EXHIBIT 10.1
PURCHASE AND CONTRIBUTION AGREEMENT
This Purchase and Contribution Agreement (this "Agreement"), dated
August 6, 1998, is by and among Brandywine Realty Trust, a Maryland real estate
investment trust ("Buyer Parent"), and Brandywine Operating Partnership L.P., a
Delaware limited partnership ("Buyer OP" and, together with Buyer Parent,
"Buyers"), LF Strategic Realty Investors L.P., Prometheus AAPT Holdings, L.L.C.
("Prometheus"), Commonwealth Atlantic Operation Properties Inc. ("CAOPI"),
Commonwealth Atlantic Land IV Inc. ("CAL IV"), Commonwealth Atlantic Land II
Inc. ("CAL II"), Commonwealth Atlantic Development Inc. ("CAD") and Commonwealth
Atlantic Land Company ("CALC" and, together with CAOPI, CAL IV, CAL II and CAD,
individually and collectively, "CAP Sellers" and, together with Prometheus,
individually and collectively, "Sellers").
RECITALS
A. Prometheus now owns in excess of 99% of the outstanding Equity
Interests in Atlantic American Properties Trust ("AAPT"); and CAP Sellers now
own all of the Contributed Assets (as defined below).
B. Buyers desire to acquire from Sellers, and Sellers desire to sell or
contribute to Buyers, as applicable, all of the outstanding Equity Interests in
AAPT (the "Acquired Equity Interests") and all of the Contributed Assets,
subject to and otherwise in accordance with the terms and conditions of this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"7350 Tilghman Drive Letter" shall mean the letter agreement, dated
as of the date hereof, between Sellers and Buyers and relating to the asset
known as 7350 Tilghman Drive.
"8260 Greensboro Drive Letter" shall mean the letter agreement,
dated as the date hereof, between Sellers and Buyers and relating to the asset
known as 8260 Greensboro Drive.
"AAPT Financial Statements" shall mean (i) the audited consolidated
balance sheet of AAPT and its Subsidiaries as of December 31, 1997 and the
related audited statements of operations and cash flows for the eight month
period ending December 31, 1997 and (ii) the unaudited consolidated balance
sheet of AAPT and its Subsidiaries as of June 30, 1998 and the related unaudited
statements of operations and cash flows for the six month period ending June 30,
1998.
"AAPT Operations" shall mean the activities of owning, operating,
leasing, managing, acquiring, developing, selling, disposing and transferring
the Real Property set forth on Schedule 4.4(a)(1), as conducted by the Acquired
Entity and the Acquired Subsidiaries on the date hereof.
"AAPT Repaid Indebtedness" shall mean all of the Indebtedness of
the Acquired Entity and the Acquired Subsidiaries set forth on Schedule 1.1(a)
hereto to be repaid by Sellers on or prior to the Closing Date as provided in
Section 8.7.
"AAPT Seller" shall mean Prometheus.
"AAPT Transferred Indebtedness" shall mean only the Indebtedness of
the Acquired Entity and the Acquired Subsidiaries set forth on Schedule 1.1(b)
hereto, together with the Acquired Entity's proportionate share of the
Indebtedness, if any, of IR Northlight Associates II (to the extent IR
Northlight Associates II remains a Partially Owned Partnership at Closing and
Buyer acquires a 50% interest in IR Northlight Associates II).
"Acquired Entity" shall mean AAPT.
"Acquired Equity Interests" shall mean all of the Equity Interests
in the Acquired Entity.
"Acquired Subsidiaries" shall mean each of the Subsidiaries of the
Acquired Entity, all of which are set forth on Schedule 1.1(c) hereto.
"Affiliate" shall mean, with respect to any Person, (a) each other
Person that, directly or indirectly, owns or controls, whether beneficially or
as a trustee, guardian or other fiduciary, 10% or more of the Equity Interests
in such Person, (b) each other Person that controls, is controlled by or is
under common control with such Person, (c) each of such Person's officers,
directors, trustees, employees, partners and members and (d) the immediate
family members of each of such Person's officers, directors, trustees,
employees, partners, members and, if natural persons, Affiliates. For the
purpose of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
"Asset Sale Proceeds" shall mean proceeds from the sale of assets
pursuant to the exercise of Purchase\Put Options, without reduction for costs
incurred in effecting any such sale.
"Assignment and Assumption Agreements" shall mean an assignment and
assumption agreement in respect of the Contributed Assets between Buyer OP and
CAP Sellers, substantially in the form attached hereto as Exhibit A.
"Assumption Agreements" shall mean an assumption agreement in
respect of the Assumed Liabilities between Buyer OP and CAP Sellers,
substantially in the form attached hereto as Exhibit B.
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"Balance Sheet" shall mean the consolidated unaudited balance
sheets of AAPT with respect to its Operations at the Balance Sheet Date and the
separate unaudited balance sheets for each of the properties listed on Schedules
4.4(a)(2) at the Balance Sheet Date attached hereto as Schedule 1.1(d).
"Balance Sheet Date" shall mean June 30, 1998.
"Bell Atlantic Management Agreement" shall mean the Tower
Management Agreement, dated as of April 30, 1998, between Bell Atlantic
Properties, Inc. and Atlantic American Properties Management, Inc.
"Bell Atlantic Purchase Agreement" shall mean the Asset Purchase
Agreement, dated as of March 14, 1997, by and among AAPT (as assignee of
Atlantic American Properties, Inc.), Penn's Landing Marine Trade Center
Associates, 1760 Market Street Associates, Bell Atlantic Properties, Inc. and
Bell Atlantic Investment, Inc, as amended and modified from time to time through
the date hereof.
"Bills of Sale and Assignment" shall mean a bill of sale and
assignment in respect of the Contributed Assets, executed by CAP Sellers,
substantially in the form attached hereto as Exhibit C.
"Books and Records" shall mean, as to any Person, all books,
records, lists, ledgers, files, reports, plans, drawings and operating records
of every kind primarily relating to, or used in the conduct of, the Operations
of such Person and customers, suppliers or distributors of the Operations of
such Person, including, without limitation, (a) all disk or tape files,
printouts, runs or other computer-prepared information, (b) all product,
business and marketing plans, (c) all separate Tax Returns of such Person and
(d) all sales, maintenance and production records, but excluding Privileged
Materials.
"Business Day" shall mean any day other than Saturday or Sunday or
a day on which commercial banks are required or authorized to close in New York
City, NY.
"Buyer Operations" shall mean the activities of owning, operating,
leasing, managing, acquiring, developing, selling, disposing and transferring
its real property, as conducted by Buyers or their Affiliates on the date
hereof.
"Buyer Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of Buyer OP, as amended; provided that nothing
in this Agreement shall restrict the ability of Buyer OP or its partners to
amend the Buyer Partnership Agreement after the date hereof.
"Buyer Termination Date" shall mean the day which is one hundred
and twenty (120) days after the date hereof (provided that such date may be
extended by up to twenty (20) days at the option of Sellers if the occurrence of
force majeure events prevent a closing condition or conditions from being
satisfied by Sellers).
"Buyers" shall have the meaning set forth in the Recitals.
"CAP Financial Statements" shall mean (i) the separate unaudited
balance sheet for each of the properties listed on Schedule 4.4(a)(2) (other
than the Construction Property) as of December 31, 1997 and the related
unaudited statements of operations and cash flows for the year ending December
31, 1997 and (ii) the separate unaudited balance sheet for each of the
properties listed on Schedule 4.4(a)(2) (other than the
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Construction Property) as of June 30, 1998 and the related unaudited statements
of operations and cash flows for the six month period ending June 30, 1998.
"CAP Operations" shall mean the activities of owning, operating,
leasing, managing, acquiring, developing, selling, disposing and transferring
the Real Property set forth on Schedule 4.4(a)(2), as conducted by CAP Sellers
on the date hereof.
"CAP Sellers" shall mean, individually and collectively,
Commonwealth Atlantic Operation Properties, Inc., Commonwealth Atlantic Land IV,
Inc., Commonwealth Atlantic Land II, Inc., Commonwealth Atlantic Development,
Inc. and Commonwealth Atlantic Land Company.
"CAP Repaid Indebtedness" shall mean all of the Indebtedness of the
CAP Sellers set forth on Schedule 1.1(f) hereto to be repaid by Sellers on or
prior to the Closing Date as provided in Section 8.7.
"CAP Transferred Indebtedness" shall mean only the Indebtedness of
the CAP Sellers set forth on Schedule 1.1(e) hereto, together with the Cap
Sellers' proportionate share of the Indebtedness of the Partially Owned
Partnerships as set forth on Schedule 1.1(e) hereto.
"CAPI" shall mean Commonwealth Atlantic Properties Inc.
"Capital Lease" shall mean, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee that,
in accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as a capital lease in a note to such balance sheet.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Carved-Out Assets" shall mean the Buyer Carved-Out Assets, the
Sellers Carved-Out Assets or the Environmental Carved-Out Assets, as applicable.
"CCM Management Agreement" shall mean the CCM Management Agreement,
dated as of April 30, 1997, by and between Bell Atlantic Properties, Inc. and
Atlantic American Properties Management, Inc.
"Closing" shall mean the consummation of the transactions
contemplated hereby on the Closing Date.
"Closing Date" shall mean August 31, 1998 or, subject to Article 10
hereof, such other date as promptly thereafter as of which all of the conditions
set forth in Articles 7 and 8 shall have been satisfied or duly waived or, if
the parties hereto shall mutually agree upon a different date, the date upon
which they shall have mutually agreed upon in writing.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1989, as amended.
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"Code" shall mean the Internal Revenue Code of 1986, as amended
(including, without limitation, any successor internal revenue law).
"Confidentiality Agreement" shall mean that certain confidentiality
letter agreement dated August 14, 1998, by and among Buyer Parent, Smith Barney,
Inc. and Lazard Freres Real Estate Investors, L.L.C.
"Consolidated Net Worth" shall mean, with respect to any Person as
of any date, the tangible net worth of such Person and its 80% or more owned
Subsidiaries as of such date.
"Contract" shall mean, with respect to any Person, any legally
binding oral or written agreement, arrangement, commitment, contract, lease,
license, instrument, obligation, commitment, purchase and sales order and other
executory commitment to which such Person and/or its Subsidiaries is a party and
which relates primarily to its Operations.
"Contributed Assets" shall mean all of CAP Sellers' right, title
and interest in and to all of the assets, properties, rights, contracts and
claims that are used or useful in the CAP Operations, in each case of every kind
and description, wherever located, whether tangible or intangible, real,
personal or mixed, as the same shall exist on the Closing Date (other than the
Excluded Assets), including, without limitation:
(a) all of its Real Property listed in Schedule 4.4(a)(2) and all
rights of CAP Sellers affecting such Real Property;
(b) all assets reflected on the Balance Sheet for the properties
listed on 4.4(a)(2) (other than the Excluded Assets pursuant to Section 2.3(f));
(c) all of CAP Sellers' Fixtures and Equipment relating to the Real
Property owned by the CAP Sellers;
(d) all intellectual property owned by CAP Sellers, or owned by
third parties and used by CAP Sellers, in connection with other Contributed
Assets or the CAP Operations;
(e) all Permits relating to the Real Property owned by the CAP
Sellers and held by any CAP Seller; and
(f) all rights under Contracts relating to the Real Property owned
by the CAP Sellers to which any CAP Seller is a party.
"Deeds" shall mean the customary form of deed for transfer of fee
simple title to the Real Property in the same form as obtained by Seller from
its grantor in the jurisdiction in which such Real Property is situated.
"Encumbrance" shall mean, with respect to any Person, any of the
following affecting the assets of such Person's business: pledge, option,
charge, easement, right-of-way, covenant, condition, encroachment, restriction,
conditional sales agreement or other encumbrance or other right of third
parties, whether voluntarily incurred or arising by operation of law, and
includes, without limitation, all encumbrances and any agreement to give any of
the foregoing in the future.
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"Environmental Laws" shall mean all applicable federal, state,
district and local laws, all rules or regulations promulgated thereunder, and
all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, in each case, relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, ground water or land). Environmental Laws shall
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Toxic Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as amended, the
Occupational Health and Safety Act, as amended, the Resource Conservation and
Recovery Act, as amended, the Federal Water Pollution Control Act, as amended,
the Safe Drinking Water Act, as amended, and the Clean Air Act, as amended.
"Equity Interests" shall mean all shares, options, warrants,
general or limited partnership interests, membership interests, participations
or other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or other entity whether voting or
nonvoting, including, without limitation, common stock, preferred stock or any
other "equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange Commission
under the Exchange Act).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended (including, without limitation, any successor legislation
thereto), and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Person, any trade
or business (whether or not incorporated) under common control with such Person
or any of its Subsidiaries and which, together with such Person or such
Subsidiary, are treated as a single employer within the meaning of Section 4
14(b), (c), (m) or (o) of the Code.
"Estimated Closing AAPT Transferred Indebtedness" shall mean
$123,000,000, representing all principal, interest, fees, costs, expenses and
other amounts which would be due and owing with respect to the AAPT Transferred
Indebtedness assuming the Closing occurs on August 31, 1998.
"Estimated Closing CAP Transferred Indebtedness" shall mean
$112,900,000, representing all principal, interest, fees, costs, expenses and
other amounts which would be due and owing with respect to the CAP Transferred
Indebtedness assuming the Closing occurs on August 31, 1998.
"Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended (including, without limitation, any successor legislation thereto),
and the rules and regulations promulgated thereunder.
"Facilities" shall mean, with respect to any Transferring Party,
all Real Property and related facilities (or such portion of such Real Property
and related facilities) owned or leased by such Transferring Party from third
parties and used in the operation of the Operations of such Transferring Party,
as more fully identified on Schedules 4.4(a)(1) and 4.4(a)(2) attached hereto.
"Financial Product Agreement" shall mean any (a) interest rate,
currency, commodity or other swap, cap, floor, collar, insurance or similar
agreement or arrangement, (b) put, call, futures or forward contract, straddle,
commodities contract, option or warrant, (c) repurchase or reverse repurchase or
similar agreement or arrangement or (d) any other financial, derivative, hedge,
or speculative product, service or agreement, contract or arrangement.
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"Financial Statements" shall mean the (a) AAPT Financial
Statements, (b) the CAP Financial Statements and (c) the Partially Owned
Partnership Financial Statements.
"Fixtures and Equipment" shall mean, with respect to any Person,
all of the furniture, fixtures, shelving, display cases, refrigerators,
furnishings, machinery, equipment, spare parts, supplies, appliances, vehicles,
computer equipment (including all related hardware, software and other technical
equipment used in the operation of such Person's Operations) and other tangible
personal property used or useful in such Person's Operations in which the such
Person has any interest and which are located in, at or upon such Person's
material real property or facilities.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
state, county, local or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Grande A Loan Agreement" shall mean the Loan Agreement, dated as
of June 30, 1997, between Goldman Sachs Mortgage Company and the borrowers named
therein, as amended from time to time through the date hereof.
"Grande A Properties" shall mean the Real Property set forth on
Schedule 5.10(a).
"Grande A Single Purpose Entity" shall mean a "Single Purpose
Entity" as defined in the Grande A Loan Agreement.
"Grande B Loan Agreement" shall mean the Loan Agreement, dated as
of June 30, 1997, between Goldman Sachs Mortgage Company and Commonwealth
Atlantic Operating Properties Inc., as amended from time to time through the
date hereof.
"Grande B Properties" shall mean the Real Property set forth on
Schedule 5.10(b).
"Grande B Single Purpose Entity" shall mean a "Single Purpose
Entity" as defined in the Grande B Loan Agreement.
"Grande Loan Documents" shall mean each of the Grande A Loan
Agreement and the Grande B Loan Agreement.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) to indemnify the owner of such primary
obligation against loss in respect thereof.
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"Hazardous Substances" shall mean any substance, chemical compound,
product, solid, gas, liquid, byproduct, pollutant, contaminant or material which
is hazardous or toxic, and includes, without limitation, any such substance
classified or regulated as a "Hazardous Waste," "Hazardous Substance,"
"Extremely Hazardous Substance" or any pollutant regulated pursuant to any
applicable Environmental Law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. section 9601
at seq.), as amended, the Resource Conservation and Recovery Act (42 U.S.C.
section 6901 et seq.), as amended, the Federal Water Pollution Control Act (33
U.S.C. section 1251 et seq.), as amended, the Clean Air Act (42 U.S.C. section
7401 et seq.), as amended, the Toxic Substances Control Act (15 U.S.C. section
2601 et seq.), as amended, the Occupational Safety and Health Act (29 U.S.C.
section 651 et seq.), as amended, the Hazardous Materials Transportation Act (49
U.S.C. section 1801 et seq), as amended, the Emergency Planning and Community
Right-to- Know Act (42 U.S.C. section 4321 et seq.), as amended, and the Safe
Drinking Water Act (42 U.S.C. section 300(f) et seq.), as amended.
"Indebtedness" of any Person shall mean all principal, interest,
fees, costs, expenses and other amounts which may be due and owing or which may
become due and owing with respect to (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property (including,
without limitation, reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers acceptances, whether or not matured,
but not including obligations to trade creditors or obligations under motor
vehicle leases or installment contracts, in each case which are not in default
and which are incurred in the ordinary course of business and consistent with
prudent business and commercial practice), (b) all obligations evidenced by
notes, bonds, debentures or similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreements (other
than in respect of motor vehicles and installment contracts of the type
described in the parenthetical in clause (a) above) with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all Capital Lease Obligations, (e) all Guaranteed
Indebtedness, (f) all items referred to in clause (a), (b), (c), (d) or (e)
above secured by (or for which the holder thereof has an existing right,
contingent or otherwise, to be secured by) any Encumbrance upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such item and (g) all liabilities, indebtedness and other obligations under
Financial Product Agreements.
"Interest Rate" shall mean the Prime Rate as published by The Wall
Street Journal on the date of payment.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"Lazard Entities" means LF Strategic Realty Investors, L.P., Lazard
Freres Real Estate Investors LLC and any Affiliates thereof.
"Leverage Ratio" shall mean, as of any date of determination, for
any Person, a percentage equal to (i) the aggregate amount of indebtedness of
such Person and its consolidated subsidiaries as of such date less the aggregate
amount of cash or cash equivalents held by or on behalf of such Person as
additional security for such indebtedness and its consolidated subsidiaries as
of such date, determined in accordance with GAAP, divided by (ii) the fair
market value of the assets of such Person and its consolidated subsidiaries as
of such date (which, in the case of any Person whose common equity securities
are publicly traded or redeemable for publicly traded securities, shall be
deemed to equal the sum of (A) the market value of the common equity securities
of such Person as of such date (which, in the case of common partnership
interests
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redeemable for publicly traded securities or held by a real estate investment
trust in an "UPREIT" structure, shall equal the closing price on the date of
determination of the number of such publicly traded securities for which such
partnership interests are redeemable or with respect to which such real estate
investment trust received such partnership interests) plus (B) the liquidation
preference of all outstanding preferred stock as of such date plus (C) the
aggregate amount of indebtedness of such Person and its consolidated
subsidiaries as of such date).
"Management Company Voting Stock" shall mean the voting common
stock of Atlantic American Properties Management II, Inc. not currently held by
the Acquired Entity or the Acquired Subsidiaries (which shares represent the
only remaining equity interest in Atlantic American Properties Management II,
Inc. not currently held by the Acquired Entity or the Acquired Subsidiaries).
"Material Adverse Effect" or "Material Adverse Change" shall mean
events, facts or circumstances which would reasonably be expected to result in a
material adverse change or effect, individually or in the aggregate, on the
operations, assets, liabilities, condition (financial or otherwise), results of
operations or cash flow of the applicable Person's Operations, taken as a whole
(provided that no Material Adverse Effect or Material Adverse Change shall occur
with respect to the Transferring Parties, the Acquired Equity Interests or the
Contributed Assets unless the adverse effect or change, individually or in the
aggregate, would reasonably be expected to result in Losses as to which
indemnity may be sought under the indemnity provisions hereunder (without regard
to the Sellers Indemnity Deductible or the Sellers Indemnity Cap) or a
diminution in value in an amount equal to or greater than $34.0 million).
"Material Contracts" shall mean, with respect to any Person, any
Contracts to which such Person or any of its Subsidiaries is a party and which
relates to its Operations which either (i) involve payments by or to any Person,
of more than $100,000 in cash or other property or services annually, (ii)
extend for a term of more than one year from the date hereof (in each case,
unless the same is cancelable on not more than thirty (30) days' notice without
fee, premium or penalty), (iii) relates to Transferred Indebtedness or Capital
Lease Obligations; provided, however, that Tenant Leases shall not be Material
Contracts or (iv) employment contracts or consulting agreements not terminable
at will without penalty or liability (other than consulting arrangements with
respect to construction at the Construction Property). Material Contracts shall
also include the partnership agreements and other charter documents of the
Partially Owned Partnerships.
"Operations" shall mean, with respect to the Acquired Entity or any
Acquired Subsidiary, the AAPT Operations; with respect to CAP Sellers, the CAP
Operations; and with respect to Buyers, the Buyer Operations.
"Partially Owned Partnership Financial Statements" shall mean (i)
the audited balance sheet of each Partially Owned Partnership as of December 31,
1997 and the related audited statements of operations and cash flows for each
such entity for the one year period ending December 31, 1997 and (ii) the
unaudited balance sheet of each partially Owned Partnership as of June 30, 1998
and the related unaudited statements of operations and cash flows for each such
entity for the six month period ending June 30, 1998.
"Partially Owned Partnerships" shall mean IR Northlight Associates
II and Interstate Center Associates.
"Permits" shall mean, with respect to any Person, all (a) licenses
held or otherwise used by such Person and its Subsidiaries in respect of its
Operations and (b) approvals, authorizations, consents,
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licenses, certificates of occupancy, zoning letters, orders and permits,
including environmental permits, of all Governmental Authorities required (i) in
connection with the operation of its Operations or (ii) to permit the continued
ownership, lease, use, operation, maintenance or development by such Person and
its Subsidiaries of any of its real property, or the operation of business
conducted thereon by such Person and its Subsidiaries in the manner currently
conducted.
"Permitted Encumbrances" shall mean, with respect to any
Transferring Party:
(i) any Encumbrances for Taxes (A) not yet due and payable
or (B) being contested in good faith by appropriate proceedings and, in the case
of contest, either paid by a Transferring Party or set forth on Schedule 4.17;
provided, that if such Encumbrances are set forth on Schedule 4.17, the Title
Company, at Closing, shall not take exception for the non-payment of the same
(e.g. Buyers shall be insured by the Title Company against losses by reason of
such contest);
(ii) statutory liens of landlords, Encumbrances of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business, for sums not yet due and payable;
(iii) Encumbrances incurred or deposits made in the ordinary
course of business in connection with workers compensation, unemployment
insurance and other types of social security or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money bonds and similar
obligations, such money bonds and similar obligations to be identified on
Schedule 4.17;
(iv) purchase money liens incurred in the ordinary course of
business and identified on Schedule 4.17;
(v) privileges, licenses or rights of public utilities and
public service companies, and recorded easements, recorded restrictions,
recorded agreements and similar recorded items, in each case which do not
materially interfere with the conduct of its Operations or with the use of
assets to be purchased pursuant hereto as presently conducted or used and do not
materially affect the value of such assets;
(vi) minor imperfections in title and minor encroachments,
if any, not material in amount and that individually or in the aggregate do not
materially interfere with the conduct of its Operations or with the use of the
assets to be purchased pursuant hereto as presently conducted or used and do not
materially affect the value of such assets;
(vii) the rights of tenants, subtenants, licensees or other
occupants or Persons under Tenant Leases or such Transferring Party's Material
Contracts;
(viii) Encumbrances arising under zoning, environmental,
municipal building and all other laws applicable to the ownership, use or
development of, or the right to maintain or operate the Real Property, provided
that none of the same enacted between the date hereof and the Closing Date shall
materially adversely affect the use of the Real Property for its current use;
(ix) all other Encumbrances, provided the Title Company
will, at the Closing, insure (at no additional cost) against collection of such
liens from Buyers or the Real Property;
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(x) possible lack or revocability of the right, if any, to
maintain or use or receive value for any vaults, marquees, stoops, awnings,
signs and sidewalk openings provided the same shall not prohibit or materially
adversely affect the use of any material portion of the existing improvements
for its current use;
(xi) Encumbrances arising under and from the 8260 Greensboro
Drive Letter and agreements entered into in accordance with Section 2.6 with
approval of Buyer; and
(xii) all matters appearing on Schedule 1.1(j).
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, business trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or Governmental Authority.
"Personnel" shall mean, with respect to any Person, the directors,
trustees, officers and employees of such Person.
"Plan" shall mean, with respect to any Person, any "employee
benefit plan," as defined in Section 3(3) of ERISA, and any other employee
benefit arrangement or payroll practice, including, without limitation,
severance pay, sick leave, vacation pay, salary continuation for disability,
employment, consulting or other compensation agreement, retirement, pension,
deferred compensation, bonus, stock purchase, stock option, hospitalization,
medical insurance, life insurance or scholarship programs maintained by such
Person, any of its Subsidiaries or any of their ERISA Affiliates or to which
such Person, any of its Subsidiaries or any of their ERISA Affiliates
contributes or are or has been obligated to contribute, or under which such
Person, any of its Subsidiaries or any of their ERISA Affiliates may have any
liability or obligation (whether oral or written and whether or not terminated).
"Preferred Shares" shall mean the preferred shares of beneficial
interest of Buyer Parent having terms and conditions substantially as set forth
on Exhibit D hereto.
"Preferred Units" shall mean Class B Preferred Units of Buyer OP
having terms and conditions substantially as set forth on Exhibit E hereto.
"Privileged Materials" shall mean (i) internal valuations and
analyses prepared by any Lazard Entity; (ii) communications between any Lazard
Entity and Sellers and their legal counsel and all related attorney-client work
product; (iii) information not primarily related to the assets to be purchased
pursuant hereto or any Operations; and (iv) such other information that any
Lazard Entity or Seller determines, based on reasonable advice of counsel, may
be required to be reported to a regulatory agency if disclosed to Buyers, but
that may not be required to be reported to a regulatory agency if not disclosed
to Buyers. Any waiver by any Lazard Entity or Seller of any privilege or
confidentiality shall be effective only if in writing, shall apply only to the
specific material in question and shall not be deemed a waiver with respect to
any other Privileged Materials. Notwithstanding the foregoing, information
falling within clause (iv) shall not be treated as Privileged Materials if a
reasonable purchaser would consider such information material to its purchase
when viewed in the context of the other information provided to it by Sellers.
"Purchase\Put Options" shall mean any rights of first offer, rights
of first refusal, option rights and agreements to purchase, acquire or ground
lease any of the assets, or any interest therein, or to sell, dispose
11
or transfer (put) any of the assets, or any interest therein, of any
Transferring Party (other than the Construction Property Option).
"Remaining Interest" shall mean the 100 shares of Series A
Preferred Stock in AAPT not currently held by Prometheus (which 100 shares
constitute the only remaining equity interest in AAPT not currently held by
Prometheus).
"Repaid Indebtedness" shall mean the AAPT Repaid Indebtedness and
the CAP Repaid Indebtedness to be repaid by Sellers on or prior to the Closing
Date as provided in Section 8.7.
