Exhibit 10.11
CONTRIBUTION AGREEMENT
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THIS CONTRIBUTION AGREEMENT ("Agreement") is made this 20th day of October,
1997, in Chicago, Illinois, by and between the parties set forth on Schedule 1
attached hereto and made a part hereof (individually, a "Contributor" and
collectively, "Contributors"), and THE PRIME GROUP, INC., an Illinois
corporation ("Company"), PRIME GROUP REALTY, L.P., a Delaware limited
partnership ("Partnership") and PRIME GROUP REALTY TRUST, a Maryland real estate
investment trust ("REIT").
R E C I T A L S:
A. Land Trusts (as hereinafter defined) are the fee owners of the Real
Property (as hereinafter defined) and the Beneficiaries (as hereinafter defined)
are the owners of the Personal Property, Contracts and Licenses (as such terms
are hereinafter defined) and the Xxxxx Entities (as hereinafter defined) are the
owners of the Business Assets (as hereinafter defined). The Real Property,
Personal Property, Contracts, Licenses and Business Assets are sometimes
collectively referred to herein as the "Property").
B. Prior to the Closing Date (as hereinafter defined), Company will
assign all of its right, title and interest in and to this Agreement to the
Partnership.
C. Contributors desire to contribute the Property or cause the Property
to be contributed to the Partnership, and the Company desires to cause
Partnership to accept the contribution of the Property from the Contributors
upon and subject to the terms and conditions hereinafter set forth.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, agreements, covenants and conditions
herein contained, and other good and valuable consideration, Contributors and
Company agree as follows:
ARTICLE 1
DEFINITIONS
1.01 Definitions. When used herein, the following terms shall have the
respective meanings set forth opposite each such term:
Agreement: This Agreement including the Exhibits and Schedules attached
hereto which are incorporated herein and made a part hereof.
Business Assets: The assets of the Xxxxx Entities, including, but not
limited to, items described on Schedule 2 attached hereto and made a part
hereof.
Closing Date: The date which is three (3) business days following pricing
of the IPO; provided, however, that if Closing has not occurred by December 31,
1997, Company may by written notice to Contributors delivered on or before
December 29, 1997, extend the last day on which the Closing may occur to March
31, 1998 so long as the Company certifies to the Contributors in such notice
that (a) the Company intends to proceed in good faith towards the consummation
of the IPO and the date on which the Company anticipates the IPO will be priced,
and (b) in furtherance of the Company's good faith effort to consummate the IPO,
the Company has elected to extend the Closing Date. Company shall deliver
written notice to Contributors of its intent to price the IPO at least five (5)
business days prior to the intended pricing date and shall thereafter notify
Contributors of any changes in its intent to price or a change in the estimated
date of Closing.
Contracts: All written: (i) insurance, service, maintenance, operating,
repair and other contracts and commitments (excluding the recorded documents
evidencing the Permitted Title Exceptions) in any way relating to the Property
or any part thereof which shall survive the closing hereunder; (ii) equipment
leases of equipment located on the Property; and (iii) guaranties and warranties
in effect with respect to the Property or any portion thereof, which shall
survive the closing hereunder. A true, correct and complete list of the
foregoing are attached as Exhibit D hereto.
Contribution Price: $96,378,588, being the consideration payable by the
Partnership to Contributors for the contribution of the Property to the
Partnership and all other covenants and warranties contained herein, as further
described in Article 3.
Deeds: Those certain Trustee's Deeds (in recordable form) delivered by the
Land Trusts of the Real Property described in Exhibit A attached hereto and made
a part hereof to the Partnership, subject only to the permitted exceptions
applicable to such Real Property.
Employee Benefit Plan: All written employee benefit plans or programs,
welfare benefits plans, retirement plans, excess benefit plans, plans maintained
to provide workers' compensation or unemployment benefits and pay practices
which Contributors have funded or been obligated to fund for their past or
present employees, independent contractors or either of their beneficiaries or
dependents.
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Environmental Laws: As defined in Section 12.01(u).
Environmental Study: As defined in Section 11.01(f).
Escrowee: First American Title Insurance Company, Chicago, Illinois
Governmental Approvals: Certificates of occupancy, licenses, permits,
authorizations and approvals required by law or by any Governmental Authority
having jurisdiction in respect of the Property, or any portion thereof,
occupancy thereof, or any present use thereof.
Government Authority: Any federal, state or local governmental body or
agency having jurisdiction in respect of the Property, or any portion thereof,
occupancy thereof, or any present use thereof.
Hazardous Materials: As defined in Section 12.01(u).
Intangible Personal Property: All logos, designs, tradenames, except the
names "Xxxxx" and/or "Narco" or derivatives thereof when used alone or in
combination with other names subject to the terms and conditions of the
Employment and Non-Competition Agreement by and among the parties hereto,
trademarks, service marks, copyrights and other intellectual property used by
Contributors in connection with the ownership and operation of the Property or
any part thereof, together with the goodwill of the business appurtenant
thereto.
IPO: The initial public offering of the stock of Prime Group Realty Trust
as contemplated by Form S-11 Registration Statement dated September 12, 1997, a
draft copy of which has been delivered to Contributors, as same may be amended
from time to time in accordance with the terms hereof.
Land Trusts: Each of the entities described as "Land Trusts" on Schedule 1
attached hereto, if any.
Leases: All leases and tenancies in the Real Property identified and
described in Exhibit F.
Legal Requirements: All laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments and governmental
authorities having jurisdiction of the Property (including, for purposes hereof,
any local Board of Fire Underwriters), and the operation thereof.
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Licenses: All licenses, franchises, certifications, authorizations,
approvals and permits issued or approved by any governmental authority and
relating to the operation, ownership and maintenance of the Property or any part
thereof, including elevator permits, machinery permits, business licenses,
ingress and egress permits and the like, as identified and described in Exhibit
E.
Mortgages: Unless specifically set forth otherwise, collectively, the
mortgages encumbering the Real Property described on Schedule 3 attached hereto,
which shall be repaid by the Partnership.
Xxxxx Entities: Each of the entities described on Schedule 1-A attached
hereto.
Xxxxx General Partner Entity: A legal entity designated by Xxxxxxx X.
Xxxxx in a written notice to the Company not less than ten (10) days prior to
Closing.
Xxxxx Properties: Property contributed to the Partnership by Contributors.
Option Property: The real property legally described on Exhibit A-2
attached hereto.
Permitted Title Exceptions: All of the items as listed and described on
Exhibit C (including the Leases and the Mortgages described on Schedule 3); acts
of Company; rights of persons claiming by, through or under Company; and any
other matters which Company shall approve in writing.
Personal Property: Any and all machinery, equipment, fixtures, furnishings,
and other tangible personal property owned by Contributors situated in or upon
or used in connection with the operation or maintenance of the Real Property or
any part thereof and all replacements, additions or accessories thereto between
the date hereof and the Closing Date, including the items identified and
described on Exhibit B, but excluding personal property owned by the Xxxxx
Entities which are not Business Assets, if any, described on Schedule 2-A or by
tenants under the Leases and personal property demised by any equipment leases
(if any) described on Exhibit F.
Property: Collectively, the Real Property, the Personal Property, the
Intangible Personal Property, the Business Assets, the Contracts, the Leases and
the Licenses.
Real Property: The Real Property legally described on Exhibit A, Xxxxxxx X-
0 and Exhibit A-2 together with all buildings and improvements thereon or
therein (including all replacements or additions thereto between the date hereof
and the Closing Date); to the extent owned by Contributors (and not a tenant
under a Lease) all systems, facilities, fixtures, machinery, equipment and
conduits to provide fire protection, security, heat, exhaust, ventilation, air
conditioning, electrical power, light, plumbing, refrigeration, gas,
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sewer and water thereto (including all replacements or additions thereto between
the date hereof and the Closing Date); all privileges, rights, easements,
hereditaments, and appurtenances thereto belonging to Contributors; and all
right, title and interest of Contributors in and to all streets, alleys,
passages and other rights-of-way included therein or adjacent thereto (before or
after the vacation thereof).
Surveys: Current as-built surveys for each property compromising the Real
Property prepared by a surveyor licensed by the State of Illinois and certified
to the Company, the Partnership, the REIT, the Contributor which is the
beneficiary of the Land Trust which holds title to the parcel of Real Property
depicted and the Title Insurer prepared in accordance with the standards for
Land Title Surveys of the American Land Title Association and the American
Congress on Surveying and Mapping Class A survey, copies of which have been
delivered to Company prior to the date hereof.
Title Commitments: A separate commitment for an ALTA Form B Owner's Title
Insurance Policy for each real property comprising the Real Property issued by
the Title Insurer in the amount of the allocation of the Contribution Price as
provided in Schedule 10 attached hereto, covering title to the Real Property on
or after the date hereof, showing the respective owner of the Real Property in
fee simple, copies of which have been delivered to Company prior to the date
hereof. Contributors shall request Title Insurer to furnish a creditor's rights
endorsement.
Title Insurer: First American Title Insurance Company, Chicago, IL
Vacant Property: The real property legally described on Exhibit A-1
attached hereto.
ARTICLE 2
CONTRIBUTION AND RECEIPT
2.01 Contribution. Subject to the conditions and on the terms contained in
this Agreement:
(a) Contributors agree to cause the Land Trusts to execute and
deliver the Deeds for the Real Property described on Exhibit A for a
contribution price equal to $96,378,588.
(b) Partnership agrees to acquire from Contributors, and Contributors
agree to contribute to Partnership all of Contributors' right, title and
interest in the Contracts, the Leases, Intangible Personal Property and Licenses
relating to the Real Property described on Exhibit A.
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(c) Partnership agrees to acquire from Contributors, and Contributors
agree to contribute to Partnership the Personal Property relating to the Real
Property described on Exhibit A by good and sufficient xxxx of sale containing
full warranties of title free and clear of liens, claims, encumbrances and
restrictions of every kind and description except for the Permitted Title
Exceptions to the extent applicable thereto.
(d) Partnership agrees to acquire from the Xxxxx Entities, and the
Xxxxx Entities agree to contribute to Partnership the Business Assets by good
and sufficient xxxx of sale containing full warranties of title free and clear
of liens, claims, encumbrances and restrictions of every kind and description
except for the Permitted Exceptions to the extent applicable thereto.
ARTICLE 3
CONTRIBUTION PRICE
3.01 Contribution Price. The total gross fair market value attributable to
the Property (excluding the Real Property described on Exhibit A-1 which is
covered by the agreements attached hereto as Exhibit K and excluding the Real
Property described in Exhibit A-2 attached hereto for which the Contribution
Price shall be calculated in accordance with Section 3.02(b) of this Agreement)
contributed by Contributors to the Partnership shall be Ninety Four Million
Eight Hundred Seventy Eight Thousand and Five Hundred Eighty Eight No/100
Dollars ($94,878,588).
3.02 Consideration Received by Contributors. (a) Provided that all
conditions precedent to the Partnership's and Contributors' obligations to close
as set forth in this Agreement have been satisfied and fulfilled or waived in
writing by the parties hereto, the Partnership shall at Closing: (i) accept a
contribution of the Property subject to the Mortgages encumbering the Real
Property described on Schedule 3, which shall be repaid by the Partnership
within one (1) business day after the IPO (as herein defined); (ii) pay the sum
of up to 15,863,800, in cash, the exact amount to be designated by Contributors;
plus (ii) admit the Xxxxx General Partner Entity as a general partner in the
Partnership which shall have general partnership common units equal in value to
the amount calculated by dividing the balance of the Contribution Price (after
deducting items (i) and (ii) above, and plus or minus prorations and other
adjustments required under this Agreement), by the initial public offering price
of the REIT common stock on the IPO Closing Date.
(b) Notwithstanding the foregoing, the Closing on the contribution to the
Partnership of the property commonly known as 000 Xxxxx Xxxx (the "Xxxxx Road
Property") and the property commonly known as 000-000 Xxxxx Xxxxx ("Xxxxx Place
Property") shall be delayed for each such property until ten (10) days after
such time if ever as Contributors notify the Partnership with respect to either
parcel that such property is one
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hundred percent (100%) leased pursuant to Qualified Leases (as hereinafter
defined) ("Closing Condition") (the Xxxxx Road Property and the Xxxxx Place
Property are herein referred to collectively as the "Delayed Closing
Properties"). The Contribution Price for each such Delayed Closing Property
shall be an amount equal to: (i) in the case of the Xxxxx Place Property,
$7,528,941, plus an amount, if any, equal to the capital expenditures made by
such Contributors to obtain such Qualified Leases which create incremental
rental income above $4.50 per rentable square foot, and (ii) in the case of the
Xxxxx Road Property, $2,531, 471 plus an amount, if any, equal to the capital
expenditures made by such Contributors to obtain such Qualified Leases which
create incremental rental income above $3.50 per rentable square foot. Such
Property shall be contributed to the Partnership in exchange for general
partnership common units equal in value to the amount calculated by dividing
such Contribution Price by the initial public offering price of the REIT common
stock on the IPO Closing Date, if the notice of satisfaction of the Closing
Condition for such Property is received by Partnership on or before the date
which is 180 days following the IPO Closing; otherwise, if the notice of
satisfaction of the Closing Condition for such Property is received by
Partnership after the date which is 180 days following the IPO Closing and on or
before the second anniversary of the IPO Closing, then such Delayed Closing
Property shall be contributed to the Partnership in exchange for general
partnership common units equal in value to the amount calculated by dividing the
Contribution Price for such Delayed Closing Property by the average daily
closing price for the REIT common stock for the ten trading days immediately
prior to the Closing Date for such Delayed Closing Property. The Partnership
(a) shall not be obligated to acquire a Property if the Closing Condition for
such Property is not satisfied [or waived] on or before the second anniversary
of the IPO Closing, and (b) shall acquire one of the Delayed Closing Properties
when the Closing Condition precedent for such acquisition is satisfied even if
the Closing Condition precedent for the acquisition of the other Delayed Closing
Property is not then satisfied.
For purposed of this paragraph the term "Qualified Lease" shall mean a
lease in which (i) the space in question is occupied by a third party tenant who
is not controlled by, under common control with, or otherwise related to
(directly or indirectly) Contributors and/or Xxxxxxx X. Xxxxx pursuant to an
arms length triple net lease on terms comparable to the Leases and under a valid
certificate of occupancy, (ii) the lease term is for a minimum of five years
(iii) the tenant is open for business and paying rent, and additional rent
attributable to taxes, insurance, and common area charges in accordance with and
as required under the terms of the lease, and (iv) the tenant shall have
delivered an unqualified tenant estoppel in the form of Schedule 7 attached or
other form reasonably acceptable to the Partnership.
3.03 Formation. (a) The Partnership's general partners will be: (i) the
REIT and the Xxxxx General Partner Entity. Currently, the REIT is a private
corporation that shall
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become a public entity through an initial public offering of securities (the
"IPO") which IPO the Partnership expects shall occur on or before December 31,
1997.
(b) Consummation of the IPO shall be a condition of the Contributors'
obligations hereunder. Provided that the REIT does, in fact, consummate the IPO,
the following shall be applicable: (i) the Partnership shall provide
Contributors with reasonable advance written notice (the "Registration Notice")
of the REIT's intent to file any amended S-11 Registration Statement (the
"Amended S-11 Statement") with the Securities and Exchange Commission (the
"SEC"); and (ii) the Partnership shall satisfy the non-cash portion of the
Contribution Price by delivery to the Xxxxx General Partner Entity at Closing
the general partnership interests described herein. Contributors shall have the
right to approve that portion of the Amended S-11 Statement which describes the
Xxxxx Property (and that portion of any future Amended S-11 Statement which
describes the Property) and agreements referenced herein and agreements entered
into with Contributors and the Xxxxx General Party Entity. In the event approval
of the Contributors to an amendment to the S-11 Statement is required pursuant
to the terms of this Agreement, such approval shall be deemed to have been given
unless Contributors disapprove such amendment (and state the reasons for such
disapproval) within one (1) Business Day after receipt of such proposed
amendment by the last of Contributors or its legal counsel, Xxxx, Xxxx & Xxxxx,
to receive such amendment. Promptly upon filing any Amended S-11 Statement with
the SEC, the Partnership shall furnish a copy of the Amended S-11 Statement to
Contributors. In addition, Company will provide Contributors and their counsel
with copies of all amendments to the S-11 statement prior to filing with the
SEC, although Contributor's approval, except as hereinbefore provided shall not
be required.
3.04 Company, REIT and Partnership Representations, Warranties and
Covenants. To induce Contributors to execute, deliver and perform this
Agreement, the Company, the REIT and the Partnership hereby represent, warrant
and covenant to Contributors on and as of the date hereof and on and as of the
Closing Date to the extent same are true, and to the extent not true, then
describing the circumstances or manner in which such representations and
warranties are not true. For purposes of this Agreement, the term "knowledge"
shall mean the actual knowledge of Xxxxxxx Xxxxx, Xxxxxxx X. Xxxxxxx and Xxxxxxx
Xxxxxxxxx. (The Company, the REIT and the Partnership hereby agree to give
Contributors written notice of any information which makes any representation or
warranty untrue within five (5) business days of obtaining such information (and
disclosure of such information shall not be deemed a breach of a representation
or warranty by the Company and/or the REIT, and/or the Partnership or default by
the Company and/or the REIT, and/or the Partnership under this Agreement in the
absence of willful or intentional acts or omissions or gross negligence by the
Company and/or the REIT, and/or the Partnership which resulted in such breach):
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(a) The Partnership will elect the "traditional method" set forth in
Treasury Regulation Section 1.704-3(b) (absent a Final Determination to the
contrary) to allocate tax attributes related to the Property as "Section 704(c)
Property" (as such term is defined in Treasury Regulation Section 1.704-3(a)(3))
or which are in any other way governed by the provisions of Section 704(c) of
the Internal Revenue Code of 1986, as amended ("Section 704(c) allocations") or
any successor section thereto.
