EXHIBIT 5.1
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made and entered as of November 12,
1997, by and between XXXX X. XXXXX, XXXXXXX X. XXXXXX, and C.P. INC., a Maryland
corporation, who are all of the general and limited partners (collectively, the
"Partners" and individually, a "Partner") of Capitol Place I Investment Limited
Partnership, a Maryland limited partnership (the "Partnership") (the Partners
are sometimes hereinafter referred to collectively as "Contributors" and
individually, a "Contributor"), and (ii) FIRST WASHINGTON REALTY LIMITED
PARTNERSHIP, a Maryland limited partnership (hereinafter referred to as
"FWRLP").
W I T N E S S E T H:
WHEREAS, the Partners own all of the partnership interests (the
"Partnership Interests") of the Partnership; and
WHEREAS, the Partnership is the record and beneficial owner of that
certain parcel of real property described on Exhibit A hereto (collectively, the
"Land"), together with the shopping center known as Bowie Plaza Shopping Center
located in Bowie, Prince George's County, Maryland, and all other buildings and
improvements situated thereon (collectively, the "Building"), and all personal
property and fixtures located therein (other than that owned by tenants) (the
"Personalty"), and all appurtenances, rights, easements, rights-of-way,
tenements and hereditaments incident thereto (the "Additional Property") (the
Land, Building, Personalty and Additional Property are hereinafter collectively
referred to as the "Property"); and
WHEREAS, Contributors and FWRLP desire to enter into this Agreement
relating to the contribution by the Contributors to FWRLP of their Partnership
Interests in exchange for certain interests in FWRLP and cash.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Contribution. Subject to the terms and conditions set forth in this
Agreement, Contributors and FWRLP agree to the contribution by Contributors to
FWRLP (the "Contribution") of all of the Partnership Interests.
2. Consideration.
(a) In consideration of the Contribution of the Partnership
Interests to FWRLP, FWRLP shall pay cash (in the form of cash, certified check
or bank wire transfer) and shall issue common partnership units of FWRLP (the
"Units") in an
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aggregate amount (cash and Units) calculated as follows: Ten Million Seven
Hundred Fifty Thousand Dollars ($10,750,000.00) less the outstanding and unpaid
principal balance of the AAL Loan (as defined below) at Closing and adjusted for
any closing adjustments and prorations (the "Consideration Amount"). The number
of Units to be issued shall be determined at Closing by dividing the
Consideration Amount allocated to Units pursuant to Exhibit Q attached hereto by
a price per Unit (the "Unit Price") equal to Twenty-Five Dollars ($25.00),
rounded to the nearest one (1) Unit. The balance of the consideration shall be
paid in cash. FWRLP will pay the cash and issue the Units to the Contributors in
accordance with the schedule set forth as Exhibit Q attached hereto.
(b) At Closing, the Partnership Interests shall be contributed
to FWRLP with the Property then being subject to the indebtedness, lien and
operation of the First Trust (as defined below). Contributors and FWRLP shall
provide to the Lender any and all information reasonably requested by the
Lender.
(c) (i) The Property is presently encumbered by a Deed of
Trust and Security Agreement and First Modification to Deed of Trust ("First
Trust") from the Partnership, as debtor, for the benefit of Aid Association for
Lutherans, as secured party (the "Lender"), which First Trust secures an
original, aggregate principal indebtness of $5,200,000.00 with interest thereon
payable over the term thereof (which ends on December 10, 2009) at a fixed
interest rate of 9.25% per annum, as evidenced by a Note from the Partnership to
Lender, as amended ("Note"). The First Trust and Note and all documents and
instruments executed in connection therewith are collectively referred to as the
"AAL Loan." The AAL Loan requires equal monthly installments of principal and
interest in the amount of the $51,455.00 per month. The outstanding principal
balance under the AAL Loan as of the date hereof is approximately $4,549,000.00.
Copies of the First Trust and Note are attached hereto as Exhibits N and O,
respectively.
(ii) FWRLP's obligations under this Agreement shall be
expressly contingent on the condition that FWRLP receive by Closing a letter
(the "Letter") from Lender (i) consenting to the Contribution of the Partnership
Interests and such modifications to the AAL Loan as FWRLP shall determine are
necessary (to the extent that FWRLP determines that modifications are necessary,
FWRLP shall so notify Contributors on or before November 20, 1997), (ii)
confirming that the AAL Loan is as described above, (iii) certifying that, to
the best knowledge of the Lender, there is no default or event which with notice
or lapse of time, or both, would constitute a default under the AAL Loan. At
Closing, Contributors shall execute an estoppel certificate in favor of FWRLP
certifying that, to the best knowledge of the Contributors, there is no default,
or event of default which with notice or lapse of time, or both, would
constitute a default under the AAL Loan. FWRLP will use commercially reasonable
efforts to obtain such Letter from Lender, and the Contributors shall reasonably
cooperate with FWRLP in its efforts to obtain such Letter from Lender on or
before November 26, 1997 (as
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defined below). FWRLP shall be responsible for all assumption fees and other
costs charged by the Lender in connection with such consents. If such Letter is
not received by FWRLP by Closing, FWRLP shall have the right to terminate this
Agreement, in which event the Deposit (defined below), together with interest
thereon, shall be returned to FWRLP. If Lender does not consent or if Lender's
Letter is other than as set forth above and is not reasonably acceptable to
FWRLP, FWRLP shall have the right, at its sole election, to terminate this
Agreement by giving written notice thereof to Contributors, whereupon the
Deposit, together with interest thereon, shall be returned to Contributors and
neither party shall have any further liability to the other except as
specifically set forth herein.
(d) Anything contained herein to the contrary notwithstanding,
in the event the Lender does not consent to the transfer of the Partnership
Interests to FWRLP as contemplated herein, then in order to cause the
transaction to proceed Contributors may, but shall not be required to, elect to
permit FWRLP to payoff the AAL Loan at Closing; provided that, in such event,
the Consideration Amount shall be reduced by the full amount of any prepayment
premium or penalty and the cash and/or Units to be issued to the Contributors
pursuant hereto shall be recomputed based upon such reduced Consideration
Amount.
3. Deposit.
(a) Within two (2) business days after the date of delivery to
FWRLP of an original of this Agreement executed by Contributors together with
completed Exhibits hereto (the date of such delivery by Contributors being the
"Acceptance Date"), FWRLP shall deliver to the Title Company, as escrow agent, a
deposit (together with interest earned thereon, the "Deposit") of Two Hundred
Fifty Thousand Dollars ($250,000.00 ) by check payable to the Commercial
Settlements, Inc., 0000 X Xxxxxx, X.X., Xxxxxxxxxx, XX 00000 (the "Title
Company").
(b) The Title Company will immediately provide Contributors
with written evidence of receipt of such Deposit. The Title Company shall place
the Deposit in an interest-bearing account within two (2) business days after
the date of receipt thereof, and interest on the Deposit shall accrue to the
benefit of the party entitled to the Deposit pursuant to this Agreement. The
Deposit shall be held by the Title Company pursuant to the terms and conditions
of this Agreement.
(c) In the event that, at any time prior to Closing, the
Contributors or FWRLP provides Title Company with a certification (a copy of
which shall be delivered contemporaneously to the other party) that the
Contributors or FWRLP, as the case may be, is entitled to the Deposit pursuant
to the terms of this Agreement, Title Company shall deliver the Deposit to such
party no less than five (5) business days and no more than seven (7) business
days after receipt of said notice, unless the other party disputes such
certification by written notice to Title Company (a copy of which
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shall be delivered contemporaneously to the other party) delivered within five
(5) business days of Title Company's receipt of the initial certification. In
such event, Title Company shall hold the Deposit pending resolution of such
dispute.
(d) The parties acknowledge that (i) Title Company is acting
solely as a stakeholder at their request and for their convenience, (ii) Title
Company shall not be deemed to be the agent of either of the parties, and (iii)
Title Company shall not be liable to either of the parties for any act or
omission on its part unless taken or suffered in bad faith, in willful disregard
to this Agreement or involving gross negligence. The Contributors and FWRLP
shall jointly and severally indemnify and hold Title Company harmless from and
against all costs, claims and expenses, including reasonable attorneys' fees,
incurred in connection with the performance of Title Company's duties hereunder,
except with respect to actions or omissions taken or suffered by Title Company
in bad faith, in willful disregard of this Agreement or involving gross
negligence on the part of Title Company; provided, however, that if any
litigation shall arise between the Contributors and FWRLP in connection
therewith, the non-prevailing party shall pay all such costs, claims and
expenses of the Title Company. In the event any dispute shall arise between the
parties hereto as to the disposition of the Deposit, the Title Company's sole
responsibility may be met, at the Title Company's option, by paying the Deposit
into the court in which relevant litigation is pending between the parties, or
by initiating an interpleader action, and upon payment of the Deposit into
court, neither Contributors nor FWRLP shall have any further right, claim,
demand, or action against the Title Company.
4. Closing. Except as otherwise provided in this Agreement, the
Contribution contemplated herein shall be consummated at the "Closing"
(sometimes hereinafter referred to as the "Closing"), which shall take place on
January 7, 1998 (the "Closing Date") or such other date as may be mutually
agreed upon by Contributors and FWRLP; provided, however, that if the Lender has
not completed all documentation consenting to the contribution of the
Partnership Interests by such date, then the Closing Date shall be extended for
such reasonable time period as is required to complete same, not to exceed
thirty (30) days. The Closing shall take place at the offices of First
Washington Realty Limited Partnership, 0000 Xxxx-Xxxx Xxxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxx 00000, or at such other place as may be mutually agreed upon
by Contributors and FWRLP.
5. Several Representations and Warranties of Contributors. In order to
induce FWRLP to enter into this Agreement and to issue the Units in
consideration for the Partnership Interests, each Contributor for such
Contributor only and for no other Contributor makes the following several
representations and warranties:
(a) Authority. Such Contributor has the right, power and
authority to enter into this Agreement and to contribute its Partnership
Interests in accordance with the terms and conditions of this Agreement. Except
for the consents required under the
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AAL Loan, no consents of any persons other than those executing this Agreement
as a Contributor are required for such execution or to cause such Contributor to
consummate the transactions contemplated by this Agreement. This Agreement is
the valid and binding obligation of such Contributor, enforceable against such
Contributor in accordance with its terms, except that such enforcement may be
subject to bankruptcy, conservatorship, receivership, reorganization,
insolvency, moratorium or similar laws or procedures relating to or affecting
creditors rights generally and to general principles of equity.