"Representative" shall mean with respect to any Person, any
attorney, financial advisor, agent, consultant or other authorized
representative of such Person.
"RF Purchase Agreement" shall mean the Stock Purchase Agreement,
dated as of October 25, 1996, by and between Virginia Retirement System and LF
Strategic Realty Investors, L.P., as amended and modified from time to time
through the date hereof.
"Rubenstein Note" shall mean the $12.9 million note issued by The
Rubenstein Company, L.P. in favor of AAPOP 2, L.P. further described on Schedule
1.1(l).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended
(or any successor legislation), and all rules and regulations promulgated
thereunder.
"Seller Termination Date" shall mean the day which is one hundred
and twenty (120) days after the date hereof (provided that such date may be
extended by up to twenty (20) days at the option of Buyers if the occurrence of
force majeure events prevent a closing condition or conditions from being
satisfied by Buyers).
"Sellers" shall have the meaning set forth in the Recitals.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Equity
Interests is at the time, directly or indirectly, owned legally or beneficially
by such Person and/or one or more Subsidiaries of such Person and (b) any
partnership, trust, limited liability company or other entity in which such
Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50%.
"Tax Return" shall mean any report, return, statement or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Taxes" shall mean any taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, including any interest,
penalties, additions to tax or additional amounts that may become payable in
respect thereof imposed by any federal, state, local or other governmental or
taxing authority, which taxes shall include, without limitation, any income
taxes, payroll and employee withholding taxes, unemployment insurance, social
security, sales and use taxes, value-added taxes, excise taxes, franchise
12
taxes, gross receipts taxes, occupation taxes, real and personal property taxes,
stamp taxes, transfer taxes, real property transfer gains taxes, workers
compensation and other obligations of the same or of a similar nature.
"Tenant Leases" shall mean oral or written agreements, arrangements
or commitments relating to the leasing or occupancy of all or any portion of the
Real Property, each of which is listed on Schedule 4.4(i).
"Title Company" shall mean the National Title Service of
Philadelphia of Commonwealth Land Title Insurance Company: Attention M. Gordon
Daniels.
"Transaction Documents" shall mean all documents executed at
Closing, including, but not limited to, this Agreement, the Assignment and
Assumption Agreements, the Assumption Agreements and the Bills of Sale and
Assignment.
"Transferred Indebtedness" shall mean the AAPT Transferred
Indebtedness and the CAP Transferred Indebtedness.
"Transferring Party" shall mean each of the Acquired Entity, the
Acquired Subsidiaries and CAP Sellers.
"Treasury Regulations" shall mean the applicable regulations
promulgated under the Code.
"WARN" shall mean the Workers Adjustment and Retraining
Notification Act, as amended, and any other applicable federal, state or local
plant closing statutes.
1.2 Other Defined Terms. In addition to the terms defined in the
Recitals to this Agreement and Section 1.1, the following terms shall have the
meanings defined for such terms in the Sections set forth below:
Term Section
---- -------
"AAPT Indemnified Claim"....................... 9.2(a)(iii)
"AAPT Purchase Price".......................... 2.1(b)
"Accountants".................................. 10.19
"Actions"...................................... 4.11
"Additional Conditions"........................ 2.6
"Additional Environmental Testing"............. 6.2(b)
"Additional Rent".............................. 2.4(c)
"Aggregate Allocated Debt"..................... 11.1
"Assigned Amount".............................. 2.4(g)(i)
"Assumed Liabilities".......................... 2.10(a)
"Base Building"................................ 2.6
"Basic Rent"................................... 2.4(c)
"Buyer Carved-Out Assets"...................... 8.3
"Buyer Disclosure Schedule".................... Article 5 Preamble
"Buyer Financial Statements"................... 5.15
"Buyer Indemnified Claim"...................... 9.2(a)(iii)
"Buyer Indemnified Party"...................... 9.2(a)(iii)
13
"Buyer Indemnity Cap".......................... 9.2(c)
"Buyer Indemnity Deductible"................... 9.2(c)
"Buyer Missing Consents"....................... 8.3
"Buyer Personnel".............................. 10.16
"Buyers' Auditor".............................. 2.8
"CAP Consideration"............................ 2.2(b)
"CAP Indemnified Claim"........................ 9.2(a)(iii)
"CAP Sellers Contribution Obligation".......... 11.2(a)
"Cap/Ex Requirements".......................... 2.4(g)(i)
"Capital Interest"............................. 4.17(g)
"Combined Allocated Debt Amount"............... 11.1
"Consolidation Transaction".................... 11.3(d)
"Construction Property"........................ 2.6
"Construction Property Option"................. 2.6
"Construction Property Purchase Agreement"..... 2.6
"Construction Property Purchase Price"......... 2.6
"Contribution"................................. 2.2(a)
"Covered Loan"................................. 11.2(a)
"Dealer Property".............................. 4.17(g)
"Earned Amount"................................ 2.6
"Environmental Carved-Out Assets".............. 6.2(b)
"Environmental Matters"........................ 4.13
"Escrow Agent"................................. 2.12
"Escrow Agreement"............................. 2.12
"Escrow Deposit"............................... 2.12
"Estimated Apportionments"..................... 2.7
"Exchanged Property"........................... 11.3(c)
"Excluded Assets".............................. 2.3
"Excluded Liabilities"......................... 2.11(a)
"Grande B Loan"................................ 11.2(c)
"Independent Auditor".......................... 2.8
"Indemnified Tenant"........................... 8.8
"Insurance Proceeds"........................... 6.7
"Insured Events"............................... 9.8
"knowledge".................................... 10.16
"Laws"......................................... 4.13
"Leasehold Estate"............................. 4.4(a)
"Leasing Costs"................................ 2.4(g)(i)
"Lessee"....................................... 4.17(1)(i)
"Letter"....................................... 10.19
"Lockout Expiration Date"...................... 11.2(b)
"Losses"....................................... 9.2(a)
"Management Lease"............................. 4.22
"Minimum Coverage Amount"...................... 11.2(b)
"Non REIT Services"............................ 4.17(1)(iv)
"Partnership Account Balance".................. 2.5(a)
14
"Pre-Closing Partial Period"................... 4.1(i)
"Percentage Rents"............................. 2.4(c)
"Post-Closing Audit"........................... 2.8
"Real Property"................................ 4.4(a)
"Real Property Leases"......................... 4.4(a)
"Required Form"................................ 8.8
"Savings Plan"................................. 9.7(c)
"Seller Disclosure Schedule"................... Article 4 Preamble
"Seller Personnel"............................. 10.16
"Sellers Carved-Out Assets".................... 7.4
"Sellers Environmental Consent"................ 6.2(b)
"Sellers Indemnified Claim".................... 9.2(a)(i)
"Sellers Indemnified Party".................... 9.2(a)(i)
"Sellers Indemnity CAP"........................ 9.2(c)
"Sellers Indemnity Deductible"................. 9.2(c)
"Sellers Missing Consents"..................... 7.4
"Specific Projects"............................ 4.1(e)
"Specified Items".............................. 2.4(g)(i)
"Specified Projects"........................... 4.1(e)
"Successor Partnership"........................ 11.3(d)
"Temporary Investment of New Capital".......... 4.17(g)
"Tenant Charges"............................... 2.4(b)(ii)
"Tenant Claim"................................. 4.4(i)
"Transparent Subsidiaries"..................... 11.2(a)
"Use Permit"................................... 2.6
"Utilities".................................... 4.4(j)
"Written Statements"........................... 4.17(v)
1.3 References to Agreement. References to this "Agreement", including
all amendments and modifications to this "Agreement," shall mean this Agreement
and mutually agreed supplements hereto and any exhibits or schedules to any of
the foregoing, and shall refer to this Agreement as the same may be in effect at
the time such reference becomes operative. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the exhibits and schedules hereto, as the same may from time to
time be amended, modified, restated or supplemented, and not to any particular
article, section, subsection or clause contained in this Agreement. Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter.
1.4 Accounting and Other Terms. Except as specifically provided in the
Financial Statements and the Buyer Financial Statements, any accounting term
used in this Agreement shall have, unless otherwise specifically provided
herein, the meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed, unless otherwise
specifically provided herein, in accordance with GAAP consistently applied. That
certain terms or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing.
15
1.5 Materiality. The parties hereby acknowledge that the definition of
the terms "Material Adverse Effect" and "Material Adverse Change," and the
various other dollar thresholds included in Articles 4, 5 and 9 of this
Agreement, are not indicative of, do not reflect, and shall not be used to
interpret, the parties' understanding of the meaning of the terms "material" and
"material adverse effect," and other like terms, as used in this Agreement.
ARTICLE 2
PURCHASE AND SALE AND CONTRIBUTION OF
ACQUIRED EQUITY INTERESTS AND CONTRIBUTED ASSETS
2.1 Purchase and Sale of Acquired Equity Interests.
(a) Transfer of Acquired Equity Interests. Upon the terms and
subject to the conditions contained herein, on the Closing Date, AAPT Seller
shall sell, convey, transfer, assign and deliver to Buyers and Buyers shall
purchase and accept from AAPT Seller (subject to allocation between Buyer Parent
and Buyer OP as Buyers may determine), all of AAPT Seller's right, title and
interest in and to the Acquired Equity Interests owned by it, excluding only the
Excluded Assets, subject to the AAPT Transferred Indebtedness and Permitted
Encumbrances.
(b) Consideration for Acquired Equity Interests. Upon the terms and
subject to the conditions contained herein, as consideration for the purchase of
the Acquired Equity Interests, on the Closing Date, Buyers shall pay to AAPT
Seller $247,000,000 in cash, plus 750,000 shares of Preferred Shares having an
aggregate liquidation preference of $37,500,000, (A) increased or reduced, as
applicable, by the (i) Estimated Apportionments relating to the Acquired Entity
as provided in Section 2.4 and (ii) adjustments for Carved-Out Assets, if any,
relating to the Acquired Entity as provided in Sections 6.2(b), 7.4 and 8.3 and
(B) (i) increased, dollar for dollar, by the amount by which the AAPT
Transferred Indebtedness outstanding on the Closing Date is less than the
Estimated Closing AAPT Transferred Indebtedness and (ii) decreased, dollar for
dollar, by the amounts by which the AAPT Transferred Indebtedness outstanding on
the Closing Date is greater than the Estimated Closing AAPT Transferred
Indebtedness (collectively, after taking into account such reductions, increases
and adjustments, the "AAPT Purchase Price"). The parties acknowledge that the
AAPT Purchase Price shall also be adjusted in accordance with the 7350 Tilghman
Drive Letter. The parties further acknowledge that $50,000 of the AAPT Purchase
Price shall be paid to the holders of the Remaining Interests in exchange for
their sale of the Remaining Interests to designees of Buyers. As soon as
practical after the Closing Date, Buyers shall remit to AAPT Seller the
aggregate amount of any cash or other Excluded Assets held by the Acquired
Entity and the Acquired Subsidiaries on the Closing Date (and not distributed by
the Acquired Entity or the Acquired Subsidiaries prior to the Closing), and any
such remittance shall be treated by the parties as an adjustment to the purchase
price. The Escrow Deposit and any accrued interest thereon shall be applied
toward the AAPT Purchase Price in accordance with Section 2.12.
(c) Delivery of AAPT Purchase Price. Upon the terms and subject to
the conditions herein set forth, at the Closing, Buyers shall pay the AAPT
Purchase Price by (A) transferring by wire transfer immediately available funds
in an amount equal to the cash portion of the AAPT Purchase Price to AAPT
Seller's accounts (which AAPT Seller shall designate by written notice delivered
to Buyers at least one Business Day prior to the Closing Date) and (B)
delivering certificates evidencing the Preferred Shares.
2.2 Contribution of Contributed Assets.
16
(a) Conveyance of Contributed Assets. Upon the terms and subject to
the conditions set forth herein, on the Closing Date, each CAP Seller shall
contribute and convey or cause to be contributed and conveyed, to Buyer OP, and
Buyer OP shall accept all right, title, and interest in and to the Contributed
Assets, in each case excluding the Excluded Assets and the Excluded Liabilities,
subject in each case to the CAP Transferred Indebtedness and Permitted
Encumbrances (the transaction described in this Section 2.2(a), the
"Contribution").
(b) Consideration for Conveyance of Contributed Assets. Upon the
terms and subject to the conditions contained herein, as consideration for the
conveyance of the Contributed Assets on the Closing Date, Buyer OP shall (A)
deliver to CAP Sellers 1,950,000 Preferred Units having an aggregate liquidation
preference of $97,500,000, (X) increased or reduced, as applicable, by the (i)
Estimated Apportionments relating to the Contributed Assets as provided in
Section 2.4 and (ii) adjustments for Carved-Out Assets, if any, relating to the
Contributed Assets as provided in Sections 6.2(b), 7.4, 8.3 and the 8260
Greensboro Drive Letter and (Y) (i) increased, dollar for dollar, by the amount
by which the CAP Transferred Indebtedness outstanding on the Closing Date is
less than Estimated Closing CAP Transferred Indebtedness and (ii) decreased,
dollar for dollar, by the amounts by which the CAP Transferred Indebtedness
outstanding on the Closing Date is greater than Estimated Closing CAP
Transferred Indebtedness (collectively, after taking into account such
reductions, increases and adjustments, the "CAP Consideration") and (B) assume
all of the Assumed Liabilities as set forth in Section 2.10(a).
(c) Delivery of CAP Consideration. Upon the terms and subject to
the conditions herein set forth, at the Closing, Buyer OP shall deliver to CAP
Sellers certificates evidencing Preferred Units in an amount equal to the CAP
Consideration.
2.3 Excluded Assets. Notwithstanding anything to the contrary herein,
Sellers are not selling, conveying, transferring, assigning, contributing or
delivering to Buyers, and Buyers are not purchasing or accepting from Sellers,
any Transferring Party's right, title and interest in and to the following
assets of any Transferring Party (the properties, assets and rights excluded
by this Section 2.3 constitute "Excluded Assets"):
(a) The direct or indirect Equity Interests of CAPI and AAPT in
Prometheus Mid-Atlantic Investors Trust, Prometheus Investment Holding Corp.,
The Rubenstein Company, L.P. and Commerce Square Partners-Philadelphia Plaza,
L.P.;
(b) The Rubenstein Note;
(c) The direct or indirect Equity Interests of AAPT in Atlantic
American Properties Management, Inc.;
(d) Other amounts and assets set forth on Schedule 2.3(d);
(e) The Bell Atlantic Management Agreement and the CCM Management
Agreement; and
(f) Cash and, to the extent provided in Section 2.4, other current
assets held by any Transferring Party (other than (i) cash or current assets
held by the Partially Owned Partnerships for which Seller receives a credit on
the Closing Date as provided in Section 2.5, (ii) Asset Sale Proceeds and (iii)
Insurance Proceeds).
17
Prior to the Closing Date, Sellers will distribute the Excluded Assets to
Sellers or Affiliates of Sellers (other than the Acquired Entity and the
Acquired Subsidiaries); provided, in the event the Acquired Entity or any
Acquired Subsidiary owns any Excluded Assets on the Closing Date, Buyers shall
use commercially reasonable efforts to transfer, at Seller's expense, such
Excluded Assets to Sellers or an Affiliate of Sellers, as Sellers shall direct
in their sole discretion, as soon as practicable following the Closing.
2.4 Apportionments. For each Real Property which is conveyed or
contributed to Buyers pursuant to the transfer of the Acquired Equity
Interests and the Contributed Assets (other than such Real Property held by
the Partially Owned Partnerships which shall be governed by Section 2.5), the
following items shall be adjusted and apportioned between Buyers and Sellers
as follows:
(a) Real Property Taxes. All real property Taxes, charges and
assessments affecting such Real Property shall be prorated on a per diem basis
as of 11:59 p.m. as of the day preceding the Closing Date, disregarding any
discount or penalty for early or late payment and on the basis of the fiscal
year of the authority levying the same. If any of the same have not been finally
assessed, as of the Closing Date, for the current fiscal year of the taxing
authority, then the same shall be adjusted at Closing based upon the most
recently issued bills therefor and shall be readjusted in connection with the
Post-Closing Audit. Following the Closing, (i) if any Seller actually receives
any refund on account of such real property Taxes, charges and assessments paid
by any Seller, the Acquired Entity or any Acquired Subsidiary (other than a
Partially Owned Partnership), such Seller shall promptly return to Buyers any
portion of such refund which would be due tenants pursuant to the applicable
Tenant Leases (provided Buyers, in turn, return to such Seller any portion of
the refund not actually paid to such tenants); and (ii) if Buyers actually
receive any refund on account of such real property Taxes, charges and
assessments paid by any Seller, the Acquired Entity or any Acquired Subsidiary
(other than a Partially Owned Partnership), Buyers shall promptly return to
Seller any portion of such refund which is either not due to tenants pursuant to
the applicable Tenant Leases or is not actually paid to such tenants.
(b) Utilities: Operating Expenses: Miscellaneous Expenses.
(i) Charges for (x) water, electricity, sewer rental, gas,
telephone and all other utilities and (y) operating expenses (including sales
and use taxes) associated with the operation of the Real Properties of the type
specified on Schedule 2.4(b)(i) shall be prorated on a per diem basis as of
11:59 p.m. on the day preceding the Closing Date, disregarding any discount or
penalty for early or late payment and, if applicable, on the basis of the fiscal
year or billing period of the authority, utility or other person levying or
charging for the same; provided, however, that operating expenses (including
sales and use taxes) of the type specified on Schedule 2.4(b)(i) referred to in
clause (y) above shall be allocated over the period with regard to which such
operating expenses of the type specified on Schedule 2.4(b)(i) are incurred
notwithstanding the date on which such amounts become payable. If the
consumption of any of the foregoing utility services is measured by meters, then
in lieu of apportionment as aforesaid Sellers shall, not earlier than the day
preceding the Closing Date, obtain a reading of each such meter and Sellers
shall pay all charges thereunder through the date of the meter readings. If
there is no such meter or if the bills for any of the foregoing have not been
issued prior to the Closing Date, the charges shall be adjusted at the Closing
on the basis of the charges for the prior period for which bills were issued and
shall be readjusted in connection with the Post-Closing Audit. If, following the
Closing, (i) any Seller actually receives any refund on account of such utility
charges, operating expenses of the type specified on Schedule 2.4(b)(i) paid by
any Seller, the Acquired Entity or any Acquired Subsidiary (other than a
Partially Owned Partnership), such Seller shall promptly return to Buyers any
portion of such refund which would be due tenants pursuant to the applicable
Tenant Leases (provided Buyers, in turn, return to such Seller any portion of
the refund not actually paid to such tenants), and (ii) Buyers actually
18
receive any refund on account of utility charges, operating expenses of the type
specified on Schedule 2.4(b)(i) paid by any Seller, the Acquired Entity or any
Acquired Subsidiary (other than a Partially Owned Partnership) prior to the
Closing, Buyers shall promptly return to Seller any portion of such refund which
is either not due to tenants pursuant to the applicable Tenant Leases or is not
actually paid to such tenants.
(ii) [Intentionally Deleted.]
(iii) Sellers shall receive a credit at Closing for any
deposits, reserves or escrow accounts funded by any Seller, the Acquired Entity
or any Acquired Subsidiary (to any of the lenders for reserve requirements, cash
collateral accounts and deferred maintenance accounts and the like, or to
utility service providers or otherwise), including, without limitation, those
set forth on Schedule 2.4(b)(iii) (unless such amounts are distributed to
Sellers on or prior to Closing, in which case all such distributed deposits,
reserves and escrow accounts shall constitute Excluded Assets). Buyers shall
accordingly arrange for the replacement of any such deposits, reserves or escrow
accounts which are distributed to Sellers prior to Closing and shall open
accounts in Buyers' name (where applicable) on or before the Closing Date. Buyer
agrees to cause all letters of credit posted by or on behalf of Sellers, the
Acquired Entity or any Acquired Subsidiary, including those on Schedule
2.4(b)(iii), to be replaced as of the Closing, and to cause Sellers to be
released from obligations under any such letters of credit (or, if Sellers are
not released from any of such letters of credit Buyers shall indemnify Sellers
for Losses incurred in connection therewith as provided in Section 9.2.)
(iv) Miscellaneous prepaid expenses and other current assets
associated with the operation of the Transferring Parties' Operations being
assumed by Buyers and not otherwise apportioned pursuant to this Section 2.4 of
the type specified on Schedule 2.4(b)(iv) shall be prorated on a per diem basis
as of 11:59 p.m. on the day preceding the Closing Date.
(c) Rents. All Basic Rents, Additional Rents and Percentage Rents
shall be deemed to be applied first to current rental periods and secondly to
satisfy rental obligations arising from past rental periods. As used herein the
term "Basic Rents" shall mean all rents and charges payable by the tenants under
the Tenant Leases, including, without limitation, occupancy rents, parking
revenues and all other revenues derived from ownership of the Real Properties,
but excluding Additional Rents and Percentage Rents. As used herein the term
"Additional Rents" shall mean any amounts payable by the tenants under the
Tenant Leases pursuant to any provisions of such leases relating to escalation
and pass-through of operating expenses and real property Taxes and any
provisions therein in respect of tenant escrows and reimbursements, which
amounts shall be allocated over the period with regard to which such operating
expenses or real property Taxes are incurred notwithstanding the date on which
such amounts become payable. As used herein the term "Percentage Rents" shall
mean any amounts payable by the tenants under the Tenant Leases pursuant to any
provisions of such leases relating to or based upon gross receipts, sales,
revenues, profits or other performance-based measures.
(i) Basic Rents shall be apportioned as follows:
(A) Sellers shall be entitled to all Basic Rents payable
in accordance with the terms of all Tenant Leases with respect to periods ending
on or prior to the Closing Date (without regard to contractual increases in such
Basic Rents occurring after the Closing Date). Buyers shall be entitled to all
Basic Rents payable in accordance with the terms of all Tenant Leases with
respect to periods ending after the Closing Date.
19
(B) If Buyers shall receive Basic Rents under any Tenant
Lease after the Closing Date which are in arrears as of the Closing Date, the
same shall be applied as follows:
(a) first, to Basic Rents due for the calendar month in
which the Closing occurs, to be apportioned through the date prior to the
Closing Date between Sellers and Buyers in proportion to their respective
periods of ownership of the Real Property for such month so that the Basic
Rents payable for the period prior to the Closing Date shall be paid to
Sellers, and from and after the Closing Date for the account of Buyers;
(b) next, to Basic Rents then due and unpaid for the
calendar month(s) after the month in which the Closing occurs, to be
received and retained for the account of Buyers; and
(c) last, to Basic Rents due and unpaid for the calendar
month(s) preceding the calendar month in which the Closing occurs, to be
paid to Sellers.
The parties agree to remit forthwith the amount of such past due Basic Rents
which is collected in accordance with the foregoing. On the Closing Date,
Sellers shall (x) furnish or cause to be furnished to Buyers a statement of
prepaid and uncollected Basic Rents under the Tenant Leases, and (y) credit to
Buyers any such Basic Rents collected by Sellers which pertain to any period
of time on or after the Closing Date. On or before the fifteenth (15th) day of
each calendar month to occur in the period commencing with the calendar month
immediately following the Closing Date and ending with the calendar month that
ends on or immediately after the date that is six months from the Closing
Date, both inclusive, Buyers shall render an accounting to Sellers with
respect to Basic Rents allocable to any extent to the period prior to the
Closing Date. If Sellers shall receive Basic Rents under any Tenant Lease
after the Closing Date, the same shall be applied by Sellers in the same order
of priority as aforesaid.
(ii) Additional Rents and Percentage Rents shall be
apportioned as follows: subject to the provisions of the last sentence of this
Section 2.4(c)(ii), at the end of the fiscal year with respect to which any
Additional Rent or Percentage Rent is payable under a Tenant Lease, there shall
be a calculation of the amount of each of such Additional Rents and Percentage
Rents to which Sellers and Buyers shall be entitled pro rata, with Sellers being
entitled to an amount equal to the amount of Additional Rent or Percentage Rent,
as applicable, multiplied by a fraction, expressed as a percentage, the
numerator of which is the number of days in said fiscal year with respect to
which such Additional Rent or Percentage Rent, as applicable, under such Tenant
Lease was payable prior to the Closing Date, and the denominator of which is the
total number of days in said fiscal year during which such Additional Rent or
Percentage Rent, as applicable, under such Tenant Lease was payable, and Buyers
shall be entitled to the remaining portion of such Additional Rent or Percentage
Rent, as applicable, provided that there shall be deducted from Sellers' and
Buyers' shares their respective proportionate share of any reasonable attorneys'
fees and costs and expenses of collection thereof actually incurred. If either
party shall have received Additional Rents or Percentage Rents with respect to
any Tenant Lease for such fiscal year in excess of the amount to which it is
entitled pursuant hereto, such excess shall be paid by the party not entitled
thereto to the other party promptly after such calculation to be applied as
aforesaid. Anything to the contrary contained in this Section 2.4(c)(ii)
notwithstanding, with respect to tenants which are in arrears in the payment of
Additional Rent or Percentage Rent under Tenant Leases as of the Closing Date,
the provisions of Section 2.4(c)(i) hereof shall apply.
(iii) Buyers agree to use commercially reasonable efforts to
collect Basic Rents, Additional Rents and Percentage Rents attributable to
pre-Closing periods (it being understood and agreed that,
20
subject to the terms of this Section 2.4(c), such rent receivables relating to
pre-Closing periods are Excluded Assets).
(d) Security Deposits. Sellers shall deliver to Buyers at Closing
in cash or by certified check without adjustment to the AAPT Purchase Price or
the CAP Consideration, the amounts of all security deposits which have been
received from tenants under the Tenant Leases to the extent not applied in
accordance with the terms thereof, together with interest thereon through the
Closing Date which is then due to or has accrued for the benefit of any tenant
under the provisions of any Tenant Lease or applicable law (to the extent any
tenant security deposit is in the form of a letter of credit, Sellers shall
assign such letter of credit or, if not assignable, cause the tenant to amend
such letter of credit so that it runs in favor of Buyers and shall deliver such
letters of credit to Buyers at the Closing (in the event that such letters of
credit are not in Sellers' possession on or by the Closing Date, Sellers shall
in lieu of delivering such letters of credit either deliver to Buyers cash in
the face amount thereof or indemnify Buyers for an amount equal to the face
amount thereof)). A list of all such letters of credit is contained on Schedule
2.4(d).
(e) Ground Leases. All current rents and other current charges
under any ground leases shall be prorated on a per diem basis as of 11:59 p.m.
on the day preceding the Closing Date.
(f) Net Leases. In respect of any Tenant Leases which are "net
leases," Basic Rents shall be apportioned as aforesaid, but there shall be no
separate apportionment of those items of Additional Rents (such as real property
Taxes, utilities and insurance premiums) to the extent the same are payable by
the respective tenants thereunder directly to the collecting authority or
entity.
(g) Leasing Costs/Capital Expenditures/Miscellaneous Items.