(b) The shares of the REIT shall be traded on the New York Stock
Exchange.
(c) As provided in the Tax Indemnity Agreement attached hereto as
Exhibit I, the Partnership shall take such steps as may be necessary to cause an
aggregate amount equal to or greater than $43,000,000 of non-recourse principal
mortgage indebtedness on the Property to be allocated to the Xxxxx General
Partner Entity for purposes of Section 752 of the Internal Revenue Code of 1986,
as amended, with such figure evidenced by a schedule prepared using the same
methodology as Exhibit M, with the amount apportioned under Treasury Regulation
Section 1.752-3(a)(3) determined using the "Indemnity Debt Allocation Method,"
as such term is defined in the Tax Indemnification Agreement attached hereto as
Exhibit I, provided, however, in the event that one or more of the properties
described on Exhibits A-2 and A-3 attached hereto are not contributed to the
Partnership in the manner provided in this Agreement, the amount of non-recourse
indebtedness set forth in this subparagraph shall be reduced by the amount of
debt shown on Exhibit M for such property(ies) which are not so contributed.
(d) On the Closing Date the Debt to Total Market Capitalization Ratio
(as defined in the S-11 Registration Statement) shall not exceed 40%.
(e) In the event the Closing does not occur by the last day on which
the Closing Date can occur, as such date may be extended pursuant hereto,
because the IPO has not been consummated, but within one year thereafter the
Company undertakes another IPO involving some or all of the properties described
in the Amended S-11 Statement, the Company shall give Contributors written
notice of such new IPO not less than thirty (30) days prior to the proposed
filing of the new S-11 Statement to be filed in connection with such new IPO and
copies of the new S-11 Statement and a draft of a proposed contribution
agreement which the Company contemplates entering into with Contributors.
Contributors shall have fifteen (15) days after receipt of such notice, S-11
Statement and Contribution Agreement in which to elect whether or not to seek
participation in the IPO under the terms of the tendered contribution agreement.
If Contributors elect to seek to participate in the new IPO, Contributors and
the Company shall negotiate diligently and in good faith to reach terms which
are mutually agreeable and execute the new contribution agreement and all other
documents to be executed in connection therewith. If the Contributors shall
fail to respond to such notice within such
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fifteen (15) day period, Contributors shall be deemed to have declined to
participate in such new IPO.
(f) The Company shall take reasonable steps and use its best efforts
to file Amendment No. 2 to the Registration Statement within 10 days of the date
hereof and shall use its reasonable efforts to complete the IPO at a price and
on terms acceptable to the Company on or before December 31, 1997, or on or
before March 31, 1998 if the Closing Date is extended as expressly provided
herein.
(g) Partnership is a partnership for federal income tax purposes, and
is not an entity referred to in Section 721(b) of the Internal Revenue Code of
1954 as amended, (the "Code") or a "publicly traded partnership" within the
meaning of Section 7704 of the Code.
(h) Partnership shall utilize the traditional method of depreciation
allocation under Section 704(c) of the Code.
(i) The REIT is organized as a "real estate investment trust" under
Sections 856 through 860 of the Code. The REIT will elect to be taxed as a
"real estate investment trust" under the Code.
ARTICLE 4
SURVEYS
4.01 Surveys. At the Closing, the REIT shall pay the cost of the Surveys.
In the event the Closing does not occur, Contributors shall pay for the cost of
the Survey. If one or more of the Surveys are dated more than ninety (90) days
prior to the Closing Date, the respective Contributor shall furnish at Closing a
certificate of such Contributor which is the beneficial owner of such affected
portion of the Real Property to Company, the Partnership, the REIT and the Title
Insurer dated within ninety (90) days prior to Closing certifying that there
have been no changes or additions to such Property since the date of the
applicable Survey.
ARTICLE 5
TITLE AND SEARCHES
5.01 Title. At the Closing, the REIT shall pay the cost of the Title
Policy. In the event the Closing does not occur, Contributors shall pay for the
cost of the Title Commitments. On the Closing Date, it shall be a condition of
Closing that the Title Insurer
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issue an owner's title insurance policies or prepaid "marked up" commitment
therefor pursuant to and in accordance with the Title Commitments insuring fee
simple title to the Real Property in the Company as of the Closing Date, subject
only to the Permitted Title Exceptions and such other exceptions as Company may
approve, and providing for full extended coverage over all general title
exceptions contained in such policies and the following special endorsements at
the REIT's sole cost and expense: Zoning Endorsement 3.1 (with parking); and a
contiguity endorsement.
5.02 Searches. Promptly after execution of this Agreement, Company shall
order (and deliver a copy of same to Contributors) searches of the records of
the Secretary of State of Illinois and the U.S. District Court for the Northern
District of Illinois confirming the absence of security interests, judgments,
tax liens and bankruptcy proceedings which affect or could affect Contributors
or the Property or any interest therein to be transferred to Company pursuant
to this Agreement (other than Permitted Title Exceptions [collectively, the
"Initial UCC Searches"]). At Closing, the REIT shall pay the cost of the
Initial UCC Searches. In the event Closing does not occur, Contributors shall
pay the cost of the Initial UCC Searches. Said searches shall be updated at
REIT's sole cost and expense as of the Closing Date confirming the absence of
such security interests, judgments, tax liens or bankruptcy proceedings.
5.03 Defects and Cures. If the items described in Sections 4.01, 5.01 and
5.02 disclose claims, liens, exceptions, conditions or other items (a "Defect")
with respect to a specific parcel of the Real Property (the "Affected Parcel")
which are not Permitted Exceptions and which are unacceptable to the Company as
inconsistent with the intended use of the Affected Parcel after Closing (which
shall be the use on the date hereof), the Company shall give the Contributor of
the Affected Parcel (the "Affected Contributor") written notice thereof on or
before October 31, 1997. Following the giving of such notice, the removal, cure
or insuring over of such a Defect shall be a condition precedent to the
Company's obligation to accept a contribution of the Affected Parcel. If the
Affected Contributor fails to remove, cure or cause the Title Insurer to insure
over the Defect in a manner reasonably satisfactory to the Company within the
earlier of Closing or thirty (30) days after delivery of the Company's notice of
the Defect to the Affected Contributor, then the Company shall, within five (5)
days thereafter, elect by written notice to be received by such Affected
Contributor on or before such fifth (5th) day, to
(a) terminate this Agreement with respect to the Affected Parcel, in which
case the Affected Parcel shall no longer be part of the Real Property which
is to be contributed to the Partnership, the Contribution Price shall be
reduced by the amount allocated to such property on Schedule 10, and the
parties shall have no further rights or obligations hereunder with respect
to such Affected Parcel except for those rights and obligations which
expressly survive any such termination, or
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(b) proceed with the transaction with respect to such Affected Parcel
pursuant to the remaining terms and conditions of this Agreement, in which
event the Company may, prior to Closing, cure, satisfy or insure over any
such Defect which can be cured by the expenditure of money and reduce the
general partnership interests allocated to the Xxxxx General Partner Entity
by the amount so expended, provided that the total amount of such
reductions shall not exceed (i) Ten Thousand Dollars ($10,000.00) in the
aggregate on title endorsements, attorneys' fees and expenses and other
out-of-pocket costs for clearance purposes with respect to all parcels
comprising the Real Property other than for the Defects enumerated in
clause (ii) immediately following or (ii) One Million Dollars
($1,000,000.00) in the aggregate with respect to all parcels comprising the
Real Property, to remove, bond over or insure over any judgments against
all Contributors or Land Trusts or mechanics' liens (which do not result
from acts or omissions on the part of Company or the Partnership) and which
have attached to and become a lien against any of the parcels of the Real
Property, except that there shall be no such limitation with regard to
clearance of liens and encumbrances voluntarily and intentionally recorded
after the date of the Title Commitments against any of the parcels
constituting the Real Property by or at the direction of any of the
Contributors.
If the Company fails to give the Affected Contributor timely notice of its
election following the Affected Contributor's failure to cure, remove or insure
over a Defect in a timely manner, the Company shall be deemed to have elected
the option contained in subparagraph (b) above. Company shall have the right at
any time to waive any objections that it may have made and, thereby, to preserve
this Agreement in full force and effect.
ARTICLE 6
POSSESSION, PRORATIONS AND CLOSING COSTS
6.01 Possession. Sole and exclusive possession of the Property, subject
to the rights of tenants in possession (as tenants only) pursuant to the Leases
shall be delivered to Company on the Closing Date.
6.02 Prorations. The following items shall be prorated by the parties at
Closing: current rents based upon actual rents actually paid per the Leases,
security deposits, if any (and any interest thereon, if any) and advance rentals
under the Leases; unused decorating or tenant improvement allowances under the
Leases; expenditures required (under the Leases) to complete any tenant
improvement work required of the landlord under the Leases to be completed prior
to the Closing Date and incomplete on the Closing
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Date; special and general real estate taxes and other ad valorem taxes and
assessments for the Property will not be prorated, however, at Closing,
Contributor shall assign to Company any and all monies being held for such real
estate taxes and assessments with respect to any tenants under the Leases which
are paying monthly escrows to the Contributors, state or city taxes, fees,
charges and assessments affecting the Property; utility charges and deposits;
fuels; and all other items of accrued or prepaid income and expenses customarily
prorated on the transfer of industrial or office properties (as the case may be)
in the Chicago, Illinois area as reasonably determined by the parties, however,
in no event shall Contributors have the right to xxx any such tenant, shall be
prorated on a cash basis as of the Closing Date on the basis of the most recent
ascertainable amounts of or other reliable information in respect to each such
item of income and expense, and the net credit to Company or Contributors shall
increase or decrease (as the case may be) the Contribution Price payable on the
Closing Date. Real estate taxes for the properties described on Schedule 5
attached hereto and made a part hereof shall not be prorated since the tenants
in occupancy are paying such real estate taxes. Following closing, Company shall
pay to Contributors all rents which Company shall collect which are specifically
allocated to periods preceding the Closing Date, except that all such rents
collected by Company shall first be applied to satisfy all current rents due
Company, and Contributors shall pay to Company all rents received by
Contributors from any tenant of the Property before or after the Closing Date
which are attributable to periods succeeding the Closing Date. As of the
Closing Date, the parties hereto agree that there will be no proration with
respect to any delinquent rents, but the Partnership shall utilize reasonable
efforts following Closing to attempt to collect delinquent rents. In addition
and in lieu of a proration credit, on the Closing Date, Contributors shall
assign to Company any and all monies being held for common area costs and
expenses with respect to any tenants under the Leases which are paying monthly
escrows to the Contributors. Contributors agree to cooperate at no cost to
Contributors with Company in the preparation of the financial statements and
other financial data respecting the ownership and operation of the Property for
calendar year 1996 (if such statements have not been completed by the Closing
Date) and subsequent periods for which such statements and data must be prepared
in order to compute, charge and prorate any tenant items. As soon as reasonably
possible after the preparation of the aforesaid financial statements and data,
Company will render statements for the tenant items to the tenants of the Real
Property under their respective Leases. From time to time as Company receives
payment of the tenant items from the tenants, Company will promptly remit to
Contributor that portion of the tenant items allocable to the Property prior to
the Closing Date.
6.03 Closing Costs. At Closing, Contributors shall pay all state and
county transfer taxes, and the REIT shall pay all other closing costs,
including, without limitation, all title charges and premiums for the title
policy, extended coverage and creditors rights endorsement, survey charges and
fees for the UCC Searches required by Section 5.02, and all local transfer
taxes, cost for zoning 3.1 endorsement and other endorsements
-13-
requested by Company, all recordation and other costs incurred in connection
with any mortgage loans obtained by Company, all escrow fees and all charges for
any New York Style closing, and all attorneys' fees and expenses of the parties.
Company shall also pay an amount not to exceed $1,620,000 imposed by the holders
of the Mortgages described on Schedule 3 in connection with the prepayment of
such Mortgages.
ARTICLE 7
ESCROW
7.01 Escrow. If required by the underwriter in connection with the Closing
of the IPO, then within five (5) days following the date on which the conditions
precedent set forth in Article XIV have been satisfied or waived, the parties,
through their respective attorneys, shall establish an escrow with the Escrowee
through which the transaction contemplated hereby shall be closed. The escrow
instructions shall be in the form customarily used by the Escrowee with such
special provisions added thereto as may be required to conform to the provisions
of this Agreement, including provisions with respect to a related money lender's
escrow from which all or any part of the Contribution Price may be paid. Said
escrow shall be auxiliary to this Agreement, and this Agreement shall not be
merged into nor in any manner superseded by said escrow. The escrow costs and
fees shall be paid by the Company unless there is no Closing, in which case the
escrow costs and fees shall be equally divided between Company and Contributor.
If required by applicable law, the Escrowee shall file with the Internal Revenue
Service the information return (Form 1099B) required by Section 6045(e) of the
Internal Revenue Code and any regulations issued pursuant thereto. Contributor
shall be responsible to give to the Escrowee such information of the Contributor
that the Escrowee needs in order to complete such form.
ARTICLE 8
BROKERAGE
8.01 Brokerage. Contributors hereby represent and warrant to the Company
and the Company hereby represents and warrants to Contributors that it or they,
as the case may be, has or have not dealt with any broker or finder in respect
to the transaction contemplated hereby. Contributors hereby agree to indemnify
Company for any claim for brokerage commission or finder's fee asserted by a
person, firm or corporation claiming to have been engaged by Contributors.
Company hereby agrees to indemnify, defend and hold harmless Contributors for
any claim for brokerage commission or finder's fee asserted by a person, firm or
corporation claiming to have been engaged by Company.
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ARTICLE 9
DESTRUCTION OR DAMAGE
9.01 Destruction or Damage. In the event any parcel constituting a
portion of the Property is damaged or destroyed after the date hereof,
Contributors shall immediately give written notice of such damage or destruction
to the Company. If, subsequent to the date hereof and prior to the Closing
Date, any parcel constituting a portion of the Property is damaged or destroyed
and the cost to repair or restore such parcel (in the reasonable judgment of the
Company) is less than $500,000 per individual property, the Company shall close
and take the parcels which have been damaged as diminished by such events, and
Contributor owning such parcel shall assign and/or pay to the Company at Closing
all insurance proceeds collected or claimed with respect to said loss or damage,
plus any deductible. If, subsequent to the date hereof and prior to the Closing
Date, all or any part of a parcel constituting a portion of the Property is
damaged or destroyed and the cost to repair or restore any such parcel (in the
reasonable judgment of the Company) is greater than $500,000 per individual
property, Contributors shall immediately give Company notice of such occurrence,
and Company may, within ten (10) days after receipt of such notice, elect to (a)
terminate this Agreement as to such parcel, the Contribution Price shall be
reduced by the amount allocated to such property on Schedule 10 and the parties
shall make any other adjustments as agreed upon, or (b) close the transaction
contemplated hereby as scheduled (except that if the Closing Date is less than
fifteen (15) days following Company's receipt of such notice, closing shall be
delayed until Company makes such election), in which event Company shall have
the right to participate in the adjustment and settlement of any insurance claim
relating to said damage, and Contributor shall assign and/or pay to Company at
closing all insurance proceeds collected or claimed with respect to said loss or
damage plus any deductible. Failure to give such notice within such time shall
be conclusive evidence that Company has waived the option to terminate by reason
of the occurrence or occurrences of what it has received notice. In the event
Company elects to terminate this Agreement as to a parcel as provided in this
Section, such parcel shall be excluded from the scope of the "Non Compete"
covenant set forth in the Consulting Agreement of Xxxxxxx X. Xxxxx, and in the
Employment Agreement of Xxxxx Xxxxx, respectively.
ARTICLE 10
CONDEMNATION
10.01 Condemnation. If, subsequent to the date hereof and prior to
the Closing Date, any proceeding, judicial, administrative or otherwise, which
shall relate to the proposed taking of all or any portion of any parcel of the
Real Property by condemnation or eminent domain or any action in the nature of
eminent domain, or the taking or closing
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of any right of access to the Real Property, is instituted or commenced, which
in any of such cases involves more than $500,000 in value as to such parcel,
Company shall have the right and option to terminate this Agreement only as to
such parcel by giving Contributor written notice to such effect within ten (10)
days after actual receipt of written notification of any such occurrence or
occurrences. Failure to give such notice within such time shall be conclusive
evidence that Company has waived the option to terminate by reason of the
occurrence or occurrences of which it has received notice, and Company shall be
credited, if received, with or be assigned all such Contributors' right to any
proceeds therefrom. Contributors hereby agree to furnish Company written
notification in respect to any such proceedings within ten (10) days of
Contributor's receipt of any such written notification or commencement of the
institution of such proceedings. Should Company be entitled to elect to so
terminate this Agreement as to such parcel and does, in fact, so terminate this
Agreement, in the case of such termination as to such parcel which has been
taken or condemned, the Contribution Price shall be reduced by the amount
allocated to such parcel on Schedule 10, and the parties shall make any other
adjustments as agreed upon. If the Closing Date is less than ten (10) days
following the last day on which Company is entitled to elect to terminate this
Agreement, then the Closing shall be delayed until Company makes such election.