(b) [Intentionally Omitted].
(c) Ownership of Interests. Such Contributor owns the
Partnership Interests owned by such Contributor, as set forth in Exhibit P
hereto, free and clear of all liens, charges, encumbrances, restrictive
agreements and assessments other than the provisions of the Partnership
Agreement (as defined in Section 6(a) below) and the AAL Loan. Upon the
contribution of such Contributor's Partnership Interests to FWRLP or its
permitted designee(s), FWRLP will receive good and absolute title thereto, free
from all liens, charges, encumbrances, restrictive agreements and assessments
whatsoever other than the provisions of the Partnership Agreement and the AAL
Loan. Such Contributor hereby waives, with respect to the contribution
contemplated by this Agreement, any "right of refusal" or other restriction on
transfer set forth in the Partnership Agreement. There are no outstanding
options, contracts, calls, commitments or demands of any nature relating to the
Partnership Interest of such Contributor, except as set forth in the Partnership
Agreement and the AAL Loan.
(d) Securities Law Matters.
(i) Each Contributor who shall receive the Units is now and, at the time of
Closing, will be an "accredited investor" as such term is defined under Rule 501
promulgated under the Securities Act of 1933, as amended (the "Securities Act");
(ii) Each Contributor's primary residence or principal place of business is
in the State of Maryland;
(iii) Each Contributor is acquiring the Units for such Contributor's own
account for investment purposes only and not with a view to distribution and
does not intend to distribute or resell the Units;
(iv) Taking into account the information and resources such Contributor can
practically bring to bear on the acquisition of the Units in FWRLP contemplated
hereby, such Contributor is knowledgeable, sophisticated and experienced in
making, and is qualified to make decisions with respect to investments in
securities presenting an investment decision like that involved in the
acquisition of the Units, including investments in securities issued by FWRLP,
and has requested,
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received, reviewed and considered all information such Contributor deems
relevant in making an informed decision to acquire the Units (including the
Confidential Information Statement attached hereto as Exhibit L which contains
the First Amended and Restated Agreement of Limited Partnership of FWRLP and any
Amendments thereto (the "FWRLP Partnership Agreement");
(v) Each Contributor will not, directly or indirectly, voluntarily offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of ) any of the Units except in
compliance with the Securities Act and the rules and regulations promulgated
thereunder and with the terms and conditions of the FWRLP Partnership Agreement;
(vi) Each Contributor acknowledges that the Units to be issued must be held
unless and until they are subsequently registered under the Securities Act and
under applicable state securities or blue sky laws, unless exemptions from such
registrations are available at the time of resale;
(vii) Prior to the issuance of the Units, each Contributor will execute all
such other documents and instruments as may be reasonably necessary to allow
FWRLP to comply with federal and state securities law requirements with respect
to the issuance of the Units and to comply with the terms of the FWRLP
Partnership Agreement; and
(viii) Each Contributor acknowledges and agrees that, notwithstanding
Section 8.6 of the FWRLP Partnership Agreement, the Units to be issued hereunder
shall not be redeemable for cash or exchangeable for Common Stock in the REIT
for a period of thirteen (13) months from and after the date of issuance to such
Contributor.
(e) No Contributor is a person other than a United States
person within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"). The transaction contemplated herein is not subject to the tax
withholding provisions of Section 3406 of the Code, or Subchapter A of Chapter 3
of the Code or of any other provision of law.
6. General Representations and Warranties of Contributors. In order to
induce FWRLP to enter into this Agreement and to issue the Units in
consideration for the Partnership Interests, the Contributors, jointly and
severally, hereby make the following representations and warranties as of the
date hereof:
(a) Authority. The Partnership is a limited partnership duly
organized and in good standing under the laws of the State of Maryland. The copy
of the Partnership' s Partnership Agreement and all amendments thereto
(collectively, the "Partnership Agreement") including all Certificates of
Limited Partnership and all
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amendments thereto, attached hereto an Exhibit P, is a true, correct and
complete copy thereof.
(b) Title. To the Contributors' knowledge, the Partnership is
the sole owner of fee simple title to the Property, and such title is marketable
and good of record and free and clear of all liens, encumbrances, covenants,
conditions, restrictions and other matters affecting title, except for the
Permitted Exceptions (as defined in Section 8(a)(iii)).
(c) Compliance with Existing Laws. To the knowledge of the
Contributors, the Partnership has not received any notice from a governmental
authority asserting that the Partnership is in violation of any applicable
building, zoning, environmental or other ordinances, statutes or regulations of
any governmental agency, in respect to the ownership, use, maintenance,
condition and operation of the Property or any part thereof.
(d) Leases. True, correct and complete copies of all of the
leases of the Property and any amendments thereto (collectively, the "Leases"),
have been delivered to FWRLP. Attached hereto as Exhibit B is a description of
all of the Leases and a current rent schedule ("Rent Schedule") covering the
Leases. There are no leases or tenancies of any space in the Property other than
those set forth in Exhibit B or, to the Contributors' knowledge, any subleases
or subtenancies unless otherwise noted therein. Except as otherwise set forth in
Exhibit B or elsewhere in this Agreement:
(i) To the knowledge of Contributors, the Leases are in full force and
effect and constitute a legal, valid and binding obligation of the respective
tenants;
(ii) no tenant has an option to purchase the Property or any portion
thereof;
(iii) no renewal or expansion options have been granted to the tenants,
except as provided in the Leases;
(iv) to Contributors' knowledge, the Partnership is not in default under
any of the Leases;
(v) the rents set forth on the Rent Schedule are being collected on a
current basis and there are no arrearages in excess of one month, except as
indicated in Exhibit B hereto, nor has any tenant paid any rent, additional rent
or other charge of any nature for a period of more than thirty (30) days in
advance;
(vi) all work for tenant alterations and other work or materials contracted
for by the Partnership and any tenant has been completed by
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the Partnership, and all work and materials have been fully paid for or will be
paid for by Closing and all contributions to tenant for tenant improvements have
been paid to tenant;
(vii) the Partnership has not sent written notice to any tenant claiming
that such tenant is in default, which default remains uncured, and to
Contributors' knowledge, no tenant is in default under its Lease, except as
indicated in Exhibit B hereto;
(ix) no action or proceeding instituted against the Partnership by any
tenant is presently pending in any court; and
(x) no security deposits are in the possession of Contributors or the
Partnership other than those set forth in Exhibit B.
(e) Service Contracts. Attached hereto as Exhibit C is a
complete and correct list of all contracts or agreements relating to the
management, leasing, operation, maintenance or repair of the Property (the
"Service Contracts"). True and correct copies of all of the Service Contracts
have been delivered to FWRLP. All of the Service Contracts set forth on Exhibit
C shall be assumed by FWRLP as of the Closing Date. Except in the case of a
default by the vendor under a specific Service Contract, no Service Contract
will be terminated, amended, modified or supplemented prior to the Closing Date
without FWRLP's prior written approval.
(f) Tax Bills. Attached hereto on Exhibit D are true and
correct copies of tax bills issued by any applicable federal, state or local
governmental authority to the Partnership with respect to the Property for the
most recent past and current tax years, and any new assessment received with
respect to a current or future tax year.
(g) Insurance. The Property is insured for at least 80% of its
replacement cost (less any deductible) against loss or damage sustained as a
result of fire or other casualty and the Partnership has rent loss insurance in
place for the Property. Attached hereto as Exhibit E is a list of all hazard,
liability and other insurance policies presently affording coverage with respect
to the Property. The Contributors shall maintain in full force and effect all
such policies until the Closing Date. Contributors shall cancel such policies as
of the Closing Date (with Contributors being entitled to any reimbursement of
any advance premiums paid by the Partnership), unless a loss in rental income
has resulted from a casualty or other insured event prior to Closing for which
the Partnership may be entitled to make a claim under such policies, in which
event the policies shall not be canceled.
(h) Condition of Property. Possession of the Property shall be
delivered to FWRLP at Closing in its "as is, where is" condition as of the date
of FWRLP's execution of this Agreement, ordinary wear and tear excepted.
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(i) Tenant Estoppels. The Contributors represent and warrant
that they shall use reasonable efforts to obtain and deliver to FWRLP a tenant
estoppel letter from each tenant in substantially the form attached hereto as
Exhibit F (or in such form or containing such information as may be required
under such tenant's lease).
(j) Condemnation Proceedings. No condemnation or eminent
domain proceedings are pending or, to the best of the Contributors' knowledge,
threatened against the Property or any part thereof, and neither the Partnership
nor the Contributors' has made any commitments to or received any written
notice, of the desire of any public authority or other entity to take or use the
Property or any part thereof whether temporarily or permanently, for easements,
rights-of-way, or other public or quasi-public purposes.
(k) Litigation. Except as set forth on Exhibit G hereto, no
litigation is pending or, to the best of the Contributors' knowledge, threatened
against the Partnership, including administrative actions or orders against the
Partnership relating to governmental regulations, affecting the use, operation
or ownership of the Property or any part thereof as contemplated herein.
(l) No Defaults. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby will: (i) subject to
any approval required under the AAL Loan, conflict with, or result in a breach
of, the terms, conditions or provisions of, or constitute a default under, any
agreement or instrument to which the Partnership is a party or by which the
Partnership or the Property is bound, (ii) subject to the approval required
under the AAL Loan, violate any restriction, requirement, covenant or condition
to which the Partnership is subject or by which the Partnership or the Property
is bound, (iii) constitute a violation of any applicable code, resolution, law,
statute, regulation, ordinance, rule, judgment, decree or order or (iv) except
as set forth herein, result in the cancellation of any contract or lease
pertaining to the Property.
(m) [Intentionally Omitted].
(n) Separate Tax Lot and Subdivision. To the best of
Contributors' knowledge, the Land is the subject of a separate subdivision, and
the Land is assessed for tax purposes as a separate and distinct parcel.
