EXHIBIT 99.2
CONTRIBUTION AGREEMENT
Between
CORPORATE OFFICE PROPERTIES, L.P.
And
MANEKIN INVESTMENT ASSOCIATES 3 LLC
AND RA & DM, INC.
Dated as of June 1, 2001
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE UPREIT AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THE SECURITIES REFERENCED HEREIN HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
THIS CONTRIBUTION AGREEMENT (this "AGREEMENT") is made and entered into as
of the ____ day of _______, 2001 (the "CONTRACT DATE"), by and among RA & DM,
INC., a Maryland corporation ("GP"), and MANEKIN INVESTMENT ASSOCIATES 3 LLC, a
Maryland limited liability company ("LP") (GP and LP are collectively referred
to as "CONTRIBUTORS"); and CORPORATE OFFICE PROPERTIES, L.P., a Delaware limited
partnership ("UPREIT").
BACKGROUND
A. GP owns a 1% general partnership interest in Gateway 63 LLLP, a Maryland
limited liability limited partnership (the "Partnership"), and LP owns a 99%
limited partnership interest in the Partnership. Contributors are the sole
partners in the Partnership. Prior to Closing, the Partnership shall be
converted into a Maryland limited liability company (the "Company") at the cost
of Contributors (the "Conversion"), such that GP shall own a 1% membership
interest and LP shall own a 99% membership interest in the Company. Accordingly,
Contributors shall own 100% of the membership interests in the Company (the
"INTERESTS"). All references in this Agreement to the "Company" shall refer to
the Partnership during the period prior to the Conversion.
B. In this Agreement, the term "REAL PROPERTY" shall mean: (i) those
parcels of land described on EXHIBIT A attached hereto (the "LAND"), together
with all rights, easements and interests appurtenant thereto, including, but not
limited to, any streets or other public ways adjacent to the Land and any water
or mineral rights owned by, or leased to, the Company; (ii) all improvements
located on the Land, including, but not limited to, the Buildings, and all other
structures, systems, and utilities associated with, and utilized by, the Company
in the ownership and operation of the Buildings (all such improvements being
collectively referred to herein as the "IMPROVEMENTS"); (iii) all personal
property of every nature and description owned by the Company and either (A)
located on or in the Land or Improvements, or (B) used in connection with the
operation and maintenance of the Real Property (collectively, the "PERSONAL
PROPERTY"), including, without limitation, all (if any) personal property listed
on EXHIBIT B attached hereto; (iv) all building materials, supplies, hardware,
carpeting and other inventory owned by the Company and maintained in connection
with the Company's ownership and operation of the Land and/or Improvements
(collectively, the "INVENTORY"); and (v) all intangible property owned by the
Company used or useful in connection with the foregoing including, without
limitation, all trademarks, tradenames, development rights, entitlements,
contract rights, tenant improvement loans, guarantees, licenses, permits and
warranties (collectively, the "INTANGIBLE PERSONAL PROPERTY").
C. Contributors and UPREIT desire to enter into this Agreement relating to
the contribution and conveyance of the Interests in exchange for LP Units and
other consideration (as defined below).
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AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, the parties agree as follows:
1. DEFINITIONS.
All terms which are not otherwise defined in this Agreement shall have the
meaning set forth in this Section 1.
1.1. "ACCREDITED INVESTOR" shall have the meaning set forth in
Regulation D promulgated under the Securities Act of 1933, as amended.
1.2. "AFFILIATES(S)" shall mean any entity affiliated with or related
to the REIT or the UPREIT.
1.3. "AMENDMENT" shall have the meaning set forth in Section 4.1.1.
1.4. "BUILDINGS" shall have the meaning set forth in the recitals to
this Agreement.
1.5. "CLOSING" or "CLOSING DATE" shall have the meaning set forth in
Section 6.
1.6 "CODE" shall mean the Internal Revenue Code.
1.7. "CONTRIBUTORS" shall have the meaning set forth in the opening
paragraph to this Agreement.
1.8. "CONTRIBUTORS' CONDITION PRECEDENT" shall mean all conditions
precedent to Contributors' obligations to close as set forth in this
Agreement.
1.9. "CONVERSION SHARES" shall have the meaning set forth in Section
4.1.3.
1.10 "EXCHANGE" shall have the meaning set forth in Section 4.6.
1.11 "GOVERNMENTAL AUTHORITY/AUTHORITIES" shall mean any agency,
commission, department or body of any municipal, township, county, local,
state or federal governmental or quasi-governmental regulatory unit, entity
or authority having jurisdiction or authority over the matter.
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1.12. "INDEMNIFIED PARTIES" shall mean the UPREIT and the REIT and
each of their respective partners, officers, directors, shareholders,
agents and employees and each of their successors and assigns.
1.13. "INFORMATIONAL MATERIALS" shall have the meaning set forth in
Section 4.2. below.
1.14. "INSPECTION PERIOD" shall have the meaning set forth in
Section 8.
1.15. "INTEREST HOLDER(S)" shall mean any direct and indirect
partners, shareholders and members of Contributors.
1.16. "INVESTOR MATERIALS" shall have the meaning set forth in Section
4.1.2.
1.17. "LOCK-UP PERIOD" as to the LP Units issued at the Closing, shall
mean the period ending on the date on which a registration statement filed
in respect of such LP Units issued to the Contributors pursuant to the
Registration Rights Agreement is declared effective.
1.18. "LOSSES" shall mean any and all claims, losses, demands,
liabilities, suits, administrative proceedings, causes of action, costs and
damages suffered by any Indemnified Party and reasonable attorneys' fees of
counsel selected by an Indemnified Party and other costs of defense,
incurred, arising against, or suffered by any Indemnified Party, both known
and unknown, present and future, at law or in equity.
1.19. "LP UNITS" shall mean the common units in the UPREIT.
1.20. "MANEKIN INDEBTEDNESS" shall mean the indebtedness of the
Company to Manekin, LLC in the amount of $1,041,430. The Manekin
Indebtedness is evidenced and secured by the Manekin Loan Documents.
1.21. "MANEKIN LOAN DOCUMENTS" shall mean the documents evidencing the
Manekin Indebtedness, as described on EXHIBIT C.
1.22. "MERCANTILE INDEBTEDNESS" shall mean the indebtedness as of the
Closing Date relating to the loan to the Company from Mercantile-Safe
Deposit and Trust Company, in the original principal amount of $21,900,000.
The Mercantile Indebtedness is evidenced and secured by the Mercantile Loan
Documents, which as of Closing shall be in the name of the Company as
borrower.
1.23. "MERCANTILE LOAN DOCUMENTS" shall mean the documents evidencing
or securing the Mercantile Indebtedness, as described on EXHIBIT C.
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1.24. "NON-TAXABLE DISPOSITION PERIOD" shall mean the period
commencing on the Closing Date and ending one year and one day thereafter.
1.25. "PARTNERSHIP AGREEMENT" shall mean the agreement of limited
partnership of the UPREIT, as amended from time to time.
1.26. "RECORDS" shall mean all books, records, tax returns,
correspondence, financial data, leases, and all other documents and
matters, public or private, maintained by the Company, Contributors or
their agents, relating to receipts and expenditures pertaining to all of
the Real Property and the Interests for the three most recent full calendar
years and the current calendar year and all contracts, rental agreements
and all other documents and matters, public and private, maintained by
Contributors or their agents, relating to operations of the Real Property,
the Company or the Interests.
1.27. "REGISTRATION RIGHTS AGREEMENT" shall mean the Amended and
Restated Registration Rights Agreement dated March 16, 1998 and attached as
Exhibit 3 to the Partnership Agreement, the benefits of which shall be
conferred upon the Contributors at the Closing.
1.28. "REIT" means Corporate Office Properties Trust a, publicly
traded Maryland real estate investment trust.
1.29. "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.30. "TAXES" shall have the meaning set forth in Section 11.1.2.3.
1.31. "TAX RETURN" shall have the meaning set forth in Section
11.1.2.3.
1.32. "UPREIT" means Corporate Office Properties, L.P., a Delaware
limited partnership.
1.33. "UPREIT'S CONDITION PRECEDENT" shall mean all conditions
precedent to UPREIT's obligations to close as set forth in this Agreement
2. CONTRIBUTION.
2.1. CONTRIBUTION. At the Closing, Contributors agree to contribute
and convey to the UPREIT, and UPREIT shall accept and take from
Contributors, on the terms and conditions set forth in this Agreement, all
of Contributors' right, title and interest in and to the Interests, free
and clear of all liens, claims and encumbrances. At the Closing,
Contributors shall relinquish any rights they may have to any net worth,
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equity, capital accounts, loan accounts (excluding the Manekin
Indebtedness), cash flow distributions and any other distributions,
withdrawals, or payments of any kind from the Company.
2.2 LIABILITIES. At the Closing, the Contributors shall cause the
Company to have paid all of its liabilities and obligations, other than the
Mercantile Indebtedness and the Manekin Indebtedness.
2.3 MANEKIN INDEBTEDNESS. At the Closing, UPREIT shall cause the
Company to repay the Manekin Indebtedness in full. To the extent the
Deposit is applied to the Manekin Indebtedness, UPREIT shall be deemed to
have made a capital contribution to the Company in such amount.
3. CONTRIBUTION CONSIDERATION. In consideration of the contribution of the
Interests by the Contributors to the UPREIT, and subject to the terms of this
Agreement, at the Closing the UPREIT shall issue to the Contributors a number of
LP Units (the "LP UNIT AMOUNT") equal to the Net Asset Value divided by $10.50
(the "UNIT PRICE") (regardless of the share price of REIT shares. Such
consideration in LP Units (based on the agreed value of the LP Units of $10.50
per Unit) shall sometimes be referred to in this Agreement as the "CONTRIBUTION
CONSIDERATION."
For example, if the Net Asset Value were $3,990,000, the Contributors
would receive 380,000 LP Units.
3.1. NET ASSET VALUE. The "NET ASSET VALUE" of the Company equals
Twenty-Three Million Four Hundred Eighty-One Thousand Six Hundred Sixty-Two
Dollars ($23,481,662) less the balance due at Closing of the Mercantile
Indebtedness and the Manekin Indebtedness. The Net Asset Value shall be
further adjusted by the positive or negative adjustments and prorations
described in Section 16 below, all of which shall be adjusted as of the
Closing Date.
3.2. DEPOSIT. UPREIT has deposited with Anchor Title Company (the
"Title Company") Three Hundred Twenty-Five Thousand and 00/100 Dollars
($325,000.00) (which deposit together with all interest earned thereon is
referred to as the "DEPOSIT"). The Deposit shall be held by the Title
Company in accordance with the terms of Section 26.10 hereof. If the
Closing occurs, the Deposit shall be applied to the Manekin Indebtedness at
the Closing; otherwise the Deposit shall be returned to UPREIT except as
provided in Section 18.2 hereof.