In the event Company elects to terminate this Agreement as to a parcel as
provided in this Section, such parcel shall be excluded from the scope of the
"Non Compete" covenant set forth in the Consulting Agreement of Xxxxxxx X. Xxxxx
and in the Employment Agreement of Xxxxx Xxxxx.
ARTICLE 11
AFFIRMATIVE COVENANTS OF CONTRIBUTOR
11.01 Affirmative Covenants of Contributor.
(a) Each Contributor, at Contributor's sole cost and expense, shall
maintain or cause to be maintained the parcel of Property it owns as required by
the terms of the Leases thereof, and shall keep and perform or cause to be
performed all obligations of the Property owner or its agents of such parcel
under the Contracts and Licenses and under the Legal Requirements, and all
obligations of the holder of the Mortgages described on Schedule 3 encumbering
such parcel to and including the Closing Date or termination of this Agreement.
Subject to closing and Sections 9.01 and 10.01 hereof, on the Closing Date,
Contributors shall tender possession of the Property to Company in the same
condition the Property was in on the date hereof, except for ordinary wear and
tear, casualty loss and condemnation (provided Company shall not have elected to
terminate this Agreement pursuant to Sections 9.01 or 10.01 as a result of such
casualty loss or condemnation). Notwithstanding anything contained herein to
the contrary, in the event that any Contributor receives written notice from any
Governmental Authority after the date
-16-
hereof, but prior to the Closing that the parcel of the Property (or a portion
thereof) is not in compliance (the "Violation") with applicable municipal and
other governmental laws, ordinances, regulations, codes, licenses, permits and
authorizations, the Contributor thereof shall provide written notice to the
Company of such event and Violation. In addition, the Contributor shall have
the affirmative obligation to utilize reasonable efforts to cure said
Violation(s) prior to the Closing, provided, that the cost to cure all such
Violation(s) with respect to all of the Property does not exceed One Hundred
Thousand and No/100 Dollars ($100,000.00) (the "Cure Limitation"). If the cost
to cure the Violation(s) shall exceed the Cure Limitation and Contributors
provide written notice to the Company that they do not intend to pay amounts in
excess of the Cure Limitation, then in such event, the Company may elect (i) to
terminate this Agreement with respect to any parcel of the Property which is
subject to an uncured Violation, and the Contribution Price shall be reduced by
the amount allocated to such parcel on Schedule 10 and the parties shall make
any other adjustments as agreed upon, whereupon this Agreement shall be null and
void as to such parcel and except as otherwise expressly provided in this
Agreement, neither party shall have any further liability to the other under
this Agreement as to such parcel; or (ii) to take title to the Property subject
to the Violation(s), in which event Contributor will provide Company with a
credit against the Contribution Price due at the Closing in the amount of the
reasonable estimate of the amount to cure such violation so long as the total
amount spent by all Contributors to cure all Violations and the amount of the
credit do not exceed One Hundred Thousand Dollars ($100,000.00).
(b) From the date of Contributors' acceptance hereof to the Closing
Date, Contributor shall maintain or cause to be maintained in full force and
effect liability, casualty and other insurance (without any self insurance) upon
and with respect to the Property against such hazards and in such amounts as
shall be required by the Mortgages or which are in effect as of the date hereof.
(c) From the date of Contributors' acceptance hereof to the Closing
Date or earlier termination of this Agreement, Contributors shall operate and
maintain the Property in the same manner as it has been operated and maintained
heretofore, provided that during said period, without the prior written consent
of Company, Contributors shall not do, suffer or permit, or agree to do, any of
the following:
(i) Enter into any other transaction with respect to or
affecting the Property which would survive the Closing, except for seasonal or
other arms length contracts with third parties in the ordinary course of
Contributors' business;
(ii) Sell (other than transfers of partnership interests in
entities comprising Contributors to or among Xxxxxxx X. Xxxxx and his wife and
children or trusts of any of said individuals, or in connection with the
redemption of partnership interests as contemplated by this Agreement), encumber
or grant any interest in the Property or any
-17-
part thereof in any form or manner whatsoever or otherwise perform or permit any
act which will diminish or otherwise affect Company's interest under this
Agreement or in or to the Property or which will prevent Contributors' full
performance of its obligations here under;
(iii) Enter into, amend, waive any rights under, terminate or
extend any Contract (other than seasonal contracts or other arms length
contracts with third parties in the ordinary course of Contributors' business)
which may be terminated on no more than thirty (30) days' notice or any of the
Leases.
(iv) Amend or waive any rights, or suffer or permit a default
to occur, under the Mortgages, except in connection with obtaining an agreement
relating to prepayment of the Mortgages described on Schedule 3; or
(v) Remove from the Property any of the fixtures thereon or
any of the Personal Property, unless such fixtures and Personal Property are
replaced with like-kind fixtures and personal property.
(d) From the date of Contributor's acceptance hereof to the Closing
Date, Contributor shall permit representatives, agents, employees, lenders,
contractors, appraisers, architects and engineers designated by Company access
to and entry upon the Real Property and the improvements thereon to examine,
inspect, measure and test the Property; provided, however, such entry shall be
upon not less than (1) Business Days' written notice and during business hours
and shall be subject to the rights of the tenants under the Leases, and shall be
made in a manner so as to have minimum interference with tenants' businesses.
Company shall furnish to the Contributor who owns the affected parcel of the
Property certificates of insurance naming Contributor as an additional insured
and otherwise reasonably satisfactory to Contributor from Company's consultants
(environmental or otherwise) and engineer, and Company shall indemnify, defend
and hold such Contributor harmless from and against any and all cost, liability
or expenses incurred by Contributor as a result of injury or damage to the
Property caused by such access and entry and testing.
(e) Contributors shall pay or cause to be paid all expenses relating
to the ownership, operation or maintenance of the Property for the period prior
to the Closing Date, and shall be responsible for all claims by and liabilities
and obligations to third parties arising or incurred as a result of
Contributors' ownership, operation or maintenance of the Property prior to the
Closing and relating to a time period prior to the Closing Date.
(f) Company may order an environmental report to be conducted by an
environmental engineering firm selected by Company (the "Environmental Study")
at any time from the date of Contributors' acceptance hereof to the Closing
Date. Company shall
-18-
pay all costs of the Environmental Study, if any. Contributors agree to
cooperate with Company, or its agents, in arranging for and conducting the
Environmental Study and the Company shall provide copies of such Environmental
Study to Contributors promptly after receipt of such Environmental Study.
(g) Contributors shall notify Company promptly if Contributors
become aware of any Violation or of any transaction or occurrence prior to the
Closing Date which would make any of the representations and warranties of
Contributors contained in Section 12.01 not true in any material respect.
(h) Contributors agree to terminate all employees on or before the
Closing Date, with the termination date to be effective not more than thirty
(30) days after the Closing Date with respect to all employees of Contributors
which Company does not elect to retain. Contributors shall be responsible for
all amounts for salaries, wages, benefits or other amounts due to and payable to
such terminated employees through the effective termination date for such
employees.
11.02 Affirmative Covenants of Company.
(a) Company, at Company's sole cost and expense, shall maintain or
cause to be maintained its assets described in the S-11 Statement as required by
the terms of any leases thereof, and shall keep and perform or cause to be
performed its obligations relating to such Property to and including the Closing
Date or termination of this Agreement. Subject to Closing and on the Closing
Date, Contributors shall tender possession of the assets described in the S-11
Statement in the same condition the Property was in on the date hereof, except
for ordinary wear and tear, casualty loss and condemnation.
(b) From the date of Company's acceptance hereof to the Closing
Date, Company shall maintain or cause to be maintained in full force and effect
liability, casualty and other insurance (without any self insurance) upon and
with respect to its assets described in the S-11 Statement.
(c) From the date of Company's acceptance hereof to the Closing
Date or earlier termination of this Agreement, Company shall operate and
maintain its assets as described in the S-11 Statement in the same manner as it
has been operated and maintained heretofore, provided that during said period,
without the prior written consent of Contributors, Company shall not do, suffer
or permit, or agree to do, any of the following:
(i) Enter into any other transaction with respect to or
affecting its assets as described in the S-11 Statement which would survive the
Closing, except for
-19-
seasonal or other arms length contracts with third parties in the ordinary
course of Company's' business;
(ii) Enter into, amend, waive any rights under, terminate or
extend any material contract (other than seasonal contracts or other arms length
contracts with third parties in the ordinary course of Company's' business)
which may be terminated on no more than thirty (30) days' notice;
(iii) Amend or waive any rights, or suffer or permit a default
to occur, under the mortgages encumbering the Company's assets described in the
S-11 Statement, except in connection with obtaining an agreement relating to
prepayment of such Mortgages; or
(iv) Remove from its assets as described in the S-11 Statement
any of the fixtures thereon or any of the personal property, unless such
fixtures and personal property are replaced with like-kind fixtures and personal
property.
(d) Company shall notify Contributors promptly if Company becomes
aware of any Violation or of any transaction or occurrence prior to the Closing
Date which would make any of the representations and warranties of Company
contained in this Agreement not true in any material respect.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS
12.01 Representations and Warranties of Contributors. To induce Company to
execute, deliver and perform this Agreement, each Contributor hereby represents
and warrants to Company with respect to such party's property on and as of the
date hereof and on and as of the Closing Date to the extent same are true, and
to the extent not true, then describing the circumstances or manner in which
such representations and warranties are not true. Notwithstanding anything to
the contrary hereof, for purposes of this Agreement, the term "knowledge" shall
mean the actual knowledge of Xxxxxxx X. Xxxxx without having any duty to inquire
or investigate. (Each Contributor hereby agrees to give Company written notice
of any information which makes any representation or warranty untrue within five
(5) business days of obtaining such information as follows with respect to the
respective portions of the Property owned by it (and disclosure of such
information shall not be deemed a breach of a representation or warranty by such
Contributor or default by such Contributor under this Agreement in the absence
of willful or intentional acts or omissions or gross negligence by such
Contributor which resulted in such breach) as follows:
-20-
(a) To the best of such Contributor's knowledge, all representations
and warranties of Contributor appearing in other Sections of this Agreement are
true and correct in all material respects.
(b) Each entity comprising Contributor and the Xxxxx Entities is duly
organized and in good standing under the laws of the State of Illinois, and is
duly qualified to do business in the State of Illinois.
(c) Each entity comprising Contributor and the Xxxxx Entities has
full capacity, right, power and authority to execute, deliver and perform this
Agreement and all documents to be executed by such party pursuant hereto, and
all required action and approvals therefor have been duly taken and obtained.
The individuals signing this Agreement and all other documents executed or to be
executed pursuant hereto on behalf of such party are and shall be duly
authorized to sign the same on such party's behalf and to bind such party
thereto. This Agreement and all documents to be executed pursuant hereto by such
party are and shall be binding upon and enforceable against such party in
accordance with their respective terms.
(d) To the best of such Contributor's knowledge, the information
included in the Exhibits hereto and the documents to be delivered to Company
pursuant to Section 11.01(e) is true, correct and complete in all material
respects, and the same shall not omit any material information.
(e) To the best of such Contributor's knowledge, Exhibit D includes a
true, correct and complete listing of all Contracts and amendments and
modifications thereof. To the best of such Contributor's knowledge, there are no
defaults under any of the Contracts, and the Contracts are in full force and
effect.
(f) To the best of such Contributor's knowledge: Exhibit E is an
accurate description of each of the Licenses, as amended and in effect, and each
of the Licenses is in full force and effect, and neither such Contributor nor
any agent or employee of Contributor has received written notice of any
intention on the part of the issuing authority to cancel, suspend or modify any
of the Licenses or to take any action or institute any proceedings to effect
such a cancellation, suspension or modification.
(g) Exhibit F is a true, correct and complete listing of all of the
Leases. Except as provided in the Leases, none of the Leases contain any option
or right of first refusal to purchase any property demised thereby, to extend
the Lease term, to lease additional space, to cancel or terminate the Lease
prior to the end of its term, or any other extraordinary provisions. To the best
of such Contributor's knowledge, (1) all tenants have accepted and are occupying
the respective leased premises described in such Leases; (2) all Leases are in
full force and effect, and no rights or interests of the landlord
-21-
thereunder have been waived or released; (3) all of landlord's obligations under
the Leases including the obligation to finish or refinish space to the
specifications provided in the Leases, have been satisfied; (4) neither the
landlord nor any tenant is in default under any Lease; and (5) such Contributor
has not received written notice of any circumstances affecting the financial
condition of any tenant of the Property, or otherwise, which would prevent such
tenant from fulfilling and complying with the obligations under its Lease.
(h) To the best of such Contributor's knowledge, the information to
be furnished by Contributor on which the computation of prorations is based
shall be true, correct and complete in all material respects.
(i) [OMITTED].
(j) Such Contributor has good and marketable title to the respective
portion of the Personal Property owned by it and each item thereof free and
clear of liens, security interests, encumbrances, leases and restrictions of
every kind and description, except the Permitted Title Exceptions.
(k) The interest of Contributor in the Contracts, the Leases and
Licenses is free and clear of all encumbrances and has not been assigned to any
other person, except as reflected in the Permitted Title Exceptions.
(l) Contributor has not granted anyone, except tenants in possession
under the Leases, possessory rights in respect to the Real Property or any part
thereof.
(m) To the best of such Contributor's knowledge: (i) the improvements
on the Real Property have been constructed and are presently used and operated
in compliance with all Licenses and all Legal Requirements, and with all
covenants, easements and restrictions affecting the Property, and (ii) all
obligations of such Contributor or the Property with regard to the Legal
Requirements, covenants, easements and restrictions have been and are being
performed in a proper and timely manner.
(n) To the best of such Contributor's knowledge, such Contributor has
not received any written notice from any tenant or Governmental Authority that
any of the improvements on the Real Property are not structurally sound and
weather-tight, nor that any of said improvements, the fixtures therein or
thereon and the Personal Property are not in good condition and working order,
with respect to which such Contributor has not taken steps to remedy the problem
enumerated in such notice.
(o) To the best of such Contributor's knowledge, there are no claims,
causes of action or other litigation or proceedings pending and no written
notice of any threatened proceeding with respect to the ownership or operation
of the Property or any
-22-
part thereof (including disputes with the holder of the Mortgages described on
Schedule 3 or any other mortgagees, Governmental Authority, utilities,
contractors or adjoining land owners) except possible claims for workers'
compensation, personal injury or property damage which are fully insured and as
to which the insurer has accepted defense.
(p) Such Contributor has not actually received any written notice of
any violations of any Legal Requirements with respect to the Property which have
not been corrected.
(q) To the best of such Contributor's knowledge, such Contributor has
not received any written notice that there is any existing, pending,
contemplated, threatened or anticipated (i) condemnation of any part of the Real
Property, (ii) widening, change of grade or limitation on use of streets
abutting the Real Property, (iii) special tax or assessment to be levied against
the Real Property, or (iv) change in the zoning classification of the Real
Property.
(r) To the best of such Contributor's knowledge, such Contributor has
not actually received any written notice from any insurance carrier that there
are defects or inadequacies in the Property which would adversely affect the
insurability of the same or cause the imposition of extraordinary premiums
therefor or create or be likely to create a hazard, excessive maintenance cost
or material operating deficiencies.
(s) Such Contributor has not actually received any written notice
from any tenant or Governmental Authority that all water, sewer, gas, electric,
telephone and drainage facilities and all other utilities and public or quasi-
public improvements upon or adjacent to the Real Property required by law or for
the normal operation of the Property are not installed, are not connected under
valid permits, are not in good working order, are not adequate to service the
Property and are not fully paid for.
(t) To the best of such Contributor's knowledge, such Contributor has
obtained all licenses, permits, easements and rights-of-way, including proof of
dedication, required from a Governmental Authority having jurisdiction over the
Property or from private parties to make use of utilities serving the Property
and to insure ingress and egress to and from the Property.
(u) Except as disclosed in the Environmental Reports described in
Schedule 9 attached hereto, to the best of such Contributor's knowledge, during
Contributor's ownership of the Property, (i) no Hazardous Materials (as defined
below) have been released into the environment, or discharged, placed or
disposed of at, on or under the Property by Contributors or by its agents or
employees; (ii) no underground storage tanks have been located on the Property
by Contributors or by its agents or employees; (iii) the Property has not been
used as a dump for waste material by such
-23-
Contributor or by its agents or employees during its ownership; and (iv) such
Contributor has not received any written notice from any Governmental Authority
or Tenant that the Property and its prior uses does not comply with and at all
times have complied with, any applicable governmental law, regulation or
requirement relating to environmental and occupational health and safety matters
and Hazardous Materials.
The term "Hazardous Materials" shall mean any substance, material,
waste, gas or particulate matter which is regulated by any local governmental
authority, the State of Illinois, or the United States Government, including,
but not limited to, any material or substance which is (i) defined as a
"hazardous waste," "hazardous substance," "extremely hazardous waste," or
"restricted hazardous waste" under any provision of Illinois law, (ii) so called
friable asbestos, (iii) polychlorinated biphenyl, (iv) radioactive material, (v)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. (S) 1251 et seq. (33 U.S.C. (S) 1317), (vi) defined as a
"hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. (S) 6901 et seq. (42 U.S.C. (S) 6903), or (vii) defined
as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
seq. (42 U.S.C. (S) 9601). The term "Environmental Laws" shall mean all
statutes specifically described in the foregoing sentence and all federal, state
and local environmental health and safety statutes, ordinances, codes, rules,
regulations, orders and decrees regulating, relating to or imposing liability or
standards concerning or in connection with Hazardous Materials in effect as of
the date of this Agreement.
