Exhibit 10.17
CONSULTING SERVICES AGREEMENT
THIS CONSULTING SERVICES AGREEMENT (the "Agreement"), is made and
entered into as of April 28, 1998 (the "Effective Date"), by and between
Corporate Office Properties Trust, formerly known as Royale Investments, Inc.
(the "Company"), with offices at Xxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxxx, XX
00000, and Net Lease Finance Corp., a Delaware corporation, d/b/a Corporate
Office Services with offices at 000 Xxxxx Xxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000
(the "Consultant").
RECITALS
A. The Company desires to engage Consultant, on a non-exclusive basis,
to identify investment opportunities relating to the acquisition of certain
types of real estate assets.
B. The Consultant is willing to make such investment opportunities
available to the Company pursuant to a right of first refusal and other rights
as contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter contained, it is covenanted and agreed by and between
the parties hereto as follows:
AGREEMENTS
1. Engagement of Consultant. The Company hereby engages the Consultant, and the
Consultant hereby accepts such engagement, to provide consulting services upon
the terms and conditions of this Agreement.
2. Services.
(a) Consulting Services. During the term of this Agreement, the
Consultant shall devote such time, energy, skills and attention to the business
and affairs of the Company and its Affiliates (as hereinafter defined) as are
reasonably required in the performance of consulting services to the Company
with respect to advising the Company's management concerning, and assisting in
the identification, analysis, structuring, negotiation of terms and closing of
Investment Opportunities (as hereinafter defined) for the Company and any
Affiliate thereof designated by the Company involving Covered Transactions (as
hereinafter defined) (hereinafter collectively referred to as the "Services").
Certain employees of Consultant approved by the Company shall be assigned to
perform services for the Company (collectively and individually, the
"Employee"). With respect to Services provided to the Company, the Consultant
shall cause such Employee to be subject to the orders, directives and investment
and underwriting policies as in effect from time to time of the Company's CEO
or, in his absence, the Chairman of the Board, and to those of the Company's
Board of Directors or such committee as it shall designate, and as are
communicated by the Company to the Consultant. For purposes of this Agreement,
"Investment Opportunities" means those business opportunities that relate to the
acquisition of real estate assets, and the assets and/or equity or debt
securities of companies and other entities owning or having interests, including
without
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limitation, operating partnership interests, in such real estate assets.
"Covered Transactions" means transactions that involve real estate assets for
use primarily as offices, medical offices, office flex and related commercial
properties, and such classes of real estate assets or properties as may be
specified by the Company from time to time as fitting within the investment
polices of the Company then in effect, as such investment policies may be
formulated by the CEO and the Board of Directors or by such person or committee
as he or it shall delegate, and which shall be communicated to the Consultant on
a current basis, and Covered Transactions may include other types of real estate
assets primarily in the context of a mixed-use portfolio (the "Other Assets").
For purposes of this Agreement, the term "Affiliate" shall mean any legal entity
which is now or hereafter fifty percent (50%) or more owned and controlled,
directly or indirectly, by the Company, or which owns, directly or indirectly,
fifty percent (50%) or more of the voting stock or securities or voting rights
of the Company.
(b) Change of Name; License of Trade Name. The Company and/or the
Consultant, as mutually agreed upon, shall promptly following execution of this
Agreement, file or cause to be filed a change of name registration or equivalent
filing with the New Jersey Secretary of State, and in such other jurisdictions,
if any, in which the Company or the Consultant is required to do so, registering
"Corporate Office Services, Inc." as the official name of the Consultant (the
"Trade Name"). The Company hereby grants the Consultant an exclusive license in
and to the Trade Name solely for use in connection with the performance of the
Services hereunder, which license shall be revocable by the Company at any time,
with or without cause.
(c) Exclusivity as to Covered Transactions; Right of First Refusal.
During the term of this Agreement, the Consultant shall identify to the Company
Investment Opportunities in respect of Covered Transactions, subject to the
provisions of this paragraph (c) and subparagraph (f). If the Company does not
enter into a contract with respect to any such Investment Opportunity within
twelve (12) months following the Consultant's advice thereof (the "Exclusive
Period"), or if the Company's CEO advises the Consultant in writing at any time
that it is not interested in pursuing such Investment Opportunity, then in
either such case the Consultant shall have the right thereafter to pursue such
Investment Opportunity for its own account or to identify and pursue same on
behalf of any other third party. In the event the assets and/or securities
involved in such Investment Opportunity are thereafter acquired by the
Consultant or by a third party on whose behalf the Consultant is acting, the
Consultant shall pay the Company fifty percent (50%) of an amount equal to the
dollar value of all fees, commissions, and/or other compensation received by the
Consultant with respect to such Investment Opportunity. In the event that,
during the term of this Agreement, the Consultant fails to identify to the
Company an Investment Opportunity in respect of a Covered Transaction prior to
identifying such Investment Opportunity to any other third party, and the
Consultant thereafter receives compensation from such third party with respect
thereto, then the Consultant shall pay the Company as liquidated damages an
amount equal to the dollar value of all fees, commissions and/or other
compensation received, directly or indirectly, by the Consultant with respect
thereto and the Company shall have the right to setoff against the compensation
hereunder the amount of such fees, commissions and/or other compensation. Any
amounts payable hereunder by the Consultant to the Company shall be payable
within
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thirty (30) days following the Consultant's receipt of such fees, commissions
and/or other compensation.