3.3. SETTLEMENT ADJUSTMENTS. The Contributors and UPREIT will settle
the prorations and adjustments as described in Section 16 in the following
manner. If Contributors owe the same, on a net basis, to UPREIT, there
shall be a reduction in the LP Units. If UPREIT owes the same, on a net
basis, to Contributors, there shall be an increase in the LP Units.
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4. LP UNITS; INVESTOR MATERIALS.
4.1. LP UNITS GENERALLY.
4.1.1. The LP Units shall be redeemable for common shares of the
REIT or cash (or a combination thereof) in accordance with the
procedures described in the Partnership Agreement. Contributors
acknowledge that the LP Units are not certificated and that,
therefore, the issuance of the LP Units shall be evidenced by the
execution and delivery of an amendment to the Partnership Agreement,
which amendment shall have been executed and delivered by the REIT on
the Closing Date (the "AMENDMENT").
4.1.2. LP has signed and GP has caused its beneficial owner to
sign EXHIBIT D attached hereto, which provides, among other things,
information concerning LP's and GP's and GP's beneficial owner's
status as Accredited Investors. GP and LP shall provide or cause to be
provided to UPREIT, or to any other party designated by UPREIT, such
other information and documentation as may reasonably be requested by
UPREIT in furtherance of the issuance of the LP Units as contemplated
hereby (together with the information provided on EXHIBIT D (the
"INVESTOR MATERIALS").
4.1.3. Contributors hereby covenant and agree that they shall
deliver or shall cause each of their direct or indirect partners,
shareholders or members to deliver to UPREIT, or to any other party
designated by UPREIT, any documentation that may be required under the
Partnership Agreement or any charter document of the REIT, and such
other information and documentation as may reasonably be requested by
UPREIT, at such time as the LP Units are redeemed for common shares of
the REIT ("CONVERSION SHARES"). The preceding covenant shall survive
the Closing.
4.2. CERTAIN INFORMATIONAL MATERIALS. Contributors hereby acknowledge
and agree that the ownership of LP Units by Contributors and their
respective rights and obligations as limited partners of the UPREIT
(including, without limitation, the right to transfer, encumber, pledge and
exchange the LP Units) shall be subject to all of the express limitations,
terms, provisions and restrictions set forth in this Agreement and in the
Partnership Agreement. In that regard, Contributors hereby covenant and
agree that they shall execute any and all documentation reasonably required
by the UPREIT and the REIT to formally memorialize the foregoing.
Contributors acknowledge that they have received and reviewed, prior to the
Closing Date, (i) the Partnership Agreement, (ii) the charter documents and
bylaws of the REIT, (iii) the REIT's Form 10-K for the year ended December
31, 2000, (iv) all Form 10-Qs and Form 8-Ks that have been filed by the
REIT since December 31, 2000, and (v) copies of all
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material press releases, proxy statements and reports to shareholders
issued since December 31, 2000, and have otherwise had an opportunity to
conduct a due diligence review of the affairs of the UPREIT and the REIT
and have been afforded the opportunity to ask questions of, and receive
additional information from, the REIT regarding the REIT and the UPREIT.
4.3. LOCK-UP PERIOD. Contributors agree that during the Lock-Up
Period, they shall not, in any way or to any extent, redeem (pursuant to
the Partnership Agreement or otherwise), sell, transfer, assign, pledge or
encumber, or otherwise convey any or all of the LP Units delivered to them
in connection with this transaction and, if applicable, any Conversion
Shares. Notwithstanding the foregoing, Contributors may pledge any or all
of the LP Units delivered to them in connection with this transaction for
the loan made to Contributors by UPREIT pursuant to Section 6.2.
4.4. TRANSFER REQUIREMENTS. After the Lock-Up Period, the Contributors
may only sell, transfer, assign, pledge or encumber, or otherwise convey
any or all of the LP Units delivered to them and, if applicable, any
Conversion Shares, in strict compliance with this Agreement, the
Partnership Agreement, the charter documents of the REIT, the registration
and other provisions of the Securities Act (and the rules promulgated
thereunder), any state securities laws, the rules of the New York Stock
Exchange and the Registration Rights Agreement, in each case as may be
applicable. A legend may be placed on the face of the certificates
evidencing the Conversion Shares to notify the holder of the restrictions
on transfer under applicable federal or state securities laws.
4.5. TRADING RESTRICTIONS. From and after the expiration of the
Lock-Up Period, the aggregate amount of common shares of the REIT that the
Contributors may sell during any 10-trading day period shall not exceed 30
percent (30%) of the average of the daily trading volume of such stock (as
reported in The Wall Street Journal) for the 30 trading days immediately
preceding the date on which the first sale of such stock during any such
10-day period occurs.
4.6. DISCLAIMER OF TAX MATTERS. Contributors acknowledge that they may
incur significant income tax by virtue of Contributors' ownership of the LP
Units under various circumstances, including but not limited to a reduction
or repayment of debt by the UPREIT, a sale of the Real Property or a sale
of the Interests acquired. Contributors acknowledge that they have relied
on the advice of their own tax counsel in connection with the contribution
of the Interests and all other tax matters relating to the Interests and
the LP Units. Contributors hereby release the REIT and UPREIT and their
officers, directors, partners, agents, attorneys, accountants and
consultants from any and all claims, losses, or damages resulting from the
tax consequences arising to the Contributors and the Interest Holders,
including but not limited to adverse tax consequences arising from the
method of allocation selected under Section 4.8 of this Agreement.
Contributors
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acknowledge that UPREIT and REIT make no representations or promises
whatsoever as to retaining any debt, except as provided in Section 5.1.2,
or providing tax basis to Contributors or the Interest Holders, nor is
UPREIT or REIT making any representations or warranties as to forbearing
from selling any or all assets directly or indirectly owned by it, except
as provided in Section 5.1.1. Neither UPREIT nor the REIT warrant, nor
shall any of them be responsible for, the federal, state or local tax
consequences to Contributors or any or all of the Interest Holders
resulting from either (i) the transactions contemplated by this Agreement
or (ii) the allocation, if any, of losses and liabilities of the UPREIT to
Contributors or any of the Interest Holders under the Partnership
Agreement, the Internal Revenue Code (the "Code") or Treasury Regulations
promulgated under the Code. The Contributors shall not be entitled to any
special cash distributions from UPREIT by virtue of the sale or disposition
of all or any of the Interests or the Real Property, notwithstanding
anything contained in the Partnership Agreement to the contrary, but shall
be entitled to their percentage share of distributions under the
Partnership Agreement even if a portion thereof is attributable to the sale
or disposition of all or any of the Interests or the Real Property. Neither
the UPREIT nor the REIT shall incur any liability under any document or
agreement required to be executed or delivered in connection with the
exchange of the Interests for the Contribution Consideration (the
"EXCHANGE").
4.7 FINAL TAX RETURN. As the contribution of the Interests to the
UPREIT will terminate the Company for federal income tax purposes, the
Contributors acknowledge that they will have no right to file the final tax
return of the Company.
4.8 SECTION 704(c) METHOD. Contributors acknowledge that the REIT
shall have the sole authority to elect a method of allocation under Section
704(c) of the Code and the Treasury Regulations promulgated thereunder in
connection with the Exchange. Contributors acknowledge that adverse tax
consequences may result to them depending on such method chosen.
5. PARTNERSHIP LIABILITIES AND SALES OF REAL PROPERTY.
5.1. DISPOSITION OBLIGATIONS. Subject to this Section 5.1 and the
provisions of Section 5.2 hereof, during the Non-Taxable Disposition Period
the UPREIT shall use its good faith, reasonable and diligent efforts:
5.1.1. To cause any sale or other voluntary disposition (other
than through a deed in lieu of foreclosure, a foreclosure action, or
an act of eminent domain) of the Real Property to qualify for
non-recognition of gain under the Code (for example, by means of
exchanges contemplated under Code Sections 351, 721, 1031 (but only if
there is no "boot") or 1033), in the manner as the Code provides from
time to time (the "NON-RECOGNITION CODE PROVISIONS"); provided,
however, that the foregoing shall not require the REIT and UPREIT, in
their sole and absolute discretion, to sell, or otherwise
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dispose of, or prevent the REIT and UPREIT, in their sole and absolute
discretion, from selling or otherwise disposing of, any of the Real
Property in a transaction that would result in a loss for federal
income tax purposes;
5.1.2. To maintain an amount of indebtedness for which
Contributors bear or are deemed to bear the "economic risk of loss"
within the meaning of Treasury Regulation Section 1.752-2(a)
(including through the use of guarantee arrangements or arrangements
providing for the imposition of a deficit restoration obligation on
Contributors pursuant to the Partnership Agreement) or which is
allocated to Contributors pursuant to Treasury Regulation Section
1.752-3(a), equal to $500,000 in the aggregate (the "MAXIMUM AMOUNT").
5.2. LIMITATION ON DISPOSITION OBLIGATIONS. Notwithstanding the
provisions of Section 5.1, the obligation of the UPREIT to undertake those
activities set forth in Sections 5.1.1 and 5.1.2 hereof shall, in all
events, be subject to, and otherwise interpreted consistent with, the
REIT's fiduciary and statutory obligations to all partners (both present
and future) in the UPREIT, and to its stockholders, both present and
future.
5.3 LIQUIDATED DAMAGES. In the event of a failure by UPREIT to
undertake the actions described in Section 5.1 during the Non-Taxable
Disposition Period, UPREIT shall pay to the Contributors liquidated damages
equal to the difference between (a) the actual Federal and state income
taxes paid by the Contributors as a result of such disposition or reduction
in indebtedness (the "Tax Payment") and (b) the present value, as of the
date of the Tax Payment (computed using a discount rate equal to 8%), of
such Tax Payment had it been paid by the Contributors on April 15, 2003.
However, if the number of LP Units held by the Contributors as of the date
of such breach is less than the number of LP Units issued at Closing, the
liquidated damages shall be proportionately reduced. The parties recognize
that damages to the Contributors due to such failure under Section 5.1
shall not be susceptible to calculation, and Contributors' sole remedy for
such failure shall be to collect such liquidated damages as provided
herein.
6. CLOSING.
6.1. TERMS. Except as otherwise provided in this Agreement, the
closing of the transactions contemplated by this Agreement (the "CLOSING")
shall take place on the date (the "CLOSING DATE") specified by UPREIT upon
not less than three (3) business days prior notice to Contributors,
provided that the Closing Date shall occur no later than fifteen (15) days
after the end of the Inspection Period. The Closing shall take place at the
offices of Miles & Stockbridge P.C., 10 Light Street, Baltimore, MD 21202,
at such other place as may be mutually agreed upon by the parties, or in
escrow at the offices of the Title Company if designated by UPREIT.