Additionally, but not in lieu of Contributor's affirmative
undertakings set forth herein, Contributor agrees to indemnify, defend and hold
harmless Company and its grantees from and against any and all debts, liens,
claims, causes of action, administrative orders and notices, costs (including,
without limitation, response and/or remedial costs), personal injuries, losses,
damages, liabilities, demands, interest, fines, penalties and expenses,
including reasonable attorneys' fees and expenses, consultants' fees and
expenses, court costs and all other out-of-pocket expenses, suffered or incurred
by Company and its grantees as a result of any such representation which is in
any manner materially inaccurate or any such warranty which is in any manner
breached in any material respect.
(v) [OMITTED].
(w) To the best of such Contributor's knowledge and belief, such
Contributor is not in default with respect to any of its obligations under any
plan, agreement or trust, and such Contributor has filed or caused to be filed
all reports with respect to the foregoing required by, and is otherwise in
compliance with, the Employees Retirement
-24-
Income Security Act of 1974, as amended, and all rules and regulations
thereunder with respect thereto.
(x) Schedule 2 is a true, correct and complete list of the Business
Assets of the Xxxxx Entities, and to the best of Contributor's knowledge such
assets are owned by the Xxxxx Entities free and clear of all liens and
encumbrances.
Notwithstanding anything contained herein to the contrary, in the
event that the Company gains knowledge prior to the Closing that any
representation or warranty contained in this Agreement is untrue or inaccurate,
Company shall, within five (5) days after gaining such knowledge but in any
event prior to the Closing Date, provide Contributor with written notice of such
and in the event that the Company closes on the acquisition of the Property,
then the Company irrevocably waives any right to claim any damages against
Contributor for the breach of such representation or warranty and Contributor
shall have no liability to the Company resulting therefrom.
EXCEPT AS OTHERWISE SPECIFICALLY AND EXPLICITLY SET FORTH IN THIS
AGREEMENT OR IN ANY DOCUMENT WHICH MAY BE EXECUTED BY CONTRIBUTOR AND DELIVERED
TO THE COMPANY AT CLOSING: (1) THE CONTRIBUTION OF THE PROPERTY AS PROVIDED FOR
HEREIN IS MADE TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW ON AN "AS IS-
WHERE IS" CONDITION AND BASIS WITH ALL FAULTS, (2) THE COMPANY ACKNOWLEDGES THAT
CONTRIBUTOR HAS NOT MADE ANY REPRESENTATIONS TO THE COMPANY WITH RESPECT TO THE
PROPERTY WHICH ARE NOT EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, WITH REGARD TO THE HABITABILITY, MERCHANTABILITY, PROFITABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES OF COMPANY
13.01 Representations and Warranties of Company. To induce Contributor to
execute, deliver and perform this Agreement, Company hereby represents and
warrants to Contributor on and as of the date hereof and on and as of the
Closing Date to the extent same are true, and to the extent not true, then
describing the circumstances or manner in which such representations and
warranties are not true. For purposes of this Agreement, the term "knowledge"
shall mean the actual knowledge of Xxxxxxx Xxxxx, Xxxxxxx X. Xxxxxxx and Xxxxxxx
Xxxxxxxxx. (The Company and the Partnership hereby agree to give Contributors
written notice of any information which makes any representation or warranty
untrue within five (5) business days of obtaining such information (and
disclosure of such information shall not be deemed a breach of a representation
or warranty by the Company
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and/or the Partnership or default by the Company and/or the Partnership under
this Agreement in the absence of willful or intentional acts or omissions or
gross negligence by the Company and/or the Partnership which resulted in such
breach) as follows:
(a) All representations and warranties of Company appearing in other
Sections of this Agreement are true and correct.
(b) Company is a corporation duly organized and in good standing
under the laws of the State of Illinois, and is duly qualified to do business in
and is in good standing under the laws of the State of Illinois.
(c) Company has full capacity, right, power and authority to execute,
deliver and perform this Agreement and all documents to be executed by Company
pursuant hereto, and all required action and approvals therefor have been duly
taken and claimed. The individuals signing this Agreement and all other
documents its executed or to be executed pursuant hereto on behalf of Company
are and shall be duly authorized to sign the same on Company's behalf and to
bind Company thereto. This Agreement and all documents to be executed pursuant
hereto by Company are and shall be binding upon and enforceable against Company
in accordance with their respective terms.
ARTICLE 14
CONDITIONS PRECEDENT AND TERMINATION
14.01 Consent Regarding Mortgage Prepayment Amounts. The obligation
of the parties to close the transaction contemplated is subject to receiving on
or before the Closing Date, with respect to the Mortgages described on Schedule
3 attached hereto which are noted on Schedule 3 as requiring the consent of the
holder of such Mortgage to prepayment, the consent of such mortgage holders to
the prepayment.
14.02 Notice to Tenants. The obligation of the parties to close the
transaction contemplated is subject to the Company receiving from Contributors
on or before the Closing Date, with respect to the tenants described on Exhibit
L attached hereto and made a part hereof, evidence that such tenants have been
notified of the transaction described in this Agreement regarding their
respective right of first refusal and/or option to purchase reasonably
acceptable to the Company and Partnership.
14.03 Truth of Representations and Warranties and Performance of
Obligations. The obligation of a party (the "Closing Party") to close the
transaction contemplated hereby is, at the Closing Party's option, and except as
otherwise provided herein, subject to all representations and warranties of the
other party (the "Other Party") contained in this Agreement being true and
correct in all material respects at and as of the Closing Date (or
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to the extent not true, same shall be disclosed to the Closing Party, and the
Closing Party shall have agreed in writing to such matters within five (5)
business days after receipt of such notice, and elects to nevertheless close).
Upon failure of any condition precedent as set forth in this Section 14.03 a
Closing Party may, by written notice to the Other Party and failure by such
Other Party to cure same within 10 days after such notice, elect at any time
thereafter to terminate this Agreement by written notice to such Other Party in
which event this Agreement shall be null and void, and except as otherwise
provided in this Agreement, the parties shall have no further obligations to the
other hereunder.
14.04 Estoppel Letters. The obligation of Company to close the
transaction contemplated by this Agreement is subject to Company's receipt of:
an estoppel letter addressed to Company dated after the date hereof, which
estoppel letters shall be in the form of Schedule 7 attached hereto or other
form satisfactory to Company from the tenants ("Major Tenants") listed on
Schedule 7-A attached hereto and made a part hereof and tenants (including Major
Tenants) occupying seventy percent (70%) of the aggregate building square
footage contained in the Property. Contributor's failure to obtain such
estoppel letters shall not be a default of Contributor under this Agreement. In
the event Company does not receive estoppel certificates from tenants occupying
seventy percent (70%) of the aggregate building square footage contained in the
Property (including Major Tenants who shall be considered as part of such
seventy percent (70%)) Company may terminate this Agreement, in which event
this Agreement shall terminate, and thereafter neither party shall have any
obligations to the other except as otherwise provided in this Agreement. In the
event Company receives estoppel certificates from at least seventy percent of
the tenants (which shall include the Major Tenants), Contributors shall either
(i) cause Xxxxxxx X. Xxxxx to deliver an estoppel certificate from all tenants
in the form attached as Schedule 7 for all such tenants which have not delivered
such estoppel certificates or (ii) withdraw any parcel of the Property where
there are missing estoppel certificates from this Agreement, whereupon the
Contribution Price shall be reduced by the amount allocated to such parcel on
Schedule 10, and the parties shall make any other adjustments as agreed upon.
At such time, if ever, that any tenant for whom Xxxxxxx X. Xxxxx delivered an
estoppel, delivers to Company a tenant estoppel reasonably acceptable to
Company, such tenant's estoppel letter shall be deemed to have replaced Xxxxxxx
X. Xxxxx'x estoppel letter as to such tenant and the applicable Xxxxx estoppel
certificates shall be returned to Xxxxxxx X. Xxxxx.
14.05 Performance of Company's Obligations. The obligation of
Contributors to close the transaction contemplated hereby is, at Contributors'
option, subject to all obligations of Company which were to have been performed
on or before the Closing Date having been timely and duly performed. If any
condition precedent to closing of Contributors as set forth in this Agreement
has not been fulfilled and satisfied on or before the Closing Date, Contributors
may, by notice to Company, elect at any time thereafter to terminate this
Agreement, provided that Contributors are not in default under this
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Agreement, and if such termination is due to Company's fault Contributors shall
be entitled to receive the sum of $1,000,000 as full and complete liquidated
damages (and not as a penalty or forfeiture), in lieu of any and all other legal
and equitable rights which Contributor may have hereunder, and all other funds
and documents theretofore delivered hereunder or deposited in escrow by either
party shall be forthwith returned to such party. In addition, Company shall
deliver to Contributors upon request copies of any environmental reports and
physical inspection reports relating to the Property.
14.06 Performance of Contributors' Obligations. The obligation of
the Company to close the transaction contemplated hereby is, at the Company's
option, subject to all obligations of Contributors which were to have been
performed on or before the Closing Date having been timely and duly performed.
If any condition precedent to Closing of the Company set forth in this Agreement
has not been fulfilled and satisfied on or before the Closing Date, the Company
may, by notice to Contributors, elect as Company's sole and exclusive remedy
either to: (i) terminate this Agreement, provided that the Company is not
itself in default under this Agreement, and if such termination is due to
Contributors' willful or intentional default (including, but not limited to,
Contributor's decision (or change of mind) such that Contributor decides not to
contribute (or be a general partner of the Partnership) and not attributable to
an innocent misstatement, misrepresentation or breach of warranty or covenant,
Contributors shall pay the Company the sum of $1,000,000.00 as full and complete
liquidated damages (and not as a penalty or a forfeiture); or (ii) except as
otherwise provided in this Agreement, Company may file an action for specific
performance of this Agreement and compel Contributor to comply with
Contributor's obligations under this Agreement.
14.07 IPO Closing. The obligation of the parties to close the
transaction contemplated hereby is subject to the condition that the IPO has
been consummated.
14.08 Put Agreement. If prior to Closing the Securities and Exchange
Commission ("SEC") has informed the Company, the Partnership and/or the REIT
that a Put Agreement in the form of Exhibit L attached hereto may not be given
in connection with the IPO, the Company shall immediately give written notice
thereof to Contributors together with the reasons as given by the SEC, and a
proposed draft of a Put Agreement, if any, which the SEC will approve. Within
two (2) business days after receipt of such written notice, Contributors may, by
written notice to Company, elect as Contributors' sole and exclusive remedy to
terminate this Agreement. In the event such a written notice from the SEC is
received, then in no event shall the Closing occur prior to the expiration of
such two (2) business day period. In the event Contributors fail to elect to
terminate this Agreement within said two (2) business day period, Contributors
shall be deemed to have elected to proceed with the transaction and to accept
the form of Put Agreement, if any, which is allowed by the SEC, and the Closing
shall occur on the first (1st) business day following the expiration of such two
(2) business day period.
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ARTICLE 15
CLOSING
15.01 Time and Place. The transaction contemplated hereby shall close
at 9:00 A.M. in Chicago, Illinois, at the offices of Winston & Xxxxxx on the
Closing Date unless an escrow is required by underwriters, in which case Closing
shall take place at the offices of the Escrowee, or on such other date, time and
place as the parties may mutually agree.
15.02 Contributors' Deliveries. On the Closing Date, Contributors
shall deposit in the escrow for each of the properties comprising the Real
Estate the following:
(i) The Deeds for that portion of the Real Property described on
Exhibit A;
(ii) Assignment of the Contracts, Leases, Intangible Personal Property
and Licenses executed by the applicable Contributor, as provided in Section
2.01(b);
(iii) Separate xxxx of sale executed by the applicable Contributor
and the Xxxxx Entities, as the case may be, as provided in Section 2.01(c) and
(d), respectively;
(iv) Agreement regarding Vacant Space executed by Xxxxxxx X. Xxxxx
relating to the 0000 X. Xxxx Xxxx, Xxxxxxx, Xxxxxxxx property in the form of
Exhibit N;
(v) Original executed counterparts of all Contracts, Leases and
Licenses assigned to Company pursuant to Section 15.02(ii) above (or, where
originals are unavailable, copies duly certified by the Contributor which is a
party thereto as being true, correct and complete copies of the originals),
together with an Assignment of same;
(vi) Certificate dated as of the Closing Date executed by each
Contributor and the Xxxxx Entities confirming that the representations and
warranties of such entity are true and correct as of the Closing Date, except as
modified by prior written notice to Company;
(vii) An opinion of counsel regarding authority and enforceability
of this Agreement and all Closing documents reasonably acceptable to Company;
(viii) An ALTA Statement, GAP Undertaking, Broker's Affidavit and
Manager's Affidavit in the form required by the Title Insurer;
(ix) [Omitted]
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(x) Certificate(s) of occupancy issued by the appropriate
governmental authorities authorizing use of each property comprising the Real
Property as the same is presently used to the extent same are in the
Contributors' possession;
(xi) An executed Affidavit in the form attached hereto as Exhibit G
or a qualifying statement from the U.S. Treasury Department that the transaction
is exempt from the withholding tax requirement imposed by Section 1445 of the
Internal Revenue Code and the rules and regulations promulgated thereunder
("Section 1445"). In the event that Contributors fail to deliver either the
Affidavit or the qualifying statement as aforesaid, Contributors agree that
Company may, at closing, deduct and withhold from the proceeds that are due to
Contributor the amount necessary to comply with the withholding tax requirement
imposed by Section 1445. Company shall deposit the amount so withheld in escrow
with the Escrowee pursuant to terms and conditions acceptable to Contributors,
Company and the Escrowee, but in any event, complying with Section 1445;
(xii) [OMITTED];
(xiii) Letters to tenants of the Property in the form of Schedule 8
attached hereto;
(xiv) A payoff letter from the holders of the Mortgages confirming
its agreement to accept prepayment of loans at any time prior to the Closing
Date for a prepayment fee not to exceed $1,620,000 (Company shall not be
responsible to pay any default interest or costs).
(xv) Such other documents, instruments, certifications and
confirmations as may be reasonably required and designated by Company to fully
effect and consummate the transactions contemplated hereby.
15.03 Company's Deliveries. On the Closing Date, Company shall deliver
the following to Contributors:
(i) An ALTA Statement, GAP Undertaking, Affidavit that no property
managers are employed in connection with the Property, and Broker's Affidavit
in form required by the Title Insurer;
(ii) The Contribution Price as provided in Article 3 hereof which
shall, to the extent appropriate, be delivered to the Xxxxx General Partner
Entity;
(iii) Tax Indemnification Agreement in the form of Exhibit I
attached hereto and made a part hereof;
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(iv) Assumption Agreement relating to Leases and Contracts;
(v) Opinion of Counsel regarding authority and enforceability of
this Agreement, the Tax Indemnification Agreement, the other Closing Documents
and containing the same opinions as given to the underwriters of the IPO in form
reasonably satisfactory to Contributor;
(vi) A supplement to this Agreement and a supplement to the Vacant
Land Agreement by which the Company, the Partnership and the REIT supplement the
representations and warranties made by each such party, respectively, to include
all of the representations and warranties which each such party made to the
underwriters of the IPO in the underwriting agreement which will be entered into
in connection with the IPO;
(vii) A Put Agreement in the form of Exhibit L attached hereto.
(viii) Such other documents, instruments, certifications and
confirmations as may be reasonably required and designated by Contributor to
fully effect and consummate the transaction contemplated hereby.
15.04 Concurrent Deliveries. Contributors and Company shall jointly
deposit (or cause to be deposited) in the escrow or deliver to each other at
closing: (i) an agreed proration statement, (ii) certificates complying with the
provisions of state, county and local law applicable to the determination of
transfer taxes; (iii) consulting agreement and employment agreement in the form
of Exhibit J and Exhibit J-1, respectively, attached hereto and made a part
hereof for Xxxxxxx X. Xxxxx and S. Xxxxx Xxxxx respectively; and (iv) the
Partnership Agreement in the form of Exhibit O attached hereto and made a part
hereof.
15.05 Closing Documents; Form, Execution and Substance. All closing
documents to be furnished by any party pursuant hereto shall be in form,
execution and substance reasonably satisfactory to the other party and its
counsel.
15.06 New York Style Closing. At the request of the Company or the
Contributors, the transaction shall be closed by means of a so-called New York
Style Closing, with the concurrent delivery of the documents of title, transfer
of interests, delivery of the title policy or marked up Title Commitment
described in Section 5.01 and the payment of the Contribution Price. The
Contributors shall provide any undertaking (the "Gap Undertaking") to the Title
Company necessary for the New York Style Closing to occur. The cost of New York
style closing shall be paid by the Company unless the transaction fails to
close, in which event Contributors and Company shall each pay fifty percent
(50%) of the charges of the Title Company for such New York Style Closing.
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15.07 Concurrent Transactions. All documents or other deliveries required
to be made by Company or Contributors at Closing, and all transactions required
to be consummated concurrently with Closing, shall be deemed to have been
delivered and to have been consummated simultaneously with all other
transactions and all other deliveries, and no delivery shall be deemed to have
been made, and no transaction shall be deemed to have been consummated, until
all deliveries required by Company, and Contributors shall have been made, and
all concurrent or other transactions shall have been consummated.
