contracts, and Other Items").
5.5.5 Non-Foreign Status Affidavit. Non- foreign status
affidavits in the forms attached hereto as Exhibit
"K".
5.5.6 Notice to Tenants. Letters to each tenant under the
Existing Leases in the form attached hereto as
Exhibit "L".
5.5.7 Closing Certificate. A Seller's Closing Certificate
in the form attached hereto as Exhibit "M", with only
such exceptions as shall be satisfactory to Buyer.
5.5.8 Omitted intentionally.
5.5.9 Current Rent Roll. Rent Roll attached hereto as
Exhibit "B-1", updated as of no more than two (2)
days prior to the Closing Date and including, without
limitation, a schedule of all unpaid rents.
5.5.10 Tax Bills. Real estate tax bills for the Buildings
for 1998 as issued.
5.5.11 Certificates of Occupancy. The existing Certificates
of Occupancy, and all other governmental permits,
certificates and approvals for the Real Property.
5.5.12 Title Company Indemnities. 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 customary
affidavits required by the Title Company to permit it
to issue to Buyer the Owner's Policy of Title
Insurance required pursuant to Section 3.1.
5.5.13 Calculation Information. For a period of one year
after the Closing Date, Seller will provide to
Buyer any information in Seller's possession
necessary or required to permit Buyer to calculate
and collect after Closing all payments of
additional rent and other charges due under the
Existing Leases. For a period of one year after
Closing, Buyer shall provide to Seller all
information necessary or required to permit Seller
to determine if Buyer has
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paid to Seller sums due and payable by Buyer to
Seller pursuant to the provisions of Sections 5.3.1
and 5.3.3 above.
The foregoing documents shall be duly executed and
acknowledged by Seller (as applicable) at the time of
Closing.
5.6 Other Deliveries. At the Closing, the following shall occur:
5.6.1 Keys and Original Documents. Seller shall deliver
at Closing to such persons as Buyer shall specify
keys to all locks for the Buildings (in Seller's
possession) and original copies of Existing
Leases, warranties, guarantees, commission
agreements and service contracts (unless
terminated as set forth herein).
5.6.2 Evidence of Authority. Seller and Buyer shall
deliver to the Title Company and each other such
documents and certificates as may be required by
the Title Company or as may be reasonably required
by the other party to evidence the capacity of the
parties hereto and the authority of the persons
executing any documents on behalf of the parties
hereto.
5.6.3 Buyer's Closing Certificate. Buyer shall deliver
to Seller at Closing a Buyer's Certificate in the
form attached hereto as Exhibit "N".
5.6.4 Other Documents. Such other documents or
deliveries as may be reasonably required by the
Title Company or as may be agreed upon by Seller
and Buyer to consummate the Transaction.
5.7 Other Conditions to Closing. Buyer's obligation to
purchase the Properties is expressly conditioned upon the
following being satisfied as of the Closing Date (or at
such earlier date as set forth herein), unless waived in
writing by Buyer, and absent satisfaction of the same Buyer
shall have the right to terminate this Agreement as
provided in Section 9.1 hereof:
5.7.1 Seller shall have delivered the documents set
forth in Section 5.5 hereof, fully executed by
Seller and made the other deliveries set forth in
Section 5.6 hereof.
5.7.2 There shall have been no material adverse change
with respect to any Existing Lease or with respect
to the physical condition of the Properties or any
part thereof, except as has been approved by Buyer
in writing, and no tenant except for Yonus Zegeye,
M.D.,
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shall (i) have filed for bankruptcy, (ii)
indicated an intention to file for bankruptcy or
(iii) be in monetary default under its Existing
Lease after notice and grace periods, if required
by the applicable Existing Lease, and Seller shall
have confirmed the foregoing in the Closing
Certificate set forth as Exhibit "M" hereto.
5.7.3 All of the representations and warranties by
Seller set forth in this Agreement shall be true
and correct in all material respects.
5.7.4 Seller shall have performed all of its covenants
and agreements set forth in this Agreement which
are required to be performed by Seller prior to or
as of the Closing Date.
5.7.5 Buyer shall have obtained from each of the tenants
under the Existing Leases an estoppel letter
pursuant to Section 7.1 below and an SNDA pursuant
to Section 7.2 below.
6. LEASE EXPENSES.
6.1 Leasing Commissions. Seller shall indemnify and hold Buyer
harmless from any claims for leasing commissions due and
payable with respect to the current terms of the Existing
Leases through the date of Closing subject, however, to the
Buyer's obligation for payment of leasing commissions as
set forth in Section 4.4.2 of this Agreement. Seller
represents and warrants to Buyer that the only leasing
commissions payable on account of any renewals, extensions,
modifications or re-leasings of the Existing Leases are
those listed on Exhibit R hereto. In reliance on the
foregoing representation and warranty by Seller, Buyer
shall indemnify and hold Seller harmless from any claims
for leasing commissions payable on account of (i) any
renewals, extensions, modifications or re-leasings of the
Existing Leases and (ii) Buyer's obligation for payment of
leasing commissions under Section 4.4.2 of this Agreement.
7. ESTOPPEL LETTERS AND SNDAs.
7.1 Buyer shall deliver for execution by each of the tenants
under the Existing Leases tenant estoppel letters (dated no
earlier than thirty (30) days before the Closing Date) in
the form attached hereto as Exhibit "O" with such
modifications as shall be designated by Buyer to reflect
the terms of the Existing Leases, or in such other form
that is reasonably acceptable to Buyer from each tenant
under the Existing Leases.
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7.2 Buyer shall deliver for execution by each of the
tenants under the Existing Leases a Subordination,
Non-Disturbance and Attornment agreement in the
form required by Buyer's lender ("SNDA"); and
Buyer shall use diligent efforts to obtain an
executed SNDA from each of the tenants under the
Existing Leases. Buyer shall deliver to Seller a
copy of each of the executed SNDAs delivered to
Buyer promptly after receiving each such SNDA.
8. REPRESENTATIONS AND WARRANTIES.
8.1 Buyer. Buyer represents and warrants to Seller the
following:
8.1.1 Buyer has full power and authority to enter
into this Agreement and to assume and
perform all of Buyer's obligations under
this Agreement.
8.1.2 The person executing this Agreement on
behalf of Buyer has been duly authorized and
is empowered to bind Buyer to this
Agreement.
8.2 Seller. Seller represents and warrants to Buyer, the
following:
8.2.1 To the best of Seller's knowledge, there is
no present plan, study or effort by any
governmental authority or agency or any
private party or entity which in any way
affects or would affect the continued
authorization of the current use and
operation of the Properties or any part
thereof.
8.2.2 Except as disclosed herein, there is no
pending or threatened litigation involving
Seller which does or would materially affect
the ownership, use, maintenance or operation
of the Properties or any part thereof or
Seller's ability to fulfill all of its
obligations under this Agreement.
8.2.3 Except as disclosed in Exhibit "P" attached
hereto, and to the best of Seller's
knowledge, the current use and occupancy of
the Properties does not violate any
applicable zoning or land use laws. Seller
has not received any written notice of a
claim of non-compliance with respect to the
Properties or any part thereof as to any
laws, ordinances, rules and regulations,
including, but not limited to, those
relating to environmental, zoning, land use
and subdivision, building, fire, health and
safety matters of any governmental or any
agency, body or subdivision thereof relating
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to the operation, ownership or use of the
Properties or any part thereof. Certificates
of occupancy and, to the best of Seller's
knowledge, any and all other permits or
licenses required by applicable government
or quasi-government agencies for occupancy
and use of all of the Properties have been
obtained and are in effect and good
standing.
8.2.4 Seller is the sole owner and holder of the
landlord's interest under the Existing
Leases and Seller has not assigned, pledged
or granted any security interest with
respect to any of the Existing Leases, the
rents payable thereunder or any security
deposit given in connection with any
Existing Lease except for assignments,
pledges or security interests which will be
terminated or released at Closing.
8.2.5 Except for the Existing Leases, Seller has
not entered into any, and there are no
other, presently effective leases relating
to any portion of the Properties, and no
person, other than the tenants under the
Existing Leases, has any right of possession
to the Properties or any part thereof.
Except as set forth in the Rent Roll, no
rent concessions to tenants are currently in
effect, no rent has been paid more than
thirty (30) days in advance by any tenant,
no rent due and owing under the Existing
Leases is unpaid and no tenant has any claim
against Seller for any security deposit or
other deposits. To the extent any Existing
Lease grants any tenant a right or option to
purchase all or any portion of the
Properties, Seller shall obtain from such
tenant, prior to Closing, a written release
and termination of such right or option in
form acceptable to Buyer and to the Title
Company (to induce the Title Company to
remove such option to purchase as an
exception to title). To the extent any
Existing Lease grants any tenant a right of
first offer, right of first refusal or
similar right to purchase all or any portion
of the Properties, Seller shall obtain from
such tenant, prior to Closing, a waiver and
release of such right or option with respect
to the conveyance of the Properties by
Seller pursuant to this Agreement (to induce
the Title Company affirmatively to insure
Buyer that such tenant's right of first
offer, right of first refusal or similar
right is not applicable to the conveyance of
the Properties by Seller pursuant to this
Agreement) and a written agreement by such
tenant that its right of first offer, right
of first refusal or similar right does not
apply in the event of a foreclosure of the
Properties or the delivery of a Deed in lieu
of foreclosure. Each of the Existing Leases
has been executed, is in full force and
effect and
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no notice has been given by or to Seller of
a default existing on the part of Seller or
any tenant thereunder except as set forth in
the Rent Roll. All construction, painting,
repairs, alterations, improvements and other
work required to be performed by the
landlord under the Existing Leases, and all
of the other obligations of the landlord
required to be performed under the Existing
Leases as of the Closing Date, have been
fully performed and paid for in full by
Seller.
8.2.6 The execution, delivery and performance of
this Agreement by Seller (i) does not and
will not conflict with or result in a breach
of or default under the organizational
documents of Seller, (ii) does not and will
not conflict with or result in a breach of
any condition or provision of, or constitute
a default under, or result in the
acceleration, creation or imposition of any
lien, charge or encumbrance upon the
Properties or any part thereof by reason of
the terms of any contract, mortgage, lien ,
agreement, indenture, instrument, decree or
judgment to which the Seller is a party or
which is or purports to be binding upon
Seller or which affects or purports to
affect the Properties or any part thereof,
and (iii) to the best of Seller's knowledge,
does not and will not breach any statute or
regulation of any governmental authority,
including, but not limited to, applicable
zoning laws and regulations, or any judicial
or administrative order relating to the
Properties or any part thereof or to Seller.
8.2.7 Seller is a duly formed and validly existing
general partnership under the laws of the
Commonwealth of Pennsylvania and has the
full right and authority to enter into this
Agreement and consummate the sale, transfers
and assignments contemplated for it herein,
and each of the persons signing this
Agreement and any other document or
instrument contemplated hereby on behalf of
Seller is or will be authorized to do so.
This Agreement has been duly authorized,
executed and delivered by Seller, and is a
legal, valid and binding obligation of
Seller enforceable in accordance with its
terms. All the documents executed by Seller
which are to be delivered to Buyer at the
Closing will be duly authorized, executed
and delivered by Seller and will be legal,
valid and binding obligations of Seller,
enforceable against Seller in accordance
with their respective terms.
8.2.8 Except as set forth on Exhibit "D", there
are no contracts or other agreements for
services, supplies or materials affecting
the use, operation or management of the
Properties or any part thereof. All of the
contracts and other agreements set forth on
Exhibit "D" are
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in full force and effect and Seller has
neither given nor received a notice of
default thereunder.
8.2.9 All information set forth in the Exhibits
hereto and in the Seller's Documents
furnished to Buyer with respect to the
Properties is true, correct and complete in
all material respects.
8.2.10 Exhibit "Q" attached hereto accurately sets
forth all guarantees and warranties in
existence as to any features of the
Properties. Seller has received no notice
that such guarantees and warranties are not
in full force and effect or that Seller is
in violation of the terms of any of them.
8.2.11 Except for assignments or pledges that will
be terminated or released as of the Closing
Date, Seller has not previously sold,
assigned or pledged the Properties or any
part thereof to any other person, party or
entity. Seller holds good and marketable
title to the Real Property, is the sole
owner of the Personal Property, and legally
and validly holds the Operating Approvals.
Except for security interests that will be
terminated or released as of the Closing
Date, no person, party or entity holds a
security interest in the Personal Property.
8.2.12 Seller does not have and has no knowledge of
any, and Seller is not a party to any,
understanding or agreement with any taxing
or assessing authority respecting the
imposition or deferment of any taxes or
assessments respecting the Properties or any
part thereof. Seller is aware of general
plans for the construction of a new access
ramp to the Pennsylvania Turnpike which will
serve the development in which Hillside
Corporate Center and Corporate Center 15 are
located and for which an assessment is to be
made against all owners of property in the
development. Except for the foregoing and
the property owners' association assessments
as set forth in Exhibit "H", there are no
improvement district or other assessments,
special or otherwise, burdening the
Properties or any part thereof, whether or
not a lien thereon, nor has Seller received
notice of the establishment of any such
district or assessment. Seller has received
no notice and has no knowledge of any
proposed increase in the assessed valuation
of the Properties or any part thereof.
8.2.13 To the best of Seller's knowledge, there is
no existing condemnation action with respect
to the Properties or any part
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thereof or any proposed or threatened
eminent domain or similar proceeding, or
private purchase in lieu of such proceeding,
which would affect the Properties or any
part thereof in any way whatsoever.
8.2.14 Consistent with its current use, the Real
Property is served by all necessary public
and/or private utilities, sewer and water
lines and all necessary easements and
agreements are in full force and effect.
Seller has received no notice or claim
contesting the validity of these easements.
8.2.15 All security deposits are fully funded as to
the principal amount and any interest due on
such deposits as provided for in accordance
with Pennsylvania law. 8.2.16 Insurance
policies covering the Properties to full
replacement value thereof are in force and
effect.
8.2.17 Except for one person employed by Seller at
Winchester Plaza Corporate Center, there are
no employees of Seller employed at the
Properties or any part thereof. Said person
is an "at-will" employee and there is no
employment agreement between Seller and said
employee.
8.2.18 To the best of Seller's knowledge, Seller is
not in default with respect to any liability
or obligations pertaining to the Properties.
8.2.19 To the best of Seller's knowledge, no
portion of the Property 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.
9. DEFAULT AND REMEDIES.
9.1 Buyer. If Seller, 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 Earnest Money Deposit. If Seller's default or
breach was not within Seller's control and was not
willful and intentional, then Buyer shall have no
further right against Seller except the right to
be reimbursed for Buyer's costs and expenses
incurred in connection with this Agreement, which
costs and expenses shall not exceed $50,000.
Otherwise, the right of Buyer to paid the Earnest
Money Deposit shall be in addition to all other
rights and remedies
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of Buyer under this Agreement, at law or in equity,
including, without limitation, the right to specific
performance and injunctive relief.
9.2 Seller. If Buyer, in default of its obligations under
this Agreement fails to consummate the Transaction
pursuant to the terms and conditions of this
Agreement, then Seller may elect as Seller's sole
option hereunder to terminate this Agreement and to
receive the Earnest Money Deposit as liquidated
damages and thereafter Seller and Buyer shall have no
further obligations or liabilities one to the other
hereunder. Seller's election to receive the Earnest
Money Deposit as "liquidated damages" is agreed to,
due to the difficulty, inconvenience and uncertainty
of ascertaining actual damages for such breach by
Buyer and the parties agree that the same is a
reasonable and fair estimate of damages. Seller and
Buyer agree that the liquidated damages clause
contained herein is reasonable and enforceable and
neither party shall challenge the liquidated damages
provision hereof as unenforceable.
10. RISK OF LOSS.
10.1 Casualty. If any Building or any part thereof is
damaged by any casualty prior to Closing, Seller
shall immediately notify Buyer in writing of the same
("Casualty Notice") and if the cost of repairing such
damage is:
(i) equal to or less than ONE HUNDRED
TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($125,000.00), then Seller shall notify
Buyer as to such damage, and Buyer shall
elect whether the Seller shall repair such
damage, and if so, Seller shall restore the
damaged Building as promptly as is
reasonably possible to as good condition as
existed immediately prior to such casualty
and in such event Closing shall be deferred
until such repair and restoration is
substantially completed (but in no event
longer than 120 days); or, Buyer may elect
to proceed with Closing as set forth herein
without repair of the casualty damage and
Buyer shall receive an assignment of
Seller's rights in any insurance proceeds
which remain unpaid to Seller in connection
with such casualty and a credit against the
Purchase Price in the amount of the
deductible under Seller's property casualty
insurance coverage for the Building plus any
amounts previously paid to Seller as
insurance proceeds in connection with such
casualty.
(ii) greater than ONE HUNDRED TWENTY-FIVE
THOUSAND AND NO/100 DOLLARS ($125,000.00),
then Buyer may elect to terminate this
Agreement by giving notice to such effect to
Seller
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not later than the earlier to occur of the
last business day prior to Closing or ten
(10) business days after receipt of the
Casualty Notice (in which event the Earnest
Money Deposit shall be returned to Buyer and
neither Seller nor Buyer shall have any
further obligations or liabilities one to
the other hereunder). If Buyer does not
elect to terminate this Agreement as set
forth in the preceding sentence, the parties
shall proceed with Closing as set forth
herein without repair of the casualty damage
and Buyer shall receive an assignment of
Seller's rights in any insurance proceeds
which remain unpaid to Seller in connection
with such casualty and a credit against the
Purchase Price in the amount of the
deductible under Seller's property casualty
insurance coverage for the Building plus any
amounts previously paid to Seller as
insurance proceeds in connection with such
casualty. Notwithstanding the foregoing, in
the event any Building, or any portion
thereof, is damaged by any casualty, Buyer
may terminate this Agreement as to that
portion only, subject to renegotiation of
the Purchase Price and other relevant terms
of this Agreement.
The Casualty Notice shall include a description of
the damage to the Building and Seller's best estimate
of the cost and time required to repair such damage.
10.2 Eminent Domain. In the event, after the execution
of this Agreement, all or a portion of the
Properties is taken by eminent domain or becomes
subject to a taking by eminent domain or a deed in
lieu of condemnation prior to Closing, Seller shall
immediately notify Buyer in writing of the same
("Eminent Domain Notice") and Buyer must elect (as
its sole and exclusive remedy) to either (i)
terminate this Agreement by giving notice to such
effect (in which event neither Seller nor Buyer shall
have any further obligations or liabilities one to
the other, and the Earnest Money Deposit shall be
returned to Buyer) or (ii) proceed with Closing as
set forth herein and accept title to the Properties
subject to such taking or proceeding together with an
assignment of all of Seller's rights and interest in
and to any proceeds or compensation which remain
unpaid to Seller in connection with such taking and a
credit against the Purchase Price for any amounts
previously paid to Seller as condemnation proceeds or
compensation in connection with such taking.
11. ADDITIONAL COVENANTS.
11.1 Notice of meetings. With respect to any meeting
or hearing of any nature of or by any governmental
body or agency or their representatives at which
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the Properties or any part thereof is expected to be
discussed at such meeting or hearing of which Seller
receives notice after the date of this Agreement and
until the Closing Date, Seller hereby covenants that
it will give prompt notice thereof to Buyer.
12. MISCELLANEOUS.
12.1 Notices. Any notice, request, demand, instruction
or other communication to be given to either party
hereunder (except those required to be delivered
at Closing) shall be in writing, and shall be
deemed to be delivered upon the earlier to occur
of (i) actual receipt if delivered by hand, (ii)
upon delivery to the courier, if sent by
commercial courier (e.g. Airborne, UPS, Federal
Express) to the address indicated, or (iii) if
sent by FAX to the number set forth below, on the
day of receipt if received by 5:00 p.m. local
time, or if received after 5:00 p.m. local time,
on the next following business day; provided,
however, copies of all notices delivered by FAX
shall be forwarded to the recipient thereof by
courier or United States' mail.
IF TO BUYER:
American Real Estate Investment L.P.
620 West Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Attention: Stephen J. Butte
Fax No. (610) 834-9560
WITH COPIES TO:
Henry F. Miller, Esquire
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, PA 19102
Fax No. (215) 977-2033
IF TO SELLER:
Szeles Real Estate Development
Company/Szeles Investment Company
5112 Lancaster Street
Harrisburg, PA 17111
Attention: A. Richard Szeles
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Fax No. (717) 561-0481
WITH COPIES TO:
George A. Vaughn, III, Esq. (Attorney for Seller)
3904 Trindle Road
Camp Hill, PA 17011
Fax No. (717) 975-9105
The FAX number, addresses and addressees for the purpose of this Section may be
changed by either party by giving written notice of such change to the other
party in the manner provided herein.
12.2 Attorneys' Fees. Subject to the limitations set
forth in Section 9.2, in the event it becomes
necessary for either Buyer or Seller to file a
suit to enforce this Agreement or any provisions
contained herein, the prevailing party in such
suit shall be entitled to recover, in addition to
all other remedies or damages, reasonable
attorneys' fees and costs of court incurred in
connection with such suit.
12.3 Entire Agreement and Modification. This Agreement
constitutes the entire agreement between Buyer and
Seller and supersedes all prior agreements and
understandings (if any), oral or written, relating
to the subject matter hereof. Notwithstanding the
foregoing, in the event the Transaction is not
consummated for any reason, Buyer and Seller shall
preserve and maintain the confidentiality of the
documents, material, data and information
exchanged by them in accordance with the
provisions contained in a certain Confidentiality
Agreement between them, except as may be required
by law, rule, regulation or order of court. This
Agreement cannot be amended, modified or altered
except by an agreement in writing executed by the
party against whom enforcement is sought.
12.4 Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto,
and their respective successors, permitted assigns
and legal representatives.
12.5 Expiration. This Agreement has been executed by
the parties on the dates set forth below their
respective signatures. It is understood that the
obligations of Buyer under this Agreement will
terminate ten (10) calendar days after the date of
Buyer's execution of this Agreement unless the
Seller has duly executed and returned a copy of
this Agreement to Buyer prior to such time.
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<PAGE>
12.6 Assignment. 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.
12.7 Headings. Section headings are for convenience of
reference only and shall in no way affect the
interpretation of this Agreement.
12.8 Governing Law. The substantive laws of the
Commonwealth of Pennsylvania and the applicable
federal laws of the United States of America shall
govern the validity, construction, enforcement and
interpretation of this Agreement.
12.8.1 BUYER AND SELLER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED UPON OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS TRANSACTION.
12.8.2 BUYER AND SELLER HEREBY KNOWINGLY AND
VOLUNTARILY AGREE THAT ANY ACTION OR
PROCEEDING AGAINST EITHER PARTY ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS
TRANSACTION SHALL BE BROUGHT IN AND ONLY IN
THE COURT OF COMMON PLEAS OF DAUPHIN COUNTY,
PENNSYLVANIA, AND BUYER EXPRESSLY WAIVES ANY
AND ALL DEFENSES TO THE EXERCISE OF PERSONAL
JURISDICTION BY SUCH COURT.
12.9 References to "Seller". Seller represents that
Winchester Plaza Corporate Center, Treeview Corporate
Center, Hillside Corporate Center and Corporate
Center 15 are owned by SREDC and that Executive Park
is owned by SIC. All references to "Seller", when
made with specific reference to Executive Park, shall
be intended to mean SIC; in all other instances,
"Seller" shall be intended to apply to SREDC or both
SREDC and SIC, as the context may indicate.
Notwithstanding the foregoing, the liability of SREDC
and SIC under this Agreement is intended to be, and
shall be construed to be, joint and several.
12.10 Full Execution. This Agreement shall be deemed fully
executed and binding upon Buyer and Seller if, as and
when both Buyer and Seller have
26
<PAGE>
executed this Agreement as set forth below and fully
executed copies have been delivered to Buyer and
Seller.
12.11 Counterpart Execution. This Agreement may be executed
in one or more counterpart copies which, taken
together, shall constitute one and the same
instrument.
12.12 Exhibits and Recitals. The Exhibits annexed hereto
and the recitals set forth above are made a part
hereof and incorporated into the body of this
Agreement by reference.
12.13 Time of the Essence; Computing Time. Time is
of the essence of this Agreement. 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 Pennsylvania are
or may elect to be closed.
12.14 Waiver of Tender of Deed and Purchase Monies. The
tender of executed deeds 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 deeds
and/or of the concurrent obligation of Buyer to pay
the portion of the Purchase Price payable at Closing.
12.15 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.
12.16 Survival. The representations and warranties of
Seller set forth in Sections 4.5 and 8 of this
Agreement shall survive a termination of this
Agreement or Closing for a period of 12 months, and
thereafter shall survive to the extent that Buyer
shall have given to Seller written notice of a breach
thereof. The obligations of Seller and Buyer pursuant
to Sections 2.4, 4.4, 5.4, 6.1, 13 and 14 of this
Agreement shall survive Closing. Except as otherwise
provided in the preceding two sentences of this
Section 12.16,
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<PAGE>
the agreements of Seller and Buyer set forth in this
Agreement shall not survive Closing.
13. 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 and 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.
14. 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 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.
15. ADDITIONAL OBLIGATIONS OF SELLER AND BUYER. At Closing, Seller and
Buyer shall execute, acknowledge and deliver an Agreement, in
recordable form, providing, inter alia, as follows:
(a) Right of First Offer/Right of First Refusal.
(i) The term "Subject Property" shall mean
that certain parcel of land situate in the Township
of Lower Allen, County of
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Cumberland, State of Pennsylvania, which is more
fully described on Exhibit "A-3" attached hereto [a
full metes and bounds legal description will be
attached for the building being constructed by Seller
which is to be the subject of this right of first
refusal]; and the term "Term" shall mean the period
of time commencing as of the date of this Agreement
and ending eighteen months after the date of this
Agreement.
(ii) Seller agrees not to sell the Subject
Property during the Term except in strict compliance
with the terms and provisions of the Agreement
contemplated by this Paragraph 15.
(iii) If, at any time during the Term,
Seller desires to sell the Property, Seller shall
give to Buyer written notice ("Sale Notice")
specifying the terms and conditions pursuant to which
Seller desires to sell the Subject Property. The Sale
Notice shall contain, at a minimum, the purchase
price, the terms on which the purchase price is
payable, the condition pursuant to which title to the
Subject Property is to be conveyed, and the closing
date (which closing date shall be not less than sixty
(60) days after the date on which Seller delivers the
Sale Notice to Buyer). Buyer shall have the right to
purchase the Subject Property pursuant to the terms
and provisions of the Sale Notice by giving to Seller
written notice ("Acceptance Notice") that Buyer
intends to purchase the Subject Property pursuant to
the terms and provisions of the Sale Notice. If Buyer
gives the Acceptance Notice to Seller, Buyer shall
thereafter purchase the Subject Property from Seller
upon the terms set forth in the Sale Notice. If Buyer
has not given to Seller an Acceptance Notice within
ten days after delivery to Buyer of the Sale Notice,
then Seller shall have the right (for a period not
exceeding 180 days) to sell the Subject Property to
any purchaser pursuant to the terms and provisions of
the Sale Notice including a purchase price variance
of up to three percent of the purchase price set
forth in the Sale Notice (or pursuant to terms and
provisions which are, in the aggregate, more
favorable to Seller than the terms and provisions
contained in the Sale Notice). If Seller gives to
Buyer a Sale Notice and Buyer does not timely give to
Seller an Acceptance Notice, and if Seller does not
thereafter (within 180 days) sell the Subject
Property in accordance with the terms and provisions
of the Sale Notice, then the rights of Buyer pursuant
to this Paragraph shall continue in full force and
effect.
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<PAGE>
(iv) If, during the Term, Seller receives a
written offer ("Unsolicited Offer") from an unrelated
third party ("Offeror") setting forth the terms and
provisions pursuant to which such Offeror desires to
purchase the Subject Property (such terms and
provisions to contain, at a minimum, the terms and
provisions set forth above to be contained in a Sale
Notice) and if Seller desires to accept the
Unsolicited Offer, Seller shall give to Buyer a copy
of the Unsolicited Offer. Buyer shall have the right
to purchase the Subject Property pursuant to the
terms and provisions of the Unsolicited Offer by
giving to Seller written notice ("Acceptance Notice")
that Buyer intends to purchase the Subject Property
pursuant to the provisions of the Unsolicited Offer.
If Buyer gives the Acceptance Notice to Seller, Buyer
shall thereafter purchase the Subject Property from
Seller upon the terms set forth in the Unsolicited
Offer. If Buyer has not given to Seller an Acceptance
Notice within ten days after delivery to Buyer of the
Unsolicited Offer, then Seller shall have the right
(for a period not exceeding 180 days) to sell the
Subject Property to the Offeror pursuant to the terms
and provisions of the Unsolicited Offer (or pursuant
to the terms and provisions which are, in the
aggregate, more favorable to Seller than the terms
and provisions contained in the Unsolicited Offer).