(i) All brokerage fees, leasing commissions, tenant
improvements and capital improvements (including free rent and reduced rent) due
and payable with respect to the Tenant Leases (collectively, "Leasing Costs"),
together with capital expenditure requirements with respect to the Real Property
("Cap/Ex Requirements"), including all Leasing Costs and Cap/Ex Requirements set
forth on Schedule 2.4(g)(i), shall be the obligation of Buyers (except as set
forth in subsection (ii) below), and there shall be no proration or adjustment
to the Purchase Price on account of such Leasing Costs and Cap/Ex Requirements,
except as provided below in this subsection (i). Schedule 2.4(g)(i) also sets
forth certain items ("Specified Items") representing Leasing Costs and Cap/Ex
Requirements, together with an assigned amount with respect to such items set
forth opposite such item ("Assigned Amount"), and Sellers' estimate of the
amount funded by Sellers, the Acquired Entity or the Acquired Subsidiaries with
respect to such items through the date hereof. Sellers shall receive a
dollar-for-dollar increase to the Purchase Price in an amount equal to the
amount actually paid by Sellers, the Acquired Entity or the Acquired
Subsidiaries in accordance with the provisions of Article 6 on or prior to
Closing Date (whether or not paid prior to the date hereof) with respect to the
Specified Items, other than Items 207, 208, 227, 228 on Schedule 2.4(g)(i),
relating to 7350 Tilghman Drive which is covered by the 7350 Tilghman Drive
Letter (such amounts not to exceed the Assigned Amount). In addition, Sellers
shall receive a dollar-for-dollar increase to the Purchase Price for any amounts
paid by Sellers, the Acquired Entity or the Acquired Subsidiaries in accordance
with the provisions of Article 6 for other Leasing Costs and Cap/Ex Requirements
after the date hereof but prior to Closing Date (it being understood that
ordinary course capital expenditures made with respect to Tenant Leases which
expenditures are reimbursable charges from Tenants shall be governed and
prorated in accordance with Section 2.4(c) above (and not this Section 2.4(g)).
The parties acknowledge that certain prorations with respect to 7350 Tilghman
Drive are set forth in the 7350 Tilghman Drive Letter.
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(ii) Notwithstanding anything to the contrary set forth in
this Agreement: (A) Buyer agrees and acknowledges that all representations and
warranties relating to Leasing Costs and Cap/Ex Requirements contained herein
(whether contained in Section 4.4(i) or otherwise) are made as to Sellers'
knowledge; and (B) Buyer shall be able to seek indemnity for any claims relating
to Leasing Costs or Cap/Ex Requirements (subject to the Sellers' Indemnity
Deductible and the Sellers' Indemnity Cap) if Buyer demonstrates both that (x)
there has been a breach by Sellers of any representation and warranty relating
to Leasing Costs or Cap/Ex Requirements contained herein and (y) such Leasing
Costs or Cap/Ex Requirements which gave rise to such breach were not expressly
set forth in the written Tenant Leases or written amendments thereto provided to
Buyer prior to the date hereof.
The parties to this Agreement hereby acknowledge that all amounts paid and
received pursuant to this Section 2.4 are adjustments to the AAPT Purchase
Price and the CAP Consideration, as applicable.
2.5 Partially Owned Partnership Interests.
(a) With respect to the Real Property held by the Partially Owned
Partnerships, (i) the cash held by each Partially Owned Partnership as of the
Closing Date shall be netted against accrued and unpaid expenses of such
Partially Owned Partnership as of the Closing Date (the "Partnership Account
Balance"), and (ii) the apportionments described in Section 2.4 shall be
calculated for the entire Real Property, and the net sum of such calculation (A)
if in favor of Buyers, shall be subtracted from the Partnership Account Balance,
or (B) if in favor of Sellers, shall be added to the Partnership Account
Balance; and the result of the foregoing calculation shall be multiplied by the
percentage interest in residual net sale proceeds to which Sellers are entitled
under the Partially Owned Partnerships' partnership agreement, which percentage
interests are identified on Schedule 4.18. The adjustment set forth in the
preceding sentence shall be estimated as of the Closing, and the AAPT Purchase
Price and the CAP Consideration adjusted according to such estimate. Final
adjustments shall be made at the time and in the manner set forth in Sections
2.4 and 2.8.
(b) With respect to the assignments of partnership interests
themselves, as between the Sellers, the Acquired Entity or the applicable
Acquired Subsidiary and Buyers, all items of partnership income, gain, loss,
deduction or credit shall be allocated between them, as of the Closing Date, by
an interim closing of the books of the partnership as of that date.
2.6 Purchase Option for Construction Property. CAP Sellers hereby grant
to Buyer Parent an option (the "Construction Property Option") to purchase the
Real Property set forth on Schedule 2.6 (the "Construction Property"). The
Construction Purchase Option shall be exercisable as provided in this Section
2.6 on or before March 31, 1999. The purchase price for the Construction
Property shall be $68,000,000 (the "Construction Property Purchase Price")
subject only to customary prorations and adjustments (i.e. similar in scope and
substance to the prorations and adjustments set forth in Section 2.4) and free
of all Encumbrances other than Permitted Encumbrances on the Construction
Property. From and after the Closing Date, Seller shall notify Buyer Parent of
the time and place of all monthly construction status meetings held with respect
to the base building at the Construction Property ("Base Building") and all
tenant work to be performed by Seller therein, and Buyer Parent shall have the
option, at its election, of having a representative of Buyer Parent who has
knowledge of construction matters participate in all such monthly construction
meetings. Upon the closing of the purchase of the Construction Property, Buyer
Parent shall receive a credit against the Construction Property Purchase Price
in an amount equal to the Earned Amount to such closing. The "Earned Amount"
shall mean an amount equal to (i) $5,000 multiplied by (ii) a fraction,
expressed as a percentage, the numerator of which is the number of days in the
period commencing on the Closing Date and ending on the
22
date when such amount is payable hereunder and the denominator of which is 30,
in payment of a portion of the costs, expenses and fees expended by or on behalf
of Buyer Parent in performing its due diligence. If Buyer Parent fails to
exercise the Construction Property Option by March 31, 1999, then the Earned
Amount shall be paid to Buyer Parent to the date of such election by Buyer
Parent. If Buyer Parent exercises the Construction Property Option by March 31,
1999, the parties shall enter into a purchase agreement in a form to be agreed
upon on or before the Closing Date (the "Construction Property Purchase
Agreement") with (A) a provision for the payment by Buyer Parent of a $3.4
million deposit (the "Construction Property Deposit") and survival of all
representations and warranties in such purchase agreement for a one year period
following the closing of such transaction (provided that all indemnification
obligations of CAP Sellers with respect to the Construction Property shall be
subject to the same (and not a separate) Sellers Indemnity Deductible and
Sellers Indemnity CAP, and shall be subject to a Material Adverse Effect closing
condition which shall be the same as set forth in the definition of "Material
Adverse Effect" herein, except that $3.5 million shall be substituted for $34.0
million) in addition to the Additional Conditions and (B) other terms and
conditions that are substantially the same as the terms in this Agreement,
including, without limitation, a provision for the closing deliveries specified
in Section 3.2(a), termination rights substantially the same as those in Article
10, tenant estoppel certificates, and the following closing conditions: (a) CAP
Sellers shall deliver (i) Deeds and Bills of Sale and Assignment and such other
bills of sale, endorsements and other good and sufficient instruments of sale,
conveyance and transfer in connection with the Construction Property, (ii)
"as-built" sealed drawings from the architect for the Construction Property, and
(iii) an architect's certificate (in form and substance required by the
architects contract or if no such certificate is required, then a certificate in
form and substance reasonably satisfactory to Buyer Parent) confirming that the
Construction Property has been completed substantially in accordance with the
plans and specifications, (b) an unconditional non-residential use permit
subject only to such conditions that do not relate to the physical construction
of the Base Building or the tenant work which it is responsible for as stated
above or any fees, costs or expenses arising out of such work or failure to
perform same, relating to the Construction Property from Fairfax County,
Virginia (the "Use Permit"), as required under the Fairfax County Zoning Code
for both completion of the Base Building and certain tenant space in the Base
Building under which the landlord is responsible for completion of tenant
improvements therein, (c) and final lien releases and waivers on customary forms
from the Sellers' material contractors and sub-contractors (the deliveries and
items referenced in clauses (a) through (c) are collectively referred to as the
"Additional Conditions"). In addition, the parties acknowledge that the
Construction Property Purchase Agreement shall contain a condition that, to the
extent an issue exists regarding access to the Construction Property through the
interparcel connection abutting adjacent parcels 10 and 11 of the Construction
Property, Seller shall resolve such issue to Buyer's reasonable satisfaction
prior to the closing thereunder and, if such issue is not so resolved, Buyer (i)
shall not be required to close and shall be entitled to the return of the
Construction Property Deposit as liquidated damages or (ii) Buyer may waive the
condition and close the transaction without abatement in the purchase price.
Buyer Parent acknowledges, however, that notwithstanding the provisions of this
Section 2.6, in no event shall the Construction Property Purchase Price be
adjusted on account of free rent or other rental abatement attributable to the
KPMG lease at the Construction Property. Buyer Parent may exercise the
Construction Property Option by delivering to CAP Sellers, at the address
specified in Section 10.4 below, an irrevocable offer to purchase prior to 5:00
p.m. (New York Time) (without regard to the next-day or "four-hour" delay
provision in Section 10.4) on March 31, 1999 (the date on which the Buyer
Parent's right to exercise the Construction Property Option expires). Buyer
Parent's purchase of the Construction Property shall close pursuant to the
Construction Property Purchase Agreement on the 30th day after the satisfaction
of the Additional Conditions. In the event the purchase of the Construction
Property does not close on or before May 31, 1999 because the Additional
Conditions (through no action of Buyer Parent) have not been satisfied by such
date, (i) the closing date may be extended by either CAP Sellers or Buyer Parent
for a period not to exceed 90 additional days in order to enable CAP Sellers to
satisfy the Additional Conditions, or (ii) if Buyer Parent or CAP
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Sellers do not elect to extend the Closing Date as provided above, (x) Buyer
Parent may terminate the Construction Property Purchase Agreement and receive a
refund of the Construction Property Deposit and payment of the Earned Amount to
such date and, in addition, if a Use Permit is not delivered by CAP Sellers as
contemplated above or Seller fails to comply with the Additional Conditions or
Seller is otherwise in breach under this Section 2.6, Buyer Parent shall be
entitled to liquidated damages on account thereof equal to a return of 40,000 OP
Units or (y) Buyer Parent may enforce specific performance of or waive the
Additional Conditions and elect to close without any abatement in the
Construction Property Purchase Price except that CAP Sellers shall continue to
be obligated to complete the construction of the Construction Property at CAP
Sellers' expense substantially in accordance with the plans and specifications
and deliver the certification from the architect as provided above and Seller
shall continue to be responsible to deliver the Use Permit. In addition to the
foregoing, Sellers shall pay to Buyer OP upon ten days prior demand therefore
any reasonably documented third-party out-of-pocket costs and expenses incurred
to complete the construction of the Base Building and the tenant work specified
above and, in such event, if Buyer Parent elects to extend the Closing Date as
set forth in clause (i) above, at the end of such extension period, if the
Additional Conditions are still not satisfied by CAP Sellers, Buyer Parent may
elect to proceed under (ii) above. The Construction Property Purchase Agreement
shall also include a provision that allows Buyer Parent to direct Sellers to
deliver title to the Construction Property to any Person. Buyer Parent may
transfer or assign its rights under the Construction Property Option to a
majority-owned Affiliate of Buyer.
2.7 Estimated Apportionments. Using the latest available financial
reports prepared in the ordinary course of business (after reasonable
consultation with Buyers), Sellers shall prepare and deliver to Buyers at least
five (5) days prior to Closing, a good faith and reasonable estimate of the
amount of the apportionments to be made pursuant to this Article 2 (the
"Estimated Apportionments") setting forth in reasonable detail Sellers'
calculation thereof. The Estimated Apportionments shall be based upon Sellers'
reasonable estimate of the items described in this Article 2 made on the basis
of the data then available and the 1998 budget. The Estimated Apportionments
shall be credited to, or deducted from, the AAPT Purchase Price in accordance
with Section 2.1(b) and the CAP Consideration in accordance with Section 2.2(b).
In no way shall Sellers' calculation of the Estimated Apportionments, or the
payment of the AAPT Purchase Price or CAP Consideration based upon the Estimated
Apportionments, estop or otherwise limit either party from making any claim or
lodging any objection with respect to such calculation.
2.8 Post-Closing Audit. There shall be a post-Closing audit (the
"Post-Closing Audit") of the Books and Records relating to the assets,
liabilities and business of the AAPT Operations and the CAP Operations for the
purpose of (i) confirming the increases, reductions and adjustments made to the
AAPT Purchase Price and the CAP Consideration at Closing in accordance with
Article 2 hereof and (ii) confirming all other payments, allocations and
apportionments between the parties pursuant to this Agreement. The Post-Closing
Audit shall be prepared as of the Closing Date, shall be conducted by Arthur
Andersen LLP and shall be completed and delivered to the Buyers within six (6)
months of the Closing (with any amounts which are not finally determined being
estimated in good faith by Arthur Anderson LLP in accordance with the historical
experience of the Transferring Parties' Operations). Sellers and their
Representatives shall provide the Post-Closing Audit and other documentation
(including all accounting work papers relating to such audit) reasonably
required to confirm such audit to an accounting firm to be chosen by Buyers
("Buyers' Auditor") for the purpose of review by Buyers' Auditor. Within thirty
(30) Business Days after Sellers and their Representatives have provided to
Buyers' Auditor the Post-Closing Audit and supporting documentation, Buyers
shall confirm or dispute such audit and final increases, reductions and
adjustments shall be made and any over- or under-payment of the AAPT Purchase
Price and/or CAP Consideration and any other payments
24
between the parties required hereunder shall be reimbursed or paid, as the case
may be within five (5) Business Days of final agreement of the parties. If
Sellers and Buyers are unable to agree on particular final increases, reductions
and adjustments, then at any time after the expiration of the thirty (30)
Business Day period referred to in the immediately preceding sentence, either
Buyers or Sellers may direct that any such disputed items be submitted to such
other "big five" independent accounting firm selected jointly by Sellers and
Buyers (the "Independent Auditor") to resolve any such disputes, and to perform
any such confirming audit, if reasonably necessary to resolve such disputes with
Sellers and Buyers each paying one-half of the fees to resolve any such disputed
items. The decisions of any such Independent Auditor shall be binding upon the
parties and payment or reimbursement of the amounts as determined by the
Independent Auditor shall be made within five (5) Business Days after receipt of
the final decision of the Independent Auditor. If the apportionment in the
Post-Closing Audit (i) exceeds the Estimated Apportionments by five percent or
more (such amount over five percent being the "Excess Amount") or (ii) is less
than the Estimated Apportionments by five percent or more (such amount over five
percent being the "Deficiency Amount"), then, in the event of (i) above, Buyer
shall pay Seller Interest on the Excess Amount from the Closing Date to the date
of payment or, in the event of (ii) above, Seller shall pay Buyer Interest on
the Deficiency Amount from the Closing Date to the date of payment.
2.9 Method of Payment. All adjustments under this Article 2 in
connection with the Acquired Entity and the Acquired Subsidiaries shall be paid
in cash by wire transfer of immediately available funds and all adjustments
under this Article 2 in connection with the Contributed Assets shall be made
through adjustments in Preferred Units (based on the liquidation preference)
issued on the Closing Date.
2.10 Assumption of Liabilities.
(a) Subject to Section 2.4, upon the terms and subject to the
conditions contained herein, at the Closing, Buyer OP shall accept and assume,
and thereafter be fully responsible for and perform, pay or otherwise discharge,
in accordance with the respective terms and subject to the respective conditions
thereof, the following, and only the following, obligations and liabilities of
CAP Sellers (the "Assumed Liabilities"):
(i) liabilities set forth on, or reserved against in, the
June 30, 1998 balance sheet in the CAP Financial Statements for the properties
listed on 4.4(a)(2); and
(ii) all liabilities incurred in the operation of the CAP
Operations or the Contributed Assets arising from and after the Closing that
relate to activities that occur after the Closing;
provided, that Assumed Liabilities shall not include obligations or liabilities
that are Excluded Liabilities; provided, further, that Assumed Liabilities will
be subject to the apportionment provisions contained in Section 2.4.
(b) The parties hereby acknowledge that, following the Closing,
AAPT, as a matter of law, will retain all of its liabilities and each Acquired
Subsidiary, severally, as a matter of law, will retain all liabilities of such
Acquired Subsidiary, notwithstanding the purchase by Buyers of the AAPT Equity
Interests pursuant to this Agreement.
2.11 Excluded Liabilities.
(a) Subject to Section 2.4, notwithstanding any other provision of
this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.10(a), Buyer OP shall not assume or be responsible
25
for, and CAP Sellers shall retain, perform and be fully responsible for, all of
the liabilities and obligations of any CAP Seller (the "Excluded Liabilities"),
including, without limitation, the following:
(i) liabilities of the CAP Sellers that do not relate to
the CAP Operations;
(ii) liabilities relating to the CAP Operations or the
Contributed Assets arising prior to the Closing or that relate to activities
that occur prior to Closing;
(iii) liabilities, if any, arising out of Sellers' breach of
the RF Purchase Agreement;
(iv) liabilities arising under CAP Repaid Indebtedness;
(v) the matters set forth on Schedule 2.11(a);
(vi) liabilities, if any, related to any Excluded Asset,
retained by the CAP Sellers, including any taxes payable on account of the
transfer of any such Excluded Asset;
(vii) liabilities, if any, relating to any pending Actions to
which any CAP Seller is a party or by which any of its assets may be bound or
affected, in each case relating to periods on or prior to Closing; and
(viii) liabilities, if any, relating to any federal, state or
local income taxes on the built-in gains under Section 1374 of the Code, and the
Treasury Regulations (or similar future statutes or regulations), as disclosed
in Internal Revenue Service Bulletin 88-119 arising after the Closing from the
partial or complete sale, transfer, conversion or redemption of Preferred Units.
(b) The parties hereby acknowledge that AAPT Seller shall be fully
responsible for and perform, pay or cause to be paid or otherwise discharge or
cause to be discharged, in accordance with their respective terms or the
respective conditions thereof, all obligations and liabilities arising from or
related to any such Excluded Asset being retained by the AAPT Seller, including
any taxes payable on account of the transfer of any Excluded Asset, and
liabilities arising under AAPT Repaid Indebtedness and those "true up" assets
and liabilities under the Bell Atlantic Purchase Agreement identified as
Excluded Assets on Schedules 2.3(d) and 4.7(b).
2.12 Deposit. Upon execution of this Agreement, by Buyers and Sellers,
Buyers shall deliver Ten Million Dollars ($10,000,000.00) (the "Escrow Deposit")
to the Title Company (the "Escrow Agent") to be held in an escrow account
pursuant to the agreement set forth in Exhibit F (the "Escrow Agreement"). In
the event the Closing occurs as set forth in this Article 2, the Escrow Deposit
and any accrued interest thereon shall be applied toward the AAPT Purchase
Price. In the event this Agreement is terminated, the Escrow Deposit shall be
applied as provided in Section 10.1(b)(iii).
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ARTICLE 3
CLOSING
3.1 Closing. Upon the terms and conditions set forth herein, and
subject to Section 10.1, the Closing shall be held at 10:00 a.m. local time on
the Closing Date at the offices of Latham & Watkins, 885 Third Avenue, Suite
1000, New York, New York 10022, or on such other date or at such other location
as mutually agreed by the parties hereto.
3.2 Deliveries at Closing. To effect the sale and purchase of the
Acquired Equity Interests and the contribution of the Contributed Assets,
subject to and otherwise in accordance with the provisions hereof, Sellers and
Buyers shall, on the Closing Date, deliver the following:
(a) Instruments of Possession. At the Closing, Sellers will execute
and deliver to Buyers (and, if required, Buyers will counter-execute and deliver
to Sellers):
(i) certificates representing all of the Acquired Equity
Interests, endorsed in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer, if applicable, together with any other
documents and instruments, as shall be necessary or appropriate to warrant and
vest in Buyers good and marketable right, title and interest in and to the
Acquired Equity Interests;
(ii) Deeds and the Bills of Sale and Assignment;
(iii) the Assignment and Assumption Agreements;
(iv) such other bill(s) of sale, endorsements, assignments
and other good and sufficient instruments of sale, conveyance, transfer and
assignment, in form and substance reasonably satisfactory to Buyers, with
respect to the Contributed Assets, as reasonably requested by Buyers, sufficient
to transfer the Contributed Assets in accordance with the provisions hereof;
(v) all plans, specifications, as-built drawings, surveys,
site plans, and final, written reports of architects, engineers and surveyors
relating to any of the assets to be transferred to Buyers, but only to the
extent that the same exist and are in the possession of any Sellers or any
property manager controlled by any Sellers;
(vi) all building records, maintenance records, expense
histories and tenant lease files in with respect to all Real Property to be
conveyed at the Closing that are in the possession of any Sellers or any
property manager controlled by any Seller;
(vii) non-foreign person certifications executed by Sellers,
as Buyers shall reasonably deem necessary, in form attached hereto as Schedule
3.2;
(viii) all master and duplicate keys, combinations and codes to
all locks and security devices for the assets to be transferred at Closing, but
only to the extent that the same exist and are in the possession of any Sellers
or any property manager controlled by any Sellers;
(ix) all machinery and/or equipment operating manuals,
technical data and other documentation relating to the building systems and
equipment, and all machinery, and all machinery,
27
equipment and other building warranties and guarantees, if any, but only to the
extent that the same exist and are in the possession of any Sellers or any
property manager controlled by any Sellers;
(x) an affidavit in favor of the Title Company on the form
used by such Title Company, in form reasonably acceptable to Sellers, to enable
the Title Company to issue its customary form of title policy. Buyers shall
require non-imputation endorsements and affirmative endorsements against
mechanic's liens, consistent with each such Sellers' obligations under Section
8.7 above;
(xi) certificates representing the Remaining Interests and
Management Company Voting Stock duly endorsed for transfer to Buyers' designees
(or with stock powers duly endorsed in blank); and
(xii) vehicle title certificates for each of the vehicles
owned by the Acquired Entity or any Acquired Subsidiary, or forming a part of
the Contributed Assets.
(b) Consents and Assumption Agreements. (A) Sellers shal deliver to
Buyers all consents set forth on Schedule 7.4 which have been obtained by the
Closing Date and all notifications, if any, to third parties obtained or made by
Sellers with respect to (i) the transfer of the Acquired Equity Interests and
the Contributed Assets to Buyers in accordance with the terms of this Agreement
and (ii) the consummation of the transactions contemplated herein and (B) Buyers
shall deliver to Sellers the Assumption Agreements.
(c) AAPT Purchase Price and CAP Consideration. Buyers shall pay to
AAPT Seller the AAPT Purchase Price pursuant to Section 2.1(c) and Buyer OP
shall deliver to CAP Sellers the CAP Consideration pursuant to Section 2.2(c).
(d) Documents; Certificates. At the Closing:
(i) Sellers shall deliver to Buyers:
(A) a certificate in substantially the form attached
hereto as Exhibit H executed by the Secretary of each Seller, the Acquired
Entity and each Acquired Subsidiary certifying as of the Closing Date: (v) a
true and correct copy of the Declaration of Trust, Certificate of Incorporation
and other organizational documents of each Seller, the Acquired Entity and each
Acquired Subsidiary and the partnership agreement governing each of the
Partially Owned Partnerships, as applicable (all of which shall be certified by
the Secretary of State of the applicable jurisdiction), and, in the case of the
Acquired Entity which is a party to a partnership agreement governing each of
the Partially Owned Partnerships, such partnership agreement, in each case as in
effect on the date of this Agreement and the Closing Date, (w) a true and
correct copy of the Bylaws of each Seller, the Acquired Entity and each Acquired
Subsidiary, as applicable, as in effect on the date of this Agreement and the
Closing Date, (x) a true and correct copy of the resolutions of the board of
trustees or directors, as applicable, of each Seller authorizing the execution,
delivery and performance of this Agreement (and all documents, agreements and
instruments contemplated hereby) by such Seller, and the consummation of the
transactions contemplated hereby and thereby, and that such resolutions are in
full force and effect and are the only resolutions in effect with respect to the
subject matter thereof, (y) a true and correct copy of the resolutions of the
board of trustees or directors, as applicable, of the Acquired Entity and each
Acquired Subsidiary authorizing the execution, delivery and performance of all
documents, agreements and instruments to be executed and delivered by it as
contemplated hereby, and the
28
consummation of the transactions contemplated thereby, and that such resolutions
are in full force and effect and are the only resolutions in effect with respect
to the subject matter thereof, and (z) incumbency matters;
(B) a certificate in substantially the form attached
hereto as Exhibit I executed by (i) the President, Chief Executive Officer or
any Vice President, and (ii) the Chief Financial Officer, of each Seller, or by
such other Representatives of each Seller reasonably acceptable to Buyers,
certifying that, as of the Closing Date, the conditions set forth in Sections
8.1, 8.2 and 8.3 with respect to Sellers (which have not been waived by Buyers)
have been satisfied;
(C) a certificate certifying as of a recent date the
good standing of each Seller, the Acquired Entity and each Acquired Subsidiary
from the Secretary of State of its applicable State of incorporation or
formation and any states where it owns or hold ground leases for any Real
Property;
(D) all other Transaction Documents to which any Seller,
the Acquired Entity or any Acquired Subsidiary is a party;
(E) a letter, from the New Jersey Department of
Environmental Protection or its successor stating that the provisions of the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., the regulations
promulgated thereunder and any successor legislation and regulations are
inapplicable to Real Property located in New Jersey;
(F) evidence of the termination of all management
agreements affecting any of the Real Property or evidence that such management
agreements will be terminated prior to the date that is 60 days after the
Closing Date, without any continuing obligation to make payments thereunder
following such termination on the part of either Buyer, the Acquired Entity or
any Acquired Subsidiary;
(G) letters of resignation signed by all officers,
directors and trustees of the Acquired Entity and the Acquired Subsidiaries and
evidence of the termination of all employees of the Acquired Entity and the
Acquired Subsidiaries, including the termination of all personal service
Contracts with employees;
(H) FIRPTA certificates executed by each Seller in form
and substance reasonably acceptable to Buyers;
(I) documentation in form and substance reasonably
acceptable to Buyers to effectuate the provisions of Section 10.7(a) hereof;
(J) all Books and Records of the AAPT Operations and the
CAP Operations, except as expressly set forth in this Agreement;
(K) such other documents or instruments necessary to
evidence compliance with the conditions set forth in Article 8 as may be
reasonably requested by Buyers; and
(L) the registration rights agreements in substantially
the forms of Exhibits G-1 and G-2.