15.08 Leasing Commissions, Management Fees and Employees. On the
Closing Date, Contributors shall terminate (effective 30 days after Closing) and
satisfy all obligations to all employees employed by Contributors and the Xxxxx
Entities in the operation of the Property (and whom Company has not retained)
through the effective termination date for such employees, and provide Company
with evidence thereof satisfactory to Company on the Closing Date. Partnership
agrees that it will hire the employees identified on Exhibit H commencing as of
the day following the Closing at the salaries provided on Exhibit H attached
hereto. Contributors agree that all obligations with respect to the termination
of all such employees of Contributors and the Xxxxx Entities, including
termination benefits, earned prior to the effective termination date of such
employees, and unfunded contributions or termination obligations with respect to
the plans, agreements and trusts described in this Agreement shall be the sole
responsibility and expense of Contributors and/or Xxxxx Entities, as the case
may be, provided that Contributors and/or the Xxxxx Entities, as the case may
be, shall not be responsible for any such obligations attributable to the
employment of such employees by Company or its agents subsequent to the Closing
Date. Contributors represent and warrant that no unpaid leasing fee or
commission which is due and payable prior to Closing and which remains unpaid
prior to Closing to any party in connection with any Lease or for extension or
renewal of such Lease for any payment for services, commissions or fees in
connection with the Property performed or incurred prior to the Closing Date,
except as set forth in the Leases or Contracts delivered.
15.09 Other Agreements. At Closing, Contributors and Partnership shall
execute the Vacant Land Agreement in the form of Exhibit K attached hereto.
ARTICLE 16
INDEMNIFICATION
16.01 Contributors' Indemnity. Contributors hereby agree to indemnify,
defend and hold harmless Company and its officers, shareholders, directors,
employees and agents against any and all losses, liabilities, fines and
penalties and damages, or actions or claims in respect thereof, except for
liabilities specifically assumed by the Company pursuant to
-32-
the terms of this Agreement (including, without limitation, amounts paid in
settlement and reasonable cost of investigation, reasonable attorneys' fees and
other legal expenses) resulting from claims (whether or not ultimately
successful) to which the Company or any of its officers, shareholders,
directors, employees and agents may become subject or which the Company or any
of its officers, shareholders, directors, employees and agents may suffer or
incur either directly or indirectly, insofar as such losses, liabilities or
damages (or actions or claims in respect thereto) arising out of, are with
respect to, or are based upon:
(i) the inaccuracy in any material respect of any representation or
warranty, or a breach of any covenant of any Contributor contained herein;
(ii) any obligations, liabilities or charges of the Contributors not
expressly assumed by the Partnership except to the extent that Partnership
receives a credit therefor on the closing statement provided, however, that the
foregoing shall not be construed as an environmental indemnity, it being
intended by the parties that the Contributors' obligations regarding Hazardous
Materials are as set forth in Section 12.01(u) hereof;
(iii) any misrepresentation in, or omission of a material fact
from, any certificate or instrument of transfer or conveyance to be furnished to
the Company by or on behalf of the Contributors under this Agreement;
(iv) [Omitted];
(v) any claim by any person for any leasing fee or commission due
and payable prior to Closing in connection with any Lease;
(vi) [Omitted]; or
(vii) any claim by any employee employed by Contributors in the
operation of the Property whose employment was terminated at closing, or whose
claim arose prior to the Closing Date.
16.02 Company's Indemnity. Company hereby agrees to indemnify, defend and
hold harmless Contributors and their officers, shareholders, directors,
partners, employees and agents against any and all losses, liabilities, fines
and penalties and damages, or actions or claims with respect thereto, except for
liabilities specifically assumed by the Contributors pursuant to the terms of
this Agreement (including, without limitation, amounts paid in settlement and
reasonable cost of investigation, reasonable attorneys' fees and other legal
expenses) resulting from claims (whether or not ultimately successful) to which
the Contributors or any of their officers, shareholders, directors, partners,
employees and agents may become subject or which the Contributors or any of
their officers, directors,
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partners, employees and agents may suffer or incur either directly or
indirectly, insofar as such losses, liabilities or damages (or actions or claims
in respect thereto) arising out of, are with respect to, or are based upon:
(i) the inaccuracy in any material respect of any representation or
warranty, or a breach of any covenant of Company contained herein;
(ii) any obligations, liabilities or charges of Contributors that
are expressly assumed by Company or which Company receives a credit therefor on
the Closing Statement;
(iii) any misrepresentation in, or omission of a material fact
from, any certificate or instrument of transfer or conveyance to be furnished to
Contributors by or on behalf of Company under this Agreement;
(iv) [Omitted]; or
(v) any damage done to the Property, any property of the tenants
under the Leases or personal injury arising out of the Company's investigation
of the Property.
(vi) any damages or liability incurred by Contributors and/or their
officers, directors, partners, employees and agents as a result of the
Partnership's failure to pay off the Mortgages described on Schedule 3-A so long
as the lender which holds such Mortgages has issued pay off letters for such
Mortgages and has agreed to accept pay off of such Mortgages pursuant to such
payoff letters.
ARTICLE 17
NOTICES
17.01 Notices. Any notice, request, demand, instruction or other document
to be given or served hereunder or under any document or instrument executed
pursuant hereto shall be in writing and shall be delivered personally or sent by
United States registered or certified mail, return receipt requested, postage
prepaid or by overnight express courier, postage prepaid and addressed to the
parties at their respective addresses set forth below, and the same shall be
effective upon receipt if delivered personally, on the next business day if
delivered by overnight courier, or two business days after deposit in the mails
if mailed by certified or registered mail. A party may change its address or
addressees for receipt of notices by service of a notice of such change in
accordance herewith.
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If to Company, the
Partnership and/or
the REIT to: c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx
With a copy to: c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
With a copy to: Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
and Xxxxxxx X. Xxxxx, Esq.
If to Contributors, to: c/o The Xxxxx Group, Ltd.
(or to any one or Chicago Metropolitan Headquarters
more Contributors) 0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, President
With a copy to: Xxxx, Xxxx, Xxxxx
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
and Xxxxxxx X. Xxxxx, Esq.
ARTICLE 18
MISCELLANEOUS
18.01 Entire Agreement, Amendments and Waivers. This Agreement and the
Exhibits and Schedules attached hereto contain the entire agreement and
understanding of the parties in respect to the subject matter hereof, and the
same may not be amended,
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modified or discharged nor may any of its terms be waived except by an
instrument in writing signed by both parties.
18.02 Further Assurances. The parties each agree to do, execute,
acknowledge and deliver all such further acts, instruments and assurances and to
take all such further action before or after the closing at no cost to
Contributor as shall be necessary or desirable to fully carry out this Agreement
and to fully consummate and effect the transactions contemplated hereby.
18.03 Survival and Benefit. Except as otherwise provided herein, all
representations, warranties, agreements, obligations and indemnities of the
parties (including, but not limited to, Sections 3, 11, 12, 13, 14 and 16 of
this Agreement) shall, notwithstanding any investigation made by any party
hereto, survive Closing for a period of twelve (12) months and all agreements,
obligations and indemnities of the parties shall, notwithstanding any
investigation made by any party hereto, survive Closing for a period of twelve
(12) months and the same shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties.
18.04 No Third Party Benefits. This Agreement is for the sole and exclusive
benefit of the parties hereto and their respective successors and assigns, and
no third party is intended to or shall have any rights hereunder.
18.05 Income Tax Withholding. Prior to Closing, Contributors shall deliver
to Company evidence reasonably satisfactory to Company (which evidence may
include the indemnity of Xxxxxxx X. Xxxxx) that the sale of the Property to
Company hereunder is not subject to, and does not subject Company to liability
under, Section 902(d) ("Section 902(d)") of the Illinois Income Tax Act (the
"Act"). If said evidence is not so delivered to Company, as aforesaid, then
Contributors shall, or Company may, notify the Illinois Department of Revenue
("Department") of the intended sale and request the Department to make a
determination as to whether the Contributors have an assessed, but unpaid,
amount of tax, penalties, or interest under the Act. Contributors agree that
Company may, at closing, deduct and withhold from the proceeds that are due
Contributors the amount necessary to comply with the withholding requirements
imposed by Section 902(d). Company shall deposit the amount so withheld in
escrow with the Escrowee pursuant to terms and conditions acceptable to
Contributors and Company, but in any event, complying with Section 902(d).
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18.06 Interpretation.
(a) The headings and captions herein are inserted for convenient
reference only and the same shall not limit or construe the paragraphs or
sections to which they apply or otherwise affect the interpretation hereof.
(b) Words importing persons shall include firms, associations,
partnerships (including limited partnerships), trusts, corporations and other
legal entities, including public bodies, as well as natural persons.
(c) The terms "include," "including" and similar terms shall be
construed as if followed by the phrase "without being limited to."
(d) This Agreement and any document or instrument executed pursuant
hereto may be executed in any number of counterparts each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
(e) Whenever under the terms of this Agreement the time for
performance of a covenant or condition falls upon a Saturday, Sunday or holiday,
such time for performance shall be extended to the next business day. Otherwise
all references herein to "days" shall mean calendar days.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.
(g) Whenever under the terms of this Agreement the consent of a party
is required to be given or obtained, such consent shall not be unreasonably
withheld, conditioned or delayed.
(h) Time is of the essence of this Agreement.
18.07 Company's Investigation and Inspections. Except as otherwise provided
herein, any investigation or inspection conducted by Company, or any agent or
representative of Company, pursuant to this Agreement, in order to verify
independently Contributors' satisfaction of any conditions precedent to
Company's obligations hereunder or to determine whether Contributors' warranties
are true and accurate, shall not affect or constitute a waiver by Company on any
of Contributors' obligations hereunder or Company's reliance thereon. Company
agrees that to the extent it discovers, prior to Closing, information which
renders any of Contributors' representations or warranties untrue, Company will
notify Contributors of such information in writing within five (5) business days
of gaining knowledge and in all events prior to the Closing Date.
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18.08 Assignment. Prior to the Closing Date, the Company shall assign all
of its right, title and interest in and to this Agreement to the Partnership in
addition to the Partnership's present obligations under the covenants,
representations and warranties contained in Section 3.04 hereof. Other than the
foregoing assignments to the Partnership, the Company may not assign this
Agreement and its right, title and interest thereunder. Upon the assignment of
this Agreement to Partnership, the Company will not be released from its
obligations hereunder to the Contributors, which obligations, indemnities,
representations and warranties shall remain in favor of Contributors.
Notwithstanding anything contained herein to the contrary, any and all
references in this Agreement to the Property being contributed and/or conveyed
to the Company shall mean the Contributors contributing and/or conveying to the
Partnership simultaneously with the IPO on the Closing Date. In addition,
Contributors shall have no obligation to contribute and/or convey the Property
to the Company, all of Contributors' obligations hereunder being to contribute
and/or convey the Property to the Partnership.
18.09 Confidentiality. Partnership and Contributors covenant and agree that
all "Confidential Information" (as hereinafter defined) concerning the terms of
this Agreement, as well as the identity of the parties to the transaction
contemplated hereby and all information concerning the Real Property (including
without limitation, all Confidential Information obtained by the Company from
Contributors prior to Closing) shall be kept in strictest confidence by the
parties prior to the Closing. In the event the transaction does not close, the
Company shall return to Contributors all Confidential Information obtained by
Company from Contributor and shall not disclose any Confidential Information
previously obtained.
"Confidential Information" means any information identified in writing as
such by the party as "Confidential subject to the Permitted Disclosures as
hereinafter defined."
After the occurrence of the Closing, the Company or the Partnership and the
Contributors shall make a joint written disclosure concerning the transaction.
Notwithstanding the foregoing, nothing contained herein shall be construed so as
to prohibit the Company, the Partnership or the REIT from making (a) disclosures
to officers, employees, agents, consultants, advisors, attorneys and any other
person or entity who needs to know in order to assist the Partnership in its
acquisition of the Real Property and the underwriters for the securities of the
REIT in connection with the IPO and their counsel and consultants, (b) any
disclosure required by law, including any such disclosure required by any
federal, state or local governmental agency or court of competent jurisdiction,
or pursuant to SEC reporting and registration requirements, or (c) any
disclosure which is reasonably necessary to protect any such party's interest in
any action, suit or proceeding brought by or against such party and relating to
the Real Property or the subject matter of this Agreement (collectively, the
"Permitted Disclosures").
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18.10 Exhibits and Schedules. Contributors shall deliver Exhibits A, X-0,
X-0, X-0, B, C, D, E and F, and Schedules 1, 1-A, 2, 2-A, 3, 5, 9 and 10 to
Company within seven (7) days after the date hereof, and Company shall deliver
Exhibits H, J, J-1, M, N and O and Schedule 8 to Contributors within seven (7)
days after the date hereof. Xxxxxxx X. Xxxxx (and his counsel) on behalf of
Contributors and the Company (and its counsel) shall review and comment on the
other party's Exhibits and Schedules within seven (7) days following receipt of
such Exhibits and Schedules. The parties shall have seven (7) days thereafter to
agree upon all such Exhibits and Schedules. In the event any one or more of such
Exhibits and/or Schedules are not agreed upon in such seven (7) day period,
either party may upon written notice to the other party terminate this
Agreement. Upon approval by a party, all of the representations and warranties
of a party with respect to such Exhibits and Schedules shall be applicable
thereto as if attached hereto. The delivery of Exhibits and Schedules after the
execution and delivery of this Agreement shall not in any manner affect the
validity of this Agreement.
18.11 Limitation on Liability. Notwithstanding anything to the contrary set
forth in this Agreement, (a) prior to Closing, a party ("Non-Defaulting Party")
shall look solely to the assets of the Land Trusts up to $1,000,000.00 if the
Contributors are the defaulting parties, or the assets of the Company, the
Partnership, and the REIT if the Company, the REIT and/or the Partnerships is
the defaulting party for satisfaction of any monetary claims against the
defaulting party; and (b) after Closing, any monetary claims against the
defaulting party resulting from a breach of such party's representations,
warranties and indemnifications shall be satisfied solely from the common units
in the Partnership of the defaulting party up to an aggregate amount of ten
percent (10%) of such defaulting party's common units in the Partnership. In no
case shall any claim against a defaulting party be asserted against its
beneficiaries, partners, members, shareholders or officers, as the case may be.
[SIGNATURE PAGE FOLLOWS ON NEXT PAGE]
-39-
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
Contributor and Company on the respective dates set forth beneath each of their
signatures and is intended to be effective as of the latest such date.
CONTRIBUTORS:
/s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx [as the beneficial
owner of Property Nos. 1, 24, 25]
MADISON GROUP
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 2]
MADISON GROUP 90
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 3]
MADISON GROUP 200
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 4]
NARCO 350 ASSOCIATES
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 5]
-40-
NARCO 4300 ASSOCIATES
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 6]
NARCO ELMHURST CENTER
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property Nos. 7,
8, 9, 10 and 11]
NARCO XXXX AVENUE ASSOCIATES
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 12]
NARCO-HILLSIDE CENTER FOR INDUSTRY
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property Nos. 13
and 14]
NARCO MANNHEIM I
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 15]
-41-
Schedule 1
Permitted Exceptions
--------------------
1. Taxes and assessments becoming a lien in the calendar year in which the
Closing occurs but which are not, as of the date of Closing, due and
payable.
2. Existing farm leases and any new farm leases entered into hereafter in
accordance with this Agreement.
3. Matters shown on the survey which do not (i) interfere with the improvements
or use of the Property permitted under present zoning laws, (ii) violate
zoning or building line restrictions or (iii) constitute an encroachment.
4. Title exceptions which (i) would not be violated or prohibited by the
improvements or use of the Property permitted under present zoning laws,
(ii) do not contain reverter or forfeiture provisions or (iii) do not limit
the marketability or insurability of title to the Property.
RIDER ATTACHED TO AND MADE A PART OF REAL ESTATE SALE
CONTRACT ("CONTRACT") DATED OCTOBER 20, 1997, BY AND AMONG
THE PRIME GROUP, INC. AN ILLINOIS CORPORATION ("COMPANY"),
PRIME GROUP REALTY TRUST, A MARYLAND REAL ESTATE
INVESTMENT TRUST ("REIT"), AND
PRIME GROUP REALTY, L. P., A DELAWARE LIMITED PARTNERSHIP
("PARTNERSHIP")
XXXXX STREAM INDUSTRIAL PARK JOINT VENTURE, NARCO PROPERTIES AND NARCO
DEVELOPMENT CO. (COLLECTIVELY, REFERRED TO AS
"CONTRIBUTORS" AND INDIVIDUALLY AS A "CONTRIBUTOR")
WITH RESPECT TO THE PROPERTY LEGALLY DESCRIBED ON EXHIBIT A
ATTACHED HERETO AND MADE A PART HEREOF ("PROPERTY")
R-1. Conflict. In the event of a conflict between the terms of this
typewritten Rider and the printed form contract to which this Rider is
affixed, the terms of this Rider shall be controlling. As used herein,
the term "Contract Date" shall mean and refer to the date on which a
counterpart of this Contract, executed by Contributors, is received by
Partnership.