(o) Hazardous Waste. Except as disclosed in the environmental
reports delivered by Contributors to FWRLP or obtained by FWRLP, Contributors
have no knowledge of any discharge, spillage, uncontrolled loss, seepage or
filtration (a "Spill") of oil, petroleum or chemical liquids or solids, liquid
or gaseous products or any hazardous waste or hazardous substance (as those
terms are used in the Comprehensive Environmental Response, Compensation and
Liability Act of 1986, as amended, the Resource Conservation and Recovery Act of
1976, as amended, or in any other applicable federal, state or local laws,
ordinances, rules or regulations relating
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to protection of public health, safety or the environment (as such laws may be
amended from time to time) at, upon, under or within the Land or any contiguous
real estate. To the best of the Contributors' knowledge, there is no proceeding
or action pending or threatened by any person or governmental agency regarding
the environmental condition of the Property. To Contributors' knowledge, the
Building is totally free of friable asbestos requiring remediation. Without
intending to limit the foregoing representations and warranties, FWRLP
acknowledges that the Property is and/or has been leased to a dry cleaner,
various restaurants and other tenants that may use regulated products in the
normal course of their business and that Contributors do not control or actively
monitor such use.
(p) Certificates of Occupancy. The Partnership will not amend
any certificates of occupancy for the Property and will maintain them in full
force and effect to the extent that the Partnership is responsible for them. .
(q) Licenses and Permits. The Contributors have received no
notice, nor have any knowledge, that the Partnership is lacking any required
permit or license issued by applicable governmental authorities for operation,
maintenance or ownership of the Property ("Licenses").
(r) Operating Statements. Attached hereto as Exhibit H are
copies of the operating statements of the Property for calendar years 1994,
1995, 1996 and 1997 (through September 30, 1997), which are true and correct to
Contributors' knowledge. Also attached as Exhibit H is a copy of the 1997
operating budget for the Property.
(s) Utilities. To Contributors' knowledge, adequate, usable
public sewers, public water facilities, gas and electrical facilities necessary
to the operation of the Property are installed in and are duly connected to the
Property and can be used without any charge except the normal deposits, if any,
and usual metered utility charges and sewer charges.
(t) Personal Property. Attached hereto as Exhibit I is a true,
correct and complete inventory of all personal property ("Personal Property"),
if any, owned by the Partnership and used in the management, maintenance and
operation of the Property (other than trade fixtures or personal property of
tenants).
(u) Leasing Commissions. To the best of Contributors'
knowledge, there are, and at Closing there shall be, no outstanding or
contingent leasing commissions or fees payable with respect to the Property.
(v) Partnership Liabilities. Except for (i) the obligations
and liabilities of the Partnership which FWRLP is taking the Partnership
Interests subject to under Section 2 (b) above, (ii) the Service Contracts,
Leases and other contractual obligations which FWRLP is acquiring the
Partnership Interests subject to pursuant to this Agreement, and (iii) any
liabilities and obligations of the Partnership which are being
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adjusted at Closing pursuant to Section 12 or other provisions of this
Agreement, the Partnership shall not have any liabilities or obligations, either
accrued, absolute or contingent or otherwise, which will not be paid or
discharged on or before the Closing Date. In addition, the Partnership has not
received notice of any, and to the best of the knowledge of the Contributors,
there is, as of the date of execution of this Agreement, no basis for any claim
against (or liability of ) the Partnership arising from the business done,
transactions entered into or other events occurring prior to the Closing Date
other than the obligations and liabilities described in the preceding sentence.
(w) Partnership for Tax Purposes. The Partnership is, and at
all times has been, properly treated as a partnership for Federal Income Tax
purposes, and not as an "association" or "publicly traded partnership" taxable
as a corporation.
(x) Taxes. The Partnership has timely filed with the
appropriate taxing authorities all returns (including without limitation
information returns and other material information) in respect of Federal, State
and local taxes (collectively "Taxes") required to be filed by it through the
date hereof and will timely file any such returns required to be filed by it on
or prior to the Closing Date. The returns and other information filed (or to be
filed) are complete and accurate in all material respects. All Taxes of the
Partnership in respect of periods beginning before the Closing Date have been
timely paid, or will be timely paid prior to the Closing Date, and the
Partnership has no material liability for Taxes in excess of the amounts so
paid. All Taxes that the Partnership has been required to collect or withhold
have been duly collected or withheld and, to the extent required when due, have
been or will be (prior to Closing Date) duly paid to the proper taxing
authority. No audits of any of the Partnership's federal, state or local returns
for Taxes by the relevant taxing authorities have occurred, and no material
deficiencies for Taxes of the Partnership have been claimed, proposed or
assessed by any taxing or other governmental authority against the Partnership.
There are no pending or, to the best of knowledge of the Contributors,
threatened audits, investigations or claims for or relating to any material
additional liability to the Partnership in respect of Taxes, and there are no
matters under discussion with any governmental authorities with respect to Taxes
that in reasonable judgement of the Contributors or their counsel, is likely to
result in a material additional liability for Taxes. There are no liens for
taxes (other than for current taxes not yet due and payable) on any of the
assets of the Partnership.
7. Obligations Pending Closing. From and after the date of this Agreement
through the Closing Date, Contributors and FWRLP, as applicable, covenant and
agree as follows:
(a) Maintenance and Operation of Premises. The Contributors
will cause the Property to be maintained in its present order and condition,
normal wear and tear excepted and will cause the continuation of the normal
operation thereof, including the purchase and replacement of fixtures and
equipment, and the continuation of the normal practice with respect to
maintenance and repairs so that the Property will,
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except for normal wear and tear, be in substantially the same condition on the
Closing Date as on the date hereof. If the transaction contemplated by this
Agreement closes as provided herein, then FWRLP will reimburse Contributors at
Closing for any costs incurred and paid by the Partnership in excess of $2,000
during each of November and December 1997 for repairs to the roof of the
Building which FWRLP has approved (which approval shall not be unreasonably
withheld or delayed) prior to such repairs being made; provided, however, that
prior approval of FWRLP shall not be required for emergency repairs to the roof,
but Contributors shall promptly notify FWRLP thereof.
(b) Licenses. The Contributors shall use reasonable efforts to
preserve in force all Licenses and to cause those expiring to be renewed.
(c) Changes in Representations. The Contributors shall notify
FWRLP promptly, and FWRLP shall notify the Contributors promptly, if either
becomes aware of any occurrence prior to the Closing Date which would make any
of its representations, warranties or covenants contained herein not true in any
material respect.
(d) Obligations as to Leases. The Contributors shall not,
without FWRLP's prior written consent (which consent shall not be unreasonably
withheld), amend, modify, renew or extend any Lease in any respect unless
required by law, or enter into new leases or approve any assignment of leases or
subletting of leased space, or terminate any Lease. If FWRLP does not respond
within five (5) business days of written request for consent from Contributors,
FWRLP shall be deemed to have consented to such request. Contributors shall not
be responsible for vacancy caused by a breach by tenant under its lease. Prior
to Closing, Contributors shall not apply all or any part of the security deposit
of any tenant unless such tenant has vacated the Property or is in material
default under its lease.
(e) Obligations as to AAL Loan. Contributors shall not,
without FWRLP's prior written consent, (i) prepay, or permit the Partnership to
prepay, the AAL Loan, or (ii) modify or amend, or permit the Partnership to
modify or amend, any of the documents evidencing or securing the AAL Loan or
otherwise entered into in connection with the AAL Loan. Contributors shall make,
or cause the Partnership to make, all payments required to be made under the AAL
Loan when due, shall perform, or cause the Partnership to perform, all
obligations under the AAL Loan and shall keep, and cause the Partnership to
keep, the AAL Loan free from default.
8. Representations, Warranties and Covenants of FWRLP. In order to
induce Contributors to enter into this Agreement and to contribute the
Partnership Interests to FWRLP, FWRLP and, solely as to the representations,
warranties and covenants contained in Sections 8(h), (j), (k) and (l), First
Washington Realty Trust, Inc ("REIT") hereby make the following representations
and warranties as of the date hereof, each of which is material:
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(a) Authority of FWRLP. FWRLP is a limited partnership duly
organized and existing and in good standing under the laws of the State of
Maryland. FWRLP has all necessary power and authority to execute, deliver and
perform this Agreement and consummate all of the transactions contemplated by
this Agreement. This Agreement is the valid and binding obligation of FWRLP,
enforceable against it in accordance with its terms.
(b) No Defaults. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby will: (i) conflict
with, or result in a breach of, the terms, conditions or provisions of, or
constitute a default under, the Partnership Agreement or any agreement or
instrument to which FWRLP is a party, (ii) violate any restriction, requirement,
covenant or condition to which the FWRLP is subject, and (iii) constitute a
violation of any applicable code, resolution, law, statute, regulation,
ordinance, rule, judgment, decree or order.
(c) Vacant Space. FWRLP hereby further agrees that if any
rentable space in the Property is vacant or the tenant thereunder is in default
under its lease on the Closing Date, FWRLP shall accept the Property subject to
such vacancy or tenant default (subject to Section 9(a)(v) hereof), provided
that the vacancy or default was not permitted or created by Contributors in
violation of any restrictions contained in this Agreement.
(d) Additional Matters Regarding Authority. The execution,
delivery and performance by FWRLP of this Agreement and each other agreement,
document or instrument contemplated hereby to which FWRLP is a party and which
is required to be delivered to Contributors at Closing (together with this
Agreement, the "FWRLP Documents"), the fulfillment of and the compliance with
the respective terms and provisions hereof and thereof by FWRLP, and the due
consummation of the transactions contemplated hereby or thereby by FWRLP have
been, or by Closing will be, duly and validly authorized and approved by all
requisite partnership actions of FWRLP.
(e) Disclosure Documents. Attached hereto as Exhibit N is a
true and correct copy of the Confidential Information Statement, as supplemented
through the date hereof. The FWRLP Partnership Agreement, as contained in the
Confidential Information Statement, as supplemented through the date hereof, has
not been amended or modified except as set forth in Exhibit N, and, to the
knowledge of FWRLP, is in full force and effect as of the date hereof, and, to
the knowledge of FWRLP, no default or condition which, with the passage of time
or the giving of notice could become a default, exists on the part of any party
thereunder.
(f) Binding Obligation. This Agreement constitutes, and all
other agreements, documents and instruments to be executed by FWRLP pursuant
hereto, when duly executed and delivered by FWRLP, will each constitute, valid
and binding obligations of FWRLP, enforceable in accordance with their
respective terms, except
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that such enforcement may be subject to bankruptcy, conservatorship,
receivership, reorganization, insolvency, moratorium or similar laws or
procedures relating to or affecting creditors' rights generally or the rights of
creditors of limited partnerships and to general principles of equity.
(g) No Capital Calls or Loans. Following Closing, neither
Contributors, as holders of the Units, nor any subsequent transferees of the
Units from Contributors, shall have any obligation to make additional capital
contributions or loans to FWRLP.
(h) Financial Information. The financial statements of FWRLP
and the REIT (including the notes thereto) included in the Confidential
Information Statement, as supplemented through the date hereof, present fairly
the financial position of the respective entity or entities presented therein at
the respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in any such
registration statement or periodic report, such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis. Since the date of the most recent financial statements
included in the Confidential Information Statement, as supplemented through the
date hereof, there has been no material adverse change, when considered as a
whole, in the condition, financial or otherwise, or in the earnings, assets,
business affairs or business prospects of FWRLP or the REIT.
(i) Issuance of Units. The FWRLP Partnership Agreement
provides, or prior to Closing will provide, for the issuance of the Units. The
Units to be issued in connection with the transactions herein contemplated have
been, or prior to their issuance on the Closing Date will have been, duly
authorized for issuance by FWRLP to Contributor, and on the date of their
issuance on the Closing Date will be validly issued, fully paid and
non-assessable. The Units conform to the description thereof contained in the
Confidential Information Statement, as supplemented through the date hereof, and
such description conforms to the rights set forth in the FWRLP Partnership
Agreement.
(j) Disclosure. The Confidential Information Statement, as
supplemented through the date hereof, on the date hereof, does not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(k) Status of REIT. First Washington Realty Trust, Inc. is
organized in conformity with the requirements for qualification as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code"), and its proposed method of operation will enable it to meet the
requirements for taxation as a real estate investment trust under the Code.
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(l) Anti-Dilution; Holding Period. FWRLP hereby covenants and agrees as
follows:
(i) If at any time prior to Closing there shall be
(a) a reorganization of FWRLP (other than a combination,
reclassification, exchange or subdivision of Units otherwise
provided for herein), (b) a merger or consolidation of FWRLP
with or into another entity in which FWRLP is not the
surviving entity, or a reverse triangular merger in which
FWRLP is the surviving entity but the Units outstanding
immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities,
cash or otherwise, or (c) a sale or transfer of FWRLP's
properties and assets as, or substantially as, an entirety to
any other person, then, as a part of such reorganization,
merger, consolidation, sale or transfer, lawful provision
shall be made so that Contributors shall thereafter be
entitled to receive at Closing the number of shares of stock
or other securities or property of the successor entity
resulting from such reorganization, merger, consolidation,
sale or transfer that Contributors would have been entitled to
receive if the Closing had been held immediately before such
reorganization, merger consolidation, sale or transfer and
Contributors had received at such Closing the Units which it
was entitled to receive under this Agreement, subject to
further adjustments as provided in this Agreement. The
foregoing provisions of this Section shall similarly apply to
successive reorganizations, consolidations, mergers, sales and
transfers occurring prior to Closing and to the stock or
securities of any other entity that are at the time receivable
by holders of the Units as a result thereof.
(ii) If FWRLP, at any time prior to Closing, by
reclassification of securities or otherwise, shall change the
Units into the same or a different number of securities of any
other class or classes, at Closing Contributors shall have the
right to receive such number or kind of securities as would
have been issuable to Contributors as the result of such
change as if Contributors held the Units immediately prior to
such reclassification or other change, all subject to further
adjustment as provided in this Section.
(iii) If FWRLP at any time prior to Closing shall
split, subdivide or combine the Units into a different number
of securities of the same class, the number of Units to be
received by Contributors at Closing shall be proportionately
increased in the case of a split or subdivision or
proportionately decreased in the case of a combination, and
the Unit Price used in this Agreement to calculate certain
adjustments to the number of Units shall be proportionately
decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
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(iv) If, prior to Closing, all holders of Units
("Unitholders") shall have received, or, on or after the
record date fixed for the determination of eligible
Unitholders, shall have become entitled to receive, without
payment therefor, other or additional Units or other
securities or property (other than cash) of FWRLP by way of
distribution, then and in each case, Contributors shall have
the right to acquire upon Closing, in addition to the number
of Units to which Contributors are entitled hereunder, and
without payment of any additional consideration thereof, the
amount of such other or additional Units or other securities
or property (other than cash) of FWRLP that Contributors would
hold on the Closing Date had they been the holder of record of
the Units on the date hereof through and including the Closing
Date, and had retained such Units and all other additional
Units and other securities or property as aforesaid during
such period, giving effect to all adjustments called for
during such period by the provisions of this Agreement.
(m) Holding Period. Except in connection with a sale of all or
substantially all of FWRLP's assets or a merger or consolidation of FWRLP, in no
event shall FWRLP voluntarily sell or otherwise dispose of the Property or any
part thereof or the Partnership Interests or any part thereof (other than
pursuant to a condemnation or under threat of condemnation) for a period of six
(6) years following the Closing Date, unless (i) it is pursuant to a tax-free
exchange such that no taxable gain would be incurred by Contributors as a result
of such sale or other disposition of the Property or the Partnership Interests
or (ii) FWRLP indemnifies and agrees to hold harmless Contributors from any
Federal and state income tax consequences attributable to such sale or other
disposition. In the event of a condemnation or involuntary conversion of a
material part of the Property, FWRLP shall use reasonable efforts to reinvest
the condemnation proceeds in such property or properties, and within such time
periods, as are required by the Internal Revenue Code to avoid Federal income
tax being payable by Contributors with respect to such condemnation proceeds.
9. Conditions Precedent to Closing.
(a) It shall be a condition precedent of FWRLP's obligation to
make a full settlement hereunder that each and every one of the following
conditions shall exist on the Closing Date:
(i) Representations and Warranties. Contributors'
representations and warranties hereunder shall be true and
correct in all material respects the same manner and with the
same effect as though such representations and warranties had
been made on and as of the Closing, except to the extent
modified by Section 9(a)(v).
(ii) Zoning. No proceedings shall have occurred or be
pending to change, redesignate or redefine the zoning
classification of the Property to a more restrictive
classification than presently exists.
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(iii) Title. Title to the Property shall be
marketable, good of record, and insurable by the Title Company
at standard rates or less, pursuant to a full coverage ALTA
Form-B (Rev. 1970 and 1984) owner's title insurance policy (or
an unconditional commitment therefor) without any exceptions
("Printed form" or otherwise) other than the Permitted
Exceptions, and in addition, without exception for mechanic's
or materialmen's lien arising from goods, labor or materials
provided to the Property prior to the Closing Date. The
"Permitted Exceptions" are:
(A) the lien of current real estate taxes and
special assessments not yet due and payable; and
(B) such other matters which are listed on Exhibit J
attached hereto. Notwithstanding anything to the
contrary contained in this paragraph (B), the
Contributors, at or prior to Closing, shall cause to
be satisfied and released of record all mortgages,
deeds of trust, financing statements, judgments,
liens and matters (other than those set forth on
Exhibit J hereto) that may be satisfied by payment of
a liquidated sum, other than the AAL First Trust;
provided, however, that if the amount thereof exceeds
$250,000 and was not voluntarily created by the
Contributors subsequent to the effective date of the
Title Commitment, Contributors need not satisfy and
release such matters, in which event FWRLP shall have
the right and option either (i) to terminate this
Agreement, or (ii) to close on the contribution of
the Partnership Interests and waive such defects in
title. In the event of termination of this Agreement,
Contributor and FWRLP shall be relieved of all
liabilities under this Agreement, except the
indemnities provided in Sections 14(a) and 16 hereof,
and the Deposit shall be returned to FWRLP.
(iv) [Intentionally Omitted].
(v) Tenant Vacancies. There shall not exist at the
Property at the Closing Date more than 15,000 square feet of
space in the aggregate which is not leased pursuant to a bona
fide lease or which the tenant therein has been in default
under its lease for more than sixty (60) days and for an
amount in excess of two (2) month's base rent at the Closing
Date.
(vi) Leasing Brokerage/Property Management
Agreements. Contributors shall have terminated any and all
leasing brokerage agreements and property management
agreements with respect to the Property effective as of the
Closing. All responsibility for dealings with any such brokers
and agents, including the payment of any claims (if deemed
warranted by the Contributors), shall be the sole
responsibility of the Contributors. The Contributors agree
that they will indemnify and hold
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FWRLP, its successors, assigns, partners, agents and
employees, harmless against any such claims and/or losses
which might be incurred by such indemnitees or by the
Partnership in connection with any outstanding and/or
contingent leasing commissions or fees or management fees.
(vii) Performance by Contributor. Contributors shall
have complied in all material respects with and not be in
breach of any of their covenants or obligations under this
Agreement.
(viii) Tenant Estoppels. FWRLP shall have received
(a) a tenant estoppel letter in substantially the form
attached hereto as Exhibit F (or in such form as required
under such tenant's lease) from, at a minimum, tenants
satisfying the requirements described on Exhibit F-1, which
tenant estoppel letters shall not contradict in any material
respect the information set forth in Exhibit B hereto or the
Contributors' representations and warranties in Section 6(d)
hereof, and (b) any subordination and attornment agreements
required by the Lender. The foregoing notwithstanding,
allegations in tenant estoppels of Landlord defaults or
breaches pertaining to roof leaks in any tenant's space or the
condition of the roof and/or roof systems shall be permitted
and shall not constitute a basis for rejecting any tenant
estoppel or for termination of this Agreement by FWRLP, but
Contributors shall be responsible for any tenant damage claim
as a result thereof accruing prior to Closing.
(b) Failure of Condition. In the event of the failure by the
Closing Date of any condition precedent set forth above, FWRLP shall notify
Contributors in writing, and if Contributors do not correct such failure (if
valid) within five (5) business days after such notice, then FWRLP, at its sole
election, may (a) terminate this Agreement, in which event the Deposit and any
interest thereon shall be returned to FWRLP and, except as otherwise provided in
Section 17 hereof, neither party shall have any further obligations or
liabilities to the other (but the indemnitees provided in Section 14(a) and 16
hereof shall survive in all events); or (b) proceed to Closing and, if such
failure constitutes a default by Contributors hereunder, avail itself of any
legal or equitable remedy FWRLP may have, except as to any default of
Contributors waived in writing by FWRLP or deemed to be waived pursuant to the
provisions of this Agreement on or before the Closing Date; or (c) extend the
Closing Date for such reasonable time period as may be determined by FWRLP (but
in no event for more than three (3) months from the Closing Date then in effect)
in order to permit the satisfaction of any condition precedent not so fulfilled.
(c) Anything to the contrary notwithstanding, the parties to
this Agreement expressly agree that the obligations of Contributors pursuant to
this Agreement are conditioned upon the satisfaction, in the reasonable
discretion of Contributors, of the following conditions:
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(i) All of the covenants, agreements, representations
and warranties made by FWRLP and/or the REIT in this Agreement
(including the attached Exhibits), the Confidential
Information Statement, as supplemented through the date
hereof, or the FWRLP Documents shall be true, accurate and
complete in all material respects, and shall have been
fulfilled in all material respects, as of the date of the
Closing Date; and
(ii) Contributors shall be released by the Lender in
writing from all liabilities they may have on account of or in
any way in connection with the AAL Loan which arise after
Closing.
In the event any of the foregoing conditions are not satisfied as of the Closing
Date, Contributors shall notify FWRLP in writing, and if FWRLP does not correct
such failure (if valid) within five (5) business days after such notice, then
Contributors, in their sole discretion, (A) may avail themselves of the remedies
provided in Paragraph 17(a) hereof if such non-satisfaction constitutes a
default by FWRLP hereunder, or (B) terminate this Agreement, in which event the
Deposit and any interest thereon shall be returned to FWRLP and neither party
shall have nay further obligation or liabilities to the other (but the
indemnities provided in Sections 14(a) and 16 hereof shall survive in all
events).
10. Contributors' Deliveries. At the Closing, the following documents,
each dated on the Closing Date, shall be delivered to FWRLP:
(a) a Contribution and Assumption Agreement ("Assignment") and
an Amendment to the Partnership Agreement ("Amendment") and Limited Partnership
Certificate, in a recordable from, reasonably satisfactory to FWRLP and the
Contributors, setting forth the assignment by each of the Contributors of their
Partnership Interest and its withdrawal from the Partnership and the
substitution of FWRLP and /or its designee(s) as partners of the Partnership,
which Amendment shall be executed and acknowledged by all the Contributors; at
FWRLP's option, such Assignment and Amendment may contain such other amendments
of the Partnership Agreement as shall be determined by FWRLP, provided that the
Contributors shall execute such Assignment and Amendment solely for the purpose
of (a) assigning their respective Partnership Interests to FWRLP or its
designee(s), and (b) withdrawing from the Partnership.
(b) a release from each Contributor releasing the Partnership
and FWRLP (and its designee(s)) as partners of the Partnership from any
obligations and liabilities with respect to the original formation of the
Partnership, and any other matter arising from business done, transactions
entered into or events occurring prior to the Closing Date (including, without
limitation, liability arising from any breach by any of the Contributors), other
than the rights of Contributors pursuant to Paragraph 12 below.
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(c) An opinion of counsel for Contributors, in from and
substance reasonably acceptable to counsel for FWRLP, to the effect that:
(i) The Partnership is a duly organized and validly existing in good
standing under the laws of the State of Maryland:
(ii) The execution and delivery of this Agreement and all other agreements
delivered in connection herewith or at the Closing, the consummation of the
transactions herein contemplated, and compliance with the terms of this
Agreement and all other agreements delivered in connection herewith or at the
Closing will not conflict with, or result in a breach of, any of the terms,
conditions or provisions of, or constitute a default under, any note, indenture,
mortgage, deed of trust, contract or other agreement or instrument to which the
Partnership is a party or by which the Partnership is bound (and of which
counsel has knowledge) (other than the AAL Loan), or any law or order, rule,
regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign;
(iii) Contributors have complete and unrestricted power to contribute,
transfer, assign and deliver to FWRLP and its designee(s) all of the Partnership
Interests to be contributed and assigned hereunder, and the Assignment and the
Amendment delivered pursuant to this Section 10 are in form legally sufficient
to vest in FWRLP and its designee(s) good title to the Partnership Interests
described therein; and
(iv) To the best of counsel's knowledge, there is no litigation or
investigation pending or threatened against the Partnership, or the Property, or
any part thereof, which might result in any material, adverse change pertaining
to the Property or the Partnership, or the operations thereof, or which
questions the validity of any action taken in, under or in connection with any
of the provisions of this Agreement.
(d) a schedule from the Contributors updating the Rent Schedule for the
Property and setting forth all arrearages in rents and all prepayments of rents;
(e) originally executed Leases and Service Contracts and copies of books,
records, operating reports, files and other materials related to the ownership,
use and operation of the Property, to the extent that any exist and are in the
possession of the Contributors, which obligation shall survive Closing;
(f) [Intentionally Omitted]
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(g) an original letter executed by the Contributors advising the tenants of
the Property of the contribution of the Partnership Interests to FWRLP and
directing that rents and other payments thereafter be sent to FWRLP or as FWRLP
may direct;
(h) possession of the Property from the Contributors in the condition
required by this Agreement, and the keys therefore;
(i) from each Contributor, the Certification of Non-foreign Status as
provided in Treas. Reg. 1.1445-2(b)(2)(iii)(B) or in any other form as may be
required by the Internal Revenue Code or the regulations issued thereunder;
(j) such other items and instruments from the Contributors as shall be
required by the Title Company in connection with the issuance of its title
insurance policy to FWRLP pursuant to Section 9(a)(iii) (including customary
owner's affidavit and non-imputation affidavit in form reasonably acceptable to
Contributors);
(k) any and all documents from the Contributors necessary to release the
Deposit from escrow with the Title Company and to have said Deposit returned to
FWRLP;
(l) any other documents required by this Agreement to be delivered by
Contributors; and
(m) An amendment to the FWRLP Partnership Agreement, in a form reasonably
acceptable to FWRLP and Contributors, admitting the Contributors who receive
Units as limited partners of FWRLP and issuing such Units as computed in
accordance with Exhibit Q hereto.
11. FWRLP's Performance. At the Closing, simultaneously with the
deliveries of Contributors pursuant to the provisions of Section 10 above, FWRLP
shall issue to Contributors the Units and cash in the manner specified in
Section 2, and FWRLP and REIT shall execute and deliver those documents and take
such other actions required to be taken by FWRLP and REIT at Closing as required
under this Agreement (including, without limitation, counterparts of the
Assignment, Amendment and amendment to the FWRLP Partnership Agreement),
whereupon the Deposit, and any interest accrued thereon, shall be returned to
FWRLP by the Title Company. In addition to the Units, FWRLP shall deliver to
Contributors at the Closing the following items:
(a) An opinion of Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, counsel
to FWRLP, (subject to customary exclusions and qualifications) to the effect
that:
(i) FWRLP is a validly existing limited partnership in good standing under
the laws of the State of Maryland;
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(ii) To such counsel's knowledge, the execution and
delivery of this Agreement and all other agreements delivered
in connection herewith or at the Closing, the consummation of
the transactions herein contemplated, and compliance with the
terms of this Agreement and all other agreements delivered in
connection herewith or at the Closing will not conflict with,
or result in a breach of, any of the terms, conditions or
provisions of, or constitute a default under, any note,
indenture, mortgage, deed of trust, contract or other
agreement or instrument to which FWRLP is a party or by which
FWRLP is bound (and of which counsel has knowledge) (other
than the AAL Loan); and
(iii) FWRLP has complete and unrestricted power to
transfer, assign and deliver to Contributors the Units to be
issued hereunder.
(b) Executed copies of such documents as AAL may reasonably
require in connection with the assumption of the AAL Loan (the "AAL Assumption
Documents"), including, if required by AAL, an indemnity agreement with regard
to hazardous wastes and toxic substances on the Property which arise after
Closing.
12. Settlement Charges; Prorations and Adjustments.
(a) FWRLP shall pay for the title examination, the title
insurance premium, notary fees and other such charges incident to Closing. Any
real estate transfer and recording fees and taxes and documentary stamps in
connection with this transaction, if any, shall be borne by FWRLP; provided,
however, that the number of Units issued to Contributors at the Closing under
Section 2(a) hereof shall be reduced by an amount equal to one-half (1/2) of the
real estate transfer and recording fees and taxes payable by FWRLP divided by
the Unit Price. Although Contributors and FWRLP believe that no real estate
transfer or recording taxes will be due in connection with the transactions
contemplated hereby, if it is finally determined that such taxes are due and
payable in connection herewith, then, as long as the Partnership Interests were
transferred in a manner such that at all times there were at least two (2)
partners of the Partnership, Contributors shall either (at Contributors'
election) (i) reimburse to FWRLP in cash one-half (1/2) of such sum paid by
FWRLP, or (ii) return/relinquish to FWRLP the number of Units equal to one-half
(1/2) of the taxes paid by FWRLP divided by the then-current price per share for
common shares in the REIT. FWRLP and Contributors shall each pay its own legal
fees related to the preparation of this Agreement and all documents required to
settle the transaction contemplated hereby.
(b) In addition to the foregoing, at the Closing, the
following adjustments and prorations shall be computed as of January 1, 1998 (it
being agreed that January 1, 1998 shall be the effective date of the Closing
irrespective of the actual date upon which Closing occurs), as if the
transaction contemplated by this Agreement was a sale of the Property by the
Partnership to FWRLP:
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(i) Taxes. Real estate and personal property taxes
shall be apportioned (based on the fiscal periods for which such taxes
are assessed) as of the Closing Date.
(ii) Assessments. All special assessments and other
similar charges which have become a lien upon the Property or any part
thereof at the Closing Date and are due and payable through the Closing
Date, if any, shall be paid in full by the Contributors at the Closing.
All other special assessments or similar charges shall be adjusted as
of the Closing Date.
(iii) Rent. Rent for the month of, and any month
after, Closing collected by the Partnership prior to Closing shall be
apportioned as of the Closing Date. If any tenant is in arrears in the
payment of rent on the Closing Date, rents received from such tenant
after the Closing shall be applied in the following order of priority:
(a) first to the payment of current rent then due; (b) second, to
delinquent rent for any period after the Closing Date; and (c) third to
delinquent rent for any period prior to the Closing Date. FWRLP shall
use reasonable efforts (other than the institution of suit) to collect
arreages due as of the Closing Date (including, without limitation,
unpaid "Additional Rent" (as defined below) attributable to periods
prior to Closing); provided, however, that at Contributors' election
(i) FWRLP shall assign to Contributors all rights with respect to such
arrearages and Contributors may pursue collection thereof or (ii) FWRLP
will institute suit at the request of Contributors to collect such
arrearages provided all costs (including attorneys' fees) in connection
therewith are paid by Contributors. FWRLP agrees to cooperate with
Contributors in ascertaining any amounts due, permitting Contributors
to avail itself of any audit rights with respect to any tenants and
otherwise assisting Contributors in collection of such arreages. If
rents or any portion thereof received by Contributors or FWRLP after
the Closing Date are payable to the other party by reason of this
allocation, the appropriate sum, less a proportionate share of any
reasonable attorneys' fee, costs and expenses of collection thereof,
shall be promptly paid to the other party, which obligation shall
survive the Closing.
If any tenants are required to pay percentage rents,
escalation charges for real estate taxes, operating expenses,
cost-of-living adjustments or other charges of a similar nature
("Additional Rents") and any Additional Rents are collected by FWRLP
after the Closing which are attributable in whole or in part to any
period prior to the Closing, then FWRLP shall promptly pay to
Contributors the portion thereof attributable to periods prior to and
including the Closing Date, less a proportionate share of any
reasonable attorneys' fees, costs and expenses of collection thereof
(if any), if and when the tenant paying the same has made all
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payments of rents and Additional Rent then due to FWRLP pursuant to the
tenant's Lease, which obligation shall survive the Closing.
(iv) Debt Service on the AAL Loan and Escrows Held by
Lender. The amount of interest payable under the AAL Loan shall be
apportioned as of the Closing Date, and Contributors shall receive a
credit for all escrows maintained by the Lender under the AAL Loan on
the Closing Date.
(v) Miscellaneous. All other charges and fees
customarily prorated and adjusted in similar transactions, including
utilities, insurance premiums and charges for Service Contracts to be
assumed by FWRLP, shall be prorated as of the Closing Date. In the
event that accurate prorations and other adjustments cannot be made at
Closing because current bills are not obtainable or the amount to be
adjusted is not yet ascertainable (as, for example, in the case of
utility bills) the parties shall prorate on the best available
information, subject to further adjustment promptly upon receipt of the
final xxxx or upon completion of final computations. To the extent that
water consumption or other utility charges may constitute a lien
against the Property, Contributors agree that an appropriate amount in
respect of water consumption or other utility charges may be held in
escrow by the Title Company in connection with its issuance of a title
insurance policy to FWRLP. The Contributors shall use their reasonable
efforts to have all utility meters read on the Closing Date so as to
accurately determine its share of current utility bills.
(c) Security Deposits. All security deposits set forth in the
Leases at the Property shall, at Contributors' election, be paid over to or be
credited to FWRLP at Closing.
(d) Bank Accounts. Immediately prior to the Closing,
Contributors shall have the right to cause the Partnership to withdraw from the
Partnership's bank account(s) and distribute to the Contributors an amount equal
to all cash within such bank account(s) at such time.
(e) Distributions. The quarterly distributions payable to
Contributors on the Common Units for the first record date after any issuance to
Contributors shall be pro rated based upon the effective date of Closing of
January 1, 1998.
13. Risk of Loss. The risk of loss or damage to the Property by fire or
other casualty, until the Closing shall be borne by the Contributors. If prior
to Closing (i) condemnation proceedings are commenced against all or any
material portion of the Property, or (ii) if the Property is damaged by fire or
other casualty to the extent that the cost of repairing such damage shall be
Four Hundred Thousand Dollars
-24-
($400,000.00) (exclusive of roof repair costs) or more or to the extent that
Giant Food, CVS/Pharmacy, Southern States or any other tenant(s) of the Property
occupying in excess of 15,000 square feet in the aggregate shall exercise a
termination right available under its lease because of such damage), or (iii) if
the Property is damaged by an uninsured risk, then FWRLP shall have the right,
upon notice in writing to the Contributors delivered within ten (10) days after
actual notice of such condemnation or fire or other casualty, to terminate this
Agreement, and thereupon the parties shall be released and discharged from any
further obligations to each other (except the indemnities provided in Section
14(a) and 16 hereof shall survive such termination) and the Deposit shall be
refunded to FWRLP. If FWRLP does not elect to terminate this Agreement or in the
event of fire or other casualty not giving rise to a right to terminate this
Agreement by FWRLP, FWRLP shall be entitled to an assignment of all of the
proceeds of fire or other casualty insurance proceeds and the rent insurance
proceeds payable with respect to the period after Closing or of the condemnation
award, as the case may be (i.e., such proceeds shall remain in the Partnership
for the benefit of FWRLP), and Contributors shall have no obligation to repair
or restore the Property; provided, however, that the Unit portion of the
Consideration shall be reduced (based on the Unit Price per Unit) by an amount
equal to the sum of (a) the "deductible" applied by the Partnership's insurance
policy, or (c) if the Partnership is self-insured, the cost of repairing such
damage. FWRLP shall have the right to participate in the negotiation and
settlement of any casualty or condemnation-related claim, provided that FWRLP
shall have previously elected not to terminate this Agreement or has no such
right of termination.
14. Inspection of Property.
(a) FWRLP's Right of Inspection. FWRLP shall have the right,
at its own risk, cost and expense, at any time or times prior to Closing, to
enter, or cause its agents or representatives to enter, upon the Property for
the purpose of making surveys, or any tests, investigations and/or studies
relating to the Property or FWRLP's intended acquisition thereof which FWRLP
deems appropriate, in its sole discretion, during reasonable hours and upon
reasonable notice to the Contributors. FWRLP's entry shall be subject to the
rights of all tenants of the Property, and FWRLP shall use reasonable efforts
not to interfere with the business being conducted by the Tenants. FWRLP shall
further have complete access to all documentation, agreements and other
information in the possession of Contributors related to the ownership, use and
operation of the Property, to the extent it is readily available to
Contributors, and shall have the right to make copies of same. FWRLP agrees to
repair any damage to the Property that may be caused by its inspections and to
indemnify and defend Contributors and hold Contributors harmless against any
injury, loss, damage or lien suffered upon the Property as a result of such
inspections. The foregoing indemnification obligation shall survive Closing
and/or any termination of this Agreement.
-25-
(b) Environmental. (i) As described in that certain Phase I
Environmental Site Assessment and Limited Subsurface Investigation prepared by
Apex Environmental, Inc. and dated October 30, 1997, dry cleaning solvents have
been identified in the soil of the Property in the area behind the existing dry
cleaners. Apex is conducting further subsurface investigations (the "Additional
Investigations") to determine the horizontal and vertical extent of the
contamination in this area (the "Contamination"). If the Costs (as defined
below) to obtain a Closure Letter (as defined below) from the Maryland
Department of the Environment ("MDE") (including the costs of any remediation,
if required) is less than $5,000.00, then the existence of the Contamination
shall not constitute a basis for terminating this Agreement and Contributors
will not be responsible for obtaining the Closure Letter.
(ii) If the Costs to obtain a Closure Letter from MDE (including
the costs of any remediation, if required) is more than $5,000.00, then, except
as set forth in the following paragraph, the existence of the contamination
shall not constitute a basis for termination of this Agreement, and in such
event Contributors shall be responsible, at their sole cost and expense for all
Costs in excess of $5,000.00 (FWRLP being liable for the first $5,000.00 of such
Costs), for obtaining the Closure Letter from MDE, and Contributors shall
diligently pursue same to completion. FWRLP will cause the Partnership to
cooperate with Contributors in obtaining the Closure Letter, and FWRLP and
Contributors agree to share any documents in their possession or which they
obtain in connection with the Contamination and Closure Letter. Contributors
agree to indemnify and hold harmless FWRLP and its representatives, agents,
successors (including, without limitation, successors in title to the Property),
assigns, and nominees, from and against all Costs associated with obtaining a
Closure Letter, which ever is applicable. The "Costs" covered by this Section
14(b) shall be deemed to mean all attorneys' and consultants' fees, costs and
expenses reasonably necessary or appropriate for obtaining the Closure Letter,
including, without limitation, the costs of preparing and filing applications,
reports, letters, certificates, forms, plans, reports and related materials to
MDE or the U.S. Environmental Protection Agency ("EPA"), whichever is
applicable, and the costs, if any, required by MDE or EPA, whichever is
applicable, to further assess and/or remediate the Contamination to the extent
required by MDE and/or EPA. "Closure Letter" shall be deemed to mean a no
further action letter, or its equivalent, stating that no further action
regarding the assessment and remediation of the Contamination is necessary, and
that the case is closed (if a case is opened).
(iii) Notwithstanding the foregoing, if the Costs to obtain a
Closure Letter from MDE (including the costs of any remediation, if required) is
in excess of $100,000.00, then Contributors shall have the right to terminate
this Agreement by giving written notice thereof to FWRLP before the Closing
Date, in which event this Agreement shall terminate, the Deposit shall be
returned to FWRLP and neither party shall have any further liabilities or
obligations to each other; provided, however, that upon such termination, the
Contributors shall reimburse FWRLP for one-half (1/2) of the cost of the
Additional Investigations (not to exceed a reimbursement of $4,000.00).
(iv) Furthermore, Purchaser shall deliver to Contributors
immediately upon its availability a copy of any environmental report it receives
from its environmental consultant, including an estimate of the Costs.
Contributors shall have the right to have its environmental consultant review
said environmental report and estimate the Costs of obtaining a Closure Letter
from MDE (including the costs of any remediation). If the estimate of the Costs
obtained by Contributors from its environmental consultant exceeds One Hundred
Thousand Dollars ($100,000.00), or in the event Purchaser does not deliver a
complete copy of the report prepared by its environmental consultant addressed
to Contributors (or permitting Contributors to rely thereon) on or before
November 26, 1997, Contributors have the right to terminate this Agreement upon
the same terms and conditions set forth above in Section 14(b)(iii). For the
purposes hereof, Contributors environmental consultant shall be a consultant
experienced in environmental matters, such as Apex Environmental.
(v) In the event Closing occurs and Contributors have
responsibility to obtain the Closure Letter (and complete any remediation, if
required) in accordance with this Section 14(b), Contributors shall arrange for
obtaining such Closure Letter (including such remediation, if required) and
advise the Partnership from time to time regarding the scope of activities
planned and completed; so long as such Closure Letter and remediation actions
are being pursued in a diligent manner under the direction of an experienced
environmental consultant, Contributors shall have the exclusive right to
complete such Closure Letter and remediation.
(c) Audit. The Contributors hereby agree to allow books and
records related to the Property to be audited (at FWRLP's sole expense) prior to
Closing upon at least ten (10) days prior notice at Contributors' office by an
independent, certified public accounting firm selected by FWRLP, and the
Contributors will cooperate and cause its employees and other agents to
cooperate in such auditing process, provided Contributors shall not incur third
party out-of-pocket expenses in connection therewith. FWRLP shall provide the
Contributors with at least ten (10) days prior notice of such audit.
15. Indemnifications.
(a) Indemnification by Contributor. Subject to the provisions
of Section 19(m) below, Contributors hereby indemnify and agree to defend and
hold harmless FWRLP and its partners and subsidiaries and any officer, director,
employee, agent of any of them, and their respective successors and assigns from
and against any and all claims, expenses, costs, damages, losses and liabilities
(including reasonable attorneys' fees) which may at any time be asserted against
or suffered by FWRLP, any indemnitee set forth above, or the Property, or any
part thereof, whether before or after the Closing Date, as a result of, on
account of or arising from (i) any breach of any covenant, representation,
warranty or agreement on the part of Contributors, or any of
-26-
them, made herein or in any instrument or document delivered pursuant to this
Agreement, and/or (ii) any obligation, claims, suit, liability, contract,
agreement, debt or encumbrance or other occurrence (other than any of the
foregoing approved, consented or taken subject to by FWRLP in accordance with
the provisions of this Agreement) created, arising or accruing on or prior to
the Closing Date, regardless of when asserted (but subject to Section 19(m)
below), and relating to the Contributors or the Property, or its operations. To
the extent an indemnification obligation under clause (i) above arises out of a
breach by any Contributor of the several representations and warranties set
forth in Section 5 hereof, only the Contributor responsible for such breach
shall be obligated to indemnify FWRLP hereunder.
(b) Indemnification by FWRLP. Subject to the provisions of
Section 19(m) below, FWRLP hereby indemnifies and agrees to defend and hold
harmless Contributors and their respective heirs, executors, administrators,
personal or legal representatives, successors and assigns from and against any
and all claims, expenses, costs, damages, losses and liabilities (including
reasonable attorneys' fees) which may at any time be asserted against or
suffered by Contributors and/or their heirs, executors, administrators, personal
or legal representatives, successors or assigns as a result of, on account of or
arising from (i) any breach of any covenant, representation, warranty or
agreement on the part of FWRLP made herein or in any instrument or document
delivered pursuant to this Agreement, and/or (ii) any obligation, claims, suit,
liability, contract, agreement, debt or encumbrance or other occurrence created,
arising or accruing after the Closing Date and relating to the Partnership, the
Partnership Interests, the Property or its operations or pertaining to tenant
security deposits delivered to FWRLP.
16. Brokerage Commission. Contributors and FWRLP represent and warrant
to each other that no brokerage fee or real estate commission is or shall be due
or owing in connection with this transaction other than that payable to First
Capital Realty, Inc., which shall be payable by FWRLP at the Closing pursuant to
a separate agreement. Contributors and FWRLP hereby indemnify and hold the other
harmless from any and all claims of any other broker or agent so claiming based
on action or alleged action of the other.
17. Default Provisions; Remedies.
(a) FWRLP's Default. If FWRLP fails to consummate the
Contribution contemplated herein when required to do so pursuant to the
provisions hereof, then the Title Company shall deliver the Deposit to
Contributors as full and complete liquidated damages, and as the exclusive and
sole right and remedy of Contributors, at law or in equity, whereupon this
Agreement shall terminate and neither party shall have any further obligations
or liabilities to any other party. In the event this Agreement is terminated,
the indemnities set forth in Sections 14(a) and 16 shall nevertheless remain in
full force and effect.
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(b) Contributors Default. Except for any breaches waived in
writing by FWRLP, if Contributors have breached any of their covenants or
obligations under this Agreement at or prior to Closing or have failed, refused
or are unable to consummate the Contribution contemplated herein by the Closing
Date or if any of the representations and warranties made by Contributors under
this Agreement shall be inaccurate or incorrect in any material respect on the
Closing Date, then FWRLP shall be entitled to (i) waive such breach, default or
failure and proceed to Closing, (ii) extend the Closing for such reasonable time
or times as may be necessary in order to enable Contributors to remedy such
breach, default or failure (not to exceed three (3) months), (iii) terminate
this Agreement and obtain the return of the Deposit, (iv) maintain an action for
specific performance or (v) if and only if the breach, failure or refusal is due
to the wrongful act or omission of Contributors, maintain an action for damages
against Contributors in an amount not to exceed $250,000 (exclusive of court
costs and reasonable attorneys' fees). In the event this Agreement is
terminated, the indemnities set forth in Sections 14(a) and 16 shall
nevertheless remain in full force and effect.
(c) The provisions of Sections 17(a) and (b) above shall not
be applicable to any breach or default by a party occurring or first becoming
actually known to the other party after Closing, and, as to any said breach or
default, the non-defaulting party may exercise any and all remedies available at
law or in equity, subject, however, to the provisions of Section 19(m) and to
the following sentence. The foregoing notwithstanding, as to any such breach or
default (other than a breach of the representations or warranties contained in
Section 5 or Section 6(x) hereof) or any indemnification obligation under
Section 15(a), any execution by FWRLP for damages awarded to FWRLP against
Contributors shall not exceed $6,300,000.00 in the aggregate (and the liability
of each of Messrs. Xxxxx and Xxxxxx for any such damages shall be limited to his
pro rata share (i.e., two-thirds (2/3) with respect to Xxxx Xxxxx and one-third
(1/3) with respect to Xxxxxxx Xxxxxx) of the lesser of the loss or the
$6,300,000.00 limitation, but not to exceed, as to each of them respectively,
the aggregate value of the respective Units (based on a price of $25.00 per
Unit) and cash received by them at Closing.
(d) In the event that any litigation shall arise between the
parties hereto as to the subject matter hereof, the prevailing party in such
litigation shall be entitled to recover from the non-prevailing party all of its
court costs and reasonable attorneys' fees.
18. Registration Rights. (a) The REIT hereby agrees to use its best
efforts to file a registration statement within thirteen (13) months after
Closing to register the issuance and resale, if required, of REIT Common Stock
which may be issued to Contributors in exchange for its Units, to use its best
efforts to cause such registration statement to become effective and to keep
such registration continuously effective (subject to certain exceptions) for a
period for four (4) years thereafter; provided, however, that the REIT shall be
permitted to postpone such filing or suspend the effectiveness of such shelf
registration statement for such periods as the REIT
-28-
reasonably determines are in the best interest of the REIT or which are
necessary to comply with securities law requirements (including suspending sales
under the shelf registration statement for such periods as the managing
underwriter in an underwritten offering deems necessary).
(b) Piggyback Registration Rights. If the REIT has a shelf
registration statement effective with respect to any of its equity securities,
the REIT will use its best efforts to cause such registration statement to
include the Common Stock issuable upon exchange of the Contributors' Common
Units, unless the REIT reasonably determines that inclusion of such Common Units
would have a material adverse effect on the REIT and its stockholders.
(c) Survival. The obligations of the REIT under this Section
18 shall survive Closing without limitation.
19. Miscellaneous Provisions.
(a) Completeness and Modification. This Agreement (together
with Exhibits A to Q attached hereto) represents the complete understanding
between the parties hereto with respect to the transactions contemplated herein,
and it supersedes all prior discussions, understandings or agreements between
the parties. This Agreement shall not be modified or amended except by an
instrument in writing signed by all of the parties hereto.
(b) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective heirs,
executors, administrators, personal and legal representatives, successors and
assigns.
(c) Assignment. This Agreement shall not be assignable by
FWRLP without the consent of Contributor; provided, however, that,
notwithstanding anything to the contrary contained in this Agreement, without
Contributors' consent, FWRLP shall be entitled (i) to assign this Agreement to
an entity controlled by, controlling or under common control with FWRLP or (ii)
to transfer or, at Closing, cause the Partnership to issue a 1% limited
partnership interest in the Partnership to the REIT or to an entity controlled
by, controlling or under common control with the FWRLP, as long as in either
case (i) the Partnership Interests are transferred in a manner such that at all
times there are at least two (2) partners of the Partnership, and (ii) the Units
are issued to Contributors as required herein. This Agreement shall not be
assignable by Contributors except by operation of law.
(d) Waiver; Modification. Failure by FWRLP or Contributors to insist upon
or enforce any of its rights hereto shall not constitute a waiver or
modification thereof.
(e) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Maryland.
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(f) Headings. The headings are herein used for convenience or
reference only and shall not be deemed to vary the content of this Agreement or
the covenants, agreements, representations and warranties herein set forth, or
the scope of any provision hereof.
(g) Continuing Documentation and Access. From and after
Closing, Contributors shall afford FWRLP reasonable access to any and all
information in their possession concerning the ownership, use and operation of
the Property (including the right to copy same at the expense of FWRLP) for
purposes of any tax examination or audit or other similar purpose, subject to
the agreements of the Contributors, the Partnership or FWRLP concerning
confidentiality set forth herein.
(h) Counterparts. To facilitate execution, this Agreement may
be executed in as many counterparts as may be required; it shall be sufficient
that the signature of, or on behalf of, each party, or that the signatures of
the persons required to bind any party, appear on one or more such counterparts.
All counterparts shall collectively constitute a single agreement.
(i) Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid or delivered by commercial courier, telecopy or overnight
courier (e.g., Federal Express) against receipt, to the addresses indicated
below:
(i) if to FWRLP:
First Washington Realty Limited Partnership
0000 Xxxx-Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
(ii) if to Contributors:
Xxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxx, Xxxxx & Kamins
00000 Xxxxx Xxxx
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxxx, Esquire
Xxxxxx, Flyer & Xxxxx
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Such notice shall be deemed given on the date of receipt by
the addressee or the date receipt would have been effectuated if delivery were
not refused. Each party may designate a new address by written notice to the
other in accordance with this Section 19(i).
(j) All Warranties Joint and Several. Except as expressly
provided otherwise in this Agreement, each and every warranty, covenant,
undertaking and agreement of Contributors hereunder shall be deemed a joint and
several warranty, covenant, undertaking and agreement of each person and entity
collectively comprising the Contributors.
(k) Further Assurances. Contributors and FWRLP agree to
execute, acknowledge and deliver any further agreements, documents or
instruments that are reasonably necessary or desirable to carry out the
transactions contemplated by this Agreement, provided that such execution,
acknowledgment and delivery does not impose any additional costs on such party
(other than such party's attorneys' fees in the review thereof and de minimis
recording costs).
(l) Business Days. A "business day" shall be Mondays through
Fridays, less and expecting all legal holidays observed by the United States
Government or the Government of the State of Maryland. Any date specified in
this Agreement which does not fall on a business day shall be automatically
extended until the first business day after such date.
(m) Survival. Each of the covenants, indemnities,
representations and warranties of this Agreement shall survive Closing and shall
thereafter remain in effect for a period of time equal to the applicable statute
of limitations in connection with the underlying claim, except as follows:
(i) the covenants, representations and warranties
contained in Section 6(a) through (k) and (m) through (t) and 8(a)
through (l) shall terminate one (1) year after the Closing Date except
as to claims for breach thereof asserted by a party within such one (1)
year period;
(ii) the indemnification for breach of
representations or warranties pursuant to clause (i) of the first
sentence of each of Section
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15(a) and 15(b) herein, shall be subject to the same survival period of
the underlying representation or warranty as contained in this
Agreement, in which case such indemnification obligation shall expire
with respect to any claim not raised by FWRLP, by written notice to
Contributors, within such survival period; and
(iii) any breach of any representation, warranty or
covenant made by any party hereto which is actually known on the
Closing Date to the party benefitted thereby shall be deemed waived
once the Closing has occurred (and in this regard each of Contributor,
FWRLP and the REIT covenant to disclose the existence of any such
breaches to the other party promptly upon learning of the same);
provided, however, that such breach shall not be deemed waived if (x)
the breaching party had actual knowledge that it was in breach on the
date of execution of this Agreement, or (y) the breach consists of an
intentional or wrongful act or omission by the breaching party after
the date of execution of this Agreement.
(n) Definition of Knowledge. For purposes of this Agreement,
whenever a statement is made to a party's "knowledge" or "to the best of the
knowledge" of a party, such statement is made only to the actual knowledge of
the party without any independent inquiry.
(o) Confidentiality. Before Closing, FWRLP agrees that it will
keep confidential, and will make reasonable efforts to have the respective
partners, employees, officers, directors, shareholders, agents, counsel,
accountants and affiliates of FWRLP, keep confidential, the terms of this
Agreement, and all information, records, materials and other data pertaining to
the Property which was acquired or learned from this Agreement or the
negotiations relating thereto or arising out of the transactions contemplated
hereby, except (i) to the extent necessary to effect the transactions
contemplated hereby, (ii) pursuant to compulsion by due process of law, (iii) in
connection with the resolution of any dispute between FWRLP and Contributors, or
(iv) if such information was obtained, or is otherwise available, in the public
domain or from other sources. The provisions of this paragraph shall survive the
Closing and the termination of this Agreement.
20. Tax Matters.
(a) FWRLP covenants that, during the period beginning on the
Closing Date and ending five (5) years thereafter, the principal balance of the
mortgage loan secured by the Property shall not be reduced below an amount equal
to the outstanding principal balance of the AAL Loan as of the Closing Date
(other than for (i) scheduled amortization of the mortgage loan, or (ii)
non-scheduled principal curtailments of the mortgage loan due to application
required by the mortgage lender of insurance or
-32-
condemnation proceeds or by the mortgage lender for other reasons beyond FWRLP's
reasonable control.
(b) If (1) FWRLP intends to make a principal prepayment of the
mortgage loan pursuant to clause (ii) under subsection (a) above, or (2) FWRLP
intends to refinance the mortgage loan secured by the Property after the fifth
(5th) anniversary of the Closing Date, then FWRLP will give each Contributor who
receives Units at least ten (10) days' prior written notice thereof, and each
such Contributor, at his written election but with no obligation to do so, may
affirmatively make a DRO Election or Bottom Guaranty Election (as described
below). Any such election shall be made by notice delivered to FWRLP no later
than the date on which the tax return for FWRLP is filed for the fiscal year in
question. In addition, at Closing each Contributor shall have the right to make
a DRO Election or Bottom Guaranty Election to the extent that the receipt of
Units at Closing would but for such election result in a distribution of money
under Section 752(b) of the Internal Revenue Code of 1986, as amended, that is
taxable for Federal income tax purposes.
(c) A DRO Election shall state that if the Contributor has a
deficit balance in its capital account following the liquidation of the
Contributor's interest in FWRLP or the liquidation of FWRLP, as the case may be,
such Contributor shall contribute to the capital of FWRLP, no later than the end
of the fiscal year during which the Contributor's interest in FWRLP is
liquidated or during which FWRLP is liquidated, as the case may be (or, if
later, 90 days after the date on which the Contributor's interest in FWRLP is
liquidated or on which FWRLP is liquidated, as the case may be) (the
"Liquidation Date") an amount of money equal to a designated portion of the
deficit in the Contributor's capital account. The term "Liquidation" shall have
the meaning given to it in Treas. Regs. Section 1.704.
(d) A Bottom Guaranty Election shall state that if FWRLP shall
be in default with respect to the mortgage loan securing the Property, then the
Contributor agrees to contribute to the capital of FWRLP a designated portion of
the principal balance of such mortgage loan (the "Contribution Limit"); however,
such contribution shall only occur if the mortgage lender shall have exhausted
all of its remedies against the Property in order to collect the amount owing
the mortgage lender, and such Contribution Limit shall be reduced on a
dollar-for-dollar basis for every dollar received by the mortgage lender from
exercising its remedies. Any such contribution shall be made by the Liquidation
Date. For example, if the amount of the mortgage loan were $10,000,000.00 and
the amount of the Contribution Limit were $1,000,000.00, the capital
contribution would only be required if and only if, the Property were sold in
foreclosure and the proceeds (whether cash or other proceeds) of sale were less
than $1,000,000.00.
(e) For the purposes of Section 704(c) of the Internal Revenue
Code of 1986, as amended (the "Code"), the value of the Property will be
allocated between the land and improvements as reasonably determined by the
Contributors and FWRLP.
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The allocation method under Section 704(c) of the Code used by FWRLP with
respect to the Property will be the traditional method set forth in Treasury
Regulation ss.1.704.3.
IN WITNESS WHEREOF, the parties hereto have executed this Contribution
Agreement as of the day and year first written above.
FWRLP:
FIRST WASHINGTON REALTY
LIMITED PARTNERSHIP
By: First Washington Realty Trust, Inc.,
WITNESS: Its general partner
/s/Xxxxxxx X. Xxxxxxxxxx By:/s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
President
Date of execution:November 11, 1997
WITNESS: CONTRIBUTORS:
/s/___________________ /s/ Xxxx X. Xxxxx
XXXX X. XXXXX
/s/_____________________ /s/ Xxxxxxx X. Xxxxxx
XXXXXXX X. XXXXXX
C.P., INC.
/s/_____________________ By:/s/ Xxxxxxx Xxxxxx
Name:
Title:
Date of execution:November 12, 1997
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First Washington Realty Trust, Inc. joins herein solely for the purpose of
making the representations, warranties and covenants contained in Sections 8(h),
(j), (k) and (l), Section 11 and Section 18 hereof.
FIRST WASHINGTON REALTY
WITNESS: TRUST, INC.
/s/ Xxxxxxx X. Xxxxxxxxxx By:/s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
President
Date of execution: November 11 , 1997
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ACKNOWLEDGE BY TITLE COMPANY
The undersigned Title Company executes this Contribution Agreement
solely to acknowledge receipt of the Deposit pursuant to Paragraph 3 hereof and
to evidence its agreement to serve as escrow agent pursuant to the terms of the
foregoing Agreement.
WITNESS: COMMERCIAL SETTLEMENTS, INC.
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
Vice President
Date:November 17, 1997
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LIST OF EXHIBITS
EXHIBIT A. Legal Description of Land Recitals
EXHIBIT B. Leases and Rent Schedule Section 6(d)
EXHIBIT C. Service Contracts Section 6(e)
EXHIBIT D. Violations Section 6(c)
EXHIBIT E. Insurance List Section 6(g)
EXHIBIT F. Form of Tenant Estoppel Section 6(i)
EXHIBIT F-1. Tenant Estoppels Section 8(a)(viii)
EXHIBIT G. Litigation Section 6(k)
EXHIBIT H. Operating Statements and Budget Section 6(r)
EXHIBIT I. Personal Property Section 6(t)
EXHIBIT J. Permitted Exceptions Section 9(a)(iii)(B)
EXHIBIT K. [Intentionally Omitted]
EXHIBIT L. Confidential Information Statement Section 8(c)
EXHIBIT M. [Intentionally Omitted]
EXHIBIT N. First Trust Section 2(c)
EXHIBIT O. Note Section 2(c)
EXHIBIT P. Partnership Agreement Section 6(a)
EXHIBIT Q. Allocation of Units, Consideration Section 2(a)
[Contributors and FWRLP to Attach Foregoing at Acceptance of this Agreement]
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