(ii) Buyers shall deliver to Sellers:
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(A) a certificate in substantially the form attached
hereto as Exhibit J executed by the Secretary of Buyer Parent certifying as of
the Closing Date: (w) a true and correct copy of (1) the Declaration of Trust,
and other organizational documents of Buyer Parent and Buyer OP (each of which
shall be certified by the Secretary of State of the applicable jurisdiction) and
(2) the Buyer Partnership Agreement, (x) a true and correct copy of the Bylaws
of Buyer Parent, (y) a true and correct copy of the resolutions of the board of
trustees of Buyer Parent authorizing the execution, delivery and performance of
this Agreement (and all documents, agreements and instruments contemplated
hereby, by Buyers and the consummation of the transactions contemplated hereby
and thereby, and that such resolutions are in full force and effect and are the
only resolutions in effect with respect to the subject matter thereof, and (z)
incumbency matters;
(B) a certificate in substantially the form attached
hereto as Exhibit K executed by (i) the President and Chief Executive Officer or
any Vice President and (ii) the Chief Financial Officer of Buyer Parent
certifying that, as of the Closing Date, the conditions set forth in Sections
7.1, 7.2 and 7.4 (which have not been waived by Sellers) have been satisfied;
(C) a certificate of the Secretary of State of their
States of formation certifying as of a recent date the good standing of Buyers
in such State;
(D) all other Transaction Documents to which Buyers are
a party;
(E) such other documents and instruments necessary to
evidence compliance with the conditions set forth in Article 7 as may be
reasonably requested by Sellers;
(F) the Board Designation Letter in substantially the
form of Exhibit T attached hereto; and
(G) the registration rights agreements in substantially
the forms of Exhibits G-1 and G-2.
(iii) Each of the parties shall deliver such documents,
certificates and other items described or contemplated in Articles 7 and 8.
(e) Conditional Delivery of Closing Documents. In order to expedite
Closing, each party shall have the right to execute and deliver closing
documents (substantially in the forms required by this Agreement and dated as of
the Closing Date) to the other party prior to Closing. Each such delivery prior
to Closing shall be subject to the conditions subsequent (without the necessity
of the delivering party repeating such conditions upon any such delivery) that
(a) each such delivery shall be effective only upon the completion of Closing in
accordance with this Agreement, and (b) if this Agreement is terminated for any
reason or if Closing is not completed on or prior to the Closing Date, then the
receiving party shall promptly return all such Closing documents to the
delivering party.
(f) Security Deposits. Sellers shall deliver to Buyers the security
deposits relating to the Acquired Equity Interests and the Contributed Assets in
accordance with Section 2.4(d).
3.3 Other Closing Matters. Each of the parties shall take such other
actions required hereby to be performed by it prior to or on the Closing Date,
including, without limitation, satisfying the conditions set
30
forth in Articles 7 and 8 and after the Closing Date to carry out, evidence and
confirm the intended purposes of this Agreement. Sellers shall take all
additional reasonable steps as may be necessary or desirable to put Buyers in
possession of, and in operational control of, the Acquired Equity Interests and
the Contributed Assets.
3.4 Effectiveness of Acts and Deliveries. All acts and deliveries
prescribed by this Article 3 will be deemed to occur in the order as may be
reasonably required by Sellers, and none of such acts or deliveries will be
effective until the last of the acts and deliveries has occurred.
3.5 Contractual Obligations. Anything in this Agreement to the
contrary notwithstanding, neither this Agreement nor the consummation of the
transactions contemplated hereby shall constitute an agreement to assign, or any
assignment of, any Contract or Permit of a Transferring Party or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
transfer or assignment thereof, without the consent of a third party thereto or
any Governmental Authority, would constitute a breach thereof, be unlawful or in
any way adversely affect the respective rights or obligations arising thereunder
of Buyers or Sellers or any Subsidiary thereof that is a party thereto. In the
case of an agreement to assign or an assignment, if any such consent is not
obtained, or if the attempted assignment would be ineffective or would adversely
affect the respective rights or obligations of Buyers or Sellers thereunder, (a)
Sellers shall use their reasonable efforts (provided that Buyers have agreed to
reimburse Sellers for the actual reasonable out-of-pocket costs associated with
such efforts in a manner reasonably satisfactory to Sellers and Buyers) (i) to
provide to Buyers the benefits under any such Contract or Permit (including,
without limitation, engaging Buyers as a subcontractor or enforcing for the
benefit of Buyers (at Buyers' expense) of any and all rights of Sellers against
a third party thereto arising out of the breach or cancellation by such third
party or otherwise) as if such Contract or Permit had been assigned to Buyers
and (ii) to obtain as soon as practicable the consent or approval of any such
third party or government agency to the assignment of such Contract or Permit
and to transfer such Contract or Permit to Buyers (and any transfer or
assignment to Buyers of any property or property rights of any Contract or
Permit that shall require the consent or approval of any third party or
government agency shall be made subject to such consent or approval being
obtained) and (b) Buyers will fulfill (through subcontract relationships with
Sellers or otherwise) Sellers' obligations under such Contracts or Permits.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Buyers to enter into this Agreement, AAPT Seller,
solely with respect to itself, the Acquired Entity and the Acquired
Subsidiaries, and each CAP Seller, jointly and severally with respect to all CAP
Sellers and the Contributed Assets held by CAP Sellers, makes, as of the date
hereof, the following representations and warranties to Buyers, except as
otherwise set forth in the written schedules to this Agreement (the "Seller
Disclosure Schedules") executed by each Seller and delivered to Buyers on or
prior to the date hereof, a copy of which is included herewith, which set forth
the exceptions to the representations and warranties contained in this Article 4
and certain other information called for by this Agreement (unless otherwise
specified, (1) each reference in this Agreement to any numbered schedule is a
reference to that numbered schedule which is included in the Seller Disclosure
Schedules and (2) no disclosure made in any particular numbered schedule of the
Seller Disclosure Schedules shall be deemed made in any other numbered schedule
of the Seller Disclosure Schedules unless expressly made therein (by
cross-reference or otherwise).
4.1 Organization of Sellers; Subsidiaries.
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(a) Each Seller, the Acquired Entity and each Acquired Subsidiary
(all of which are identified on Schedule 4.1(a)) (i) is a trust, corporation or
partnership duly organized, or formed, as the case may be, validly existing and
in good standing under the laws of the state of its incorporation or formation,
(ii) is duly qualified as a foreign trust, corporation or partnership in good
standing under the laws of each jurisdiction set forth on Schedule 4.1(a), and
there are no additional jurisdictions where its ownership or lease of real
property or the conduct of its business requires such qualification and the
failure to be so qualified would reasonably be expected to result in a material
adverse effect on such trust, corporation or partnership, (iii) has the
requisite trust, corporate or partnership power and authority and the legal
right to own, transfer, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct its
business as now being conducted, except to the extent it would not, individually
or in the aggregate, reasonably be expected to result in a material adverse
effect, and (iv) is in compliance with its certificate or articles of
incorporation, declaration of trust, bylaws, certificate of limited partnership
or partnership agreement, as applicable, except to the extent such
non-compliance with organizational documents is identified on Schedule 4.1(a).
The organizational chart appended to Schedule 4.1(a) showing the ownership
structure of the Acquired Entity and each Acquired Subsidiary is true and
accurate in all material respects.
(b) Except as set forth on Schedule 4.1(b), none of the Acquired
Entity or any CAP Seller owns, beneficially or of record, any Equity Interests
in, or has any other direct or indirect interest in, any corporation,
partnership, limited liability company, joint venture or other Person involved
in the Transferring Parties' Operations (other than in an Acquired Subsidiary).
(c) Sellers are not "foreign persons" and will deliver to Buyers, at
the Closing, a statement certifying that they are not "foreign persons" within
the meaning of the Code.
(d) AAPT was formed for the primary purpose of owning and operating
commercial real estate projects.
(e) Each of the transparent (wholly owned) and subsidiary (partially
owned) partnerships own commercial real estate projects (the "Specified
Projects"). Additionally, each of the wholly owned corporate subsidiaries
(Qualified REIT subsidiaries) own commercial real estate projects (the "Specific
Projects"). The applicable wholly owned corporate subsidiary's by-laws and
amendments have been duly executed and the shares of stock of each wholly owned
corporate subsidiary are effective on the date hereof.
(f) AAPT duly and timely made or will make the election specified in
Section 856(c)(1) of the Code, to be a REIT for federal income tax purposes
commencing with its taxable year ended December 31, 1997.
(g) AAPT has been managed at all times by one or more trustees or
directors, and the beneficial ownership of AAPT has been at all times evidenced
by transferable shares.
(h) AAPT has ensured that after the calendar year ended December 31,
1997, the beneficial ownership of AAPT was not held by less than 100 persons for
30 days or more.
(i) For the portion of the year ended December 31, 1998 beginning on
January 1, 1998 and ending on the Closing Date (such portion, the "Pre-Closing
Partial Period"), AAPT has ensured that at no time during the last half of such
calendar year, was more than 50 percent in value of the AAPT's outstanding
32
shares of beneficial ownership owned directly or indirectly by five or fewer
individuals within the meaning of Code Section 856(h).
(j) AAPT's taxable year for federal income tax purposes is a calendar
year.
(k) AAPT is not chartered or supervised as a bank, savings and loan,
or similar association under state or federal law.
(l) AAPT has not operated as a small business investment company under
the Small Business Investment Act of 1958.
(m) AAPT has not operated as a business development corporation; i.e.,
it was not created by or pursuant to an act of a state legislature for the
purpose of promoting, maintaining, and assisting the economy within such state
by making loans that generally would not be made by banks.
(n) AAPT has not engaged in the business of issuing life insurance,
annuity contracts, or contracts of health or accident insurance.
(o) AAPT has not at any time been a party to a tax-free reorganization
with another corporation and does not hold any asset the disposition of which
could be subject to Section 1374 of the Code.
(p) AAPT does not have any, nor has it succeeded to, any earnings and
profits of any corporation accumulated during a non-REIT year.
4.2 Power; Authorization; Enforceable Obligations. The execution, delivery
and performance by each Seller of this Agreement, the other Transaction
Documents to which each of them is a party and all instruments and documents to
be delivered by each of them on the Closing Date, and the consummation by each
Seller of the transactions contemplated by the foregoing (a) are within each
Seller's trust, corporate or partnership power, as applicable, (b) have been
duly authorized by all necessary action including, without limitation, approval
by shareholders, (c) are not and will not be in contravention of any Sellers'
Declaration of Trust, certificate or articles of incorporation or bylaws or
other organizational documents, (d) do not and will not conflict with or violate
any law or regulation, or any judgment, order or decree of any court or other
Governmental Authority applicable to any Seller, or Transferring Party, (e) will
not conflict with or result in the material breach or termination of, result in
the loss of material rights or benefits under, constitute a material default
under, accelerate any performance required by or give rise to any obligation to
purchase or repurchase any Indebtedness under any Material Contract to which any
Transferring Party is a party or by which any Transferring Party is bound,
except as disclosed in Schedule 4.2, (f) will not result in the creation or
imposition of any Encumbrance upon any of the property of a Transferring Party
(other than those created by a Transaction Document) and (g) except as disclosed
on Schedule 7.4, do not and will not require on the part of any Transferring
Party the consent or approval of, or any filing with or other notification of,
any Governmental Authority, any holder of Indebtedness, any party to a Material
Contract or any other Person. This Agreement has been, and at or prior to the
Closing Date, each of the other Transaction Documents to which any Seller is a
party shall have been, duly executed and delivered by each Seller. This
Agreement constitutes (and from after the Closing Date each Transaction Document
to which any Seller is a party shall constitute) a legal, valid and binding
obligation of each Seller, enforceable against each Seller in accordance with
its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar affecting creditors' rights and remedies
generally, and subject, as to enforceability, to
33
judicial discretion and general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)).
4.3 Absence of Certain Changes or Events. Since December 31, 1997, except
as set forth on Schedule 4.3, disclosed on the Balance Sheet or consented to in
writing by Buyers: (a) there has been no adverse change and (b) no Transferring
Party has made or suffered any:
(i) sale, assignment, lease (other than in the ordinary course of
business consistent with past practices of Seller), or transfer of any material
asset, except pursuant to Section 6.1 with respect to Tenant Leases;
(ii) cancellation, termination or material amendment of any Material
Contract;
(iii) material damage or destruction (whether or not covered by
insurance) affecting any material assets to be transferred pursuant hereto;
(iv) mortgage, pledge or other Encumbrance of any material asset other
than Permitted Encumbrances; or
(v) agreement (either written or oral) by such Transferring Party to
do any of the foregoing.
4.4 Real Property.
(a) With respect to the Acquired Entity and the Acquired Subsidiaries,
Schedule 4.4(a)(1), and with respect to the CAP Sellers, Schedule 4.4(a)(2),
contains an accurate and complete list, as of the date of this Agreement, of
(i)(A) all fee interests in real property and buildings, improvements and
structures owned by such Transferring Parties and (B) all leasehold estates (the
"Leasehold Estates") in real property and buildings, improvements and structures
owned by such Transferring Parties, in each case, that are being transferred to
Buyers hereunder (all of such fee interests, Leasehold Estates, buildings,
improvements and structures, together with all easements, rights of way,
privileges, appurtenances and other rights pertaining thereto, being the "Real
Property"), and (ii) the location of, and the status of approval process, if
any, for the development acreage of, such Real Property. Schedules 4.4(a)(1) and
4.4(a)(2) also identify each of the operative documents creating a Leasehold
Estate (the "Real Property Leases"). The applicable Transferring Party has good
and indefeasible title in fee simple (or as otherwise specified in Schedules
4.4(a)(1) and 4.4(a)(2)) to all of the Real Property set forth in such Schedules
and owns all Leasehold Estates set forth in such Schedules.
(b) Except as described in Schedule 4.4(b), and except for the
Construction Property, to Sellers' knowledge, all of the buildings and
structures located on the Real Property are in operating condition and repair
(normal wear and tear excepted and taking into account the respective ages of
such buildings, structures, building systems and equipment, and excepting
immaterial operating conditions and items of repair), suitable for the purposes
for which they are being used and each has adequate public rights of ingress and
egress for the operation of the Transferring Parties' Operations and for the
normal and customary uses of the tenants of such buildings or structures.
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(c) No party holding an interest superior to any Leasehold Estate has
given notice of, or made a claim with respect to or against Sellers, as to any
material breach or default, in any material respect, by any Transferring Party
with respect to such superior interest, other than in respect of such a breach
or default which has been cured.
(d) Except as set forth in Schedule 4.4(d), no Transferring Party is
obligated under or a party to any Purchase\Put Option relating to any Real
Property listed in Schedules 4.4(a)(1) and 4.4(a)(2).
(e) Except as set forth in Schedule 4.4(e), (1) to the knowledge of
the Sellers, no condemnation, zoning or other land-use regulation proceedings,
including, without limitation, resolutions of intent, which would materially
detrimentally affect the use and operation of all or any portion of any Real
Property for its present or intended purpose or the value of all or any portion
of the Real Property and the Transferring Parties' Operations conducted thereon
have been instituted or threatened, and (2) no Seller or Transferring Party has
received any written notice of any such material proceedings affecting all or
any material portion of any Real Property.
(f) Except as set forth in Schedules 4.4(e) and (f), and except for
the Construction Property, the use being made of each building that constitutes
Real Property is in substantial conformity with the certificate of occupancy
issued for the facilities located on such Real Property, other than as would
not, individually or in the aggregate, reasonably be expected to result in a
material adverse effect. Except as set forth in Schedules 4.4(e) and (f), all
required certificates and permits of such type have been issued and are in full
force and effect.
(g) Except as set forth in Schedule 4.4(g), no Transferring Party has
received any written notice or, to Sellers' best knowledge, is otherwise aware
of any expiration of, pending expiration of, changes to, or pending changes to
any special exception, conditional use permit, variance or similar land use
approval with respect to any Real Property, other than as would not,
individually or in the aggregate, reasonably be expected to result in a material
adverse effect.
(h) Except (i) as permitted pursuant to a Permitted Encumbrance and
(ii) for members of the public with respect to public areas of the Real
Property, to the Sellers' knowledge, no Person has any right, as member, tenant,
occupant or otherwise, to use, lease and/or occupy any portion of the Real
Property, and there are no written or, to the Sellers' knowledge, oral
agreements between any Transferring Party and any other Person providing for
such occupancy or use of any portion of the Real Property.
(i) Schedule 4.4(i) sets forth a true, correct and complete list of
all Tenant Leases, including a list of all tenants (including, without
limitation, any licensees, assignees or other occupants and, to Sellers'
knowledge, any subtenants), rents (including any prepaid amounts), expiration
dates, renewal rights, termination rights and all material amendments and
modifications thereto. True, correct and complete copies of all of the documents
comprising each Tenant Lease are contained in files that have been made
available in full to Buyers. Each Tenant Lease is the legal, valid and binding
obligation of a Transferring Party, is in full force and effect and is
enforceable against such Transferring Party. Except as indicated in Schedule
4.4(i) and except as assigned as collateral for the indebtedness described on
Schedules 1.1(a), 1.1(b), 1.1(e) or 1.1(f), none of the Tenant Leases and none
of the rents or their charges payable thereunder is currently assigned
(collaterally or otherwise), pledged, encumbered or otherwise hypothecated by
any Transferring Party. No holder of any assignment of Tenant Leases has
asserted or exercised any of its rights under Tenant Leases. Except as set forth
on Schedule 4.4(i) or Schedule 4.11, no Transferring Party and, to the knowledge
of Sellers,
35
no tenant under any Tenant Lease, is in default of material obligations
thereunder, and, to the Sellers' knowledge, no event has occurred which, with
the giving of notice or passage of time or both, would constitute a default of
such material obligations by any Transferring Party and any tenant thereunder
(in each case, without investigation). Except as set forth in Schedule 4.4(i) or
Schedule 4.11, no written notice has been received by any Transferring Party
from any tenants, licensees or occupants under any Tenant Lease asserting any
claim, cause of action or right of offset against the landlord under any Tenant
Lease or asserting any defense to payment of any sum or performance of any
obligation due under any Tenant Lease, in each case in an amount in excess of
$50,000 (any of the foregoing, a "Tenant Claim"), and, to the knowledge of
Sellers, no such Tenant Claim exists. Except as set forth in Schedule 2.4(g)(i)
or Schedule 4.4(i), to the Sellers' knowledge, no brokerage fees, commissions,
tenant improvements or capital improvements (including free rent and reduced
rent) with respect to any of the Tenant Leases are due and payable (or may
become due and payable) in connection with any Tenant Lease. To Sellers'
knowledge, except as set forth on Schedule 2.4(g)(i), there are no construction
or capital improvements which are in process at the Real Property or which are
committed to commence prior to December 31, 1998 (other than ordinary course
repair items which are reimbursable from Tenants under Tenant Leases).
(j) Other than with respect to unimproved land and the Construction
Property, to Sellers' knowledge, all utilities, useable public sanitary and
storm sewers, public water facilities, electric facilities and, if any, gas
facilities (collectively, the "Utilities") required for the operation of the
Real Property either enter the Real Property through adjoining public streets
or, if they pass through adjoining public land, do so in accordance with valid
public easements or private easements which will inure to the benefit of Buyers.
All of said Utilities are installed and operating and all installation,
connection and "tap-in" charges have been paid in full or will be paid for in
full in the ordinary course.
(k) Except as disclosed on Schedule 4.4(k), to Sellers' knowledge, all
material charges, fees and assessments (including condominium fees), and any and
all other material sums due under declarations, cross-easements and agreements
with third parties to which the Real Property or any portion thereof may be
subject, have been paid and are being paid on a current basis.
(l) None of the Real Property is currently used for farming,
agriculture or similar purposes.
4.5 Tangible Personal Property.
(a) Set forth on Schedule 4.5 is a general description of all items of
tangible personal property owned by any Transferring Party that (i) are material
to their Operations, (ii) have a fair market value in excess of $100,000 or
(iii) are automobiles, and that (A) are located in such Transferring Party's
offices or (B) are located elsewhere and are used primarily in their Operations.
(b) To the knowledge of Sellers, each Transferring Party has valid
title to all of the items of tangible personal property listed on Schedule 4.5,
free and clear of all Encumbrances other than Permitted Encumbrances.
(c) To Sellers' knowledge, none of the artwork, if any, being a part
of , or included within, the Acquired Equity Interest or the Contributed Assets,
was prepared on a "work for hire" basis and none of the artwork was commissioned
after 1991.
36
4.6 Intangible Personal Property. To the knowledge of Sellers, each
Transferring Party either owns, free and clear of all Encumbrances other than
Permitted Encumbrances, the right, title and interest in, to and under, or has
acquired in connection with the acquisition of equipment or software an implied
license to use, any and all intellectual property which is utilized in their
Operations. To the knowledge of Sellers, the use of such intellectual property
by each Transferring Party does not conflict with, infringe upon or violate any
patent, trademark, trade name, registration, copyright, copyright registration
or any pending application relating thereto of any other Person. No Transferring
Party has received written notice of any outstanding or threatened, judicial or
adversary proceedings, disputes or other disagreements with respect to any of
such intellectual property.
4.7 Material Contracts.
(a) Schedule 4.7(a) contains a true, correct and complete list of all
Material Contracts (other than Permitted Encumbrances) to which any Transferring
Party is a party. Each such Material Contract is a legal, valid and binding
agreement of the Transferring Party that is a party thereto, enforceable against
it in accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
judicial discretion and general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and, to the
knowledge of Sellers, each such Material Contract is a legal, valid and binding
agreement against the other parties thereto (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to judicial discretion and general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity)). The reserves required under Article IX of the Grande A and Grande B
Loan Agreements, respectively, are fully funded in accordance with the terms of
such Agreements.
(b) Except as set forth in Schedule 4.7(b), to the knowledge of
Sellers:
(i) no Transferring Party is in breach of or in default under
any Material Contract or has given or received written notice thereof;
(ii) the Transferring Parties are not in breach of any Contracts
(other than Tenant leases and Material Contract(s)) which breach, individually
or in the aggregate, would reasonably be expected to result in liability of
$100,000 or more.
(iii) there has not occurred any event which, after the giving of
notice or the lapse of time or both, would constitute a default under, or result
in a breach of, any such Material Contract;
(iv) none of the rights of any Transferring Party under any of
the Material Contracts will be subject to termination or modification as a
result of the consummation of the transactions contemplated by this Agreement or
any of the other Transaction Documents; and
(v) no consent or approval of any Person is required under any
Material Contract to which a Transferring Party is a party to the consummation
of the transactions contemplated hereby and by the other Transaction Documents.
37
(c) The "Separateness Covenants" set forth in the Declaration of Trust
of AAPT are not required pursuant to any contractual obligation or requirement
of Seller (other than such requirement as may be imposed under the Grande A Loan
Documents).
4.8 Environmental Matters. Except as set forth on Schedule 4.8
(a) to the knowledge of Sellers, the operations of each Seller, each
Transferring Party, their employees and their tenants relating to their
Operations are, and all of the Real Property is, in compliance in all material
respects with all applicable Environmental Laws;
(b) to the knowledge of Sellers, each Seller, each Transferring Party
and each of their tenants, has obtained all material Permits required under all
applicable Environmental Laws necessary to operate their Operations at the Real
Property as currently conducted;
(c) no Seller or Transferring Party is a party to or is obliged under,
and no Real Property is the subject of, any outstanding written order, judgment
or decree with any Governmental Authority or other Person respecting any
material violation of Environmental Laws relating to their Operations;
(d) no Seller or Transferring Party has received any written notice,
including potentially responsible party notices or information requests pursuant
to the federal Superfund law or any applicable Environmental Law, alleging that
such Seller or Transferring Party may be in violation, in any material respect,
of any Environmental Law or may have any material liability under any
Environmental Law relating to their Operations;
(e) to the knowledge of Sellers, there are no investigations of any
Seller or Transferring Party involving Environmental Laws, relating to such
Seller or Transferring Party or any of their tenants, or to their operations, or
currently owned, operated or leased property pending or threatened;
(f) to the knowledge of Sellers, no Hazardous Substances have been
stored, except in accordance with applicable law, or have been released or
discharged by Sellers or by any prior owner or operator, into the environment
at, on or under the Real Property which storage or release could result in a
material liability to Seller; and
(g) to the knowledge of Sellers, no Hazardous Substance has been
disposed of by Seller, or on Sellers' behalf, or by any prior owner or operator,
at, on or under the Real Property or, if generated at the Real Property, at any
off-site location, except in accordance with applicable laws which disposal
could result in a material liability to Seller.
4.9 Permits. To the knowledge of Sellers, each Transferring Party has all
material Permits required to conduct their Operations as now being conducted and
to operate the Facilities (other than the Construction Property). To the
knowledge of Sellers, all such Permits are valid and in full force and effect
except as listed on Schedule 4.9. To the knowledge of Sellers, each Transferring
Party has not violated and is in material compliance with all such Permits and
no Transferring Party has received any written notice to the effect that it is
not in compliance with, or that they are in violation of, any such Permits.
4.10 Financial Statements, etc. (a) The Financial Statements have been
prepared from the Books and Records of the Acquired Entity, in the case of the
AAPT Financial Statements, of the particular property
38
in the case of the CAP Financial Statements, or the particular Partially-Owned
Partnership, in the case of the Partially-Owned Partnership Financial
Statements, each in accordance with GAAP applied on a basis consistent with
prior accounting periods (except as may be stated in the notes thereto), (b)
true and correct copies of the Financial Statements have been provided to
Buyers, (c) the AAPT Financial Statements fairly present the financial position
of the AAPT Seller and the Acquired Subsidiaries on a consolidated basis as of
their respective dates and the results of operations and changes in financial
position and cash flows for the respective periods then ended, (d) the CAP
Financial Statements fairly present the financial position of each property
listed on Schedule 4.4(a)(2) (other than the Construction Property) as of their
respective dates and the results of operations and changes in financial position
and cash flows of such properties for the respective periods then ended, and (e)
the Partially Owned Partnership Financial Statements fairly present the
financial position of each Partially Owned Partnership as of their respective
dates and the results of operations and changes in financial position and cash
flows for the respective periods then ended.
4.11 No Litigation. (a) Except as disclosed in Schedule 4.11, none of the
Transferring Parties has received any written material allegation or charge and
there is no action, order, writ, injunction, judgment or decree outstanding or
any claim, suit, litigation, proceeding, labor dispute, arbitration,
governmental audit or investigation (collectively, "Actions") of any nature,
civil, criminal, regulatory or otherwise, in law or in equity, pending or, to
the knowledge of Sellers, threatened, against or affecting any Transferring
Party relating to their Operations, before or by any federal, state, municipal
or other governmental or nongovernmental department, commission, board, bureau,
agency, court or other instrumentality, or by any private person or entity; and
(b) there is no Action or proceeding pending to which any Transferring Party is
a party or, to the knowledge of Sellers, threatened, before a court or other
Governmental Authority to restrain, prohibit or otherwise challenge the
transactions contemplated by this Agreement or any of the other Transaction
Documents, nor has any governmental or quasi-governmental agency or regulatory
body notified in writing any Transferring Party that the consummation of the
transactions contemplated hereby or by the other Transaction Documents would
constitute a violation of the laws of the United States or the laws of the
jurisdiction to which such court or governmental or quasi-governmental agency or
regulatory body is subject or that it intends to commence proceedings to
restrain the consummation of such transactions, to force divestiture if the same
are consummated, or to modify the terms or results of such transactions.