(d) Excluded Activities. The Company hereby acknowledges that the
Consultant has substantial experience and contacts involving real estate assets
that are not within the scope of Covered Transactions, including, without
limitation, those real estate assets for use primarily as non-office industrial
properties, retail properties, residential real estate and shopping centers, and
which may result in the Consultant having Investment Opportunities with respect
to such real estate assets and any other opportunities not involving real estate
assets (collectively, "Excluded Activities"). The Company acknowledges further
that, except as hereinafter expressly stated, the Consultant shall not have any
obligation, either express or implied, to the Company with respect to any
Investment Opportunity involving real estate assets that are involved in the
Excluded Activities, nor shall it be a breach of any fiduciary obligation
involving a corporate opportunity or otherwise for the Consultant to pursue such
Investment Opportunity for its own account or to identify and pursue same on
behalf of any other third party; provided, however, that Consultant shall be
obligated to advise the Company after the consummation of the Excluded Activity
of the nature of such Excluded Activity and furnish the Company on a
confidential basis such documentation as the Company shall reasonably request to
assure itself, based on its own evaluation thereof, that such Investment
Opportunity involves real estate assets that are not within the scope of Covered
Transactions and that no Employee was involved in the pursuit of such Excluded
Activity. When and if the Company broadens its investment policies to encompass
one or more classes of real estate assets other than those stated above as being
within the scope of Covered Transactions, such class(es) of real estate shall
thereafter be deemed to be a Covered Transaction which the Consultant and its
Employees shall be authorized to identify and pursue hereunder, and which shall
be subject to the Company's right of first refusal as set forth in Section 2(b)
hereof as fully as if such class(es) of real estate assets had been included
within the scope of Covered Transactions on the Effective Date of this
Agreement; provided, however, that the specified Excluded Activities and
transactions with the persons and entities set forth on Exhibit A shall not
become Covered Transactions by operation of this paragraph (d) or otherwise.
(e) Coordination of Services. The Consultant shall use diligent efforts
to assure that its activities in connection with any Investment Opportunity that
it has a right to pursue, either for its own account or on behalf of a third
party, pursuant to paragraphs (c) or (d) of this Section 2, do not interfere
with its performance of Services hereunder. Notwithstanding anything to the
contrary contained in this Agreement, Consultant shall not, without the express
written consent of the Company, permit Employee to pursue any Investment
Opportunities involving Excluded Activities or non-Company business which are
not competitive with the Company or do not interfere with or detract from the
performance of Employee's duties.
(f) Prior Contacts and Prior Services. The Company understands that,
prior to the Effective Date of this Agreement, Employees of Consultant were
performing brokerage, finder and referral services for such persons and/or
companies as are listed on Exhibit A hereto (collectively, "Prior Contacts") and
that such Employee may be entitled to commissions, fees and/or other
compensation from these Prior Contacts and for the services previously performed
as provided in such Exhibit A ("Prior Services"). The Company therefore agrees
that the
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Consultant shall permit such Employee to receive and retain for its own benefit
any commissions, fees and/or other compensation due to such Employee now or in
the future from these Prior Contacts and for the Prior Services as set forth on
Exhibit A, whether or not otherwise a Covered Transaction or otherwise an
"Excluded Activity". In the event that any brokerage, finder or referral
opportunities should be presented to the Consultant or any Employee in the
future, whether by the Prior Contacts or otherwise, which would otherwise be
Covered Transactions, the Consultant shall present such opportunities to the
Company for approval, and if the Company declines to pursue such opportunities,
the Consultant may pursue same for its own account or that of others, and any
commissions, fees or other compensation earned from such opportunities shall be
paid directly to the Company, with fifty percent (50%) of such amounts being
paid to the Consultant by the Company as special referral compensation.
(g) Expenses, Facilities. The Consultant shall be reimbursed by the
Company promptly for all reasonable travel expenses, long distance telephone
charges and the pro rata share attributable to the Services performed by the
Consultant for the Company for the cost of support services, office space and
accouterments as shall be reasonably necessary and appropriate for the
performance of the Services for the Company incurred solely in the performance
of the Services hereunder. Whenever reasonably practical, the Company shall pay
in advance for the costs of airplane travel and hotel charges for Employee of
Consultant performing services for the Company. The Consultant shall be solely
responsible for maintaining at its sole cost and expense its support services,
office space and accouterments (subject to appropriate reimbursement as
described above) and for providing its employees such medical, pension or other
benefits, if any, as it shall solely determine.
3. Compensation. As full compensation for the services to be provided for the
Consultant hereunder, the Consultant shall receive the following payments:
(a) Incentive Compensation.
(i) The Consultant shall earn incentive compensation
("Incentive Compensation") at and subject to the
closing of each Covered Transaction by the Company or
an Affiliate, including any Covered Transaction which
rises to the level of or otherwise becomes a Change
in Control (as hereinafter defined), equal to thirty
(30) basis points times the Total Value (as
hereinafter defined in Section 3(c) below) of such
Covered Transaction, including any Operating
Partnership Units, or other debt or equity securities
issued by the Company or an Affiliate (hereafter
"OPU's") and transferred or exchanged by the Company
or an Affiliate pursuant to such Covered Transaction,
which amounts shall be paid within thirty (30) days
after the closing of such Covered Transaction.
Notwithstanding the foregoing, if all or any part of
the ownership interest in a Covered Transaction is
purchased by any one or all of: Xxxx X. Xxxxxx; Xxx
X. Xxxxxxx; or any Affiliate or either of them as
defined under the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended, or any
entity fifty percent (50%) or
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more owned and controlled, directly or indirectly, by
either or both of Messrs. Xxxxxx and Xxxxxxx
(collectively, the "Enumerated Parties"), then the
percentage of the Total Value (as hereinafter
defined), up to 100% thereof, deemed to have been
acquired by the Company shall include the percentage
purchased by such aforementioned Enumerated Parties,
as if such Total Value had been acquired directly and
solely by the Company.
(ii) An Investment Opportunity of the Company or an
Affiliate involving Other Assets shall give rise to
Incentive Compensation on the same basis as a Covered
Transaction, except that the value of the Other
Assets shall not initially be included within Total
Value. The amount of the value excluded from the
calculation of Total Value shall be equal to that
portion of the value allocated to such Other Assets
in the transaction documents, or if not so allocated,
the allocation of value shall be that allocated by
the Company in its internal documents for purposes of
analysis of the value of such transaction. If neither
of the above shall be applicable, the value of such
Other Assets shall be as mutually agreed upon between
the Chief Investment Officer of the Consultant and
the CEO of the Company or, failing such mutual
agreement, determined by Arbitration or by a mutually
agreed upon consultant as to such value, subject to
the following: If, within a period of one (1) year
following the closing of the Covered Transaction in
question the Company fails to dispose of the Other
Assets that were part of the relevant Covered
Transaction, then the Consultant shall be paid
Incentive Compensation and entitled to the Incentive
Amount (pursuant to paragraph 3(b) hereof) which
would otherwise have been payable to Consultant with
respect to such undisposed of Other Assets.