R-2. Contribution Price. The contribution price (the "Contribution Price") to
be paid by Partnership to Contributors for the Property shall be equal to
the product of: (a) Three and 00/100 Dollars ($3.00), multiplied by (b)
the number equal to the number of gross square feet of such portion of
the Property, minus the number square feet of such portion of the
Property consisting of streets and/or roads; provided, however, the
number of acres acquired by Partnership at any time shall be not less
than two (2) acres and Partnership shall acquire not less than twenty
(20) acres on or before the first anniversary of the date hereof, and
shall acquire not less than an additional twenty (20) acres on or before
each succeeding anniversary of the date hereof through and including the
fifth anniversary of the date hereof. The portion of the Property
selected by the Partnership for each closing hereunder shall consist of
such portion of a parcel or parcels which shall leave any remaining
portion of a parcel commercially useful for development. The Property (or
portion thereof selected by the Partnership) shall be contributed to the
Partnership in exchange for general partner common units equal in value
to the amount calculated by dividing the Contribution Price by the
average daily closing price for the REIT common stock for the ten trading
days immediately prior to the Closing Date for such portion of the
Property.
1
R-3. Survey and Title Commitment. (a) Not less than five (5) days prior to the
Closing Date (as defined in (P)R-5 hereinafter), Partnership shall obtain
an updated version of the Title Commitment previously issued to
Partnership, dated no earlier than thirty (30) days prior to the Closing
Date, in the amount of the Contribution Price, containing no exceptions
to title other than exceptions which are set forth on Schedule 1 attached
hereto and made a part hereof. The Partnership shall also obtain, not
less than five (5) days prior to the Closing Date, a survey updated to a
date no earlier than thirty (30) days prior to the Closing Date (or
obtain from Contributors an affidavit of no change if there have been no
changes since the date of the Survey delivered to Partnership). The
Partnership shall pay for the cost of the title commitment and survey at
Closing.
(b) If the Title Commitment discloses claims, liens, exceptions,
conditions or other items (a "Defect") with respect to a specific parcel
of the Real Property (the "Affected Parcel") which are not Permitted
Exceptions and which are unacceptable to the Company as inconsistent with
the intended use of the Affected Parcel after Closing, the Company shall
give the Contributor of the Affected Parcel (the "Affected Contributor")
written notice thereof within ten days after receipt of such title
commitment. Following the giving of such notice, the removal, cure or
insuring over of such a Defect shall be a condition precedent to the
Company's obligation to accept a contribution of the Affected Parcel. If
the Affected Contributors fail to remove, cure or cause the Title Insurer
to insure over the Defect in a manner reasonably satisfactory to the
Company within twenty (20) days after delivery of the Company's notice of
the Defect to the Affected Contributor, then the Company shall, within
five (5) days thereafter, elect by written notice to be received by such
Affected Contributor on or before such fifth (5th) day, to
(i) terminate this Agreement with respect to the Affected Parcel, in
which case the Affected Parcel shall no longer be part of the Real
Property which is to be contributed to the Partnership and the
parties shall have no further rights or obligations hereunder with
respect to such Affected Parcel except for those rights and
obligations which expressly survive any such termination, or
(ii) proceed with the transaction with respect to such Affected
Parcel pursuant to the remaining terms and conditions of this
Agreement, in which event the Company may, prior to Closing, cure,
satisfy or insure over any such Defect which can be cured by the
expenditure of money and reduce the general partnership interests
allocated to the Xxxxx general partner by the amount so expended,
provided that the total amount of such reductions shall not exceed
(1) One
2
Thousand Dollars ($1,000.00) in the aggregate on title endorsements,
attorneys' fees and expenses and other out-of-pocket costs for
clearance purposes with respect to all parcels comprising the Real
Property other than for the Defects enumerated in clause (2)
immediately following or (ii) Ten Thousand Dollars ($10,000.00) per
acre, to remove, bond over or insure over any judgments against all
Contributors or Land Trusts or mechanics' liens (which do not result
from acts or omissions on the part of Company or the Partnership)
which have attached to and become a lien against any of the parcels
of the Real Property, except that there shall be no such limitation
with regard to clearance of liens and encumbrances voluntarily and
intentionally recorded after the date of the Title Commitments
against any of the parcels constituting the Real Property by or at
the direction of any of the Contributors.
If the Company fails to give the Affected Contributor timely notice of
its election following the Affected Contributor's failure to cure, remove
or insure over a Defect in a timely manner, the Company shall be deemed
to have elected the option contained in subparagraph (b) above. Company
shall have the right at any time to waive any objections that it may have
made and, thereby, to preserve this Agreement in full force and effect.
(c) At Closing, Contributors shall deliver to Partnership an Affidavit
of Title in customary form covering the Closing Date and showing title in
such Contributors subject only to the Permitted Exceptions.
R-4. Investigations. From time to time prior to the Closing Date, the
Partnership shall have the right to conduct any tests and inspections of
the Property which are reasonably desired by the Partnership, including
environmental testing, and to conduct any studies reasonably desired by
Partnership relative to the feasibility of the proposed purchase and
development of the Property and/or relative to compliance with all
applicable requirements and conditions relative to the purchase,
ownership and development of the Property (such tests, inspections and
studies are collectively referred to as "Investigations"), provided that
Partnership shall deliver to Contributors at least twenty-four (24) hours
advance notice of each entry on the Property, with a description of the
proposed activity, which notice can be verbal, but Partnership agrees to
endeavor to give as much advance notice of each entry as is possible,
with the intent that, if possible, Partnership will deliver such notice
to Contributors in writing at least three (3) days prior to each entry.
Such Investigations must be performed at no cost or expense to
Contributors and with no material change with respect to the condition of
the
3
Property which could adversely affect the marketability or value thereof.
If any such change occurs, Partnership shall be responsible therefor and
shall immediately advise Contributors of same. Partnership shall promptly
take any and all reasonable remedial measures directed by Contributors,
at Partnership's sole risk and expense, and if Partnership fails to
remedy any such change, Contributors shall have the right, but not the
duty, to arrange for such remedial measures at the sole risk and expense
of Partnership and all amounts paid by Contributors shall be reimbursed
by the Partnership within 5 days after written demand from Contributors.
Partnership shall indemnify, defend and hold Contributors and their
officers, shareholders, directors, partners, employees and agents
harmless against any liability, claim, action, loss, damage, cost or
expense, including without limitation, attorney's fees and expenses,
arising in connection with Partnership's investigation or the presence of
Partnership's representatives on the Property (including agents and
consultants for environmental and soil testing).
Partnership agrees to deliver to Contributors, without charge to
Contributors, as soon as each becomes available to Partnership, copies of
each report, other than financial documentation, from any of the
Investigations. Contributors hereby acknowledge that a reasonable number
of soil borings conducted in accordance with reasonable and customary
care and diligence is not a prohibited activity and shall not be
considered a material change in the condition of the Property which could
adversely affect the marketability or value thereof, provided that
Partnership promptly performs customary site restoration.
R-5. Closing Date. Each closing shall occur on one or more dates, (each a
"Closing Date") designated by Partnership by written notice to
Contributors, which date shall be no earlier than thirty (30) days and no
later than sixty (60) days after Contributors receive said notice from
the Partnership, or on such other date as Contributors and Partnership
shall agree in writing. In all events, the final Closing Date for the
contribution of the then remaining Property shall occur on or before the
fifth anniversary of the date hereof.
R-6. Representations and Warranties.
(1) Representations and Warranties of the Contributors. Each Contributor
warrants and represents, which warranties and representations shall be
true on and as of the date hereof and on and as of each of the applicable
Closing Date(s) to the extent same are true, and to the extent same are
not true, then describing the circumstances or manner in which such
representations and warranties are not true. Notwithstanding anything to
the contrary hereof, for purposes of this Agreement, the term "Knowledge"
shall mean the actual knowledge of Xxxxxxx
4
X. Xxxxx without having any duty to inquire or investigate. Each
Contributor agrees to give Partnership written notice of any information
which makes any representation or warranty untrue with respect to a
Property 15 days prior to the Closing for such portion of the Property
and disclosure of such information shall not be deemed a breach of a
representation or warranty by Contributors or a default by Contributors
under this Agreement in the absence of willful or intentional acts or
omissions or gross negligence by such Contributors.
(a) Except as set forth hereinafter, such Contributor has not granted
any person, firm or corporation any lease, leasehold estate, possessory
right, option to lease or purchase, or any other interest in the Property
or any part thereof.
(b) To the best of such Contributor's knowledge, such Contributors has
not received any written notice of any pending action in any court or
administrative agency to condemn or acquire, by eminent domain or
otherwise, all or any part of the Property, to zone or rezone the same or
to impose or foreclose any liens or liability for any environmental
violations.
(c) Except as disclosed in the Environmental Reports described in
Schedule 9 attached hereto, to the best of such Contributors's knowledge,
during Contributors's ownership of the Property, (i) no Hazardous
Materials (as defined below) have been released into the environment, or
discharged, placed or disposed of at, on or under the Property by
Contributors or by its agents or employees; (ii) no underground storage
tanks have been located on the Property by Contributors or by its agents
or employees; (iii) the Property has not been used as a dump for waste
material by such Contributor or by its agents or employees during its
ownership; and (iv) such Contributors has not received any written notice
from any Governmental Authority or Tenant that the Property and its prior
uses does not comply with and at all times have complied with, any
applicable governmental law, regulation or requirement relating to
environmental and occupational health and safety matters and Hazardous
Materials.
The term "Hazardous Materials" shall mean any substance, material,
waste, gas or particulate matter which is regulated by any local
governmental authority, the State of Illinois, or the United States
Government, including, but not limited to, any material or substance
which is (i) defined as a "hazardous waste," "hazardous substance,"
"extremely hazardous waste," or "restricted hazardous waste" under any
provision of Illinois law, (ii) so called friable asbestos, (iii)
polychlorinated biphenyl, (iv) radioactive material, (v) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act, 33
U.S.C. (S) 1251 et seq. (33 U.S.C. (S) 1317), (vi) defined as a
"hazardous waste" pursuant to Section 1004 of the Resource Conservation
and Recovery Act, 42 U.S.C. (S) 6901 et seq. (42
5
U.S.C. (S) 6903), or (vii) defined as a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. (S) 9601 et seq. (42 U.S.C. (S) 9601). The
term "Environmental Laws" shall mean all statutes specifically described
in the foregoing sentence and all federal, state and local environmental
health and safety statutes, ordinances, codes, rules, regulations, orders
and decrees regulating, relating to or imposing liability or standards
concerning or in connection with Hazardous Materials in effect as of the
date of this Agreement.
Additionally, but not in lieu of Contributors's affirmative
undertakings set forth herein, Contributors agrees to indemnify, defend
and hold harmless Company and its grantees from and against any and all
debts, liens, claims, causes of action, administrative orders and
notices, costs (including, without limitation, response and/or remedial
costs), personal injuries, losses, damages, liabilities, demands,
interest, fines, penalties and expenses, including reasonable attorneys'
fees and expenses, consultants' fees and expenses, court costs and all
other out-of-pocket expenses, suffered or incurred by Company and its
grantees as a result of any such representation which is in any manner
materially inaccurate or any such warranty which is in any manner
breached in any material respect.
(d) To the best of such Contributor's knowledge, such Contributor has
not received any written notice of any action pending, or to the best of
such Contributors's knowledge threatened, in law or in equity, or in any
administrative court or proceeding, which may or might affect the title
to the Property.
(e) To the best of such Contributor's knowledge, such Contributor has
not received any written notice that the Property is not in compliance
with all statutes, laws and ordinances applicable thereto.
(f) To the best of such Contributors's Knowledge, attached as Exhibit
B is a true, correct and complete copy of all contracts relating to any
portion of the Property. To the best of Contributors's knowledge, there
are no defaults under any of the Contracts, and the Contracts are in full
force and effect.
Notwithstanding anything contained herein to the contrary, in the
event that the Partnership gains knowledge prior to the Closing that any
representation or warranty contained in this Agreement is untrue or
inaccurate, Partnership shall, within five (5) business days after
gaining such knowledge but in no event subsequent to the Closing Date,
provide Contributors with written notice of such and in the event that
the Partnership closes on the acquisition of the Property, then the
Partnership irrevocably waives any right to claim any damages against
6
Contributors for the breach of such representation or warranty and
Contributors shall have no liability to the Partnership resulting
therefrom.
EXCEPT AS OTHERWISE SPECIFICALLY AND EXPLICITLY SET FORTH IN THIS
AGREEMENT OR IN ANY DOCUMENT WHICH MAY BE EXECUTED BY Contributors AND
DELIVERED TO THE PARTNERSHIP AT CLOSING: (1) THE CONVEYANCE OF THE
PROPERTY AS PROVIDED FOR HEREIN IS MADE TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW ON AN "AS IS-WHERE IS" CONDITION AND BASIS WITH ALL
FAULTS, (2) THE PARTNERSHIP ACKNOWLEDGES THAT Contributors HAS NOT MADE
ANY REPRESENTATIONS TO THE PARTNERSHIP WITH RESPECT TO THE PROPERTY WHICH
ARE NOT EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION, WITH REGARD TO THE HABITABILITY, MERCHANTABILITY,
PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(2) Representations, Warranties and Covenants of the Company, the
Partnership and the REIT.
(a) The Partnership will elect the "traditional method" set forth in
Treasury Regulation Section 1.704-3(b) (absent a Final Determination to
the contrary) to allocate tax attributes related to the Property as
"Section 704(c) Property" (as such term is defined in Treasury Regulation
Section 1.704-3(a)(3)) or which are in any other way governed by the
provisions of Section 704(c) of the Internal Revenue Code of 1986, as
amended ("Section 704(c) allocations") or any successor section thereto.
(b) Partnership is a partnership for federal income tax purposes, and
is not an entity referred to in Section 721(b) of the Internal Revenue
Code of 1954 as amended, (the "Code") or a "publicly traded partnership"
within the meaning of Section 7704 of the Code.
(c) Partnership shall utilize the traditional method of depreciation
allocation under Section 704(c) of the Code.
(d) Company is a corporation duly organized and in good standing under
the laws of the State of Illinois, and is duly qualified to do business
in and is in good standing under the laws of the State of Illinois.
(e) Company has full capacity, right, power and authority to execute,
deliver and perform this Agreement and all documents to be executed by
Company pursuant hereto, and all required action and approvals therefor
have
7
been duly taken and claimed. The individuals signing this Agreement and
all other documents its executed or to be executed pursuant hereto on
behalf of Company are and shall be duly authorized to sign the same on
Company's behalf and to bind Company thereto. This Agreement and all
documents to be executed pursuant hereto by Company are and shall be
binding upon and enforceable against Company in accordance with their
respective terms.
(f) The REIT is organized as a "real estate investment trust" under
Sections 856 through 860 of the Code. The REIT will elect to be taxed as
a "real estate investment trust" under the Code.
R-7. TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE PARTIES. The obligation of
each party to close each transaction contemplated hereunder shall be
conditioned upon receipt prior to each Closing of a certification by such
party confirming the truth and accuracy of all of the representations and
warranties made by such part at the IPO Closing, and to the extent not
true and accurate, then describing the circumstances or manner in which
such representations and warranties are not true. The obligation of a
party (the "Closing Party") to close the transaction contemplated hereby
is, at the Closing Party's option, and except as otherwise provided
herein, subject to all representations and warranties of the other party
(the "Other Party") contained in this Agreement being true and correct in
all material respects at and as of the Closing Date (or to the extent not
true, same shall be disclosed to the Closing Party, and the Closing Party
shall have agreed in writing to such matters within five (5) business
days after receipt of such notice, and elects to nevertheless close).
Upon failure of any condition precedent as set forth in this Section, a
Closing Party may, by written notice to the Other Party and failure by
such Other Party to cure same within 10 days after such notice, elect at
any time thereafter to terminate this Agreement by written notice to such
Other Party in which event this Agreement shall be null and void, and
except as otherwise provided in this Agreement, the parties shall have no
further obligations to the other hereunder.
R-8. Operation and Maintenance of Property. Pending the closing, Contributors
will operate and maintain the Property in compliance with applicable law
and in the same manner as the Property has heretofore been operated and
maintained and, without the prior written consent of Partnership or
(except as otherwise provided herein , Contributors will neither: (a)
enter into any contract to sell or lease (except for a farm lease) any
portion of the Property or any agreement relating to the Property, nor
(b) further encumber or grant any interest in the Property, nor (c) enter
into any service contracts (other than seasonal contracts or other arms
8
length contracts with third parties in the ordinary course of business)
unless same can be terminated on no more than thirty (30) days' notice.
R-9. Zoning Proceedings. Contributors agrees that it will join with
Partnership (and execute such documents and applications as Partnership
shall require) and shall reasonably cooperate with and provide reasonable
assistance to, Partnership in any and all zoning, building, subdivision
and consolidation applications and proceedings (the "Zoning Proceedings")
which Partnership determines are necessary or required to permit the use
of the future improvements located on the Property consistent with the
existing zoning classifications as a business park for office/industrial
warehouse buildings. All such Zoning Proceedings shall be undertaken and
procured at the sole cost and expense of Partnership and Partnership
shall reimburse Contributors for the actual out-of-pocket expenses,
including without limitation, attorneys fees, incurred by Contributors in
cooperating with the Partnership. Partnership may not seek any change in
the existing zoning classification of the Property as an
office/industrial warehouse business park.
