<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1997 (September
15, 1997)
MID-ATLANTIC REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 1-12286 52-1832411
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
170 West Ridgely Road, Suite 300, Lutherville, MD 21093
(Address of principal executive offices)
Registrant's telephone number, including area code (410) 684-2000
N.A.
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On September 15, 1997, Mid-Atlantic Realty Trust ("MART") sold Gateway
International (Gateway), its sole Class A suburban office project, to Prentiss
Properties Trust (Prentiss), a Dallas based real estate investment trust. The
purchase price for this 203,000 square foot, two building project was
$22,584,070. Included in the sale were 6.5 acres of contiguous land. Net
proceeds of the transaction of approximately $21.4 million were applied by MART
to reduce the outstanding balance of its revolving line of credit.
Gateway International, located on Interstate 295 at the
Baltimore-Washington International Airport, was developed in two phases. The
86,000 square foot Phase I opened in late 1986 while the 117,000 square foot
Phase II opened in 1990.
MART is a Maryland real estate investment trust (REIT) which owns,
leases, develops and manages neighborhood and community shopping centers and
other commercial real estate, primarily in the Middle Atlantic region. MART's
common shares are traded on the New York Stock Exchange under the symbol "MRR".
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a). Pro Forma Financial Information - Mid-Atlantic Realty Trust and
Subsidiaries
Pro Forma Condensed Combined Balance Sheet - June 30, 1997
(Unaudited)
Pro Forma Condensed Combined Statement of Operations - Six
Months Ended June 30, 1997 (Unaudited)
Pro Forma Condensed Combined Statement of Operations - For the
Year Ended December 31, 1996 (Unaudited)
Notes to Pro Forma Condensed Combined Financial Statements
(b). Exhibits
1. Partnership Purchase and Sale Agreement among BTR Gateway,
Inc., Mid-Atlantic Realty Trust, and Prentiss Properties
Acquisition, L.P.
3
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MID-ATLANTIC REALTY TRUST
Date: September 30, 1997 By:/s/Paul G. Bollinger
--------------------
Paul G. Bollinger, Vice President
and Controller
Principal Financial Officer
mart.pr
4
<PAGE>
Item 7.(a). Pro Forma Financial Information - Mid-Atlantic Realty Trust and
Subsidiaries
The following unaudited pro forma combined financial
statements are based upon the consolidated financial statements of Mid-Atlantic
Realty Trust (Company or MART) and the combined financial statements of JHP
Commercial Properties (JHP). The pro forma condensed combined balance sheet and
statements of operations have been prepared using the purchase method of
accounting with respect to the acquisition of JHP. These statements reflect how
the balance sheet of the Company might have appeared at June 30, 1997 if the
acquisition of JHP and the sale of Gateway had been consummated at that date and
how the statements of operations of the Company might have appeared if the
acquisition and sale had been consummated at the beginning of the periods
presented. These unaudited pro forma condensed combined financial statements are
not necessarily indicative of the results of operations or financial position of
the Company that would have occurred had the acquisition and sale occurred at
the beginning of the periods presented or on the date indicated, nor are they
necessarily indicative of the future results or financial position of the
Company.
These unaudited pro forma condensed combined financial
statements should be read in conjunction with the audited consolidated financial
statements of the Company included in its Form 10-K for the year ended December
31, 1996, the unaudited consolidated financial statements of the Company
included in its Form 10-Q for the six months ended June 30, 1997, and the
audited combined financial statements of JHP as of and for the years ended
December 31, 1996, 1995 and 1994 included in Form 8K filed by the Company on
July 15, 1997. The unaudited pro forma adjustments are based upon this financial
information and certain other assumptions included in the notes to the unaudited
pro forma condensed combined financial statements.
As indicated above, the acquisition of JHP will be accounted
for by the purchase method of accounting. The Company's cost to acquire JHP,
including the fair value of liabilities assumed, approximated the fair value of
the assets acquired. The purchase allocation adjustments made in connection with
the development of the unaudited pro forma condensed combined financial
statements are based on the information available at this time. Subsequent
adjustments and refinements to the allocation may be made based on additional
information.
As indicated above, the pro forma condensed combined financial
statements are not necessarily indicative of the future results or financial
position of the Company. The pro forma financial statements do not include the
full affect of redevelopment and leasing activity at the JHP properties during
the first six months of 1997.
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF
JUNE 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MART, MLP
MART Pro Forma Pro Forma and Subsidiaries
and Subsidiaries JHP Adjustments Adjustments (Pro Forma
(Historical) (Historical) JHP (Note B) GATEWAY (Note B) Combined)
------------ ------------ ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Properties:
Operating properties $196,781 91,362 29,682 (a)(b) (24,921) (a) 292,904
Less accumulated depreciation 44,246 14,748 (14,748)(b) (5,372) (a) 38,874
----------------------------------------------------------------------------------
152,535 76,614 44,430 (19,549) 254,030
Development operations 8,638 0 (125)(c) (4) (a) 8,509
Property held for development or sale 6,753 0 0 (1,210) (a) 5,543
-------------------------------------------------------------------------------------
167,926 76,614 44,305 (20,763) 268,082
Cash and cash equivalents 2,564 255 (913)(b),(c) (2) (a) 1,904
Notes and accounts receivable-tenants and other 714 804 (804)(b),(c) 122 (a) 836
Prepaid expenses and deposits 84 535 (94)(b) (12) (a) 513
Deferred financing costs 1,885 487 (487)(b),(c) 0 1,885
-------------------------------------------------------------------------------------
$173,173 78,695 42,007 (20,655) 273,220
=====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses 4,189 2,073 (1,362)(b),(c) 68 (a) 4,968
Notes payable 16,000 0 0 (16,000) (b) 0
Construction loan payable 2,829 0 0 2,829
Mortgages payable 69,785 81,768 2,155 (b) (5,400) (b) 148,308
Convertible subordinated debentures 36,186 0 0 36,186
Deferred income 819 271 (268)(b),(c) (23) (a) 799
------------------------------------------------------------------------------------
129,808 84,112 525 (21,355) 193,090
Minority interest in consolidated 2,731 0 36,065 (a) 0 38,796
joint ventures
Owners' Equity 40,634 (5,417) 5,417 (a),(b) 700 (c) 41,334
------------------------------------------------------------------------------------
$173,173 78,695 42,007 (20,655) 273,220
====================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma MART
MART Pro Forma Adjustments and Subsidiaries
and Subsidiaries JHP Adjustments GATEWAY (Pro Forma
(Historical) (Historical) JHP (Note C) (Note C) Combined)
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rentals $13,761 6,395 (86) (b) (1,689) (a) 18,381
Tenant recovery 2,489 880 3,369
Other 147 -- (16) (c) (2) (a) 129
-----------------------------------------------------------------------------------------
16,397 7,275 (102) (1,691) 21,879
COSTS AND EXPENSES:
Interest 5,363 3,665 (120)(d) (749) (a) 8,159
Depreciation and amortization of
property and improvements 2,749 1,054 6 (e)
156 (f) (416) (a) 3,549
Operating 4,223 1,096 (30)(g) (547) (a) 4,742
General and Administrative 1,135 489 (412)(h) 1,212
-----------------------------------------------------------------------------------------
13,470 6,304 (400) (1,712) 17,662
-----------------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST 2,927 971 298 21 4,217
Minority interest expense (137) -- (1,133)(i) (6) (a) (1,276)
-----------------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS 2,790 971 (835) 15 2,941
Gain on properties 91 -- 700 (b) 791
-----------------------------------------------------------------------------------------
NET EARNINGS: $2,881 971 (835) 715 3,732
=========================================================================================
NET EARNINGS PER SHARE $0.37 0.48
============== ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma MART
MART Pro Forma Adjustments and Subsidiaries
and Subsidiaries JHP Adjustments GATEWAY (Pro Forma
(Historical) (Historical) JHP (Note C) (Note C) Combined)
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rentals $26,562 13,229 (1,574) (a)
(170) (b) (3,518) (a) 34,529
Tenant recovery 5,135 -- 1,574 (a) 6,709
Other 709 17 (33) (c) (10) (a) 683
-----------------------------------------------------------------------------------------
32,406 13,246 (203) (3,528) 41,921
COSTS AND EXPENSES:
Interest 12,354 7,268 (274)(d) (1,498) (a) 17,850
Depreciation and amortization of
property and improvements 5,414 2,072 14 (e)
368 (f) (801) (a) 7,067
Operating 8,818 2,087 (58)(g) (1,143) (a) 9,704
General and Administrative 2,098 1,099 (727)(h) 2,470
-----------------------------------------------------------------------------------------
28,684 12,526 (677) (3,442) 37,091
-----------------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST 3,722 720 474 (86) 4,830
Minority interest expense (514) -- (1,229)(i) 24 (a) (1,719)
-----------------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS 3,208 720 (755) (62) (a) 3,111
Gain on properties 301 -- 700 (b) 1,001
-----------------------------------------------------------------------------------------
NET EARNINGS: $3,509 720 (755) 638 4,112
=========================================================================================
NET EARNINGS SHARE $0.56 0.66
============== ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
On July 1, 1997 the Company transferred all of its interests in real
properties to a newly-formed partnership, MART Limited Partnership, (MLP), in
exchange for 9,277,687 operating partnership units in MLP. On the same date
various entities affiliated with JHP contributed their interests in a portfolio
consisting of nine shopping centers and one medical office building to MLP in
exchange for 3,175,770 operating partnership units in MLP. As a result of these
transactions, MART is the sole general partner of MLP and has an ownership
interest of approximately 72% in MLP.