Notwithstanding the foregoing, if the class of assets
represented by the Other Assets becomes, during the
one (1) year period in question, a class of assets
designated by the Company as being within the scope
of Covered Transactions, then the value of the Other
Assets shall be included in the Total Value
irrespective of any disposition.
(b) Deferred Compensation. In addition to Incentive Compensation under
paragraph 3(a), Consultant shall be entitled to additional deferred monetary
compensation in connection with each Covered Transaction with respect to which
it is entitled to Incentive Compensation under paragraph 3(a) hereof. Such
deferred compensation, if any, shall be an amount (the "Incentive Amount") equal
to the product of the Common Stock Appreciation Percentage (as hereinafter
defined) times the Base Amount described below. Payment of the Incentive Amount
may be requested by Consultant to be paid in a lump sum payment or in a series
of payments by giving one or more Exercise Notices as described in Section
3(b)(ii)(E) below. Consultant shall be entitled to transfer to an Employee
Consultant's rights hereunder relating to the Incentive Amount.
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(i) The Base Amount. At the Closing Date (as hereinafter
defined) for each Covered Transaction with respect to
which the Consultant is entitled to receive Incentive
Compensation under paragraph 3(a), the Base Amount
for each Covered Transaction shall be established.
The Base Amount is equal to 30 basis points times the
Total Value of the Covered Transaction. The Base
Amount shall be adjusted retroactively as of the
Transaction Date (as hereinafter defined) for any
increase in the Total Value of the Covered
Transaction arising from the inclusion of Other
Assets in the Total Value of the Covered Transaction
by operation of paragraphs 3(a) and 3(c) hereof.
(ii) Definitions.
(A) The Transaction Date shall mean the business
day prior to the earliest of (y) a public
announcement of the Covered Transaction, or
(z) the execution of a definitive contract
with respect to the Covered Transaction.
(B) For purposes of this paragraph, the Common
Stock of the Company shall mean a share of
the voting common stock of the Company, no
par value and the price of the Common Stock
of the Company as of the Transaction Date or
the Notice Date (as hereinafter defined),
shall be equal to the weighted average of
the closing prices of the Common Stock of
the Company on the five (5) trading days
proceeding the respective date.
(C) For purposes of this paragraph, the "Common
Stock Appreciation Percentage" shall mean
the percentage by which the value of the
Common Stock of the Company on the Notice
Date (as hereinafter defined) exceeds the
value of the Common Stock of the Company on
the Transaction Date, which percentage shall
be expressed as a fraction, the numerator of
which is the positive difference between the
value of the Common Stock as of the Notice
Date minus the value of the Common Stock as
of the Transaction Date, and the denominator
of which is the value of the Common Stock as
of the Transaction Date. In case of any
reclassification, capital reorganization,
stock split or stock dividend or other
change of outstanding shares of Common Stock
of the Company (other than a change in par
value, or from no par value to par value, or
as a result of an issuance of Common Stock
except by way of a subdivision, split or
combination), or in case of any
consolidation or merger of the Company with
or into another corporation which results in
a reclassification, capital reorganization
or other change of outstanding shares of
Common Stock, the value of the Common Stock
for purposes of determining the Common Stock
Appreciation Percentage shall be
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determined by reference to the kind and
amount of shares of Common Stock receivable
upon such reclassification, capital
reorganization or other change,
consolidation or merger, which value shall
be functionally equivalent to the value of
Common Stock as it existed prior to such
reclassification, change, stock split, stock
dividend, consolidation or merger.
(D) For purpose of this paragraph and paragraph
3(a) above, the term Closing Date of the
Covered Transaction shall mean the day on
which the direct or indirect ownership of
the assets which are the subject of the
transaction passes to the Company and/or its
Affiliate or Enumerated Parties, as
applicable.
(E) For purposes of this paragraph the term
Notice Date shall be each date upon which
the Consultant gives notice or is deemed to
give notice (the "Exercise Notice") of its
intention to receive compensation with
respect to all or any portion of the
Incentive Amount (but not less than $5,000
or the amount of the Incentive Amount or the
remainder thereof, to the extent less than
$5,000, as to which no Exercise Notice
previously has been given) designated in
such Exercise Notice with respect to the
Covered Transaction so noted. Each Exercise
Notice shall specify the Covered Transaction
with respect to which the Exercise Notice is
being given, the amount of the Incentive
Compensation payable, and a calculation of
that portion of the Base Amount of the
Covered Transaction with respect to which
the Incentive Amount is payable. The portion
of the Base Amount specified in such
Exercise Notice shall be subtracted from the
Base Amount with respect to the relevant
Covered Transaction, for purposes of
determining the Base Amount upon which any
remaining Incentive Amount (and Base Amount
payable under paragraph 3(b)(iv) hereof, if
applicable) shall be determined and
calculated in the future. No Notice Date
shall be earlier than the first anniversary
of the Closing Date of a Covered
Transaction. No Notice Date shall be later
than (i) three (3) years after termination
of this Agreement on the bases set forth in
paragraphs 4(b), 4(c) or 4(g) hereof, or
(ii) two (2) years after termination of this
Agreement on the bases set forth in
paragraphs 4(e) or 4(f) hereof [subject in
all events to the earlier requirement
(hereinafter noted) for the Notice Date in
the event Consultant voluntarily terminates
the Agreement prior to the expiration of the
thirty month term described in paragraph
4(a)]. Upon the expiration of such three
year or two year period, as applicable, an
Exercise Notice shall be delivered given and
the Notice Date shall be deemed to occur
with respect to any remaining Incentive
Amount as to which any Base Amount may be
outstanding at such time. An Exercise Notice
for the Incentive
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Amount or the portion thereof as to which no
Exercise Notice previously has been given
shall be deemed given and the Notice Date
shall be deemed to occur, with respect to
any remaining Incentive Amount as to which
any Base Amount may be outstanding, as of
the date that is one (1) year after the
termination or expiration date of this
Agreement if such termination is voluntarily
initiated by Consultant prior to the
expiration of the thirty (30) month term
described in paragraph 4(a) hereof (which
termination is not on account of the bases
set forth in paragraph 4(c) or 4(g) hereof)
or if such termination is on account of the
bases set forth in paragraph 4(d) hereof.