R-10. Bulk Sales. At each Closing, Contributor shall deliver to Company
evidence reasonably satisfactory to Company (which evidence may include
the indemnity of Xxxxxxx X. Xxxxx) that the sale of the Property to
Company hereunder is not subject to, and does not subject Company to
liability under, Section 902(d) ("Section 902(d)") of the Illinois Income
Tax Act (the "Act"). If said evidence is not so delivered to Company, as
aforesaid, then Contributor shall, or Company may, notify the Illinois
Department of Revenue ("Department") of the intended sale and request the
Department to make a determination as to whether the Contributor has an
assessed, but unpaid, amount of tax, penalties, or interest under the
Act. Contributor agrees that Company may, at closing, deduct and withhold
from the proceeds that are due Contributor the amount necessary to comply
with the withholding requirements imposed by Section 902(d). Company
shall deposit the amount so withheld in escrow with the Escrowee pursuant
to terms and conditions acceptable to Contributor and Company, but in any
event, complying with Section 902(d).
R-11. FIRPTA. Prior to the closing of the transaction contemplated by the
provisions of this Contract and as a condition of such closing,
Contributors shall deliver to Partnership a certificate with respect to
Contributors's non-foreign status sufficient to comply with the
requirements of Section 1445 of the Internal Revenue Code of the United
States of America and all regulations applicable thereto (all herein
collectively referred to as "FIRPTA"). If Contributors shall fail to
furnish the certifications described above, Partnership, in its sole
discretion, may withhold from the proceeds of sale payable by Partnership
hereunder, an amount sufficient to comply with the requirements of
FIRPTA. Notwithstanding anything to the
9
contrary contained herein, Contributors does hereby covenant and agree
with the Partnership to forever fully protect, defend and save the
Partnership harmless from and against all losses, costs, damages,
attorney's fees and expenses which Partnership may suffer, expend or
incur under, or by reason or in consequence of such Contributors
violation of the provisions of FIRPTA. The provisions of this paragraph
shall survive the closing.
R-12. Broker. Each party hereto warrants (which warranty shall survive the
closing) that neither party has engaged nor dealt with any broker in
connection with this transaction and hereby indemnifies and agrees to
hold the other harmless for a breach of such warranty.
R-13. Architectural Review Committee. At a Closing when Partnership has
acquired all remaining Property in a business park controlled by Xxxxxxx
X. Xxxxx, the affected Contributor shall assign to Partnership all of its
right, if any, as developer pursuant to the recorded covenants for such
business park and cause all members of the Architectural Review Committee
and/or Property Owners Association established for such business park to
resign (other than third parties not related to Contributors, its general
partners or related parties) effective as of Closing. In addition,
Contributors shall turn over to Partnership all books and records
relating to same at Closing.
R-14. Governing Law. This Contract shall be governed and construed in
accordance with the laws of the State of Illinois.
R-15. Entire Agreement. This Contract constitutes the entire agreement and
understanding of the parties hereto and this Contract may not be amended,
modified or supplemented except by an instrument in writing duly executed
by the parties hereto. This Contract supersedes any and all prior written
or oral agreement or understanding between the parties in connection with
this transaction.
R-16. Assignment. This Agreement may not be assigned by either party without
the written consent of the other party.
R-17. Successors and Assigns. The provisions of this Contract shall inure to
the benefit of, and be binding upon, the respective parties and their
respective successors and assigns.
R-18. Survive Closing. All representations and warranties with respect to a
portion of a Property which is acquired shall survive for a period of
twelve (12) months following any Closing of such portion of the Property.
All agreements and
10
obligations of a party hereunder, the performance of which it is
contemplated will occur after Closing, shall survive Closing.
R-19. Default. (a) In the event a Contributor defaults under this Contract, and
such default continues for ten (10) days after written notice of such
default, Partnership, shall be entitled as its sole and exclusive remedy
either to xxx Contributors for specific performance in order to enforce
Contributors' obligations under this Agreement or to xxx for the
Partnership's (or Company's or the REIT's, as the case may be) actual
damages incurred or suffered on account of such default.
(b) In the event Partnership, Company or REIT defaults under this
Contract, and such default continues for ten (10) days after written
notice of such default, Contributors shall be entitled, as their sole and
exclusive remedy, to xxx for an amount equal to its actual damages
incurred or suffered on account of such default.
R-20. Notices. Any notice, request, demand, instruction or other document to be
given or served hereunder or under any document or instrument executed
pursuant hereto shall be in writing and shall be delivered personally or
sent by United States registered or certified mail, return receipt
requested, postage prepaid or by overnight express courier, postage
prepaid and addressed to the parties at their respective addresses set
forth below, and the same shall be effective upon receipt if delivered
personally, on the next business day if delivered by overnight courier,
or two business days after deposit in the mails if mailed by certified or
registered mail. A party may change its address or addressees for receipt
of notices by service of a notice of such change in accordance herewith.
If to Company, the
Partnership and/or
the REIT to: c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx
With a copy to: c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
11
With a copy to: Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
and Xxxxxxx X. Xxxxx, Esq.
If to Contributors, to: c/o The Xxxxx Group, Ltd.
(or to any one or Chicago Metropolitan Headquarters
more Contributors) 0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, President
With a copy to: Xxxx, Xxxx, Xxxxx
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
and Xxxxxxx X. Xxxxx, Esq.
R-21. Limitation on Liability. Notwithstanding anything to the contrary set
forth in this Agreement: (a) prior to Closing, a party ("Non-Defaulting
Party") shall look solely to the assets of the Land Trusts up to
$1,000,000.00 if the Contributors are the defaulting party, or the assets
of the Company, the Partnership and the REIT, if the Company, the REIT or
the Partnership are the defaulting party, for satisfaction of any
monetary claims against the defaulting party; and (b) after the Closing,
any monetary claims against the defaulting party resulting from a breach
of such party's representations, warranties and indemnifications shall be
satisfied solely from the common units in the Partnership of the
defaulting party up to an aggregate amount of ten percent (10%) of such
defaulting party's common units in the Partnership. In no case shall any
claim against a defaulting party be asserted against its beneficiaries,
partners, members, shareholders or officers, as the case may be.
PARTNERSHIP:
PRIME GROUP REALTY, L.P., a Delaware limited
partnership
By: Prime Group Realty Trust, a Maryland real
estate investment trust
12
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
REIT:
PRIME GROUP REALTY TRUST, a Maryland real estate
investment trust
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
COMPANY:
THE PRIME GROUP, an Illinois corporation
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
CONTRIBUTORS:
XXXXX STREAM INDUSTRIAL PARK JOINT VENTURE, an
Illinois general partnership
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
13
NARCO PROPERTIES, LTD.
By:
-----------------------------
Name: Xxxxxxx X. Xxxxx
Title: General Partner
NARCO DEVELOPMENT CO.
By:
-----------------------------
Name: Xxxxxxx X. Xxxxx
Title: General Partner
14
EXHIBIT L
PUT OPTION AGREEMENT
--------------------
THIS PUT OPTION AGREEMENT is made and entered into as of this ____ day of
____, 1997 (this "Agreement") by and between ____________________ (the "NAC
General Partner") and PRIME GROUP REALTY TRUST, a Maryland real estate
investment trust ("PRT") and Prime Group Realty, L.P., a Delaware limited
partnership (the "Operating Partnership").
W I T N E S S E T H :
WHEREAS, the NAC General Partner is a general partner of the Operating
Partnership and owns ____ Common Units of general partnership interest (the "GP
Common Units") in the Operating Partnership;
WHEREAS, PRT is the managing general partner of the Operating Partnership;
WHEREAS, PRT has outstanding common shares of beneficial interest, $.01 par
value (the "Common Shares"), which are listed and traded on the New York Stock
Exchange;
NOW, THEREFORE, in consideration of ten dollars and the mutual
representations, covenants and agreements described in the Agreement and herein
and other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the undersigned hereby agree as follows:
Section 1. Grant of Put Option; Purchase Price.
-----------------------------------
PRT and the Operating Partnership hereby grant to the NAC General Partner
two irrevocable options to put portions of its GP Common Units (individually, a
"Put Option" and, collectively, the "Put Options") to PRT and the Operating
Partnership for cash at a per Common Unit price (the "Per Common Unit Price")
equal to 95% of the average daily closing price for Common Shares for the ten
trading days immediately prior to the Closing (as hereinafter defined) of each
respective Put Option. The aggregate purchase price for the GP Common Units
(the "Purchase Price") for each Put Option shall be an amount equal to the Per
Common Unit Price multiplied by the total number of GP Common Units being put by
the NAC General Partner at the Closing of each respective Put Option. The first
exercise of the Put Option may be for all or less than all of the GP Common
Units then held by the NAC General Partner, but shall be for no less than 50% of
the NAC General Partner's GP Common Units; the second exercise shall be for all,
but not less than all, of the GP Common Units then owned by the NAC General
Partner.
Section 2. Term of Put Options.
-------------------
The Put Options shall be first exercisable commencing on the date that is
twenty-one months from the date hereof and terminating on the date the NAC
General Partner no longer owns any of the GP Common Units. The Put Options may
be exercised twice by the NAC General Partner. The first exercise shall occur
no earlier than twenty one months from the date hereof and the second exercise
shall occur no earlier than thirty-two months from the date hereof.
Section 3. Exercise of Put Options.
-----------------------
The Put Options may be exercised by the NAC General Partner at any time
prior to their expiration pursuant to Section 2 hereof upon delivery to PRT and
the Operating Partnership by the NAC General Partner of a written notice of the
election by the NAC General Partner to exercise such Put Option.
Section 4. Closing.
-------
Within sixty (60) days of the delivery of the written notice of exercise of
a Put Option pursuant to Section 3 hereof, the Operating Partnership and PRT and
the NAC General Partner shall close (the "Closing") the purchase and sale of the
GP Common Units at the offices of PRT on a mutually agreeable date. At the
Closing, PRT shall deliver to the NAC General Partner the Purchase Price in
immediately available funds and the NAC General Partner shall deliver the GP
Common Units to PRT. The GP Common Units shall be delivered by the NAC General
Partner to PRT free and clear of all liens, claims and encumbrances of any kind.
The NAC General Partner hereby agrees to execute and deliver to PRT at the
Closing such other agreements, instruments, certificates and documents as are
reasonably requested by PRT to effect the transfer of the GP Common Units
pursuant to the Put Option purchase and sale.
Section 5. Amendment, Modification and Waiver.
----------------------------------
This Agreement may not be amended or modified or any provision, right or
obligation hereunder waived except by a writing signed by both parties hereto.
Section 6. Severability.
------------
Any invalidity, illegality or unenforceability of any provision of this
Agreement shall not render invalid, illegal or unenforceable the remaining
provisions hereof.
Section 7. Headings.
--------
The headings contained herein are for convenience of reference only and
shall not be deemed to be a part of this Agreement.
-2-
Section 8. Governing Law.
-------------
This Agreement shall be governed by and construed under the laws of the
State of Illinois without regard to the principles of conflicts of laws.
Section 9. Assignability.
-------------
This Agreement shall not be assigned by either the NAC General Partner or
PRT and the Operating Partnership without the express written consent of the
other parties hereto.
Section 10. Notices.
-------
All notices hereunder shall be in writing and effective (i) upon receipt,
if delivered in person or (ii) three days after the same shall have been
deposited in the U.S. mail, via registered or certified mail, to the address set
forth on the signature page hereto.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the day and year first above written.
PRIME GROUP REALTY, L.P.
-------------------------------------------
-------------------------------------------
By: Prime Group Realty Trust -------------------------------------------
Its: Managing General Partner
By: By:
------------------------ ------------------------
Its: Its:
------------------------ ------------------------
PRIME GROUP REALTY TRUST
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
By:
------------------------
Its:
------------------------
-3-
SCHEDULE 7
----------
TENANT ESTOPPEL CERTIFICATE
_________________, 1997
Prime Group Realty, L.P.
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: ___________________
Re: Lease Dated: ___________________
Landlord: ___________________
Tenant: ___________________, a(n) _________________
Premises: ___square feet in the building located at
_______________, ______________, Illinois
Gentlemen:
The undersigned, __________________, a(n) ______________("Tenant"), the
tenant under the above-described lease, a copy of which is attached hereto as
Exhibit A, ("Lease") provides this Tenant Estoppel Certificate to you as
conclusive evidence of the matters set forth herein concerning the
above-referenced Lease and the Premises.
As of the date hereof, the undersigned hereby certifies the following:
1. That the Lease supersedes, in all respects, all prior written or oral
agreements between Landlord and Tenant with respect to the Premises
and there are no agreements, understandings, warranties, or
representations between Landlord and Tenant with respect to the Lease
or the Premises except as expressly set forth in the copy of the Lease
(including all amendments thereto, if any) attached hereto as
Exhibit A.
2. That, as of the date hereof, the Lease has not been changed, amended,
modified, supplemented or superseded except as set forth in the copy
of the Lease (including all amendments thereto, if any) attached
hereto as Exhibit A.
3. That the Lease remains in full force and effect and there are no known
existing defaults by Tenant under the Lease.
4. That the improvements and space required by the Lease to be delivered
to Tenant have been satisfactorily completed and delivered by
Landlord, and have been accepted by the Tenant.
5. That the Premises are currently occupied and open for the use by
Tenant, its customers, employees and invitees.
6. That Tenant's interest in the Lease and the Premises demised therein,
or any part thereof, has not been sublet, transferred or assigned.
7. That all duties of an inducement nature required of the Landlord under
the Lease, as of the date of this certificate, have been fulfilled by
Landlord and Tenant is fully obligated to pay rent and all other
charges coming due under the Lease.
8. That the Commencement Date of the Lease was ___________, 19__ and the
Expiration Date of the Lease is _________________, _____.
9. That the monthly base rent under the Lease of $______ commenced on
_____________, 19__ and the last monthly payment of rent in the amount
of $__________ was made by Tenant on _________________, 1997. No
monthly rental has been prepaid nor has Tenant been given any free
rent, partial rent, rebates, rent rebates or concessions except as
provided in Lease. Tenant has no claims, defenses or offsets against
any rents payable under the Lease.
10. That a security deposit in the amount of $______ has been deposited
with Landlord.
11. That Landlord, to the best of our knowledge, has fully performed all
of its obligations under the Lease, as of the date of this
certificate, and there are no known circumstances existing under which
Landlord may be deemed in default merely upon the service of notice or
passage of time, or both.
12. That Landlord has not given its consent to Tenant (for example, to
sublease or to alter the Premises) to take any action which, pursuant
to the Lease, requires Landlord's consent, except
______________________.
13. That Tenant has not received any notice of a prior sale, transfer,
assignment, pledge or other hypothecation of the Premises or the Lease
or of the rents provided for therein.
14. That Tenant has not filed, and is not currently the subject of any
filing, voluntary or involuntary, for bankruptcy or reorganization
under any applicable bankruptcy or creditors rights laws.
15. That Tenant is a ________ (corporation], organized, validly existing
and in good standing under the law of __________.
In issuing this Estoppel Certificate, Tenant understands that you will rely
thereon in your acquiring that certain real estate which includes the Premises.
, a(n)
-------------------------------------
-------------------------------------------
By:
----------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
SCHEDULE 7A
-----------
REQUIRED TENANT ESTOPPELS
-------------------------
Dynamic Manufacturing
Spraying Systems
Ameritech
3-D Exhibits
Semblex Corp.
Household Finance
Xxxxx, Inc.
Associates Material
Household Credit Service
Xxxxxxx Xxxxxxxxxx
FBI
Boston Coach
Echlin, Inc.
Federal Cypress
NARCO RIVER BUSINESS CENTER
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 16]
NARCO TOWER ROAD ASSOCIATES
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 18]
OLYMPIAN OFFICE CENTER
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 19]
TRI-STATE INDUSTRIAL PARK JOINT
VENTURE
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property Xx. 00
xxx 00]
XXXXX XXXXXX XXXXXXXXXX XXXX JOINT
VENTURE
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 26]
NARCO ENTERPRISES, INC.
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, as General Partner
[as the beneficial owner of Property No. 27]
Dated: October 20, 1997
THE XXXXX ENTITIES:
THE XXXXX GROUP LTD.
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, General Partner
NARCO CONSTRUCTION, INC.
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, President
XXXXX & CO.
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, General Partner
XXXXX ASSET MANAGEMENT, INC.
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, President
XXXXX ARCHITECTURAL, INC.