4.12 Liabilities. To the knowledge of Sellers, there are no material
liabilities, obligations or commitments of any nature (whether absolute or
contingent, liquidated or unliquidated, due or to become due, accrued or
unaccrued, matured or unmatured) relating to their Operations, other than (a)
liabilities which are reflected and reserved against in the Balance Sheet which
have not been paid or discharged since the date thereof, (b) liabilities arising
under any Contracts, Permits, and other commitments, obligations and matters
described in the Seller Disclosure Schedules in accordance with their terms (and
under those Contracts which are not required to be disclosed on the Seller
Disclosure Schedules), and (c) liabilities incurred since the Balance Sheet Date
in the ordinary course of business. Schedule 4.12 accurately and completely
lists on a loan by loan basis: (i) the outstanding principal balance of the
Transferred Indebtedness as of June 30, 1998, (ii) the interest rate borne by
the Transferred Indebtedness, (iii) the maturity date of the Transferred
Indebtedness and (iv) any right of any lender of any of the Transferred
Indebtedness to participate in any sale or refinancing proceeds relating to any
of the properties identified on Schedules 4.4(a)(1) and 4.4(a)(2). Sellers have
discharged or otherwise made provisions to discharge or bond over those
Permitted Encumbrances consisting of Encumbrances of carriers, warehousemen,
mechanics and materialmen (other than with respect to the Construction Property
and unfiled mechanics liens for work with respect to which payment will be made
in the ordinary course).
39
4.13 Compliance with Applicable Law. Except as set forth on Schedule 4.13,
since June 1997, neither the conduct of their Operations nor the ownership,
operation, lease, use, maintenance or condition of any of the properties and
assets of any Transferring Party (including all or any portion of the Real
Property) has violated, in any material respect, any applicable federal, state,
local or other laws, statutes, ordinances, regulations (including, without
limitation, any laws or regulations relating to zoning, immigration,
discrimination, leasing (including, without limitation, requirements as to rent
and tenant mix), labor or employment practices), or any applicable order, writ,
injunction or decree of any court, commission, board, bureau, agency,
instrumentality or other Governmental Authority (collectively, "Laws"). No
representation or warranty is made in this Section 4.13 with respect to
compliance with laws, statutes, ordinances, regulations or rules relating to the
matters covered in Section 4.8 ("Environmental Matters").
4.14 No Brokers. Except as set forth on Schedule 4.14, none of any Seller
nor any Transferring Party has employed or made any agreement with any broker,
finder or similar agent or any Person or firm which will result in the
obligation of Buyers or any of Buyers' Affiliates to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the sale of
the Acquired Equity Interests or the Contributed Assets to Buyers as
contemplated hereby.
4.15 Labor Matters. Except as set forth on Schedule 4.15:
(a) No Transferring Party is a party to any labor or collective
bargaining agreement applicable to their Operations and there are no labor or
collective bargaining agreements which pertain to any of the employees of any
Transferring Party and which is applicable to their Operations.
(b) There are no strikes, work stoppages, slowdowns, lockouts,
arbitrations or grievances or other labor disputes pending or, to the knowledge
of Sellers, threatened, against or involving any Transferring Party applicable
to their Operations. There are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of Sellers, threatened by or on behalf
of any employee or group of employees of any Transferring Party applicable to
their Operations.
(c) There are no complaints, charges or claims against any
Transferring Party pending or threatened, with any public or Governmental
Authority applicable to their Operations, based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by such Transferring Party, of any individual.
(d) Each Transferring Party is in compliance, in all material
respects, with all applicable Laws, regulations and orders relating to the
employment of labor, including all such Laws, regulations and orders relating to
wages, hours, WARN, collective bargaining, discrimination, civil rights, safety
and health, workers' compensation and the collection and payment of withholding
and social security taxes and any similar Tax, in each case, with respect to
their Operations.
(e) There are not employees or former employees of any Transferring
Party absent from work on a leave of absence, leave under the Family and Medical
Leave Act (or any state or local ordinance providing similar reinstatement
rights), or military service who would be entitled to reinstatement upon
application to Buyers at the conclusion of such leave.
4.16 ERISA. Except as set forth on Schedule 4.16:
40
(a) As of the Closing, no Seller or Transferring Party will maintain
any Plan (other than the insured group health Plans maintained by Atlantic
American Properties Management II, Inc. as in effect on the date of this
Agreement) under which Buyers would have any obligation or liability
post-Closing. No Seller or Transferring Party maintains, contributes to or has
any liability (whether direct or indirect, including, without limitation, as a
result of an indemnification obligation) under, or with respect to, and no ERISA
Affiliate has any liability which has or will create any material obligation by,
or result in any liability to, Buyers with respect to or under, any Plan. No
liability (whether direct or indirect, including, without limitation, as a
result of an indemnification obligation) with respect to any Plan has been or is
expected to be incurred by any Seller, any Transferring Party, any ERISA
Affiliate or their Operations under or pursuant to Title I or IV of ERISA or the
penalty, excise tax or joint and several liability provisions of the Code
relating to employees and employee compensation and employee benefit plans that
could, following the Closing, become or remain a liability of their Operations
or Buyers or of any employee compensation arrangement or employee benefit plan
established or contributed to by Buyers, and, except as otherwise provided
herein, no event, transaction or condition has occurred or exists that could
result in any such liability to their Operations or, following the Closing,
Buyers.
(b) Neither the execution and delivery by each Seller of this
Agreement and the other Transaction Documents to which each of them is a party
and the consummation by each Seller of the transactions contemplated by the
foregoing will result in the acceleration or creation of any rights of any
Person to benefits under any Plan (including, without limitation, the
acceleration of the vesting or exercisability of any stock options or restricted
stock, the acceleration of the accrual or vesting under any Plan or the
acceleration or creation of any right under any severance, parachute or change
in control agreement) which could result in a liability to Buyers.
(c) There is no action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitration, governmental
audit or investigation relating to or seeking benefits under any Plan that is
pending or, to the knowledge of Sellers, threatened or anticipated against any
Seller, any Transferring Party, any ERISA Affiliate or any Plan (other than
claims for benefits in the ordinary course).
(d) Except pursuant to Section 9.7, neither any provision of any Plan
or Contract (whether or not written), nor any transaction, condition or other
event exists or has occurred that would require either Buyer, the Acquired
Entity or the Acquired Subsidiary to provide any compensation, payments or
benefits (including severance payments) to or on behalf of any former or current
employee of any Transferring Party.
(e) None of the assets to be acquired by Buyers constitute assets of
an employee benefit plan which would result in any portion of the transactions
contemplated hereby constituting a "prohibited transaction" within the meaning
of ERISA or the Code.
(f) Notwithstanding anything to the contrary in this Agreement, Buyers
shall have no obligation to hire any Seller or Transferring Party employees.
4.17 Tax Matters. Except as disclosed on Schedule 4.17:
(a) All Tax Returns required to be filed by the Acquired Entity prior
to the Closing Date have been or will be filed (or caused to be filed) on a
timely basis (taking into account any extensions of time) and all Taxes shown to
be due thereon have been or will be paid (or cause to be paid) or shown as a
liability
41
on the Balance Sheet, except to the extent such Taxes are being contested in
good faith by appropriate proceedings and are disclosed on Schedule 4.17.
(b) Sellers have no knowledge of any dispute or claim reasonably
likely to involve more than $250,000 that is currently pending with any taxing
authority in connection with any Tax Return of the Acquired Entity. Except as
disclosed on Schedule 4.17, no waivers of statutes of limitation with respect to
any such Tax Returns have been given by or requested from the Acquired Entity.
Except to the extent shown on the Seller Disclosure Schedules, all deficiencies
asserted or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the financial statements of the
Acquired Entity, or are being contested and an adequate reserve therefor has
been established and is reflected on the Balance Sheet.
(c) After the Closing, none of the Acquired Entity or any Acquired
Subsidiary will be a party to or bound by (nor will any such Acquiring Entity or
Acquiring Subsidiary become a party to or bound by) any tax-sharing or
tax-allocation agreement by virtue of any agreement or understanding (other than
this Agreement) which existed prior to the Closing Date, and, as of the Closing
Date, such Acquiring Entity or Acquiring Subsidiary will have complied with all
such tax-sharing or tax-allocation agreements and all amounts required to be
paid by any Acquiring Entity or Acquiring Subsidiary pursuant to any such
agreement will have been paid.
(d) AAPT intends to make a valid election to be treated as a "real
estate investment trust" for U.S. federal income tax purposes within the meaning
of Section 856(a) of the Code, commencing with its taxable year ended on
December 31, 1997.
(e) Commencing with its taxable year ended December 31, 1997 and
through the date of this Agreement, AAPT has at all times satisfied the
requirements for qualification as a "real estate investment trust" (within the
meaning of Section 856(c) of the Code) for purposes of Section 856-860 of the
Code.
(f) Each of any Acquired Subsidiary that is organized as a
partnership or limited liability company will be treated as a partnership and
not as an association taxable as a corporation or a publicly traded partnership
for federal income tax purposes.
(g) At least 75 percent of the gross income of AAPT for the year ended
December 31, 1997 was derived and is expected to be derived for the Pre-Closing
Partial Period from sources specified in Code Section 856(c)(3). These sources
include but are not limited to (a) rents from the Specified Projects or other
commercial real estate properties to be acquired in the future, (b) gain from
the sale or other disposition of all or a portion of the Specified Projects or
other commercial real estate properties acquired in the future (including
interests in real property and interests in mortgages on real property), other
than property that is stock in trade of AAPT or other property which would
properly be included in the inventory of AAPT if on hand at the close of its
taxable year, or property held by AAPT primarily for sale to customers in the
ordinary course of its trade or business (collectively, "Dealer Property') (as
further described in Paragraph (l) below) and (c) income attributable to stock
or debt instruments acquired in connection with the temporary investment of new
capital received by AAPT in exchange for its shares of beneficial interest or in
a public offering of its debt obligations having maturities of at least five
years, provided that such income is received or accrued during the one-year
period beginning on the date on which AAPT receives such new capital (such
source income is hereafter referred to as the "Temporary Investment of New
Capital"). For purposes of all representations with respect to income contained
herein, AAPT shall be treated as receiving (i) a proportionate
42
share of all income received by the transparent and subsidiary partnerships in
accordance with AAPT's capital interest ("Capital Interest") in transparent and
subsidiary partnership interest, and (ii) all income received by any wholly
owned corporate subsidiary in which AAPT has owned 100 percent of the stock at
all times during the period of such wholly owned corporate subsidiary's
existence.
(h) At least 95 percent of the gross income of AAPT for calendar year
ended December 31, 1997 was derived and is expected to be derived for the
Pre-Closing Partial Period from sources specified in Code Section 856(c)(2).
These sources include those specified in Code Section 856(c)(3), as described in
Paragraph (g) above, plus interest and dividends from any source and gain from
the sale or disposition of stock or securities other than Dealer Property.
(i) For tax years beginning before January 1, 1998, less than 30
percent of the gross income of AAPT for each taxable year was derived from the
sale or other disposition of (a) stock or securities held for less than one
year, (b) property in a transaction that is a prohibited transaction (as defined
in Code Section 857(b)(6)(B)(iii)), and (c) real property (including interests
in real property and interests in mortgages on real property held for less than
four years, other than property compulsorily or involuntarily converted within
the meaning of Code Section 1033, and property acquired by AAPT through
foreclosure and which satisfies the requirements set forth in Code Section
856(e).
(j) AAPT, the transparent and subsidiary partnerships, and wholly
owned corporate subsidiaries have held all of the Specified Projects and other
commercial real estate properties (and all of their other respective assets) for
investment purposes and not as (a) stock in trade or other property of a kind
which would properly be included in inventory if on hand at the close of the
taxable year, or (b) property held primarily for sale to customers in the
ordinary course of the trade or business of AAPT, transparent and subsidiary
partnerships, and wholly owned corporate subsidiaries, as the case may be, and
that the amount of income from prohibited transactions (within the meaning of
Code Section 857(b)(6)(B)(iii)), if any, for either the calendar year ended
December 31, 1997 or the Pre-Closing Partial Period will not be material.
(k) AAPT, the transparent and subsidiary partnerships, a wholly owned
corporate subsidiaries do not own more than 10 percent of the voting stock
interest of any corporation other than a "qualified REIT Subsidiary" within the
meaning of Code Section 856(i). AAPT intends to take all necessary measures to
ensure that the stock interest owned by AAPT, transparent and subsidiary
partnerships and wholly owned corporate subsidiaries, in any such corporation
will not exceed 10 percent of the voting securities of such corporation and that
the value of the stock interest will not exceed 5 percent of the value of AAPT's
total assets.
(l) With respect to the gross income tests described in Paragraphs (g)
and (h) above:
(i) None of the rents received by AAPT, the transparent and
subsidiary partnerships, and wholly owned corporate subsidiaries under their
existing leases is based on the net income or profits of any person, including
any tenants at any of the Properties (the "Lessee") and any subtenants thereof,
which would cause AAPT to fail to satisfy the gross income tests described in
Paragraphs (g) and (h) above.
(ii) AAPT does not own, directly or indirectly, 10 percent or
more within the meaning of Code Section 856(d) of the beneficial interests in
any Lessee, which would cause AAPT to fail to
43
satisfy the gross income tests described in Paragraphs (g) and (h) above. In
determining ownership, the attribution rules of Code Section 318 (as modified by
Code Section 856(d)(5)) will be taken into account.
(iii) AAPT is not a party to a lease of real property where the
rent under such lease attributable to personal property is greater than 15
percent of the total rent to be received under the lease to the extent that such
rental would cause AAPT to fail to satisfy the gross income tests described in
Paragraphs (g) and (h) above.
(iv) Except as provided in the next sentence, neither AAPT,
transparent and subsidiary partnerships, or wholly owned subsidiaries furnish or
provide any services ("Non REIT Services") to a Lessee other than services that
are usually and customarily rendered in connection with the rental space or
occupancy only and are not otherwise considered rendered to the Lessee. To the
extent that AAPT has rendered any Non REIT Services to the Lessees, either
directly or through the transparent and subsidiary partnership, or wholly owned
corporations, AAPT has retained an independent contractor within the meaning of
Code Section 856(d)(3) (from whom none of AAPT, the transparent and subsidiary
partnerships, or wholly owned corporate subsidiaries will derive or receive any
income) to furnish or perform such services and such services are customary for
the geographic market in which they have been provided so that AAPT has not
failed to satisfy the gross income tests described in Paragraphs (g) and (h)
above.
(v) AAPT, the transparent and subsidiary partnerships, and the
wholly owned corporations have kept sufficient records to enable AAPT to make
the filings required under Treas. Reg. section 1.856-4(b)(4) (relating to the
receipt of rents from any person in which AAPT, directly or indirectly, owns any
proprietary interest) and Treas. Reg. section 1.856.4 (b)(5)(iv) (relating to
the use of unrelated independent contractors), and AAPT has made such required
filings.
(m) AAPT has exercised ordinary business care and prudence in
attempting to comply with the gross income tests set forth in Code Section
856(c).
(n) At least 75 percent of the value of the total gross assets of AAPT
has consisted, at the close of each quarter of each taxable year of AAPT, of (a)
cash and cash items (including receivables), (b) Government securities, (c) the
Specified Projects, (d) other commercial real estate properties acquired in the
future (including interests in real property and interests in mortgages on real
property), (e) shares (or transferable certificates of beneficial interest) in
other qualified real estate investment trusts, and (f) stock or debt instruments
acquired in connection with the Temporary Investment of New Capital received by
AAPT in exchange for its capital stock or in a public offering of its debt
obligations having maturities of at least five years, and held for not longer
than the one-year period beginning on the date on which AAPT receives such new
capital. For purposes of all representations with respect to assets contained
herein, AAPT is treated as owning, (i) its proportionate share of assets owned
by any transparent and subsidiary partnership in which AAPT directly owns an
interest (as determined in accordance with AAPT's directly owned Capital
Interest in such transparent and Subsidiary Partnership), and (ii) the assets of
any wholly owned corporation in which AAPT owns 100 percent of the stock and the
direct interests in such entities are not treated as "securities."
(o) Not more than 25 percent of the value of its total assets has
consisted, at the close of each quarter of each taxable year of AAPT, of
securities (other than Government securities and securities described in items
(e) and (f) of Paragraph (n) above or the last sentence of Paragraph (n) above),
limited in respect of any one issuer to an amount not greater than 5 percent of
the value of the total assets of AAPT and to not more than 10 percent of the
outstanding voting securities of such issuer.
44
(p) AAPT, the transparent and subsidiary Partnerships, awholly owned
corporate subsidiaries have revalued their assets at the end of each quarter of
each taxable year (if any) in which securities of another issuer (other than a
REIT or a qualified REIT subsidiary or an entity taxed as a Partnership for
federal income tax purposes) were acquired by any such entity, respectively, and
eliminated within 30 days after the end of each such quarter any discrepancy
between the value of AAPT's various investments and the requirements of the 75
percent and 25 percent asset tests described in Paragraphs (n) and (o) above,
respectively, to the extent such discrepancy is attributable in whole or in part
to acquisitions during such quarter.
(q) AAPT has kept and has retained sufficient records so as to be able
to show that AAPT has complied during each of its taxable years with the asset
tests contained in Code Section 856(c)(5) and described in Paragraphs (n) and
(o) above.
(r) AAPT has exercised ordinary business care and prudence in
attempting to comply with the asset tests set forth in Code Section 856(c)(5).
(s) AAPT has distributed in calendar year 1997 to its stockholders an
amount equal to at least 95 percent of its real estate investment trust taxable
income (as defined in Code Section 857(b)(2) and as determined without regard to
the deduction for dividends paid and by excluding any net capital gain) plus 95
percent of the excess of AAPT's net income from foreclosure property, if any,
over the tax imposed on such income by Code Section 857(b)(4)(A), less any
excess noncash income (within the meaning of Code Section 857(e)).
(t) AAPT has taken all necessary measures within its control to avoid
the imposition of the 4 percent excise tax pursuant to Code Section 4981 for the
year ended December 31, 1997. The excise tax is imposed on AAPT if it does not
distribute to its stockholders by the end of each calendar year (or by January
31 of the following calendar year in connection with a dividend declared in
October, November or December to shareholders of record in such a month) an
amount equal to at least the sum of (i) 85 percent of AAPT's ordinary income for
such calendar year, (ii) 95 percent of AAPT's capital gain net income for such
calendar year, and (iii) any undistributed ordinary income or capital gain net
income from prior years.
(u) The distributions by AAPT have been made pro rata, with no
preference to any share as compared with other shares of the same class.
(v) AAPT has demanded by January 30, 1998 for the year ended December
31, 1997 written statements (the "Written Statements") with respect to ownership
of shares of AAPT's stock, from those stockholders (if any) determined as
follows: (i) if AAPT has 200 or less stockholders of record of its shares of
stock on any dividend record date, demands shall be made of each record holder
holding of record one-half of one percent or more of the shares of any class of
its stock; (ii) if AAPT has between 201 and 1,099 stockholders of record of its
shares of stock on any dividend record date, demands shall be made of each
record holder holding of record one percent or more of the shares of any class
of its stock; and (iii) if AAPT has 2,000 or more stockholders of record of its
shares of stock on any dividend record date, demands shall be made of each
record holder holding of record five percent or more of the shares of any class
of its stock. AAPT has requested that the Written Statements (a) disclose the
actual ownership of the shares of stock held by AAPT's stockholders of record of
whom demand was made, and (b) show the maximum number of shares of AAPT's stock
actually or constructively (through application of the attribution rules of
Section 544, as modified by Code Section 856(h)(1)(B)) owned by each of the
actual owners of AAPT's shares of stock identified in the
45
Written Statements at any time during the last half of AAPT's immediately
preceding taxable year. AAPT has maintained copies of the Written Statements, as
part of the permanent records of AAPT within the Internal Revenue District in
which AAPT is required to file its tax return, and has kept the Written
Statements at all times available for inspection by any internal revenue
officer or employee.
4.18 Capitalization. (a) The authorized, issued and outstanding Equity
Interests in the Acquired Entity and each Acquired Subsidiary is set forth on
Schedule 4.18. With respect to such Equity Interests, Sellers make the following
representations and warranties:
(i) Such Equity Interests are owned, beneficially and of record by
the Persons specified on Schedule 4.18 in each case free and clear of all
Encumbrances;
(ii) All of the outstanding Equity Interests or interests of each of
such Persons has been validly issued, is free from preemptive rights and, in the
case of corporations, fully paid and non-assessable;
(iii) Except as set forth on Schedule 4.18, there is no existing
option, warrant, call, right, commitment, subscription, instrument or other
agreement of any character requiring or relating to, and there are no securities
outstanding which upon conversion or exchange would require or relate to, the
issuance, sale, purchase, redemption or transfer of any Equity Interests in the
Acquired Entity or any Acquired Subsidiary or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase any Equity
Interests in any such Person; and
(iv) Except as set forth on Schedule 4.18, there is no voting trust
or other voting agreement with respect to the Acquired Entity or any Acquired
Subsidiary or any agreement (other than the Transaction Documents) relating to
the issuance, sale, redemption, transfer or other disposition of the Equity
Interests in any such Person.
(b) Each of the partnership agreements governing the Partially Owned
Partnerships, each as amended up through the date hereof, are in full force and
effect as of the date hereof and true and correct copies of such partnership
agreements and the amendments thereto have been delivered to Buyers. Schedule
4.18 accurately and completely sets forth the percentage interest owned,
directly or indirectly, by AAPT or a CAP Seller, as applicable in each Partially
Owned Partnership as of the date hereof. All interests of Sellers, and to
Sellers' knowledge, all interest of other Persons, in the Partially Owned
Partnerships have been duly authorized and validly issued and are fully paid and
non-assessable, free and clear of all Encumbrances except as set forth in
Schedule 4.18. As of the date hereof, the capital accounts of the partners in
each of the Partially Owned Partnerships are set forth on Schedule 4.18 and no
partner has been asked to make a capital contribution to either of the Partially
Owned Partnerships other than contributions that have been made in full as of
the date hereof. Sellers have no reason to believe that additional capital calls
will be made under the partnership agreements relating to either of the
Partially Owned Partnership. Sellers have no knowledge of a breach by any
partner of its obligations under the partnership agreements of either of the
Partially Owned Partnerships.
4.19 Securities Laws Matters. Each of the Sellers (a) is acquiring the
Preferred Shares and Preferred Units contemplated hereby solely for the purpose
of investment and not with a view to, or for resale in connection with, any
distribution thereof in violation of the Securities Act, (b) has had the
opportunity to ask questions of the officers and trustees of, and has had access
to information concerning Buyers and their business, (c) is an "accredited
investor" as defined in Rule 501(a) under the Securities Act, (d) has such
46
knowledge, sophistication and experience in business and financial matters so as
to be capable of independently evaluating the merits and risks of the investment
and the consummation of the transactions contemplated hereby, (e) has so
evaluated the merits and risks of such investment and the consummation of the
transactions contemplated hereby, (f) is able to bear the economic risk of such
investment, (g) has reviewed Buyer Parent's filings with the SEC, (h) is able to
afford complete loss of such investment, and (i) acknowledges that the
certificates evidencing the Preferred Shares and Preferred Units, and the
certificates evidencing the common shares of beneficial interest of Buyer Parent
issuable upon redemption or conversion thereof, shall bear a legend indicating
that such securities have not been registered under the Securities Act or any
applicable state securities laws and the transferability thereof is subject to
compliance with the Securities Act and applicable state securities laws and (j)
represents that it is making an investment in the Preferred Shares and Preferred
Units without the influence of any general advertising or general solicitation
by Buyers. Sellers will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of all or any part of such
Preferred Shares, Preferred Units or common shares of beneficial interest of
Buyer Parent issuable upon conversion or redemption thereof (or solicit any
offers to buy, purchase, or otherwise acquire such Preferred Shares, Preferred
Units or common shares of beneficial interest of Buyer Parent issuable upon
conversion or redemption thereof), except in compliance with the Securities Act.
Sellers are residents of the states identified beside their names on Schedule
4.19. Sellers further acknowledge that common shares of beneficial interest of
Buyer Parent issuable upon conversion or redemption of Preferred Shares and
Preferred Units are to be issued in a transaction exempt from registration under
Section 5 of the Securities Act by virtue of Section 4(2) of the Securities Act
and agree not to take actions that would make such exemption unavailable. None
of the Sellers holds more than 4.99% of the outstanding common shares of
beneficial interest of Buyer Parent.
4.20 Disclaimer. Except as set forth in this Article 4, no Seller is
making any representations or warranties of any kind whatsoever, whether
express, implied or statutory, as to any matters concerning the assets to be
transferred pursuant hereto (including, without limitation, the Transferring
Parties), the Sellers' and the Transferring Parties' Books and Records, their
Operations or the Real Property. Buyers and their Affiliates specifically
acknowledge and agree that they have been given a full opportunity to examine
the Sellers' and the Transferring Parties' Books and Records (other than
Privileged Materials), their Operations and Real Property and, except as set
forth in this Agreement (including the representations and warranties set forth
in this Article 4 and the indemnification provisions relating thereto as to
which Buyers are expressly relying upon in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby), are relying upon their own independent
investigation and analysis of the Sellers' and the Transferring Parties' Books
and Records (other than Privileged Materials), their Operations and Real
Property as they deem necessary or appropriate.
4.21 [Intentionally Deleted].
4.22 Transaction with Affiliates. Except as set forth on Schedule 4.22, no
Affiliate of any of the Sellers is a party to any contract, agreement or
arrangement with the Acquired Entity or any Acquired Subsidiary that relates to
the AAPT Operations, including, without limitation, any contract, agreement or
other arrangement providing for the furnishing of services by, or the rental or
use of real or personal property from, any such party or any entity in which
such party has a substantial interest other than Tenant Leases and other than
the lease in which the Acquired Entity or the Acquired Subsidiaries is the
tenant.
4.23 Insurance. Schedule 4.23 sets forth a complete and accurate list of
all insurance policies and fidelity and other bonds (showing as to each policy
or bond the carrier or issuer, identifying number, coverage
47
limits, expiration date and a general description of the type of coverage
provided) maintained by the Transferring Parties (with respect to their
respective Operations). All of such insurance policies are in full force and
effect, and none of the Transferring Parties is in material default with respect
to its obligations under any of such insurance policies, including the
obligation to pay any premium or make any other payment necessary or appropriate
to maintain such coverage in full force and effect. Such insurance provides
coverage which is of the type and amounts customarily carried by Persons
conducting businesses similar to the Sellers' respective Operations and as
otherwise may be required by law and by any and all Material Contracts. Except
as set forth in Schedule 4.23, there is no claim pending under any of such
policies or bonds as to which coverage has been denied or disputed by the
underwriters of such policies or bonds, or in respect of which such underwriters
have reserved their rights, and there have not been any such claims within the
last year. All such policies or comparable policies shall be kept in full force
and effect through the Closing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYERS
As an inducement to Sellers to enter into this Agreement, Buyer Parent
and Buyer OP, jointly and severally, make, as of the date hereof, the following
representations and warranties to each Seller, except as otherwise set forth in
the written schedules to this Agreement (the "Buyer Disclosure Schedules")
executed by Buyers and delivered to Sellers on or prior to the date hereof, a
copy of which is included herewith, which set forth the exceptions to the
representations and warranties contained in this Article 5 and certain other
information called for by this Agreement (unless otherwise specified, (1) each
reference in this Agreement to any numbered schedule is a reference to that
numbered schedule which is included in the Buyer Disclosure Schedules and (2) no
disclosure made in any particular numbered schedule of the Buyer Disclosure
Schedules shall be deemed made in any other numbered schedule of the Buyer
Disclosure Schedules unless expressly made therein (by cross-reference or
otherwise).