Notwithstanding anything to the contrary
contained herein, in the event of a
termination of this Agreement on the bases
set forth in paragraphs 4(b), 4(c) or 4(g)
hereof, Consultant shall be entitled to give
an Exercise Notice at any time after the
occurrence of such termination event, but in
any event not later than the three (3) year
period from termination elsewhere provided
herein. Notwithstanding the above, with
respect to either a Transaction that
includes Other Assets or a Residual
Transaction as to which Consultant is
entitled to Incentive Compensation,
Consultant shall not be required to give an
Exercise Notice earlier than one year from
the Closing Date of such Residual
Transaction or from the date of inclusion of
such Other Assets, as applicable, as to the
Incentive Amount (and Base Amount
compensation under paragraph 3(b)(iv), if
applicable) which may apply with respect to
such Residual Transaction or Other Assets.
(iii) Payment of Incentive Amount. Within thirty (30) days
after the giving of an Exercise Notice with respect
to any Covered Transaction, the Company shall pay the
Consultant the amount due to Consultant with respect
to such Covered Transaction pursuant to such Exercise
Notice.
(iv) Payment of Base Amount. In addition to Incentive
Compensation, the Consultant shall be entitled to
payment of the Base Amount for any Covered
Transaction (an "Open Transaction") for which payment
of the Incentive Amount is payable as described above
only in the event that Consultant shall be terminated
on the bases set forth in paragraphs 4 (b), 4(c) or
4(g). Within thirty (30) days of the occurrence of
any of such events, the Consultant shall be paid the
Base Amount for each Open Transaction; provided
however, payment of that portion of the Base Amount
attributable to Other Assets for an Open Transaction
involving Other Assets or constituting a Residual
Transaction shall be made within 30 days after
inclusion of such Other Assets or within 30 days
after the closing of the Residual Transaction, as
applicable, provided further that the portion of the
Base Amount in a Residual Transaction involving
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Other Assets shall be paid within thirty (30) days
after inclusion of such Other Assets in the Base
Amount.
(c) Total Value of Transaction. Subject to paragraph 3(a)(ii), for
purposes of calculating the Incentive Compensation payable and Incentive Amount
available to the Consultant under Sections 3(a) and (b), the "Total Value" of a
Covered Transaction shall be equal to:
(i) the total monetary value of cash, equity or debt
securities, OPU's (valued as if it were freely
tradable common stock) or other property paid or
exchanged by the Company, or any Affiliate (or the
Enumerated Parties), for the assets being acquired
plus any mortgage debt or other debt assumed by the
Company or Affiliate (or forgiveness by the Company
or such Affiliate of indebtedness for which a seller
or its affiliate is responsible), but excluding
ordinary closing obligations such as real estate
taxes and operational ordinary-course-of-business
liabilities assumed by the Company or any Affiliate
(collectively, the "Closing Payments"); and
(ii) any deferred payments to be paid to or for the
benefit of the seller or its assignee under the
Covered Transaction after the closing and in respect
of the assets being acquired from such seller (as
opposed to payments to be made in the ordinary course
and in reasonable amounts for post-closing services
or covenants to be performed by seller or its
affiliates), such deferred payments to include
"earn-out" amounts relative to post-closing
performance of the assets being acquired
("Post-Closing Payments"). For purposes hereof, Total
Value shall be deemed to have been paid in respect of
Post-Closing Payments, and Incentive Compensation in
respect thereof shall be deemed to have been earned
by the Consultant, when, as and if such Post-Closing
Payments are in fact earned by and paid to the seller
in question.
The Total Value of the Closing Payments paid by the Company
(or an Affiliate) or the Enumerated Parties as consideration in a Covered
Transaction shall be the value stated therefor or determined under the
definitive contract for such Covered Transaction. Where the Company (or an
Affiliate) or the Enumerated Parties acquire less than the entire ownership
interest in assets that are the subject of a Covered Transaction (a "Partial
Acquisition"), Total Value shall be determined by reference to the consideration
paid or assumed or forgiven in the aggregate by the Company, its Affiliates and
the Enumerated Parties, and not by any other third parties. To the extent that
any securities of the Company and/or any Affiliate constitute a portion of the
consideration paid by the Company in respect of a Covered Transaction, whether
in respect of a Closing Payment or Post-Closing Payment, but the value therefor
is not so stated or cannot be so determined under the definitive contract for
such Covered Transaction, such securities shall be valued at the fair market
value without discount thereof on the business day immediately preceding the
date on which the transfer of such securities is made to the
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seller pursuant to the Covered Transaction, unless some other valuation
methodology is agreed to by the Company and the Consultant and the relevant
Employee.
4. Term and Termination.
(a) Basic Term. This Agreement shall be for a term of thirty (30)
months, commencing as of the Effective Date hereof, unless sooner terminated by
either party, with or without cause, effective as of the first business day
after written notice to that effect is delivered to the other party. The
Consultant shall be entitled to receive payments for Residual Transactions (as
hereinafter defined and provided) in the event this Agreement expires by its
terms at the end of such thirty (30) month period. The parties may, by mutual
written agreement, continue this Agreement after such thirty (30) month period,
in which event all provisions hereof shall continue in full force and effect
until the effective date of termination pursuant to written notice or
termination thereof given by either party, or until this Agreement is superseded
by a new written contract governing the terms and conditions of the Consultant's
provision of Services to the Company.