Under the agreement for contribution of interests and the limited
partnership agreement, the limited partners (excluding MART) have the right to
"put" their units to MLP for cash, subject to various limitations and
conditions. In the event units are put to MLP, MART may assume MLP's obligation
to pay cash or, at its option, may settle the obligation by issuing common
shares of beneficial interest on a one-to-one basis.
On September 15, 1997, the Company sold Gateway for $22,584,070. Net
proceeds of approximately $21,400,000 were used to pay down the Company's line
of credit and other debt.
B. ADJUSTMENTS TO PRO FORMA CONDENSED COMBINED BALANCE SHEET
The accompanying unaudited pro forma condensed combined balance sheet
as of June 30, 1997 reflects certain adjustments which were required to give
effect to matters directly attributable to the acquisition of JHP and the sale
of Gateway. Explanations of the adjustments are as follows:
ACQUISITION OF JHP:
(a) Adjust assets acquired and liabilities assumed to fair value
and record fair value of operating partnership units issued.
(b) Eliminate the assets and liabilities not acquired by the
Company and record costs incurred at closing.
(c) Reclassify liabilities to conform to presentation used by the
Company.
GATEWAY SALE:
(a) Eliminate assets and liabilities related to Gateway.
(b) To record paydown of debt from proceeds of sale.
(c) To record net gain resulting from sale.
<PAGE>
C. ADJUSTMENTS TO PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
The accompanying unaudited pro forma condensed combined statements of
operations for the six months ended June 30, 1997 and the year ended December
31, 1996 reflect certain adjustments which are explained below. These
adjustments are required to give effect to matters directly attributable to the
acquisition of JHP and the sale of Gateway, and to reclassify certain revenues
and expenses of JHP to conform to the presentation used by the Company.
Explanations of the adjustments are as follows:
ACQUISITION OF JHP:
(a) Reclassify tenant recover revenues to conform to the
presentation used by the Company.
(b) Eliminate the effect of JHP using the straight-line basis to
recognize minimum rent revenues under tenant leases which
provide for varying rents over their terms. MART has not used
the straight-line basis due to immateriality.
(c) Reduce interest income to reflect the use of short-term
investments (assumed to earn interest at 5%) to pay
acquisition costs.
(d) Reduce interest expense to eliminate interest on JHP debt not
assumed and to reflect the different basis in mortgages
payable assumed.
(e) Record depreciation expense on capitalized transaction costs
incurred in connection with closing.
(f) Increase depreciation expense for the difference in property
basis due to fair value adjustments.
(g) Eliminate commercial management payroll of JHP for non-common
area maintenance operating expenses. The related services
required for JHP will be performed by MART employees and
charged to general and administrative expenses.
(h) Reduced general and administrative expenses to eliminate
expenses which are not expected to be incurred by the combined
organization (primarily compensation and related costs of form
JHP employees who are not joining MART and who management does
not intend to replace).
(i) Record non-MART partners' share of combined earnings.
GATEWAY SALE:
(a) Eliminate revenues and expenses of Gateway.
(b) Record net gain resulting from sale.
D. EARNINGS PER SHARE
The weighted average number of common shares of beneficial interest
outstanding used in the calculation of earnings per share for the six months
ended June 30, 1997 and the year ended December 31, 1996 were 7,818,000 and
6,216,000, respectively, on a primary basis.
C70864a.171
<PAGE>
(b) Exhibits
<PAGE>
PARTNERSHIP PURCHASE AND SALE AGREEMENT
among
BTR GATEWAY, INC.,
a Maryland corporation,
and
MID-ATLANTIC REALTY TRUST,
a Maryland real estate investment trust
"Sellers"
and
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
"Purchaser"
Dated as of
July 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINED TERMS...................................................... 1
2. PURCHASE AND SALE OF PARTNERSHIP INTERESTS......................... 3
3. THE PURCHASE PRICE................................................. 3
4. TITLE.............................................................. 4
5. DUE DILIGENCE INSPECTIONS.......................................... 5
6. REPRESENTATIONS AND WARRANTIES OF SELLERS.......................... 7
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER............. 10
8. CONFIDENTIALITY.................................................... 11
9. CONDITIONS PRECEDENT TO CLOSING.................................... 11
10. COVENANTS OF SELLERS............................................... 12
11. SELLERS' CLOSING DELIVERIES........................................ 14
12. PURCHASER'S CLOSING DELIVERIES..................................... 15
13. PRORATIONS AND ADJUSTMENTS......................................... 16
14. CLOSING............................................................ 18
15. CLOSING COSTS...................................................... 19
16. RISK OF LOSS....................................................... 19
17. DEFAULT............................................................ 20
18. INDEMNIFICATION.................................................... 20
19. BROKER'S COMMISSION................................................ 21
20. VACANT SPACE ALLOWANCE............................................. 22
21. MISCELLANEOUS...................................................... 23
- i -
<PAGE>
EXHIBITS
Exhibit A Legal Description of the Land
Exhibit B Partnership Balance Sheet for December 31, 1996
and 1997 year-to-date
Exhibit C Schedule of Intangible Property
Exhibit D Schedule of Leases
Exhibit E List of Personal Property
Exhibit F Form of Tenant Estoppel Certificate
Exhibit G Form of General Partnership Assignment
Exhibit H Form of Limited Partnership Assignment
Exhibit I Notice to Tenants
Exhibit J Submission Matters
- ii -
<PAGE>
PARTNERSHIP PURCHASE AND SALE AGREEMENT
THIS PARTNERSHIP PURCHASE AND SALE AGREEMENT (this
"Agreement") is entered into as of July 15, 1997, among PRENTISS PROPERTIES
ACQUISITION PARTNERS, L.P., a Delaware limited partnership ("Purchaser"), BTR
GATEWAY, INC., a Maryland corporation ("GP SELLER"), and MID-ATLANTIC REALTY
TRUST, a Maryland real estate investment trust ("MART") (MART and GP Seller are
together called "LP Sellers"). GP Seller and LP Sellers are hereinafter
collectively referred to as "Sellers."
RECITALS:
A. The Partnership (as hereinafter defined) owns that certain
real property located in Anne Arundel County, Maryland, consisting of
approximately 26.35 acres and more particularly described on Exhibit A attached
hereto (the "Land"), which Land includes a development parcel commonly known as
Gateway International III, together with any improvements located thereon (the
"Improvements"), including, without limitation, two (2) commercial office
buildings of approximately 84,605 square feet (Gateway International I) and
118,800 (Gateway International II).
B. GP Seller owns a five percent (5%) general partnership
interest in the Partnership.
C. LP Sellers own a ninety-five percent (95%) limited
partnership interest in the Partnership.
D. Sellers desire to sell to Purchaser, and Purchaser desires
to purchase from Sellers, all of Sellers' right, title and interest in and to
the Partnership Interests (as hereinafter defined) for the price and on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Recitals,
the covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINED TERMS
For purposes of this Agreement, the following terms shall have
the meanings set forth below:
a. "Balance Sheet" means the December 31, 1996 (with 1997
year-to-date) balance sheet for the Partnership, a copy of which is attached
hereto as Exhibit B.
b. "Effective Date" means the date this Agreement is fully
executed and delivered by Purchaser and Seller.
<PAGE>
c. "Intangible Personal Property" means all of the
Partnership's interest in and to all trademarks and trade names used or useful
in connection with the Real Property (including, without limitation, the
Partnership's interest, if any, in the right to use the name "Gateway
International") (collectively, the "Trade Names"), together with the
Partnership's interest (if any) in and to any service contracts, guarantees,
licenses, approvals, certificates, permits and warranties relating to the
Property, to the extent assignable, and the contract, rights, guarantees,
licenses, permits (to the extent transferable) and warranties more particularly
described in Exhibit C attached hereto.
d. "Leases" means collectively all of the Partnership's right,
title, estate and interest in and to the unexpired leases covering the Land and
Improvements as of the Closing Date, together with any and all amendments,
modifications or supplements thereto, which leases are identified in the
Schedule of Leases attached hereto as Exhibit D.
e. "Partnership" means Gateway International Limited
Partnership, a Maryland limited partnership.
f. "Partnership Agreement" means that certain Certificate of
Amendment of BW Limited Partnership, dated November 21, 1983, among GP Seller,
as general partner, and Walter A. Kehoe and BTR Winterson, Inc., as limited
partners, as amended by that certain Second Certificate of Amendment of Limited
Partnership, dated December 24, 1984, both filed with the Maryland State
Department of Assessments and Taxation, a copy of which Partnership Agreement
has been delivered to Purchaser.
g. "Partnership Interests" means the respective general and
limited partnership interests of Sellers in the Partnership that, in the
aggregate, constitute one hundred percent (100%) of the partnership interests in
the Partnership.
h. "Personal Property" means all personal property and
fixtures (if any) owned by the Partnership and located on the Real Property and
used or useful in the operation of the Real Property including, without
limitation, to the extent owned by the Partnership, all plans, specifications,
drawings and other technical descriptions prepared for the development,
construction, repair or alteration of the Land and the Improvements, and all
amendments and modifications thereof, and all other property described in
Exhibit E attached hereto.
i. "Property" means the Real Property, the Personal Property
and the Intangible Personal Property.
j. "Real Property" means the Land, the Improvements and all
rights, privileges, easements and
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<PAGE>
appurtenances to the Land and the Improvements, if any, including, without
limitation, all of the Partnership's right, title and interest, if any, in and
to all easements, rights-of-way and other appurtenances used or connected with
the beneficial use or enjoyment of the Land and the Improvements (the Land, the
Improvements and all such easements and appurtenances (including, without
limitation, the Partnership's interest as lessor under the Lease)).
2. PURCHASE AND SALE OF PARTNERSHIP INTERESTS
On the Closing Date (as hereinafter defined), subject to the
terms and conditions set forth in this Agreement, (i) GP Seller hereby agrees to
sell, convey, assign and transfer to Purchaser (or Purchaser's nominee) its five
percent (5%) general partnership interest in the Partnership, (ii) LP Sellers
hereby agree to sell, convey, assign and transfer to Purchaser (or Purchaser's
nominee) their ninety-five percent (95%) limited partnership interest in the
Partnership, and (iii) Purchaser hereby agrees to purchase, acquire and accept
from Sellers such Partnership Interests, free and clear of all liens, security
interests, options and adverse claims of any kind or character.
3. THE PURCHASE PRICE
The purchase price for the Partnership Interests is Twenty-Two
Million Seven Hundred Fifty Thousand Dollars ($22,750,000) (the "Purchase
Price"), which shall be paid and allocated to Sellers in accordance with the
Partnership Agreement. The Purchase Price shall be paid to Sellers by Purchaser
at the Closing (as that term is defined in Section 14 below) as follows:
a. Within two (2) business days after execution of this
Agreement by all parties, Purchaser shall deposit in escrow with the Washington,
D.C. office of Chicago Title Insurance Company (the "Title Company") an initial
earnest money deposit in immediately available funds in the amount of Five
Hundred Thousand Dollars ($500,000) (together with all accrued interest thereon,
the "Deposit"). The Deposit shall be held by Title Company in an interest
bearing account insured by the federal government in an institution as directed
by Purchaser. At the Closing, the Deposit shall be paid to Sellers and credited
against the Purchase Price. If the Closing does not occur because of the failure
of any Purchaser's Condition Precedent (as defined in Section 9 below) or any
other reason except for a default under this Agreement on the part of Purchaser,
the Deposit shall be immediately refunded to Purchaser. If the Closing does not
occur because of a default under this Agreement on the part of Purchaser, the
Deposit shall be paid to and retained by Sellers pursuant to Section 17 below.
- 3 -
<PAGE>
b. The balance of the Purchase Price over and above the
Deposit shall be paid to Sellers through the Title Company by wire transfer of
immediately available funds at the Closing, increased or decreased by all
prorations as provided herein.
4. TITLE
a. During the Due Diligence Period (as hereinafter defined),
Purchaser shall obtain at its sole cost and expense: (i) from the Title Company
either a current commitment for the issuance of an owner's policy of title
insurance or a prop forma endorsement to the existing policy of title insurance
of the Partnership, together with good and legible copies of all documents
constituting exceptions to Sellers' title to the Property (the "Commitment");
(ii) current UCC lien, tax and judgment searches of the Partnership and each
Seller in any relevant jurisdiction (the "Searches"); and (iii) a current "As
Built" survey of the Property (the "Survey").
b. If the Commitment, Searches or Survey reflects or discloses
any defect, exception, or other matter affecting the Property ("Title Defects")
that is unacceptable to Purchaser in its sole and absolute discretion, Purchaser
shall provide Sellers with written notice of Purchaser's objections prior to the
expiration of the Due Diligence Period. Sellers shall have the right to notify
Purchaser in writing within five (5) days after Sellers receive Purchaser's
title objection notice that Sellers elect to (i) endeavor in good faith to cure
or remove the Title Defects or (ii) terminate this Agreement, upon which the
Deposit shall be returned to Purchaser. Sellers' failure timely to notify
Purchaser of its election as aforesaid shall be deemed to be Sellers' election
to terminate this Agreement, upon which the Deposit shall be returned to
Purchaser. If Sellers elect to cure or remove the Title Defects, Sellers shall
have thirty (30) days after Sellers receive Purchaser's title objection notice
to cure or remove such Title Defects and if after electing to attempt to do so,
Sellers receive Purchaser's title objection notice to cure or remove such title
Defects and if after electing to attempt to do so, Sellers do not cure or remove
the Title Defects within said thirty (30) day period, Sellers shall no notify
Purchaser in writing within said thirty (30) day period; provided, however, that
Sellers may elect to satisfy any monetary lien or encumbrance out of the
Purchase Price at the Closing, and the encumbrance of future front foot benefit
assessments shall not be subject of any objection by Purchaser but shall be
adjusted to the date of Closing. If Sellers terminate this Agreement pursuant to
this Section (whether by notice to Purchaser or by failure to notify Purchaser
as aforesaid), Purchaser shall have the right to notify Sellers in writing
within five (5) days after such termination, that Purchaser elects to waive any
Title Defects that Sellers' have
- 4 -
<PAGE>
not elected to cure or remove and thereby nullify Sellers' election to terminate
this Agreement and Purchaser shall purchase the Property subject to such Title
Defects.
c. If Sellers fail to timely cure or remove any exception that
Sellers have agreed to endeavor in good faith to cure or remove, Purchaser shall
have the option either to (i) notify Sellers in writing, within ten (10) days
after Purchaser receives Sellers' written notice that Sellers have not cured or
removed all of the Title Defects, that Purchaser terminates this Agreement and
receive a refund of the Deposit, or (ii) proceed to Closing without a reduction
in the Purchase Price
d. Any matter disclosed by the Commitment, the Searches or the
Survey that Purchaser waives in writing or that Purchaser does not object to
shall be deemed approved by Purchaser and shall constitute a "Permitted
Exception" hereunder. The foregoing notwithstanding, Permitted Exceptions shall
not include and Purchaser shall not be required to object to the following:
defects, liens, encumbrances, survey matters, adverse claims or other matters
created, first appearing in the public records, arising or attaching subsequent
to the effective date of the Commitment but prior to the Closing; easements or
claims of easements not shown by the public records or the Survey; leases and
the rights of any parties in possession of the Property or any portion thereof
other than under the Leases; deeds of trust, mortgages, judgment liens,
mechanic's or materialmen's liens (including any right to claim such liens), tax
liens and other monetary liens against the Partnership, the Partnership
Interests, the Property or any portion thereof except for future front foot
benefit assessments and other public or quasi-public assessments payable on an
annual basis; and items to be complied with by Sellers or the Partnership set
forth in Schedule B, Section 1 of the Commitment.
5. DUE DILIGENCE INSPECTIONS
a. Purchaser shall have forty-five (45) days after the
Effective Date (the "Due Diligence Period") within which to inspect the
condition of the Property, to inspect the Submission Matters (as hereinafter
defined) and to evaluate the feasibility of purchasing the Partnership.
Purchaser and its duly authorized agents or representatives ("Purchaser's
Agents") shall be entitled to enter upon the Property at all reasonable times
during the Due Diligence Period in order to conduct engineering studies, soil
tests, environmental tests, asbestos tests, environmental tests, asbestos tests,
roof inspection, and any other inspections and/or tests that Purchaser may deem
necessary or advisable.
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b. Sellers shall, at Sellers' sole expense, on or before the
Effective Date, deliver to Purchaser the items set forth on Exhibit J attached
hereto (the "Submission Matters").
c. Purchaser, in its sole and absolute discretion, may
terminate this Agreement at any time during the Due Diligence Period by sending
to Sellers written notice indicating Purchaser's election to so terminate this
Agreement. If Purchaser terminates this Agreement during the Due Diligence
Period, the Deposit shall be immediately refunded to Purchaser.
d. Purchaser shall be responsible for any property damage
caused to Property or bodily injuries caused by Purchaser or Purchaser's Agents
during the Due Diligence Period. Purchaser agrees to keep the Property free from
all liens and to indemnify, defend, and hold harmless the Partnership and the
Sellers from and against all claims, actions, losses, liabilities, damages,
costs and expenses (including, but not limited to, reasonable attorneys' fees
and costs) incurred, suffered by, or claimed against the Partnership or the
Sellers by reason of any damage to the Property or injury to persons caused by
Purchaser and/or Purchaser's Agents in exercising its right under this Section
5. This indemnity shall survive the Closing or any termination of this
Agreement.
e. Within five (5) business days after the Effective Date,
Sellers shall provide to Purchaser's representatives and independent accounting
firm access to financial and other information relating to the Property and the
Partnership in the possession of or otherwise available to Sellers, their
affiliates or Sellers' management company which would be sufficient to enable
Purchaser's representatives and independent accounting firm to prepare audited
financial statements for 1994, 1995 and 1996 in conformity with generally
accepted accounting principles and enable them to prepare such statements,
reports, or disclosures as Purchaser may deem necessary or advisable. Sellers
shall also provide to Purchaser's independent accounting firm a signed
representation letter which would be sufficient to enable an independent public
accountant to render an opinion on the financial statements related to the
Property and the Partnership. Sellers shall authorize and cause any attorneys
who have represented Sellers in material litigation pertaining to or affecting
the Property or the Partnership to respond, at Purchaser's expense, to inquiries
from Purchaser's representatives and independent accounting firm. If, and to the
extent that, Sellers financial statements pertaining to the Property or the
Partnership for any periods during the years 1994, 1995 or 1996 have been
audited, promptly after the execution of this Agreement, Sellers shall provide
Purchaser with copies of such audited financial statements and shall cooperate
with Purchaser's representatives and independent public accountants to enable
them to contact the auditors who
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prepared such audited financial statements and to obtain, at Purchaser's
expense, a reissuance of such audited financial statements.
6. REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Purchaser (and to
Purchaser's nominees) with respect to the Partnership and its respective
Partnership Interest that the following matters are true and correct as of the
execution of this Agreement and will also be true and correct as of the Closing:
a. GP Seller is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
its chief executive office at 170 W. Ridgely Road, Suite 300, Lutherville, MD
21093.
b. MART is a Maryland real estate investment trust, duly
organized/formed, validly existing and in good standing under the laws of the
State of Maryland and has its chief execution office in at 170 W. Ridgely Road,
Suite 300, Lutherville, MD 21093.
c. [Intentionally Deleted]
d. This Agreement is, and all the documents executed by
Sellers that are to be delivered to Purchaser at the Closing will be, duly
authorized, executed, and delivered by Sellers.
e. There are no actions, suits, or proceedings pending or, to
the best of each Seller's knowledge, threatened against any Seller or otherwise
affecting the Partnership or any portion of the Property, at law or in equity,
or before or by any federal, state, municipal, or other governmental court,
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign.
f. None of Sellers nor the Partnership has received any notice
of any violation of any ordinance, regulation, law, statute, building code,
zoning ordinance, or environmental laws pertaining to the Property or any
portion thereof or of any pending zoning change or special assessment pertaining
to the Property.
g. [Intentionally Deleted]
h. None of Sellers nor the Partnership has received any notice
of condemnation of the Property or any portion thereof.
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i. To the best of each Seller's knowledge, the Property is not
in violation of any environmental laws, the Americans with Disabilities Act, or
any other laws affecting the Property.
j. To the best of Seller's knowledge, all governmental
approvals necessary for the operation of the Property have been obtained and are
in full force and effect, including all code requirements regarding building
occupancy and use, parking, and zoning.
k. All service, personal property leases and management
contracts affecting the Property are cancelable upon no more than thirty (30)
days written notice by the Partnership.
l. [Intentionally Deleted]
m. (A) (i) Exhibit D lists and/or Sellers have delivered to
Purchaser (prior to or during the Due Diligence Period with written evidence of
the specific documents delivered) copies of all the agreements, instruments and
documents which constitute the Leases, (ii) there are no outstanding assignments
by Sellers or the Partnership of Sellers' interest in the Partnership or the
Partnership's interest in the Leases except to mortgage lenders (the liens of
which will be released at Closing), (iii) there are no earned and unpaid leasing
commissions or fees due and payable prior to the Closing (or which will become
due and payable after the Closing) with respect to the Leases, (iv) the Leases
do not contain and none of the tenants under the Leases nor any person or entity
other than Purchaser has any option or right to purchase the Property, (v) the
Leases are in full force and effect and have not been modified, amended or
altered and (vi) there are no other leases or service contracts, maintenance
agreements, leasing commission or brokerage agreements, repair contracts,
property management contracts, contracts for the purchase or delivery of labor,
services, materials or goods, supplies or equipment or similar agreements
entered into by or on behalf of any Seller or the Partnership that will be
obligations of Purchaser or the Partnership after the Closing, other than those
delivered as Submission Matters; and (B) the Partnership, as landlord, is not in
default under any of the Leases and, to the best of each Seller's knowledge and
except as may be otherwise disclosed to Purchaser in writing prior to or during
the Due Diligence Period, the tenant under each of the Leases is not in default
thereunder.
n. To the best of each Seller's knowledge, the Balance Sheet
delivered to Purchaser pursuant to this Agreement and attached hereto as Exhibit
B is a true, correct and complete copies of the most recent balance sheet for
the Partnership. To the best of each Seller's knowledge, there has been no
material
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adverse change to the assets and liabilities of the Partnership since the date
of the Balance Sheet.
o. Each Seller is the record and beneficial owner of, and has
good title to, its respective Partnership Interest, free and clear of all liens,
security interests, assignments, options and adverse claims to title of any kind
or character, and such Partnership Interest is not the subject of any agreement
(other than this Agreement) providing for the sale and transfer thereof.
p. No consent, waiver or approval by any third party is
required in connection with the execution and delivery by each Seller of this
Agreement or the performance by each Seller of the obligations to be performed
by such Seller under this agreement.
q. The Partnership is a limited partnership duly formed and
validly existing under the laws of the State of Maryland and has its chief
executive office at 170 W. Ridgely Road, Suite 300, Lutherville, MD 21093. The
Partnership Agreement provided to Purchaser is a true and complete copy thereof
and all amendments and modifications with respect thereto. No Seller is in
default under the Partnership Agreement.
r. The Partnership does not have and has never had any
employees.
s. All tax returns for federal, state and local income,
excise, sales and use, personal property and franchise taxes required by law to
be filed by the Partnership prior to the Effective Date have been filed (or
extensions to file have been obtained), and all taxes, if any, shown on such
returns, together with any interest or penalties thereon, have been paid. All
such tax returns required by law to be filed by the Partnership prior to the
Closing will be filed (or extensions to file will be obtained), and all taxes,
if any, shown on such returns, together with any interest or penalties thereon,
will have been paid.
t. At the Closing, there will be no outstanding contracts made
by Sellers or the Partnership for the construction or repair of any improvements
to the Real Property which have not been fully paid for or provided for, the
Sellers shall cause the Partnership to discharge all mechanics' or materialmen's
liens arising from any labor or materials furnished to the Real Property prior
to the Closing.
u. The Partnership has not engaged in any business or
activities other than the business of owning, leasing and operating the
Property.
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v. The Partnership does not own directly or indirectly any
capital stock or interest in any partnership, corporation or other entity or
business enterprise other than the Property.
w. GP Seller was formerly known as BTR Winterson, Inc. and
MART was formerly known as BTR Realty, Inc. The Partnership has not been known
by any name other than (i) the name by which such entity is referred to in this
Agreement and (ii) BW Limited Partnership.
The representatives and warranties set forth hereinabove shall
not survive the closing of this Agreement, except that the representatives and
warranties set forth in (1) items d, e, f, h, n, p, r, s, t and v shall survive
the closing of this Agreement for a period of six (6) months and (2) items m, o
and u shall survive the closing of this Agreement for a period of twelve (12)
months.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PURCHASER
Purchaser represents and warrants to Sellers that the
following matters are true and correct as of the execution of this Agreement and
will also be true and correct as of the Closing:
a. Purchaser is a limited partnership, duly formed, validly
existing and in good standing under the laws of the State of Delaware.
b. This Agreement is, and all documents executed by Purchaser
which are to be delivered to Sellers at the Closing will be, duly authorized,
executed, and delivered by Purchaser.
c. Purchaser is not an employee benefit plan (a "Plan")
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), nor a person or entity acting, directly or indirectly, on behalf of any
Plan or using the assets of any Plan or acquire the Partnership Interests,
Purchaser is not a "party in interest" (as that term is defined in Section 3(14)
of ERISA) with respect to any Plan that is an investor in Sellers (as identified
in Schedule 1 attached hereto), and Purchaser's acquisition of the Property will
not constitute or result in a prohibited transaction under Section 406 of ERISA
or Section 4975 of the Code.
The representations and warranties set forth hereinabove shall
survive the closing of the Agreement for a period of three (3) years.
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8. CONFIDENTIALITY
Prior to the Closing, Purchaser and Sellers agree that they
will not disclose the transaction contemplated in this Agreement, provided, they
must discuss the transaction contemplated in this Agreement with parties
reasonably necessary to consummate the transaction, including the Title Company,
Purchaser's and Sellers' attorneys and representatives and prospective lenders.
Notwithstanding the foregoing, it is acknowledged that Purchaser is, or is an
affiliate of, a real estate investment trust (the "REIT") and the REIT has and
will seek to sell shares to the general public; consequently, Purchaser shall
have the right to disclose any information regarding the transaction
contemplated by this Agreement required by law or as determined to be necessary
or appropriate by Purchaser or Purchaser's attorneys to satisfy disclosure and
reporting obligations of Purchaser or its affiliates. After Closing, Purchaser
shall be free to disclose previously confidential information in its sole
discretion. The foregoing notwithstanding, neither Purchaser nor Sellers shall
issue any press release concerning or mentioning this transaction before or
after Closing without the prior written consent of the other party (such consent
not to be unreasonably withheld), except that Purchaser and Seller shall each
have the right to disclose any information regarding the transaction
contemplated by this Agreement required by law or as determined to be necessary
or appropriate by Purchaser or Purchaser's attorneys or by Seller or Seller's
attorneys, as applicable, to satisfy disclosure and reporting obligations of
Purchaser or its affiliates or Sellers or its or their affiliates, as
applicable. The provisions of this Sections shall survive termination of this
Agreement.
9. CONDITIONS PRECEDENT TO CLOSING
a. The following shall be conditions precedent to Purchaser's
obligation to consummate the purchase and sale transaction contemplated herein
(the "Purchaser's Conditions Precedent"):
i. Purchaser shall not have terminated this Agreement in
accordance the provisions hereof within the time periods described in said
provisions.
ii. Title Company shall stand ready to issue, at the Closing,
an ALTA owner's policy of title insurance, standard form 1970B (the "Title
Policy"), insuring the Partnership's interest in the Real Property, dated the
day of the Closing, with liability in the amount of the Purchase Price, subject
only to the Permitted Exceptions, together with such endorsements Purchaser may
reasonably request.
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iii. Purchaser shall have received and reasonably approved,
prior to the end of the Due Diligence Period, an executed estoppel certificate
substantially in the form of Exhibit F hereto from each tenant under their
respective Lease; provided that if such estoppel certificates are not received
from tenants occupying fewer than 5,000 square feet, GP Seller may issue such an
estoppel certificate as to such tenants, and Purchaser will accept the same as
though delivered by such tenants.
iv. There shall be no material breach of any of any of
Seller's representations, warranties or covenants set forth herein as of the
Closing.
v. Sellers shall have delivered to Purchaser or the Title
Company, as applicable, the items required to be delivered pursuant to the terms
of this Agreement.
b. The following shall be conditions precedent to Sellers'
obligation to consummate the purchase and sale transaction contemplated herein
(the "Sellers' Conditions Precedent"):
i. Purchaser shall not have terminated this Agreement in
accordance the provisions hereof within the time periods described in said
provisions.
ii. Purchaser shall have timely delivered to the Sellers or
the Title Company, as applicable, the items required to be delivered pursuant to
the terms of this Agreement and all immediately available funds due from
Purchaser for disbursement as directed hereunder.
iii. There shall be no material breach of any of Purchaser's
representations, warranties or covenants set forth herein as of the Closing.
10. COVENANTS OF SELLERS
Sellers covenant with Purchaser, as follows:
a. From the Effective Date through the Closing, Sellers shall
cause the Partnership to refrain from selling, encumbering, or otherwise
transferring the Property, or any portion thereof or any interest therein,
without Purchaser's consent.
b. From the Effective Date through the Closing, Sellers shall
cause the Partnership neither to enter into any new leases, nor amend, modify or
extend the existing Leases, in any case without the prior written consent of
Purchaser (which consent shall not be unreasonably withheld or delayed).
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c. From the Effective Date through the Closing, Sellers shall
cause the Partnership to keep the Property insured for full replacement value
against fire, vandalism and other loss, damage and destruction, and to keep the
Partnership insured under a comprehensive general liability policy; provided,
however, that Sellers' insurance policies shall not be assigned to Purchaser at
the Closing, and Purchaser shall be obligated to obtain its own insurance
coverage from and after the Closing.
d. From the Effective Date through the Closing, Sellers shall
cause the Partnership to operate and maintain the Property to standards not less
than the standards to which the Partnership operates and maintains the Property
on the Effective Date.
e. Sellers shall cause the Partnership to pay in full, prior
to the Closing, all debts incurred for labor, goods, utility charges, material
and services of any kind relating to the Property.
f. Sellers shall cause the Partnership to refrain from
amending, altering or terminating the Partnership Agreement without the prior
written consent of Purchaser.
g. Each Seller agrees that, after the Effective Date, it shall
not sell, transfer or assign, or create, grant or permit to exist a lien or
security interest in, its respective Partnership Interest except as contemplated
by this Agreement.
h. Each Seller agrees that it will, at any time and from time
to time after the Closing, upon the reasonable request of Purchaser and at
Purchaser's cost and expense, do, execute, acknowledge and deliver, or cause to
be done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances and assurances as may be reasonably required
for better assigning, transferring and conveying the Partnership Interests to
Purchaser.
i. After the Closing, GP Seller shall prepare any tax returns
or reports of the Partnership which are required to be filed by the Partnership
for any taxable period of the Partnership that ends on or before the Closing.
j. Upon Purchaser's reasonable request, for a period of three
(3) years after the Closing, or, in the event of a governmental investigation or
audit, at any time, Sellers shall make all of Sellers' records with respect to
the Partnership or the Property available to Purchaser for inspection, copying
and audit by Purchaser's designated accountants.
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11. SELLERS' CLOSING DELIVERIES
At the Closing, Sellers shall deliver to Purchaser or the
Title Company, as applicable, the following:
a. An assignment in the form of Exhibit G attached hereto,
executed by GP Seller and consented to by each LP Seller (the "General
Partnership Assignment"), transferring, conveying and assigning to Purchaser (or
Purchaser's nominee) all right, title and interest in and to such GP Seller's
Partnership Interest, free and clear of all liens, encumbrances, security
interests, options and adverse claims of any kind or character, together with an
agreement by the GP Seller to indemnify, protect, defend and hold Purchaser
harmless from and against any and all claims, damages, losses, costs and
expenses (including attorneys fees) arising in connection with such Partnership
Interest and related to the period prior to the Closing and a comparable
indemnity from Purchaser relating to the period following the Closing.
b. An assignment in the form of Exhibit H attached hereto,
executed by each LP Seller and consented to by GP Seller (the "Limited
Partnership Assignment"), transferring, conveying and assigning to Purchaser (or
Purchaser's nominee) all right, title and interest in and to each LP Seller's
Partnership Interest, free and clear of all liens, encumbrances, security
interests, options and adverse claims of any kind or character, together with an
agreement by each LP Seller to indemnify, protect, defend and hold Purchaser
harmless from and against any and all claims, damages, losses, costs and expense
(including attorneys' fees) arising in connection with such Partnership Interest
and related to the period prior to the Closing and a comparable indemnity from
Purchaser relating to the period following the Closing.
c. An Amended and Restated Partnership Agreement and Amended
and Restated Certificate (the "Amendment to Partnership Agreement"), executed
and acknowledged by Sellers, providing for (i) the withdrawal of LP Sellers as
limited partners of the Partnership, (ii) the withdrawal of the GP Seller as the
general partner of the Partnership, (iii) the admission of Purchaser (or
Purchaser's nominee) as the limited partner of the Partnership, general partner
of the Partnership and (v) such other matters as Purchaser may reasonably
request.
d. Reasonable proof of the due authorization, execution and
delivery by Sellers of this Agreement and the documents delivered by Sellers
pursuant hereto.
e. An affidavit from each Seller certifying that such Seller
is not a "foreign person" within the meaning of Section 1445(f) (3) of the Code.
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f. Any other documents, instruments or agreements reasonably
necessary to effectuate the transaction contemplated by this Agreement.
g. To the extent not previously delivered to Purchaser,
originals of the Partnership Agreement, the Leases, the contracts, the Personal
Property, certificate(s) of occupancy and other instruments evidencing the
Intangible Property or, if such originals are not available, copies certified by
Sellers to be true, correct and complete copies of such originals.
h. Any keys in the possession of Sellers to all locks located
in the Property.
i. Letters executed by GP Seller and the Partnership's
management agent, if any, addressed to the tenants, in form of Exhibit I
attached hereto, notifying and directing payment of all rent and other sums due
from the tenants from and after the date of the Closing to be made at
Purchaser's direction.
12. PURCHASER'S CLOSING DELIVERIES
At the Closing, Purchaser shall deliver to the Sellers or the
Title Company, as applicable, the following:
a. The balance of the Purchase Price, together with such other
sums as the Title Company shall require to pay Purchaser's share of the Closing
costs, prorations, reimbursements and adjustments as set forth in Section 13
herein, in immediately available funds.
b. An executed counterpart of the General Partnership
Assignment.
c. An executed counterpart of the Amendment to Partnership
Agreement.
d. An executed counterpart of the Limited Partnership
Assignment.
e. Reasonable proof of the due authorization, execution and
delivery by Purchaser of this Agreement and the documents delivered by Purchaser
pursuant hereto.
f. Any other documents, instruments or agreements reasonably
necessary to effectuate the transaction contemplated by this Agreement.
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13. PRORATIONS AND ADJUSTMENTS
a. The following shall be prorated and adjusted between
Sellers and Purchaser as of the day of the Closing, except by this Agreement.
i. General real estate, personal property and ad valorem taxes
and assessments, front foot benefit charges and any improvement or other bonds
encumbering the Property, for the current tax year for the Property. The
foregoing items shall be assumed and paid by Purchaser for periods after the
Closing.
ii. Utility charges, if any, and such other items that are
customarily prorated in transactions of this nature shall be ratably prorated.
iii. Rent and other charges under the Leases (other than
Delinquent Rents (as hereinafter defined)). Rents and other charges under the
Leases that are fifteen (15) days or more past due as of the Closing
("Delinquent Rents") shall not be prorated and such Delinquent Rents received by
the Partnership after the Closing shall be applied (A) first, to the
Partnership's actual out-of-pocket costs of collection incurred with respect to
the tenant on and after the Closing; (B) second, to the Partnership's costs of
collection incurred with respect to the tenant prior to the Closing; (C) third,
to rents and other charges due from the tenant for the month in which such
payment is received by the Partnership; (D) fourth, to rents and other charges
attributable to any period after the Closing which are past due on the date of
receipt; and (E) finally, to Delinquent Rents as of the Closing (and Purchaser
shall cause the Partnership to promptly remit such amounts to Sellers).
Purchaser agrees to cause the Partnership to use commercially reasonable efforts
to collect any such Delinquent Rents (provided, however, that Purchaser shall
have no obligation to cause the Partnership to institute legal proceedings,
including an action for unlawful detainer, against a tenant owing Delinquent
Rents). Sellers may pursue a tenant after the Closing for collection of
Delinquent Rents but Sellers shall not have the right to institute any action
for unlawful detainer against such tenant.
iv. The amount of all unapplied security deposits under the
Leases shall be credited to Purchaser.
v. To the extent that Partnership assets or liabilities as of
the Closing Date are other than as set forth on the Balance Sheet and are not
otherwise adjusted pursuant to Section 13(a), an appropriate adjustment
acceptable to both parties and payment shall be made by the parties at the
Closing.
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vi. The Purchase Price shall be adjusted (A) downward, by the
amount of any liabilities of the Partnership pursuant to any contracts for
services performed for the benefit of the Partnership prior to the Closing Date
but which are to be paid by the Partnership after the Closing Date, and
Purchaser shall cause the Partnership to make such payments after the Closing
Date promptly when the same are due and payable and (B) upward, by the amount of
any services prepaid prior to the Closing Date to be performed for the benefit
of the Partnership after the Closing Date, and Sellers shall provide to
Purchaser satisfactory evidence of such prepayment and rights to services.
vii. Such other items that are customarily prorated in
transactions of this nature (including, without limitation, any utilities paid
by landlord under the Leases) shall be ratably prorated.
b. For purposes of calculating prorations, Purchaser shall be
deemed to be the owner of the Partnership Interests, and, therefore, entitled to
the income therefrom and responsible for the expenses thereof for the entire day
upon which the Closing occurs. All such prorations shall be made on the basis of
the actual number of days of the month which shall have elapsed as of the day of
the Closing and based upon the actual number of days in the month and a three
hundred sixty-five (365) day year.