5.1 Organization of Buyers/Subsidiaries. Buyers and each of their
Subsidiaries (each of which are identified in Schedule 5.1(a)) (a) is a trust,
corporation, limited liability company or partnership duly organized, or formed,
as the case may be, validly existing and in good standing under the laws of its
state of incorporation or formation, (b) is duly qualified as a foreign trust,
corporation, limited liability company or partnership in good standing under the
laws of each jurisdiction set forth on Schedule 5.1(a), and there are no
additional jurisdictions where its ownership or lease of real property or the
conduct of its business requires such qualification and the failure to be so
qualified would reasonably be expected to result in a material adverse effect on
such trust, corporation, limited liability company or partnership, (c) has the
requisite trust, corporate, limited liability company or partnership power and
authority and the legal right to own, transfer, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease and to conduct its business as now being conducted, except to the extent
it would not, individually or in the aggregate, reasonably be expected to result
in a material adverse effect, and (d) is in compliance with its declaration of
trust, certificate or articles of incorporation, bylaws, limited liability
company certificate and agreement, certificate of limited partnership or
partnership agreement, as applicable, except to the extent such non-compliance
with organizational documents is identified on Schedule 5.1(a). Buyers have
furnished to Sellers true and complete copies of their Declaration of Trust,
By-laws, Certificate of Limited Partnership and the Buyer Partnership Agreement,
as applicable, as amended or supplemented to the date of this Agreement.
5.2 Power; Authorization; Enforceable Obligations. The execution, delivery
and performance by Buyers of this Agreement, the other Transaction Documents to
which it is a party and all instruments and
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documents to be delivered by it on the Closing Date, and the consummation by
Buyers of the transactions contemplated by the foregoing (a) are within Buyers'
trust or limited partnership power, as applicable, (b) have been duly authorized
by all necessary action of Buyers, (c) are not and will not be in contravention
of Buyers' Declaration of Trust, By-laws and the Buyer Partnership Agreement or
other governing documents, (d) do not and will not conflict with or violate any
law or regulation, or any judgment, order or decree of any court or other
Governmental Authority applicable to Buyers or any of their Subsidiaries, (e)
will not conflict with or result in the material breach or termination of,
result in the loss of material rights or benefits under, constitute a material
default under, accelerate any performance required by or give rise to any
obligation to purchase or repurchase any Indebtedness under any Material
Contract to which Buyers or any of their Subsidiaries is a party or by which
Buyers or any of their Subsidiaries is bound, except as disclosed in
Schedule 5.2, (f) will not result in the creation or imposition of any
Encumbrance upon any of the property of Buyers or any of their Subsidiaries and
(g) except for the filing of a Supplemental Listing Application with the New
York Stock Exchange covering common shares of beneficial interest of Buyer
Parent issuable upon redemption or exchange of Preferred Shares or Preferred
Units and except for the filing by Buyers of a Current Report on Form 8-K with
the SEC in connection with the transactions contemplated hereby, do not and will
not require on the part of Buyers or any of their Subsidiaries the consent or
approval of, or any filing with or other notification of, any Governmental
Authority, any holder of Indebtedness or any other Person. This Agreement has
been, and at or prior to the Closing Date, each of the other Transaction
Documents to which Buyers are a party shall have been, duly executed and
delivered by Buyers. This Agreement constitutes (and from and after the Closing
Date each Transaction Document to which Buyers are a party shall constitute) a
legal, valid and binding obligation of Buyers, enforceable against Buyers in
accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
judicial discretion and general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)).
5.3 Capitalization. Upon the issuance of the Preferred Shares and the
Preferred Units pursuant to this Agreement and assuming Buyer Parent does not
issue additional shares of beneficial interest and Buyer OP does not issue
additional partner interests between the date hereof and the Closing Date, the
authorized, issued and outstanding interests in Buyers shall be as set forth on
Schedule 5.3. All such outstanding interests have been offered and sold in
compliance with all applicable laws (including, without limitation, Federal and
state securities laws). Nothing in this Agreement shall restrict the ability of
Buyer Parent to issue additional shares of beneficial interest or Buyer OP to
issue additional partner interests.
5.4 Valid Issuance of Preferred Shares and Preferred Units. The Preferred
Shares being issued to AAPT Seller and the Preferred Units being issued to CAP
Sellers hereunder each, when issued, sold and delivered in accordance with the
terms hereof for the consideration set forth herein, shall be duly and validly
issued, fully paid and nonassessable and free and clear of any Encumbrances of
any kind whatsoever, other than Encumbrances imposed by the Securities Act and
applicable state securities laws.
5.5 No Registration Under the Securities Act. Assuming the continuing
accuracy of AAPT Seller's and CAP Sellers' representations set forth in Section
4.19 and compliance by each CAP Seller with any transfer restrictions set forth
in the Buyer Partnership Agreement or in the legends on the certificates
evidencing the Preferred Shares and the Preferred Units, the offer, sale and
delivery of the Preferred Shares or the Preferred Units by Buyers to AAPT Seller
and CAP Sellers, respectively, in the manner contemplated by this Agreement will
be exempt from the registration requirements of Section 5 of the Securities Act.
49
5.6 No Litigation. (a) There is no injunction, writ, preliminary
restraining order or other order in effect or, to the knowledge of Buyers,
threatened, of any nature issued by a court or other Governmental Authority of
competent jurisdiction directing that the transactions provided for herein and
in the other Transaction Documents to which either Buyer is a party not be
consummated as provided herein; and (b) there is no action or proceeding pending
or, to the knowledge of Buyers, threatened, before a court or other Governmental
Authority to restrain, prohibit or otherwise challenge the transactions
contemplated by this Agreement or any of the other Transaction Documents (or
seeking substantial damages from Buyers or any of their Affiliates as a result
thereof), nor has any governmental or quasi-governmental agency or regulatory
body notified Buyers that the consummation of the transactions contemplated
hereby or by the other Transaction Documents would constitute a violation of the
laws of the United States or the laws of the jurisdiction to which such court or
governmental or quasi-governmental agency or regulatory body is subject or that
it intends to commence proceedings to restrain the consummation of such
transactions, to force divestiture if the same are consummated, or to modify the
terms or results of such transactions.
5.7 No Brokers. Except as set forth on Schedule 5.7, neither Buyer nor any
of their officers, trustees, employees, shareholders, partners or Affiliates has
employed or made any agreement with any broker, finder or similar agent or any
Person or firm which will result in the obligation of Sellers or any of Sellers'
Affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.
5.8 Investment Intention of Buyers. Each Buyer (a) is acquiring the
Acquired Equity Interests pursuant to Article 2 of this Agreement solely for the
purpose of investment and not with a view to, or for resale in connection with,
any distribution thereof in violation of the Securities Act, (b) has had the
opportunity to ask questions of the officers and directors of, and has had
access to information concerning Sellers, the Acquired Entity, the Acquired
Subsidiaries, and their Operations, (c) is an "accredited investor" as defined
in Rule 501(a) under the Securities Act, (d) has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
independently evaluating the merits and risks of the investment and the
consummation of the transactions contemplated hereby, (e) has so evaluated the
merits and risks of such investment and the consummation of the transactions
contemplated hereby, (f) is able to bear the economic risk of such investment
and (g) is able to afford complete loss of such investment. Neither Buyer will,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of all or any part of such Acquired Equity Interests (or
solicit any offers to buy, purchase, or otherwise acquire such Acquired Equity
Interests), except in compliance with the Securities Act, it being acknowledged
that immediately after the Closing, Buyer Parent shall transfer the AAPT Equity
Interests acquired by it to Buyer OP.
5.9 Financing. Buyers have received commitment letters dated July 30, 1998
from NationsBank, N.A. and NationsBanc Mortgage Capital Corp. pursuant to which
such lenders have committed to provide Buyers with funds to enable Buyers to
purchase the Acquired Equity Interests and the Contributed Assets and pay the
AAPT Purchase Price and the CAP Consideration to Sellers.
5.10 Purchase Price Not Assets of Employee Benefit Plan. No portion of the
AAPT Purchase Price constitutes assets of an employee benefit plan which would
result in any portion of the transactions contemplated hereby constituting a
"prohibited transaction" within the meaning of ERISA or the Code.
5.11 [Intentionally Deleted.]
5.12 [Intentionally Deleted.]
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5.13 Net Worth. Each Buyer has a Consolidated Net Worth of at least
$25,000,000.
5.14 Real Estate Investment Trust. Buyer Parent made a valid election to be
treated as a "real estate investment trust" for U.S. federal income tax
purposes, within the meaning of Section 856(a) of the Code, commencing with its
taxable year ended on December 31, 1986, and has at all times so qualified.
5.15 Financial Statements. The audited combined financial statements for
the year ended December 31, 1997 and the unaudited combined financial statements
for the three months ended March 31, 1998 (collectively, the "Buyer Financial
Statements") have been provided to Sellers and the Buyer Financial Statements
fairly present the financial position of Buyers and their Subsidiaries on a
consolidated basis as of the respective dates, and the results of operations and
changes in financial position and cash flows for the respective periods,
indicated therein, in accordance with GAAP applied on a basis consistent with
prior accounting periods (except as may be stated in the notes thereto).
5.16 Liabilities. To the knowledge of Buyers, there are no material
liabilities, obligations or commitments of any nature (whether absolute or
contingent, liquidated or unliquidated, due or to become due, accrued or
unaccrued, matured or unmatured) relating to their Operations, other than (a)
liabilities which are reflected and reserved against in the balance sheet that
is a part of the Buyer Financial Statements which have not been paid or
discharged since the date thereof, (b) liabilities arising under any Contracts,
Permits, and other commitments described in the Buyer Disclosure Schedules (and
under those Contracts which are not required to be disclosed on the Buyer
Disclosure Schedules), (c) liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice (including,
without limitation, liabilities related to acquisitions) and (d) liabilities,
obligations or commitments disclosed by Buyer Parent prior to the date of this
Agreement in filings with the SEC.
5.17 No Material Misrepresentations or Omission. Buyer Parent's filings
with the SEC on Form 10-K under the Exchange Act for the fiscal year ended
December 31, 1997 and on Form 10-Q under the Exchange Act for the fiscal quarter
ended March 31, 1998, as of the date such filings were made, do not contain any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading.
5.18 Resolutions. The Board of Trustees of Buyer Parent has adopted
resolutions to exempt Sellers from (i) the ownership limitations set forth in
Buyer Parent's Declaration of Trust and (ii) the "business combination" statute
of the Maryland General Corporation Law.
ARTICLE 6
COVENANTS OF BUYERS AND SELLERS
Buyers and Sellers covenant and agree with each other that from the
date hereof through the Closing:
6.1 Maintenance of Operations Prior to Closing.
(a) Sellers shall carry on their Operations in Sellers' ordinary
course, consistent with past practice (subject to the provisions of Section 6.3
hereof). Without limiting the generality of the foregoing, Sellers through the
Closing Date will (i) maintain the material assets to be transferred pursuant
hereto in their current state of repair, substantially in conformity with
Sellers' maintenance practices prevailing on the date
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hereof, excepting normal wear and tear (subject to Sections 2.4 and 6.1(d));
(ii) use reasonable efforts to preserve its current material business
relationships with customers, suppliers, distributors and others having material
business dealings with their Operations; (iii) use reasonable efforts to collect
accounts receivable; and (iv) pay accounts payable in the ordinary course of
business.
(b) Prior to the Closing, without the prior written consent of Buyers
(such consent deemed to have been given if Buyers fail to respond in writing
within five (5) Business Days of their receipt of Sellers' request for consent
hereunder and, with respect to Section 6.1(b)(vi), after August 29, 1998, such
consent not to be withheld if such action is consistent (i) with Buyers' past
leasing practices and (ii) Sellers' fiduciary duty to preserve the value of its
assets), Sellers shall not with respect to their Operations:
(i) except as set forth in Section 9.7(c) below, amend or enter
into any employment or severance Contract, Plan or arrangement with any former,
current or future employee of their Operations which following the Closing would
become an obligation of Buyer;
(ii) dispose of any material assets to be transferred pursuant
hereto (other than dividends of cash or accounts receivable to Sellers or
Affiliates of Sellers to the extent provided in Section 2.3(f) and other than in
connection with the exercise of Purchase\Put Options, the Asset Sale Proceeds
resulting therefrom to be (A) retained by the Acquired Entity or any Acquired
Subsidiary or (B) included in the Contributed Assets);
(iii) encumber (other than Permitted Encumbrances) any material
asset to be transferred pursuant hereto (other than pursuant to refinancings as
permitted by (v) below);
(iv) alter from Sellers' accounting methods, principles or
practices prevailing on the date of this Agreement, any accounting methods,
principles or practices that would affect the Financial Statements;
(v) enter into, modify, extend or amend or take any action with
respect to the Transferred Indebtedness other than as set forth on Schedule
6.1(b)(v) (it being understood that Buyers and Sellers shall cooperate in
approving the terms of the Transferred Indebtedness to be refinanced as set
forth on Schedule 6.1(b)(v));
(vi) enter into or amend any Tenant Lease; or
(vii) enter into any Contract with respect to any of the
foregoing.
(c) Buyers agree to review any action that requires Buyers' consent
under this Section 6.1 as promptly as practicable following receipt of written
notice from Sellers.
(d) Prior to Closing without the prior written consent of Buyers,
Sellers shall not, with respect to their respective Operations, make any
expenditures with respect to Leasing Costs and Cap/Ex Requirements other than
expenditures that Sellers, the Acquired Entity or the Acquired Subsidiaries are
required to make under contractual obligations of Sellers, the Acquired Entity
or the Acquired Subsidiaries and other than ordinary course repair items which
are reimbursable charges from tenants (it being understood that Schedule
2.4(g)(i) shall specify (such specification to be agreed upon within 10 days
after the date hereof) which Leasing Costs and Cap/Ex Requirements that Buyers
have provided their consent prior to fund such
52
expenditures). Sellers shall provide Buyers with at least 48 hours notice for
any such expenditures made pursuant to contractual obligations as to which
Buyers have not provided their consent (unless emergency circumstances prevent
such advance notice, in which case notice shall be provided as soon as
practicable thereafter).
(e) Prior to the Closing, the Acquired Entity or the Acquired
Subsidiaries as appropriate shall cause to be filed sales and use tax returns
required to be filed by it (including returns specified on Schedule 4.17).
6.2 Investigation by Buyers.
(a) Except with respect to Privileged Materials, Sellers shall
allow Buyers, their counsel, accountants and other Representatives, during
regular business hours (and subject at all times to the confidentiality
obligations set forth in the Confidentiality Agreement), to make such inspection
of the assets to be transferred pursuant hereto and the Facilities and to
inspect and make copies of Contracts, Books and Records and all other documents
and information reasonably requested by Buyers and related to the Transferring
Parties' Operations.
(b) Subject to the limitations contained in paragraph (a) above,
Buyers may enter upon any of the Real Property from time to time prior to the
Closing Date, accompanied by an agent of Sellers who shall make themselves
reasonably available, for purposes of conducting such inspections,
investigations and/or studies as Buyers deem reasonably necessary, including,
without limitation, financial reviews, physical inspections and lease reviews.
In the event, after the date hereof, Buyers receive new information relating to
any material environmental hazards that may exist on any Real Property (which
information is not set forth in any environmental reports delivered to Buyers by
Sellers prior to the date hereof), Buyers may also perform environmental reviews
and testing (any such environmental reviews and testing to be performed in a
manner consistent with good engineering practices and only by licensed engineers
reasonably acceptable to Sellers) ("Additional Environmental Testing"), which
activities include test borings and soil and water samplings, upon receipt of
Sellers' written consent (a "Sellers Environmental Consent"). Buyers may also
perform Additional Environmental Testing on the Real Property identified on
Schedule 6.2(b)(v). Any Additional Environmental Testing shall be completed on
or prior to the date that is thirty days after the date hereof. In the event
Sellers fail to provide a Sellers Environmental Consent to Buyers within five
(5) Business Days of the written request therefor by Buyers, Buyers may elect to
remove the assets to which such written request relates from the assets to be
transferred pursuant to this Agreement (such removed assets, the "Environmental
Carved-Out Assets") and the AAPT Purchase Price or the CAP Consideration, as
applicable, shall be adjusted in accordance with Section 2.1(b) or 2.2(b), as
applicable (such purchase price to be mutually agreed upon by the parties, or if
no such agreement is reached, by a reputable third party appraiser to be
selected in good faith by the parties).
(c) Buyers' access to the Real Property shall be subject to the
rights of the tenants of any of the Real Property, who shall not be unreasonably
disturbed during any such inspection by Buyers. Buyers shall not engage in any
activity in or about the Real Property which directly or indirectly violates the
terms of any governmental or quasi-governmental statute, rule, regulation, order
or practice. Buyers shall not make any physical changes to any of the Real
Property, except for test borings and soil and water samplings in accordance
with Section 6.2(b) above. Buyers may contact any governmental or
quasi-governmental authorities concerning the Real Property without the prior
written approval of Sellers. Sellers shall have the
53
opportunity to observe any and all action taken by Buyers or their
representatives, consultants and agents pursuant to this Section 6.2.
(d) Each Buyer agrees to indemnify, defend and hold harmless Sellers
from and against all physical damage to any of the Real Property, Fixtures and
Equipment, personal injury and/or any other claims or liability which may occur
as a result of Buyers' (or Buyers' representatives, consultants and agents)
entry or activities upon any of the Real Property. Each Buyer agrees to keep and
hold confidential any and all reports, summaries, studies or results that are
the product of its investigations of the Real Property, and not to disclose such
reports without Sellers' written consent or unless required to do so by
applicable law. The provisions of this Section 6.2(d) shall survive termination
of this Agreement.
(e) Buyers, or any of Buyers' consultants performing
physical tests on the Real Property, shall maintain public liability insurance
policies (naming each Seller as additional named insured with respect to any
liability occurring on the Real Property of such Seller), with combined single
limit coverage of at least $1,000,000, insuring against claims arising as a
result of the inspections of Buyers, their representatives, consultants and
agents at any of the Real Property. A certificate of insurance evidencing the
foregoing coverage shall be delivered to Sellers prior to Buyers' or any of
Buyers' representatives, consultants and agents' entry on to any of the Real
Property.
(f) In the event Closing does not occur with respect to one or more
parcels of Real Property, Buyers shall promptly return to Sellers any documents
obtained from Sellers or Sellers' agents and deliver to Sellers, without charge,
copies of all written test results, studies, reports and similar materials
obtained by or on behalf of Buyers relating to such Real Property.
6.3 Consents and Reasonable Efforts. Each of the parties hereto covenants
and agrees, upon the terms and subject to the conditions contained herein, to
use all reasonable efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary or advisable to consummate and make
effective the transactions contemplated hereby in accordance with the terms
hereof provided that nothing contained herein shall require either party or any
of its Affiliates to (A) defend or bring any lawsuit should it determine, in its
sole discretion, that it is not in its interests to do so or (B) sell, transfer,
divest or otherwise dispose of any of its respective business, assets or
properties (other than such disposition pursuant to Article 2 of this Agreement)
in connection with this Agreement or any other transactions contemplated hereby.
6.4 Notification of Certain Matters. Between the date hereof and the
Closing Date, each party shall give prompt written notice to the other of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any material representation or warranty contained in
this Agreement or in any exhibit or schedule hereto to be untrue or inaccurate
in any material respect, (ii) any Material Adverse Change and (iii) any failure
of any party or, in the case of Sellers, the Acquired Entity, the Acquired
Subsidiaries, or Representatives of any such Person to comply with, perform or
satisfy any material covenant, condition or agreement to be complied with,
performed by or satisfied by it under this Agreement or any exhibit or schedule
hereto; provided that such disclosure shall not be deemed to cure, or to relieve
any party of any liability or obligation with respect to, any breach of a
representation, warranty, covenant or agreement or to satisfy any condition
hereunder.
6.5 Repayment of Certain Loans. On or prior to the Closing Date, all
Repaid Indebtedness will be repaid by Sellers.
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6.6 Notification of Potential Breaches of Representations and Warranties.
Each of Buyers and Sellers shall use its good faith efforts to notify the other
party in writing of its discovery of any matter that would render any of such
party's or the other party's representations and warranties contained herein
untrue or incorrect in any material respect.
6.7 Risk of Loss. From the date hereof until the Closing, all risk of loss
or damage to, or condemnation of, the assets of the Transferring Parties shall
be borne by Buyers. If any portion of such assets is destroyed or damaged by
fire or any other cause (other than use, wear or loss in the ordinary course of
business) or condemned or taken by any Governmental Authority on or prior to the
Closing, Sellers shall give written notice to Buyers as soon as practicable
thereafter, but in any event within five calendar days after discovery of such
damage or destruction or condemnation or taking and the amount of insurance or
condemnation awards, if any, covering such assets (collectively, the "Insurance
Proceeds"). All Insurance Proceeds less amounts, if any, used to restore any
portion of the Real Property or leased property, as the case may be, shall be
transferred or otherwise assigned to Buyers at the Closing. Notwithstanding
anything to the contrary in this Section 6.7, in the event the aggregate amount
of losses or damages to, or condemnations of, the assets to be transferred
pursuant to this Agreement not covered by Insurance Proceeds results
individually or in combination with other matters or occurrences in a Material
Adverse Effect, Buyers may elect to terminate this Agreement pursuant to Section
10.1(a)(iv).
6.8 Supplemental Application. Promptly following the execution and
delivery of this Agreement, Buyers will file a Supplemental Listing Application
with the New York Stock Exchange and use its best efforts to obtain the approval
for listing of the common shares of beneficial interest of Buyer Parent that are
issuable upon the exchange or redemption of the Preferred Shares and the
Preferred Units.
6.9 Transfer Certificates. Sellers shall deliver all or any transfer
certificates required by the applicable governmental authorities in connection
with the transfer of the Real Property, or the acquisition of the Acquired
Entity or any of the Acquired Subsidiaries.
6.10 SEC Matters. Buyers shall use its best efforts to ensure that the
issuance of the Preferred Units shall be (i) exempt from the registration
requirements of the Securities Act and (ii) either exempt from, registered
pursuant to, or qualified under any applicable state securities or "blue sky"
requirements.
6.11 REIT Status. Buyers shall take all actions necessary for AAPT to
remain qualified as a "real estate investment trust" (within the meaning of
Section 856(c) of the Code) for purposes of Sections 856 through 860 of the
Code.
6.12 Labor. Each Transferring Party shall provide to its employees all
notices or payments that may be required under WARN and/or similar state or
local statue or ordinance relating to loss or transfer of employment, if any,
prior to the Closing Date.
6.13 Remaining Interests. Immediately prior to the Closing, Prometheus
shall either (i) acquire all the Remaining Interests or (ii) if requested by
Buyers, cause such Remaining Interests to be conveyed directly by the holders of
such Remaining Interests to Buyers or their designees (such Remaining Interests
in each case to be conveyed free and clear of all Encumbrances).
6.14 Certain Letter. Sellers agree to provide Ernest T. Brown with a notice
substantially in the form of Exhibit L within five Business Days following the
date of this Agreement.
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ARTICLE 7
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to sell the Acquired Equity Interests and
contribute the Contributed Assets to Buyers on the Closing Date and to
consummate the transactions contemplated hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions any of
which may be waived by Sellers in accordance with Section 10.9:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyers contained in this Agreement shall be true and correct at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, and Buyers shall have performed all agreements
and covenants required hereby to be performed by it prior to or at the Closing
Date, except for such breaches of representations, warranties, agreements and
covenants which would not result, individually or in the aggregate, in a
Material Adverse Change.
7.2 No Proceedings or Litigation. No Actions by any Governmental Authority
or other Person shall have been instituted or threatened for the purpose of
enjoining or preventing, or which question the validity or legality of, any of
the transactions contemplated hereby, except for such Actions which would not
result, individually or in the aggregate, in a Material Adverse Change. There
shall not be an injunction in effect instituted by any Governmental Authority
that enjoins the transaction contemplated hereby.
7.3 Transaction Documents. Buyers shall have executed and delivered to
Sellers the Transaction Documents to which Buyers are a party.
7.4 Consents. The consents set forth on Schedule 7.4 from third parties,
Governmental Authorities, and any other entity or Person denoted as consents
constituting conditions to Sellers' obligations to close shall have been
obtained and be effective; provided that if any of the consents set forth on
Schedule 7.4 which are denoted as Sellers' conditions to closing have not been
obtained (a "Sellers Missing Consent"), Buyers may cause Sellers (assuming all
other conditions to Sellers' obligations to close have been satisfied) to close
(i) with respect to all assets to be transferred pursuant hereto other than the
assets to which such Missing Consent relates (the "Sellers Carved-Out Assets"),
provided that Buyers shall remain obligated for the one-year period following
the Closing Date to purchase the Sellers Carved-Out Assets for the purchase
price allocated to such Sellers Carved-Out Assets (such purchase price to be
mutually agreed upon by the parties, or if no such agreement is reached, by a
reputable third party appraiser to be selected in good faith by the parties)
(and otherwise on the same terms and conditions as set forth herein) as soon as
practicable following the date such Sellers Missing Consent is obtained (and the
parties agree to amend and modify this Agreement as may be necessary to give
effect to the deferred closing with respect to such Sellers Carved-Out Asset) or
(ii) notwithstanding the election by Sellers to cause Buyers to close only with
respect to the assets that are not Buyer Carved-Out Assets pursuant to Section
8.3, with respect to all assets that are the subject of this Agreement (other
than Environmental Carved-Out Assets) by providing Sellers with indemnification
(reasonably acceptable to Sellers) with respect to any liability resulting from
closing without receiving such Sellers Missing Consent. For the avoidance of
doubt, in the event Buyers elect to close in accordance with this Section 7.4,
Sellers shall be required to close in accordance with such election
notwithstanding the failure to secure all of the consents set forth on Schedule
7.4.
7.5 Documents; Certificates. Buyers shall have furnished Sellers with the
documents and certificates pursuant to Section 3.2(d)(ii).
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7.6 Deliver of Certificate to Goldman Sachs. Buyers shall have delivered to
Goldman Sachs Mortgage Company officer's certificates as required under Section
6.1(j)(ii) of each of the Grande Loan Documents.
7.7 Supplemental Listing Application. Prior to the Closing Date, the common
shares of beneficial interest of Buyer Parent issuable upon conversion or
redemption of the Preferred Shares and the Preferred Units shall have been
approved for listing with the New York Stock Exchange, upon official notice of
issuance.
7.8 Issuance of the Preferred Shares and the Preferred Units. The issuance
of the Preferred Shares and the Preferred Units shall be (i) exempt from the
registration requirements of the Securities Act and (ii) either exempt from,
registered pursuant to, or qualified under, any applicable state securities or
"blue sky" requirements.