(b) Premature Termination. In the event that the Company terminates
this Agreement for any reason other than a For Cause termination (as hereinafter
defined), death or Disability (as hereinafter defined) in accordance with the
provisions of paragraphs (d), (e) or (f), respectively, of this Section 4, and
if such termination occurs prior to the end of the thirty (30) month term, then
notwithstanding any actual or allegedly available alternative business
opportunities or other mitigation of damages by or available to the Consultant
or any direct, consequential, actual or other damages purportedly incurred by
the Consultant, the Consultant shall be entitled to fixed and liquidated damages
constituting a lump sum payment ("Lump Sum Payment") equal to the greater of:
the Prior Compensation (as defined and calculated in clause (i) below) or the
applicable Fixed Amount (as described in clause (ii) below), as follows:
(i) the applicable "Prior Compensation" shall be the
total cash compensation earned by or otherwise owed
to paid or other entitlement earned by or otherwise
due to the Consultant by the Company during the
twelve (12) month period immediately preceding and
ending with the effective date of termination,
including all Incentive Compensation described below,
including all Incentive Compensation paid under
Section 3(a) hereof, and also including all Incentive
Compensation to be received with respect to Covered
Transactions with respect to which contracts were
executed prior to the date of termination, but
excluding and without giving any effect to any
Incentive Amount;
(ii) the applicable "Fixed Amount", which shall be the
amount of: (x) $1,500,000, if termination occurs
prior to October 1, 1998; (y) $1,000,00, if
termination occurs after October 1, 1998 and prior to
October 1, 1999; or (z) $500,000, if termination
occurs after October 1, 1999 and prior to October 1,
2000.
Only the greater of the amounts determined under clause (i) above or
clause (ii) above shall be payable to the Consultant as the Lump Sum Payment,
and not both. In addition to the
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Lump Sum Payment, the Consultant shall be entitled to Incentive Compensation in
respect of any Covered Transaction, including any Covered Transaction which
rises to the level of or otherwise becomes a Change in Control (as hereinafter
defined), that closes within one (1) year after such termination of this
Agreement and to which the Consultant would have been entitled had the Covered
Transaction closed on the day prior to such termination ("Residual
Transactions"). The Consultant shall not be entitled to any Incentive Amount
with respect to any such Residual Transactions, except with respect to Covered
Transactions with respect to which a contract was entered into prior to
termination of this Agreement. The payments provided under this Section shall be
in lieu of damages, and made in exchange for a release of all claims by each of
the Consultant against the Company with respect to the termination of this
Agreement, but shall not be offset against or diminish any other Incentive
Compensation accrued and payable as of the date of termination.
(c) Termination by Consultant for Breach. If, at any time during the
term of this Agreement, the Company commits a material breach of its obligations
under this Agreement which is not cured within a reasonable period of time after
notice thereof is provided to the Company, then the Consultant shall have the
right, but only with the consent of Employee, by written notice to the Company
given within one hundred twenty (120) days after such breach to terminate this
Agreement for breach, effective as of thirty (30) days after such notice, in
which event the Consultant shall have no rights or obligations under this
Agreement other than as provided in Sections 5 and 6 hereof. The Consultant
shall in such event be entitled to the payment of the Lump Sum Payment and
Incentive Compensation in respect of Residual Transactions, as if such
termination of this Agreement had been effectuated pursuant to paragraph (b) of
this Section 4. Notwithstanding the foregoing, the parties acknowledge and agree
that it shall not be considered a material breach of this Agreement if the
Company should decide to relocate its primary corporate office to a new location
which is more than fifty (50) miles from northern New Jersey, provided
Consultant's Employee shall be permitted to retain an office in northern New
Jersey.
(d) Termination For Cause. This Agreement may be terminated "For Cause"
as hereinafter defined. Termination "For Cause" means the termination of this
Agreement on the basis or as a result of: (i) a material violation by the
Consultant (or by the Company and caused by the Consultant) of any applicable
material law or regulation respecting the business of the Company which has a
materially detrimental effect on the business of the Company; (ii) the
Consultant or Employee being found guilty of, or pleading guilty to, or
otherwise being found by an arbitrator pursuant to Section 10(d) hereof to have
engaged in, to the Company's material detriment, a felony or an act of
dishonesty or other behavior which results in material embarrassment or
discredit to the Company, whether in connection with the performance of the
Services hereunder or otherwise; (iii) the commission of an act (or omission) by
any officer or director of Consultant or by Employee which act would disqualify
such individual from serving as an officer or director of the Company (if such
individual were an officer or director of the Company) under reasonable criteria
adopted by the Board of Directors of the Company, and in the case of any dispute
as confirmed by an arbitrator pursuant to Section 10(d) hereof; (iv) a course of
conduct of the Consultant which is repetitive or continuous and willful or
grossly negligent, and which has a materially detrimental effect on the business
of the Company; (v) if the Consultant permits or directs Employee to pursue and
Employee does pursue any
11
Investment Opportunities other than those for the Company, except as
specifically permitted hereunder; or (vi) an event that would entitle the
Consultant to terminate its employment agreement with an Employee, on a "for
cause" basis under such Agreement. Except in relation to a bona fide emergency,
the Consultant shall be entitled to at least thirty (30) days' prior written
notice of the Company's intention to terminate this Agreement For Cause, and
such notice shall specify the basis of, causes and grounds for such termination,
and shall afford the Consultant a reasonable opportunity to cure any conduct or
act (if curable) and/or cease any course of conduct alleged as grounds for such
termination, and a reasonable opportunity to present to the Board of Directors
of the Company its position regarding any dispute relating to the existence of
such cause. In the event of the termination of this Agreement For Cause, no Lump
Sum Payment or any other further payments shall be due hereunder, with the sole
exception being that Incentive Compensation fully earned and vested as of the
date of such termination by virtue of closings of Covered Transactions completed
prior to the date of termination or which are the subject of existing and
outstanding contracts shall be paid, as well as Incentive Compensation earned in
respect of Residual Transactions. The Incentive Amount under Section 3(b) shall
be determined with respect of Covered Transactions completed prior to such
termination.
(e) Termination Upon Death. This Agreement shall terminate upon the
death of an Employee. Payments that are due and owing under this Agreement at
such death, including Incentive Compensation for Covered Transactions that shall
have closed prior to the date of death, together with Incentive Compensation in
respect of Residual Transactions, shall be made promptly to the Consultant in
full settlement and satisfaction of all claims and demands of the Consultant. No
Lump Sum Payment shall be due in respect of such termination.