If Seller gives to Buyer an Unsolicited Offer and
Buyer does not timely give to Seller an Acceptance
Notice, and if Seller does not thereafter (within 180
days) sell the Subject Property to the Offeror in
accordance with the terms and provisions of the Sale
Notice, then the rights of Buyer pursuant to this
Paragraph shall continue in full force and effect.
(v) Anything to the contrary notwithstanding
in this subparagraph 15(a), Seller shall have the
right to grant to any tenant or prospective tenant
(unrelated to Seller) of the Subject Property, as a
material inducement to remain as a tenant at the
Subject Property or to enter into a lease with Seller
for space in the Subject Property a right of first
offer/right of first refusal upon the same terms and
provisions as those granted to Buyer herein ("Tenant
Right"). Such Tenant Right shall be superior to the
Right of First Offer/Right of First Refusal granted
herein to Buyer, but if such Tenant Right is not
exercised by the tenant, Buyer's Right of First
Offer/Right of First Refusal shall not be
extinguished.
(b) Noncompetition.
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<PAGE>
(i) For the purposes of this subparagraph
(b), the term "Noncompetition Term" shall mean the
period of time commencing as of the date of this
Agreement and ending on the sooner to occur of (A)
December 1, 2000; or (B) the date on which at least
90% of the rentable floor area of the Subject
Property is occupied by tenants pursuant to
arm's-length leases with Seller.
For the purposes of this subparagraph (b), the term
"Prospect" shall mean any party which is an occupant
of any space within Corporate Center 15 or Hillside
Corporate Center (whether as a tenant or a
subtenant).
(ii) Seller agrees that during the
Noncompetition Term, Seller will not negotiate to
lease, nor enter into any lease, for any space within
the Subject Property with any Prospect.
Notwithstanding the foregoing, during the
Noncompetition Term, Seller shall be able to
negotiate to lease or enter into a lease for space
within the Subject Property with any Prospect if: (1)
the Prospect has given to Buyer written notice of
Prospect's intent not to renew its existing lease
with Buyer; (2) the Buyer has given to the Prospect
written notice of Buyer's intent to terminate or not
to renew its existing lease with the Prospect; or (3)
the Prospect seeks to lease space in addition to that
under an existing lease and such additional space is
unavailable in either Corporate Center 15 or Hillside
Corporate Center.
(c) Binding Effect. The terms and provisions of the
Agreement contemplated by this Paragraph 15 shall be binding
upon and shall inure to the benefit of both Seller and Buyer,
their successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been
executed by the parties hereto in multiple counterparts and
is effective as of the date hereof.
SELLER:
SZELES REAL ESTATE DEVELOPMENT
COMPANY
A Pennsylvania General
Partnership
By: /s/ Alexander R. Szeles
Alexander R. Szeles, Partner
By: /s/ A. Richard Szeles
A. Richard Szeles, Partner
By: /s/ Brian J. Szeles
Brian J. Szeles, Partner
SZELES INVESTMENT COMPANY
A Pennsylvania General Partnership
By: /s/ Alexander R. Szeles
Alexander R. Szeles, Partner
By: /s/ A. Richard Szeles
A. Richard Szeles, Partner
By: /s/ Brian J. Szeles
Brian J. Szeles, Partner
BUYER:
AMERICAN REAL ESTATE
INVESTMENT, L.P.
32
<PAGE>
By: AMERICAN REAL ESTATE
INVESTMENT CORPORATION, general partner
By: /s/ Stephen J. Butte
Stephen J. Butte, Vice President
33
<PAGE>
Exhibit 10-3
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered
into as of the 30th day of April, 1998, between AMERICAN REAL ESTATE
INVESTMENT, L.P., a Delaware limited partnership ("Acquiror"), AMERICAN REAL
ESTATE INVESTMENT CORPORATION, a Maryland corporation (the "REIT") and the
other parties listed on the signature pages hereto. The entities which are to
contribute Properties or the Additional Properties (as each such term is
defined below) to Acquiror by deed transfer or by assignment of IDA Lease
Agreement (as defined below) pursuant to this Agreement are hereinafter
sometimes referred to individually as a "Deed Contributor" and collectively
as the "Deed Contributors" (each of which potential Deed Contributors are set
forth on Schedule B attached to this Agreement); the parties or entities
which are to contribute Properties or the Additional Properties to Acquiror
by Partnership Interest Assignment (as defined below) pursuant to this
Agreement are hereinafter sometimes referred to individually as an "Interest
Contributor" and collectively as the "Interest Contributors" (each of which
potential Interest Contributors are set forth on Schedule B attached to this
Agreement); and the party which is to contribute the Management Contracts (as
defined below) to Acquiror by Assignment of Management Contracts (as defined
below) pursuant to this Agreement is hereinafter referred to as the
"Management Contributor" (which such Management Contributor is set forth on
Schedule B attached to this Agreement). The Deed Contributors, the Interest
Contributors and the Management Contributor are hereinafter sometimes
referred to individually and collectively, as the context requires, as
"Contributor."
RECITALS
A. The Owners (as defined below) are the owners of certain fee or
other interests (as more fully described in Section 1A) in (i) fourteen (14)
office and industrial buildings known as 5000 Campuswood Drive, East
Syracuse, New York; 5010 Campuswood Drive, East Syracuse, New York; 5015
Campuswood Drive, East Syracuse, New York; 250 South Clinton Street,
Syracuse, New York; 507 Plum Street, Syracuse, New York; 308 Maltbie Street,
Syracuse, New York; 400 West Division Street, Syracuse, New York; 1045 James
Street, Syracuse, New York; 50-60 Lakefront Boulevard (Waterfront I),
Buffalo, New York; One Apollo Drive, Glens Falls, New York; 5009 Campuswood
Drive, East Syracuse, New York; 115-125 Indigo Creek Drive, Greece, New York;
One Park Place, Syracuse, New York; and One Clinton Square, Syracuse, New
York (each individually, a "Property" and all of which are herein
collectively referred to as, the "Properties"), (ii) one office building
known as 40 LaRiviere Drive (Waterfront II), Buffalo, New York ("Waterfront
II") and (iii) two (2) office buildings known as One City Centre-Chestnut
Street, Rochester, New York ("One City Centre") and Three City Centre (180
South Clinton Street), Rochester, New York ("Three City Centre"); and the
Management Contributor is a party to those certain management contracts set
forth in Schedule A (the "Management Contracts"). Waterfront II, One City
Centre and
<PAGE>
Three City Centre are hereinafter sometimes referred to individually as an
"Additional Property" and collectively as the "Additional Properties."
B. The Deed Contributors shall contribute and convey to Acquiror all
of their interests relating to those Properties or Additional Properties
which will be contributed to Acquiror by deed transfer or assignment of IDA
Lease Agreement pursuant to this Agreement (the "Deed Properties"); the
Interest Contributors shall contribute and convey to Acquiror all of their
partnership interests (the "Partnership Interests") in the entities which
will be contributed to Acquiror by Partnership Interest Assignment pursuant
to this Agreement (each, a "Contributed Entity" and collectively, the
"Contributed Entities") (each of which potential Partnership Interests are
listed next to each potential Contributed Entity on Schedule B attached to
this Agreement, each of which Contributed Entity owns fee or leasehold title
to the Property, Properties or Additional Properties, as the case may be, set
forth next to such Contributed Entity on Schedule B (the "Partnership
Properties")); and Management Contributor shall contribute and convey to
Acquiror all of its interest in the Management Contracts; and Acquiror
desires to acquire and accept same from Contributor, each upon and subject to
the terms and conditions of this Agreement. Each Deed Contributor and
Contributed Entity is sometimes hereinafter referred to as an "Owner" and the
Deed Contributors and the Contributed Entities are sometimes hereinafter
referred to collectively as the "Owners."
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, Acquiror and Contributor agree that ownership in and to the
following shall be, directly (i.e., by deed transfer by the Owner owning the
following or by assignment of IDA Lease Agreement by the lessee thereunder)
or indirectly (i.e., by Partnership Interest Assignment of the Contributed
Entity owning the following), transferred by Contributor to Acquiror at the
Closing (as defined below) with respect to the Properties, at the Second
Closing (as defined below) with respect to Waterfront II, and at the Option
Closing (as defined below) with respect to One City Centre and Three City
Centre, as contemplated by this Agreement:
A. All of the following described items related to
the Properties or the Additional Properties, as the case may be:
(i) other than with respect to those Properties or the
Additional Properties which are subject to IDA Lease Agreements, those
certain parcels of real estate more particularly described in Exhibit A
attached to this Agreement; together with all and singular the
easements, rights of way, covenants, agreements, rights, tenements,
hereditaments and appurtenances thereunto now or hereafter belonging or
appertaining (collectively, the "Land"), and any development or other
rights associated with any Property or Additional Properties, as the
case may be;
(ii) other than with respect to those Properties or
Additional Properties which are subject to IDA Lease Agreements, all
rights, if any, in 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 and all insurance proceeds or
condemnation awards received by or for the benefit of, or if not so
received, for which the rights thereto have accrued for the benefit of
Contributor, which on the Closing Date (as defined below), the Second
Closing Date (as defined
2
<PAGE>
below), or the Option Closing Date (as defined below), as the case may
be, have not been expended to restore or repair the applicable
Property or Additional Property, as the case may be (all of the
foregoing being included within the term "Land");
(iii) other than with respect to those Properties or
Additional Properties which are subject to IDA Lease Agreements and to
be conveyed subject to the IDA Lease Agreements, 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, (i) the fourteen (14) office
and industrial buildings known as 5000 Campuswood Drive, East Syracuse,
New York; 5010 Campuswood Drive, East Syracuse, New York; 5015
Campuswood Drive, East Syracuse, New York; 250 South Clinton Street,
Syracuse, New York; 507 Plum Street, Syracuse, New York; 308 Maltbie
Street, Syracuse, New York; 400 West Division Street, Syracuse, New
York; 1045 James Street, Syracuse, New York; 50-60 Lakefront Boulevard
(Waterfront I), Buffalo, New York; One Apollo Drive, Glens Falls, New
York; 5009 Campuswood Drive, East Syracuse, New York; 115-125 Indigo
Creek Drive, Greece, New York; One Park Place, Syracuse, New York; and
One Clinton Square, Syracuse, New York, (ii) Waterfront II, (iii) One
City Centre (if Acquiror has delivered the Additional Property Notice
(as defined below) with respect to One City Centre) and (iv) Three City
Centre (if Acquiror has delivered the Additional Property Notice with
respect to Three City Centre); each 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");
(iv) 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, Additional 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, and excluding those items listed on Exhibit B as "Excluded
Personal Property";
(v) 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, Additional
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 in Contributor's
possession or control, booklets, manuals and promotional and
advertising materials concerning the Properties, Additional 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,
Additional Properties or any part thereof;
(vi) 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,
Additional Properties or any part thereof, including, without
limitation, claims, choses in action, contract rights and telephone
exchange numbers; provided, that, notwithstanding anything contained
herein to the contrary, the parties hereto hereby acknowledge and agree
that Contributor is not, pursuant to the terms of this Agreement,
transferring any of its right, title and interest in and
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to the name, or the use of the name, "Pioneer," except that (i) for so
long as Acquiror shall, directly or indirectly, hold fee or leasehold
title to any of the Properties located in Pioneer Business Park in
East Syracuse, New York and Acquiror has the right to name such office
park, Acquiror shall continue to name such office park "Pioneer
Business Park" and (ii) Acquiror shall have the right to continue to
use the name "Pioneer" to the extent such name is part of the name of
a Contributed Entity but only for so long as it takes Acquiror (but in
no event to exceed sixty (60) days from the date of Closing) to change
the name of such Contributed Entity;
(vii) all currently effective 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, Additional
Properties or any part thereof, including those agreements and
understandings listed on Schedule 8A(xii) (collectively, the "Service
Contracts"), a list of which is attached to this Agreement as Exhibit C
(other than those agreements and understandings listed on Schedule
8A(xii));
(viii) each Owner's interest, as landlord, in all leases
for portions of the Properties or Additional Properties, as the case
may be. A schedule of all current leases affecting the Properties,
Additional Properties or any part thereof (collectively, the "Leases,"
with such schedule being referred to in this Agreement as the "Rent
Roll"), including each tenant's name, a description of the space
leased, the amount of annual fixed rent due and the amount of security
deposit paid, if any, the term of each Lease, and a description of any
right to renew or extend, is attached to this Agreement as Exhibit D;
and
(ix) With respect to Properties or Additional Properties
transferred subject to IDA Lease Agreements, Owner's interest, as
tenant, in all IDA Lease Agreements (as defined below).
Notwithstanding anything contained herein to the contrary, the parcel of vacant
land adjacent to One City Centre and Three City Centre which is owned by Pioneer
Properties Company of Rochester (the "Vacant Land") shall not be transferred to
Acquiror, but shall be transferred by Pioneer Properties Company of Rochester to
another entity designated by Contributor, prior to the Option Closing, free of
any rights of Acquiror (other than with respect to the rights granted to
Acquiror pursuant to Section 3G following the Option Closing, if applicable).
B. With respect to Properties or Additional Properties
to be contributed to Acquiror by Partnership Interest Assignment, all right,
title and interest in and to the Partnership Interests.
C. All of the Management Contracts.
D. Nothing herein shall be deemed to prevent
Contributor from distributing cash from a Contributed Entity at or prior to
the applicable closing.
2. EARNEST MONEY
Within three (3) business days after the execution of this
Agreement by Contributor and Acquiror, Acquiror shall deliver to First American
Title Insurance Company located in Philadelphia, Pennsylvania ("Escrowee") a
check payable to Escrowee or wire transferred federal funds in the amount of
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Five Hundred Thousand Dollars ($500,000) (the "Initial Earnest Money"). Within
three (3) business days after the expiration of the Inspection Period (as
defined below) (including any extension thereof), if Acquiror has not delivered
a Termination Notice (as defined below) to Contributor prior to the expiration
of the Inspection Period pursuant to Section 9, Acquiror shall deliver to
Escrowee a check payable to Escrowee or wire transferred federal funds in the
amount of Five Hundred Thousand Dollars ($500,000) (the "Additional Earnest
Money"). The Initial Earnest Money, together with any and all interest earned
thereon (net of any investment costs), and the Additional Earnest Money, if
applicable, 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 the
REIT. The REIT is a real estate investment trust whose common stock is listed on
the American Stock Exchange (the "AMEX").
B. Contribution Consideration. (i) The aggregate
consideration to be paid to Contributor by Acquiror at the Closing (the
"Contribution Consideration") shall be as follows (subject to adjustment
pursuant to Sections 3L, 3P and 10):
(a) for the Deed Properties and for the Partnership
Interests related to the Contributed Entities (other than with
respect to Additional Properties), the aggregate consideration
shall consist of:
(1) that number of OP Units (as defined below) equal
to (i) 2,182,113 OP Units; minus (ii) the amount of
OP Units equal to (a) the aggregate amount of any
prorations described in Section 6E ("Prorations")
with respect to the Properties 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 with respect to
the Properties credited, as of the Closing Date, to
Contributor divided by (y) $16.50; and
(2) Seventy Nine Million Two Hundred Thirty One
Thousand Three Hundred Eighty Nine and 00/100 Dollars
($79,231,389.00) (as such amount may be increased
pursuant to Section 3B(v) below, the "Cash Amount");
minus the sum of all of the indebtedness (as set
forth on Exhibit F attached hereto) of Contributor
(including unpaid principal and interest, and any and
all prepayment penalties and other expenses incurred
as a result of any prepayment of such indebtedness by
Acquiror at Closing, other than with respect to the
Assumed Indebtedness), as of the Closing Date, on, or
relating to, the Properties (the "Existing
Indebtedness"); minus the amount reimbursed to
Contributor pursuant to Section 3M relating to the
Properties.
(b) for the Management Contracts relating to the
Properties, the aggregate
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contribution consideration shall consist of 284,592 OP Units.
Notwithstanding the foregoing sentence, as mutual incentive
to consummate the Second Closing, only 260,483 OP Units
allocable to the Management Contracts relating to the
Properties shall be delivered at the Closing and 24,109
OP Units allocable to the Management Contracts relating to
the Properties shall be delivered if and when the Second
Closing occurs.
(ii) The aggregate consideration to be paid to the
Contributor of Waterfront II by Acquiror at the Second Closing
(the "Waterfront II Consideration") for Waterfront II shall
consist of (subject to adjustment pursuant to Sections 3L, 3P
and 10):
(a) that number of OP Units equal to (i)
139,388 OP Units; minus (ii) the amount of OP Units
equal to (a) the aggregate amount of any Prorations
with respect to Waterfront II credited, as of the
Second 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 with
respect to Waterfront II credited, as of the Second
Closing Date, to Contributor divided by (y) $16.50;
and
(b) Eight Million and 00/100 Dollars
($8,000,000.00) (as such amount may be increased
pursuant to Section 3B(v) below, the "Waterfront II
Cash Amount"); minus the sum of all of the
indebtedness (as set forth on Exhibit F attached
hereto) of Contributor (including unpaid principal
and interest, and any and all prepayment penalties
and other expenses incurred as a result of any
prepayment of such indebtedness by Acquiror at the
Second Closing), as of the Second Closing Date, on,
or relating to, Waterfront II (the "Waterfront II
Indebtedness"); minus the amount reimbursed to
Contributor pursuant to Section 3M relating to
Waterfront II.
(iii) If Acquiror has delivered the Additional
Property Notice and Contributor has not exercised its option
under Section 3L(iii) to delete One City Centre from this
Agreement, the aggregate consideration to be paid to the
Contributor of One City Centre by Acquiror at the Option
Closing (the "One City Centre Consideration") for One City
Centre shall consist of (subject to adjustment pursuant to
Sections 3L, 3P and 10):
(a) that number of OP Units equal to (i)
103,132 OP Units; minus (ii) the amount of OP Units
equal to (a) the aggregate amount of any Prorations
with respect to One City Centre credited, as of the
Option 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 with
respect to One City Centre credited, as of the Option
Closing Date, to Contributor divided by (y) $16.50;
and
(b) Six Million Four Hundred Sixty One
Thousand Five Hundred Thirty Five and 00/100 Dollars
($6,461,535)(as such amount may be increased pursuant
to Section 3B(v) below, the "One City Centre Cash
Amount"); minus the sum of all of the indebtedness
(as set forth on Exhibit F attached hereto) of
Contributor (including unpaid principal and interest,
and any and all prepayment penalties and other
expenses incurred as a result of any prepayment of
such indebtedness by Acquiror at the Option Closing),
as of the Option Closing Date, on, or relating to,
One City Centre (the "One City Centre Indebtedness");
minus the amount reimbursed to Contributor pursuant
to Section 3M relating to One City Centre; and
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(c) for the Management Contract relating to
One City Centre, the aggregate contribution
consideration shall consist of 8,555 OP Units.
(iv) If Acquiror has delivered the Additional
Property Notice, the aggregate consideration to be paid to the
Contributor of Three City Centre by Acquiror at the Option
Closing (the "Three City Centre Consideration") for Three City
Centre shall consist of (subject to adjustment pursuant to
Sections 3L, 3P and 10):
(a) that number of OP Units equal to (i)
247,369 OP Units; minus (ii) the amount of OP Units
equal to (a) the aggregate amount of any Prorations
with respect to Three City Centre credited, as of the
Option 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 with
respect to Three City Centre credited, as of the
Option Closing Date, to Contributor divided by (y)
$16.50; and
(b) Seventeen Million Seventeen Thousand Two
Hundred Ninety Six and 00/100 Dollars ($17,017,296)
(as such amount may be increased pursuant to Section
3B(v) below, the "Three City Centre Cash Amount");
minus the sum of all of the indebtedness (as set
forth on Exhibit F attached hereto) of Contributor
(including unpaid principal and interest, and any and
all prepayment penalties and other expenses incurred
as a result of any prepayment of such indebtedness by
Acquiror at the Option Closing), as of the Option
Closing Date, on, or relating to, Three City Centre
(the "Three City Centre Indebtedness"); minus the
amount reimbursed to Contributor pursuant to Section
3M relating to Three City Centre; and
(c) for the Management Contract relating to
Three City Centre, the aggregate contribution
consideration shall consist of 22,112 OP Units.
(v) (a) Contributor may deliver a written notice (the
"Cash Notice") to Acquiror not later than June 1, 1998
electing to increase the Cash Amount, Waterfront II Cash
Amount, One City Centre Cash Amount and Three City Centre Cash
Amount by up to $19,289,780 in the aggregate (the "Additional
Cash Amount"), with a resulting decrease in the number of OP
Units under Section 3B(i)(a)(1), Section 3B(ii)(a), Section
3B(iii)(a) and Section 3B(iv)(a), respectively, equal to the
Additional Cash Amount allocable to each Property and
Additional Property (pursuant to a revised Schedule 3B(i) to
be delivered by Contributor concurrently with the Cash
Notice), divided by $16.50. Whether or not a Cash Notice is
delivered, Contributor will deliver to Acquiror not later than
June 1, 1998 a revised Schedule 3B(i) setting forth the amount
of cash and OP Units comprising the Contribution Consideration
for each Property and Additional Property.
(b) If, after the Closing, the Additional
Cash Amount is less than $19,289,780 in the
aggregate, Contributor may deliver a written notice
(each, an "Increase Notice") to Acquiror (1) not
later than 15 business days prior to the Second
Closing Date electing to increase the Waterfront II
Cash Amount (the "Second Increase"), and (2) not
later than 15 business days prior to the Option
Closing Date electing to increase the One City Centre
Cash Amount and/or Three City Centre Cash Amount (the
"Option Increase"), with a resulting decrease in the
number of OP Units under Section 3B(ii)(a), Section
3B(iii)(a) and/or Section 3B(iv)(a), respectively,
equal to the Second Increase allocable to Waterfront
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II and the Option Increase allocable to One City
Centre and/or Three City Centre (pursuant to a
revised Schedule 3B(i) to be delivered by Contributor
concurrently with an Increase Notice), divided by
$16.50; provided, however, that the sum of the Second
Increase and the Option Increase may not exceed
$500,000 in the aggregate, and the sum of the
Additional Cash Amount, the Second Increase and the
Option Increase may not exceed $19,289,780 in the
aggregate.
The Waterfront II Consideration, One City Centre Consideration, if any,
and Three City Centre Consideration, if any, are hereinafter sometimes
referred to individually and collectively as the "Additional
Consideration." If the calculation of the Contribution Consideration,
or the Additional Consideration, as the case may be, in accordance with
the foregoing provisions would result in a fraction of an OP Unit being
delivered to a Contributor, then such fraction shall be rounded to the
nearest whole number. The Properties are to be contributed to Acquiror
(directly or indirectly) subject to all Existing Indebtedness, which is
not to exceed the Cash Amount; minus the amount reimbursed to
Contributor pursuant to Section 3M relating to the Properties; minus
the amount of Existing Indebtedness which any Properties which become
Deleted Properties (as defined below), Contributor Deleted Properties
(as defined below) or Eliminated Properties (as defined below) are
subject to. Waterfront II is to be contributed to Acquiror (directly or
indirectly) subject to the Waterfront II Indebtedness, which is not to
exceed the Waterfront II Cash Amount minus the amount reimbursed to
Contributor pursuant to Section 3M relating to Waterfront II. One City
Centre is to be contributed to Acquiror (directly or indirectly)
subject to the One City Centre Indebtedness, which is not to exceed the
One City Centre Cash Amount; minus the amount reimbursed to Contributor
pursuant to Section 3M relating to One City Centre. Three City Centre
is to be contributed to Acquiror (directly or indirectly) subject to
the Three City Centre Indebtedness, which is not to exceed the Three
City Centre Cash Amount; minus the amount reimbursed to Contributor
pursuant to Section 3M relating to Three City Centre. The Contribution
Consideration and Additional Consideration are allocated amongst (i)
the Properties and Additional Properties in proportion to each
Property's and Additional Property's aggregate value, as set forth in
Schedule 3B(i), and (ii) the Management Contracts in proportion to each
Management Contract's aggregate value, as set forth in Schedule 3B(ii).
C. Issuance of OP Units. Units of limited partnership interest
in Acquiror (the "OP Units") shall be issued at the Closing (with respect to the
Properties), the Second Closing (with respect to Waterfront II) or the Option
Closing (with respect to One City Centre and Three City Centre) in the names of
and delivered to those recipients identified by Contributor to Acquiror who have
executed and delivered to Acquiror at Closing, the Second Closing or the Option
Closing, as the case may be, the OP Unit Recipient Agreement (as defined below)
(the "OP Unit Recipients"). At least 10 business days prior to the Closing, the
Second Closing or the Option Closing, as the case may be, Contributor shall
deliver to Acquiror Exhibit G to be attached hereto, listing such OP Unit
Recipients and the number of OP Units allocated to each of them. With respect to
the first Partnership Record Date (as defined below) on or after the Closing,
the Second Closing and the Option Closing, as the case may be, for distributions
by Acquiror as contemplated by the Partnership Agreement (as defined below),
distributions payable with respect to the OP Units issued pursuant to this
Agreement shall be made to the OP Unit Recipients on a pro rata basis based upon
the number of days during the calendar quarter preceding such Partnership Record
Date that the OP Unit Recipients held such OP Units. "Partnership Record Date"
shall mean the record date established by the REIT, as general partner of
Acquiror, for any particular distribution of Net Operating Cash Flow (as defined
in and pursuant to the Partnership Agreement). The REIT hereby covenants and
agrees that the first Partnership Record Date on or after the Closing, the
Second Closing and the Option Closing, as the case
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may be, will be the same as the record date for distributions to the
stockholders of the REIT.
After the applicable Lock-up Period (as defined below) the OP
Units issued at the Closing, the Second Closing and the Option Closing, as the
case may be, 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 (subject to the anti-dilution provisions
set forth in the Partnership Agreement), 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 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. The REIT agrees that it will use its
commercially reasonable efforts to obtain such stockholder approval, including
presenting such matter, with management's endorsement, to the REIT's
stockholders at the next annual or special meeting of stockholders following the
Closing, and to present such matter at each subsequent meeting for at least
three years from the Closing Date if the necessary stockholder approval is not
obtained. If such stockholder approval is not obtained by the end of the Lock-Up
Period (as defined below), each OP Unit Recipient may exercise its Conversion
Right (as defined in the Partnership Agreement) for those OP Units which are no
longer restricted pursuant to Section 3E, and shall be entitled to receive cash,
but not Conversion Shares, pursuant to the Partnership Agreement (without regard
to the second sentence in Section 12.6 of the Partnership Agreement).
D. Transfer Restrictions. Each OP Unit Recipient, by his
execution and delivery of the OP Unit Recipient Agreement, agrees that he may
only offer, sell, offer or contract to sell, transfer, assign, grant any option
for the sale of, 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 OP Unit Recipient
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. The OP
Unit Recipient Agreement shall reflect the foregoing.
E. Lock-Up Period. Each OP Unit Recipient agrees by his
execution of the OP Unit Recipient Agreement that for a period of twelve (12)
months following the Closing (the "First Anniversary") with respect to OP Units
issued at the Closing, and for a period of six (6) months following the Second
Closing or Option Closing (or until the First Anniversary, whichever is later)
with respect to OP Units issued at the Second Closing or Option Closing (each as
applicable, 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), or effect or seek to effect a Transfer of
any or all of the OP Units delivered to the OP Unit Recipient at the Closing,
the Second Closing or the Option Closing, respectively; provided that the
foregoing transfer restrictions shall not apply to (i) pledges of, or
encumbrances on, OP Units in favor of institutional lenders or other financial
institutions with assets in excess of Five Billion Dollars, provided that such
OP Unit Recipient shall promptly notify Acquiror of such pledge of, or
encumbrance on, such OP Units, stating the details thereof, or (ii) Transfers
made, subject to the restrictions hereof, 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
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more than twenty-five percent (25%) of the OP Units delivered to such OP Unit
Recipient at the Closing, the Second Closing or the Option Closing, as the case
may be, or Conversion Shares in respect thereof may be sold in the three-month
period following the initial Lock-Up Period, and an additional twenty-five
percent (25%) of such OP Units and Conversion Shares (plus any OP Units or
Conversion Shares which could have previously been sold pursuant to the
provisions hereof but were not) may be sold in each three-month period
thereafter (so that all OP Units and Conversion Shares may be sold after the
ninth (9th) month after the Lock-Up Period following, as applicable, the Closing
Date, with respect to OP Units issued at the Closing, the Second Closing Date,
with respect to OP Units issued at the Second Closing, or the Option Closing
Date, with respect to OP Units issued at the Option Closing). Notwithstanding
the foregoing, if all of the OP Units received by an OP Unit Recipient, directly
or indirectly, at the Closing, Second Closing and Option Closing is less than
30,000 OP Units, then such OP Unit Recipient shall be entitled to sell all of
his remaining OP Units at any time following the expiration of the Lock-Up
Period. The term "Permitted Transferee" with respect to any OP Unit Recipient
shall mean such recipient's spouse; a parent or lineal descendant (including an
adopted child) of a parent, or the parent or spouse of a lineal descendant 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; 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; other OP Unit Recipients or Permitted Transferees thereof;
any direct or indirect equity owners of an OP Unit Recipient; and any public
charity, private foundation or charitable institution as defined in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), but
only in each case, who (a) is an Accredited Investor (as defined in Rule 501
under the Securities Act); and (b) agrees in writing in an instrument reasonably
acceptable to Acquiror to be bound by the restrictions on transfer of the OP
Units and Conversion Shares contained in this Agreement. The OP Unit Recipient
Agreement shall reflect the foregoing. Notwithstanding the provisions of Section
9.3(a) of the Partnership Agreement, by its execution and delivery of this
Agreement, the REIT, as general partner of Acquiror, hereby consents to
Transfers of OP Units during and after the Lock-Up Period as permitted in this
Agreement during the Lock-Up Period, subject to the provisions of Section
9.3(b)-(d) and Section 9.6 of the Partnership Agreement.
F. Right of First Refusal/First Offer on Sale of OP Units.
Each OP Unit Recipient will agree that Acquiror shall have a right of first
refusal with respect to unsolicited offers to purchase OP Units from such OP
Unit Recipient and a right of first offer with respect to OP Units that such OP
Unit Recipient seeks to sell (other than Transfers to Permitted Transferees), as
provided in an agreement to be delivered by each OP Unit Recipient at Closing,
the Second Closing or the Option Closing, as the case may be, substantially in
the form of Exhibit H attached hereto (the "OP Unit Recipient Agreement"). Any
Permitted Transferee will be required to agree to be bound by the provisions of
this Section 3F.
G. Right of First Offer/First Refusal on Development,
Sale and Acquisition of Buildings.
(i) Development Projects. During the period from and
after the Closing Date through and continuing up to and including the
fifth (5th) anniversary thereof (the "Option Period"), Acquiror shall
have a continuing right of first offer on development opportunities of
the Falcone Group (as defined below) in the Standard Metropolitan
Statistical Areas of Albany, Buffalo, Rochester and Syracuse in the
State of New York (the "SMSAs") for the construction of office or
industrial buildings (excluding medical
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office buildings) on undeveloped land or the demolition of existing
improvements and the construction of office or industrial buildings
(excluding medical office buildings) on a parcel of land (each, a
"Development Project") in accordance with the following procedures: If
during the Option Period the Falcone Group desires to develop a
Development Project in any of the SMSAs and desires to use a
third-party equity capital partner (other than key executives or
employees of Pioneer Development Company, LLC making minority
investments)(a "Development Partner"), the Falcone Group shall provide
written notice (a "Development Offer Notice") to Acquiror (i)
specifying the terms and conditions upon which the Falcone Group would
be willing to develop such Development Project with a Development
Partner including the terms of payment or capital contributions, as the
case may be, the identity of the Development Project and other material
terms and conditions (collectively, the "Development Offer Terms"); and
(ii) offering Acquiror the opportunity to become the Development
Partner for such Development Project upon the Development Offer Terms.
Acquiror or its nominee shall be entitled, for a period of fifteen (15)
days after the date of receipt of a Development Offer Notice (the
"Development Exercise Period"), to exercise its rights hereunder by
written notice to the Falcone Group (a "Development Acceptance Notice")
to become a Development Partner for the Development Project, in
accordance with the Development Offer Terms. If during the Development
Exercise Period Acquiror delivers a Development Acceptance Notice to
the Falcone Group, Acquiror and the Falcone Group shall use
commercially reasonable efforts to enter into appropriate documentation
for Acquiror to become a Development Partner upon the Development Offer
Terms with regard to the Development Project within sixty (60) days
after the date of receipt of the Development Offer Notice by Acquiror.
If (i) Acquiror fails to timely deliver a Development Acceptance Notice
to the Falcone Group, (ii) Acquiror notifies the Falcone Group that it
does not desire to become a Development Partner, or (iii) a Development
Acceptance Notice is timely given but after all commercially reasonable
efforts have been made by the Falcone Group, appropriate documentation
is not entered into within the sixty (60) day period noted above, then
the Falcone Group shall have the right to seek and enter into an
agreement with another Development Partner for the Development Project
upon terms which would not be materially more favorable to Acquiror
than the Development Offer Terms; provided, however, that if the
Falcone Group does not enter into a binding contract for a third-party
to become a Development Partner for such Development Project within 180
days of the later of (x) the expiration of the Development Exercise
Period (e.g. if Acquiror failed to timely exercise, or declined its
right to exercise, its option hereunder) or (y) the end of the
applicable time period relating to clause (iii) above, or the Falcone
Group desires to offer a third-party the right to become a Development
Partner for such Development Project on terms which would be materially
more favorable to Acquiror than the Development Offer Terms, then
Acquiror shall again have its right of first offer to become a
Development Partner for the development of the Development Project as
set forth in this paragraph, and the Falcone Group and Acquiror shall
again comply with the requirements hereof; provided, however, that if
the Falcone Group desires to enter into an agreement with another
Development Partner on terms which would be materially more favorable
to Acquiror than the Development Offer Terms, Acquiror shall only have
five (5) calendar days after receipt of the revised Development Offer
Terms to deliver the Development Acceptance Notice. Notwithstanding the
foregoing, this subsection (i) shall not apply to third-party
financing.
(ii) Sale Projects.
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(a) During the Option Period, if the Falcone Group
shall decide to sell (whether by transfer of fee simple
interest or a leasehold interest, sale of an interest in an
entity which owns an interest in, an installment sale, or
otherwise) one or more office or industrial buildings and
related land and facilities (excluding medical office
buildings)
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directly or indirectly owned or controlled by the Falcone
Group and located in any of the SMSAs (each, an "Offer
Project"), then prior to offering any Offer Project to a
third-party purchaser, the Falcone Group shall provide written
notice (an "Offer Project Notice") to Acquiror (i) specifying
the purchase price, terms of payment, identity of the Offer
Project and other material terms and conditions which the
Falcone Group proposes for the sale of the Offer Project
(collectively, the "Offer Project Terms") and (ii) offering to
sell to Acquiror the Offer Project on the Offer Project Terms.
Acquiror or its nominee will have the option, to be exercised
by written notice (an "Offer Project Acceptance Notice") to
the Falcone Group within fifteen (15) days after Acquiror's
receipt of the Offer Project Notice (the "Offer Exercise
Period") to accept the Offer Project Terms. The Falcone Group
and Acquiror shall use commercially reasonable efforts to
enter into a purchase and sale agreement relating to the Offer
Project upon the Offer Project Terms within sixty (60) days
after receipt by Acquiror of the Offer Project Notice and the
Falcone Group and Acquiror shall consummate the transaction
contemplated by the Offer Project Notice within the time
period specified in such agreement. If (i) Acquiror fails to
timely deliver the Offer Project Acceptance Notice to the
Falcone Group, (ii) Acquiror notifies the Falcone Group that
it does not desire to accept the Offer Project Terms, (iii) an
Offer Project Acceptance Notice is timely given but after all
commercially reasonable efforts have been made by the Falcone
Group, a purchase and sale agreement is not entered into
within the sixty (60) day period noted above, or (iv) the
transaction contemplated by the Offer Project Notice is not
consummated within time period set forth in the purchase and
sale agreement, unless such consummation is delayed for
reasons beyond the reasonable control of Acquiror, then the
Falcone Group shall have the right to sell the Offer Project
to a third-party purchaser upon terms which would not be
materially more favorable to Acquiror than the Offer Project
Terms; provided, however, if a binding agreement with regard
to the Offer Project is not entered into by the Falcone Group
and a third-party purchaser within 180 days of the later of
(x) the expiration of the Offer Exercise Period (if Acquiror
failed to timely exercise, or declined its right to exercise,
its option hereunder) or (y) the end of the applicable time
period relating to clauses (iii) or (iv) above, or the Falcone
Group desires to offer to sell the Offer Project to a
third-party purchaser on terms which would be materially more
favorable to Acquiror than the Offer Project Terms, then the
Falcone Group shall, prior to offering the Offer Project to a
third-party, again be obligated to offer to sell to Acquiror
the Offer Project by delivering a revised Offer Project Notice
to Acquiror reflecting the revised Offer Project Terms the
Falcone Group would be willing to accept for the Offer Project
and the Falcone Group and Acquiror shall again comply with the
requirements hereof; provided, however, that if the Falcone
Group desires to offer to sell the Offer Project to a
third-party purchaser on terms which would be materially more
favorable to Acquiror than the Offer Project Terms, Acquiror
shall only have five (5) calendar days after receipt of the
revised Offer Project Terms to deliver the Offer Project
Acceptance.
(b) During the Option Period, if the Falcone Group
receives from a third-party an unsolicited offer to purchase
(whether by transfer of fee simple interest or a leasehold
interest, an interest in an entity which owns an interest in,
an installment sale, or otherwise) one or more office or
industrial buildings and/or related land and facilities
(excluding medical office buildings) directly or indirectly
owned or controlled by the Falcone Group and located in any of
the SMSAs (each, a "Refusal Project"), then prior to accepting
such unsolicited offer, the Falcone Group shall provide
written notice (a "Refusal Project Notice") to Acquiror
specifying (i) the purchase price, terms of payment, identity
of the
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Refusal Project and other material terms and conditions
offered to the Falcone Group relating to the sale of the
Refusal Project (collectively, the "Refusal Project Terms")
and (ii) offering to sell to Acquiror the Refusal Project on
the Refusal Project Terms. Acquiror or its nominee will have
the option, to be exercised by written notice (a "Refusal
Project Acceptance Notice") to the Falcone Group within
fifteen (15) days after Acquiror's receipt of the Refusal
Project Notice (the "Refusal Exercise Period") to accept the
Refusal Project Terms. The Falcone Group and Acquiror shall
use commercially reasonable efforts to enter into a purchase
and sale agreement relating to the Refusal Project upon the
Refusal Project Terms within sixty (60) days after receipt by
Acquiror of the Refusal Project Notice and the Falcone Group
and Acquiror shall consummate the transaction contemplated by
the Refusal Project Notice within the time period specified in
such agreement. If (i) Acquiror fails to timely deliver the
Refusal Project Acceptance Notice to the Falcone Group, (ii)
Acquiror notifies the Falcone Group that it does not desire to
accept the Refusal Project Terms, (iii) a Refusal Project
Acceptance Notice is timely given but after all commercially
reasonable efforts have been made by the Falcone Group, a
purchase and sale agreement is not entered into within the
sixty (60) day period noted above, or (iv) the transaction
contemplated by the Refusal Project Notice is not consummated
within the time period set forth in the purchase and sale
agreement, unless such consummation is delayed for reasons
beyond the reasonable control of Acquiror, then the Falcone
Group shall have the right to sell the Refusal Project on
terms which would not be materially more favorable to Acquiror
than the Refusal Project Terms to the third-party purchaser
which offered to buy the Refusal Project; provided, however,
if a binding agreement with regard to the Refusal Project is
not entered into by the Falcone Group and such third-party
purchaser within 180 days of the later of (x) the expiration
of the Refusal Exercise Period (if Acquiror failed to timely
exercise, or declined its right to exercise, its option
hereunder) or (y) the end of the applicable time period
relating to clauses (iii) or (iv) above, or the Falcone Group
desires to sell the Refusal Project to such third-party
offeror on terms which would be materially more favorable to
Acquiror than the Refusal Project Terms, then the Falcone
Group shall, prior to selling the Refusal Project to such
third-party, again be obligated to offer to sell to Acquiror
the Refusal Project by delivering a revised Refusal Project
Notice to Acquiror reflecting the revised Refusal Project
Terms the Falcone Group would be willing to accept for the
Refusal Project and the Falcone Group and Acquiror shall again
comply with the requirements hereof; provided, however, that
if the Falcone Group desires to offer to sell the Refusal
Project to a third-party purchaser on terms which would be
materially more favorable to Acquiror than the Refusal Project
Terms, Acquiror shall only have five (5) calendar days after
receipt of the revised Refusal Project Terms to deliver the
Refusal Project Acceptance.
This subsection (ii) of Section 3G shall not apply to any
Deleted Properties and shall apply to any Contributor Deleted
Properties. With respect to any Contributor Deleted
Properties, the rights of Acquiror in this subsection (ii) of
Section 3G shall be subject to the existing rights of partners
or required offerees of the Falcone Group which are contained
in the partnership agreement of the relevant Owner, and shall
not apply if the Falcone Group is a minority partner in an
Owner of a Contributor Deleted Property on the date of this
Agreement and the other partners in such Owner elect to sell
or otherwise dispose of such Contributor Deleted Property to a
third party.
(iii) Notwithstanding the foregoing right of first offer
and right of first refusal,
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such rights shall not apply to Development Projects, Offer Projects or
Refusal Projects in instances where the Falcone Group either receives
bona fide offers from, or proposes to develop or acquire with,
potential purchasers or potential developers who would also be, or
whose affiliate would be, the sole tenant in the existing building(s)
or the building(s) proposed to be built pursuant to such projects.
(iv) Acquisition Buildings.
----------------------
(a) During the Option Period, the Falcone Group shall
not, directly or indirectly, acquire, solicit, seek to acquire
or solicit, or otherwise pursue any opportunities to acquire
(whether by transfer of fee simple interest, a leasehold
interest or an interest in any entity owning any such
interest, an installment sale, or otherwise) any office or
industrial buildings or related land and facilities (excluding
medical office buildings) located in any of the SMSAs other
than for or on behalf of Acquiror.
(b) During the Option Period, if the Falcone Group
receives from a third-party an unsolicited offer to sell to
the Falcone Group (whether by transfer of fee simple interest,
a ground lease, an installment sale, or otherwise) one or more
office or industrial buildings and related land and facilities
(excluding medical office buildings) located in any of the
SMSAs, then the Falcone Group shall promptly provide written
notice to Acquiror of such offer and shall refer such
third-party offeror to Acquiror.
(v) The Falcone Group. The "Falcone Group" shall mean
Michael J. Falcone and his spouse, Michael P. Falcone and his spouse,
and lineal descendants of Michael J. Falcone and Michael P. Falcone
(the "Falcone Family") and each entity that directly or indirectly,
through one or more intermediaries, is controlled by the Falcone
Family. For purposes of this definition, control of an entity means the
power, direct or indirect, to direct or cause the direction of
management and policies of such person or entity whether by contract or
otherwise.
(vi) Confidentiality. Acquiror agrees to keep strictly
confidential the terms and existence of any Development Project, Offer
Project or Refusal Project unless and until it has been accepted by
Acquiror.
H. Tax Matters.
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(i) No Property Disposition. (a) In the case of those
Properties or Additional Properties set forth on Schedule 3H attached
hereto, 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 (with respect to the Properties), the Second Closing (with
respect to Waterfront II) or the Option Closing Date (with respect to
One City Centre and Three City Centre), or (II) the sale or disposition
in a taxable transaction, or conversion by each OP Unit Recipient who
received OP Units in respect of such Property (or Additional Property,
as the case may be) of OP Units representing 70% of the OP Units
delivered to such OP Unit Recipient at the Closing, the Second Closing
and the Option Closing in respect of such Property (or Additional
Property, as the case may be) (the "70% Condition"); and (b) in the
case of the remaining Properties, 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 (including, without limitation, by way of a deed in lieu of
foreclosure, a foreclosure action, or an act of eminent domain) of any
of the Properties or
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<PAGE>
Additional Properties in a transaction that causes Contributor to
recognize taxable income in excess of "book" income under Section
704(c) of the Code with respect to such sale or other disposition
without the consent of the affected Contributor. Thereafter,
Acquiror shall use all commercially reasonable efforts in disposing
of any of the Properties or Additional Properties during the period
expiring on the earlier to occur of (x) the tenth (10th) anniversary
of the Closing Date (with respect to the Properties), the Second
Closing Date (with respect to Waterfront II) or the Option Closing
Date (with respect to One City Centre and Three City Centre), or (y)
the achievement of the 70% Condition, to structure such disposition
as a transaction that will not result in a material gain to the
Contributors, whether by means of an exchange contemplated under
Code Sections 351, 354, 355, 368, 721, 1031, 1033 or otherwise,
provided that if such disposition were not so structured the affected
Contributor would recognize taxable income in excess of "book" income
with respect to such disposition.
(ii) Debt Maintenance and Guaranty Requirements. At
Closing, or at any time subsequent thereto in accordance with the terms
hereof, Acquiror will permit Contributor at Contributor's option to
guarantee the "bottom" portion (i.e., the least risky portion) of
available indebtedness of Acquiror or indemnify the REIT, Acquiror or
any of their subsidiaries for liabilities in respect thereof. Subject
to this Section 3H(ii), Acquiror agrees to maintain at all times an
amount of indebtedness equal to $57,000,000 (reduced by the amount of
indebtedness Contributor no longer requires due to the Additional Cash
Amount) (the "Debt Amount") for only Contributor (as allocated by
Contributor among Contributor) to guarantee (or indemnify the REIT,
Acquiror or any of their subsidiaries for such indebtedness). The
provisions of this Section 3H(ii) shall apply until the earlier to
occur of (a) the seventh (7th) anniversary of the Closing Date or (b)
the achievement of the 70% Condition. Notwithstanding the foregoing, if
any OP Unit Recipient (i) obtains a tax-free step-up in the basis of
their OP Units for federal income tax purposes; (ii) sells, transfers
or otherwise disposes of their OP Units in a taxable transaction; or
(iii) receives an allocation under Treasury Reg. Section 1.704-3(b)
using the traditional method without curative allocations that reduces
the amount of Built-in-Gain (as defined below), then the Debt Amount
shall be commensurately reduced. For purposes of this Agreement,
"Built-in-Gain" shall mean, with respect to each Property or Additional
Property, the amount of taxable income in excess of "book" income that
would be allocated to Contributor if such Property or Additional
Property, as the case may be, were disposed of in a fully taxable
transaction. After the seventh (7th) anniversary of the Closing Date
and until the achievement of the 70% Condition, Acquiror will use
commercially reasonable efforts to permit Contributor to guarantee
available indebtedness of Acquiror or indemnify the REIT, Acquiror or
any of their subsidiaries for liabilities in respect thereof, up to an
amount equal to what the reduced Debt Amount would have been under this
Section 3H(ii) if it were still applicable.
(iii) Allocation Method. Pursuant to Section 5.4 of the
Partnership Agreement, Acquiror shall elect to use the "traditional
method" without curative allocations set forth in Regulation Section
1.704-3(b) with respect to the Properties.
I. Board Seat. The REIT shall take all actions necessary to
appoint Michael J. Falcone to the Board of Directors of the REIT at Closing,
with an initial term to last until the next annual meeting of the REIT's
stockholders. At such annual meeting, Michael J. Falcone shall be nominated to
serve as a Class I director of the REIT (i.e., with an initial term of three (3)
years).
J. Allocation of Contribution Consideration. Prior to the
Closing, the Second
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<PAGE>
Closing and the Option Closing, as the case may be, and if requested by
Acquiror, Acquiror and Contributor shall use commercially reasonable efforts to
agree in writing upon the allocation of the Contribution Consideration and the
Additional Consideration, as the case may be, among the Land and the
Improvements. Acquiror and Contributor agree that the Personal Property has no
separate value except in connection with the Properties and Additional
Properties. No part of the Contribution Consideration is attributable to the
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, Additional Properties, the Partnership Interests and the
Management Contracts or to effect the other purposes of this Agreement.
L. Assumption of Debt; Deletion of Property. Contributor shall
use all commercially reasonable efforts to renegotiate the prepayment penalties
payable in respect of that portion of the Existing Indebtedness encumbering, or
related to, those Properties known as One Park Place, Syracuse, New York, and
1045 James Street, Syracuse, New York, and the Additional Property known as One
City Centre. If Contributor is unable to renegotiate such prepayment penalties
to Contributor's reasonable satisfaction, Contributor shall have the following
options:
(i) If Contributor is unable to renegotiate the
prepayment penalties payable (and to renegotiate with the lender to
allow for prepayment) in respect of that portion of the Existing
Indebtedness encumbering, or related to, One Park Place, Syracuse, New
York (the "Park Place Indebtedness"), Contributor shall have the
option, exercisable upon written notice to Acquiror not less than five
(5) business days prior to the Closing Date, to (i) delete and
eliminate One Park Place, Syracuse, New York from this Agreement or
(ii) contribute such Property to Acquiror subject to the Park Place
Indebtedness and Acquiror shall assume the Park Place Indebtedness (the
"Assumed Park Place Indebtedness"); provided, however, that on the
Closing Date the Park Place Indebtedness shall not exceed the aggregate
principal sum of $11,200,000 plus current interest. If Acquiror assumes
the Park Place Indebtedness pursuant to this Section 3L(i), the
Contribution Consideration shall be adjusted pursuant to the formula
set forth in Schedule 3L.
(ii) If Contributor is unable to renegotiate the
prepayment penalties payable in respect of that portion of the Existing
Indebtedness encumbering, or related to, 1045 James Street, Syracuse,
New York (the "James Street Indebtedness"), Contributor shall have the
option, exercisable upon written notice to Acquiror not less than five
(5) business days prior to the Closing Date, to (i) delete and
eliminate 1045 James Street, Syracuse, New York from this Agreement or
(ii) to contribute such Property to Acquiror subject to the James
Street Indebtedness and Acquiror shall assume the James Street
Indebtedness (the "Assumed James Street Indebtedness" and together with
the Assumed Park Place Indebtedness, the "Assumed Indebtedness");
provided, however, that on the Closing Date the James Street
Indebtedness shall not exceed the aggregate principal sum of $3,427,259
plus current interest. If Acquiror assumes the James Street
Indebtedness pursuant to this Section 3L(ii), the Contribution
Consideration shall be adjusted pursuant to the formula set forth in
Schedule 3L.
(iii) If Contributor is unable to renegotiate the
prepayment penalties payable in respect of that portion of the Existing
Indebtedness encumbering, or related to, One City Centre, Contributor
shall have the option, exercisable upon written notice to Acquiror on
or prior to the date
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<PAGE>
which is five (5) business days prior to the Option Closing Date, to
delete and eliminate One City Centre from this Agreement.
If Contributor exercises its option pursuant to this Section 3L to delete one or
more of the properties set forth in this Section 3L (each a "Contributor Deleted
Property," and together the "Contributor Deleted Properties"), this Agreement
shall, without further action of the parties, be deemed to have been
automatically and ipso facto amended to eliminate each Contributor Deleted
Property herefrom. Upon such amendment of this Agreement, (a) all references to
the Properties or Additional Properties, as the case may be, shall automatically
exclude the Contributor Deleted Properties and no obligations of Contributor (or
Acquiror's Conditions Precedent) set forth herein shall apply to the Contributor
Deleted Properties, (b) all references to Contributor and Owner shall
automatically exclude the Contributor(s) and Owner(s) appurtenant to the
Contributor Deleted Properties, (c) the Contribution Consideration or Additional
Consideration shall be reduced by the amount allocated to the Contributor
Deleted Properties and their related Management Contracts pursuant to Schedule
3B(i) and Schedule 3B(ii), and (d) Acquiror shall promptly return to Contributor
all documents, records and studies relating to the Contributor Deleted
Properties. Notwithstanding the foregoing, no such amendment shall modify any
indemnity or other obligation of a party regarding the Contributor Deleted
Properties which expressly survives the deletion of the Property or Additional
Property, or the termination of this Agreement.
In addition, if Frontier Corporation (a tenant at Three City
Centre) timely exercises its right of first refusal to purchase Three City
Centre, then Three City Centre shall be deemed a Contributor Deleted Property
for all purposes under this Agreement.
M. Reimbursement for Capital Expenditures. At the Closing, the
Second Closing and the Option Closing, Acquiror shall reimburse or pay
Contributor for those capital expenditures made or incurred by Contributor with
respect to the Properties (in the case of the Closing), Waterfront II (in the
case of the Second Closing) or One City Centre and Three City Centre (in the
case of the Option Closing) during the twenty four (24) month period preceding
the Closing Date, the Second Closing Date or the Option Closing Date, as the
case may be, (which capital expenditures shall be identified in writing by
Contributor at least three (3) business days prior to the Closing Date, the
Second Closing Date or the Option Closing Date, as the case may be); provided,
however, that the amount reimbursed under this Section 3M shall not exceed the
amount of cash payable to Contributor pursuant to Section 3B(i), Section 3B(ii),
Section 3B(iii) or Section 3B(iv), respectively (including the Additional Cash
Amount), in each case prior to any adjustment for this Section 3M. Acquiror
shall disburse the amounts payable pursuant to this Section 3M at the Closing,
the Second Closing and the Option Closing, as the case may be, to those people
specified by Contributor in writing at least three (3) business days prior to
the Closing Date, the Second Closing Date or the Option Closing Date,
respectively.
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N. Notification if Representations and Warranties Untrue.
Prior to the Closing Date (with respect to the Properties), the Second Closing
Date (with respect to Waterfront II) or the Option Closing Date (with respect to
One City Centre and Three City Centre), 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. Contributor shall have thirty (30) days from
the date it receives such notification from Acquiror to cure such inaccuracy. If
the expiration of such thirty (30) day period occurs after the applicable
closing date and if Contributor is unable to cure such inaccuracy prior to the
closing date with respect to any property, then the applicable closing shall
occur for all unaffected properties and an additional closing shall occur for
the affected properties as soon as practicable thereafter, but in no event later
than the end of such thirty (30) day period. If an additional closing occurs,
the properties acquired at such additional closing shall be treated as if they
were acquired at the applicable closing for purposes of determining applicable
post-closing time periods under this Agreement.
O. Excepted Holder Limit. If at the time any OP Unit Recipient
exercises its Conversion Right the REIT elects to deliver Conversion Shares, and
the delivery of such Conversion Shares would violate the Ownership Limit (as
defined in the REIT's charter), then the REIT hereby covenants and agrees that
it will (i) create an Excepted Holder Limit (as defined in the REIT's charter)
for such OP Unit Recipient; or (ii) pay cash in lieu of Conversion Shares for
such OP Units (the cash amount to be determined as provided in the Partnership
Agreement).
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P. Certain Partner Consents. With respect to the properties
known as 50-60 Lakefront Boulevard (Waterfront I), One City Centre, Three City
Centre and One Park Place, Contributor shall use its best efforts to obtain,
within 20 days of the date of this Agreement, all consents and approvals as may
be required to consummate the transactions contemplated by this Agreement from
each partner of the respective Contributed Entity. If, after using such best
efforts, Contributor is unable to obtain such consents and approvals within such
period of time with respect to any one or more of the properties known as 50-60
Lakefront Boulevard (Waterfront I) or One Park Place, then Contributor shall
promptly notify Acquiror, and Acquiror shall have the option either to terminate
this Agreement upon delivery to Contributor of a Termination Notice (in which
case, Section 14 shall not apply) or to consummate the transactions contemplated
by this Agreement; provided, however, that Contributor may delete One Park Place
and Acquiror may not then deliver a Termination Notice due to the failure to
obtain such consents and approvals with respect to One Park Place, and One Park
Place will thereafter be treated as a Contributor Deleted Property under this
Agreement. If, after using such best efforts, Contributor is unable to obtain
such consents and approvals within such period of time with respect to any one
or more of the properties known as One City Centre or Three City Centre, then
Contributor shall promptly notify Acquiror. If Acquiror elects to consummate the
transactions with respect to the Properties or does not elect to terminate its
option with respect to One City Centre and Three City Centre, then Contributor
will continue to use its best efforts to obtain such consents and approvals
until the Closing Date or the end of the Additional Property Option Period with
respect to One City Centre and Three City Centre, respectively. If, at such
time, Contributor is still unable to obtain such consents and approvals, then
this Agreement shall, without further action of the parties, be deemed to have
been automatically and ipso facto amended to eliminate each such property
herefrom (together, the "Eliminated Properties"). Upon such amendment of this
Agreement, (a) all references to the Properties or Additional Properties shall
automatically exclude the Eliminated Properties and no obligations of
Contributor (or Acquiror's Conditions Precedent) set forth herein shall apply to
the Eliminated Properties, (b) all references to Contributor and Owner shall
automatically exclude the Contributor(s) and Owner(s) appurtenant to the
Eliminated Properties, (c) the Contribution Consideration or Additional
Consideration shall be reduced by the amount allocated to the Eliminated
Properties and their related Management Contracts pursuant to Schedule 3B(i) and
Schedule 3B(ii), and (d) Acquiror shall promptly return to Contributor all
documents, records and studies relating to the Eliminated Properties.
Notwithstanding the foregoing, no such amendment shall modify any indemnity or
other obligation of a party regarding the Eliminated Properties which expressly
survives the deletion of the Property or Additional Property, or the termination
of this Agreement.
Q. Falcone Net Worth. Michael J. Falcone and Michael P.
Falcone hereby agree that, (i) at all times from and after the Closing Date and
up to and including the date which is the 18 month anniversary of the Closing
Date (or such later date as a claim for indemnification made by Acquiror is
resolved, provided that Acquiror made such claim in a timely manner as provided
in Sections 8E and 15), they will maintain a combined personal net worth of at
least $50,000,000; and (ii) at all times from and after the date which is the 18
month anniversary of the Closing Date and up to and including the date which is
the 18 month anniversary of the later of the Second Closing Date or the Option
Closing Date (or such later date as a claim for indemnification made by Acquiror
is resolved, provided that Acquiror made such claim in a timely manner as
provided in Sections 8E and 15), they will maintain a combined personal net
worth of at least $9,000,000 plus the amount of all timely claims for
indemnification made by Acquiror; provided, however, that in no event will they
be required to maintain a combined personal net worth exceeding $50,000,000.
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R. Employees. Attached hereto as Exhibit N is a list of
employees who Acquiror will hire at Closing, the Second Closing or the Option
Closing, as applicable.
S. Industrial Development Authorities. To the extent required
by the terms of an IDA Lease Agreement, Acquiror and Contributor shall each use
their commercially reasonable efforts to obtain the consent of each applicable
IDA (the "IDA Consents") to the, direct or indirect, transfer of the leasehold
estate to Acquiror. Acquiror and Contributor shall each bear its own costs of
obtaining the IDA Consents. If Acquiror and Contributor are unable to obtain the
IDA Consent for any Property or Additional Property which is subject to an IDA
Lease Agreement by the Closing Date, the Second Closing Date or the Option
Closing Date, as the case may be, then Contributor shall take all necessary
steps to terminate the applicable IDA Lease Agreement and related IDA documents
and obtain the reconveyance of the applicable Property or Additional Property to
Contributor and Contributor shall transfer such Property or Additional Property
to Acquiror at the Closing, the Second Closing or the Option Closing, as the
case may be, pursuant to the terms and conditions of this Agreement applicable
to those properties to be transferred to Acquiror by deed transfer or
partnership assignment, without any reduction of the Contribution Consideration
or the Additional Consideration.
T. Additional Property Option. Acquiror shall have the option,
exercisable upon written notice to Contributor (the "Additional Property
Notice") during the period (the "Additional Property Option Period") beginning
on the date of this Agreement and ending on the date which is ninety (90) days
from the date of this Agreement, to purchase both One City Centre and Three City
Centre at the Option Closing as follows:
(i) If Acquiror delivers the Additional Property Notice,
subject to the terms and conditions contained in this Agreement
(including Contributor's right under Section 3L(iii) to delete One City
Centre from this Agreement), ownership in and to One City Centre and
Three City Centre shall be, directly or indirectly, transferred by
Contributor to Acquiror at the Option Closing.
(ii) If Acquiror delivers the Additional Property Notice
and Contributor has exercised its option to delete One City Centre from
this Agreement pursuant to Section 3L(iii), subject to the terms and
conditions contained in this Agreement, ownership in and to Three City
Centre shall be, directly or indirectly, transferred by Contributor to
Acquiror at the Option Closing.
U. Graphic Controls Corporation Lease. If Graphic Controls
Corporation is entitled to an initial abatement of fixed rent on the date
Acquiror acquires Waterfront II, Contributor will pay to Acquiror (on the first
of each month until Graphic Controls Corporation's initial obligation to pay
rent commences), an amount equal to (i) the monthly fixed rent Graphic Controls
Corporation would have paid on such first of the month but for the abatement
(each, a "Monthly Rent Payment"), minus (ii) the present value (calculated on
the date each Monthly Rent Payment is made) of an amount equal to the Monthly
Rent Payment twenty years into the future discounted at the rate of 10% per
annum.
V. Management Contracts. Acquiror hereby covenants and agrees
that neither it nor its Permitted Designees (as defined below) will sell or
otherwise dispose of the Management Contracts; provided, however, that Acquiror
or its Permitted Designees may cancel or otherwise terminate the Management
Contracts. Acquiror hereby covenants and agrees that, if the Management
Contracts are cancelled or otherwise terminated, neither it nor its Permitted
Designees will take the position that such cancellation or termination results
in an allocation of income to the Management Contributor.
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W. One Park Place Lobby Renovations. Contributor and Acquiror
agree that certain renovation work (the "Renovation") to the building lobby of
One Park Place is necessary. Contributor has delivered to Acquiror the budget
for the Renovation and plans therefore (totaling $475,000). Contributor agrees
to perform (or cause to be performed) the Renovation promptly, in a good and
workmanlike manner, consistent with the budget and plans for the Renovation,
whether completed prior to or subsequent to the Closing. Acquiror agrees to pay
Contributor for the Renovation in accordance with the budget. Prior to Closing,
costs incurred in performing the Renovation shall be paid by Contributor but
shall be reimbursed by Acquiror at Closing in cash and in addition to all other
amounts which may be owed to Contributor at Closing. Subsequent to Closing,
costs incurred in performing the Renovation shall be paid by Contributor and
reimbursed by Acquiror within ten (10) business days of submission by
Contributor (not more frequently than monthly) to Acquiror of a reimbursement
request. Any request made by Contributor for reimbursement of costs incurred in
performing the Renovation, whether at Closing or pursuant to a reimbursement
request thereafter, shall be accompanied by invoices, receipts or other evidence
reasonably substantiating that such costs were incurred by Contributor or are
then due and owing in connection with the Renovation. If the Renovation is not
completed by the Closing, Acquiror shall allow Contributor access to One Park
Place as shall be necessary for Contributor to complete the Renovation. If Marsh
& McLennan, Inc. ("M&M") is entitled to receive free parking at One Park Place
pursuant to the terms of that certain letter agreement from Pioneer Development
Company, LLC to M&M regarding the Renovation, then Contributor shall pay to
Acquiror, on or prior to the date such amount would otherwise have been due and
payable by M&M, the amount which would have been paid by M&M but for M&M's right
to receive such free parking; provided, however, that Contributor shall not be
obligated to pay such amounts to the extent, but only the extent, the Renovation
would have been completed but for the fault of Acquiror. The provisions of this
Section 3W shall be deemed null and void if One Park Place is, or the
partnership interests of the owners thereof are, not conveyed to Acquiror at
Closing in accordance with the terms of this Agreement.
4. OPERATION OF PROPERTIES AND CONDUCT THROUGH CLOSING
A. Through the Closing Date (with respect to the Properties)
and through the Option Closing Date (with respect to One City Centre and Three
City Centre), each Owner shall:
(i) Except as otherwise provided for in this Agreement,
manage and operate the Properties and One City Centre and Three City
Centre, as the case may be, only in and shall not take any actions
except in accordance with each Owner'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.
(ii) Not enter into any new lease, service contract or
management contract or extend, modify, amend or renew any Lease,
Service Contract or Management Contract without the prior written
consent of Acquiror, which consent shall not be unreasonably withheld,
conditioned or delayed; provided, however, each Owner may enter into
new leases which pertain to less than 5,000 rentable square feet, or
new service contracts with a duration of less than one year, or
extensions, modifications, amendments or renewals of Leases which
pertain to less than 5,000 rentable square feet or Service Contracts
with a duration of less than one year, upon prior notice to, but
without the consent of, Acquiror so long as such new lease or service
contract or extension, modification, amendment or renewal of a Lease or
Service Contract is on market terms with bona fide third
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parties and is the type of transaction which each Owner currently
enters into in the normal course of its business.
(iii) Not cancel any Lease, Service Contract or Management
Contract without the prior written consent of Acquiror, which consent
shall not be unreasonably withheld, conditioned or delayed.
(iv) Pursuant to the provisions of Section 9, provide
Acquiror with access to the Properties for it to inspect same to assure
that each Owner is complying with the requirements of this Section 4.
(v) Have the right to commence or continue to assert,
whether before or after Closing, any proceedings or applications for
reduction in the real estate tax assessment of any of the Properties or
Additional Properties set forth in Schedule 4A(v) (a "Tax Reduction
Proceeding") for any real estate tax year during which Acquiror or its
Permitted Designee was not the fee or leasehold title holder of any of
such Properties or Additional Properties, as the case may be. Have the
right to commence, whether before or after Closing, a Tax Reduction
Proceeding for any of the Properties or the Additional Properties for a
real estate tax year in which both Owner and Acquiror or its Permitted
Designee each held fee or leasehold title to any such Property, but
only if (i) Acquiror notifies Contributor that Acquiror will not
commence a Tax Reduction Proceeding for such real estate tax year or
(ii) there remains thirty (30) days or less in which to institute a Tax
Reduction Proceeding for such real estate tax year and Acquiror has not
commenced a Tax Reduction Proceeding for such real estate tax year. To
the extent Contributor commences any Tax Reduction Proceeding pursuant
to this Section 4A(v), Contributor will notify Acquiror in writing of
such commencement and provide copies of all documentation in connection
therewith to Acquiror, and Contributor will use counsel it customarily
uses (at their customary fee arrangement) with regard to Tax Reduction
Proceedings. To the extent any Tax Reduction Proceeding is required to
be brought in the name of Acquiror and Contributor has the right to
commence such a proceeding hereunder, then Contributor shall have the
right to commence such proceeding in the name of Acquiror. Acquiror
agrees to cooperate with Contributor at no expense to Acquiror,
including without limitation, executing any required documents, in
connection with Contributor's commencement of a Tax Reduction
Proceeding. To the extent any award or refund is paid to Contributor or
Acquiror for any real estate tax year during which both parties owned
fee or leasehold title to a Property, such party receiving such award
or refund shall promptly deliver to the other party such party's
allocable share of the award or refund after subtracting any required
reimbursement to tenants and the out-of-pocket costs of obtaining such
award or refund therefrom, including without limitation, the fees owed
to certiorari counsel (which fees shall be paid by the party receiving
the award or refund). To the extent any award or refund is paid to
Acquiror for any real estate tax year during which only Contributor
owned fee or leasehold title to a Property, Acquiror shall promptly
deliver to Contributor the award or refund after subtracting any
required reimbursement to tenants and the out-of-pocket costs of
obtaining such award or refund therefrom, if any.
(vi) 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 and for One City Centre and
Three City Centre that come into the possession or control of
Contributor for any period(s) including the period between the date of
this Agreement and the Option Closing Date.
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(vii) Not sell, 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, conditioned or
delayed, except that the loan with respect to Three City Centre may be
modified pursuant to the terms Contributor previously disclosed to
Acquiror.
(viii) Not sell, assign, grant any security interest in,
pledge, encumber, dispose of, or otherwise transfer all or any part of
any of the Partnership Interests with respect to the Properties except
to another Contributor or its affiliate.
If Acquiror does not timely deliver the Additional Property Notice, the above
shall not apply to One City Centre and Three City Centre from and after
expiration of the Additional Property Option Period.
B. Through the Second Closing Date the Owner of
Waterfront II shall:
(i) Complete the expansion of Waterfront II in
accordance with the construction plans relating thereto and keep the
Land, the Improvements and the tangible Personal Property at Waterfront
II in their current condition and repair, ordinary wear and tear
excepted, other than in connection with such expansion.
(ii) Not enter into any new lease, service contract or
management contract or extend, modify, amend or cancel the Lease with
Graphic Controls Corporation or the IDA Lease Agreements relating to
Waterfront II (except that the IDA Lease Agreement may be amended
pursuant to the terms Contributor previously disclosed to Acquiror or
is consistent with the Graphic Controls Corporation lease and the new
financing described in Section 4B(vi)), or extend, modify, amend or
renew any Service Contract or Management Contract relating to
Waterfront II, without the prior written consent of Acquiror.
(iii) Not cancel any Lease, Service Contract or Management
Contract pertaining to Waterfront II without the prior written consent
of Acquiror.
(iv) Pursuant to the provisions of Section 9, provide
Acquiror with access to Waterfront II for it to inspect same.
(v) Promptly deliver to Acquiror copies of any operating
statements for Waterfront II that come into the possession or control
of Contributor for any period(s) including the period between the date
of this Agreement and the Second Closing Date.
(vi) Not sell, grant any security interest in, pledge,
encumber, dispose of, finance or refinance any indebtedness in respect
of Waterfront II without the prior written consent of Acquiror, which
consent shall not be unreasonably withheld, conditioned or delayed,
except that the current financing may be replaced with the new
financing which Contributor previously disclosed to Acquiror.
(vii) Not sell, assign, grant any security interest in,
pledge, encumber, dispose of, or otherwise transfer all or any part of
any of the Partnership Interests with respect to Waterfront II, except
to another Contributor or its affiliate.
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5. STATUS OF TITLE TO PROPERTIES
A. State of Title. The Deed Contributors shall convey the Deed
Properties to Acquiror or Acquiror's Permitted Designee by bargain and sale
deeds with covenants against grantor's acts in recordable form (the "Deeds"),
the Interest Contributors shall contribute their Partnership Interests to
Acquiror or Acquiror's Permitted Designee by the Partnership Interest
Assignments (as defined below) and the Management Contributor shall contribute
its interest in the Management Contracts to Acquiror or Acquiror's Permitted
Designee by an Assignment of Management Contracts (as defined below); provided,
however, that in the case of the Properties and Additional Properties that are
subject to lease agreements ("IDA Lease Agreements") with an Industrial
Development Authority ("IDA"), the Deed Contributor which holds the leasehold
interest in such Property or Additional Properties shall (subject to Section 3S
above) convey to Acquiror (in lieu of the foregoing) all leasehold right, title
and interest of such Deed Contributor in and to such Properties or Additional
Properties. Title to the Properties and Additional Properties shall be good,
marketable and insurable fee simple title, free and clear of all liens and
encumbrances and shall be subject only to: (i) those covenants, conditions,
liens, encumbrances, easements, assessments, restrictions, water and sewer
charges, related payment in lieu of taxes agreements ("PILOT Agreements") and
other title exceptions of record which are disclosed on each Title Commitment,
UCC Search and Survey (each as defined below) and are not objected to by
Acquiror within the Inspection Period (as defined below), (ii) rights of tenants
under the Leases, as tenants only (except with respect to tenants having a
purchase option or similar rights as disclosed in this Agreement), (iii) the
lien of the Existing Indebtedness, if any, on those Properties encumbered by the
Existing Indebtedness as of the date hereof and (iv) general real estate taxes
for the year in which the Closing, Second Closing or Option Closing, as the case
may be, occurs and subsequent years, not yet due and payable (the above
enumerated exceptions being hereinafter collectively referred to as the
"Permitted Exceptions"); provided, however, that in the case of the Properties
and Additional Properties that are subject to IDA Lease Agreements, the Deed
Contributor which holds the leasehold interest in such Property or Additional
Properties shall (subject to Section 3S above) convey to Acquiror all leasehold
right, title and interest of such Deed Contributor in and to such Properties and
Additional Properties, free and clear of all liens and encumbrances and subject
only to the Permitted Exceptions. The Partnership Interests shall be contributed
to Acquiror free and clear of all liens, claims and encumbrances.
B. Preliminary Evidence of Title. As specified below, Acquiror
shall obtain at Acquiror's expense the following documents to evidence the
condition of Contributor's title to the Properties and Additional Properties:
(i) Acquiror shall obtain for each of the Properties and
Additional 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 Permitted Designee and committing to
insure title to the Properties and Additional 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. Acquiror shall direct the Title Insurer to
deliver to Contributor and to Contributor's counsel copies of each
Title Commitment at the same time the Title Insurer delivers each Title
Commitment to Acquiror. The Title Commitment shall show fee simple
title to the Properties and Additional Properties vested in Owner or
the IDA, as the case may be. The Owner's Title Insurance Policy
(collectively, the "Title Policies") to be issued to Acquiror at the
Closing, the Second Closing or the Option Closing, as the case may be,
pursuant to the
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corresponding Title Commitment shall contain an extended coverage
endorsement over the so-called general or standard exceptions that are
a part of the printed form of the policy, an ALTA Form 103.7 access
endorsement, coverage insuring any easements for utilities servicing
the Properties or Additional Properties that do not connect to the
Properties or Additional Properties, as the case may be, from a public
street, and such other endorsements as counsel for Acquiror shall
reasonably deem appropriate, all at Acquiror's sole cost and expense.
(ii) Acquiror, at its sole option and expense, may order
and obtain 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 and Additional Properties are located for
Uniform Commercial Code Financing Statements, tax liens and the like in
the name of Contributor, the Properties, Additional Properties and any
other name or location reasonably requested by Acquiror.
(iii) Acquiror may obtain, at its sole option and expense,
a current "as-built" plat of survey (the "Survey") for each of the
Properties and Additional 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 and Additional
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, neither the
Properties nor Additional Properties are 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 or Additional
Properties.
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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 to any of the Properties (including Additional Properties), other than
Permitted Exceptions, or any other title or survey matter which does not conform
to the requirements of this Agreement with respect to any of the Properties or
Additional Properties, Acquiror shall so notify Contributor and Contributor may,
at its election, undertake to eliminate such unacceptable defects, objections or
exceptions, it being agreed that other than (i) final, unappealable judgments
against an Owner, (ii) mortgages or other liens which can be satisfied by
payment of a liquidated amount, other than the mortgages securing the Existing
Indebtedness, (iii) defects, objections or exceptions which can be removed by
payments not to exceed $25,000 for each Property including each Additional
Property and not to exceed $100,000 in the aggregate for all title defects, and
(iv) payments to the mortgagees which are currently required pursuant to
existing loan documents in order to cause the mortgagees to consent to Acquiror
assuming the Assumed Indebtedness, and except as provided below, Contributor
shall have no obligation to incur any expense or bring any action in connection
with curing such defects, objections or exceptions. Other than the items
described in (i) through (iv) above, which Contributor agrees to cure at its
sole cost and expense without regard to the cost thereof (other than as
expressly set forth in item (iii)), if after complying with the foregoing
requirements, Contributor is unable to or elects not to eliminate all
unacceptable defects, objections or exceptions in accordance with the terms of
this Agreement on or before the date which is at least two (2) business days
prior to the Closing Date, the Second Closing Date or the Option Closing Date,
as the case may be, Acquiror may elect either to (x) terminate this Agreement by
giving written notice to Contributor (a "Termination Notice") and, upon such
election, Acquiror shall immediately receive from Escrowee the Earnest Money, in
which event this Agreement, without further action of the parties hereto, 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 Section 9B (the "Surviving Indemnities"); (y) accept title subject
to such unacceptable defects, objections or exceptions and receive no credit
against or reduction of the consideration to be given to Contributor hereunder;
or (z) pursuant and subject to Section 10, delete and eliminate from this
Agreement any or all of the affected Properties or Additional Properties, at
Acquiror's sole election, and with respect to such Properties or Additional
Properties not so deleted, elect to accept title subject to such unacceptable
defects, objections or exceptions and receive no credit against or reduction of
the consideration to be given to Contributor hereunder. If Acquiror fails to
make any such election, and elects not to pursue its other rights and remedies
as aforesaid, Acquiror shall be deemed to have elected option (x) above.
6. CLOSING
A. Closing Date. The closing with respect to the Properties
contemplated by this Agreement (the "Closing") shall occur at the offices of
Rogers & Wells LLP, 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 fifteenth (15th) day after the
expiration of the Inspection Period or (ii) such other time and at such other
place as Contributor and Acquiror shall agree upon in writing. The "Closing
Date" shall be the date of the Closing.
B. Closing Documents.
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(i) Contributor. Contributor shall deliver or cause to
be delivered to Acquiror at or before Closing, to the extent
applicable, each of the following items with respect to the Properties:
(a) the Deeds for each of the Deed Properties (other
than the Deed Properties
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to be contributed by the assignment of an IDA Lease
Agreement), substantially in the form of Exhibit I-1 attached
hereto, such Deeds to be duly executed by the Deed
Contributors;
(b) a bill of sale for each of the Deed Properties,
substantially in the form of Exhibit I-2 attached hereto, such
bill of sale to be duly executed by the Deed Contributors
(although the bill of sale for Deed Properties to be
contributed by assignment of an IDA Lease Agreement shall not
include any building or improvements);
(c) a letter advising tenants under the Leases of the
change in ownership of the Deed Properties or of the address
and contact person of the Contributed Entities and directing
them to pay rent to Acquiror or as Acquiror may direct, in
form and substance to be mutually agreed upon by Acquiror and
Contributor;
(d) any and all affidavits, certificates or other
documents reasonably 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
customary 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 of the Leases for
each of the Deed Properties in substantially the form of
Exhibit J-1 attached hereto (the "Assignment of Leases")
(including an updated Rent Roll certified by Contributor as of
the Closing Date as being true, accurate and complete in all
material respects and all security deposits thereunder), an
assignment of those Service Contracts that Acquiror elects to
assume or which may not be terminated prior to Closing as set
forth in Exhibit C attached hereto in substantially the form
of Exhibit J-2 attached hereto for each of the Deed Properties
(the "Assignment of Service Contracts"), and, subject to
Section 3S above, an assignment and assumption of the
leasehold estates granted to a Deed Contributor under the IDA
Lease Agreements and related PILOT Agreements in substantially
the form of Exhibit J-3 attached hereto (the "Assignment of
IDA Lease Agreements");
(f) an assignment and assumption of the Management
Contracts in substantially the form of Exhibit J-4 attached
hereto (the "Assignment of Management Contracts");
(g) the delivery of all necessary and appropriate
consents and approvals in connection with the assignment of
the Partnership Interests and an assignment and assumption of
Partnership Interests from each Interest Contributor in
substantially the form of Exhibit J-5 attached hereto (the
"Partnership Interest Assignments");
(h) all of the original Leases, IDA Lease Agreements
and Management Agreements, 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;
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(i) for the Deed Properties, an assignment, in form
and substance reasonably satisfactory to Acquiror and
Contributor, pursuant to which Contributor transfers all items
of intangible personal property referred to in Section 1A(vi)
above;
(j) any existing bonds, warranties or guaranties
which are in any way applicable to the Properties or any part
thereof which are in the possession or subject to the control
of Contributor;
(k) the delivery of all necessary consents and
approvals of lenders under the Assumed Indebtedness, if any,
and a pay-off letter (the "Pay-Off Letter") issued by each
lender under the Existing Indebtedness (other than the Assumed
Indebtedness, if any), setting forth the amount of principal
and interest outstanding on the Closing Date, and the amount
of any prepayment fees and other related charges;
(l) to the extent not previously delivered to
Acquiror, copies of the most currently available tax bills for
the Properties;
(m) 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;
(n) 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;
(o) a certificate, dated the Closing Date and signed
by Michael J. Falcone, certifying to Acquiror that the
representations and warranties of Michael J. Falcone contained
in this Agreement are true and correct in all material
respects as of the Closing Date;
(p) For each Property subject to an IDA Lease
Agreement for which IDA Consents have been obtained pursuant
to Section 3S or for which no consent is required, an estoppel
certificate from each IDA that is a party to an IDA Lease
Agreement stating that which the IDA is obligated to state
under the IDA Lease Agreement. Each estoppel certificate shall
be in form and substance reasonably satisfactory to Acquiror;
(q) a leasing agreement (the "Leasing Agreement") in
form and substance reasonably satisfactory to Contributor and
Acquiror, the material terms of which are set forth in Exhibit
K attached to this Agreement, such Leasing Agreement to be
duly executed by Acquiror and Pioneer Management Services
Company, LLC;
(r) notices to parties to Service Contracts that are
being assigned pursuant to the Assignment of Service Contracts
(the "Service Contracts Notices");
(s) a duly completed, executed and acknowledged (i)
Combined Real Estate Transfer Tax Return and Credit Line
Mortgage Certificate for New York State ("TP-584"),
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(ii) any transfer tax returns required by local law, (iii) the
New York State Real Property Transfer Report ("RP-5217"), and
(iv) any other documents required to record the Deeds or the
Assignment of IDA Lease Agreements;
(t) if any letter of credit constitutes a security
deposit under any Lease, Contributor will assign the same to
Acquiror at Closing, or if not assignable, Contributor will
cause the tenant to replace the same with a comparable
instrument;
(u) an assignment and assumption of the Assumed
Indebtedness, if necessary;
(v) an estoppel certificate from each lender under
the Assumed Indebtedness, if any, in form and substance
reasonably satisfactory to Acquiror; and
(w) 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. Acquiror shall deliver or cause to be
delivered to Contributor at or before Closing each of the following
items with respect to the Properties:
(a) (1) for the Deed Properties, the Assignment of
Leases, the Assignment of Service Contracts, and, for the Deed
Properties to be contributed by assignment of IDA Lease
Agreement, the Assignment of IDA Lease Agreements, (2) the
Assignment of Management Contracts and (3) for the Contributed
Entities, the Partnership Interest Assignments;
(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 Leasing Agreement;
(d) the Service Contracts Notices;
(e) a certificate of the REIT duly executed by an
authorized officer of the REIT in such capacity, on the REIT's
behalf and in its capacity as general partner of Acquiror, as
the case may be, certifying that annexed thereto (i) is a true
and correct copy of (x) the Partnership Agreement and any and
all amendments thereto, and (y) the certificate of limited
partnership of the Acquiror and all amendments thereto, if
any, as filed in the State of Delaware; and the same have not
been otherwise modified or amended, and are in full force and
effect; (ii) are duly adopted resolutions authorizing the
consummation of the transactions contemplated by this
Agreement; and (iii) is a true and correct copy of the REIT's
Certificate of Incorporation and by-laws and all amendments
thereto and that the same have not been otherwise modified or
amended, and are in full force and effect;
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(f) a certificate of Acquiror, certifying that each
OP Unit Recipient has been admitted as a limited partner of
Acquiror, effective on the Closing Date, and that Acquiror's
books and records will, as of the Closing, indicate that each
OP Unit Recipient is the holder of the number of OP Units
designated in Exhibit G;
(g) a certificate, dated the Closing Date and signed
by the President or any Vice President of the REIT, certifying
to Contributor that the representations and warranties of
Acquiror and the REIT contained in this Agreement are true and
correct in all material respects as of the Closing Date;
(h) a Surrender Agreement relating to the surrender
of a portion of space leased on the second floor of 250 S.
Clinton Street, Syracuse, New York, which space is shown
hatched in Exhibit L, in form and substance reasonably
satisfactory to Acquiror and Contributor;
(i) a receipt for security deposits transferred to
Acquiror substantially in the form of Exhibit M attached
hereto;
(j) a duly executed and acknowledged (i) TP-584, (ii)
any transfer tax returns required by local law, (iii) RP-5217,
and (iv) any other documents required to record the Deeds or
the Assignment of IDA Lease Agreements;
(k) a good standing certificate dated the most recent
practicable date for each of the REIT and Acquiror or its
Permitted Designee which takes title to a Property or an
assignment of Partnership Interests with respect thereto;
(l) an incumbency certificate of the REIT, in form
and substance reasonably satisfactory to Acquiror and
Contributor;
(m) an assignment and assumption of the Assumed
Indebtedness, if necessary, or such other documents as may
reasonably be requested by the lender under any Assumed
Indebtedness in order to reflect the assumption of such
Assumed Indebtedness by Acquiror;
(n) resolutions of the REIT's Board of Directors
appointing Michael J. Falcone to the Board of Directors of the
REIT; and
(o) 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. Additional Closing Dates
------------------------
(i) Second Closing Date. The closing with respect to
Waterfront II contemplated by this Agreement (the "Second Closing")
shall occur at the offices of Rogers & Wells LLP, 200 Park Avenue, New
York, New York 10166, on the basis of a "New York Style"
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closing at 10:00 a.m. on (i) the fifth (5th) business day after all
conditions precedent to the respective obligations of the parties with
regard to Waterfront II have been satisfied or waived or (ii) such
other time and at such other place as Contributor and Acquiror shall
agree upon in writing. The "Second Closing Date" shall be the date of
the Second Closing.
(ii) Option Closing Date. The closing with respect to One
City Centre and Three City Centre contemplated by this Agreement (the
"Option Closing") shall occur at the offices of Rogers & Wells LLP, 200
Park Avenue, New York, New York 10166, on the basis of a "New York
Style" closing at 10:00 a.m. on the earlier to occur of (i) the
thirtieth (30th) day after delivery of the Additional Property Notice,
(ii) the fifteenth (15th) day after the IDA Consents with respect to
One City Centre and Three City Centre are obtained, or (iii) such other
time and at such other place as Contributor and Acquiror shall agree
upon in writing. The "Option Closing Date" shall be the date of the
Option Closing.
D. Additional Closing Documents.
-----------------------------
(i) Contributor. Contributor shall deliver or cause to
be delivered to Acquiror at or before the Second Closing or the Option
Closing, as the case may be, each of the following items, where
applicable, relating to Additional Properties:
(a) if by deed transfer, the Deed for each Additional
Property, substantially in the form of Exhibit I-1 attached
hereto, such Deed to be duly executed by the Deed Contributor;
(b) if by deed transfer, a bill of sale,
substantially in the form of Exhibit I-2 attached hereto, such
bill of sale to be duly executed by the Deed Contributor;
(c) a letter advising the tenant under the Leases of
the change in ownership of Additional Properties, if
applicable, or change in the address and contact person of the
Contributed Entity relating to each Additional Property, if
applicable, and directing them to pay rent to Acquiror or as
Acquiror may direct;
(d) any and all affidavits, certificates or other
documents reasonably required by the Title Insurer in order to
cause it to issue at the Second Closing or the Option Closing,
as the case may be, an Owner's Title Insurance Policy for each
Additional Property (or marked-up commitment therefor) in the
form and condition required by this Agreement (it being
understood that Contributor will provide any customary
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) if by deed transfer, the Assignment of Leases for
each Additional Property in substantially the form of Exhibit
J-1 attached hereto (including an updated Rent Roll for
Additional Properties certified by Contributor as of the
Second Closing Date or Option Closing Date, as the case may
be, as being true, accurate and complete in all material
respects and all security deposits thereunder), the Assignment
of Service Contracts that Acquiror elects to assume or which
may not be terminated prior to the Second Closing or Option
Closing, as the case may be, as set forth in Exhibit C
attached hereto in substantially the form of Exhibit J-2
attached hereto, and, subject to Section 3S above, the
Assignment
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of IDA Lease Agreement and related PILOT Agreement in
substantially the form of Exhibit J-3 attached hereto;
(f) the delivery of all necessary and appropriate
consents and approvals in connection with Partnership Interest
Assignments;
(g) the original Lease, IDA Lease Agreement and
Management Agreements, 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
Additional Properties and in the possession or control of
Contributor;
(h) if by deed transfer, an assignment, in form and
substance reasonably satisfactory to Acquiror and Contributor,
pursuant to which Contributor transfers all items of
intangible personal property referred to in Section 1A(vi)
above;
(i) any existing bonds, warranties or guaranties
which are in any way applicable to the Additional Properties
or any part thereof which are in the possession or subject to
the control of Contributor;
(j) the delivery of a Pay-Off Letter issued by each
lender under the Waterfront II Indebtedness, the One City
Centre Indebtedness, if any, and the Three City Centre
Indebtedness, if any, setting forth the amount of principal
and interest outstanding on the Second Closing Date or Option
Closing Date, as the case may be, and the amount of any
prepayment fees and other related charges;
(k) to the extent not previously delivered to
Acquiror, copies of the most currently available tax bills for
the Additional Properties;
(l) 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;
(m) 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;
(n) a certificate, dated the Second Closing Date or
Option Closing Date, as the case may be, and signed by Michael
J. Falcone, certifying to Acquiror that the representations
and warranties of Michael J. Falcone contained in this
Agreement (except as they relate to the properties or the
Owners or Contributors with respect thereto not the subject of
the Second Closing or the Option Closing, as the case may be)
are true and correct in all material respects as of the Second
Closing Date or Option Closing Date, as the case may be;
(o) for each Additional Property subject to an IDA
Lease Agreement for
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which IDA Consents have been obtained pursuant to Section 3S
or for which no consent is required, an estoppel certificate
from each IDA that is a party to an IDA Lease Agreement
stating that which the IDA is obligated to state under the IDA
Lease Agreement. Each estoppel certificate and consent shall
be in form and substance reasonably satisfactory to Acquiror;
(p) the Service Contracts Notices;
(q) a duly completed, executed and acknowledged (i)
TP-584, (ii) any transfer tax returns required by local law,
(iii) RP-5217, and (iv) any other documents required to record
the Deed or Assignment of IDA Lease Agreements;
(r) if any letter of credit constitutes a security
deposit under any Lease, Contributor will assign the same to
Acquiror at the Second Closing or Option Closing, as the case
may be, or if not assignable, Contributor will cause the
tenant to replace the same with a comparable instrument;
(s) with respect to the Option Closing, an agreement
pursuant to which (i) Acquiror agrees to be liable for 50% of
the costs, allocated to Pioneer Management Services Company,
LLC for the Corporate Woods, Rochester lease, wherein Pioneer
Management Services Company, LLC has its Rochester office and
(ii) Contributor agrees to grant Acquiror the right to have
two employees of Acquiror share the use of the space shown on
Exhibit Q in said leased premises; and
(t) 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 Additional Properties and such other
governmental or regulatory approvals to be issued to
Contributor with respect to the Additional Properties).
(ii) Acquiror. Acquiror shall deliver or cause to be
delivered to Contributor at or before the Second Closing or Option
Closing, as the case may be, each of the following items, where
applicable, with respect to the Additional Properties:
(a) (1) if by deed transfer, the Assignment of
Leases, the Assignment of Service Contracts, and, if
contributed by assignment of IDA Lease Agreement, the
Assignment of IDA Lease Agreements, (2) the Assignment of
Management Contracts and (3) if by assignment of partnership
interests, the Partnership Interest Assignments;
(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;
(d) a certificate of the REIT duly executed by an
authorized officer of the REIT in such capacity, on the REIT's
behalf and in its capacity as general partner of Acquiror, as
the case may be, certifying that annexed thereto (i) is a true
and correct copy
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of (x) the Partnership Agreement and any and all amendments
thereto, and (y) the certificate of limited partnership of the
Acquiror and all amendments thereto, if any, as filed in the
State of Delaware; and the same have not been otherwise
modified or amended, and are in full force and effect; (ii)
are duly adopted resolutions authorizing the consummation of
the transactions contemplated by this Agreement; and (iii) is
a true and correct copy of the REIT's Certificate of
Incorporation and by-laws and all amendments thereto and that
the same have not been otherwise modified or amended, and are
in full force and effect;
(e) a certificate of Acquiror, certifying that each
OP Unit Recipient has been admitted as a limited partner of
Acquiror, effective on the Second Closing Date or Option
Closing Date, as the case may be, and that Acquiror's books
and records will, as of the Second Closing or the Option
Closing, as the case may be, indicate that each OP Unit
Recipient is the holder of the number of OP Units designated
in Exhibit G;
(f) a certificate, dated the Second Closing Date or
Option Closing Date, as the case may be, and signed by the
President or any Vice President of the REIT, certifying to
Contributor that the representations and warranties of
Acquiror and the REIT contained in this Agreement are true and
correct in all material respects as of the Second Closing Date
or Option Closing Date, as the case may be;
(g) a receipt for security deposits transferred to
Acquiror substantially in the form of Exhibit M attached
hereto;
(h) a duly executed and acknowledged (i) TP-584, (ii)
any transfer tax returns required by local law, (iii) RP-5217,
and (iv) any other documents required to record the Deeds or
Assignment of IDA Lease Agreements;
(i) a good standing certificate dated the most recent
practicable date for each of the REIT and Acquiror or the
Permitted Designee which takes title to Additional Properties
or an assignment of Partnership Interests with respect
thereto;
(j) an incumbency certificate of the REIT, in form
and substance reasonably satisfactory to Acquiror and
Contributor;
(k) with respect to the Option Closing, the agreement
described in Section 4D(i)(s) above; and
(l) 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.
E. Closing Prorations and Adjustments.
-----------------------------------
(i) A statement of prorations and adjustments shall be
prepared by Acquiror
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in conformity with the provisions of this Agreement and submitted to
Contributor for review not less than three (3) business days prior to
each of the Closing Date (with respect to the Properties), the Second
Closing Date (with respect to Waterfront II) and the Option Closing
Date (with respect to One City Centre and Three City Centre). For
purposes of prorations, Acquiror shall be deemed the owner of the
Properties on the Closing Date, the owner of Waterfront II on the
Second Closing Date and the owner of One City Centre and Three City
Centre on the Option 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)
with respect to the Properties and Additional Properties, as of the
Closing Date, the Second Closing Date or the Option Closing Date, as
the case may be:
(a) The full amount of the cash security and other
cash deposits paid under the Leases, together with interest
thereon if required by law or under the Leases, shall be
credited to Acquiror, except to the extent any security
deposits have been applied, after the date of this Agreement,
to the curing of a default under the Lease and have not been
replenished. No such security deposits have been applied to
the curing of a default under the Lease and have not been
replenished as of the date of this Agreement;
(b) To the extent such charges are not billed
directly to Tenants, water, electricity, sewer, gas, telephone
and other utility charges shall be prorated based, to the
extent practicable, on final meter readings and final
invoices, or, if final readings and invoices are not
available, based on the most currently available billing
information, and reprorated upon issuance of final utility
bills;
(c) Amounts paid or payable under any Service
Contracts being assigned to Acquiror shall be prorated based,
to the extent practicable, on final invoices or, if final
invoices are not available, based on the most currently
available billing information, and reprorated upon issuance of
final invoices;
(d) For Properties which are not subject to IDA Lease
Agreements, all real estate, personal property and ad valorem
taxes applicable to the Properties or Additional Properties
and levied with respect to calendar year 1998 or the
appropriate fiscal year shall be prorated on an accrual basis,
as of the Closing Date, the Second Closing Date or the Option
Closing Date, as the case may be, utilizing the actual final
Tax Bills for the properties for 1997 (or 1998 if available)
adjusted for any announced changes in rates of taxation or
assessed valuation of the properties. Prior to or at the
Closing, Second Closing or Option Closing, as the case may be,
Contributor shall pay or have paid all Tax Bills that are due
and payable prior to or on the Closing Date, Second Closing
Date or Option Closing Date, as the case may be, and shall
furnish evidence of such payment to Acquiror and the Title
Insurer. For the Properties and Additional Properties, which
are subject to IDA Lease Agreements, taxes will be adjusted
pursuant to the applicable PILOT Agreement;
(e) All assessments, general or special, shall be
prorated as of the Closing Date, the Second Closing Date and
the Option Closing Date, as the case may be, 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, the Second Closing Date and the
Option Closing Date, respectively, and Acquiror shall be
responsible for any
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installments of assessments which are first due or payable on
or after the Closing Date, the Second Closing Date and the
Option Closing Date, as the case may be;
(f) Except as set forth in Section 6(E)(i)(h),
commissions of leasing and rental agents for any Lease entered
into as of or prior to the Closing Date with respect to the
Properties, the Second Closing Date with respect to Waterfront
II or the Option Closing Date with respect to One City Centre
and Three City Centre, as the case may be, that are due and
payable at or prior to the Closing Date, the Second Closing
Date or the Option Closing Date, as the case may be, whether
with respect to base lease term, future expansions, renewals,
or otherwise, shall be paid in full at or prior to the
Closing, the Second Closing or the Option Closing, as the case
may be, 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 with respect to the Properties, the Second Closing
Date with respect to Waterfront II or the Option Closing Date
with respect to One City Centre and Three City Centre. At the
time(s) of final calculation and collection from tenants of
Additional Rent for 1998 (or for 1999 with respect to
Additional Properties, if applicable), 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, the Second Closing and the Option
Closing, as the case may be, and shall not merge into any
instrument of conveyance delivered at the Closing, the Second
Closing or the Option Closing, as the case may be. At the
Closing, the Second Closing and the Option Closing, as the
case may be, no "Delinquent Rents" (rents or other charges
which are due and owing as of the Closing, the Second Closing
or the Option Closing, as the case may be) shall be prorated
in favor of the Contributor. Notwithstanding the foregoing,
Acquiror shall use reasonable efforts after the Closing Date
with respect to the Properties, the Second Closing Date with
respect to Waterfront II and the Option Closing Date with
respect to One City Centre and Three City Centre, to collect
any Delinquent Rents due to the Contributor from tenants.
Further, after the Closing Date with respect to the
Properties, the Second Closing Date with respect to Waterfront
II or the Option Closing Date with respect to One City Centre
and Three City Centre, the Contributor shall continue to have
the right, enforceable at its sole expense, to pursue legal
action against any tenant (and any guarantors) who owe any
Base Rent or additional rent to Contributor for the period
prior to the Closing Date, the Second Closing Date or the
Option Closing Date, as the case may be, 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, the Second Closing or the Option Closing, as the case
may be, 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,
the Second Closing Date or the Option Closing Date, as the
case may be (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, the Second Closing Date or the Option
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Closing Date, as the case may be, that the Contributor does
not pay or for which Acquiror does not receive a credit at the
Closing, the Second Closing or the Option Closing, as the case
may be, 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, the Second Closing or the Option
Closing Date, as the case may be (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 Leases set forth in Schedule 6E(i)(h)
attached to this Agreement are referred to herein as "New
Leases." 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"). For any new lease for any
such Vacancy ("Vacancy Lease") that is executed prior to
Closing, if the terms of such Vacancy Lease have been approved
by Acquiror (or were not approved, but approval is not
required pursuant to this Agreement), and for any New Leases,
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 and the New
Leases (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 or New Lease's term
that elapses after the rent commencement date and prior to
Closing and Acquiror's proportionate share shall be the
balance of the Vacancy Lease Costs. If this Agreement is
terminated prior to Closing, then Acquiror shall have no
liability or obligation with respect to any Vacancy Lease, any
New Lease or any Vacancy Lease Costs;
(i) Award or refunds in connection with a Tax
Reduction Proceeding pursuant to Section 4(A)(v); and
(j) 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 Additional
Properties, as the case may be, and therefore entitled to the income
therefrom and responsible for the expenses thereof, for the entire
Closing Date, the Second Closing Date or the Option Closing Date, as
the case may be, Second Closing Date and Option Closing Date, as the
case may be. All such prorations shall be made on the basis of the
actual number of days of the year and month that shall have elapsed as
of the Closing Date. 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, the Second Closing or
the Option Closing, as the case may be, shall be reprorated and finally
adjusted within ninety (90) days after the Closing Date, the Second
Closing Date or the Option Closing Date, as the case may be, otherwise
all prorations shall be final.
(iii) Any errors in calculations or adjustments shall be
corrected or adjusted as soon as practicable after the Closing, the
Second Closing or the Option Closing, as the case may be; such
adjustments shall be made in cash or OP Units at the election of
Acquiror.
(iv) To the extent Acquiror receives a credit at the
Closing, the Second Closing or the Option Closing, as the case may be,
for any of the items set forth in this Section 6E, then such
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item shall be the post-closing obligation of Acquiror.
F. Closing Costs. All transfer taxes, documentary stamps,
intangible taxes and similar taxes or charges 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, if any. Each party shall pay its own
attorney's fees and all of its other expenses, except as otherwise expressly set
forth herein.
G. Possession. Upon consummation of the Closing, the Second
Closing and the Option Closing, Contributor shall deliver to Acquiror full and
complete possession of the Properties and Additional Properties, as the case may
be, subject only to the Permitted Exceptions and other matters accepted by
Acquiror.
7. CASUALTY, LOSS AND CONDEMNATION
A. If, prior to the Closing, any single Property 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 Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00) to a Property), Contributor shall immediately
so notify Acquiror and Acquiror shall be entitled to (i) pursuant and subject to
Section 10, delete and eliminate from this Agreement such Property affected by
such damage or destruction, at Acquiror's sole discretion, or (ii) subject to
the rights of holders of the Existing Indebtedness related to such Property,
receive the condemnation proceeds at Closing or settle the loss under all
policies of insurance applicable to the destruction or damage to such Property
if not deleted pursuant to Section 10, and receive the proceeds of insurance
applicable thereto at Closing, 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, prior to the Closing,
two or more 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 Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) to a
Property), Contributor shall immediately so notify Acquiror and Acquiror shall
have the option either to terminate this Agreement upon delivery to Contributor
of a Termination Notice 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 (i) pursuant and subject to Section 10, delete and
eliminate from this Agreement any one Property affected by such damage or
destruction, at Acquiror's sole discretion, and (ii) with respect to the
Properties not so deleted, subject to the rights of holders of the Existing
Indebtedness related to such Property, receive the condemnation proceeds or
settle the loss under all policies of insurance applicable to the destruction or
damage to such Properties, 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 Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) or less) to a Property
or any part thereof, Acquiror shall have the right to (i) require Contributor to
repair such damage prior to the Closing, or (ii) require Contributor to assign
(subject to the rights of holders of the Existing Indebtedness related to such
Property) 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
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assignment of all insurance claims as aforesaid, Acquiror shall receive at the
Closing a credit against the Contribution Consideration in an amount equal to
any deductible(s) applicable thereto.
B. If, prior to the Second Closing (with respect to Waterfront
II) or the Option Closing (with respect to One City Centre and Three City
Centre), any such property 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 Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)),
Contributor shall immediately so notify Acquiror and Acquiror shall have the
option either to terminate this Agreement with respect to such Additional
Property upon delivery to Contributor of a Termination Notice or to consummate
the transaction contemplated by this Agreement with respect to such Additional
Property 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 to
the Additional Property, and receive the proceeds of insurance applicable
thereto, and Contributor shall, at the Second Closing, the Option 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 with respect to the Additional Property, this Agreement
shall, without further action of the parties, be deemed to have been
automatically and ipso facto amended to eliminate the Additional Property
herefrom. If there is any other damage or destruction (that is, damage or
destruction of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) or
less) to an Additional Property or any part thereof, Acquiror shall have the
right to (i) require Contributor to repair such damage prior to the Second
Closing or Option Closing, as the case may be, or (ii) subject to the rights of
holders of the Existing Indebtedness related to such Additional Property,
require Contributor to assign all insurance claims pertaining to such damage or
destruction to Acquiror by executing and delivering to Acquiror at the Second
Closing and Option Closing, as the case may be, 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 Second Closing or Option Closing, as the case may
be, a credit against the Additional Consideration in an amount equal to any
deductible(s) applicable thereto.
8. REPRESENTATIONS AND WARRANTIES
A. Michael J. Falcone and no other signatory hereto represents
and warrants to Acquiror that the following are true, complete and correct as of
the date of this Agreement:
(i) Each Owner is a general partnership duly organized
and validly existing under the laws of the State of New York 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. Each Owner is duly qualified, licensed or admitted to do
business 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 that individually or
in the aggregate for all Owners would not materially adversely affect
the Properties, Management Contracts, assets, business, operations or
condition (financial or otherwise) of an Owner, individually or taken
together with all Owners as a whole, or the ability of an Owner,
individually or taken together with all Owners as a whole, to perform
its obligations under this Agreement (an "Owner Material Adverse
Effect"). Such jurisdictions are listed on Schedule 8A(i).
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(ii) No Contributor or Owner has made a general
assignment for the benefit of creditors, filed any voluntary petition
in bankruptcy or suffered the filing of any involuntary petition by its
creditors, suffered the appointment of a receiver to take possession of
all, or substantially all, of its assets (except as disclosed on
Schedule 8A(xxii)(1)), suffered the attachment or other judicial
seizure of all, or substantially all, of its assets, admitted in
writing its inability to pay its debts as they come due or made an
offer of settlement, extension or composition to its creditors
generally.
(iii) Each person or entity (other than Acquiror or the
REIT) listed on the signature pages hereto (each, a "Signatory") has
full requisite power and authority to enter into, execute and deliver
this Agreement and to perform fully its obligations hereunder. The
execution, delivery and performance by each Signatory of this Agreement
and the execution, delivery and performance of the other documents to
be delivered by each Signatory or other Contributor at Closing, the
Second Closing, and the Option Closing, and the consummation by each
Signatory and other Contributor of the transactions contemplated hereby
and thereby have been (or will be with respect to documents to be
delivered at the Closing, the Second Closing or the Option Closing)
duly and validly authorized by all necessary action on the part of such
Signatory or other Contributor and no other proceedings on the part of
any Signatory, including of its partners, members or otherwise are
necessary to authorize the execution, delivery and performance by such
Signatory of this Agreement and the other documents to be delivered by
such Signatory at the Closing, the Second Closing or the Option
Closing, as the case may be, and the consummation by such Signatory of
the transactions contemplated hereby and thereby, and no other
proceedings on the part of any other Contributor, including of its
partners, members or otherwise will be necessary (at the Closing, the
Second Closing or the Option Closing, as the case may be) to authorize
the execution, delivery and performance by such Contributor of the
other documents to be delivered by such Contributor at the Closing, the
Second Closing or the Option Closing, as the case may be, and the
consummation by such Contributor of the transactions contemplated
hereby and thereby. This Agreement has been duly executed and delivered
by each Signatory and is a valid and binding obligation of each
Signatory, enforceable against each Signatory in accordance with its
terms.
(iv) Except as set forth in Schedule 8A(iv), neither the
execution and delivery of this Agreement by any Signatory nor the
performance by any Signatory or other Contributor or Contributed Entity
of the transactions contemplated hereby will: (a) violate or conflict
with any of the provisions of the partnership agreement or certificates
of limited partnership, if any, (or similar organizational and
governing documents) of any Contributor or Contributed Entity; (b)
except as would not have an Owner 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, encumbrance, pledge, claim, security interest,
demand, easement, covenant, condition, restriction and encroachment of
any kind or nature (collectively, "Liens") in or upon any of the
Properties or Additional Properties or assets of any Contributor or
Contributed Entity 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 any Contributor or Contributed Entity is a
party or by which it or any of its assets may be bound or affected; or
(c) except as would not have an Owner 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 any Contributor,
Contributed Entity, the Properties, Additional
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Properties or the assets of any Contributor or Contributed Entity.
Other than those which have been obtained or made prior to the date
hereof, or as set forth in Schedule 8A(iv) attached to this Agreement,
no consent or approval or action of, filing with or notice to any
Governmental or Regulatory Authority (as defined below), any creditor,
investor, member, partner, shareholder, or tenant-in-common of any
Contributor, Contributed Entity or other party is necessary or required
for the execution, delivery and performance by each 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 an Owner Material Adverse Effect.
(v) To the best of each Owner's knowledge, it is not (a)
in violation of its partnership agreement (or similar organizational
and governing documents), (b) except as set forth in Schedules
8A(xxii)(1) and 8A(vi) 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 it or its properties or 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 Owner Material Adverse Effect. To the best of each
Owner's knowledge, (x) it is not in default under any of the documents,
recorded or unrecorded, referred to in the Title Commitments for the
Properties or Additional Properties, and (y) no Owner or any of the
Properties or Additional 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 any Owner or its
assets, the Properties or Additional Properties, occupancy of the
Properties or Additional 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 an Owner
Material Adverse Effect.
(vi) The Owners are the sole owners of fee simple title
to the Properties that are not subject to IDA Lease Agreements. With
respect to each of the Properties and Additional Properties subject to
IDA Lease Agreements disclosed on Schedule B, such IDA is the sole
lessor under the applicable IDA Lease Agreement for such Property or
Additional Properties, as the case may be, and the respective Owner is
the sole owner of the leasehold estate in and to such Property or
Additional Property, as the case may be. Except as set forth in
Schedule 8A(vi), each of the IDA Lease Agreements and the related PILOT
Agreements are in full force and effect, and has not been modified,
amended, or altered, in writing or otherwise and no Owner has received
any notice of a default thereunder that remains outstanding. Each Owner
has complied with (and, prior to the Closing, the Second Closing or the
Option Closing, as the case may be, shall continue to comply with) in
all material respects the terms of all IDA Lease Agreements, and all
notices or correspondence received from the IDA. Except as set forth in
Schedule 8A(vi), each Owner has paid (and, at all times prior to the
Closing, the Second Closing or the Option Closing, as the case may be,
shall pay), when and as due, all sums due under the IDA Lease
Agreements. Each Owner has delivered to Acquiror true, complete and
accurate copies of all IDA Lease Agreements. No Owner has 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
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one or more of the Permitted Exceptions. To the best of each Owner's
knowledge, there are no development or other rights associated with any
Property or Additional Property which are not being transferred to
Acquiror under this Agreement or the documents contemplated by this
Agreement other than the Vacant Land.
(vii) Each Interest Contributor has or will have at the
Closing, the Second Closing or the Option Closing, as the case may be,
legal and beneficial title to one-hundred (100%) percent of their
respective interest in the Contributed Entities to be contributed
hereunder, free and clear of all Liens. The Partnership Interests
represent all of the equity interests in the Contributed Entities. Each
Interest Contributor has the power and authority to own its respective
Partnership Interests, and the contribution of such Partnership
Interests pursuant to this Agreement is or will be, to the extent
necessary, authorized and within the power of each Interest Contributor
on or prior to the Closing, the Second Closing or the Option Closing,
as the case may be. At the Closing, the Second Closing or the Option
Closing, as the case may be, Acquiror will receive legal and beneficial
title to one-hundred (100%) percent of the Partnership Interests, free
and clear of all Liens. Each partnership agreement of the Contributed
Entities has been duly authorized, executed and delivered by each party
thereto and constitutes a valid and binding obligation of those
parties, enforceable in accordance with its terms. True and complete
copies of such partnership agreements have been delivered to Acquiror,
and have not been amended since their respective dates.
(viii) Each Owner has obtained and paid for (or caused to
be 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
Additional Properties, and all of the same are in good standing. To the
best of each Owner's knowledge, the Properties and Additional
Properties and each part thereof contain not less than the minimum
number of parking spaces required under applicable law.
(ix) The schedule of insurance policies to be furnished
to Acquiror pursuant to Section 11(iii) below will be true, complete
and correct in all material respects, all such policies are in full
force and effect and no Owner is in default with respect to any
material provisions contained in any such policy. Neither any Owner
nor, to the best of each Owner's knowledge, any agent of any Owner, has
received from any insurer any notice with respect to any defects or
inadequacies affecting all or any part of the Properties
or Additional 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.
(x) Except as set forth in Schedule 8A(x) attached to
this Agreement, there is no judicial, municipal or administrative
action, suit, arbitration, proceeding or investigation pending or, to
the best of each Owner's knowledge, threatened against, relating to or
affecting any Owner, its assets, the Properties, Additional 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
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or Additional 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 each Owner's
knowledge, threatened against any Owner.
(xi) Except as set forth in Schedule 8A(xi) attached to
this Agreement, no Owner has received from any Governmental or
Regulatory Authority any written notice of, nor is any Owner aware of,
zoning, building, fire, health code, environmental or other violations
of applicable laws, rules, ordinances codes and regulations with
respect to the Properties, Additional Properties, or any part thereof.
(xii) The Service Contracts (which include the agreements
set forth on Schedule 8A(xii)) and the Management Contracts comprise
every contract, agreement, relationship and commitment, oral or
written, other than the Leases, the IDA Lease Agreements, the Existing
Indebtedness, the Waterfront II Indebtedness, the One City Centre
Indebtedness and the Three City Centre Indebtedness, that affect the
Properties or Additional Properties and to which any Owner is a party
or by which it is bound, including, without limitation, all agreements
relating to the management, construction, operation, maintenance or
repair of any Property or Additional Property, the purchase of
materials, supplies, equipment, machinery parts, products and services,
and the lease of any property, real or personal. The Service Contracts
are in full force and effect and have not been modified, amended or
altered, in writing or otherwise. Neither any Owner nor, to the best of
each Owner'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 Owner (or its assignees or successors)
without payment of any penalty upon not more than thirty (30) days
prior notice. Except as otherwise noted on Exhibit C or on Schedule
8A(xii), no Service Contract is with an affiliate of Contributor.
(xiii) No Contributor or Contributed Entity has any
patents, trademarks, servicemarks or trade names used in connection
with the Properties or Additional Properties, except for the names
"Pioneer Development Company, LLC" and "Pioneer Management Services
Company, LLC." To the best of each such person'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 each such
person's knowledge, threatened against any Contributor or any
Contributed Entity with respect to alleged infringement of any patent,
trademark, servicemark or trade name related to the Properties or
Additional Properties.
(xiv) (a) Except as set forth on Schedule 8A(xiv), there
is no proceeding, plan, study or effort by any governmental authority
or agency pending, or to the best of each Owner's knowledge,
threatened, which in any way affects or would affect the present use,
improvements on, size or zoning of any of the Properties or Additional
Properties (and no Owner has received any notice from any governmental
authority of any such plan, study or effort), and there is no existing,
or to the best of each Owner's knowledge, proposed or contemplated plan
to widen, modify or realign any street or highway or any existing, or
to the best of each Owner's knowledge, proposed or contemplated eminent
domain proceedings that would affect any of the Properties or
Additional Properties in any way whatsoever (and no Owner has received
any notice from any governmental authority of any such existing,
proposed or contemplated plan or proceedings); and
(b) To the best of each Owner's knowledge, all laws,
ordinances, codes, rules
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and regulations of any Governmental and Regulatory Authority, bearing
on the construction, maintenance, repair or operation of each of the
Properties and Additional Properties have been complied with by each
Owner, except the non-compliance with which would not reasonably be
expected to have an Owner Material Adverse Effect.
(xv) The Rent Roll is true, complete and correct in all
material respects. 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. No Owner has
received any notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of any Owner
under any of the Leases, or affecting or questioning the
rights of any Owner of the continued possession of the leased
or subleased premises under any such Lease;
(b) Except as set forth on the Rent Roll, all
obligations of the lessor under the Leases that accrue to the
date hereof 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 (with respect to the Properties), the
Second Closing (with respect to Waterfront II) or the Option
Closing (with respect to One City Centre and Three City
Centre) or subject to proration hereunder in all cases), and,
to the best of each Owner's knowledge, no tenant has
conditionally accepted lessor's performance of such
obligations. Except as set forth on the Rent Roll, no tenant
has asserted in writing 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
no Owner has any 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, on two or more occasions, 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 in writing that any Owner provide that tenant with
any reduction in the tenant's monetary obligations under its
Lease; (iii) no tenant has requested that any Owner, in its
capacity as landlord, permit the tenant to terminate its Lease
on an accelerated basis; (iv) no Owner has "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) no Owner
has 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, no Owner
has received any written notice from any tenant stating that,
or has knowledge that, a petition in bankruptcy has been
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filed or is threatened to be filed by or against such tenant;
(f) Except with respect to security deposits and as
set forth on the Rent Roll, 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 each Owner'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
any Owner in connection with any Lease, including, but not
limited to, any exercised option(s) to expand or renew;
(i) The Rent Roll sets forth all security deposits
paid by tenants under the Leases. (i) No tenant or any other
party has asserted any claim in writing (other than for
customary refund at the expiration of a Lease) to all or any
part of any security deposit and (ii) no Owner has applied any
portion of any security deposit to the payment of any sums due
from any tenant under a Lease, which sums have not been
reimbursed by such tenant;
(j) 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 Additional Properties, or any portion thereof,
or any right of first refusal to purchase any of the
Properties or Additional 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
Additional Properties or a portion thereof. Except as set
forth on the Rent Roll or due to a default by landlord or in
connection with a casualty or condemnation, no tenant has, by
virtue of its Lease or any other agreement or understanding
any of the following (i) the option to terminate its Lease
prior to the stated expiration date and (ii) the option to
reduce the rentable space at any of the Properties or
Additional Properties that such tenant is currently occupying;
and
(k) Except as set forth on the Rent Roll: (i) to the
best of each Owner's knowledge, no tenant has sublet its
leased premises; and (ii) there are no outstanding written
requests from any tenant to any Owner, 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.
(xvi) Except as set forth in Schedule 8A(xvi) attached to
this Agreement, to the best of each Owner's knowledge, there are no
general or special assessments applicable to the Properties or
Additional Properties or any part thereof. The bill or bills issued for
the years 1995, 1996, 1997 and 1998, for all real estate taxes and
personal property taxes and copies of any and all notices pertaining to
real estate taxes or assessments applicable to the Properties and
Additional
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Properties (the "Tax Bills") (and to each Owner's knowledge, the only
real estate tax bills applicable to the Properties or Additional
Properties) have been delivered to Acquiror. Except as set forth in
Schedule 8A(xvi) attached to this Agreement, no Owner has received any
notice of any proposed or actual increase in the assessed valuation of
or rate of taxation of any or all of the Properties or Additional
Properties from that reflected in the most recent Tax Bills or PILOT
Agreements. Except as set forth in Schedule 8A(xvi) attached to this
Agreement, there is not now pending 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 each Owner's
knowledge, will be, assessed against the Properties, or Additional
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 Additional
Properties, or any portion thereof, that are outstanding or unpaid,
and, to each Owner's knowledge, none will be levied prior to the
Closing, the Second Closing or the Option Closing, as the case may be.
No Owner has 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, the
Second Closing or the Option Closing, as the case may be, other than
agreements entered into in connection with a Tax Reduction Proceeding
permitted pursuant to Section 4(A)(v).
(xvii) Each Owner has prepared and timely filed all tax
returns required to be filed on or before the date hereof with respect
to its Properties and Additional Properties, which tax returns are
true, correct and complete in all material respects. Except as set
forth on Schedule 8A(xvii), each Owner has paid or made provision for
the payment of all taxes with respect to its Properties and Additional
Properties that are due or claimed to be due from it on or before the
date hereof by any governmental taxing authority. Other than as set
forth on Schedule 8A(xvii), no federal, state, local or foreign taxing
authority has given written notice to any Owner of any tax deficiency,
lien, interest or penalty or other assessment against the Properties or
Additional Properties or any Owner which has not been paid and no audit
or written inquiry has been commenced or, to the best of each Owner's
knowledge, threatened by any federal, state, local or foreign tax
authority relating to the Properties or Additional Properties or any
Owner that may be expected to result in a tax deficiency, lien interest
or other assessment against the Properties or Additional Properties.
(xviii) To the best of each Owner's knowledge, the Personal
Property and the Excluded Personal Property is substantially all of the
personal property owned by such Owner and used in the operation of its
Properties and Additional Properties. Each Owner has good title to its
Personal Property, free and clear of any Liens.
(xix) The financial information regarding the Properties
and Additional Properties furnished by the Owners to Acquiror is true,
complete and correct in all material respects and accurately set forth
in all material respects the results of the operations of the
Properties and Additional Properties for the periods covered.
(xx) The Management Contracts are the only management
contracts pertaining to the Properties or Additional Properties and may
be terminated by Acquiror following the advance notice specified in
Schedule A, at no cost or expense to Acquiror.
(xxi) All utilities (including, without limitation, gas,
electricity, telephone, water
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and sanitary and storm sewers) are connected to the Improvements as
necessary, and all connection, hook-up, tap fees and the like have been
paid.
(xxii) Except for the Existing Indebtedness, the Waterfront
II Indebtedness, the One City Centre Indebtedness and the Three City
Centre Indebtedness, there are no mortgages or deeds of trust presently
encumbering the Properties or Additional Properties or any portion
thereof. Except as set forth on Schedule 8A(xxii)(1), each Owner is in
compliance with (and, prior to the Closing, the Second Closing or the
Option Closing, as the case may be, 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 Indebtedness, the Waterfront II Indebtedness,
the One City Centre Indebtedness and the Three City Centre Indebtedness
(the "Existing Notes"). Except as set forth on Schedule 8A(xxii)(1),
each Owner is current in the payment of (and, at all times prior to the
Closing, the Second Closing or the Option Closing, as the case may be,
shall pay, when and as due), all sums due under the Existing
Indebtedness, the Waterfront II Indebtedness, the One City Centre
Indebtedness or the Three City Centre Indebtedness, the Existing Notes
and all other loan documents securing the Existing Notes (the "Other
Loan Documents"). The Existing Notes, the Existing Indebtedness, the
Waterfront II Indebtedness, the One City Centre Indebtedness and the
Three City Centre Indebtedness and the Other Loan Documents are in full
force and effect, and no Owner has received any notice of a default
thereunder that remains outstanding except as may be related to a
non-compliance set forth in Schedule 8A(xxii)(1) attached to this
Agreement. Each Owner has delivered to Acquiror true, complete and
accurate copies of the Existing Notes, the Existing Indebtedness, the
Waterfront II Indebtedness, the One City Centre Indebtedness and the
Three City Centre Indebtedness and the Other Loan Documents. Except as
set forth in Schedule 8A(xxii)(2) attached to this Agreement, the
indebtedness evidenced by the Existing Notes may be prepaid, in full,
on the Closing Date.
(xxiii) No representation or warranty made by any
Contributor or Contributed Entity 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 (taking into account any
knowledge, materiality or other similar qualifier contained therein).
All items delivered by or on behalf of any Owner 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 any Owner
to Acquiror pursuant to this Agreement constitute all of and the only
Leases and other agreements to which any Owner is presently a party
relating to or affecting the ownership, leasing, management and
operation of the Properties and Additional Properties, there being no
"side" or other agreements, written or oral, in force or effect, to
which any Owner is a party or to which any Property or Additional
Property is subject.
(xxiv) Except as set forth in (x) Schedule 8A(xxiv)
attached to this Agreement; (y) any environmental report delivered to
Acquiror by Contributor prior to the date of this Agreement; or (z) any
environmental report procured by Acquiror regarding any of the
Properties or the Additional Properties:
(a) The Properties and Additional Properties are
owned and operated by each Owner in compliance with all
Environmental Laws, except for instances of non-compliance as
would not individually or in the aggregate reasonably be
expected to have an Owner
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Material Adverse Effect.
(b) No Owner has received in the past and there are
no pending or, to the knowledge of each Owner, threatened (in
writing) claims, complaints, notices, correspondence or
requests for information 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 Additional Properties or
any portion thereof.
(c) To the best of each Owner's knowledge, there have
been no Releases of a Hazardous Material at, on, under, in or
about any of the Properties or Additional Properties or any
portion thereof during any period that any Owner owned or
leased such Property or Additional Property or prior thereto.
None of the Properties or Additional Properties is listed, or
to the best of each Owner'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 each Owner's knowledge, no
conditions exist at, on, under, in or about the Properties or
Additional 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, except for those
which would not individually or in the aggregate have an Owner
Material Adverse Effect.
(e) Each Owner has been issued all Environmental
Permits required for the operation of the Properties or
Additional Properties. All such Environmental Permits are in
full force and effect and each Owner is in compliance in all
material respects with the terms and conditions of such
Environmental Permits.
(f) No Owner has transported, disposed of or treated,
or arranged for the transportation, disposal or treatment of,
any Hazardous Material from the Properties or Additional
Properties or any portion thereof to any location that is: (i)
listed, or to the best of each Owner'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 each
Owner's knowledge, threatened, Federal, state or local
enforcement action or other investigation under any
Environmental Law.
(g) There are no underground storage tanks at, on or
under the Properties or Additional Properties or any portion
thereof. No Owner has removed, closed or abandoned any
underground storage tanks at any of the Properties or
Additional Properties, and no Owner has any knowledge of the
existence, abandonment, closure or removal of underground
storage tanks at any of the Properties or Additional
Properties.
(h) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted
by, or which are in the possession of, any Owner in relation
to any Property or Additional Property which have not been
delivered to Acquiror prior to the execution of this
Agreement.
For purposes of this item (xxiv), the following terms shall have the
meanings ascribed to them
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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 to the extent related to Hazardous Materials, 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 to the extent related to
Hazardous Materials; and (vii) notification and reporting requirements
relating to the foregoing. Without limiting the above, Environmental
Law also includes the following: (i) the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Sections. 9601 et
seq.), as amended ("CERCLA"); (ii) the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act (42 U.S.C.
Sections. 6901 et seq.), as amended ("RCRA"); (iii) the Emergency
Planning and Community Right to Know Act of 1986 (42 U.S.C. Sections.
11001 et seq.), as amended; (iv) the Clean Air Act (42 U.S.C.
Sections. 7401 et seq.), as amended; (v) the Clean Water Act
(33 U.S.C. Sections. 1251 et seq.), as amended; (vi) the Occupational
Safety and Health Act (29 U.S.C. Sections. 651 et seq.), as amended,
to the extent applicable to Hazardous Materials; (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 compound, pollutant, contaminant, pesticide, petroleum or petroleum
product or by product, radioactive substance, hazardous or extremely
hazardous solid waste, special, dangerous or toxic waste, hazardous or
toxic substance 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.
(4) "Release" means any spill, discharge, leak, migration,
emission, escape, injection or dumping 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.
(xxv) At the Closing Date, the Second Closing Date and the
Option Closing Date, as the case may be, the only assets of the
Contributed Entities will be the Partnership Properties listed on
Schedule B and the related Personal Property, and the only liabilities
of the
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Contributed Entities will be the Assumed Indebtedness, if any, and
liabilities incurred in the ordinary course of business with respect to
the operation of the Partnership Properties prior to the Closing Date,
the Second Closing Date or the Option Closing Date, as the case may be.
(xxvi) (a) Except as set forth in Schedule 8A(xxvi), at
Closing (with respect to the Properties), the Second Closing (with
respect to Waterfront II) and the Option Closing (with respect to One
City Centre and Three City Centre), all gross income of the Contributed
Entities and all gross income generated by the Deed Properties will be
derived pursuant to the Leases and from no other sources, and (b) other
than the Personal Property, the Service Contracts and the items
specified in Section 1A(v) and (vi), all of the assets held by the
Contributed Entities and all of the Deed Properties, at the Closing
(with respect to the Properties), the Second Closing (with respect to
Waterfront II) and the Option Closing (with respect to One City Centre
and Three City Centre), will be assets described in Section
856(c)(4)(A) of the Code.
(xxvii) Each Partnership Interest contributed by the
Interest Contributors is an interest in a partnership that has been
organized and at all times classified as a partnership for federal
income tax purposes and for the applicable state income tax purposes
and not as a corporation or an association taxable as a corporation.
(xxviii) Attached to this Agreement as Exhibit C and Schedule
8A(xii) is a true and complete list of all the Service Contracts. There
are no currently effective employment and union agreements affecting or
pertaining in any way to the Properties, Additional Properties or any
part thereof.
B. Michael J. Falcone represents and warrants to Acquiror
that, as of the Closing (with respect to the Properties), the Second Closing
(with respect to Waterfront II) and the Option Closing (with respect to One City
Centre and Three City Centre), each of the representations and warranties set
forth in Section 8A above shall be true, complete and correct in all material
respects except for changes in the operation of the Properties or Additional
Properties occurring prior to the Closing, the Second Closing or the Option
Closing, as the case may be, that are specifically permitted by or pursuant to
this Agreement.
C. Acquiror and the REIT represent and warrant 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 full partnership power and authority to
enter into, execute and deliver this Agreement and to perform fully its
obligations hereunder. The execution, delivery
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and performance by Acquiror of this Agreement and the other documents
to be delivered by Acquiror at Closing, the Second Closing and the
Option Closing, as the case may be, and the consummation by Acquiror of
the transactions contemplated hereby and thereby are permitted under
the Partnership Agreement, and at Closing, the Second Closing and the
Option Closing, as the case may be, will have been duly and validly
authorized by all necessary partnership action on the part of Acquiror,
and no other partnership proceedings on the part of Acquiror, including
of its partners, are necessary to authorize the execution, delivery and
performance by Acquiror of this Agreement and the other documents to be
delivered by Acquiror at Closing, the Second Closing and the Option
Closing, as the case may be, and the consummation by Acquiror of the
transactions contemplated hereby and thereby. 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) Neither the execution and delivery of this Agreement
by Acquiror and the REIT nor the performance by Acquiror and the REIT
of the transactions contemplated hereby will: (a) violate or conflict
with any of the provisions of the Partnership Agreement or the REIT's
Certificate of Incorporation or bylaws; or (b) except as would not have
an Acquiror Material Adverse Effect or a REIT Material Adverse Effect
(as defined below), violate or conflict with any Laws or Orders
applicable to Acquiror, the REIT or their assets.
(iv) 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
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.
(v) The Partnership Agreement is in full force and
effect and has not been further amended or modified.
(vi) 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,
fully-paid and free of all Liens.
(vii) 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.
(viii) 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
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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
and its subsidiaries taken together as a whole (a "REIT Material
Adverse Effect"). The REIT is the sole general partner of Acquiror.
(ix) The REIT has all requisite corporate power and
authority to enter into, execute and deliver this Agreement,
individually and in its capacity as general partner of Acquiror and to
perform fully its obligations hereunder individually and 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, the Second Closing and the Option
Closing, as the case may be, and the consummation by the REIT of the
transactions contemplated hereby and thereby at Closing, the Second
Closing and the Option Closing, as the case may be, 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.
(x) 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.
(xi) 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, free of all Liens and upon official notice of issuance
will be listed on the AMEX (or such other exchange or national
quotation system as the Common Stock is then traded on).
(xii) The REIT, 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 Entity") within
d the meaning of the Code and has complied with all requirements
contained in the Code to qualify as a REIT Entity for such years, and
(ii) has operated, and currently intends to continue to operate, in
such a manner as to qualify as a REIT Entity for the tax year ending
December 31, 1998 and thereafter.
(xiii) 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 REIT Material Adverse Effect.
(xiv) The REIT has filed all forms, reports, schedules,
proxy materials,
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registration statements and related prospectuses and supplements and
other documents required to be filed by the REIT with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Act or
the Securities Exchange Act of 1934, as amended, for the year ended
December 31, 1997 and from December 31, 1997 up to the date hereof
(collectively, the "SEC Documents") and will cause to be delivered to
Contributor copies of such additional documents as may be filed with
the SEC by the REIT between the date hereof and the Closing Date. The
SEC Documents were, and those additional documents filed between the
date hereof and the Closing will be, prepared and filed in all material
respects in compliance with the rules and regulations promulgated by
the SEC, and do not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein in order
to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. Except as set forth on
Schedule 8C(xiv), no material event has occurred between the date of
the REIT's most recent report filed with the SEC and the date of this
Agreement which would be required to be disclosed in a document filed
with the SEC.
(xv) The consolidated financial statements included in
the SEC Documents have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
period involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Form 10-QSB) and
present fairly (subject, in the case of the unaudited statements, to
normal, recurring year-end audit adjustments) the consolidated
financial position of Acquiror or the REIT, as applicable, and their
respective Subsidiaries (as defined below) at the dates thereof and the
consolidated results of operations and cash flows for the periods then
ended. "Subsidiaries" means (i) any entity of which Acquiror or the
REIT (or other specified entity), as applicable, shall own directly or
indirectly through a subsidiary, a nominee arrangement or otherwise (x)
at least a majority of the outstanding capital stock (or other shares
of beneficial interest) or (y) at least a majority of the partnership,
joint venture or similar interests, and (ii) any entity in which
Acquiror or the REIT (or other specified entity), as applicable, is a
general partner or joint partner, including without limitation in the
case of the REIT, Acquiror.
(xvi) As of April 27, 1998, (A) the authorized shares of
stock of all classes of the REIT consists of 65,000,000 shares of
capital stock, par value $.001 per share, and all of such shares are
initially classified as "Common Stock"; (B) the issued and outstanding
shares of the REIT consists of 5,487,386 shares of Stock; and (C) no
shares of preferred stock of the REIT are outstanding.
(xvii) As of April 27, 1998, 9,459,743 OP Units are issued
and outstanding.
(xviii) Neither the REIT nor Acquiror has made a general
assignment for the benefit of creditors, filed any voluntary petition
in bankruptcy or suffered the filing of any involuntary petition by
either of the REIT's or Acquiror's creditors, suffered the appointment
of a receiver to take possession of all, or substantially all, of the
REIT's or Acquiror's assets, suffered the attachment or other judicial
seizure of all, or substantially all, of the REIT's or Acquiror's
assets, admitted in writing its inability to pay its debts as they
come due or made an offer of settlement, extension or composition to
its creditors generally.
(xix) Attached hereto as Schedule 8C(xix) is a listing
(the "REIT Rent Roll") of the following as of March 31, 1998, which is
true, complete and correct in all material respects for all properties
in which the REIT holds an interest (collectively, the "REIT
Property"): (i) the name
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of each tenant; (ii) the fixed rent required to be paid; (iii) the
expiration date of each lease; and (iv) any arrearages of any tenant
beyond thirty (30) days.
(xx) Acquiror was not and is not a publicly traded
partnership within the meaning of Section 7704 of the Code and the
regulations promulgated thereunder. In addition, no subsidiary of
Acquiror or the REIT has taken the position, for federal income tax
purposes, that it is a publicly traded partnership within the meaning
of Section 7704 of the Code or the regulations promulgated thereunder.
D. Acquiror represents and warrants to Contributor that, as of
the Closing, the Second Closing and the Option Closing, as the case may be, each
of the representations and warranties set forth in Section 8C above shall be
true, complete and correct in all material respects.
E. Except as hereinafter provided, all representations and
warranties made in this Section 8 by Michael J. Falcone and by Acquiror and the
REIT (i) which pertain to the Properties or the ownership, operation or status
of the Properties or the Owners thereof, shall survive the Closing until the
eighteen (18) month anniversary of the Closing Date, (ii) which pertain to
Waterfront II or the ownership, operation or status of Waterfront II or the
Owner thereof, shall survive the Second Closing Date until the eighteen (18)
month anniversary of the Second Closing Date, and (iii) which pertain to One
City Centre or Three City Centre or the ownership, operation or status of One
City Centre or Three City Centre or the Owners thereof, shall survive the Option
Closing Date until the eighteen (18) month anniversary of the Option Closing
Date, and shall not merge into any instrument of conveyance delivered at the
Closing, the Second Closing or the Option Closing, as the case may be; 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 15 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 15. 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, the Second
Closing Date or the Option Closing Date, as the case may be, which shall survive
for the respective periods set forth herein. Notwithstanding the foregoing, the
representations and warranties contained in Section 8A (xxv) shall survive until
the seventh (7th) anniversary of (i) the Closing Date with respect to the
Contributed Entities relating to the Properties; (ii) the Second Closing Date
with respect to the Contributed Entity relating to Waterfront II; and the Option
Closing Date with respect to the Contributed Entities relating to One City
Centre and Three City Centre.
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F. Contributor shall provide to Acquiror and its auditors (i)
during the Inspection Period and following the Closing, the Second Closing or
the Option Closing, as the case may be, access at all reasonable times to all
financial and other information relating to the Properties and Additional
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 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, the Second Closing or the Option
Closing, as the case may be, (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, the Second Closing or the Option Closing, as the case may
be, for a period of eighteen (18) months.
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9. ACQUIROR'S INSPECTION OF THE PROPERTIES
A. Subject to the provisions of Section 9B, during the period
extending to and including the 60th day from the date of this Agreement (the
"Inspection Period"), Acquiror and Acquiror's employees, agents, engineers,
surveyors, consultants, appraisers, auditors and other representatives
(collectively, "Representatives") will, upon reasonable advance notice to and
approval from Contributor, be given the right to enter upon the Properties and
Additional 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 Additional 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 or Additional Properties), as Acquiror or Acquiror's Representatives
may reasonably request. Subject to Section 8F, Contributor shall cooperate fully
with the inspections hereunder by Acquiror and its Representatives, and shall
furnish to Acquiror and its Representatives all such books, records, information
(financial or otherwise), data and agreements that Acquiror or Acquiror's
Representatives may reasonably request in connection with the investigations
hereunder, including but not limited to, copies of all leases, Services
Contracts, insurance policies, environmental reports, working drawings, plans
and specifications, surveys, appraisals, engineering and architect reports, real
estate tax bills and receipts, operating statements and related documents.
Acquiror shall have the right, at its sole cost and expense, to perform a Phase
One environmental assessment of each of the Properties and Additional
Properties. Upon Acquiror's receipt of any such Phase One assessment, it shall
promptly 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 or Additional 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; any such further inspections or testings shall be conducted
at the sole cost and expense of Acquiror. 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 or Additional
Properties (the "Inspection Condition"). If the Inspection Condition is not so
satisfied, Acquiror, prior to the expiration of the Inspection Period, in its
sole discretion, may deliver to Contributor a Termination Notice; provided that
if the Inspection Condition is not satisfied with respect to the results of any
environmental, survey or engineering investigation and evaluation, then, at
Acquiror's sole election (pursuant to and subject to the terms of Section 10),
rather than delivering to Contributor a Termination Notice, Acquiror may delete
and eliminate from this Agreement any or all of the Properties, or Additional
Properties, for which the results of such environmental, survey or engineering
investigation and evaluation does not meet Acquiror's satisfaction. 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
9B. If Acquiror does not give the Termination Notice or the Property Deletion
Notice (as defined below) 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 or to delete and
eliminate properties, pursuant to and subject to the terms of this Section 9 and
Section 10, shall be deemed deleted from this Agreement and, subject to all
other conditions and provisions contained in this Agreement, the parties shall
proceed to Closing without any credit against or reduction of the Contribution
Consideration.
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B. Acquiror acknowledges and agrees that all physical damage
resulting from any test, survey inspection and/or examination done by Acquiror
or its Representatives at any of the Properties or Additional Properties shall
be repaired by Acquiror at its sole cost and expense. Acquiror shall hold
Contributor harmless and indemnify Contributor for any Losses (as defined below)
resulting from Acquiror's inspection of the Properties or Additional Properties
described in Section 9A and which would not have been incurred but for the acts
or omissions of Acquiror or its 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, and provided further that Acquiror shall have no
liability to Contributor for any Losses for which Contributor receives proceeds
from its existing insurance, and Contributor waives any right of recovery
against Acquiror for the amount of such insurance proceeds (it being agreed that
Contributor shall have no obligation to make a claim with its insurance carrier
as a condition to proceeding against Acquiror).
10. DELETION OF PROPERTIES
A. Deletion of Properties. If Acquiror does not exercise its
unilateral right to deliver a Termination Notice pursuant to Sections 5C, 7, or
9, Acquiror may nevertheless elect to proceed with the acquisition of less than
all of the Properties or the Additional Properties, and to delete and eliminate
from this Agreement those certain Properties (or Additional Properties) that
Acquiror, in its sole discretion (but subject to the limitations set forth in
this Agreement with respect to acceptable reasons for Acquiror to so delete a
Property or Additional Property), elects not to acquire (the "Deleted
Properties"), pursuant to the delivery to Contributor, not later than fifteen
(15) days prior to the Closing Date (unless otherwise provided for in this
Agreement), of written notice describing the Deleted Properties and the reasons
for such deletion (the "Property Deletion Notice"), under which Acquiror may
exercise the foregoing partial termination option and designate those specific
Properties (or Additional Properties), that shall constitute Deleted Properties
under this Agreement. Upon the delivery by Purchaser of a Property Deletion
Notice, this Agreement shall, without further action of the parties, be deemed
to have been automatically and ipso facto amended to eliminate the Deleted
Properties herefrom. Upon such amendment of this Agreement, (a) all references
to the Properties or Additional Properties, as the case may be, shall
automatically exclude the Deleted Properties and no obligations of Contributor
(or Acquiror's Conditions Precedent) set forth herein shall apply to the Deleted
Properties, (b) all references to Contributor and Owner shall automatically
exclude the Contributor(s) and Owner(s) appurtenant to the Deleted Properties
with respect to such Properties, (c) the Contribution Consideration or
Additional Consideration shall be reduced by the amount allocated to the Deleted
Properties and their related Management Contracts pursuant to Schedule 3B(i) and
Schedule 3B(ii), and (d) Acquiror shall promptly return to Contributor all
documents, records and studies relating to the Deleted Properties.
Notwithstanding the foregoing, no such amendment shall modify any indemnity or
other obligation of a party regarding the Deleted Properties which expressly
survives the deletion of the Property or Additional Property, or the termination
of this Agreement. In all events, however, Acquiror's rights under this Section
10A are expressly subject to the specific limitations imposed under Section 10B
below.
B. Maximum Deletion. In the aggregate with respect to Sections
5C and 9, Acquiror may deliver Property Deletion Notices pursuant to Section 10A
with respect to either (i) any single Property or Additional Property; or (ii)
one or more Deleted Properties which, in the aggregate, represent no more than
$15,000,000 of the total aggregate Contribution Consideration. In addition, in
connection with Section 7, Acquiror may deliver a Property Deletion Notice
pursuant to Section 10A with respect to any single Property or Additional
Property.
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11. SCHEDULES
Within five (5) business days after the date of this
Agreement, to the extent not previously delivered, Contributor shall furnish to
Acquiror:
(i) a true, correct and complete copy of each written
Service Contract and a true, correct and complete summary of each oral
Service Contract;
(ii) true, correct and complete copies of all of the
Leases;
(iii) a schedule of all insurance certificates owned by or
on behalf of Contributor with respect to the Properties and the
coverage amounts thereunder;
(iv) copies of all audited, where available, or unaudited
financial statements for 1995, 1996 and 1997, and all available
financial statements for 1998; and
(v) copies of the most recent survey of and title policy
or commitment for each of the Properties in the possession or control
of Contributor.
12. CONDITIONS PRECEDENT
A. Acquiror's obligation to acquire the Properties shall be
subject to and contingent upon the following conditions precedent with respect
to the Properties, any or all of which Acquiror may waive only by a notice
delivered in accordance with Section 16G:
(i) The willingness of the Title Insurer to issue to
Acquiror at the Closing the Title Policies in accordance with Section
5B(i), upon the sole condition of the payment of the applicable
premiums.
(ii) Contributor shall have obtained and delivered to
Acquiror original executed tenant estoppel certificates (the "Tenant
Estoppel Certificates") in substantially the form of Exhibit O attached
hereto, dated not more than thirty (30) days before Closing, and
executed by tenants under Leases leasing not less than eighty-five
percent (85%) of the total aggregate gross rental income for all of the
Properties, including, without limitation, those particular tenants of
the Properties listed in Exhibit P attached hereto ("Required Estoppel
Tenants"). Contributor shall use its reasonable, good faith and
diligent efforts to obtain the Tenant Estoppel Certificates from all
tenants under the Leases. 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 delivery of a notice of termination, on or
before the Closing Date, which notice is sufficient to terminate all of
the Service Contracts that Acquiror has a right to and 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 Michael
J. Falcone in this
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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 by Contributor of all consents and
approvals as may be required to consummate the transactions
contemplated by this Agreement.
(vii) The delivery of all consents and approvals set forth
on Schedule 8A(iv) to this Agreement other than the IDA Consents.
(viii) Contributor not being otherwise in default of any of
its material obligations under this Agreement.
(ix) Contributor shall have delivered pay-off letters
with respect to the Existing Indebtedness (other than the Assumed
Indebtedness, if any).
(x) Michael J. Falcone and Michael P. Falcone shall have
delivered to Acquiror a net worth statement, in form and substance
reasonably satisfactory to Acquiror, stating a combined personal net
worth of at least $50,000,000.
Notwithstanding anything contained in Section 14B herein to
the contrary, if the condition precedent set forth in Section 12A(i) is not
satisfied or waived on or prior to the Closing Date, Acquiror shall only have
the rights and remedies set forth in Section 5C. Notwithstanding anything
contained in Section 14B herein to the contrary, if the condition precedent set
forth in Sections 12A(ii) is not satisfied or waived on or prior to the Closing
Date, Acquiror shall only 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
12A(iii), (iv), (v), (vi), (vii), (viii), (ix) and (x) is not satisfied or
waived on or prior to the Closing Date, then Acquiror shall have the rights and
remedies provided in Section 14B.
B. Contributor's obligation to contribute and convey the
Properties shall be subject to and contingent upon the following conditions
precedent with respect to the Properties, any or all of which Contributor may
waive by a notice delivered in accordance with Section 16G:
(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) Between the date of this Agreement and the Closing
Date, Acquiror and the REIT shall not have entered into a line of
business substantially different from its current business.
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(iv) Acquiror not being otherwise in default of any of
its material obligations under this Agreement.
(v) The delivery by Acquiror of all consents and
approvals as may be required for Acquiror to consummate the
transactions contemplated by this Agreement.
If any of the conditions precedent set forth in Section 12B is
not satisfied or waived on or prior to the Closing Date, then Contributor shall
have the rights and remedies provided in Section 14A.
C. Acquiror's obligation to acquire the Additional Properties
shall be subject to and contingent upon the following conditions precedent at
the Second Closing or the Option Closing, as the case may be, with respect to
the applicable Additional Property, any or all of which Acquiror may waive only
by a notice delivered in accordance with Section 16G:
(i) The willingness of the Title Insurer to issue to
Acquiror at the Second Closing or the Option Closing, as the case may
be, the Title Policies in accordance with Section 5B(i), upon the sole
condition of the payment of the applicable premiums.
(ii) With respect to Waterfront II, Contributor shall
have obtained and delivered to Acquiror an original executed Tenant
Estoppel Certificate, dated not more than thirty (30) days before the
Second Closing, and executed by Graphic Controls Corporation, the sole
tenant under the Lease related to Waterfront II. Such Tenant Estoppel
Certificate shall appropriately identify the full and complete Lease
but will omit certifications that are inappropriate. With respect to
One City Centre and Three City Centre (if Acquiror has delivered the
Additional Property Notice), Contributor shall have obtained and
delivered to Acquiror original executed Tenant Estoppel Certificates in
substantially the form of Exhibit O attached hereto, dated not more
than thirty (30) days before the Option Closing, and executed by
tenants under Leases leasing not less than eighty-five percent (85%) of
the total aggregate gross rental income for all of each such property,
including, without limitation, the Required Estoppel Tenants listed in
Exhibit P attached hereto with respect to One City Centre and Three
City Centre. Contributor shall use its reasonable, good faith and
diligent efforts to obtain the Tenant Estoppel Certificates from all
tenants under the Leases with respect to the Additional Properties.
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 delivery of a notice of termination, on or
before the Second Closing Date or the Option Closing, as the case may
be, which notice is sufficient to terminate all of the Service
Contracts with respect to Additional Properties that Acquiror has a
right to and has elected to terminate by written notice given to
Contributor.
(iv) The representations and warranties made by Michael
J. Falcone in this Agreement (as they relate to the transactions to be
consummated at the Second Closing or the Option Closing, as the case
may be) shall be true and correct in all material respects on the
Second Closing Date or the Option Closing, as the case may be, as if
made on the Second Closing Date or the Option Closing, as the case may
be.
(v) The delivery by Contributor of all documents
(executed by parties other than Acquiror, where required) required
under Section 6D(i).
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(vi) The delivery by Contributor of all consents and
approvals as may be required to consummate the transactions
contemplated by this Agreement with respect to the Second Closing or
the Option Closing, as the case may be.
(vii) The delivery of all consents and approvals set forth
on Schedule 8A(iv) to this Agreement other than the IDA Consents with
respect to Additional Properties.
(viii) Contributor not being otherwise in default of any of
its material obligations under this Agreement.
(ix) Contributor shall have delivered pay-off letters
with respect to the Waterfront II Indebtedness, the One City Centre
Indebtedness and the Three City Centre Indebtedness.
(x) With respect to Waterfront II, Graphic Controls
Corporation has taken possession of Waterfront II and Contributor has
obtained a permanent certificate of occupancy for the space covered by,
and the use contemplated by, the related Lease.
(xi) Michael J. Falcone and Michael P. Falcone shall have
delivered to Acquiror a net worth statement, in form and substance
reasonably satisfactory to Acquiror, stating a combined personal net
worth of at least $9,000,000 plus the amount of all timely claims for
indemnification made by Acquiror; provided, however, that in no event
will such statement be required to state a combined personal net worth
exceeding $50,000,000.
Notwithstanding anything contained in Sections 14D or 14F
herein to the contrary, if any of the conditions precedent set forth in Sections
12C(i) or (ii) is not satisfied or waived on or prior to the Second Closing Date
or the Option Closing, as the case may be, Acquiror shall only have the right to
terminate this Agreement with respect to the applicable Additional Properties
upon written notice to Contributor, and this Agreement, without further action
of the parties, shall become null and void with respect to such Additional
Properties and neither party shall have any further rights or obligations under
this Agreement with respect to Additional Properties except with respect to the
Surviving Indemnities. If any of the conditions precedent set forth in Section
12C (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) and (xi) is not satisfied
or waived on or prior to the Second Closing Date or the Option Closing, as the
case may be, then Acquiror shall have the rights and remedies provided in
Section 14D.
D. Contributor's obligation to contribute and convey
Additional Properties shall be subject to and contingent upon the following
conditions precedent with respect to Additional Properties, any or all of which
Contributor may waive by a notice delivered in accordance with Section 16G:
(i) The representations and warranties made by Acquiror
in this Agreement shall be true and correct in all material respects on
the Second Closing Date or the Option Closing Date, as the case may be,
as if made on the Second Closing Date or the Option Closing Date, as
the case may be.
(ii) The delivery by Acquiror of all documents (executed
by Acquiror, where required) required under Section 6D(ii).
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(iii) Acquiror not being otherwise in default of any of
its material obligations under this Agreement.
(iv) The delivery by Acquiror of all consents and
approvals as may be required for Acquiror to consummate the
transactions contemplated by this Agreement with respect to the Second
Closing or the Option Closing, as the case may be.
If any of the conditions precedent set forth in Section 12D is
not satisfied or waived on or prior to the Second Closing Date or the Option
Closing, as the case may be, then Contributor shall have the rights and remedies
provided in Section 14C.
13. 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.
14. DEFAULT AND REMEDIES
A. If, prior to the Closing, Acquiror is in default with
respect to, or breaches, or fails to perform one or more of the representations,
warranties, covenants or other terms of this Agreement, and such default, breach
or failure is not cured or remedied within five (5) business days prior to the
Closing Date, 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 Surviving
Indemnities. It is recognized by Contributor and Acquiror that the damages
Contributor will sustain by reason of Acquiror's default, breach or failure will
be substantial, but difficult, if not impossible, to ascertain. The 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 five (5) business days prior to the
Closing Date, 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 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. If
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; provided, however, that in no event shall Contributor be required to
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reimburse Acquiror for any such expenses in excess of (i) if prior to the end of
the Inspection Period, $500,000; and (ii) if after the Inspection Period,
$1,000,000.
C. If, after the Closing has occurred, but prior to the Second
Closing, Acquiror is in default with respect to, or breaches, or fails to
perform one or more of the representations, warranties, covenants or other terms
of this Agreement related to Waterfront II, and such default, breach or failure
is not cured or remedied within five (5) business days prior to the Second
Closing Date or otherwise waived by Contributor, Contributor may terminate this
Agreement with respect to Waterfront II and, as its sole remedy, receive
$100,000 from Acquiror, as liquidated damages, and, upon such payment, the
parties shall be released from all further obligations and liabilities under
this Agreement with respect to Waterfront II, except with respect to the
Surviving Indemnities. It is recognized by Contributor and Acquiror that the
damages Contributor will sustain by reason of Acquiror's default, breach or
failure will be substantial, but difficult, if not impossible, to ascertain. The
payment stated above has been determined by the parties as a reasonable sum for
damages and is intended not as a penalty, but as full liquidated damages.
D. If, after the Closing has occurred, but prior to the Second
Closing, Contributor is in default with respect to, or breaches, or fails to
perform one or more of the representations, covenants, warranties or other terms
of this Agreement related to Waterfront II, and such default, breach or failure
is not cured or remedied within five (5) business days prior to the Second
Closing Date or otherwise waived by Acquiror, Acquiror as its sole remedy may
either (a) terminate this Agreement with respect to Waterfront II, in which
event Contributor shall pay Acquiror $100,000 and, upon such payment, the
parties shall be released from all further obligations and liabilities under
this Agreement with respect to Waterfront II, except with respect to the
Surviving Indemnities, or (b) sue for specific performance. If Acquiror elects
the remedy set forth in (a) above, Contributor shall make such payment within
fifteen (15) days after Contributor's receipt of written notice from Acquiror.
It is recognized by Contributor and Acquiror that the damages Acquiror will
sustain by reason of Contributor's default, breach or failure will be
substantial, but difficult, if not impossible, to ascertain. The payment stated
above has been determined by the parties as a reasonable sum for damages and is
intended not as a penalty, but as full liquidated damages. It is understood and
agreed that if, due to no fault of Contributor, Graphic Controls Corporation
terminates its Lease, then notwithstanding the provisions of this Section 14D,
Acquiror shall not be entitled to receive liquidated damages from Contributor.
E. If, after the Closing has occurred, but prior to the Option
Closing, Acquiror is in default with respect to, or breaches, or fails to
perform one or more of the representations, warranties, covenants or other terms
of this Agreement related to One City Centre and Three City Centre, and such
default, breach or failure is not cured or remedied within five (5) business
days prior to the Option Closing Date or otherwise waived by Contributor,
Contributor may terminate this Agreement with respect to One City Centre and
Three City Centre and, as its sole remedy, receive $100,000 from Acquiror, as
liquidated damages, and, upon such payment, the parties shall be released from
all further obligations and liabilities under this Agreement with respect to One
City Centre and Three City Centre, except with respect to the Surviving
Indemnities. It is recognized by Contributor and Acquiror that the damages
Contributor will sustain by reason of Acquiror's default, breach or failure will
be substantial, but difficult, if not impossible, to ascertain. The payment
stated above has been determined by the parties as a reasonable sum for damages
and is intended not as a penalty, but as full liquidated damages.
F. If, after the Closing has occurred, but prior to the Option
Closing, Contributor is in default with respect to, or breaches, or fails to
perform one or more of the representations, covenants, warranties or other terms
of this Agreement related to One City Centre and Three City Centre, and such
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default, breach or failure is not cured or remedied within five (5) business
days prior to the Option Closing Date or otherwise waived by Acquiror, Acquiror
as its sole remedy may either (a) terminate this Agreement with respect to One
City Centre and Three City Centre, in which event Contributor shall pay Acquiror
$100,000 and, upon such payment, the parties shall be released from all further
obligations and liabilities under this Agreement with respect to One City Centre
and Three City Centre, except with respect to the Surviving Indemnities, or (b)
sue for specific performance. If Acquiror elects the remedy set forth in (a)
above, Contributor shall make such payment within fifteen (15) days after
Contributor's receipt of written notice from Acquiror. It is recognized by
Contributor and Acquiror that the damages Acquiror will sustain by reason of
Contributor's default, breach or failure will be substantial, but difficult, if
not impossible, to ascertain. The payment stated above has been determined by
the parties as a reasonable sum for damages and is intended not as a penalty,
but as full liquidated damages.
15. INDEMNIFICATION
A. Indemnification by Contributor. Subject to Section 15D of
this Agreement, after Closing (with respect to the Properties), the Second
Closing (with respect to Waterfront II), or the Option Closing (with respect to
One City Centre and Three City Centre), Michael J. Falcone and Michael P.
Falcone, jointly and severally, agree 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 reasonable 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 of Michael J. Falcone or any other Contributor contained in this
Agreement, or failure to perform or breach of any covenant or agreement on the
part of any Contributor contained in this Agreement, (ii) any dispute set forth
in Schedule 8A(x) attached to this Agreement, and (iii) any matters disclosed on
Schedules 8A(vi), (xvii), and (xxii)(1) attached to this Agreement in respect of
Waterfront II.
B. Indemnification by Acquiror. Subject to Section 15D of this
Agreement, after Closing, Acquiror agrees to indemnify the Contributor and its
partners, members, officers, directors, employees, agents and affiliates in
respect of, and hold each of them harmless from and against, any and all Losses
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to any breach of or
inaccuracy in any representation or warranty, or failure to perform or breach of
any covenant or agreement on the part of Acquiror contained in this Agreement.
C. Method of Asserting Claims. All claims for indemnification
by any Indemnified Party under this Section 15 will be asserted and resolved as
follows:
(i) If any claim or demand in respect of which an
Indemnified Party might seek indemnity under this Section 15 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.
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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 15 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
15C(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 15). 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
15 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 15C(i), or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently
or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period,
then the Indemnified Party will have the right to defend, at
the sole cost and expense of the Indemnifying Party, the Third
Party Claim by all appropriate proceedings, which proceedings
will be prosecuted by the Indemnified Party in a reasonable
manner and in good faith or will be settled at the discretion
of the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party,
the Indemnifying Party will, at the sole cost and expense of
the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting.
Notwithstanding the foregoing provisions of this
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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 15 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 15 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 15C.
(ii) If any Indemnified Party should have a claim under
this Section 15C 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 15 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 15C.
(iii) Any dispute submitted to arbitration pursuant to
this Section 15C 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
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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 15, 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 15C(i), as to which indemnity under Section 15
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 15,
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 15.
(4) "Indemnifying Party" shall mean any person or entity
providing indemnification under any provision of Section 15.
(5) "Indemnity Notice" shall mean written notification
pursuant to Section 15C(ii) of a claim for indemnity under Section 15 by an
Indemnified party, specifying the nature of and basis for such claim, together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
D. Except as otherwise provided in this Agreement, (i) neither
Contributor, on the one hand, nor Acquiror and the REIT, on the other hand,
shall have the right to bring a claim against the other by virtue of any of the
representations or warranties set forth herein being false or misleading unless
(a) such claim is brought on or prior to the date through which such
representation or warranty survives, (b)
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until notice of the false or misleading representation or warranty has been
given to the other party and such other party has had a reasonable period of
time to cure such false or misleading representation or warranty and (c) the
aggregate damages to the party bringing the claim for such false or misleading
representation or warranty are expected to exceed $750,000, but thereafter such
party may bring a claim against the other for the entire amount of its aggregate
damages not to exceed the Damages Cap (as defined below); and (ii) in no event
shall either Contributor, on the one hand, or Acquiror and the REIT, on the
other hand, have a liability to the other for any breach, inaccuracy,
incompleteness or non-fulfillment of any of the representations, warranties,
covenants or agreements set forth in this Agreement relating to such party in
excess of $50,000,000 in the aggregate (the "Damages Cap"). Notwithstanding the
foregoing, neither the limitation set forth in Section 15D(i)(c) nor the Damages
Cap shall apply to any liability arising from a breach of the representation and
warranty contained in Section 8A(xxv) and any such liability shall not be
aggregated with any other liabilities for the purpose of determining whether the
Damages Cap has been reached.
E. The indemnification provisions of this Section 15 shall,
notwithstanding anything contained herein to the contrary, be the sole and
exclusive remedy of Acquiror and Contributor, as against each other, with
respect to all matters or Losses arising under or relating to this Agreement,
including, without limitation, all Losses incurred under or relating to
Environmental Laws, under any form or theory of action whatsoever, whether in
contract, tort, statute or otherwise, including without limitation CERCLA and
comparable state and local statutes.
16. MISCELLANEOUS
A. Except as otherwise expressly set forth herein, this
Agreement shall not be cancelled or merged upon consummation of the Closing, the
Second Closing or the Option Closing, as the case may be. 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 Representatives may have made with respect thereto or any
information developed by or made available to Acquiror prior to the Closing, the
Second Closing or the Option Closing, as the case may be. Each and every
representation and warranty of Acquiror and the REIT contained in this Agreement
shall be deemed to have been relied upon by Contributor notwithstanding any
investigation Contributor or its Representatives may have made with respect
thereto or any information developed by or made available to Contributor prior
to the Closing, the Second Closing or the Option Closing, as the case may be.
B. Neither this Agreement nor any interest hereunder shall be
assigned or transferred by Contributor. Acquiror may direct Contributor to
convey the Properties, Additional Properties or any part thereof to any party
designated by Acquiror, provided notice of such designation is given to
Contributor in writing at least ten (10) business days prior to Closing, the
Second Closing or the Option Closing, as the case may be, and that any such
designee is a directly or indirectly wholly-owned partnership subsidiary of
Acquiror or the REIT (a "Permitted Designee"). 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.
C. This Agreement constitutes the entire agreement between
Contributor and Acquiror with respect to the Properties and Additional
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 or Additional Properties is
hereby rendered null and void.
D. This Agreement constitutes an offer by Acquiror to
Contributor and shall not be
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effective until executed by each of Acquiror and Contributor. The date of this
Agreement shall be the date on which Acquiror signs this Agreement as indicated
below the signature line for Acquiror.
E. In the computation of any period of time provided for in
this Agreement or by law, the day of the act or event from which the period of
time runs shall be excluded, and the last day of such period shall be included,
unless it is a Saturday, Sunday or legal holiday, in which case the period shall
be deemed to run until the end of the next day which is not a Saturday, Sunday
or legal holiday.
F. This Agreement shall be governed and interpreted in
accordance with the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof.
G. All notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and delivered
personally (including delivery by overnight courier such as Federal Express) or
by certified mail, return receipt requested, postage prepaid or by facsimile
transmission to the fax number shown below and simultaneously mailed by
first-class mail of the United States Postal Service, addressed as follows:
1. If to Contributor:
Pioneer Development Company, LLC
250 South Clinton Street
Syracuse, New York 13202-1258
Telephone: (315) 471-2181
Facsimile: (315) 471-1154
Attention: Michael P. Falcone
With a copy to:
Pioneer Development Company, LLC
250 South Clinton Street
Syracuse, New York 13202-1258
Telephone: (315) 471-2181
Facsimile: (315) 471-1154
Attention: Neil A. Rube, Esq.
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10021
Telephone: (212) 856-6843
Facsimile: (212) 856-7805
Attention: Eric R. Landau, Esq.
2. If to Acquiror:
American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
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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 LLP
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 16G.
H. Contributor acknowledges that (i) the computation of
taxable income of Acquiror is crucial in the determination of the taxable income
of REIT, (ii) REIT needs to be able to prepare accurate estimates of its taxable
income in order to monitor compliance with the requirement that it distribute
95% of its taxable income to its shareholders, and (iii) the depreciation of the
Properties and Additional 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 December 31, 1997 for each Property and each Additional
Property; and (ii) prior to the expiration of the Inspection Period, Contributor
shall provide Acquiror with all data in their possession or control required to
perform depreciation allocations (as contemplated by Section 704(c) of the Code)
with respect to each Property, each Additional Property and each OP Unit
Recipient. Such data shall include the tax basis allocable to each OP Unit
Recipient for each Property and each Additional Property. In addition,
Contributor acknowledges that, if repayment of any of the Existing Indebtedness
other than 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.
I. Except as otherwise required by law or the rules of any
applicable securities exchange or national market system, so long as this
Agreement is in effect, neither Acquiror nor Contributor will, and will not
permit any of their respective 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 the other, 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.
J. This Agreement may be executed in any number of identical
counterparts, any or all of which may contain the signatures of fewer than all
of the parties but all of which shall be taken
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together as a single instrument. Execution copies of this Agreement may also be
exchanged by facsimile, and facsimile signatures shall be treated as originals.
K. When the context so requires, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
include all genders.
L. This Agreement may not be modified, discharged or changed
in any respect whatsoever, except by a further agreement in writing duly
executed by Contributor and Acquiror. However, any consent, waiver, approval or
authorization shall be effective if signed by the party granting or making such
consent, waiver, approval or authorization.
M. The invalidation or unenforceability in any particular
circumstance of any of the provisions of this Agreement shall in no way affect
any of the other provisions hereof, which shall remain in full force and effect.
N. The Properties and Additional 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 the
Closing, the Second Closing or the Option Closing, as the case may be. Except as
expressly set forth in this Agreement or in any document delivered by
Contributor at the Closing, the Second Closing or the Option Closing, as the
case may be, 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 and Additional
Properties.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the 30th day of April, 1998:
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
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
a Maryland corporation
By: /s/ Stephen J. Butte
------------------------------------------------
Name: Stephen J. Butte
Title: Vice President
CONTRIBUTOR:
/s/ Michael J. Falcone
---------------------------------------------------
Name: Michael J. Falcone
Title: General Partner
/s/ Michael P. Falcone
---------------------------------------------------
Name: Michael P. Falcone
Title: General Partner
PIONEER PROPERTIES COMPANY OF CLINTON SQUARE,
a New York general partnership
By: /s/ Michael J. Falcone
------------------------------------------------
Name: Michael J. Falcone
Title: General Partner
<PAGE>
WATERFRONT ASSOCIATES,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
PIONEER INDIGO ONE COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
PIONEER FRANKLIN SQUARE COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
1045 JAMES STREET COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
PIONEER APOLLO DRIVE COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
<PAGE>
PIONEER PARK ONE COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
PIONEER CLINTON STREET COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
PIONEER MALTBIE COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
5010 CAMPUSWOOD COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
5015 CAMPUSWOOD COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
400 WEST DIVISION COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
PIONEER DAYCARE COMPANY,
a New York general partnership
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
<PAGE>
MANAGEMENT CONTRIBUTOR:
PIONEER MANAGEMENT SERVICES COMPANY, LLC
By: /s/ Michael J. Falcone
----------------------------------------------
Name: Michael J. Falcone
Title: General Partner
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of August 15, 1998, by and
between American Real Estate Investment Corporation, a Maryland corporation (the
"Company") and Timothy A. Peterson ("Executive"), recites and provides as
follows:
W I T N E S S E T H:
WHEREAS, the Company is a self-administered Maryland
corporation, which owns, acquires, develops and leases office and industrial
properties;
WHEREAS, the Company desires to employ Executive to devote a
significant portion of his time (as hereinafter defined) to the business of the
Company, including, without limitation, the operation and management of the
Company and the properties, and to serve as the Senior Vice President and Chief
Financial Officer of the Company; and
WHEREAS, Executive desires to be so employed on the terms and
subject to the conditions hereinafter stated.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants,
promises and obligations of the parties provided for in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
A. DEFINITIONS.
For purposes of this Agreement, the following terms shall have
the following meanings (applicable to both the singular and plural forms of the
terms defined):
1. "Acquisition of Office or Industrial Property" means
engaging in the activity of soliciting, seeking to acquire, obtaining an option
or first right of refusal to acquire, or acquiring, any interest in an Office or
Industrial Property or in real property planned for development as an Office or
Industrial Property.
2. "Affiliate" means (i) any person directly or indirectly
controlling, controlled by, or under common control with such other person, (ii)
any executive officer, director, trustee or general partner of such other
person, and (iii) any legal entity for which such person acts as an executive
officer, director, trustee or general partner. The term "person" means and
includes any natural person, corporation, partnership, association, limited
liability company or any other legal entity.
3. "Board" means the Board of Directors of the Company.
<PAGE>
4. "Closing Date" means August 15, 1998.
5. "Change in Control" means the happening of any of the
following:
(i) any "person," including a "group" (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), but excluding
the Company, any entity controlling, controlled by or under
common control with the Company, any employee benefit plan
of the Company or any such entity, and, with respect to
Executive, Executive and any "group" (as such term is used
in Section 13(d)(3) of the Exchange Act) of which Executive
is a member), is or becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Exchange Act), directly
or indirectly, of securities of the Company representing 50%
or more of either (A) the combined voting power of the
Company's then outstanding securities or (B) the then
outstanding shares (in either such case other than as a
result of an acquisition of securities directly from the
Company); or
(ii) any consolidation or merger of the Company or any
subsidiary where the stockholders of the Company,
immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially
own (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, shares representing
in the aggregate 50% or more of the voting securities of the
corporation issuing cash or securities in the consolidation
or merger (or of its ultimate parent corporation, if any);
or
(iii) there shall occur (A) any sale, lease, exchange or
other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of
the Company, other than a sale or disposition by the Company
of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the
voting securities of which are owned by persons in
substantially the same proportion as their ownership of the
Company immediately prior to such sale or (B) the approval
by stockholders of the Company of any plan or proposal for
the liquidation or dissolution of the Company; or
(iv) the members of the Board at the beginning of any
consecutive 24-calendar-month period (the "Incumbent
Directors") cease for any reason other than due to death to
constitute at least a majority of the members of the Board;
provided that any director whose election, or nomination for
election by the Company's stockholders, was approved by a
vote of at least a majority of the members of the Board then
still in office who were members of the Board at the
beginning of such 24-calendar-month period, shall be deemed
to be an Incumbent Director.
6. "Competitive Activity" means engaging in directly, through
an Affiliate, or being employed by any entity undertaking, or otherwise
undertaking to do any of the following within a 30-mile radius of any Property
of the Company: (i) Acquisition of Office or Industrial Property, (ii) Office or
Industrial Property Ownership or Leasing, (iii) Office or Industrial Property
<PAGE>
Construction, (iv) Office or Industrial Property Entitlements, (v) Speculation,
or (vi) Office or Industrial Property Management and Operation.
7. "Employment Term" means the Initial Term, as herein
defined, and the successive annual renewals of this Agreement until terminated.
The initial term of Executive's employment hereunder (the "Initial Term") shall
be for a period of two years, commencing on the Closing Date and continuing
until the second anniversary of the Closing Date, unless terminated earlier as
provided herein. After the second anniversary of the Closing Date, the term
shall be automatically renewed for successive one-year periods (subject to
termination as otherwise provided herein) unless either party notifies the other
party in writing prior to 90 days before the expiration of the Initial Term and
each annual renewal thereof, as applicable.
8. "Good Reason" means the occurrence, without Executive's
express written consent, of any one or more of the following events:
(a) a reduction in the annual base salary of
Executive;
(b) the removal or suspension from office without
cause of Executive or failure without cause to elect or appoint Executive as
Senior Vice President and Chief Financial Officer of the Company throughout the
Employment Term;
(c) any substantial alteration, including any
material diminution, in the nature or status of Executive's responsibilities as
Senior Vice President and Chief Financial Officer, or a change to Executive's
direct reporting relationship to the President of the Company, which substantial
alteration or change, respectively, is not remedied or cured as contemplated by
Section B, Paragraph 9(b) hereof;
(d) the assignment of any duties which are in any
significant respect inconsistent with Executive's status as Senior Vice
President and Chief Financial Officer of the Company, which inconsistent
assignment is not remedied or cured as contemplated by Section B, Paragraph 9(b)
hereof; and
(e) the relocation of Executive's office to more than
50 miles from Plymouth Meeting, Pennsylvania.
9. "Independent Director" means a member of the Board who is
defined as an "Independent Director" in the Amended and Restated Articles of
Incorporation of the Company, as filed with the Securities and Exchange
Commission, as amended.
10. "Involuntary Termination" means the breach by the Company
of any material provision of this Agreement and such breach continues for a
period of 14 days after the Independent Directors on the Board receive written
notice of such breach.
11. "Noncompetition Period" means the period beginning the
later of the date of the termination of the Employment Term, for whatever
reason, and the date on which Executive ceases to be a member of the Board and
ending one year from the date of such termination.
<PAGE>
12. "Office or Industrial Property" means any Property that is
used in whole or in part for office or industrial space or office or
industrial-related purposes, whether in fee or leasehold, together with all
improvements and fixtures now or hereafter located thereon, all rights,
privileges and easements appurtenant thereto, and all tangible and intangible
personal property used in connection therewith.
13. "Office or Industrial Property Construction" means the
construction, renovation or repair of improvements on an Office or Industrial
Property by Executive or an Affiliate of Executive.
14. "Office or Industrial Property Entitlements" means
engaging in the process by which a person with an interest in an Office or
Industrial Property obtains necessary or desirable governmental approvals,
licenses, permits, entitlements or agreements for the commencement of Office or
Industrial Property Construction.
15. "Office or Industrial Property Management and Operation"
means engaging in directly or through an Affiliate, or being employed by any
entity undertaking, or otherwise undertaking the day-to-day management and
operation of an Office or Industrial Property, whether pursuant to a master
lease, management agreement or any other arrangement.
16. "Property" means any real property or any interest
therein.
17. "Speculation" means engaging in the activity of
soliciting, seeking to acquire, obtaining an option or a first right of refusal
to acquire, or acquiring, any interest in an Office or Industrial Property with
the intention at any time of acquiring (or obtaining an option or a first right
of refusal to acquire) or holding an Office or Industrial Property for
subsequent sale or other transfer to any person for purposes of Competitive
Activity.
18. "Termination Without Cause" means the termination of
Executive's employment (i) by the Company for any reason other than Termination
With Cause, or (ii) by Executive for Good Reason.
19. "Termination With Cause" means the termination of
Executive's employment by act of the Board for any of the following reasons:
(a) any material breach of this Agreement, consisting
of any gross or willful refusal, failure or neglect by Executive in connection
with the performance of his duties and fulfillment of his obligations under this
Agreement;
(b) (i) conduct by Executive that would result in
material injury to the reputation of the Company if he were retained in his
position with the Company, including (A) conviction of (or pleading nolo
contendere to) a felony under the laws of the United States or any State thereof
or of an equivalent crime under the laws of any other jurisdiction, (B)
commission of a crime of (1) moral turpitude, (2) dishonesty, (3) breach of
trust or (4) unethical business conduct, or (C) bankruptcy, insolvency or
general assignment
<PAGE>
for the benefit of his creditors, or (ii) commission of any crime involving the
Company;
(c) any failure to comply substantially with any
written rules, regulations, policies or procedures of the Company, if such
non-compliance could be expected to have a material and adverse effect on the
Company's business, which has not been cured within 14 days after notice
thereof; or
(d) any failure to comply with the Company's internal
policies regarding insider trading or insider dealing which has not been cured
within 14 days after notice thereof.
20. "Voluntary Termination" means Executive's voluntary
termination of his employment hereunder (which does not include termination for
Good Reason), which may be effected by Executive's giving the Board 60 days'
written notice of Executive's desire to terminate his employment.
B. THE EMPLOYMENT RELATIONSHIP.
1. Employment. The Company shall employ Executive, and
Executive agrees to be so employed, in the capacity of Senior Vice President and
Chief Financial Officer of the Company to serve for the Employment Term, subject
to earlier termination as herein provided.
2. Services. Executive shall devote a significant portion of
his time, attention and effort to the Company's affairs. Specifically, Executive
shall have senior management authority and oversight responsibility with respect
to capital markets accounting, as well as the accounting, financial reporting,
budget processes and systems functions of the Company and its Office and
Industrial Properties, consistent with directions from the Board. As used
herein, "a significant portion of his time, attention and effort" shall mean
substantially all of Executive's working time devoted to business activities.
3. Compensation. (a) The Company initially shall pay Executive
for his services an annual base salary of $200,000, in equal installments not
less frequently than bi-weekly, subject to any increases in base compensation as
approved by the Compensation Committee of the Board (the "Compensation
Committee").
(b) During the Employment Term, in addition to the annual base
salary, Executive shall be eligible to receive, in the discretion of the
Company, an annual bonus ("Annual Bonus"). Notwithstanding the foregoing, for
the remainder of the first calendar year of employment, Executive shall receive
a guaranteed Annual Bonus in an amount equal to $37,500 and, for the second
calendar year of employment, Executive shall receive a guaranteed Annual Bonus
in an amount equal to $100,000. Each Annual Bonus payable under this Section B,
Paragraph 3(b) shall be payable to Executive during the first quarter of each
calendar year to follow the year for which the Annual Bonus is paid and in
accordance with the Company's customary procedures for payment of executive
bonuses.
(c) Effective as of the date hereof, the Company shall provide
Executive with
<PAGE>
an interest-free, recourse loan during the Employment Term, such loan to be
evidenced by such promissory note as the Company may reasonably request
(including without limitation, in the discretion of the Company, provisions to
reflect the terms of this Paragraph 3(c)), in an amount necessary for Executive
to purchase 25,000 shares of Common Stock, par value $.001, of the Company (the
"Shares") on the American Stock Exchange; provided that Executive provides
documentation acceptable to the Company indicating the dollar amount of such
purchase. During the period commencing on the date of Executive's purchase of
such Shares, and ending on the first anniversary of such date, Executive shall
not, voluntarily or involuntarily, sell, transfer, anticipate, alienate or
assign the Shares and shall not pledge or encumber the Shares unless any
underlying debt obligation relating thereto is with full recourse to Executive,
other than to the Company, and shall take all such actions, consent to all such
arrangements and execute all such documents, as may be required by the Company
to ensure that the requirements of this sentence are met; provided, however,
that such Shares may be held jointly by Executive and Executive's wife if
Executive's wife agrees in a manner satisfactory to the Company (i) that the
terms of this sentence shall be applicable to her and (ii) to be bound by such
requirements. In addition to the Annual Bonus, Executive shall receive on each
of the first three anniversaries of the date hereof an additional bonus, for so
long as he continues to be employed hereunder, each in an amount equal to
$33,333.33 (or, if lower, the then-remaining amount of principal outstanding, if
any); provided that (i) the Company may retain each such additional bonus in
satisfaction of and as an offset to Executive's obligations under the loan and
(ii) without limiting the generality of Section D, Paragraph 5 hereof, the
Company may require Executive to pay to the Company at the time of the payment
of any such additional bonus the amount the Company in good faith deems
necessary to satisfy the Company's obligation to withhold federal, state or
local income or other taxes incurred by reason of such additional bonus (it
being expressly agreed that, notwithstanding the foregoing, Executive's
satisfaction of any tax-withholding requirements so imposed by the Company is a
condition precedent to the Company's obligation to pay each such additional
bonus). Notwithstanding the foregoing, the outstanding balance of the above
loan, if not earlier due, shall become due and payable 120 days after
Executive's Employment Term has terminated for any reason, other than an
Involuntary Termination or a Termination Without Cause. If the outstanding loan
balance becomes due and payable under the preceding sentence, and is not timely
repaid, then the outstanding loan balance shall thereupon begin to accrue
interest at The Wall Street Journal prime rate as used by First Union
Corporation (including its subsidiaries) in connection with mortgage loans made
thereby (or such other rate as is used thereby for such purposes), plus three
percentage points, compounded monthly.
(d) Executive shall be entitled to full and complete
participation in the Company's Salary Reduction and Other Elective Simplified
Employee Pension-Individual Retirement Account Contribution Agreement as
documented on Form 5305A-SEP, to the extent in effect from time to time.
(e) In addition, the Company may from time to time pay
Executive such compensation or benefits as the Compensation Committee of the
Board may, in its discretion, award to Executive under any compensation, bonus,
stock purchase, stock option, profit sharing or other employee benefit plan that
may hereafter be adopted (any such compensation is referred to as "Incentive
Compensation"). Executive's Incentive Compensation will be consistent with the
Incentive Compensation available to other similarly situated senior executives
of the Company.
<PAGE>
(f) Without limiting the generality of Paragraph 3(e),
effective as of the date hereof, Executive shall be granted an option (the
"Option") to purchase 50,000 shares of common stock of the Company at an
exercise price equal to the fair market value at such time. To the extent that
there has been no termination of Executive's employment and the Option has not
otherwise expired, one third of the shares subject to the Option shall vest
immediately upon grant, with an additional one third of the shares subject to
the Option to vest on each of the following two anniversaries of the date of
grant. The Option shall be subject to a definitive option award agreement
containing such other terms and conditions (including without limitation
provisions relating to termination of employment, method of exercise and
payment, withholding and nontransferability) as the Board determines in its sole
discretion which are not inconsistent with the foregoing provisions of this
Paragraph 3(f).
4. Benefits. The Company agrees to provide Executive with the
following benefits during the Employment Term:
(a) Vacation. Executive shall be entitled each year
to a paid vacation in accordance with the practices of the Company as
constituted by the Board.
(b) Employee Benefits. Executive shall be entitled to
all rights, benefits and privileges to which other management level employees of
the Company are entitled, including, but not limited to, any retirement,
pension, profit sharing, insurance, hospital or other plans which may now be in
effect or which may hereafter be adopted by the Company.
5. Expenses. The Company recognizes that Executive will have
to incur certain out-of-pocket expenses, including, but not limited to, travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse Executive for all reasonable expenses necessarily incurred
by him in the performance of his duties upon presentation of a voucher or
documentation reasonably acceptable to the Company indicating the amount and
business purposes of any such expenses. In addition, the Company shall reimburse
Executive, upon Executive's submission of proof of such expenses, for the
following costs of relocating from Smyrna, Georgia to the Villanova,
Pennsylvania area: direct costs associated with (i) the sale of Executive's
current residence, located in Smyrna, Georgia (excluding any loss that may have
been incurred in connection therewith), (ii) the purchase of a new residence
within the Villanova, Pennsylvania area (excluding the actual price of the
residence), (iii) the provision of temporary housing, for up to three months,
(iv) searching for a new residence, (v) the actual moving from Smyrna, Georgia
to the Villanova, Pennsylvania area and (vi) obtaining a new mortgage loan
(excluding any interest-related costs, but including "points" up to three
points). In the event Executive incurs federal, state or local income taxes
attributable to the Company's bearing such moving expenses, the Company shall
pay Executive an additional payment sufficient to offset any such income taxes
(excluding any interest or penalties) and any such income taxes imposed by
reason of such payment.
6. Termination in Case of Death or Disability. In case of
Executive's death or permanent disability (defined as physical or mental
inability, confirmed by a licensed physician, to
<PAGE>
perform substantially all of the services described herein that continues for a
period of 180 consecutive or non-consecutive days in any 365-day period), the
Company may elect to terminate Executive pursuant to the terms of Section B,
Paragraph 8 hereof.
7. Termination With Cause; Voluntary Termination. The Company
may terminate this Agreement upon a determination that an event has occurred
within the definition of Termination With Cause; provided, however, in the case
of a Termination With Cause based upon clauses (a) or (b) of such definition,
the Company shall provide Executive written notice of such grounds for
termination. If Executive shall suffer Termination With Cause or shall cease
being an employee of the Company on account of a Voluntary Termination, then (i)
Executive shall not be entitled to any compensation after the effective date of
such Voluntary Termination or Termination With Cause (except compensation
accrued but unpaid on the date of such event); (ii) any continued rights and
benefits Executive may have under employee benefit plans and programs of the
Company upon such a termination, if any, shall be determined in accordance with
the terms of such plans and programs; and (iii) Executive shall have no further
rights to any other compensation or benefits hereunder or granted hereunder on
or after the termination of employment, or any other rights hereunder.
8. Termination Upon Death or Disability. Upon death or other
termination of employment by virtue of disability, then (i) Executive shall not
be entitled to any compensation after the effective date of such termination
(except compensation accrued but unpaid on the date of such event); (ii) all
outstanding unvested Options granted under Paragraph 3(f) shall vest and shall
otherwise be exercisable in accordance with their terms; and (iii) Executive
shall have no further rights to any other compensation or benefits hereunder or
granted hereunder on or after the termination of employment, or any other rights
hereunder. Any continued rights and benefits that Executive, or Executive's
estate or other legal representatives, may have under employee benefit plans and
programs of the Company upon such death or disability shall be determined in
accordance with the terms and provisions of such plans and programs.
9. Involuntary Termination or Termination Without Cause. (a)
If Executive shall suffer an Involuntary Termination or a Termination Without
Cause, then (i) the Company shall pay Executive cash compensation in a lump sum
equal to (A) Executive's base salary (based on Executive's base salary at the
time of such termination) plus (B) the prior year's Annual Bonus under Paragraph
3(b) or, if greater, $100,000 (except as set forth in Section B, Paragraph 10
hereof); (ii) the Company shall continue to provide, for the longer of one year
or the remainder of the Employment Term, Executive with the level of
health/medical insurance or coverage provided to Executive at the time of such
termination; it being expressly understood and agreed that nothing in this
clause (ii) shall restrict the ability of the Company to amend or terminate such
plans and programs from time to time in its sole discretion; provided, however,
that the Company shall in no event be required to provide any coverage after
such time as Executive becomes entitled to receive benefits of the same type
from another employer or recipient of Executive's services (and provided,
further, that such entitlement shall be determined without regard to any
individual waivers or other similar arrangements); (iii) all outstanding
unvested Options granted under Paragraph 3(f) shall vest and shall otherwise be
exercisable in accordance with their terms; (iv) subject to Executive's
satisfaction of any tax-withholding obligations as contemplated by Section B,
Paragraph 3(c) hereof, the Company shall forgive $300,000 of the loan made by
the Company to Executive under
<PAGE>
Section B, Paragraph 3(c) hereof (or, if lower, the outstanding balance
thereof); and (v) except as provided in Section B, Paragraph 10, Executive shall
have no further rights to any other compensation or benefits hereunder or
granted hereunder on or after the termination of employment, or any other rights
hereunder. Any continued rights and benefits that Executive may have under
employee benefit plans and programs of the Company upon such termination shall
be determined in accordance with the terms and provisions of such plans and
programs.
(b) Notwithstanding the foregoing, (i) neither Good Reason nor
grounds for Involuntary Termination shall be deemed to exist unless written
notice of termination on account thereof (specifying a termination date no less
than 14 days and no more than 21 days from the date of such notice) is given no
later than 90 days after the time at which the event or condition purportedly
giving rise to Good Reason or the Involuntary Termination first occurs or
arises; and (ii) if there exists (without regard to this clause (ii)) an event
or condition that constitutes Good Reason or grounds for Involuntary
Termination, the Company shall have 14 days from the date notice of such a
termination is given to remedy or cure such event or condition and, if the
Company does so, such event or condition shall not constitute Good Reason or
grounds for Involuntary Termination, respectively, hereunder.
10. Termination Upon a Change in Control. If, within the
one-year period to follow a Change in Control, Executive shall suffer a
termination other than by reason of death or disability or a Termination With
Cause, then, in lieu of the amount provided for under clause (i) of the first
sentence of Section B, Paragraph 9 hereof, Executive shall receive two times
such amount, and, in addition to such other payments and benefits as may be
provided for under Section B, Paragraph 9 hereof, (i) any and all outstanding
unvested options held by Executive shall vest and become immediately exercisable
otherwise in accordance with their terms and (ii) subject to Executive's
satisfaction of any tax-withholding obligations as contemplated by Section B,
Paragraph 3(c) hereof, the Company shall forgive the outstanding balance on the
loan made by the Company to Executive under Section B, Paragraph 3(c) hereof.
11. Indemnification. The Company agrees that for the
Employment Term, provisions of the Company's bylaws regarding indemnification
and advancement of expenses of officers and directors shall not be amended to
adversely effect Executive nor shall the Company's articles of incorporation be
amended to adversely effect Executive's rights with respect to limitation of
liability, indemnification or advancement of expenses.
C. AGREEMENT NOT TO COMPETE
Except as explicitly provided herein, Executive agrees, for
the entire Employment Term and Noncompetition Period, to the following
covenants, effective within the United States:
1. Competitive Activity Restriction. Executive, personally or
through any Affiliate of Executive, shall not conduct any Competitive Activity
other than through the Company, unless a majority of the Board, which majority
must include a majority of the Independent Directors, have determined that such
Competitive Activity will not have a material adverse effect on the business or
operations of the Company. Notwithstanding any other provision of this
Agreement, and without limiting any obligations to the Company that Executive
may have without
<PAGE>
regard hereto, Executive agrees that, during the time he is employed by the
Company, Executive shall present to the Company all opportunities that arise to
engage in Competitive Activities unless Executive reasonably determines that
such opportunities are not appropriate for the Company.
2. No Beneficial Ownership. Executive shall not beneficially
own directly or indirectly any beneficial interest in any entity engaged in any
Competitive Activity other than the Company, except for any interest in a
company traded on a nationally recognized public securities exchange (including
The Nasdaq National Market), provided such interest does not exceed 5% of the
outstanding capital stock of such company.
3. Loans. Executive shall not directly or indirectly make any
loan to, or hold any note evidencing a loan from, any entity engaged in any
Competitive Activity.
4. Competitive Entity. Executive shall not be a director or
trustee, partner, officer, principal, agent or employee of, or consultant to
(whether for compensation or not), or work in any other capacity for, any entity
engaged in any Competitive Activity.
5. Notification to Independent Directors. If Executive or any
Affiliate of Executive desires to engage in any Competitive Activity, Executive
shall describe fully the proposed activity in a written notice (the "Disclosure
Notice") to the Company and the Independent Directors. A Disclosure Notice shall
only pertain to a specific proposed project and the referenced proposed project
shall be described therein with specificity as to timing, location, scope and
the extent of Executive's involvement, financially and in terms of his time
commitment. A Disclosure Notice may not request approval for any conceptual or
non-project specific activity or for any activity that is prohibited by this
Agreement.
6. Confidential Information. Executive shall keep secret and
retain in strictest confidence, and shall not use for his benefit or the benefit
of others, except in connection with the business and affairs of the Company and
its Affiliates, all confidential matters relating to the Company's business and
the business of any of its Affiliates, learned by Executive heretofore or
hereafter directly or indirectly from the Company or any of its Affiliates (the
"Confidential Company Information"), including, without limitation, information
with respect to (i) sales figures (whether per property or otherwise), (ii)
profit or loss figures (whether per property or otherwise), and (iii) customers,
clients, tenants, and customer lists; and shall not disclose such Confidential
Company Information to anyone outside of the Company except with the Company's
express written consent and except for Confidential Company Information which is
at the time of receipt or thereafter becomes publicly known through no wrongful
act of Executive's or is received from a third party not under an obligation to
keep such information confidential and without breach of this Agreement.
7. No Interference or Solicitation. Notwithstanding any other
provision of this Agreement, during the Noncompetition Period, Executive shall
not directly or indirectly (i) solicit or endeavor to entice away any existing
client of the Company or any potential client of the Company whom the Company
was actively soliciting during the time of Executive's directorship, or any
person who during the Employment Term or the one-year period which follows the
expiration of the Employment Term was or is a client of the Company, (ii) hire,
solicit or otherwise
<PAGE>
encourage any employee or independent contractor of the Company to leave the
employment of, or terminate any contractual relationship with, the Company, or
(iii) hire any employee or independent contractor who has left the employment or
other service of the Company or any of its Affiliates within the six-month
period which follows the termination of such employee's or independent
contractor's employment or other service with the Company and its Affiliates, or
(iv) otherwise interfere with, disrupt or attempt to disrupt the relationships,
contractual or otherwise, between the Company and its employees or independent
contractors or solicit or encourage any employee or independent contractor of
the Company to engage in any Competitive Activity.
8. Return of Property. All memoranda, notes, lists, records,
property and any other tangible product and documents (and all copies thereof),
whether visually perceptible, machine-readable or otherwise, made, produced or
compiled by Executive or made available to Executive concerning the business of
the Company or its Affiliates, (i) shall at all times be the property of the
Company (and, as applicable, any Affiliates) and shall be delivered to the
Company at any time upon its request, and (ii) upon Executive's termination of
employment, shall be immediately returned to the Company; provided, however,
that Executive may retain a copy of his "rolodex" (or other similar record of
names and addresses) maintained from time to time in the ordinary course.
D. MISCELLANEOUS PROVISIONS.
1. Notices. All notices or deliveries authorized or required
pursuant to this Agreement shall be deemed to have been given when in writing
and when (i) deposited in the U.S. mail, certified, return receipt requested,
postage prepaid, or (ii) otherwise delivered by hand or by overnight delivery,
against written receipt, by a common carrier or commercial courier or delivery
service addressed to the parties at the following addresses or to such other
addresses as either may designate in writing to the other party:
To the Company: American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Telephone: (601) 834-7950
Facsimile: (610) 834-9560
To Executive: Timothy A. Peterson,
2. Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and shall not be modified in any manner except by written instrument
signed by or on behalf of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors and assigns of the
parties hereto.
3. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED AND
<PAGE>
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
4. Assignment. Executive acknowledges that his services are
unique and personal. Executive may not assign his rights or delegate his duties
or obligations under this Agreement except (a) his rights to compensation and
benefits hereunder may be transferred by will or operation of law and (b) his
rights under employee benefit plans or programs described in Section B,
Paragraph 4(b) may be assigned or transferred in accordance with the terms of
such plans or programs, or regular practices thereunder. Executive's rights and
obligations under this Agreement shall inure to the benefit of and shall be
binding upon Executive's heirs and personal representatives.
5. Withholding. The Company shall be entitled to withhold from
any payments or deemed payments any amount of tax withholding required by law.
6. Titles and Headings. Titles and headings to sections and
paragraphs in this Agreement are inserted for the convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
8. Amendments. No amendment, modification, waiver or
supplement to this Agreement shall be binding on any of the parties hereto
unless it is in writing and signed by the parties in interest at the time of the
modification, and further provided any such modification is approved by a
majority of the Independent Directors. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.
9. No Third-Party Beneficiaries. This Agreement is solely for
the benefit of the parties to this Agreement and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claims or action
or other right in excess of those existing without reference to this Agreement.
10. Maximum Legal Enforceability; Time of Essence. Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available to
any party to this Agreement, each party hereto acknowledges that damages would
not be an adequate remedy for any breach of the provisions of this Agreement and
agrees that the obligations of the parties hereunder shall be specifically
enforceable. Time shall be of the essence as to each and every provision of this
Agreement.
<PAGE>
11. Specific Performance. (a) Executive acknowledges that the
obligations undertaken by him pursuant to this Agreement are unique and that the
Company will not have an adequate remedy at law if he shall fail to perform any
of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of Section C of this
Agreement is essential to protect the rights, interest and goodwill of the
Company. Accordingly, in addition to any other remedies that the Company may
have at law or in equity, the Company shall have the right to have all
obligations, covenants, agreements and other provisions of Section C of this
Agreement specifically performed by Executive, and the Company shall have the
right to obtain preliminary and permanent injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of Section C of this
Agreement by Executive. Executive acknowledges that the Company will have the
right to have the provisions of Section C of this Agreement enforced in any
court of competent jurisdiction, it being agreed that any breach or threatened
breach of Section C of this Agreement would cause irreparable injury to the
Company and its business and that money damages would not provide an adequate
remedy to the Company.
(b) Any controversy or claim arising out of or relating to
this Agreement or the breach of this Agreement that is not resolved by Executive
and the Company (or its Affiliates, where applicable), other than controversies
or claims arising under Section C, to the extent necessary for the Company (or
its Affiliates, where applicable) to avail itself of the rights and remedies
provided under Section D, Paragraph 11(a) hereof, shall be submitted to
arbitration in Philadelphia, Pennsylvania in accordance with Pennsylvania law
and the procedures of the American Arbitration Association. The determination of
the arbitrator(s) shall be conclusive and binding on the Company (or its
Affiliates, where applicable) and Executive and judgment may be entered on the
arbitrator(s)' award in any court having jurisdiction.
12. Survival. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Section C hereof, Section D,
Paragraphs 5 and 11 hereof, and the other provisions of this Section D (to the
extent necessary to effectuate the survival of Section C and Section D,
Paragraphs 5 and 11), shall survive termination of this Agreement and any
termination of Executive's employment hereunder.
13. Operations of Affiliated Parties. Executive agrees that he
will refrain from authorizing any Affiliate to perform any activities that would
be prohibited by the terms of this Agreement if they were performed by him.
Notwithstanding anything to the contrary contained in this Agreement, Executive
shall not be required by the terms of this Agreement to violate any fiduciary
duty existing on the date hereof that he owes to a third party.
14. Existing Agreements. Executive represents to the Company
that he is not subject or a party to any employment or consulting agreement,
non-competition covenant or other agreement, covenant or understanding which
might prohibit him from executing this Agreement or limit his ability to fulfill
his responsibilities hereunder.
15. Parachutes. If all, or any portion, of the payments
provided under this Agreement, either alone or together with other payments and
benefits which Executive receives or is entitled to receive from the Company or
an affiliate, would constitute an excess "parachute
<PAGE>
payment" within the meaning of Section 280G of the Code (whether or not under an
existing plan, arrangement or other agreement) (each such parachute payment, a
"Parachute Payment"), and would result in the imposition on Executive of an
excise tax under Section 4999 of the Code, then, in addition to any other
benefits to which Executive is entitled under this Agreement, Executive shall be
paid by the Company an amount in cash equal to the sum of the excise taxes
payable by Executive by reason of receiving Parachute Payments plus the amount
necessary to put Executive in the same after-tax position (taking into account
any and all applicable federal, state and local excise, income or other taxes at
the highest possible applicable rates on such Parachute Payments (including
without limitation any payments under this Paragraph 15) as if no excise taxes
had been imposed with respect to Parachute Payments (the "Parachute Gross-up")).
Except as may otherwise be agreed to by the Company and Executive, the amount or
amounts (if any) payable under this Paragraph 15 shall be as conclusively
determined by the Company's independent auditors (who served in such capacity
immediately prior to a Change in Control (or, if applicable, a change in control
which is not a Change in Control)). If such independent auditors refuse to make
the required determinations, then such determinations shall be made by a
comparable independent accounting firm of national reputation selected by the
Company and reasonably acceptable to Executive.
16. Further Assurances. The parties to this Agreement will
execute and deliver or cause the execution and delivery of such further
instruments and documents and will take such other actions as any other party to
the Agreement may reasonably request in order to effectuate the purpose of this
Agreement and to carry out the terms hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written above.
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
By: /s/ Jeffrey E. Kelter
----------------------
Name: Jeffrey E. Kelter
Title: President
TIMOTHY A. PETERSON
-----------------------------
/s/ Timothy A. Peterson
<PAGE>
Address and other contact information for
Timothy A. Peterson as of the date hereof
(not to be included with any public filings
of this Agreement.)
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE
American Real Estate Investment Corporation Hires Chief Financial Officer
PLYMOUTH MEETING, Penn., August 10 /PRNewswire/ -- American Real Estate
Investment Corporation (the "Company") (AMEX: REA) announced today that Timothy
A. Peterson will join the firm as its Senior Vice President and Chief Financial
Officer. In his role as the Company's Chief Financial Officer, Mr. Peterson will
report directly to Jeff Kelter, American Real Estate's President, and will
oversee all capital markets activities, and the firm's accounting, financial
reporting, budgeting and systems functions.
Prior to joining the Company, Mr. Peterson was employed by Post Properties,
Inc., where he has held a variety of positions since 1989, including his current
responsibility as Executive Vice President, Finance. While at Post Properties,
Mr. Peterson managed all capital markets activities and oversaw accounting,
budgeting and public reporting functions. Mr. Peterson has a Masters of Business
Administration from the University of Florida, and is a Certified Public
Accountant. He is active in the National Association of Real Estate Investment
Trusts (NAREIT), currently serving as Accounting Committee Co-Chair and an
adjunct member of the Best Financial Practices Task Force. Mr. Peterson is a
member of the Tax Policy Advisory Board of the National Realty Committee and a
member of the University of Florida Real Estate Advisory Board.
"We are delighted to welcome Tim on board at American Real Estate. He brings an
extraordinary depth of knowledge and experience to our firm, and will play an
integral part in the continued growth and success of our Company. He has
terrific operating experience, and his equity and debt expertise in the capital
markets will be vital in the continued execution of our growth strategy," stated
Jeff Kelter, President of American Real Estate.
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 located in the Mid-Atlantic and Northeast
states. The Company currently owns 55 office and industrial properties
containing an aggregate of 6.5 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.
<PAGE>
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