7.9 Letter Agreements. Buyers shall have duly executed and delivered to
Sellers a copy of each of the 7350 Tilghman Drive Letter and the 8260 Greensboro
Drive Letter.
ARTICLE 8
CONDITIONS TO BUYERS' OBLIGATIONS
The obligations of Buyers to purchase the Acquired Equity Interests and
the Contributed Assets and to consummate the transactions contemplated hereby
are subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, any of which may be waived by Buyers in accordance with
Section 10.9:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Sellers contained in this Agreement shall be true and correct at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date and Sellers shall have performed all agreements
and covenants required hereby to be performed by them prior to or at the Closing
Date, except for such breaches of representations, warranties, agreements and
covenants which would not result, individually or in the aggregate, in a
Material Adverse Change.
8.2 No Proceedings or Litigation. No Actions by any Governmental Authority
or other Person shall have been instituted or threatened for the purpose of
enjoining or preventing, or which question the validity or legality of, any of
the transactions contemplated hereby, except for such Actions which would not
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Change. There shall not be an injunction in effect instituted
by any Governmental Authority that enjoins the transaction contemplated hereby.
8.3 Consents. The consents set forth on Schedule 8.3(i) from third parties,
Governmental Authorities, and any other entity or Person denoted as consents
constituting conditions to Buyers' obligations to close shall have been obtained
and be effective; provided that if any of the consents set forth on Schedule
8.3(i) which are denoted as Buyers' conditions to closing have not been obtained
(a "Buyer Missing Consent"), Sellers may cause Buyers (assuming all other
conditions to Sellers' obligations to close have been satisfied) to close (i)
with respect to all assets to be transferred pursuant hereto other than the
assets to which such Buyer Missing Consent relates (the "Buyer Carved-Out
Assets"), provided that Buyers shall remain obligated for the
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one-year period following the Closing Date to purchase the Buyer Carved-Out
Assets for the purchase price allocated to such Buyer Carved-Out Assets (such
purchase price to be mutually agreed upon by the parties, or if no such
agreement is reached by a reputable third party appraiser to be selected in good
faith by the parties) (and otherwise on the same terms and conditions as set
forth herein) as soon as practicable following the date such Buyer Missing
Consent is obtained (and the parties agree to amend and modify this Agreement as
may be necessary to give effect to the deferred closing with respect to the
Buyer Carved-Out Asset) or (ii) with respect to all assets that are the subject
of this Agreement (other than Environmental Carved-Out Assets) by providing
Buyers with indemnification (reasonably acceptable to Buyers) with respect to
any liability resulting from closing without receiving such Buyer Missing
Consent. For the avoidance of doubt, in the event Sellers elects to close in
accordance with this Section 8.3, Buyers shall be required to close in
accordance with such election notwithstanding the failure to secure all of the
consents set forth on Schedule 8.3(i). The consents set forth on Schedule 8.3(i)
shall include (i) certificates from partners in the Partially Owned Partnerships
evidencing admission to the Partially Owned Partnerships and such other matters
as may be reasonably requested by Buyer, and (ii) a waiver of the purchase
option by Capital One in Westmoreland Plaza in a form reasonably acceptable to
Buyers to the extent the same is in effect at the Closing Date and not otherwise
waived.
8.4 Material Changes. Since December 31, 1997, there shall have been no
Material Adverse Change.
8.5 Transaction Documents. Sellers shall have executed and delivered to
Buyers the Transaction Documents to which any Seller is a party.
8.6 Documents; Certificates. Sellers shall have furnished Buyers with the
documents and certificates pursuant to Section 3.2(d)(i).
8.7 Indebtedness. Sellers shall have repaid all of the Repaid Indebtedness
on or prior to the Closing.
8.8 Estoppel Certificates. At or prior to the Closing, estoppel
certificates shall have been obtained from tenants leasing at least an aggregate
of 75% of the aggregate rentable space at all of the Real Property, including
those identified on Schedule 8.8(i) (the "Identified Tenants"), and from the
ground lessors identified on Schedule 8.8(ii). The estoppel certificates shall
be substantially in the form attached hereto as Schedule 8.8(iii) (the "Required
Form"); provided, however, that if a tenant or ground lessor refuses to sign an
estoppel certificate in the Required Form but signs an estoppel certificate that
contains such information as the tenant or ground lessor from whom the
applicable request is made is obligated under its lease to execute and deliver,
the estoppel certificate shall be deemed to be acceptable, but only if it does
not contain any information materially inconsistent with the representations and
warranties of Sellers contained herein. In the event Sellers are unable to
deliver an acceptable Estoppel Certificate, they may, in lieu thereof, deliver
their certificate containing the information set forth on the Required Form in
respect of the applicable tenant or ground lessor, which certificate shall serve
as Sellers' representation and warranty as to the facts stated therein, which
representation and warranty shall survive for a period of one year following the
Closing Date.
8.9 Supplemental Listing Application. Prior to the Closing Date, the common
shares of beneficial interest of Buyer Parent issuable upon conversion or
redemption of the Preferred Shares and Preferred Units shall have been approved
for listing with the New York Stock Exchange, upon official notice of issuance.
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8.10 Issuance of Preferred Units. The issuance of the Preferred Units shall
be (i) exempt from the registration requirements of the Securities Act and (ii)
either exempt from, registered pursuant to, or qualified under any applicable
state securities or "blue sky" requirements.
8.11 Management Agreements. All of the interests of Atlantic American
Properties Management, Inc. (which hold the Bell Atlantic Management Agreement
and the CCM Management Agreement) shall have been transferred to an Affiliate of
the Acquired Entity, other than the Acquired Subsidiaries.
8.12 Outstanding Equity Interests. The Acquired Equity Interests shall be
the only Equity Interests on AAPT outstanding on the Closing Date.
8.13 Letter Agreements. Sellers shall have duly executed and delivered to
Buyers a copy of each of the 7350 Tilghman Drive Letter and the 8260 Greensboro
Drive Letter.
8.14 Assumption, Modification and Release Agreement. Sellers shall deliver
to Buyers agreements in substantially the forms set forth on Exhibits O-1, O-2,
O-3, O-4 and O-5 or in such other form as requested by the applicable lender and
acceptable to Buyer, executed by each lender that holds a mortgage on any of the
Real Property that will be sold or contributed directly or indirectly at the
Closing (including through the acquisition of the Acquired Equity Interests)
subject to such mortgage.
8.15 Representation Letter From Recipients of Preferred Units and Preferred
Shares. Each of the Sellers and LF Strategic Realty Investors L.P. that is to
receive any Preferred Shares or Preferred Units pursuant to this Agreement shall
have executed and delivered to Buyer Parent a letter with form of Exhibit P
hereto.
ARTICLE 9
ACTIONS BY SELLERS
AND BUYERS AFTER THE CLOSING
9.1 Survival. Other than the representations contained in Sections 4.2,
4.19, 5.2 and 5.4 (which shall survive indefinitely) all representations and
warranties set forth in this Agreement shall survive until 5:00 p.m. (New York
time) on the day that is the first anniversary of the Closing Date or, if such
day is not a Business Day, then the next Business Day; provided, however, all
representations and warranties of the Sellers relating to the Construction
Property shall survive until 5:00 p.m. (New York time) on the day that is the
first anniversary of the closing under the Construction Property Purchase
Agreement. Unless expressly stated herein to the contrary, all covenants shall
survive indefinitely.
9.2 Indemnifications.
(a) (i) From and after the Closing, Buyers shall, jointly and
severally, indemnify, save and hold Sellers and each of their Subsidiaries,
Affiliates, directors, officers, employees, successors, transferees and
assignees (each, a "Seller Indemnified Party"), harmless from and against any
and all costs, losses (including, without limitation, diminutions in value),
charges, liabilities, obligations, damages (whether actual or consequential),
lawsuits, actions, judgments, deficiencies, demands, fees, claims, settlements
and expenses (whether arising out of third-party claims or otherwise),
including, without limitation, interest, penalties, reasonable attorneys' fees
and expenses and all amounts paid in the investigation, defense or settlement of
any
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of the foregoing and costs of enforcing this indemnity (collectively, "Losses")
incurred in connection with, arising out of, resulting from or relating to
(1) any breach of a representation or warranty of Buyers contained in Article 5
of this Agreement so long as the claim therefor is asserted prior to expiration
of the survival period set forth in Section 9.1, (2) any breach by Buyers of any
of their agreements contained herein, (3) any Assumed Liability or any liability
of the Acquired Entity and the Acquired Subsidiaries, (4) all liabilities of
AAPT and its Subsidiaries under the Bell Atlantic Purchase Agreement (except to
the extent provided in Section 2.11(b)) and (5) all liabilities under the RF
Purchase Agreement with respect to the Contributed Assets relating to the period
from and after the Closing Date (each, a "Seller Indemnified Claim"). The rights
to indemnification under Section 9.2(a) relating to a breach of Article 11
hereof shall be subject to the provisions of Section 11.5 below.
(ii) Promptly after receipt by any party hereto of notice of
commencement of any Action, or the assertion by any third party of any Seller
Indemnified Claim, with respect to which any Seller Indemnified Party is
entitled to indemnification under this Section 9.2(a), such party shall use its
best efforts to notify each other party hereto in writing of the commencement of
such Action or the assertion of such Seller Indemnified Claim, but the failure
to notify the indemnifying party shall not relieve the indemnifying party of its
indemnification obligations hereunder, except to the extent the indemnifying
party is actually prejudiced by such failure to notify. In case any such Action
is brought or any such Seller Indemnified Claim is asserted, Buyers shall be
entitled, but shall not be required, to participate (at its own expense) in the
defense thereof or Buyers, at their option, may elect to take charge of and
control the defense of any such Action or Seller Indemnified Claim, provided
that Buyers shall agree to pursue the defense of such Action or Seller
Indemnified Claim in good faith by appropriate actions or proceedings promptly
taken or instituted and diligently pursued. If Buyers elect to assume the
defense of any Action or Seller Indemnified Claim, then such Seller Indemnified
Party shall be entitled to participate (at its own expense) in said defense.
(iii) From and after the Closing, (A) AAPT Seller shall indemnify,
save and hold Buyers and each of their Subsidiaries, Affiliates, trustees,
officers, employees, successors, transferees and assignees (each, a "Buyer
Indemnified Party"), harmless from and against any and all Losses incurred in
connection with, arising out of, resulting from or relating to (1) any breach of
a representation or warranty of AAPT Seller contained in Article 4 of this
Agreement so long as the claim therefor is asserted prior to expiration of the
survival period set forth in Section 9.1, (2) any breach by AAPT Seller of any
of its agreements contained herein, (3) any liability referred to in Section
2.11(b) hereof and (4) any compensation or payments or benefits (including
severance payments and obligations under the Savings Plan, exclusive of the
benefit payments thereunder and customary administrative costs incurred to
terminate the Savings Plan) to or on behalf of any person employed by the
Acquired Entity or any of the Acquired Subsidiaries on or prior to the Closing
Date with respect to periods of employment occurring on or prior to the Closing
Date (each an "AAPT Indemnified Claim") and (B) each CAP Seller, jointly and
severally, shall indemnify and hold each Buyer Indemnified Party harmless from
and against any and all Losses incurred in connection with, arising out of,
resulting from or relating to (1) any breach of a representation or warranty by
any CAP Seller contained in Article 4 of this Agreement so long as the claim
therefor is asserted prior to expiration of the survival period set forth in
Section 9.1, (2) any breach by any CAP Seller of any of their agreements
contained herein, (3) any Excluded Liabilities related to CAP Sellers and (4)
any compensation or payments or benefits (including severance payments and
obligations) to or on behalf of any person employed by any CAP Seller on or
prior to the Closing Date with respect to periods of employment occurring on or
prior to the Closing Date (each, a "CAP Indemnified Claim" and, together with
the AAPT Indemnified Claims, the "Buyer Indemnified Claims").
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(iv) Promptly after receipt by any party hereto of notice of
commencement of any Action, or the assertion by any third party of any Buyer
Indemnified Claim, with respect to which any Buyer Indemnified Party is entitled
to indemnification under this Section 9.2(a)(ii), such party shall use its best
efforts to notify each other party hereto in writing of the commencement of such
Action or the assertion of such Buyer Indemnified Claim, but the failure to
notify the indemnifying party shall not relieve the indemnifying party of its
indemnification obligations hereunder, except to the extent the indemnifying
party is actually prejudiced by such failure to notify. In case any such Action
is brought or any such Buyer Indemnified Claim is asserted, Sellers shall be
entitled, but shall not be required, to participate (at their own expense) in
the defense thereof or Sellers, at their option, may elect to take charge of and
control the defense of any such Action or Buyer Indemnified Claim, provided that
Sellers shall agree to pursue the defense of such Action or Buyer Indemnified
Claim in good faith by appropriate actions or proceedings promptly taken or
instituted and diligently pursued. If Sellers elect to assume the defense of any
Action or Buyer Indemnified Claim, then such Buyer Indemnified Party shall be
entitled to participate (at its own expense) in said defense.
(b) Settlement of Claims. Sellers and Buyers shall not be liable for
any settlement of any action or proceeding effected without its written consent,
but if settled with its written consent (which consent shall not be unreasonably
withheld or delayed), the indemnifying party agrees to indemnify and hold all
parties indemnified under this Agreement harmless from and against any and all
Losses by reason of such settlement in accordance with this Section 9.2(b).
(c) Restriction on Indemnification. In no event shall Buyers be liable
to any Seller Indemnified Party for damages pursuant to Section 9.2(a)(i)(1)
until the aggregate amount of damages pursuant to such Section for which the
Buyers is obligated to provide indemnity exceeds $1,000,000 (the "Buyer
Indemnity Deductible"), after which Buyers shall have liability for the amount
of such resulting Losses in excess of $1,000,000, but in no event shall Buyers'
liability under Section 9.2(a)(i)(1) exceed an aggregate amount of $10,000,000,
not including the amount of the Buyer Indemnity Deductible (the "Buyer Indemnity
Cap") (other than with respect to a breach of the representations contained in
Sections 5.2 and 5.4 as to which to the Buyer Indemnity Deductible and the Buyer
Indemnity Cap shall not apply). In no event shall Sellers be liable to any Buyer
Indemnified Party for damages pursuant to Sections 9.2(a)(iii)(A)(1) or
9.2(a)(iii)(B)(1) until the aggregate amount of damages pursuant to such
Sections for which Sellers (taken collectively) are obligated to provide
indemnity exceeds $1,000,000 (the "Sellers Indemnity Deductible), after which
AAPT Seller, for itself, or the CAP Sellers, for themselves, jointly and
severally, shall have liability for the amount of such resulting Losses in
excess of $1,000,000, but in no event shall Sellers' liability under Sections
9.2(a)(iii)(A)(1) or 9.2(a)(iii)(B)(1) exceed an aggregate amount of
$10,000,000, not including the amount of the Sellers Indemnity Deductible (the
"Sellers' Indemnity Cap") (other than with respect to a breach of the
representations contained in Sections 4.2 and 4.19 as to which to the Seller
Indemnity Deductible of the Seller Indemnity Cap shall not apply). For the
avoidance of doubt, the Buyer Indemnity Deductible and the Sellers Indemnity
Deductible and Buyer Indemnity Cap and Seller Indemnity Cap set forth in this
Section 9.2(c) shall not affect Buyers' or Sellers' payment obligations in
connection with Article 2 (other than as provided in Sections 2.4(g)(ii)),
Sections 9.2(a)(i)(2)-(5), 9.2(a)(iii)(A)(2)-(4) or 9.2(a)(iii)(B)(2)-(4), or
Article 11, as applicable.
(d) Notification of Breaches. No party to this Agreement shall be
entitled to any indemnification with respect to any breach or inaccuracy of any
representation, warranty or covenant under this Agreement if such party has
actual knowledge (with no duty of inquiry) prior to the date hereof of such
breach or inaccuracy of the applicable representation, warranty or covenant. In
addition to the foregoing,
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Buyers hereby release CAP Sellers from any and all statutory or common law
contribution rights or obligations, or other similar claims for contribution,
under any Environmental Laws.
(e) Survival of Indemnification. Each of the parties hereto agrees
that the indemnifications provided for pursuant to this Section 9.2 shall
survive the Closing.
(f) Characterization of Indemnity Payments. The parties to this
Agreement hereby acknowledge that all amounts paid and received pursuant to this
Section 9.2 are adjustments to the AAPT Purchase Price and the CAP
Consideration, as applicable.
(g) Maintenance of Net Worth. AAPT Seller agrees to maintain, during
the period beginning on the Closing Date until the first anniversary of the
Closing Date, a net worth of at least $10,000,000 less the amount of any amounts
paid to Buyers pursuant to its obligations under Section 9.2(a)(iii). CAP
Sellers agree to maintain, during the period beginning on the Closing Date until
(i) if the Construction Property Option is exercised, the first anniversary of
the sale of the Construction Property by Sellers to Buyer (or an appointee
thereof) (or if Buyer breaches its obligations under the construction Property
Purchase Agreement, the date such agreement is terminated by Sellers in
accordance with its terms) or (ii) if the Construction Property Option is not
exercised, the later of (x) the first anniversary of the Closing Date or (y) the
expiration of the Construction Property Option, a collective net worth of at
least $10,000,000 less the amount of any amounts paid to Buyers pursuant to its
obligations under Section 9.2(a)(iii). Notwithstanding the foregoing, the
obligation to maintain the net worth of the AAPT Sellers and the CAP Sellers
shall be extended in the event any claim is filed prior to the applicable one
year periods referred to in this Section until the final disposition of such
claim; provided that, to the extent the claim is less than $10.0 million, the
obligation to maintain the net worth shall be limited to the amount of the claim
plus twenty percent.
9.3 Further Assurances. Each of Buyers and Sellers shall use
commercially reasonable efforts to take all actions and to do all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement (including, without limitation, satisfying the
closing conditions in Articles 7 and 8 hereto); provided that nothing contained
herein shall require either party or any of its Affiliates to (A) defend or
bring any lawsuit should it determine, in its sole discretion, that it is not in
its interests to do so or (B) sell, transfer, divest or otherwise dispose of any
of its respective business, assets or properties in connection with this
Agreement or any other transactions contemplated hereby. Following the Closing,
each party agrees to execute such documents, instruments or conveyances and take
such actions as may be reasonably requested by the other party and otherwise
cooperate in a reasonable manner with such other party, its Affiliates and their
respective Representatives in connection with any action that may be necessary
or advisable to carry out the provisions hereof or transactions contemplated
hereby.
9.4 Tax Cooperation and Realty Transfer Taxes.
(a) Mutual Assistance Regarding Taxes. Sellers, on the one hand, and
Buyers, on the other, agree to provide each other such assistance (including
access to Books and Records) as may be reasonably required by either of them in
connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority or any judicial or administrative proceeding
related to any liability for Taxes (including any refunds of Taxes) and each
will provide the other with any records or information relevant to such Tax
Return, audit or examination, proceeding or determination as are in its
possession or subject to its control. Such assistance shall include making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided pursuant hereto. All
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information provided pursuant to this Section 9.4(a) shall be held in
confidence, and not be disclosed to others for any reason whatsoever, except to
the extent such disclosure is required in order to effect the intent of this
Section 9.4(a) or such disclosure is required by law. For a period of seven
years from the Closing Date, neither Buyers nor Sellers shall destroy any
records related to the their Operations necessary for Tax Return preparation or
support in audits or other tax proceedings for any period up to and including
the Closing Date without the prior written consent of the other. Each of Buyers
and Sellers agree that AAPT shall make a valid election to be treated as a "real
estate investment trust" for U.S. federal income tax purposes within the meaning
of Section 856(a) of the Code, commencing with its taxable year ended on
December 31, 1997, and will take all actions reasonably necessary to cause such
election to be made.
(b) Realty Transfer Taxes. Buyers shall pay 100% of any realty
transfer Taxes payable in connection with the consummation of the transactions
contemplated hereby (except as provided in the 7350 Tilghman Drive Letter).
9.5 Maintenance of Books and Records. Each of Sellers and Buyers shall
preserve, until the seventh anniversary of the Closing Date, all records
possessed or to be possessed by such party relating to any of the assets,
liabilities or business of their Operations prior to the Closing Date. After the
Closing Date, where there is a legitimate purpose, such party shall provide the
other with access, upon prior reasonable written request specifying the need
therefor, during regular business hours, to (a) the Personnel of such party and
(b) the books of account and records of such party, but, in each case, only to
the extent relating to the assets, liabilities or business of the Transferring
Parties' Operations prior to the Closing Date, and the other party and its
Representatives shall have the right to make copies of such books and records;
provided, however, that the foregoing right of access shall not be exercisable
in such a manner as to interfere unreasonably with the normal operations and
business of such party; and, provided further, that, as to so much of such
information as constitutes trade secrets or confidential business information of
such party, the requesting party and its officers, directors, trustees and
representatives will use due care to not disclose such information except (i) as
required by law, (ii) with the prior written consent of such party, which
consent shall not be unreasonably withheld, or (iii) where such information
becomes available to the public generally or becomes generally known to
competitors of such party through sources other than the requesting party or its
Affiliates, Personnel or Representatives. The party requesting access to any
such books and records, information or Personnel shall bear all of the
out-of-pocket costs and expenses (including without limitation, attorneys' fees,
but excluding reimbursement for salaries and employee benefits) reasonably
incurred in connection with providing access to such books and records,
information and Personnel. Such records may nevertheless be destroyed by a party
if such party sends to the other party written notice of its intent to destroy
records, specifying with particularity the contents of the records to be
destroyed, and the records may then be destroyed after the 30th day after such
notice is given unless the other party objects to the destruction, in which case
the party seeking to destroy the records shall deliver such records to the
objecting party (which party shall be responsible for the costs of delivery).
9.6 Payment Received. Sellers and Buyers each agree that after the Closing
they will hold and will promptly transfer and deliver to the other, from time to
time as and when received by them, any cash, checks with appropriate
endorsements (using their reasonable efforts not to convert such checks into
cash), or other property that they may receive on or after the Closing which
properly belongs to the other party, including, without limitation, any
insurance proceeds, and will account to the other for all such receipts.
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9.7 Employee Matters.
(a) Employment. Buyers shall have no obligation to offer employment
to any employee of Sellers or any Transferring Party. If a Buyer elects to make
an offer of employment to any such employee, such offer may but need not be (1)
for the same position as held by the employee with Sellers or a Transferring
Party immediately prior to the Closing and/or (2) at the same compensation rate
as paid by the Sellers or a Transferring Party to such employee immediately
prior to the Closing. All such offers of employment and the actual employment of
any such employee shall be subject to Buyers' right, in their sole discretion,
to establish and modify from time to time the terms and conditions of such
employment and to terminate any such employee at any time. Except as Buyers may
expressly provide, all such employees shall be treated as new, at-will employees
of Buyers from their date of employment.
(b) Group Health Continuation. Buyers agree that they will and will
cause the Acquired Entity and Acquired Subsidiaries to comply with COBRA after
the Closing Date with respect to all Qualified Beneficiaries (as that term is
used in COBRA) who experience a Qualifying Event (as that term is used in COBRA)
in connection with this transaction or who are Qualified Beneficiaries as of the
Closing Date.
(c) Termination of 401(k) Plan. No later than effective on the
Closing Date, Sellers shall terminate the Atlantic American Property Management
Inc. Savings Plan (the "Savings Plan") provided that Buyer will perform such
administrative functions as required in connection with such termination.
9.8 Insurance. From and after the Closing Date, Sellers shall indemnify,
save and hold Buyers harmless from and against any and all Losses arising from
Insured Events to the extent of proceeds actually received by any Seller from
insurance carriers on account of such Losses, and Sellers shall exercise
commercially reasonable efforts to collect such proceeds. "Insured Events" shall
mean incidents occurring prior to the Closing Date which result in Losses
covered by director and officer, property or liability policies carried by any
Seller or by any parent corporation of any Seller for the benefit of such
Seller. Buyers hereby agree to reimburse Sellers for all documented, actual
out-of-pocket costs associated with such indemnification in a manner reasonably
satisfactory to Sellers and to cooperate with Sellers and the insurance carriers
in pursuing the claim.
9.9 Waiver of Liability. None of Buyers' or Sellers' Representatives have
made, will make or be deemed to have made, in this Agreement or in any
Transaction Document, any representation, warranty, promise, covenant or
statement of any nature hereunder or with respect to the transactions
contemplated hereby.
9.10 LF Strategic Realty Investors L.P. Guarantee. LF Strategic Realty
Investors L.P. hereby unconditionally guarantees to each Buyer that Sellers
shall perform their obligations under Section 9.2(g) of this Agreement in
accordance with their terms.
ARTICLE 10
MISCELLANEOUS
10.1 Termination.
(a) Termination. This Agreement may be terminated at any time prior to
Closing:
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(i) By unanimous written consent of Buyers and Sellers;
(ii) By Buyers if the Closing shall not have occurred on or
before Buyer Termination Date because of the failure of any of the conditions
set forth in Article 8 to be satisfied (for reasons other than Buyers' failure
to comply with its obligations hereunder);
(iii) By Sellers if the Closing shall not have occurred on or
before Seller Termination Date because of the failure of any of the conditions
set forth in Article 7 to be satisfied (for reasons other than Sellers' failure
to comply with their obligations hereunder); or
(iv) By Buyers in accordance with the last sentence of Section
6.7.
(b) In the Event of Termination. In the event of termination of this
Agreement:
(i) Each party shall redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same;
(ii) Subject to Section 10.13 below, the confidentiality
provisions set forth in the Confidentiality Agreement and incorporated pursuant
to Section 10.2 shall survive and remain in full force and effect, and none of
the information described therein received by any party with respect to the
business of any other party or its Affiliates shall be disclosed to any third
party except as permitted therein; and
(iii) In the event that this Agreement shall be terminated
pursuant to Section 10.1(a) hereof, all obligations of the parties hereto under
this Agreement shall terminate, and there shall be no liability of any party
hereto to any other party with each party hereto bearing its own expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement, except as follows: (A) in the event this
Agreement is terminated by Buyers pursuant to Section 10.1(a)(ii) and all of the
closing conditions set forth in Article 7 have been satisfied (other than the
conditions relating to the actual delivery of documents by Buyers at the
Closing), Buyers shall have the right (1) to receive the return of the Escrow
Deposit (including accrued interest thereon) and (2) in the case of the failure
of the transactions contemplated by this Agreement to close due to a breach of a
representation, warranty, covenant or agreement by Sellers, to receive (a) the
reasonable fees paid by Buyers to update the existing surveys and (b) Buyers'
actual, documented out-of-pocket costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, (the fees, costs and
expenses set forth in (a) and (b) not to exceed $25,000 per Real Property) and
(B) in the event this Agreement is terminated pursuant to Section 10.1(a)(iii)
and all of the closing conditions set forth in Article 8 have been satisfied
(other than the conditions relating to the actual delivery of documents by
Sellers at the Closing), Sellers shall be entitled to the Escrow Deposit
(including accrued interest). In the event this Agreement terminates for any
other reason, the Escrow Deposit (including all accrued interest) shall be
returned to Buyer. The parties agree that the payment of the Escrow Deposit to
Sellers will constitute liquidated damages and shall be in lieu of any other
relief to which Sellers might otherwise be entitled for Buyers' failure to
consummate this Agreement. If this Agreement is terminated as provided herein,
all filings, applications and other submissions made pursuant to the terms
hereof shall, to the extent practicable, be withdrawn from the agency or other
Persons to which they were made. Notwithstanding anything to the contrary in
this Section 10.1(b)(iii), in the event the Buyer Termination Date has occurred
and all of the closing conditions set forth in Article 7 have been satisfied (it
being understood that the conditions set forth in Section 7.4 shall also be
deemed satisfied for the purposes of this sentence if Buyer exercises its
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rights pursuant to the proviso contained in the first sentence thereof), Buyers
may seek specific performance of Sellers' obligations to convey the Real
Property and other assets in accordance with this Agreement in lieu of
exercising its rights under Section 10.1(b)(iii)(A).