(f) Termination Upon Disability. The Company may terminate this
Agreement after Employee is determined to have a Disability (as hereinafter
defined). For purposes of this Agreement, "Disability" means such Employee's
inability, as a result of physical or mental incapacity, to perform
substantially his usual and customary duties in connection with the Consultant's
performance of Services hereunder for a period of either four (4) consecutive
months, or one hundred and twenty (120) business days within a consecutive
twelve (12) month period. In the event of a dispute regarding such Employee's
Disability, such dispute shall be resolved through arbitration as provided in
paragraph (d) of Section 9 hereof, except that the arbitrator appointed by the
American Arbitration Association shall be a duly licensed medical doctor. The
Consultant shall be entitled to the compensation provided for under this
Agreement during any period of such Employee's incapacitation occurring during
the term of this Agreement prior to the establishment of such Employee's
Disability and subsequent termination of this Agreement, including Incentive
Compensation for closed Covered Transactions, and Incentive Compensation for
Residual Transactions closed within one (1) year following such incapacitation.
No Lump Sum Payment shall be due in respect of such termination. Notwithstanding
anything contained in this Agreement to the contrary, until the date specified
in a notice of termination relating to such Employee's Disability, Consultant
may, after a temporary period of infirmity of such Employee, allow such Employee
to resume the performance of his duties in connection with the Consultant's
performance of the Services hereunder in which event no Disability of such
Employee will be deemed to have occurred until the date of termination.
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(g) Termination Upon Change in Control.
(i) In the event of a Change in Control (as defined
below) of the Company and the termination of this
Agreement, by operation of Section 4(c) within the
twelve (12) months preceding, or a period of one
hundred eighty (180) days after, the Change in
Control, other than on a For Cause basis (or due to
death or Disability), or by the Consultant within one
hundred eighty (180) days after the Change in
Control, the Consultant shall be entitled to such
payments as if such termination had been effectuated
pursuant to Section 4(b) hereof for any Transaction
which rises to the level of or otherwise becomes a
Change in Control.
(ii) For purposes of this paragraph, the term "Change in
Control" means the following:
(A) the merger, consolidation or other material
business combination of the Company,
including without limitation an exchange or
purchase of securities, or the sale of all
or substantially all of the assets of the
Company, with a publicly traded entity which
has a market capitalization of Five Hundred
Million Dollars ($500,000,000) or more, or a
non-publicly traded entity which has net
operating income of Fifty Million Dollars
($50,000,000) or more, at the time of such
transaction; or
(B) the completion of a material business
combination (including those anticipated in
subclause (A) above) by the Company as a
result of which, or within one hundred
twenty (120) days of Closing of such
transaction, either Xxxx X. Xxxxxx or Xxx X.
Xxxxxxx is removed or otherwise ceases to be
a member of the Board of Directors of the
Company other than incidentally due to his
death or disability or neither of Xxxxxx nor
Shidler retains an executive or managerial
role with the Company unless failure to
remain in such capacity is due to such
person's death or disability.
Notwithstanding the above, any business combination
constituting an asset-specific (i.e., non-company wide) venture or financing
relationship by an investor or provider of capital, or constituting a minority
investment by or in the Company, shall not qualify as a Change in Control,
including, without limitation, an investment by or in the Company by or in a
downreit venture or "opportunity fund" which invests in real estate companies as
part of an investment strategy unrelated to any long term management or control
strategy. In no event shall the prospective transaction with Baltimore Gas and
Electric Company regarding the acquisition of the "Constellation" group
constitute or be considered to be a Change in Control hereunder.
13
(h) Company Rights Upon Termination. In the case of any termination of
this Agreement or the relevant employment agreement of an Employee, the Company
shall have the right to hire or place for employment such Employee.
5. Confidentiality and Loyalty. The Consultant acknowledges that heretofore or
hereafter during the course of this Agreement, it and/or its Employee have
produced and received, and may hereafter produce, receive and otherwise have
access to, various materials, records, data, trade secrets and information not
generally available to the public (collectively, "Confidential Information")
regarding the Company and its subsidiaries and affiliates. Accordingly, during
the term and subsequent to termination of this Agreement, the Consultant shall
hold in confidence and shall not directly or indirectly disclose, use, copy or
make lists of any Confidential Information and shall cause its employees to also
abide by such obligations, in each case except to the extent that such
information is or thereafter becomes lawfully available from public sources, or
such disclosure is authorized in writing by the Company, required by law or by
any competent administrative agency or judicial authority, or otherwise as
reasonably necessary or appropriate in connection with the performance by the
Consultant of the Services hereunder. All records, files, documents, computer
diskettes, computer programs and other computer-generated material, as well as
all other materials or copies thereof relating to the Company's business, which
the Consultant shall prepare or use, shall be and remain the sole property of
the Company, shall not be removed from the Company's premises without its
written consent, and shall be promptly returned to the Company upon termination
of the Consultant's Services hereunder. The Consultant agrees to abide by the
Company's reasonable policies, as in effect from time to time, respecting
confidentiality and the avoidance of interests conflicting with those of the
Company.
6. Non-Competition Covenant.
(a) Restrictive Covenant. The Company, the Consultant and Employee have
jointly reviewed the tenant lists, property submittals, logs, broker lists, and
operations of the Company, and have agreed that as an essential ingredient of
and in consideration of this Agreement and the payment of the amounts described
in Sections 3 and 4 hereof, the Consultant hereby agrees that, except with the
express prior written consent of the Company, for the term of this Agreement, as
such may be extended, it will not, and will cause Employee not to, directly or
indirectly compete with the business of the Company including, but not by way of
limitation, by directly or indirectly owning, managing, operating, controlling,
consulting for, advising, brokering, acquiring, selling, financing, or by
directly or indirectly serving as an employee, officer or director of or
consultant to, or by soliciting or inducing, or attempting to solicit or induce,
any employee or agent of the Company to terminate employment with Company and
become employed by any person, firm, partnership, corporation, trust or other
entity which owns or operates a business similar to that of the Company, or by
soliciting or attempting to solicit for any reason whatsoever any person or
entity from whom the Company, or any Affiliate, has bought property (the
"Restrictive Covenant"). For purposes of this paragraph(s), a business shall be
considered "similar" to that of the Company if it is engaged in the acquisition,
development, ownership, operation, management or leasing of office, medical
office, office flex and related commercial properties (or Excluded Activities or
Other Property Types from time to time pursued by the Company)
14
(i) in any geographic market or territory in which the Company owns properties
during the term of this Agreement; (ii) in any "Target Market" publicly
identified as an intended situs of acquisitions by the Company; or (iii) in any
market in which an acquisition is proposed or pending during the term of this
Agreement. An acquisition shall be deemed to be pending if it is the subject of
a purchase (or lease or contribution or other acquisition or venture-related)
agreement, or whose basic terms shall have been confirmed in writing under a
binding or non-binding letter of intent or term sheet executed by the parties.
In addition, for a period of six (6) months following the termination of this
Agreement for any reason whatsoever, with or without cause, whether precipitated
by the Consultant or the Company, the Consultant shall and shall cause its
Employee to abandon and refrain from contact with every person and entity in
connection with or concerning any potential acquisition or Covered Transaction
then in the Company's "Pipeline" (as defined below). Within ten (10) business
days after the termination of this Agreement, the Consultant shall deliver to
the CEO of the Company, and the CEO shall deliver to the Consultant, a written
statement of all acquisitions or other Projects (as hereinafter defined) in the
Pipeline (the "Pipeline Statement"). The Consultant's receipt of any amounts
otherwise due under Sections 4(b) or (c) or otherwise hereunder shall be
conditioned on and withheld pending its providing the Pipeline Statement to the
CEO. The restrictions concerning any one individual Project in the Pipeline
shall continue for such six (6) month period unless the Consultant receives from
the Company written notice that the Company has abandoned such Project, and any
such notice shall not diminish or otherwise affect the restrictions on any other
Projects contained in the Pipeline Statement. A Project shall be considered in
the "Pipeline" if, as of the date of the Consultant's termination, the
acquisition of the Project is pending (for example, is the subject of a letter
of intent), or is subject to a written proposal or a written broker submittal.
Omission of a Project from the Pipeline Statement by the Consultant shall not
affect the application of this Section 6(a) to any Project that is in fact in
the Pipeline. For purposes of this Agreement, a "Project" includes any potential
Covered Transaction, and may take the form of (w) an acquisition for cash, or an
acquisition as part of an UPREIT transaction or otherwise; (x) a development
project; (y) a joint venture partnership or other cooperative relationship,
whether through a DOWNREIT relationship or otherwise; or (z) any other
investment by the Company or an Affiliate. If the Consultant violates the
Restrictive Covenant and the Company brings legal action for injunctive or other
relief, the Company shall not, as a result of the time involved in obtaining
such relief, be deprived of the benefit of the full period of the Restrictive
Covenant with respect to the Covered Transaction or Project which is the subject
of the violation. Accordingly, the Restrictive Covenant shall be deemed to have
the duration specified in this paragraph (a) computed from the date the relief
is granted, but reduced by the time between the period when the Restrictive
Period began to run and the date of the first violation of the Restrictive
Covenant by the Consultant. In the event that a successor of the Company assumes
and agrees to perform this Agreement or otherwise acquires the Company, this
Restrictive Covenant shall continue to apply only to the primary service area of
the Company as it existed immediately before such assumption or acquisition, and
shall not apply to any of the successor's other offices or markets. The
foregoing Restrictive Covenant shall not prohibit the ownership, directly or
indirectly, of capital stock or similar securities which are listed on a
securities exchange or quoted on the National Association of Securities Dealers
Automated Quotation System which do not represent more than five percent (5%) of
the outstanding capital stock of any corporation. Notwithstanding the foregoing,
the Restrictive Covenant shall
15
no longer remain in force against the Consultant in the event the Company shall,
within the meaning of the United States Bankruptcy Code, be insolvent so as to
be unable to pay its debts as they become due or be subject to a pending
proceeding as a debtor under the United States Bankruptcy Code or a state
proceeding such an assignment for the benefit of creditors.
(b) Remedies for Breach of Restrictive Covenant. Consultant and each
Employee acknowledges that the restrictions contained in Section 5 and this
Section 6 of this Agreement are reasonable and necessary for the protection of
the legitimate proprietary business interests of the Company; that any violation
of these restrictions would cause substantial injury to the Company and such
interests; that the Company would not have entered into this Agreement with the
Consultant without receiving the additional consideration offered by the
Consultant and Employee in binding itself and himself to these restrictions; and
that such restrictions were a material inducement to the Company to enter into
this Agreement. In the event of any violation or threatened violation of these
restrictions; the Company shall be relieved of any further obligations under
this Agreement, and, notwithstanding Section 10(d) hereof, shall be entitled to
any rights, remedies or damages available at law, in equity or otherwise under
this Agreement, and shall be entitled to preliminary and temporary injunctive
relief granted by a court of competent jurisdiction to prevent or retrain any
such violation by the Consultant and/or by Consultant's Employees and any and
all other persons who are a director or officer, or who are employed by, the
Consultant, such relief to be provided while the parties are awaiting the
decision of the arbitrator selected in accordance with paragraph (d) of Section
10 of this Agreement, which decision, if rendered adverse to the Consultant
and/or such Employee of Consultant, may include permanent injunctive relief to
be granted by the court.
(c) Restrictive Covenant of Employee. Contemporaneously with the
execution and delivery of this Agreement by Consultant, Consultant has caused
each Employee of Consultant to execute and deliver to the Company, a restrictive
covenant agreement on substantially the same terms as set forth in this Section
5.
7. Independent Contractor Status. The Consultant, it officers and directors
shall at all times during the term of this Agreement each be deemed an
independent contractor and not any agent or employee of the Company. Neither the
Consultant, nor any of its officers or directors, shall have any power or
authority, or purport or represent itself or himself to have any power or
authority, to bind or commit the Company in any manner or for any purpose
whatsoever, except with the express prior written authorization of the Company's
CEO or its Chairman of the Board.
8. Interest in Assets. The Consultant shall not, and shall not permit any
Employee to, acquire hereunder any rights in funds or assets of the Company,
otherwise than by and through the actual payment of amounts payable hereunder;
nor shall the Consultant have any power to transfer, assign, anticipate,
hypothecate or otherwise encumber in advance any of said payments; nor shall any
of such payments be subject to seizure for payment of any debt, judgment,
alimony, separate maintenance or be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise of the Consultant or any Employee.
16
9. Indemnification. The Company shall upon demand defend, hold
harmless and indemnify the Consultant, its officers, directors, employees and
agents (and their respective successors, assigns, heirs, executors and
administrators) from and against all expenses and liabilities reasonably
incurred by any of them including, but not limited to, judgments, court costs
and attorneys' fees and the cost of reasonable settlements, solely in
connection with or arising out of any action, suit or proceeding for acts
committed by it, him or them, as the case may be, within the scope of the
Services performed pursuant to this Agreement, except to the extent that the
Company would be precluded, as a matter of law under the Company's By-Laws or
Certificate of Incorporation, from providing such indemnity if such
Consultant were an officer or director or employee of the Company after proof
by judgment that such activity precluded such indemnification.
10. General Provisions.
(a) Successors; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Consultant, the Company and their respective
successors and permitted assigns, and any successor or assign of the Company
shall be deemed the "Company" hereunder. The Company shall require any Affiliate
to which this Agreement may be assigned or any successor to all or substantially
all of the business and/or assets of the Company, whether directly or
indirectly, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Consultant,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
successor had taken place. The Consultant shall not have the right to assign its
rights obligations hereunder without the consent of the Company and Consultant's
Employee which can be withheld for any or no reason; provided, however, that the
Consultant shall, to the extent permitted by law, have the right to assign to
Consultant's Employee its right to receive Incentive Compensation and/or Stock
Purchase Loans pursuant to Sections 3(a) and (b) hereof and to payments payable
upon or arising from termination of the Agreement or related to or due upon a
Change in Control.
(b) Entire Agreement; Modifications. This Agreement and any other
written agreement executed by all of the Company, Consultant and Employee that
is of even date herewith constitute the entire agreement between the parties
respecting the subject matter hereof, and supersede all prior negotiations,
undertakings, agreements and arrangements with respect thereto, whether written
or oral. Except as otherwise explicitly provided herein, this Agreement may not
be amended or modified, or rights of the Consultant waived or modified, except
by written agreement signed by the Consultant and the Company and such Employee.
(c) Enforcement and Governing Law. The provisions of this Agreement
shall be regarded as divisible and separate; if any of said provisions should be
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remaining provisions shall not be affected
thereby. This Agreement shall be construed and the legal relations of the
parties hereto shall be determined in accordance with the laws of the State of
New Jersey, as it constitutes the principal place of business of the Consultant.
17
(d) Arbitration. Except as provided in and subject to paragraph (b) of
Section 5, any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted by a single
arbitrator sitting in Philadelphia, Pennsylvania, in accordance with the
arbitration rules of the American Arbitration Associates (the "AAA") pertaining
to service contract disputes, if any, then in effect. The arbitrator shall be
selected by the parties from a list of eleven (11) arbitrators provided by the
AAA, provided that no arbitrator shall be related to or affiliates with either
of the parties. No later than ten (10) days after the list of proposed
arbitrators is received by the parties, the parties, or their respective
representatives, shall meet at a mutually convenient location in Philadelphia,
Pennsylvania, or telephonically. At that meeting the party who sought
arbitration shall eliminate one (1) proposed arbitrator and then the other party
shall eliminate one (1) proposed arbitrator. The parties shall continue to
alternatively eliminate names from the list of proposed arbitrators in this
manner until each party has eliminated five (5) proposed arbitrators. The
remaining arbitrator shall arbitrate the dispute. The proceedings shall be
conducted under a so-called "baseball arbitration" format, such that each party
shall submit, in writing, the specific requested action or decision it wishes to
take, or make, with respect to the matter in dispute, and the arbitrator shall
be obligated to choose one (1) party's specific requested action or decision,
without being permitted to effectuate any compromise or "new" position;
provided, however, that the arbitrator is authorized to award amounts not in
dispute during the pendency of any dispute or controversy arising under or in
connection with this Agreement. The losing party shall bear the cost of all
counsel, experts or other representatives that are retained by both parties,
together with all costs of the arbitration proceeding, including, without
limitation, the fees, costs and expenses imposed or incurred by the arbitrator.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction; including, if applicable, entry of a permanent injunction under
paragraph (b) of Section 6. No arbitration involving Covered Transactions as to
which any Employee is involved shall be conducted in which such Employee is not
included as a party, or given an opportunity to participate as a party to such
arbitration and such Employee consents thereto.
(e) Waiver. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be performed by the other party, shall be deemed a waiver of any similar or
dissimilar provisions or conditions at the same time or any prior or subsequent
time.
(f) Notices. Notices given pursuant to this Agreement shall be in
writing, and shall be deemed given when received, and, if mailed, shall be
mailed by United States registered or certified mail, return receipt requested,
postage prepaid. Notices to the Company shall be addressed to the principal
headquarters of the Company, to the attention of Xxxx X. Xxxxxx, Chief Executive
Officer, with a copy of such notice to be provided to:
18
Xxxxxx X. Xxxxxxxxx, Esq.
Barack Xxxxxxxxxx Xxxxxxxxxx Xxxxxxx & Xxxxxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Notices to the Consultant shall be sent to the address first stated
above therefor, and in the case of any notice relating to a matter involving any
Employee of Consultant, such notice shall be with a copy of such notice to be
provided to such Employee and his counsel.
(g) Authority. Each of the Company and the Consultant represents and
warrants to the other that its signatory is duly authorized to execute and
perform under this Agreement, without the need for any consent or approval of
such party's Board of Directors or of any other party, and that this Agreement
is not violative of or in conflict with any agreement, understanding, order,
decree, law, regulation or other matter to which it is subject or by which it is
bound.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Agreement as of the date first above written.
CORPORATE OFFICE PROPERTIES NET LEASE FINANCE CORP. d/b/a
TRUST CORPORATE OFFICE SERVICES
By: /s/ Xxxx X. Xxxxxx By:
-------------------------- ------------------------------
Xxxx X. Xxxxxx Its:
------------------------------
Chief Executive Officer
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