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6.2. LOAN. At the option of Contributors, at any time after the
Closing but prior to March 31, 2002, UPREIT shall make a loan to
Contributors in an amount not to exceed an amount equal to the number of LP
Units issued to Contributors multiplied by $10.50 per Unit multiplied by
85% (the amount of such loan is referred to as the "Principal Sum). The
Principal Sum shall bear interest until paid at the fluctuating prime rate
as listed in THE WALL STREET JOURNAL under "Money Rates." Such loan shall
be secured by the LP Units issued by UPREIT to Contributors. Interest
payments on the loan shall be paid monthly in arrears until maturity
beginning on the first day of the first month after the date the loan is
made. The loan shall mature one year and one day after the Closing Date.
The loan documents evidencing the loan shall be subject to the approval of
the Contributors and the UPREIT.
7. CONTRIBUTORS' DELIVERIES. Within seven (7) days after the execution of
this Agreement by Contributors and UPREIT ("DOCUMENT DELIVERY DATE"),
Contributors shall deliver or cause to be delivered to UPREIT the items listed
on Exhibit M attached hereto ("CONTRIBUTORS' DELIVERIES").
8. INSPECTION PERIOD.
8.1. BASIC REAL PROPERTY INSPECTION. From and after Contract Date, at
reasonable times and upon reasonable notice, UPREIT, its agents and
representatives shall be entitled to conduct inspections of the Real
Property, which will include the rights to: (i) enter upon the Land and
Improvements to perform inspections and tests of any and all of the Real
Property, including, but not limited to, inspection, evaluation and testing
of the heating, ventilation and air-conditioning systems and all components
thereof, all structural and mechanical systems within the Improvements,
including, but not limited to, sprinkler systems, power lines and panels,
air lines and compressors, automatic doors, tanks, pumps, plumbing and all
equipment, vehicles, and Personal Property; (ii) examine and copy any and
all Records; (iii) make investigations with regard to zoning, environmental
(including, but not limited to, an environmental assessment as specified in
Section 8.2, which includes, but is not limited to, an analysis of the
presence of any asbestos, chlordane, formaldehyde or other Hazardous
Material in, under or upon the Real Property, or any underground storage
tanks on, or under, the Land), building, code, regulatory and other legal
or governmental requirements; (iv) make or obtain market studies and real
estate tax analyses; and (v) interview the tenants under any leases with
respect to their current occupancies. Without limitation of the foregoing,
UPREIT or its designated independent or other accountants may audit the
Financial Statements (as defined in EXHIBIT E attached hereto), and
Contributors shall supply such documentation as UPREIT or its accountants
may reasonably request in order to complete such audit.
8.2. ENVIRONMENTAL ASSESSMENT. From and after Contract Date, at
reasonable times and upon reasonable notice, UPREIT or UPREIT's agents
shall have the right to employ one or more environmental consultants or
other professionals to perform
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or complete such environmental inspections and assessments of the Real
Property as UPREIT deems necessary or desirable. UPREIT and its consultants
shall also have the right to undertake or complete a technical review of
all documentation, reports, plans, studies and information in possession or
control of Contributors, or their past or present environmental
consultants, concerning or in any way related to the environmental
condition of the Real Property. In order to facilitate the assessments and
technical review, Contributors shall extend their full cooperation (but
without third party expense to Contributors, including but not limited to
attorneys fees) to UPREIT and its environmental consultants, including,
without limitation, providing access to all files and fully and completely
answering all questions.
8.3. APPROVAL DATE. The "APPROVAL DATE" shall be forty-five (45) days
after the later of (a) the Contract Date and (b) the receipt by UPREIT of
all of the Contributors' Deliveries. UPREIT shall approve or disapprove the
Contributors' Deliveries and all matters related thereto, the physical
condition of the Real Property and any other matters relating to this
transaction, in writing ("APPROVAL NOTICE") prior to 6:00 p.m. on the
Approval Date. The determination as to whether or not the Contributors'
Deliveries or the physical condition of the Real Property are acceptable or
whether UPREIT desires to proceed with this transaction, shall be in
UPREIT's sole and absolute discretion. If UPREIT fails to send an Approval
Notice timely, either UPREIT or Contributors will have the right to
terminate the Agreement by written notice to the other. However, UPREIT
shall have three (3) business days after receipt of Contributors'
termination notice to elect in writing to waive such contingency, in which
event this Agreement will not be terminated and will remain in full force
and effect. If the Agreement is terminated, the Deposit shall be returned
to UPREIT and neither party shall have any further obligation to each other
hereunder. Notwithstanding anything to the contrary herein, UPREIT may
waive its rights hereunder at any time during the 45-day period referred to
above and give its Approval Notice early. If this Agreement is terminated,
UPREIT shall provide to the Contributors' copies of all reports obtained by
UPREIT regarding the Real Property.
8.4. PRESS RELEASE. UPREIT shall have the right to issue a press
release upon the consummation of the transactions contemplated hereby.
9. TITLE AND SURVEY MATTERS
9.1. TITLE. At the Closing, the Company shall have good and marketable
title to the Real Property, insurable as such (at regular rates), free and
clear of all liens, claims and encumbrances except for the Permitted
Encumbrances (as hereinafter defined in Section 9.5(a)). From and after the
date of this Agreement, Contributors shall not take any action, or fail to
take any action, that would cause such Real Property to become subject to
any exceptions or objections, other than the Permitted Encumbrances.
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9.2. ALTA SURVEY. After the Contract Date, UPREIT at its cost shall
promptly order a current as-built ALTA survey for the Real Property or
update of the Company's existing as-built survey in accordance with ALTA
requirements (the "Survey").
9.3. OBTAIN PTR. After the Contract Date, UPREIT at its cost shall
promptly order a preliminary title report for the Real Property issued by
the Title Company, together with copies of all instruments and documents
referred to therein (the preliminary title report together with such other
instruments are herein collectively referred to as the "PTR").
9.4. APPROVAL OF PTR AND SURVEY. UPREIT shall approve or disapprove in
writing the matters set forth in or disclosed by the PTR by the Approval
Date, subject to UPREIT's right to order continuation searches up to and
including the Closing Date. The determination as to whether or not the PTR
or any matter covered thereby or any update thereof is acceptable shall be
in UPREIT's sole and absolute discretion.
9.5. BUYER'S DISAPPROVAL OF PTR.
(a) CONTRIBUTORS' RIGHT TO CURE. If UPREIT disapproves the PTR
within the time period set forth in Section 9.4 hereof, UPREIT shall
forward to Contributors a copy of the PTR simultaneously with its
disapproval and Contributors shall have the right, within fifteen (15)
days after written notice from UPREIT, to agree in writing to remove,
correct or otherwise cure any disapproved items prior to the Closing,
at Contributors' sole cost and expense, and, in such event,
Contributors shall cause the same to be accomplished prior to the
Closing. Notwithstanding the preceding sentence, Contributors shall
not be required to remove (i) the lien arising from the Mercantile
Loan Documents, (ii) those liens, easements and encumbrances appearing
on the PTR which Buyer expressly agrees to assume or take subject
pursuant to the terms of this Agreement and (iii) all matters of
record that are not monetary liens (collectively the "Permitted
Encumbrances"), but shall be required to remove all liens or
encumbrances arising after the Approval Date and prior to the Closing.
(b) UPREIT'S RIGHTS. If Contributors do not give UPREIT written
notice of Contributors' agreement to remove such disapproved items or
if Contributors elect to cure, but do not cure the defect timely, then
UPREIT shall have the right to elect to: (i) waive UPREIT's objection
to the disapproved matters which Contributors do not undertake to
remove, in which case the Contribution Consideration shall be reduced
by any amounts paid by UPREIT to remove liens having a definite and
ascertainable monetary value; or (ii) terminate this Agreement. Upon
any such
13
termination of this Agreement, the Deposit shall be returned to UPREIT
and neither party shall have any further liability to the other,
except as otherwise provided herein.
9.6. TITLE A CONDITION PRECEDENT. It shall be a Condition Precedent
that the marked-up PTR delivered on the Closing Date shall be in the form
described in this Section 9 and have all standard and general printed
exceptions deleted so as to afford full "extended form coverage," and shall
further include an owner's comprehensive endorsement, an endorsement
certifying that the bills for the real estate taxes pertaining to the Land
and Improvements do not include taxes pertaining to any other real estate,
an access endorsement, a contiguity endorsement, if applicable, a
subdivision or plat act endorsement, a survey endorsement, a Fairway
endorsement, non-imputation endorsement, a creditors' rights endorsement
and any other customary commercially available endorsements. UPREIT shall
bear the responsibility of the costs of all endorsements.
10. REPRESENTATIONS AND WARRANTIES AS TO THE REAL PROPERTY. Except as
otherwise set forth in the Exhibits attached to this Agreement which set forth
the exceptions to the representations and warranties contained in this Section
10 and certain other information called for by this Agreement, in order to
induce UPREIT to enter into this Agreement, Contributors represent and warrant
to UPREIT that the following matters are true and correct as of the Contract
Date, and shall be true and correct as of the Closing Date, and further covenant
as follows, each of which is material and shall survive the Closing,
notwithstanding any investigation at any time made by or on behalf of UPREIT:
10.1. TITLE. The Company has good and marketable title to the Real
Estate, insurable as such (at regular rates), free and clear of all
mortgages and security interests (other than the Mercantile Indebtedness),
leases, agreements and tenancies (other than the "LEASES" listed on EXHIBIT
F), licenses, claims, options, options to purchase, liens, covenants,
conditions, restrictions, rights-of-way, easements, judgments and other
matters affecting title to the Real Property, except for all encumbrances
of record.
10.2. CONTRIBUTORS' DELIVERIES. All of Contributors' Deliveries listed
on EXHIBIT M and all other items delivered by Contributors 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 Contributors to UPREIT pursuant to this
Agreement constitute all of and the only Leases and other agreements
relating to or affecting the ownership and operation of the Real Property,
there being no "side" or other agreements, written or oral, in force or
effect, to which the Company is a party or to which the Real Property is
subject.
14
10.3. DEFAULTS. The Company is not in default under any of the
documents, recorded or unrecorded, nor have Contributors or the Company
received any written notice alleging the existence of any such default.
10.4. CONTRACTS. There are no contracts of any kind relating to the
management, leasing, operation, maintenance or repair of the Real Property,
except those Contracts listed on EXHIBIT G attached hereto. The Company has
performed all obligations required to be performed by it, and is not in
default, under any of such Contracts. All the Contracts may, by the express
terms thereof, be terminated without penalty or other payment by the
Company (or its assignee or successor) upon no more than 30 days' prior
notice.
10.5. PHYSICAL CONDITION. There is no existing patent or latent
structural or other material physical defect in the condition of the Real
Property, or any component or portion thereof, that would or could impair
or impose costs upon the use, occupancy or operation of the Real Property,
and that has not been fully corrected. There is no material defect in the
Improvements, the structural elements thereof, the mechanical systems
(including, without limitation, all HVAC Systems, plumbing, electrical,
elevator, security, utility and sprinkler systems) therein, or the roof of
the Building, nor has the Company nor any of the Contributors received any
written notice from any tenant or any other party alleging the existence of
any such material defect.