10.2 Confidentiality. Subject to Section 10.13 below, the covenants,
terms and conditions of the Confidentiality Agreement are incorporated herein
by reference and shall continue in full force and effect until the Closing, at
which time such terms and the obligations of Buyers under this Section 10.2
shall terminate; provided, however, that such terms and obligations shall
terminate only in respect of that confidential information relating primarily
to the Transferring Parties' Operations. From and after the date hereof,
Sellers shall use reasonable care not to disclose, submit or file with any
third party, confidential information relating to the Transferring Parties'
Operations, except where disclosure may be required by law or as may be
necessary for Sellers to enforce its rights or fulfill its obligations under
this Agreement or to Tenants prior to Closing in the ordinary course of
business consistent with past practice, and Buyers shall use reasonable care
not to disclose, submit or file with any third party, confidential information
relating to Sellers (other than with respect to the Transferring Parties'
Operations), except where disclosure may be required by law or as may be
necessary for Buyers to enforce their rights or fulfill their obligations
under this Agreement. In accordance with Section 10.1(b)(ii), the
confidentiality obligations incorporated herein shall survive any termination
of this Agreement.
10.3 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of all other parties to this Agreement (provided that Buyers may assign
or transfer, in whole or in part, their rights hereunder to an Affiliate of
Buyers without the prior consent of all the parties hereto if Buyers remain
bound by the terms and conditions of this Agreement). Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective Representatives, heirs, legatees, successors and
permitted assigns, and no other Person shall have any right, benefit or
obligation hereunder.
10.4 Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; the
earlier of (a) the next Business Day, or (b) four hours after it is transmitted
provided the expiration of such fourth hour occurs before 5:00 p.m. Eastern
standard time if transmitted by telecopy, electronic or digital transmission
method with telephonic or electronic confirmation of receipt; the Business Day
after if sent for next Business Day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express); and upon receipt or refusal
of delivery, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to Sellers, addressed to:
Atlantic American Properties Trust.
c/o Lazard Freres Real Estate Investors, L.L.C.
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Telecopy No.: (212) 332-5980
Attention: Murry N. Gunty
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With a required copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Telecopy No.: (212) 751-4864
Attention: R. Ronald Hopkinson and James I. Hisiger
If to Buyer Parent or Buyer OP:
Brandywine Realty Trust
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Telecopy No.: (610) 325-5682
Attention: Gerard H. Sweeney, President and Chief Executive
Officer
With required copies to:
Brandywine Realty Trust
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Telecopy No.: (610) 325-4628
Attention: Brad A. Molotsky, General Counsel
and
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Telecopy No.: (215) 981-4750
Attention: Michael H. Friedman
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.5 [Intentionally Deleted]
10.6 [Intentionally Deleted]
10.7 Indemnification. Sellers agree to (a) assign, at the Closing, all
indemnification rights under the Bell Atlantic Purchase Agreement and the RF
Purchase Agreement against the sellers thereunder related to the assets and
liabilities transferred to Buyers and (b) take all actions reasonably
necessary for Buyers to
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realize any benefits from such assignment, provided that Buyers shall reimburse
Sellers for any reasonable actual out-of-pocket costs incurred by Sellers in
connection with its obligations under this Section 10.7.
10.8 Choice of Law; Waiver of Trial by Jury. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of New York (without reference to its choice of law
provisions) except to the extent of real estate conveyancing issues, in which
case such issues shall be construed, interpreted and the rights of the parties
determined in accordance with the laws of the state in which the applicable
property is located. Each party irrevocably consents to the service of any and
all process in any action or proceeding arising out of or relating to this
Agreement by the mailing of copies of such process to each party at its address
specified in Section 10.4. The parties hereto irrevocably submit to the
non-exclusive jurisdiction of the United States District Courts for the Southern
District of New York and for the Eastern District of Pennsylvania (or, if
subject matter jurisdiction in that court is not available, in any state court
located within the City of New York or the City of Philadelphia) over any
dispute arising out of or relating to this Agreement or any agreement or
instrument contemplated hereby or entered into in connection herewith or any of
the transactions contemplated hereby or thereby. Each party hereby irrevocably
agrees that all claims in respect of such dispute or proceeding may be heard and
determined in such courts. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum in connection therewith. The parties hereto
waive the right to a jury trial in connection with any suit, action or
proceeding seeking enforcement of such party's rights under this Agreement.
10.9 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties (except to the extent specifically provided for herein).
No amendment, supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
10.10 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Invalidity. If any provision of this Agreement shall for any reason
be held invalid or unenforceable, the invalidity or unenforceability of any such
provision shall in no way affect the validity or enforceability of any other
provision of this Agreement, provided, however, if the invalidity or
unenforceability of any provision shall materially deprive either party of the
economic benefit intended to be conferred by this Agreement, the parties shall
negotiate in good faith to restructure this Agreement in a manner whereby the
economic effect is as nearly as possible the same as the economic effect of this
Agreement prior to such invalidity or unenforceability.
10.12 Titles. The titles, captions or headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
10.13 Publicity. The parties agree that upon the execution and delivery of
this Agreement, Buyer, Buyer OP, and Sellers or an Affiliate thereof, shall
issue a joint press release in substantially the form of
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Exhibit Q attached hereto. Except as provided in the preceding sentence, no
party shall issue any press release or make any public statement regarding the
transactions contemplated hereby prior to Closing, without the prior approval of
the other party, and the parties hereto shall issue a mutually acceptable press
release promptly after Closing; provided that nothing herein shall restrict any
party from making any disclosure which it or its counsel reasonably deems
necessary in order to fulfill such party's disclosure obligations imposed by
law. At any time after the date hereof, Buyers may file a copy of this
Agreement, and any and all Exhibits hereto, as an exhibit to any filings it may
make with the SEC and may disclose information relating to the transactions
contemplated by this Agreement in any filing it may make with the SEC and in any
prospectus it may prepare in connection with the offering of securities.
10.14 Fees and Expenses. Subject to the provisions of Section 10.1(b)(iii),
the parties shall be responsible for the following fees and expenses: (a)
Sellers shall pay all of the fees, costs and expenses incurred by Sellers
incident to or in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby; (b) Buyers shall pay all of the fees, costs
and expenses incurred by Buyers incident to or in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and Buyers shall
pay all fees, costs and expenses referred to in the letter, dated as of July 23,
1998, from Gerard H. Sweeney to Murry N. Gunty regarding the cost of the
AAPT\CAP audit ("SEC 3-14 Audit"); (c) realty transfer Taxes shall be paid as
provided in Section 9.4; and (d) Buyers shall pay 100% of the title commitment
fees (other than the 20% non-imputation fee, which shall be split equally
between Buyers and Sellers (the amount to be paid by Sellers in connection with
the non-imputation fee not to exceed $100,000)), surveys for the Real Property,
environmental reports, engineering reports and all other due diligence by Buyers
in connection with the consummation of the transactions contemplated hereby.
Buyers shall be entitled to a dollar for dollar credit to the AAPT Purchase
Price to the extent AAPT or any of the Acquired Subsidiaries are responsible for
any such fees or costs which pursuant to this Agreement are the responsibility
of Sellers.
10.15 No Third-Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to or shall (a) confer on any Person other than the parties
hereto and their respective successors or assigns any rights (including
third-party beneficiary rights) remedies, obligations or liabilities under or by
reason of this Agreement or (b) constitute the parties hereto as partners or as
participants in a joint venture. This Agreement shall not provide third parties
with any remedy, claim, liability, reimbursement, cause of action or other right
in excess of those existing without reference to the terms of this Agreement.
10.16 Knowledge. Whenever a statement herein is qualified by "to the
knowledge," or a similar phrase, it shall mean the actual knowledge of Seller
Personnel or Buyer Personnel, as applicable. The term "Seller Personnel" shall
mean each of Murry N. Gunty, Jim Still, Carol Chiodo and Brent Sinnett. The term
"Buyer Personnel" shall mean Anthony Nichols, Sr., Gerard H. Sweeney, Mark S.
Kripke and Brad A. Molotsky.
10.17 Reservation of Claims. Notwithstanding anything to the contrary set
forth in this Agreement or any Transaction Document, the assets acquired
pursuant hereto shall not include, and Sellers specifically reserve for their
and their Affiliates' benefit, which pursuant to this Agreement are the
responsibility of Sellers and all claims that may now exist or hereafter arise,
whether known or unknown, against any officer, director, employee, insider,
accountant, attorney, underwriters or other person employed or engaged by
Sellers, or any other Person, who has caused or may have caused a loss to
Sellers or any Seller Affiliate to the extent such loss does not constitute a
loss with respect to an asset acquired pursuant hereto following the date
hereof.
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10.18 Limitation of Liability.
(a) No recourse shall be had for any obligation of Buyer Parent or
Buyer OP under this Agreement or under any document executed in connection
herewith or pursuant hereto, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
partner, officer or employee of Buyer Parent or Buyer OP (other than against
Buyer Parent in its capacity as a shareholder of Buyer OP), whether by virtue of
any statute or rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being expressly waived and released by the Sellers
and any other party claiming by, through or under the Sellers.
(b) No recourse shall be had for any obligation of Sellers under this
Agreement or under any document executed in connection herewith or pursuant
hereto, or for any claim based thereon or otherwise in respect thereof, against
any past, present or future trustee, director, shareholder, partner, officer or
employee of Sellers, whether by virtue of any statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being
expressly waived and released by Buyers and any other party claiming by, through
or under Buyers.
10.19 SEC Reporting Requirements. For the period of time commencing on the
date hereof and continuing through the first anniversary of the Closing Date
hereunder, the Sellers shall, from time to time, upon reasonable advance written
notice from Buyer Parent or Buyer OP, provide Buyer OP and Buyer Parent and
their representatives with access to all financial and other information,
whether or not then in Sellers' possession pertaining to the period from January
1, 1997 through the Closing Date, which information is relevant and reasonably
necessary, in the opinion of the outside, third party accountants of Buyer OP
and Buyer Parent (the "Accountants"), to enable Buyer OP and Buyer Parent and
the Accountants to file financial statements in compliance (at Buyer's cost)
with any or all of (a) Rule 3-05 or 3-14 of Regulation S-X of the SEC; (b) any
other rule issued by the SEC and applicable to Buyer OP and Buyer Parent; and
(c) any registration statement, report or disclosure statement filed with the
SEC by or on behalf of Buyer OP and Buyer Parent. In connection with the SEC
3-14 Audit, Sellers shall deliver to the Accountants a representation letter
(the "Letter") in the form attached hereto as Schedule 10.19, if requested by
Buyer. Sellers shall cooperate with Buyers to cause any SEC audit requirements
to be completed and delivered to Buyer within a reasonable time period to insure
that all SEC filing requirements are met.
10.20 Like Kind Exchange. In the event Buyers request AAPT Seller to sell
directly to Buyer or its designee one or more of the properties owned by an
Acquired Subsidiary for a cash price immediately prior to the Closing, AAPT
Seller agrees to cooperate with Buyers to facilitate such sale, with a
corresponding adjustment to the AAPT Purchase Price, subject in any event to
AAPT being satisfied, in its discretion, that implementation of such an
arrangement is effected in a manner that does not adversely affect it
(including, but not limited to, imposing any additional costs on Seller).
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ARTICLE 11
DEBT ALLOCATIONS AND CONTRIBUTION GUARANTEES; RESTRICTIONS
ON SALE AND REFINANCING OF CONTRIBUTED ASSETS
11.1 Allocation of Nonrecourse Debt. The parties intend that, immediately
following the contribution of the Contributed Assets at the Closing, CAP Sellers
shall be allocated, for purposes of determining CAP Sellers' adjusted tax basis
in their aggregate interest in Buyer OP, nonrecourse debt of Buyer OP and its
Subsidiaries, by operation of Section 752 of the Code and the Treasury
Regulations thereunder and the Buyer Partnership Agreement, with respect to each
Contributed Asset, other than as a result of the CAP Sellers Contribution
Obligation (as defined below), in the amount set forth on Schedule 11.1 attached
hereto. The aggregate amount of nonrecourse debt to be so allocated to CAP
Sellers, as set forth on Schedule 11.1, is referred to herein as the "Aggregate
Allocated Debt." Neither Buyer OP nor CAP Sellers makes any representation or
warranty to the other as to whether the IRS will agree with such allocation or,
if the IRS does not so agree, whether the IRS would prevail in such contrary
position. The parties recognize that the IRS might contend either that a larger
amount of the existing nonrecourse debt of Buyer OP must be allocated to CAP
Sellers, in which event a lesser amount of the existing nonrecourse debt of
Buyer OP would be allocated to the other partners of Buyer OP, or,
alternatively, that a larger amount of the existing nonrecourse debt of Buyer OP
must be allocated to the other partners of Buyer OP, in which event a lesser
amount of the existing nonrecourse debt of Buyer OP would be allocated to CAP
Sellers. Buyer OP agrees that its Tax Returns for the tax year in which the
contribution of the Contributed Assets occurs shall reflect the allocation to
CAP Sellers of an amount of indebtedness not less than $88 million (the
"Combined Allocated Debt Amount"). Buyer OP's Tax Returns for each subsequent
year ending on or before December 31, 2003 shall continue to reflect the
allocation to CAP Sellers of an amount of indebtedness determined on the same
basis as that used to compute the indebtedness allocable to CAP Sellers for the
year in which the contribution of the Contributed Assets to Buyer OP occurs,
except to the extent that such allocations are affected by any material changes
that occur after the date hereof in the U.S. federal income tax laws or the
relevant facts. Buyer OP (i) shall notify CAP Sellers of the commencement of any
administrative proceedings by the IRS with respect to the Tax Returns of Buyer
OP or any Subsidiary for such years, (ii) shall permit CAP Sellers to
participate in such administrative proceedings or subsequent judicial
proceedings to the extent either of such proceedings relate both to CAP Sellers
and to matters addressed in this Agreement and (iii) shall not settle any aspect
of such proceedings described in clause (ii) that materially affects the U.S.
federal or state income tax liability of CAP Sellers without CAP Sellers's
consent, which consent shall not be unreasonably withheld.
11.2 Contribution Obligations With Respect to Debt.
(a) Prior to October 31, 2000, Buyer OP shall notify CAP Sellers as to
the amount of the then existing debt of Buyer OP that would be allocated to CAP
Sellers if the Contribution Agreement referred to in Section 11.2(c) below was
cancelled. In addition, prior to October 31, 2000, Buyer OP shall provide CAP
Sellers with a schedule, which must be satisfactory to CAP Sellers in their sole
discretion, identifying specific outstanding indebtedness of Buyer OP and its
Subsidiaries that are treated as partnerships or are disregarded for federal
income tax purposes (the "Transparent Subsidiaries"), in an aggregate amount
equal to at least $10 million. Commencing December 30, 2000, CAP Sellers shall
be permitted, at their option, and if CAP Sellers so elect Buyer OP shall be
obligated to enter into with respect to all or a portion of such indebtedness
(up to a maximum principle amount of $10 million) one or more Contribution
Agreements (the "CAP Sellers Contribution Obligation") in substantially the form
attached as Exhibit S attached hereto. No partner in Buyer OP or any affiliate
of any such partner, other than CAP Sellers, any CAP Sellers Subsidiary or a
wholly-owned Transparent Subsidiary of Buyer OP as to which no Partner of Buyer
OP has any liability,
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shall be personally liable for, or bear or incur, directly or indirectly, with
respect to that portion of any indebtedness (a "Covered Loan") that is subject
to a CAP Sellers Contribution Agreement, whether by guaranty, the pledge of
collateral, or otherwise, in a manner that would cause such portion of
indebtedness not to be properly allocable to the CAP Sellers under Section 752
of the Code and the Treasury Regulations promulgated thereunder.
(b) To the extent that, at any time on or after December 30, 2000, but
prior to January 2, 2004, (the "Lockout Expiration Date"), Buyer OP or any of
its Transparent Subsidiaries refinances any Covered Loan, or principal is repaid
on the portion of any Covered Loan with respect to which CAP Sellers have
entered into a Contribution Agreement, CAP Sellers shall be entitled to enter
into one or more CAP Sellers Contribution Agreements with respect to other debt
of Buyer OP or any of its Transparent Subsidiaries, and the portion of debt that
is to be guaranteed by CAP Sellers shall meet the conditions described in the
last sentence of Section 11.2(a), so that the total amount of all Covered Loans
following any such refinancing or principal repayment is equal to $10 million,
or such lesser amount as CAP Sellers determine is necessary to avoid recognition
of taxable gain pursuant to Section 731 of the Code (the lesser of such amount
or $10 million, the "Minimum Coverage Amount"), it being understood and agreed
however that in the event that such other debt does not exist, or such other
debt is less than the Minimum Coverage Amount or the portion of the Minimum
Coverage Amount then being repaid or refinanced, the applicable portion of such
debt may not be repaid or such amount must be refinanced by Buyer OP. Any debt
for which CAP Sellers enters into a CAP Sellers Contribution Agreement pursuant
to this Agreement shall be deemed to be a Covered Loan.
(c) Prior to the Closing Date, CAP Sellers and Buyer OP shall execute
and deliver a Contribution Agreement in substantially the form attached as
Exhibit S of the entire amount of the loan (the "Grande B Loan") represented by
the Grande B Loan Agreement. Prior to January 2, 2001, Buyer OP shall not,
directly or indirectly, or cause or permit any Subsidiary to, modify, refinance,
or repay any amount of the Grande B Loan without the prior written consent of
CAP Sellers.
11.3 Restrictions on Sales of Contributed Assets and Certain Refinancings.
(a) Subject to Section 11.3(c), until the Lockout Expiration Date,
Buyer OP shall not, directly or indirectly, or cause or permit any Subsidiary
to, sell, exchange or otherwise dispose of any of the Contributed Assets or any
indirect interest (including, without limitation, any interest of Buyer OP or
any Subsidiary of Buyer OP in any Subsidiary that owns any Contributed Assets,
whether by liquidation, merger or otherwise).
(b) (i) Until the Lockout Expiration Date, Buyer OP shall not,
directly or indirectly, or cause or permit any Subsidiary to, modify, refinance
or repay any principal amount of any indebtedness that is either (a) secured to
any extent by Contributed Assets or otherwise allocable to CAP Sellers by
operation of Section 752 of the Code or (b) a Covered Loan, without the prior
written consent of CAP Sellers, unless (x) in the case of indebtedness described
in clause (a), the aggregate amount of the Partnership's nonrecourse liabilities
that would be allocated to CAP Sellers by operation of Section 752 of the Code
and the regulations thereunder and the Buyer Partnership Agreement other than as
a result of the CAP Sellers Contribution Obligation after giving effect to such
repayment or refinancing would equal or exceed $10 million or (y) in the case of
indebtedness described in clause (b), Buyer OP complies with the provisions of
Section 11.2(b) provided, however, that any such refinancing that has the effect
of accelerating principal repayments would meet the requirements of this Section
11.3(b) if such acceleration were treated as a payment prior to maturity.
72
(ii) For the purposes of this Section 11.3(b), any transaction or
other event, including, without limitation, any modification of indebtedness, in
which any partner of Buyer OP or any affiliate of any such partner other than
CAP Sellers or any CAP Sellers Subsidiary would become personally liable for, or
would bear or incur, directly or indirectly, the "risk of loss" with respect to
any indebtedness that is either secured by a Contributed Asset or is a Covered
Loan, whether by guaranty, the pledge of collateral, or otherwise, in a manner
that would cause such indebtedness not to be considered a Nonrecourse Liability
(as such term is defined in the Buyer Partnership Agreement) shall be considered
a refinancing of such indebtedness for purposes of this Section 11.3(b), and
Buyer OP shall not permit such action to occur unless, and only if, such deemed
refinancing of such indebtedness would not violate Section 11.2(a).
(c) Section 11.3(a) shall not apply to any transaction involving any
Real Property that is transferred to Buyer OP pursuant to the Contribution
(which property is referred to as the "Exchanged Property"), if such transaction
qualifies as a like-kind exchange under Section 1031 of the Code or an
involuntary conversion under Section 1033 of the Code in which no gain is
recognized by Buyer OP or the Subsidiary thereof owning such property or CAP
Sellers as holders of the Preferred Units issued hereunder, as the case may be,
as long as the following conditions are satisfied: (v) in the case of a Section
1031 like-kind exchange, such exchange is not with a "related party" within the
meaning of Section 1031(f)(3) of the Code; (w) the property received in exchange
for the Exchanged Property (referred to as the "Replacement Property") is
acquired in the same taxable year of Buyer OP or such Subsidiary in which the
disposition of the Exchanged Property occurs and the requirements of Section
11.3(b) would be satisfied immediately after such exchange occurs (treating the
exchange as having resulted in a refinancing of all debt secured by the
Exchanged Property for purposes of making such determination); (x) all of the
restrictions of this Section 11.3 shall apply to the Replacement Property and
the indebtedness outstanding with respect to the Replacement Property shall be
treated in the same manner and to the extent set forth in this Section 11.3; and
(y) as of the closing of such transaction, after giving effect thereto, the
ratio of the amount of secured indebtedness allocated to the Replacement
Property to the fair market value of the Replacement Property shall not exceed
80%. Additionally, Section 11.3(a) shall not apply to a contribution by Buyer OP
of Real Property that is transferred to Buyer OP pursuant to the Contribution to
a partnership that is an Affiliate of Buyer OP if (i) such transaction qualifies
for treatment under Section 721 of the Code; (ii) no gain or loss is recognized
by Buyer OP on the transaction; (iii) the transferee partnership covenants and
agrees in writing (and agrees to indemnify CAP Sellers for any breach of such
covenant and agreement), for the benefit of CAP Sellers as holders of the
Preferred Units received by it pursuant to the terms hereof, that all of the
restrictions of this Section 11.3 shall apply to such Real Property and the
indebtedness outstanding with respect thereto in the same manner and to the
extent otherwise set forth in this Section 11.3; and (iv) Buyer OP shall not be
released from (and shall be jointly and severally liable for damages resulting
from a breach by the successor partnership from) any and all obligation pursuant
to this Article 11.
(d) Section 11.3(a) shall not apply to any transaction that involves
either a merger or consolidation of Buyer OP or a Subsidiary thereof with or
into another entity that qualifies as a "partnership" for federal income tax
purposes (the "Successor Partnership") or a transfer of all or substantially all
of the assets of Buyer OP or such Subsidiary to a Successor Partnership and
dissolution of Buyer OP or such Subsidiary, as the case may be, in connection
therewith (in either case, a "Consolidation Transaction") so long as no gain or
income is recognized by Buyer OP or such Subsidiary with respect to any Real
Property that is transferred to Buyer OP pursuant to the Contribution or by CAP
Sellers as holders of the Preferred Units issued hereunder in connection with
such Consolidation Transaction, provided that (w) the requirements of Section
11.3(b) would be satisfied immediately after the Consolidation Transaction
occurs (treating the Consolidation Transaction as having resulted in a
refinancing of all debt of Buyer OP or such Subsidiary for purposes of
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making such determination) and (x) the Successor Partnership covenants and
agrees in writing (and agrees to indemnify CAP Sellers for any breach of such
covenant and agreement), for the benefit of CAP Sellers as holders of the
Preferred Units received by it pursuant to the terms hereof, that all of the
restrictions of this Section 11.3 shall apply to such Real Property and the
indebtedness outstanding with respect thereto in the same manner and to the
extent otherwise set forth in this Section 11.3; and (y) as of the closing of
such transaction, after giving effect thereto, the Leverage Ratio of the
Successor Partnership (or the successor thereto following such transaction)
shall not exceed 80%.
11.4 Maintenance of Combined Allocated Debt Amount. Until the Lockout
Expiration Date, Buyer OP shall not take, or permit any Subsidiary to take, any
action after the Closing Date that results in the amount of indebtedness that
Buyer OP will allocate to CAP Sellers following any such action, in accordance
with Section 752 of the Code and the regulations thereunder and the Buyer
Partnership Agreement, to be reduced to an amount less than the Combined
Allocated Debt Amount.
11.5 Damages Limited to Monetary Damages. CAP Sellers' remedies for any
breach by Buyer OP (or its successors in interest) of any provision of this
Article 11 shall be limited to monetary (as opposed to equitable) damages, being
the amount of taxes (including interest and penalties) imposed on CAP Sellers
and their direct and indirect owners, including taxes imposed on CAP Sellers and
their direct and indirect owners resulting from the receipt by CAP Sellers of
indemnification payments hereunder.
11.6 Choice of Section 704(c) Method. Buyer OP covenants and agrees that
the "traditional method," as defined in Treasury Regulation Section 1.704-3(b),
of allocating income, gain, loss and deduction to account for the variation
between the fair market value and adjusted basis of the Contributed Assets
contributed to Buyer OP by CAP Sellers shall be used (1) with respect to the
contribution of the Contributed Assets and (2) with respect to any revaluation
of such assets pursuant to Treasury Regulation Sections 1.704- 1(b)(2)(iv)(f),
1.704-1(b)(2)(iv)(g), and 1.704-3(a)(6) and the corresponding provisions of the
Buyer OP partnership agreement.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
SELLERS BUYERS
PROMETHEUS AAPT HOLDINGS, L.L.C. BRANDYWINE REALTY TRUST
By: LF STRATEGIC REALTY INVESTORS L.P.,
as sole member
By: LAZARD FRERES REAL ESTATE INVESTORS
L.L.C.,
as general partner
By: __________________________ By: __________________________
Name: Name: Gerard H. Sweeney
Title: Title: President and Chief Executive Officer
COMMONWEALTH ATLANTIC OPERATION BRANDYWINE OPERATING PARTNERSHIP, L.P.
PROPERTIES INC.
By: __________________________ By: BRANDYWINE REALTY TRUST, as general partner
Name:
Title:
By: __________________________
Name: Gerard H. Sweeney
Title: President and Chief Executive Officer
COMMONWEALTH ATLANTIC LAND IV INC.
By: __________________________
Name:
Title:
COMMONWEALTH ATLANTIC LAND II INC.
By: __________________________
Name:
Title:
COMMONWEALTH ATLANTIC DEVELOPMENT INC.
By: __________________________
Name:
Title:
COMMONWEALTH ATLANTIC LAND COMPANY
By: __________________________
Name:
Title:
For purposes of Section 9.10 only,
LF STRATEGIC REALTY INVESTORS L.P.
By: Lazard Freres Real Estate Investors L.L.C.,
as general partner
By: __________________________
Name:
Title: