Exhibit 10.14
TAX INDEMNIFICATION AGREEMENT
This Tax Indemnification Agreement (the "Agreement") is made as of
December 11, 1997, by and among Brandywine Operating Partnership, L.P., a
Delaware limited partnership (the "Partnership"), Laurel Oak Road LLC ("Laurel
Oak"), and M. Sean Scarborough ("MSS") and R. Randle Scarborough ("RSS")
(collectively with Laurel Oak, the "Limited Partner").
WITNESSETH:
WHEREAS, the Limited Partner has executed that certain Amended and
Restated Agreement of Limited Partnership of Brandywine Operating Partnership,
L.P., dated as of November 18, 1997 (the "Partnership Agreement"); and
WHEREAS, Limited Partner received its limited partnership interest in
the Partnership in exchange for the contribution to the Partnership of certain
assets listed on Schedule A hereto (the "Assets") in a transaction to which
Section 721 of the Internal Revenue Code of 1986, as amended (the "Code")
applied; and
WHEREAS, at the time of the contribution, Limited Partner had
unrealized built-in gain (as defined in Treasury Regulation Section
1.704-3(a)(3)) in each Asset as set forth on Schedule A hereto; and
WHEREAS, the Partnership is willing to reimburse and indemnify the
Limited Partner for possible tax on the built-in gain of the Limited Partner in
the Assets under the limited circumstances set forth herein; and
WHEREAS, MSS and RRS are the members of Laurel Oak, and Laurel Oak may
distribute its limited partnership interest in the Partnership to MSS and RRS.
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth herein, the parties hereto, intending to be legally
bound hereby, agree as follows:
AGREEMENT
1. Definitions. As used in this Agreement, the capitalized terms
shall have the respective meanings ascribed to them in this Section 1.
Capitalized terms not defined herein, shall have the meanings ascribed to them
in the Partnership Agreement.
"Built-in Gain" means the unrealized built-in gain of the Limited
Partner in the Assets, individually and cumulatively, as determined from time to
time in accordance with Section 704(c), Treasury Regulation Section
1.704-3(a)(3) and the Partnership Agreement.
"Covered Tax Liabilities" means the sum of (A) any federal and state
taxes (excluding interest and penalties) imposed on any remaining Built-in Gain
of the Limited Partner as a result of a sale or distribution (other than a
distribution to the Limited Partner) of the Assets to which Section 704(c) of
the Code applies at time during the Term, plus (B) any additional federal and
state taxes (excluding interest and penalties) which may be imposed on a
distribution to the Limited Partner under this Agreement.
"Term" means the 48 month period beginning as of the date of this
Agreement.
2. Indemnification for Tax on Built-in Gain. Within 90 days
following the occurrence of an event (such as a sale or distribution of the
Assets (other than a distribution to the Limited Partner) to which Section
704(c) of the Code applies) which causes the Covered Tax Liabilities to become
fixed and determined, the Partnership hereby agrees that it shall cause a
distribution to be made by the Partnership to the partners of the Partnership
under and in accordance with Section 6.1 of the Partnership Agreement such that
under such distribution, the Limited Partner shall receive an amount equal to
the Covered Tax Liabilities paid by the Limited Partner. Notwithstanding the
foregoing, federal, state or local tax on the Built-in Gain of the Limited
Partner arising as a result of (i) the sale or distribution of the Assets after
the Term or (ii) the disposition, transfer or conversion by the Limited Partner
of its limited partnership interest at any time (including during the Term),
shall be the sole obligation of the Limited Partner and the Partnership shall
not effect a distribution under this Section 2 and Section 6.1 of the
Partnership Agreement and shall have no other liability therefor under this
Agreement or otherwise.
3. Initial Determination of its Built-in Gain. The Limited Partner
hereby represents and warrants that as of the date of their contribution to the
Partnership, the Built-in Gain of the Limited Partner in each of the Assets is
as set forth on Schedule A hereto.
4. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflict of law principles thereof.
5. Counterparts. This Agreement may be executed in one or more
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts together constituting the same agreement.
IN WITNESS WHEREOF, this Tax Indemnification Agreement has been duly
executed and delivered by the respective parties on the date first above
written.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: Brandywine Realty Trust, its general partner
/s/ Gerard H. Sweeney
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By: Gerard H. Sweeney
Title: President and Chief Executive Officer
LAUREL OAK ROAD LLC
/s/ M. Sean Scarborough
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By: Mr. Sean Scarborough
Title: Member
/s/ M. Sean Scarborough
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By: M. Sean Scarborough
/s/ R. Randle Scarborough
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By: R. Randle Scarborough