c. The amount of such prorations shall be initially performed
by Sellers and Purchaser at Closing but shall be subject to adjustment in cash
after the Closing as and when complete and accurate information becomes
available, if such information is not available at the Closing. Sellers and
Purchaser agree to cooperate and use their best efforts to make such adjustments
no later than sixty (60) days after the Closing (except with respect to property
taxes, which shall be adjusted within sixty (60) days after the tax bills for
the applicable period are received). Without limiting the generality of the
foregoing, Sellers and Purchaser agree that:
i. With respect to any year-end reconciliations of
reimbursable expenses under the Leases, Sellers and Purchaser shall cooperate to
complete such reconciliations as soon as possible after the Closing, with
Sellers responsible for amounts owing to the tenants under the Leases, and
entitled to amounts payable by the tenants under the Leases (as the case may
be), with respect to periods prior to the Closing, and with Purchaser and the
Partnership responsible for amounts owing to the tenants under the Leases, and
entitled to amounts payable by the tenants under the Leases (as the case may
be), with respect to periods from and after the Closing (and, with respect to
any such amounts payable to Sellers, Purchaser agrees that it shall cause the
Partnership to use commercially
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reasonable efforts to collect such amounts, provided, however, that Purchaser
shall have no obligation to cause the Partnership to institute legal
proceedings, including an action for unlawful detainer, against a tenant owing
any such amounts);
ii. With respect to any property tax appeals or reassessments
filed by the Partnership for tax years prior to the year in which the Closing
occurs, Sellers shall be entitled to the full amount of any refund or rebate
resulting therefrom (subject to a requirement under the Leases to pay to the
tenants thereunder a share of any such refund or rebate, which shall be Sellers'
sole obligation), and with respect to any property tax appeals or reassessments
filed by the Partnership for the tax year in which the Closing occurs, Sellers
and Purchaser shall share the amount of any rebate or refund resulting therefrom
(after first paying to Sellers all costs and expenses incurred by Sellers in
pursuing such appeal or reassessment) in proportion to their respective periods
of ownership of the Property for such tax year (with Sellers and Purchaser each
obligated for any amount of such refund or rebate required to be paid to the
tenant under the Lease for its respective period of ownership of the Partnership
Interests for such tax year); and
iii. In no event will there be any proration of insurance
premiums under Sellers' existing policies of insurance relating to the Property,
or the Partnership, and Purchaser acknowledges and agrees that none of Sellers'
insurance policies (or any proceeds payable thereunder, except as expressly
provided for in Section 16 below) will be maintained for the Partnership for the
period after the Closing or otherwise assigned for the benefit of Purchaser at
the Closing, and Purchaser shall be solely obligated to cause the Partnership to
obtain any and all insurance that it deems necessary or desirable.
d. Except as set forth in this Section 13, all items of income
and expense which accrue for the period prior to the Closing will be for the
account of Sellers and all items of income and expense which accrue for the
period on and after the Closing will be fore the account of Purchaser. The
provisions of this Section 13 shall survive the Closing.
14. CLOSING
Provided Purchaser's Conditions Precedent and Sellers'
Conditions Precedent have been satisfied or waived in writing, the purchase and
sale contemplated herein shall close (the "Closing") twenty (20) days after the
expiration of the Due Diligence Period or on such date and time mutually agreed
to by the parties.
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15. CLOSING COSTS
Purchaser and Sellers shall share equally the cost of filing
and recording the amendment to the certificate of limited partnership with the
appropriate government agency(ies). Each party shall bear the expense of its own
counsel. Purchaser and Sellers each shall be responsible for one-half or any
escrow fee. All other costs and prorations shall be allocated in accordance with
local custom.
16. RISK OF LOSS
a. If prior to the Closing, the Improvements, or any part
thereof, are materially damaged (as set forth in Section 16(d), Purchaser shall
have the right, exercisable by giving written notice to Sellers within five (5)
days after receiving written notice of such damage or destruction (but in any
event prior to the Closing), either (i) to terminate this Agreement, in which
case neither party shall have any further rights or obligations hereunder
(except as may be expressly provided to the contrary elsewhere in this
Agreement), and the Deposit shall be returned to Purchaser, or (ii) to accept
the Partnership Interests with the Property in its then condition and to proceed
with the Closing without any abatement or reduction in the Purchase price and
receive an assignment of all of the Partnership's and/or Sellers' right to any
insurance proceeds payable by reason of such damage or destruction. If Purchaser
elects to proceed under clause (ii) above, Sellers shall not compromise, settle
or adjust any claims to such proceeds without Purchaser's prior written consent.
b. If prior to the Closing, all or any material portion (as
set forth in Section 16(d)) of the Property is subject to a taking by public
authority, Purchaser shall have the right, exercisable by giving written notice
to Sellers within five (5) days after receiving written notice of such taking
(but in any event prior to the Closing), either (i) to terminate this Agreement,
in which case neither party shall have any further rights or obligations
hereunder (except as may be expressly provided to the contrary elsewhere in this
Agreement), and the Deposit shall be returned to Purchaser, or (ii) to accept
the Partnership Interests with the Property in its then condition, without any
abatement or reduction in the Purchase Price, and receive an assignment of all
of the Partnership's and/or Sellers' rights to any condemnation award payable by
reason of such taking. If Purchaser elects to proceed under clause (ii) above,
Sellers shall not compromise, settle or adjust any claims to such aware without
Purchaser's prior written consent. As used in this Section 16, "taking" shall
mean any transfer of the Property or any portion thereof to a governmental
entity or other party with appropriate authority, by exercise of the power of
eminent domain.
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c. If prior to the Closing, any non-material portion of the
Property is damaged or subject to a taking, Purchaser shall accept the
Partnership Interests with the Property in its then condition (without any
abatement or reduction in the Purchase Price) and proceed with the Closing, in
which case Purchaser shall be entitled to an assignment of all of Sellers'
rights to any insurance proceeds or any award in connection with such taking, as
the case may be. If any such non-material damage or taking occurs, Sellers shall
not compromise, settle or adjust any claims to such insurance proceeds or such
award, as the case may be, without Purchaser's prior written consent.
d. For the purpose of this Section 16, damage to the Property
or a taking of a portion thereof shall be deemed to involve a material portion
thereof if the reasonably estimated cost of restoration or repair of such damage
or the amount of the condemnation award with respect to such taking shall exceed
$500,000.
17. DEFAULT
a. If Sellers default in their obligations under this
Agreement, Purchaser shall have all remedies at law and in equity, including
specific performance; provided, however, that in an action for damages,
Purchaser shall be limited to recovering its actual damages but not any
consequential damages.
b. If Purchaser fails to close the purchase of the Partnership
Interests for any reason other than Sellers' default or failure of a Purchaser's
Condition Precedent, the Deposit shall be paid to and retained by Sellers as
liquidated damages. The amount paid to and retained by Sellers as liquidated
damages shall be Sellers' sole contractual remedy if Purchaser fails to close
the purchase of the Partnership Interests. The parties hereto expressly agree
and acknowledge that Sellers' actual damages in the event of a default by
Purchaser would be extremely difficult or impracticable to ascertain and that
the amount of the Deposit represents the parties' reasonable estimate of such
damages.
18. INDEMNIFICATION
a. Sellers, jointly and severally, hereby agree to indemnify,
hold harmless and defend Purchaser, the Partnership (including its partners),
and any assignee or successor in interest (the "Indemnified Parties") from and
against:
i. all debts, damages, claims, causes of action, liabilities
and obligations of any nature, whether absolute, accrued, contingent or
otherwise, of the Partnership
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arising from business done, transactions entered into or other events occurring
prior to the Closing Date;
ii. subject to the survival limitations set forth in Section
6, any loss, liability or damage suffered or incurred by the Indemnified Parties
because any representation or warranty made by Sellers in this Agreement was
incorrect in any material respect; and
iii. all costs and expenses (including reasonable attorneys'
fees and disbursements) incurred by the Indemnified Parties in connection with
any action, suit, proceeding, demand, assessment or judgment incident to any of
the matters indemnified against in this Section 18(a).
b. Purchaser hereby agrees to indemnify, hold harmless and
defend Sellers from and against:
i. all debts, damages, claims, causes of action, liabilities
and obligations of any nature, whether absolute, accrued, contingent or
otherwise, of the Partnership arising from business done, transactions entered
into or other events occurring from and after the Closing Date;
ii. any loss, liability or damage suffered or incurred by
Sellers because any representation or warranty made by Purchaser in this
Agreement was incorrect in any material respect; and
iii. all costs and expenses (including reasonable attorneys'
fees and disbursements) incurred by Sellers in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 18(b).
19. BROKER'S COMMISSION
Purchaser and Sellers each represent and warrant to the others
that no brokerage commission, finder's fee or other compensation is due or
payable with respect to the transaction contemplated hereby other than a
commission to be paid to Preston Partners, Inc. pursuant to a separate
agreement, which shall be paid by Sellers. Purchaser shall indemnify, defend,
and hold Sellers harmless from and against any losses, damages, costs and
expenses (including, but not limited to, attorneys' fees and costs) incurred by
Sellers by reason of any breach or inaccuracy of the Purchaser's representations
and warranties contained in this Section 19. Each Seller shall indemnify,
defend, and hold Purchaser harmless from and against any losses, damages, costs
and expenses (including, but not limited to, attorneys' fees and costs) incurred
by Purchaser by reason of any breach or inaccuracy of such Seller's
representation and warranties
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contained in this Section 19. The provisions of this Section 19 shall survive
the Closing.
20. VACANT SPACE ALLOWANCE
a. Sellers agree that for every day that all or any portion of
the Daughters of Charity space (Suite 300) at Gateway International I (such
space containing approximately 16,332 square feet) (the "Charity Space") or for
Suite 101 at Gateway International II (such space containing approximately 8,400
square feet) ("Suite 101") is not leased or occupied by Purchaser, an Approved
Entity (as hereinafter defined) or another tenant for such day during the nine
(9) month period that commences on the Closing Date, Sellers, within five (5)
days after receipt of a written request therefor (Purchaser anticipates billing
on a monthly basis), shall pay to the Partnership $18.00 per square foot per
annum prorated on a daily basis for every square foot of such space not so
leased. Purchaser shall cause the Partnership to endeavor in good faith to lease
the Charity Space and Suite 101 to an entity (other than Purchaser or an Approve
Entity) upon commercially reasonable terms, including a minimum term of three
(3) years, a minimum base rent of $18.00 per square foot, a tenant improvement
allowance not to exceed $15.00 per square foot and otherwise to a creditworthy
entity.
b. At Closing, Sellers shall deposit with the Title Company
$12.00 per square foot (the "Allowance Escrow") for the Charity Space and for
Suite 101. When the Partnership leases the Charity Space (or any portion
thereof) and/or Suite 101 (or any portion thereof) to a person or entity other
than Purchaser or an Approved Entity, the Title Company shall pay to the
Partnership within thirty (30) days after receipt of an invoice therefor the
Partnership's expenses incurred for leasing commissions payable to brokers that
are not an Approved Entity and for tenant improvements made or to be made to
such space; provided, however, in no event shall the Partnership have the right
to be reimbursed for more than $12.00 per square foot for the Charity Space or
for Suite 101 for the aforementioned expenses. Tenant improvement expenses shall
include, without limitation, construction costs, space planning and design
costs, permits and fees and outside construction supervision costs. With respect
to any portion of the Charity Space or Suite 101 that the Partnership has not
leased or which is not occupied by Purchaser or an Approved Entity during the
nine (9) month period that commences on the Closing Date, the Title Company
shall pay to the Partnership from the Allowance Escrow a sum equal to $12.00 per
square foot of such vacant space, with such payment being made to the
Partnership on the date that is nine (9) months after the Closing Date. To the
extent that the Partnership leases any portion of the Charity Space or Suite 101
during the nine (9) month period that commences on the Closing Date and the
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Partnership incurs expenses of less than $12.00 per square foot for leasing
commissions payable to brokers that are not an Approved Entity and for tenant
improvements made or to be made to such leased space, the Title Company shall
refund to Sellers the remaining portion of the Allowance Escrow, with such
refund being made within five (5) days after such nine (9) month period. The
Title Company shall deposit the Allowance Escrow into an interest bearing
account and any interest thereon will accrue to the benefit of Seller.
21. MISCELLANEOUS
a. This Agreement is the entire Agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written, between the parties with
respect to the matters contained in this Agreement. Any waiver, modification,
consent or acquiescence with respect to any provision of this Agreement shall be
set forth in writing and duly executed by or in behalf of the party to be bound
thereby. No waiver by any party of any breach hereunder shall be deemed a waiver
of any other or subsequent breach.
b. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same instrument.
c. Time is of the essence in the performance of and compliance
with each of the provisions and conditions of this Agreement.
d. Any communication, notice or demand of any kind whatsoever
which either party may be required or may desire to give to or serve upon the
other shall be in writing and delivered by personal service (including express
or courier service), or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
Purchaser: Prentiss Properties Acquisition
Partners, L.P.
5890 West Northwest Parkway
Suite 400
Dallas, Texas 75220
Attention: J. Kevan Dilbeck
General Counsel
Telephone: (214) 654-5710
Telecopy: (214) 350-2409
With a copy to: Prentiss Properties Acquisition
Partners, L.P.
3112 Fairview Park Drive
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Falls Church, Virginia 22042
Attention: Michael J. Cooper
Telephone: (703) 560-4700
Telecopy: (703) 560-8349
Sellers: Mid-Atlantic Realty Trust
170 W. Ridgely Road, Suite 300
Lutherville, MD 21093
Attention: F. Patrick Hughes
Telephone: (410) 684-2000
Telecopy: (410) 859-5685
With a copy to: Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, LLC
233 E. Redwood Street
Baltimore, MD 21202
Attention: David H. Fishman, Esq.
Telephone: (410) 576-4234
Telecopy: (410) 576-4246
Any party may change its address for notice by written notice
given to the other in the manner provided in this Section. Any such
communication, notice or demand shall be deemed to have been duly given or
served on the date of confirmed receipt.
e. The parties agree to execute such instructions to the Title
Company and such other instruments and to do such further acts as may be
reasonably necessary to carry out the provisions of this Agreement.
f. Wherever possible, each provision of this Agreement shall
be interpreted in such a manner as to be valid under applicable law, but, if any
provision of this Agreement shall be invalid or prohibited thereunder, such
invalidity or prohibition shall be construed as if such invalid or prohibited
provision has not been inserted herein and shall not affect the remainder of
such provision or the remailing provisions of this Agreement.
g. The language in all parts of this Agreement shall be in all
cases construed simply according to its fair meaning and not strictly for or
against any of the parties hereto. Section headings of this Agreement are solely
for convenience of reference and shall not govern the interpretation of any of
the provisions of this Agreement. References to "Sections" are to Sections of
this Agreement, unless otherwise specifically provided.
h. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
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i. If any action is brought by either party against the other
party, relating to or arising out of this Agreement, the transaction described
herein or the enforcement hereof, the prevailing party shall be entitled to
recover from the other party reasonable attorneys' fees, costs and expenses
incurred in connection with the prosection or defense of such action.
j. This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and to their respective transferees,
successors, and assigns. Neither this Agreement nor any of the rights or
obligations of Sellers or Purchaser hereunder shall be transferred or assigned
by Sellers or Purchaser without the prior written consent of the non- assigning
party; provided, however, Purchaser may assign Purchaser's interest hereunder,
or designate as the entity taking title to the Partnership Interest, the part of
Purchaser, one or more subsidiaries or affiliates of Purchaser or of entities to
whom Purchaser provides investment management services (an "Approved Entity")
without Sellers' prior written consent.
k. Neither this Agreement nor any memorandum thereof shall be
recorded or filed in the public land or other public records of any jurisdiction
by either party and any attempt to do so may be treated by the other party as a
breach of this Agreement. Purchaser shall indemnify, defend, and hold Sellers
harmless from and against any losses, damages, costs and expenses (including,
but not limited to, attorneys' fees and costs) incurred by Sellers by reason of
any breach by Purchaser of this Section 21(p). Each Seller shall indemnify,
defend, and hold Purchaser harmless from and against any losses, damages, costs
and expenses (including, but not limited to, attorneys' fees and costs) incurred
by Purchaser by reason of any breach by such Seller of this Section 21(p). The
provisions of this Section 21(p) shall survive the Closing.
l. If any of the dates specified in this Agreement shall fall
on a Saturday, a Sunday, or a holiday, then the date of such action shall be
deemed to be extended to the next business day.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
first above written.
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SELLERS:
GP SELLER:
BTR GATEWAY, INC.,
a Maryland corporation
By: /s/ F. Patrick Hughes
Name: F. Patrick Hughes
Title: President
LP SELLERS:
BTR GATEWAY, INC.,
a Maryland corporation
By: /s/ F. Patrick Hughes
Name: F. Patrick Hughes
Title: President
MID-ATLANTIC REALTY TRUST
By: /s/ F. Patrick Hughes
Name: F. Patrick Hughes
Title: President
PURCHASER:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P.,
a Delaware limited partnership
By: PRENTISS PROPERTIES, INC.,
a Delaware corporation
as General Partner
By: /s/ Robert K. Wiberg
Robert K. Wiberg
Senior Vice President
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