10.6. UTILITIES. All water, sewer, gas, electric, telephone, drainage
and other utility equipment, facilities and services required by law or
necessary for the operation of the Real Property as they are now being
operated, and as required for operation of the Building, are installed and
connected pursuant to valid permits, are adequate to service the Real
Property, and, to Contributors' knowledge, are in good operating condition.
No fact or condition exists, to Contributors' knowledge, that would or
could result in the termination or impairment of the furnishing of service
to the Real Property of water, sewer, gas, electric, telephone, drainage or
other such utility services. The Company has paid all amounts owing for
utility services as of the most recent billing period. The utility
equipment servicing the Real Property is in material compliance with all
applicable governmental laws, rules and regulations.
10.7. IMPROVEMENTS. The Improvements were completed and installed in
substantial accordance with the Plans (as defined in EXHIBIT H attached
hereto), which were approved by all Governmental Authorities having
jurisdiction thereover, and do not violate any governmental laws,
ordinances, rules or regulations.
10.8. EMPLOYEES. The Company does not employ any persons. With respect
to the Real Property, neither the Company nor any affiliate of the Company
are a party to, nor is the Real Property subject to, any collective
bargaining or other agreement or understanding with any labor union, and
neither the Company nor any affiliate of the
15
Company are privy to or involved in any labor or union controversy or other
similar interaction of any kind.
10.9. COMPLIANCE WITH LAWS AND CODES. The Real Property, and the use
and operation of any or all of them are (or the use and operation of any
component, portion or area of the Real Property is) in material compliance
with all applicable municipal and other governmental laws, ordinances,
regulations, codes, licenses, permits and authorizations, and there are
presently and validly in effect all licenses, permits and other
authorizations necessary (including, without limitation, certificates of
occupancy) for the use, occupancy and operation of the Real Property as
they are presently being operated, whether required of the Company or a
tenant. Without limiting the foregoing, the Real Property complies in all
material respects with all applicable requirements of the Americans With
Disabilities Act of 1990 (42 U.S.C.A. ss.12101 et seq.). Contributors have
no knowledge that any heating or other burning equipment located at or used
in connection with the Real Property violates any law or regulation of any
Governmental Authorities having jurisdiction over the Real Property. The
Real Property is zoned by the municipality in which it is located so as to
permit the uses and structures thereon, in a manner that accommodates and
is compatible in all material respects with the Building and Improvements
as they presently exist. The Real Property is not a non-conforming use or
nonconforming structure under applicable present zoning laws. No zoning,
subdivision, environmental, Hazardous Material, building code, health,
fire, safety or other law, order or regulation is violated by the continued
maintenance, operation or use of any Improvements or parking areas in or at
the Real Property, and no notice of any such violation has been issued to
the Company by any Governmental Authority having jurisdiction over the Real
Property. All driveway entrances and exits to the Real Property are
permanent and no special access or other permits are required to maintain
same. All existing streets and other improvements, including water lines,
sewer lines, sidewalks, curbing and streets at the Real Property have been,
or will be, paid for prior to the Closing (to the extent due and owing as
of the date thereof) and either enter the Real Property through adjoining
public streets, or, if they enter through private lands, do so in
accordance with valid, irrevocable easements running with the ownership of
the Real Property.
10.10. LITIGATION. There are no pending or, to the best knowledge of
Contributors, threatened judicial, municipal or administrative proceedings
affecting Contributors, the Company or the Real Property, or in which
Contributors, the Company is or will be a party by reason of the Company's
ownership or operation of the Real Property or any portion thereof,
including, without limitation, proceedings for or involving collections,
condemnation, eminent domain, alleged building code or environmental or
zoning violations, or personal injuries or property damage alleged to have
occurred on the Real Property or by reason of the condition, use of, or
operations on, the Real Property. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are
16
pending against Contributors or the Company or, to the best knowledge of
Contributors, threatened against Contributors or the Company, nor are any
of such proceedings contemplated by Contributors.
10.11. INSURANCE. The Company now has in force customary and
commercially reasonable amounts of property, liability and business
interruption insurance relating to the Real Property from established and
reputable insurers. The Company has not received any notice from any
insurance carrier, nor are Contributors aware of, any defects or
inadequacies in the Real Property that, if not corrected, would result in
termination of insurance coverage or increase in the normal and customary
cost thereof.
10.12. FINANCIAL INFORMATION. All Financial Statements delivered by
Contributors accurately set forth the results of the operation of the Real
Property for the periods covered. All of the Company's Records are
complete, accurate, true and correct in all material respects. There has
been no material adverse change in the financial condition or operation of
the Real Property since the period covered by the Financial Statements.
10.13. RE-ZONING. There is not now pending, and Contributors have no
knowledge of, any threatened proceeding for the re-zoning of the Real
Property or any portion thereof, or the taking of any other action by
governmental authorities that would have an adverse or material impact on
the value of the Real Property or use thereof.
10.14. PERSONAL PROPERTY. The Personal Property listed in EXHIBIT B
attached hereto is all of the personal property owned by the Company and
used in (or necessary for) the operation of the Real Property. All such
Personal Property is in good and operable condition and repair, and free of
material defects.
10.15. REAL ESTATE TAXES. True and complete copies of the most recent
real estate tax bills (the "TAX BILL(S)") for, and the only Tax Bills
applicable to, the Real Property have been delivered to UPREIT. Neither the
Contributors nor the Company has received notice of and do not have any
actual knowledge of any proposed increase in the assessed valuation or rate
of taxation of the Real Property from that reflected in the most recent Tax
Bills. There is not now pending, and Company will not, without the prior
written consent of UPREIT (which consent shall not be unreasonably withheld
or delayed), institute prior to the Closing Date, any proceeding or
application for a reduction in the real estate tax assessment of the Real
Property or any other relief for any tax year. There are no outstanding
agreements with attorneys or consultants with respect to the Tax Bills that
will be binding on UPREIT or the Real Property after the Closing. Other
than the amounts disclosed by the Tax Bills, no other real estate taxes
have been, or, to the best knowledge of Contributors, will be, assessed
against the Real Property, or any portion thereof, in respect of the year
2000/2001 or any prior year, and no special
17
assessments of any kind (special, bond or otherwise) are or have been
levied against the Real Property, or any portion thereof, that are or will
be outstanding or unpaid at the Closing (to the extent due and owing as of
the date thereof). The Company is not delinquent in the payment of any real
estate taxes presently due and owing with respect to the Real Property.
10.16. EASEMENTS AND OTHER AGREEMENTS. The Company is not in default
in complying with the terms and provisions of any of the covenants,
conditions, restrictions, rights-of-way or easements constituting one or
more of the Permitted Encumbrances.
10.17. LEASE CONTROVERSIES. No controversy, complaint, negotiation or
renegotiation, proceeding, suit or litigation relating to any Lease is
pending or, to the best knowledge of Contributors, threatened, whether in
any tribunal or informally. The Contributors are and shall remain
responsible after the Closing Date for defending (or continuing) any such
suit, proceeding or other matter relating to periods prior to the Closing
Date, and all damages, loss, expenses and costs related thereto.
10.18. SOIL CONDITION. To Contributors' knowledge, the soil condition
of the Land is such that it will support all of the Improvements for the
foreseeable life of the Improvements, without the need for unusual or new
sub-surface excavations, fill, footings, caissons or other installations.
The Improvements, as built, were constructed in a manner compatible with
the soil condition at the time of construction, and all necessary
excavations, fill, footings, caissons or other installations were then and
have since been provided.
10.19. MERCANTILE LOAN DOCUMENTS AND MANEKIN LOAN DOCUMENTS. EXHIBIT C
attached hereto sets forth a true, correct and complete listing of all of
the promissory notes, mortgages and other loan documents evidencing or
securing the Mercantile Indebtedness and the Manekin Indebtedness, and
Contributors have delivered true, correct and complete copies of the
Mercantile Loan Documents and the Manekin Loan Documents to UPREIT prior to
the date hereof as part of Contributors' Deliveries. The Company has
complied with (and, prior to the Closing, shall continue to comply with)
the terms of, and all notices or correspondence received from the holder of
the Mercantile Loan Documents and the Manekin Loan Documents. The Company
has paid (and, at all times prior to the Closing, shall pay) all sums due
under the Mercantile Loan Documents and the Manekin Loan Documents. The
Mercantile Loan Documents and the Manekin Loan Documents are in full force
and effect. The Company is not in default under the Mercantile Loan
Documents and the Manekin Loan Documents, and there has not occurred any
event which, with the giving of notice and/or the passage of time, or both,
would constitute a default by the Company thereunder. The outstanding
principal amount of the Mercantile Indebtedness and Manekin Indebtedness is
accurately set forth on EXHIBIT C.
18
10.20. CONDEMNATION. The Contributors have no knowledge of any pending
or contemplated condemnation or other governmental taking proceedings
affecting all or any part of the Real Property.
10.21. DISCLOSURE. No representation or warranty made by the
Contributors in this Agreement, and no Exhibit 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 or necessary in order to provide a prospective owner of the
Real Property with adequate information as to the Real Property and its
management, operation, maintenance and repair. There is no fact known to
Contributors which has, or which could reasonably have been foreseen by
Contributors as likely to have, an adverse effect on the management,
operation, maintenance and repair of the Real Property which has not been
disclosed herein or in any Exhibit.
10.22. COMPANY LIABILITIES. Except for (i) the obligations and
liabilities of the Company pursuant to the Mercantile Indebtedness and
Manekin Indebtedness, and (ii) any accrued liabilities and obligations of
the Company under the Leases and the Contracts or as otherwise disclosed in
this Agreement or which are being adjusted at Closing pursuant to Section
16 of this Agreement, all of which shall not exceed $100,000 and (iii)
expenses incurred in the ordinary course of business of the operation of
the Real Property as disclosed on the Company balance sheet as of Closing,
the Company does not have any liabilities or obligations, either accrued,
absolute or contingent or otherwise. In addition, the Company has not
received notice of any, and there is no basis for any, claim against (or
liability of) the Company arising from the business done, transactions
entered into or other events occurring prior to the Closing Date.
The representations and warranties in this Section 10 shall be deemed
remade by Contributors as of the Closing Date with the same force and
effect as if in fact specifically remade at that time.
11. REPRESENTATIONS AS TO SECURITIES AND OTHER MATTERS.
11.1. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS. In order to
induce UPREIT to enter into this Agreement and to issue the LP Units in
consideration for the Interests, the Contributors make the following
representations and warranties, each of which is material and shall survive
the contribution hereof without limitation, notwithstanding any
investigation at any time made by or on behalf of UPREIT.
11.1.1. AUTHORITY. The execution and delivery of this Agreement
by Contributors, and the performance of this Agreement by
Contributors, have been duly authorized by Contributors, and this
Agreement is binding on Contributors and enforceable against them in
accordance with its terms. Any required consent of any
19
creditor, investor, partner, shareholder, tenant-in-common, judicial
or administrative body, Governmental Authority, or other governmental
body or agency, or other party to such execution, delivery and
performance by Contributors have been obtained, except for any consent
required under the Mercantile Loan Documents. Neither the execution of
this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in a breach of, default under, or acceleration
of, any agreement (other than the Mercantile Loan Documents) to which
Contributors or their shareholders or members is a party or by which
Contributors or their shareholders or members are bound; or (ii)
violate any restriction, court order, agreement or other legal
obligation to which Contributors or their shareholders or members are
subject.
11.1.2. COMPANY AND TAX-RELATED ISSUES.
11.1.2.1 The Partnership at all times has been, and upon
conversion the Company shall be, properly treated as a
partnership for federal income tax purposes and not as an
"association" or "publicly traded partnership" taxable as a
corporation.
11.1.2.2 No member of the Company or the Partnership has
pledged or otherwise encumbered its membership interest or
partnership interest in the Company or the Partnership.
11.1.2.3. The Company and the Partnership have filed or
caused to be filed in a timely manner (within any applicable
extension periods) all tax, information or other returns required
to be filed by the Code or by applicable state, or local tax laws
(collectively "TAX RETURNS"). Such Tax Returns are true, correct
and complete in all respects; and all federal, state or local
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium unemployment, disability,
personal property, sales, use, transfer, registration, estimated,
or other tax of any kind whatsoever, including any interest,
penalty or other addition thereto, whether disputed or not,
(collectively, "TAXES") due, and Taxes due in respect of any
person for which the Company and the Partnership had an
obligation to withhold and/or otherwise pay over Taxes, have been
timely paid in full or will be timely paid in full by the due
date thereof (and whether or not shown on a Tax Return). With
respect to any taxable year for which a statute of limitations
(or similar provision) has not yet run, none of the Tax Returns
of the Company or the Partnership have been audited by a
government or taxing authority, nor is any such audit or other
proceeding in process, pending, to Contributors' knowledge
threatened (either in writing or verbally, formally or
informally) or expected to be asserted with respect to Taxes (or
collection of Taxes) of the Company or the Partnership, and
neither the Company nor the Partnership has received notice
(either in writing or verbally, formally or informally) or expect
to receive notice that they have not filed a Tax Return or not
paid Taxes required to be filed, withheld, or paid by it. The
Company and the Partnership have disclosed on their federal
income tax returns all
20
positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662.
No claim has ever been made by an authority in a jurisdiction
where the Company or Partnership do not file Tax Returns that
they are or may be subject to taxation by that jurisdiction.
11.1.3. INTENTIONALLY DELETED
11.1.4. UNITED STATES PERSON. Contributors and each of their
members, officers or directors is a "United States Person" within the
meaning of Section 1445(f)(3) of the Code, as amended, and shall have
executed and delivered an "Entity Transferor" certification at
Closing.
11.1.5. INVESTMENT REPRESENTATION. Contributors represents that
the LP Units are being acquired by them with the present intention of
holding such LP Units for purposes of investment, and not with a view
towards sale or any other distribution. Contributors recognize that
they may be required to bear the economic risk of an investment in the
LP Units for an indefinite period of time. Richard Alter, the sole
owner of GP, and LP are both Accredited Investors. Richard Alter and
LP have such knowledge and experience in financial and business
matters so as to be fully capable of evaluating the merits and risks
of an investment in the LP Units. No LP Units will be issued,
delivered or distributed to any person or entity who either (i) is a
resident of the State of California or New York or (ii) is other than
an Accredited Investor with respect to whom there has been delivered
to UPREIT satisfactory Investor Materials confirming the status of
such person or entity as an Accredited Investor. Contributors have
been furnished with the Informational Materials described in Section
4.2 above, and have read and reviewed the Informational Materials and
understand the contents thereof. Contributors have been afforded the
opportunity to ask questions of those persons they consider
appropriate and to obtain any additional information they desire in
respect of the LP Units and the business, operations, conditions
(financial and otherwise) and current prospects of the UPREIT and
REIT. Contributors have consulted their own financial, legal and tax
advisors with respect to the economic, legal and tax consequences of
delivery of the LP Units and have not relied on the Informational
Materials, the UPREIT, the REIT or any of their officers, directors,
affiliates or professional advisors for such advice as to such
consequences.. Neither Contributors nor their members or shareholders
require the consent of any Interest Holder in order to consummate the
transactions contemplated by this Agreement including, without
limitation, to amend any partnership agreement, operating agreement,
charter or other governing document of Contributors, which has not
been obtained. Richard Alter and LP are domiciled in the State of
Maryland.
11.1.6 OWNERSHIP OF INTERESTS. Contributors own the Interests,
free and clear of all liens, charges, encumbrances, restrictive
agreements and assessments. UPREIT shall receive at Closing good and
absolute title hereto, free of all
21
liens, charges, encumbrances, restrictive agreements and assessments
whatsoever, at the Closing. There are no outstanding options,
contracts, calls, commitments or demands of any nature relating to the
Interests.
11.1.7 OWNER OF GP. Richard Alter is the sole owner of GP.
11.1.8 PARTNERSHIP AGREEMENT. The Partnership Agreement of
Partnership and the form of Operating Agreement of the Company have
been provided to UPREIT and there have been no further amendments
thereto.
12. COVENANTS OF CONTRIBUTORS.
12.1. NEW LEASES. The Company shall not amend or terminate any Lease,
nor shall Contributors execute any new lease, license, or other agreement
affecting the ownership or operation of all or any portion of the Real
Property or for personal property, equipment, or vehicles, without in each
case UPREIT's prior written approval, which approval shall not be
unreasonably withheld or delayed.
12.2. NEW CONTRACTS. The Company shall not enter into any contract
with respect to the ownership and operation of all or any portion of the
Real Property that will survive the Closing, or that would otherwise affect
the use, operation or enjoyment of the Real Property, without UPREIT's
prior written approval, which approval may be granted or denied in UPREIT's
sole discretion, except for service contracts entered into in the ordinary
course of business that are terminable, without penalty, on not more than
30 days' notice, for which no approval shall be required.
12.3. INSURANCE. The insurance policies described in Section 10. 11
above shall remain continuously in force through and including the Closing
Date.
12.4. OPERATION OF REAL PROPERTY. The Company shall or shall cause the
Management Company (defined in Section 15.1.13) to operate and manage the
Real Property consistent with prior practices, maintaining present services
(including, but not limited to, pest control), and shall maintain the Real
Property in good repair and working order; shall keep on hand sufficient
materials, supplies, equipment and other Personal Property for the
efficient operation and management of the Real Property consistent with
prior practices; and shall perform, when due, all of the Company's
obligations under the Mercantile Loan Documents and the Manekin Loan
Documents, Leases, Contracts, and other agreements relating to the Real
Property and otherwise in accordance with applicable laws, ordinances,
rules and regulations affecting the Real Property. None of the Personal
Property, fixtures or Inventory shall be removed from the Real Property,
unless replaced by personal property, fixtures or inventory of equal or
greater utility and value.
22
12.5. PRE-CLOSING EXPENSES. The Company has paid or will pay or cause
to be paid in full, prior to the Closing, all bills and invoices received
prior to the Closing Date for labor, goods, material and services of any
kind relating to the Real Property and the Company and utility charges for
the period prior to the Closing. Contributors shall pay to UPREIT promptly
upon demand all bills and invoices received after the Closing Date for
labor, goods, material and services of any kind relating to the Real
Property and the Company and utility charges for the period prior to the
Closing. Any alterations, installations, decorations and other work
required to be performed by the Company under any and all agreements
affecting the Real Property have been or will, by the Closing, be completed
and paid for in full, except for the work on Building D to be completed as
listed on Exhibit K.
12.6. NO ASSIGNMENT. After the Contract Date and prior to the Closing,
the Company shall not assign, alienate, lien, encumber or otherwise
transfer all or any part of the Real Property or any interest therein.
12.7. GOOD FAITH. All actions required pursuant to this Agreement that
are necessary to effectuate the transaction contemplated herein will be
taken promptly and in good faith by Contributors, and Contributors shall
furnish UPREIT with such documents or further assurances as UPREIT may
reasonably require.
12.8. AVAILABILITY OF RECORDS.
12.8.1. Upon UPREIT's reasonable request, for a period of two
years after the Closing, the Contributors shall (i) make the Records
available to UPREIT for inspection, copying and audit by UPREIT's
designated accountants; and (ii) cooperate with UPREIT (without any
third party expense to the Contributors, including but not limited to
attorneys fees) in obtaining any and all permits, licenses,
authorizations, and other Governmental Approvals necessary for the
operation of the Real Property. Without limitation of the foregoing in
this Section 12.9, the Contributors agree to abide by the terms of
EXHIBIT J attached hereto. At any time before or within two years
after the Closing, the Contributors further agree to provide to the
UPREIT's designated independent auditor, upon the reasonable request
of the UPREIT or such auditor, (x) access (to the same extent to which
the UPREIT would be entitled to such access) to the books and records
of the Real Property and all related information (including the
information listed on EXHIBIT I) regarding the period for which the
UPREIT is required to have the Real Property audited under the
regulations of the SEC, and (y) a representation letter delivered by
the Contributors regarding the books and records of the Real Property,
in substantially the form as attached hereto as EXHIBIT J.
12.8.2. In addition, during such two year period Contributors
(without any third party expense to the Contributors, including but
not limited to attorneys fees) shall provide, and cooperate in all
reasonable respects in providing,
23
UPREIT with copies of, or access to, such factual information as may
be reasonably requested by UPREIT, and in the possession or control of
Contributors, to enable the REIT to issue one or more press releases
concerning the transaction that is the subject of this Agreement,
which press releases may be reviewed and commented on, but not
approved, by Contributors, to file a Current Report on Form 8-K (as
specified on EXHIBIT I attached hereto), if, as and when such filing
may be required by the SEC and to make any other filings that may be
required by any Governmental Authority. The obligation of Contributors
to cooperate in providing UPREIT with such information for UPREIT to
file its Current Report on Form 8-K shall survive the Closing.
12.9. CHANGE IN CONDITIONS. Contributors shall promptly notify UPREIT
of any change in any condition with respect to the Real Property or of the
occurrence of any event or circumstance that makes any representation or
warranty of Contributors or the Company to UPREIT under this Agreement
untrue or misleading, or any covenant of Contributors or the Company under
this Agreement incapable or less likely of being performed, it being
understood that Contributors' obligation to provide notice to UPREIT under
this Section 12.9 shall in no way relieve Contributors of any liability for
a breach by Contributors of any of its representations, warranties or
covenants under this Agreement.
12.10. LLC STRUCTURE. Prior to the Closing Date, the Contributors
shall cause the Partnership to convert into the Company such that
Contributors are the sole members of the Company. The organizational
documents for the Company (articles of organization and operating
agreement) must be reviewed and approved by UPREIT prior to the conversion
of the Partnership into the Company. Otherwise, there shall be no change to
the composition of the owners of the Company.
12.11. CURE OF VIOLATIONS. On or before the Closing Date, Contributors
shall exercise commercially reasonable efforts to cure (or escrow
sufficient funds at the Closing with the Title Company to cure) all
violation(s) of law, code, ordinance or regulation that are the subject of
any written notice issued by a Governmental Authority with respect to the
Real Property after the Contract Date.
13. ENVIRONMENTAL WARRANTIES AND AGREEMENTS.
13.1. DEFINITIONS. Unless the context otherwise requires:
13.1.1. "ENVIRONMENTAL LAW" OR "ENVIRONMENTAL LAWS" shall mean
all applicable past, present or future federal, state and local
statutes, regulations, directives, ordinances, rules, court orders,
decrees, arbitration awards and the common law, which pertain to
environmental matters, contamination of any type whatsoever or health
and safety matters, as such have been amended, modified or
supplemented from time to time (including all present and future
amendments thereto and re-authorizations
24
thereof). Environmental Laws include, without limitation, those
relating to: (1) 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 wildlife,
endangered species, wetlands or natural resources; (v) Tanks; (vi)
health and safety of employees and other persons; and (vii)
notification requirements relating to the foregoing. Without limiting
the above, Environmental Law also includes the following: (i) the
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. ss.ss.9601 ET SEQ.), as amended ("CERCLA"); (ii) the Solid
Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act (42 U.S.C. ss.ss.6901 ET SEQ.), as amended ("RCRA");
(iii) the Emergency Planning and Community Right to Know Act of 1986
(42 U.S.C. ss.ss.11001 ET SEQ.), as amended; (iv) the Clean Air Act
(42 U.S.C. ss.ss.7401 ET SEQ.), as amended; (v) the Clean Water Act
(33 U.S.C. ss.1251 ET SEQ.), as amended; (vi) the Toxic Substances
Control Act (15 U.S.C.ss.2601 ET SEQ.), as amended; (vii) the
Hazardous Materials Transportation Act (49 U.S.C. ss.ss.1801 ET SEQ.),
as amended; (viii) the Federal Insecticide, Fungicide and Rodenticide
Act (7 U.S.C. ss. 136 ET SEQ.), as amended; (ix) the Federal Safe
Drinking Water Act (42 U.S.C. ss.300f ET SEQ.), as amended; (x) the
Federal Radon and Indoor Air Quality Research Act (42 U.S.C. ss.7401
note, ET SEQ.), (xi) the Occupational Safety and Health Act (29
U.S.C.ss. 651 ET SEQ.), as amended; (xii) any state, county, municipal
or local statutes, laws or ordinances similar or analogous to
(including counterparts of) any of the statutes listed above; and
(xiii) any rules, regulations, directives, orders or the like adopted
pursuant to or implementing any of the above.
13.1.2. "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 or are otherwise required by Governmental
Authorities.
13.1.3. "HAZARDOUS CONDITIONS" refers to the existence or
presence of any Hazardous Materials on, in, under, or at, the Real
Property (including air, soil and groundwater) or any portion of any
of them, which are in excess of the quantities permitted under the
Environmental Laws or which because of their concentration or
physical, chemical or infectious characteristic otherwise violates
Environmental Laws.
13.1.4. "HAZARDOUS MATERIAL" or "HAZARDOUS MATERIALS" shall mean
any chemical, pollutant, contaminant, pesticide, petroleum or
petroleum product or by product, radioactive substance, solid waste
(hazardous or extremely hazardous), special, dangerous or toxic waste,
substance, chemical or material regulated, listed, limited or
prohibited under an Environmental Law, including without limitation:
(i) friable or damaged asbestos, asbestos containing material,
presumed asbestos-containing material, polychlorinated biphenyls
("PCBs"), solvents and waste oil; (ii) any "hazardous
25
substance" as defined under CERCLA; and (iii) any "hazardous waste" as
defined under RCRA.
13.1.5. "RELEASE" means any spill, discharge, leak, migration,
emission, escape, injection, dumping or other release or threatened
release of any Hazardous Material into the environment, whether or not
notification or reporting to any Governmental Authority was or is
required. Release includes, without limitation, historical releases
and the meaning of Release as defined under CERCLA.
13.1.6. "REMEDIAL ACTION" shall mean any and all corrective or
remedial action, preventative measures, response, removal, transport,
disposal, clean-up, abatement, treatment and monitoring of Hazardous
Materials or Hazardous Conditions, whether voluntary or mandatory, and
includes all studies, assessments, reports or investigations performed
in connection therewith to determine if such actions are necessary or
appropriate (including investigations performed to determine the
progress or status of any such actions), all occurring on or after the
Contract Date.
13.1.7. "REMEDIAL COSTS" shall include all costs, liabilities,
expenses and fees incurred on or after the date of this Agreement in
connection with Remedial Action, including but not limited to: (i) the
fees of environmental consultants and contractors; (ii) reasonable
attorneys' fees (including compensation for in-house and corporate
counsel provided such compensation does not exceed customary rates for
comparable services); (iii) the costs associated with the preparation
of reports, and laboratory analysis (including charges for expedited
results if reasonably necessary); (iv) regulatory, permitting and
review fees; (v) costs of soil and/or water treatment (including
groundwater monitoring) and/or transport and disposal; and (iv) the
cost of supplies, equipment, material and utilities used in connection
with Remedial Action.
13.1.8. "TANK" OR "TANKS" means above-ground and underground
storage tanks, vessels and related equipment, including appurtenant
pipes, lines and fixtures containing or previously containing any
Hazardous Material or fraction thereof.
13.2. WARRANTIES. Contributors hereby represent and warrant, with
respect to the Real Property, that the following matters are true and
correct as of the Contract Date, in all material respects, and shall be
true and correct as of the Closing Date, in all material respects:
13.2.1. Contributors have made available or delivered to UPREIT
originals (or true, complete and accurate copies) of all of the
documents in their possession, custody or control, which documents
include and/or relate to:
26
(a) All approvals, plans, specifications, test borings,
percolation tests, engineering studies, surveys or other
environmental data concerning the Real Property;
(b) All permits (including Environmental Permits),
approvals, registrations, Tank registration and/or closure
documentation, certificates, applications, notices, orders,
directives, legal pleadings, correspondence or other documents of
any nature that Contributors, the Company any tenant of the
Company, any of the Company's predecessors-in-title or any tenant
of the Company's predecessors-in-title have submitted to, or
received from, any Governmental Authority regarding the Real
Property and their use, compliance or non-compliance with
Environmental Laws; and
(c) The results of any investigation of the Real Property
including, but not limited to, Phase I or Phase II site
assessments, asbestos inspection and/or removal reports, tests or
investigations of soil or other substrate air, groundwater,
surface water, or the building interior, and any testing or
investigation results relating to the removal or abandonment of
any Tanks from the Real Property.
UPREIT agrees not to disclose such documents to any third party
if Closing does not occur.
13.2.2. The Real Property has been and continues to be owned and
operated in material compliance with all Environmental Laws and
Environmental Permits.
13.2.3. There have been no past and there are no pending or, to
Contributors' knowledge, threatened: (i) claims, complaints, notices,
correspondence or requests for information received by Contributors
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 Real Property or
any portion thereof, and (ii) written correspondence, claims,
complaints, notices, or requests for information from or to
Contributors or the Company regarding any actual, potential or alleged
liability or obligation under or violation of any Environmental Law or
Environmental Permit with respect to the Real Property or any portion
thereof.
13.2.4. There have been no Releases and there does not exist, to
Contributors' knowledge, a threatened Release of a Hazardous Material
on, in, under or at the Real Property or any portion thereof.
13.2.5. The Real Property is not listed or, to the actual
knowledge of Contributors, proposed or nominated for listing on the
National Priorities List pursuant
27
to CERCLA, the Comprehensive Environmental Response and Liability
Information System or on any other similar list of sites under
analogous state laws.
13.2.6. There are no Tanks at, on or under the Real Property.
Neither Contributors nor the Company has removed, closed or abandoned
any Tanks at the Real Property, and Contributors have no knowledge of
the existence, abandonment, closure or removal of Tanks at the Real
Property.
13.2.7. There are no PCBs or friable or damaged asbestos at the
Real Property.
13.2.8. There has been no storage, treatment, disposal,
generation, transportation or Release of any Hazardous Materials by
Contributors or, to Contributors' actual knowledge, its predecessors
in interest, or by any other person or entity for which Contributors
are or may be held responsible, at, on, under, or about the Real
Property (or any portion thereof) in violation of, or which could give
rise to any claim, obligation or liability under, Environmental Laws.
The representations and warranties in this Section 13.2 shall be
deemed remade by Contributors as of the Closing Date with the same force
and effect as if in fact specifically remade at that time. Such
representations and warranties are qualified by the fact that Contributors
has restricted access to portions of the Real Property pursuant to the
terms of the Leases.
14. ADDITIONAL CONDITIONS PRECEDENT TO CLOSING.
14.1. UPREIT'S ADDITIONAL CONDITIONS PRECEDENT. In addition to the
other conditions enumerated in this Agreement, the following shall be
UPREIT's Conditions Precedent:
14.1.1. PHYSICAL CONDITION. The physical condition of Real Property
shall be substantially the same on the Closing Date as on the Contract
Date, reasonable wear and tear excepted, unless the alteration of said
physical condition is the result of Damage (as defined in Section 17).
Without limiting the generality of the foregoing, the parties acknowledge
and agree that the failure by Contributors to cure any violation described
in Section 12.11 shall be a failure of this condition precedent.
14.1.2. PENDING ACTIONS. At the Closing, there shall be no
administrative agency, litigation or governmental proceeding of any kind
whatsoever, pending or threatened with respect to the Company or the Real
Property, (i) that, after the Closing, would, in UPREIT's sole and absolute
discretion, materially and adversely affect the value or marketability of
the Real Property or the ability of the Company to operate
28
the Real Property in the manner it is being operated on the Contract Date,
or (ii) for the purpose of enjoining or preventing, or which question the
validity or legality of, the transaction contemplated hereby.
14.1.3. FLOOD INSURANCE. As of the Closing Date, if the Real Property
is located in a flood plain, UPREIT shall have obtained flood plain
insurance in form and substance acceptable to UPREIT.
14.1.4. MERCANTILE INDEBTEDNESS. Contributors shall provide to UPREIT
a letter from the holder of the Mercantile Loan Documents dated no earlier
than two (2) days prior to the Closing Date (i) setting forth the amount of
principal and interest outstanding on the Closing Date and confirming that
there are no other amounts due thereunder, and (ii) stating that no default
exists under any of the Mercantile Loan Documents. Such letter shall be
referred to collectively as the "LENDER ESTOPPEL." Contributors shall
reasonably cooperate with UPREIT in attempting to obtain such Lender
Estoppel.
14.1.5. OWNERS. Contributors shall be the sole members of the Company.
14.1.6. BANKRUPTCY. As of the Closing Date, neither Contributors, the
Company nor the Real Property shall be the subject of any bankruptcy
proceeding.
14.1.7. REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Contributors contained in this Agreement shall be true and
correct as of the Closing Date as though such representations and
warranties were made on such date.
14.1.8. COVENANTS PERFORMED. All covenants of Contributors and the
Company required to be performed on or prior to the Closing Date shall have
been performed, in all material respects.
14.1.9. TENANT ESTOPPELS. UPREIT shall have received a tenant estoppel
letter in substantially the form attached hereto as Exhibit L from all
tenants at the Real Property occupying at least 95% of the leaseable space.
14.1.10. BUILDING D. No later than June 1, 2001, Contributors shall
have completed the shell work on Building D located on the Real Property
except for these items as listed on Exhibit K.
In the event all such conditions have not been satisfied at or prior to the
Closing, UPREIT may elect to either waive the unsatisfied condition and proceed
to Closing or terminate this Agreement, in which case the Deposit shall be
returned to UPREIT and neither party shall have any further obligations
hereunder.
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15. CLOSING DELIVERIES.
15.1. CONTRIBUTORS' DELIVERIES. At the Closing (or such other times as
may be specified below), Contributors shall deliver or cause to be
delivered to UPREIT the following, each in form and substance reasonably
acceptable to UPREIT and its counsel:
15.1.1. ASSIGNMENT OF MEMBERSHIP INTERESTS. An Assignment of
Membership Interests executed by Contributors conveying the Interests
to UPREIT free and clear of all liens, claims and encumbrances;
15.1.2. LENDER ESTOPPEL. The Lender Estoppel from the holder of
the Mercantile Indebtedness in conformity with Section 14.1.4.
15.1.3. KEYS. Keys to all locks located at the Real Property;
15.1.4. AFFIDAVIT OF CONTRIBUTORS AND NON-IMPUTATION AFFIDAVIT.
An Affidavit of Contributors (the form of which is attached as Exhibit
N-1) as required by the Title Company in the State of Maryland as a
condition to the deletion of the general exceptions of Schedule B,
Section 2 of the PTR and a Non-Imputation Affidavit as required by the
Title Company, executed by Contributors, and the form of which is
attached hereto as Exhibit N-2;
15.1.5. LETTER TO TENANTS. A letter executed by the Management
Company addressed to each tenant, in form provided by UPREIT,
directing payment of all rents accruing after the Closing Date to be
made to UPREIT or at its direction;
15.1.6. ORIGINAL DOCUMENTS. To the extent not previously
delivered to UPREIT, originals of the Leases and Contracts;
15.1.7. CLOSING STATEMENT. A closing statement conforming to the
proration and other relevant provisions of this Agreement (the
"CLOSING STATEMENT") duly executed by Contributors;
15.1.8. ENTITY TRANSFER CERTIFICATE. Entity transfer
certifications confirming that each Contributor is a "United States
Person" within the meaning of Section 1445 of the Code;
15.1.9. RENT ROLL. A Rent Roll, prepared as of the Closing Date,
certified by Contributors to be true, complete and correct through the
Closing Date;
30
15.1.10. PARTNERSHIP AGREEMENT. The amendment to the Partnership
Agreement of UPREIT in connection with the admission of Contributors
as additional limited partners receiving LP Units hereunder;
15.1.11. CLOSING CERTIFICATE. A certificate, signed by
Contributors, certifying to the UPREIT that the representations and
warranties of Contributors contained in this Agreement are true and
correct as of the Closing Date and that all covenants required to be
performed by Contributors prior to the Closing Date have been
performed;
15.1.12. AMENDMENT TO OPERATING AGREEMENT. An amendment to the
Operating Agreement of the Company pursuant to which UPREIT shall be
admitted as sole member in the place of Contributors;
15.1.13. RELEASES. Release from Contributors and Manekin, LLC
("MANAGEMENT COMPANY") releasing the Company, UPREIT and REIT from all
obligations or liabilities relating to the Company;
15.1.14. OPINION OF COUNSEL. An opinion of counsel for
Contributors, in form and substance acceptable to UPREIT, regarding
the Company and the Contributors;
15.1.15. RELEASE BY MANEKIN, LLC. A release executed by Manekin,
LLC in favor of the Company and UPREIT of all claims in connection
with the Manekin Indebtedness; and
15.1.16. OTHER. Such other documents and instruments as may
reasonably be required by UPREIT (including, without limitation, those
of Contributors' Deliveries in Contributors' possession or control
that have not previously been delivered to UPREIT), its (or its
underwriters' or lenders') counsel or the Title Company and that may
be necessary to consummate the transaction that is the subject of this
Agreement and to otherwise give effect to the agreements of the
parties hereto.
After the Closing, Contributors shall execute and deliver to UPREIT
such further documents and instruments as UPREIT shall reasonably request
to effect this transaction and otherwise effect the agreements of the
parties hereto.
15.2. UPREIT'S DELIVERIES. Unless previously delivered to
Contributors, at the Closing (or such other times as may be specified
below), UPREIT shall cause to be delivered to Contributors the following,
each in form and substance reasonably acceptable to Contributors and UPREIT
and their respective counsel:
31
15.2.1. AMENDMENT. The Partnership Amendment, duly executed by
the REIT;
15.2.2. CLOSING STATEMENT. The Closing Statement, duly executed
by the UPREIT.
16. PRORATIONS AND ADJUSTMENTS. The following shall be prorated and
adjusted between Contributors and UPREIT as of the Closing Date, except as
otherwise specified:
16.1. UPREIT and Contributors believe that no transfer and recording
taxes or sales taxes shall be due by virtue of this transaction. If taxes
are assessed, Contributors and UPREIT shall divide the cost of such taxes
equally between them. Each party's respective obligations to pay or
reimburse such taxes shall survive the Closing;
16.2. Water, electricity, sewer, gas, telephone and other utility
charges shall be prorated based, to the extent practicable, on final meter
readings and final invoices, or, in the event final readings and invoices
are not available, based on the most currently available billing
information, and reprorated upon issuance of final utility bills;
16.3. Amounts paid or payable under any Contracts shall be prorated
based, to the extent practicable, on final invoices, or, in the event final
invoices are not available, based on the most currently available billing
information, and reprorated upon issuance of final invoices;
16.4. All real estate, personal property and ad valorem taxes
applicable to the Real Property and levied with respect to tax year
2000/2001 shall be prorated as of the Closing Date (but not any delinquent
charges or interest, all of which shall be paid by Contributors), utilizing
the actual final Tax Bills. Prior to or at the Closing, the Company shall
pay or have paid all Tax Bills that are due and payable prior to or on the
Closing Date and shall furnish evidence of such payment to UPREIT and the
Title Company. Each party's respective obligations to reprorate real estate
taxes shall survive the Closing;
16.5. All assessments, general or special, shall be prorated as of the
Closing Date on a "due date" basis such that Contributors shall be
responsible for any installments of assessments which are first due or
payable prior to the Closing Date and UPREIT shall be responsible for any
installments of assessments which are first due or payable on or after the
Closing Date;
16.6. Commissions of leasing and rental agents for all leases entered
into as of or prior to the Closing Date, whether with respect to base lease
term, future expansions, renewals, or otherwise, shall be paid in full at
or prior to the Closing by Contributors, without contribution or proration
from UPREIT, except for the commission
32
in an amount not to exceed to $30,000 payable to Manekin, LLC and KLNB,
Inc. relating to the lease to Corvis Corporation for the period from the
Closing through December 1, 2001;
16.7. All base rents and other charges, including, without limitation,
all additional rent, shall be prorated as of the Closing Date. At the
time(s) of final calculation and collection from tenants of additional rent
for 2001, there shall be a re-proration between Contributors and UPREIT as
to additional rent adjustments, with such re-prorations being payable to
the appropriate recipient in cash. Such re-proration shall be paid upon
UPREIT's presentation of its final accounting to Contributors, certified as
to accuracy by UPREIT. The parties' respective obligations to reprorate
additional rent shall survive the Closing. At the Closing, no "Delinquent
Rents" (rents or other charges that are due as of the Closing) shall be
prorated in favor of Contributors or the UPREIT. All rents and other
charges received by (or for the benefit of) the Company from tenants after
the Closing shall be first applied against obligations owed to, or for the
benefit of, the Company with respect to those obligations accruing
subsequent to the Closing Date, and any excess shall be delivered to
Contributors, but only to the extent of amounts in default and owed to, and
for the benefit of, the Company for the period prior to the Closing Date.
In no event, however, shall any sums be paid to Contributors to the extent
Contributors have been previously reimbursed for such default out of any
security deposit and security deposits have been appropriately prorated
hereunder;
16.8. Distributions in respect of the LP Units acquired by the
Contributors shall begin to accrue from and after the Closing Date
(notwithstanding the fact that such date may not be the applicable Record
Date under the Partnership Agreement), and the amount of distributions paid
or to be paid to the Contributors for any quarter shall be prorated
accordingly;
16.9. Such other items that are customarily prorated in transactions
of this nature shall be ratably prorated; and
16.10. The Contribution Consideration shall be reduced by all accrued
or unpaid liabilities of the Company, other than the Mercantile
Indebtedness and Manekin Indebtedness.
For purposes of calculating prorations, UPREIT shall be deemed to be in
title to the Interests, and therefore entitled to the income therefrom and
responsible for the expenses thereof, for the entire Closing Date. All such
prorations shall be made on the basis of the actual number of days of the year
and month that shall have elapsed as of the Closing Date. Bills received after
the Closing that relate to expenses incurred, services performed or other
amounts allocable to the period prior to the Closing Date shall be paid, in
cash, by Contributors, to the extent due and owing. Bills received by
Contributors after the Closing Date that relate to expenses incurred, services
performed or other
33
amounts allocable to the period on or after the Closing Date,
shall be paid, in cash, by the Company, to the extent due and owing.
17. DESTRUCTION, LOSS OR DIMINUTION OF REAL PROPERTY. If, prior to the
Closing, all or any portion of the Real Property is damaged by fire or other
natural casualty (collectively, "DAMAGE"), or is taken or made subject to
condemnation, eminent domain or other governmental acquisition proceedings
(collectively, "EMINENT DOMAIN"), then the following procedures shall apply:
17.1. If the aggregate cost of repair or replacement in connection
with any Damage at the Real Property or the value of the Eminent Domain
(collectively, "REPAIR AND/OR REPLACEMENT") is $500,000 or less, UPREIT
shall close and take the Interests in question subject to a reduction in
the Contribution Consideration otherwise due at the Closing in the full
amount of the cost of repair and/or replacement, and the Contributors shall
be assigned from the Company all insurance proceeds relating thereto up to
$500,000. The deductible shall be paid by Contributors.
17.2. If the aggregate cost of repair and/or replacement at the Real
Property is greater than $500,000, then UPREIT, in its sole and absolute
discretion, may elect any of the following options: (i) UPREIT may
terminate this Agreement by written notice to Contributors, the Deposit
shall be returned to UPREIT and neither party shall have any further
liability to the other under this Agreement, except as otherwise provided
herein; or (ii) UPREIT may proceed to close on the Interests, in which case
the Company shall be entitled to all insurance proceeds but the
Contribution Consideration shall be reduced by the deductible applicable to
such insurance policy.
18. DEFAULT; INDEMNITY.
18.1. DEFAULT BY CONTRIBUTORS. If (i) any of Contributors'
representations and warranties contained herein shall not be true and
correct, (ii) Contributors fail to perform any of the covenants and
agreements contained herein to be performed by Contributors within the time
for performance as specified herein (including Contributors' obligation to
close), or (iii) any of the UPREIT's Conditions Precedent shall not have
been satisfied as of the Closing Date, then UPREIT may elect either to (x)
terminate this Agreement by written notice to Contributors in which case
the Deposit shall be returned to UPREIT, or (y) close and, except in the
case of clause (iii) above, file an action for either or both of specific
performance and damages to compel Contributors to cure all or any of such
default(s), in whole or in part, whereupon UPREIT shall be entitled to
deduct from the Contribution Consideration, the cost of such action and
cure, and all reasonable expenses incurred by UPREIT in connection
therewith, including, but not limited to, reasonable attorneys' fees.
Notwithstanding anything to the contrary herein and in addition to any
other remedies of UPREIT, UPREIT shall be entitled to recover actual
34
(but not consequential) damages suffered by UPREIT by reason of
Contributors' defaults hereunder, including UPREIT's Reasonable Costs.
18.2. DEFAULT BY UPREIT. In the event UPREIT defaults in its
obligations to acquire the Interests, then Contributors' sole and exclusive
remedy shall be to terminate this Agreement and retain the Deposit as
liquidated damages. Contributors shall have no other remedy for any default
by UPREIT. UPREIT and Contributors acknowledge that the damages to the
Contributors resulting from UPREIT's breach would be difficult, if not
impossible, to ascertain with any accuracy, and that the liquidated damages
amount set for in this Section 18.2 represents both parties' best efforts
to approximate such potential damages.
18.3. INDEMNIFICATION.
18.3.1. THE REIT AND THE UPREIT. Contributors agree to and do
hereby indemnify, defend and hold harmless REIT, UPREIT and the
Indemnified Parties from and against any and all Losses arising out
of, by virtue of or related in any way to, a breach of any
representation, warranty or covenant of Contributors set forth in this
Agreement, or any liabilities, obligations or expenses of the Company
(other than the Mercantile Indebtedness and the Manekin Indebtedness)
accruing prior to Closing whether discovered before or after the
Closing.
18.3.2. CONTRIBUTORS. UPREIT agrees to and does hereby indemnify,
defend and hold harmless Contributors from and against any and all
Losses (but not consequential damages) arising out of, by virtue of or
related in any way to, a breach of any representation, warranty or
covenant of UPREIT set forth in this Agreement, whether discovered
before or after the Closing.
19. SUCCESSORS AND ASSIGNS. The terms, conditions and covenants of this
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective nominees, successors, beneficiaries and assigns; provided,
however, no direct or indirect conveyance, assignment or transfer of any
interest whatsoever of, in or to the Real Property, the Interests or of this
Agreement shall be made by Contributors during the term of this Agreement.
UPREIT may assign all rights in or to the Real Property, the Interests or this
Agreement to a single member limited liability company in which its single
member is the UPREIT.
20. LITIGATION. In the event of litigation between the parties with respect
to the Real Property, the Interests this Agreement, the performance of their
respective obligations hereunder or the effect of a termination under this
Agreement, the losing party shall pay all costs and expenses incurred by the
prevailing party in connection with such litigation, including, but not limited
to, reasonable attorneys' fees of counsel selected by the prevailing party.
35
21. NOTICES. All notices to be provided hereunder shall be in writing and
directed as follows:
Contributors: c/o Manekin, LLC
7061 Columbia Gateway Drive
Columbia, Maryland 21046
Attn: President
Telephone: (410) 290-1440
Facsimile: (410) 290-1494
With a copy to: Lonnie M. Ritzer, Esquire
Shapiro Sher & Guinot
36 South Charles Street, 20th Floor
Baltimore, Maryland 21201
Telephone: (410) 385-4221
Facsimile: (410) 539-7611
UPREIT: Corporate Office Properties Trust
8815 Centre Park Drive
Suite 400
Columbia, MD 21045
Attn: John Harris Gurley, Esquire
Telephone: (410) 992-7247
Facsimile: (410) 992-7534
With a copy to
its attorney: Miles & Stockbridge P.C.
10 Light Street
Baltimore, MD 21202
Attention: Richard E. Levine
Telephone: (410) 385-3536
Facsimile: (410) 385-3700
Notices be deemed properly delivered and received when and if either (i)
personally delivered, including via facsimile; or (ii) on the first business day
after deposit with a commercial overnight courier for delivery on the next
business day. Any party may change its address for delivery of notices by
properly notifying the others pursuant to this Section 21.
22. BENEFIT. This Agreement is for the benefit only of the parties hereto
and their nominees, successors, beneficiaries and assignees as permitted in
Section 19 above
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and no other person or entity be entitled to rely hereon, receive any benefit
here from or enforce against any party hereto any provision hereof.
23. LIMITATION OF LIABILITY. All liabilities and obligations of UPREIT
under this Agreement be those of UPREIT only. Contributors shall not, under this
Agreement or any circumstances, look to any person or entity other than UPREIT,
including, but not limited to, any Affiliate of UPREIT, for performance or
satisfaction of UPREIT's obligations and liabilities in connection with this
Agreement. Without limiting the foregoing, none of the REIT or any Affiliate of
UPREIT or their respective members, partners and shareholders incur any
liability under this Agreement or any document or agreement required in
connection with this Agreement, and UPREIT not be required (in connection with
this Agreement) to execute any document or agreements that does not expressly
exculpate and release such parties and their respective successors, assigns,
affiliates, officers, shareholders, partners, employees, agents and
representatives from any liability or obligation arising out of, or in
connection with, this Agreement. Except as otherwise specifically provided in
this Agreement, none of the REIT and UPREIT shall assume or discharge any debts,
obligations, liabilities or commitments of Contributors or the Company, fixed or
contingent, known or unknown.
24. BROKERAGE. UPREIT and Contributors each represents to the other that it
has not dealt with any broker or agent in connection with this transaction. Each
party hereby indemnifies and holds harmless the other party from all loss, cost
and expense (including reasonable attorneys' fees) arising out of a breach of
its representation or undertaking set forth in this Section 24.
25. REASONABLE EFFORTS. Contributors shall use their reasonable, diligent
and good faith efforts, to perform as may be necessary or otherwise reasonably
requested by UPREIT to effectuate the Exchange, and to otherwise carry out the
purposes of this Agreement.
26. MISCELLANEOUS.
26.1. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties with respect to the transaction
contemplated herein, and all prior or contemporaneous oral agreements,
understandings, representations and statements, and all prior written
agreements, understandings, letters of intent and proposals are merged into
this Agreement. Neither this Agreement nor any provisions hereof may be
waived, modified, amended, discharged or terminated except by an instrument
in writing signed by the party against which the enforcement of such
waiver, modification, amendment, discharge or termination is sought, and
then only to the extent set forth in such instrument.
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26.2. CONSTRUCTION. This Agreement shall not be construed more
strictly against one party than against the other merely by virtue of the
fact that it may have been prepared by counsel for one of the parties, it
being recognized that both Contributors and UPREIT have contributed
substantially and materially to the preparation of this Agreement. The
headings of various Sections in this Agreement are for convenience only,
and are not to be utilized in construing the content or meaning of the
substantive provisions hereof.
26.3. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Maryland.
26.4. PARTIAL INVALIDITY. The provisions hereof shall be deemed
independent and severable, and the invalidity or partial invalidity or
enforceability of any one provision shall not affect the validity of
enforceability of any other provision hereof.
26.5. EXPENSES. Except to the extent as otherwise expressly provided
to the contrary herein, UPREIT and Contributors shall bear its own
respective costs and expenses relating to the transactions contemplated
hereby, including, without limitation, fees and expenses of legal counsel
or other representatives for the services used, hired or connected with the
proposed transactions mentioned above.
26.6. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any of which may contain the signatures of less
than all parties, and all of which together shall constitute a single
agreement.
26.7. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors.
26.8. FURTHER ASSURANCES. Contributors agree to execute and
acknowledge and deliver any further agreements, documents or instruments
that are necessary or desirable in the judgment of UPREIT to carry out the
transactions contemplated hereby.
26.9 SURVIVAL. All representations, warranties, covenants and
indemnities contained herein shall survive the Closing.
26.10. ESCROW PROVISIONS. The Title Company shall hold the Deposit in
accordance with the terms and provisions of this Agreement, subject to the
following:
26.10.1. OBLIGATIONS. The Title Company undertakes to perform
only such duties as are expressly set forth in this Agreement and no
implied duties or obligations be read into this Agreement against the
Title Company.
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26.10.2. RELIANCE. The Title Company may act in reliance upon any
writing or instrument or signature which it, in good faith, believes,
and any statement or assertion contained in such writing or
instrument, and may assume that any person purporting to give any
writing, notice, advice or instrument in connection with the
provisions of this Agreement has been duly authorized to do so. The
Title Company shall not be liable in any manner for the sufficiency or
correctness as to form, manner and execution, or validity of any
instrument deposited in escrow, nor as to the identity, authority, or
right of any person executing the same, and the Title Company's duties
under this Agreement be limited to those provided in this Agreement.
26.10.3. DISPUTES. If the parties (including the Title Company)
are in disagreement about the interpretation of this Agreement, or
about their respective rights and obligations, or the propriety of any
action contemplated by the Title Company, or the application of the
Deposit, the Title Company shall hold the Deposit until the receipt of
written instructions from both the UPREIT and the Contributors or a
final order of a court of competent jurisdiction. In addition, in any
such event, the Title Company may, but not be required to, file an
action in interpleader to resolve the disagreement. The Title Company
shall be indemnified for all costs and reasonable attorneys' fees in
its capacity as the Title Company in connection with any such
interpleader action and shall be fully protected in suspending all or
part of its activities under this Agreement until a final judgment in
the interpleader action is received.
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IN WITNESS WHEREOF, the parties hereto have executed this Contribution
Agreement the day and year first above written.
CONTRIBUTORS:
MANEKIN INVESTMENT ASSOCIATES 3
LLC, a Maryland limited liability company
By: /s/ Louis C. LaPenna (SEAL)
--------------------------------
Louis C. LaPenna
Authorized Person
RA & DM, INC.
By: /s/ Louis C. LaPenna (SEAL)
--------------------------------
Louis C. LaPenna
Vice President
UPREIT:
CORPORATE OFFICE PROPERTIES, L.P.
By: Corporate Office Properties Trust,
Its general partner
By: /s/ Roger A. Waesche, Jr. (SEAL)
-------------------------------
Name: Roger A. Waesche, Jr.
Title: Senior Vice President
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