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxx, President
Dated: October 20, 1997
COMPANY:
THE PRIME GROUP, INC., an Illinois corporation
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Its: Executive Vice President
---------------------------------------
Dated: October 20, 1997
PARTNERSHIP:
PRIME GROUP REALTY, L.P., a Delaware
limited liability partnership
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Its: Chief Executive Officer
---------------------------------------
Dated: October 20, 1997
REIT:
PRIME GROUP REALTY TRUST, a Maryland
real estate investment trust
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Its: President
---------------------------------------
Dated: October 20, 1997
LIST OF EXHIBITS & SCHEDULES
----------------------------
EXHIBIT A - LEGAL DESCRIPTION - REAL PROPERTY
EXHIBIT A-1 - LEGAL DESCRIPTION - VACANT REAL PROPERTY
EXHIBIT A-2 - LEGAL DESCRIPTION - XXXXX AND XXXXX PROPERTIES
EXHIBIT A-3 - LEGAL DESCRIPTION - 0000 XXXXXXX XXXXX AND 0000
XXXXXXX XXXXX
EXHIBIT B - PERSONAL PROPERTY
EXHIBIT C - PERMITTED TITLE EXCEPTIONS
EXHIBIT D - LISTING OF CONTRACTS
EXHIBIT E - SCHEDULE OF LICENSES
EXHIBIT F - SCHEDULE OF LEASES
EXHIBIT G - NON-FOREIGN AFFIDAVIT
EXHIBIT H - LIST OF EMPLOYEES (AND BENEFITS) TO BE HIRED BY
COMPANY
EXHIBIT I - TAX INDEMNIFICATION AGREEMENT
EXHIBIT J - CONSULTING AGREEMENT
EXHIBIT J-1 - EMPLOYMENT AGREEMENT
EXHIBIT K - VACANT LAND AGREEMENT
EXHIBIT L - PUT AGREEMENT
EXHIBIT M - NON RECOURSE DEBT METHODOLOGY
EXHIBIT N - AGREEMENT REGARDING VACANT SPACE (Re: 0000 Xxxx Xxxx)
EXHIBIT O - PARTNERSHIP AGREEMENT
SCHEDULE 1 - LIST OF CONTRIBUTORS (INCLUDING PARTIES REQUIRED BY SEC) AND
PROPERTY LOCATIONS
SCHEDULE 1-A - LIST OF THE XXXXX ENTITIES
SCHEDULE 2 - SCHEDULE OF BUSINESS ASSETS
SCHEDULE 2-A - PERSONAL PROPERTY OWNED BY XXXXX ENTITIES WHICH ARE NOT
BUSINESS ASSETS
SCHEDULE 3 - DESCRIPTION OF MORTGAGE LOANS TO BE REPAID
SCHEDULE 4 - [INTENTIONALLY OMITTED]
SCHEDULE 5 - REAL ESTATE PROPERTIES WITH NO TAX PRORATION
SCHEDULE 6 - [INTENTIONALLY OMITTED]
SCHEDULE 7 - FORM OF TENANT ESTOPPELS
SCHEDULE 7-A - LIST OF MAJOR TENANTS
SCHEDULE 8 - FORM OF LETTERS TO TENANTS
SCHEDULE 9 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 10 - ALLOCATION OF CONTRIBUTION PRICE
EXHIBIT G
---------
[LOGO]
CHICAGO TITLE INSURANCE COMPANY
INSTRUCTIONS: Section A and EITHER Section B, C, or D (as applicable)
must be completed and signed on ALL Escrows involving a sale/transfer.
ESCROW NO.:__________
NOTICE REGARDING "FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT,"
SEC. 1445, INTERNAL REVENUE CODE
(A)
Effective January 1, 1985, Section 1445 of the Internal Revenue Code
requires that every Buyer of real property from a foreign Seller withhold ten
percent of the gross purchase price and transmit that sum to the Internal
Revenue Service for application against the Seller's tax liability.
Certain exceptions may apply, such as the purchase by a buyer of property
acquired for use as the buyer's residence and the amount paid is $300,000.00 or
less. Also, the Buyer may rely on an affidavit from the Seller as shown below,
subject to certain limitations.
If withholding is required, and the Buyer fails to make the necessary
withholding, FIRPTA states that the Buyer shall be responsible for the payment.
CHICAGO TITLE INSURANCE COMPANY is not authorized by law to advise you on
this tax matter. We suggest that you consult with your attorney or tax advisor.
This form must be signed and returned by each named Buyer and Seller, or by
an authorized agent for each named Buyer and Seller.
-------------------------------------- --------------------------------------
(Buyer) (Seller)
-------------------------------------- --------------------------------------
(Buyer) (Seller)
CERTIFICATION OF NONFOREIGN STATUS
(B) (Individual)
Section 1445 of the Internal Revenue Code provides that a transferee
(buyer) of a U.S. real property interest must withhold tax if the transferor
(seller) is a foreign person. To inform the transferee (buyer) that withholding
of tax is not required upon my disposition of a U.S. real property interest, I,
______________________________________certify the following:
(Name of transferor)
1. I am not a nonresident alien for purposes of U.S. income taxation
2. My U.S. taxpayer identifying number is__________________________; and
(Social Security Number)
3. My home address is____________________________________________________
I understand that this certification may be disclosed to the Internal Revenue
Service by the transferee and that any false statement I have made here could be
punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this certification and
to the best of my knowledge and belief it is true, correct, and complete.
Dated:
--------------------------------------- ---------------------------------
(Signature of Seller)
---------------------------------
W&S Draft
10/21/97
Exhibit I
---------
TAX INDEMNIFICATION AGREEMENT
TAX INDEMNIFICATION AGREEMENT (the "Agreement"), dated as of [ ________],
1997 between , XXXXXXX X. XXXXX, an individual ("XX Xxxxx"), NARCO ENTERPRISES,
INC., a _______ corporation, and XXXXX GROUP LIMITED, a ________ corporation,
(collectively, the "Xxxxx Indemnitees"), and PRIME GROUP REALTY, L.P., a
Delaware limited partnership ("UpREIT").
WHEREAS, certain of the Xxxxx Indemnitees (or their predecessors in
interest) had interests in one or more of those certain partnerships set forth
on Exhibit A hereto ("Xxxxx Partnerships"), which owned the "Xxxxx Properties"
(as such term is defined in that certain Contribution Agreement, between ______,
dated October __, 1997 (the "Contribution Agreement");
WHEREAS, certain each of the Xxxxx Indemnitees is a member of a limited
liability company, (the "Xxxxx LLC"), which has entered into the that certain
Agreement of Limited Partnership of Prime Group Realty, L.P. (the "Partnership
Agreement"), dated the date hereof;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions. For purposes of the Agreement, capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to them in the Partnership Agreement or the Contribution Agreement.
Any term defined by reference to an agreement, instrument or other document
shall have the meaning so assigned to it whether or not such document is in
effect. Unless otherwise indicated, references in the Agreement to articles,
Sections, paragraphs, clauses, appendices, schedules and exhibits are to the
same contained in or attached to this Agreement.
For purposes of this Tax Indemnification Agreement, the following
terms shall apply:
(a) The term "After-Tax Basis" shall mean, with respect to any payment
to be received, the amount of such payment supplemented by a further amount so
that, after deduction of the amount of all federal, applicable state and Xxxx
Ridge income taxes that are required to be paid by the recipient thereof
(assuming that the recipient is taxable at the highest marginal federal,
applicable state and Xxxx Ridge income tax rates then applicable to the
recipient and taking into account any tax benefits to be realized by such
recipient from the receipt of the
1
indemnified amount) with respect to the receipt by it of such amounts, the net
amount received is equal to the payment required to be made on an After-Tax
Basis.
(b) The term "Realistic Possibility of Success" shall mean such
circumstances that tax counsel may properly advise reporting such position on a
tax return in accordance with Section 10.34 of 31 C.F.R. part 10, governing
practice before the Internal Revenue Service.
(c) The term "GP Termination Date" shall mean the period beginning
the date hereof and ending on the date on which the Xxxxx LLC (or its successor)
is no longer a General Partner in the Partnership.
(d) The term "Indemnity Term" shall mean the period beginning on the
GP Termination Date and ending on the tenth anniversary thereof.
(e) The term "Final Determination" shall mean (i) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final after all allowable
appeals by either party to the action have been exhausted or the time for filing
such appeal has expired, or in any case where judicial review shall at the time
be unavailable because the proposed adjustment involves a decrease in net
operating loss carry forward or a business credit carry forward, a decision,
judgment, decree or other order of an administrative official or agency of
competent jurisdiction, which decision, judgment, decree or other order has
become final (i.e., where all administrative appeals have been exhausted by all
parties thereto), (ii) a closing agreement entered into under Section 7121 of
the Code, or any other final settlement agreement entered into in connection
with an administrative or judicial proceeding and with the consent of UpREIT or
as otherwise permitted in Section 6 of the Partnership Agreement, or (iii) the
expiration of the time for instituting a claim for refund, or if such a claim
was filed, the expiration of the time for instituting suit with respect thereto.
(f) The term "Indemnity Debt Allocation Method" shall mean the
allocation of the Partnership's excess nonrecourse liabilities in any UpREIT
taxable year for purposes of Regulations Section 1.752-3(a)(3) based upon each
Partner's relative ownership of Units as of the beginning of such UpREIT taxable
year; provided, that nothing in this Agreement shall be interpreted as
prohibiting the UpREIT from actually using a different debt allocation than that
based upon the Indemnity Debt Allocation Method.
(g) The term "Xxxx Ridge" shall mean the municipality of the Village
of Xxxx Ridge, Illinois.
Section 2. Tax Representations. The Xxxxx Indemnitees jointly and
severally represent, warrant and covenant as follows:
2
(a) immediately prior to the relevant Adjustment Date, the Xxxxx
Properties are subject to aggregate Nonrecourse Liabilities, allocable among the
Xxxxx Properties, as shown on Exhibit B attached hereto;
(b) each Nonrecourse Liability, described in Section 2(a) of this
Agreement, was incurred by the Xxxxx Partnership or Xxxxx Indemnitee, which
owned the Xxxxx Properties to which such Nonrecourse Liability is allocated,
either (i) more than two years prior to the date of the Contribution Agreement,
or (ii) not in anticipation of the transfer of such Xxxxx Property to UpREIT
(within the meaning of Regulations Section 1.707-5(a)(6));
(c) each Nonrecourse Liability, described in Section 2(a) of this
Agreement, has encumbered such Xxxxx Properties throughout the period beginning
on the earlier of the date two years prior to the date of the Contribution
Agreement and the date such liability was incurred by the Xxxxx Partnership or
Xxxxx Indemnitee, as applicable, and ending on the Adjustment Date in respect of
such Xxxxx Properties;
(d) each Nonrecourse Liability, described in Section 2(a) of this
Agreement, is nonrecourse for purposes of Regulations Section 1.752-1(a)(2);
(e) immediately prior to the relevant Adjustment Date, each Xxxxx
Indemnitee's share of Partnership Minimum Gain under Regulations Section 1.704-
2(g)(1) is as shown on Exhibit B attached hereto;
(f) immediately prior to the relevant Adjustment Date, each Xxxxx
Indemnitee is allocated Nonrecourse Liabilities under Code Section 752 and the
Regulations as shown on Exhibit B attached hereto;
(g) intentionally omitted;
(h) intentionally omitted;
(i) the gross fair market value of any Xxxxx Property equals the initial
Gross Asset Value of such Property credited to the Capital Account of the
relevant contributing Xxxxx Partnership or Xxxxx Indemnitee;
(j) each Xxxxx Indemnitee will report any payment received by it under
this Agreement as a payment made within Section 707(a) of the Code.
(k) each Xxxxx Indemnitee has and will have a taxable year that is the
calendar year; and
(l) each Xxxxx Property constitutes nonresidential real property under
Code Section 168;
provided, however, that the breach of any of the foregoing representations,
warranties and covenants shall operate only to reduce the UpREIT's indemnity
obligation under this Agreement, and no one shall have any other rights, damages
or recoveries in respect of any such breach.
Section 3. Indemnified Income Inclusions. If any Xxxxx Indemnitee
shall be required to include in its gross income for federal, applicable state
or Xxxx Ridge income tax purposes (including by way of either an adjustment
proposed by an examining agent during audit or at a closing conference or the
receipt of a "30-day letter" by a Xxxxx Indemnitee or a "60-day letter" by the
Tax Matters Partner of the UpREIT proposing an adjustment to the tax returns of
the Xxxxx Indemnitee or the UpREIT, respectively, and treating the Xxxxx
Indemnitee's distributive share of taxable items of the UpREIT allocated to the
Xxxxx Indemnitee under the Partnership Agreement as "required" for this
purpose), with respect to any of its taxable years which begin prior to the end
of the Indemnity Term, any of the following:
(a) UpREIT items of income and gain attributable to such Xxxxx
Indemnitee's share of the net decrease in Partnership Minimum Gain from Xxxxx
Properties (to the extent not duplicative with subsection (c));
(b) Gain under Code Section 731 from a deemed distribution under Code
Section 752 from the retirement or refinancing of either the Nonrecourse
Liabilities shown on Exhibit B attached hereto, or the debt which refinances or
replaces such Nonrecourse Liabilities; or
(c) gain from the sale, transfer or disposition of Xxxxx Properties;
(d) income under Code Section 704(c) in excess of that allocable to such
Xxxxx Indemnitee under the "traditional method" of Regulations Section 1.704-
3(b),
(such an inclusion being an "Income Inclusion"), UpREIT shall pay to such Xxxxx
Indemnitee an indemnity with respect to the additional federal, applicable state
and Xxxx Ridge income tax liability from such Income Inclusion in the amount
determined in Section 4 hereof.
Section 4. Amount of Indemnification.
(a) In the case of any Income Inclusion that is indemnifiable pursuant to
Section 3 of this Agreement, the relevant Xxxxx Indemnitee (x) shall notify
UpREIT orally and in writing as soon as possible (so as to minimize
indemnifiable costs and expenses incurred under this Agreement prior to such
Income Inclusion), and (y) shall give UpREIT a written certificate setting forth
in reasonable detail (i) the computation of the amount of such Income Inclusion
and (ii) the computation of such amount or amounts that shall equal the sum of
(1) the actual net increase in federal, applicable state and Xxxx Ridge income
tax (including any interest, penalties, fines, or other additions thereto)
("Inclusion Taxes") actually payable by a Xxxxx Indemnitee on an After-Tax
Basis, as a result of such Income Inclusion, determined after taking into
account all deductions, credits, or other federal, applicable state and Xxxx
Ridge income tax benefits then realized and resulting from (a) such Income
Inclusion, (b) the incurrence of the tax liability
indemnified under this Agreement, or (c) the receipt of any indemnity payment
made under this Agreement (computed in accordance with Sections 3 and 6 of this
Agreement), plus (2) the reasonable costs and expenses incurred by such Xxxxx
Indemnitee in respect of such Income Inclusion.
(b) Each Xxxxx Indemnitee agrees to act in good faith to claim any tax
benefits (including filing claims for refunds and amended tax returns) and take
such other actions as may be reasonable to minimize the net amount of any
indemnity payment due from UpREIT hereunder and to maximize the amount of its
tax savings; provided, however, that such Xxxxx Indemnitee shall not be required
to take any action which, in its good faith judgment, would have any material
adverse business consequences to it. If UpREIT shall disagree with such
computation and so requests in a written notice delivered to such Xxxxx
Indemnitee within thirty (30) days following UpREIT's receipt of the
certificate, such amount shall be reviewed and determined by an independent
public accounting firm of national recognition selected by XX Xxxxx and
reasonably acceptable to UpREIT. The costs of such verification shall be borne
by UpREIT unless such verification shall result in an adjustment in UpREIT's
favor by an amount of more than 5% of the Inclusion Taxes actually due, in
which case such costs shall be borne by such Xxxxx Indemnitee. Each Xxxxx
Indemnitee agrees to cooperate with such independent accounting firm and to
supply it with all information reasonably necessary to permit it to accomplish
such review and determination. Such information shall be for the confidential
use of such accountants and shall not be disclosed to UpREIT or any other
person. UpREIT and each Xxxxx Indemnitee agree that the sole responsibility of
the independent public accounting firm shall be to verify the amount of a
payment pursuant to this Agreement and that matters of interpretation of this
Agreement are not within the scope of the independent accounting firm's
responsibilities.
(c) To the extent that a Xxxxx Indemnitee recognizes an amount in respect
of an Income Inclusion that is indemnifiable pursuant to Section 3 of this
Agreement for any UpREIT taxable year beginning prior to the Indemnity Term,
UpREIT will pay such Xxxxx Indemnitee as its indemnity obligation under this
Agreement 100% of the amount described in Section 4(a).
(d) Any payment due to a Xxxxx Indemnitee pursuant to this Section 4 shall
be paid upon the earlier of the date that (1) the additional federal income tax
in respect of such Income Inclusion is due from the Xxxxx Indemnitee, or (2) the
Xxxxx Indemnitee has filed a return that reflects or would reflect such
additional federal income tax; provided, however, that (A) obligations of such
Xxxxx Indemnitee and UpREIT under this Agreement will first be set off against
each other, and (B) no payment shall be due earlier than completion of the
computation of such indemnity amount as described in Section 4(a).
Section 5. Exclusions.
(a) Notwithstanding the foregoing, UpREIT shall not have any liability for
indemnification under this Agreement (other than for reasonable costs and
expenses incurred by a Xxxxx Indemnitee in accordance with this Agreement) to
the extent the amount otherwise indemnifiable is payable by such Xxxxx
Indemnitee as a result of one or more of the following:
(i) Any Xxxxx Indemnitee recognizing gain in respect of the Capital
Contribution of Xxxxx Properties under Code section 707(a)(2), assuming that
each Nonrecourse Liability described in Section 2(a) of this Agreement is a
"qualified liability" within the meaning of Regulations Section 1.707-5(a)(6),
except as a result of either a sale or disposition of such Xxxxx Property, an
indemnity payment under this Agreement, or the general partner nature of the
Xxxxx LLC's interest in the Partnership and the put right described in that
certain [Put Agreement], dated the date hereof, between _____ ;
(ii) Any payment of cash to a Contributor under Section 3.02(a)(i)
of the Contribution Agreement;
(iii) Any Xxxxx Indemnitee's Interest in the UpREIT not being
respected as a partnership interest to the extent, and as provided in, the
Partnership Agreement;
(iv) The allocations of income, gain, loss, deduction and credit set
forth in the Partnership Agreement not being respected under Sections 704(b) and
704(c) of the Code, except as a result of the exercise of discretion by the
Managing General Partner of the UpREIT in respect of (A) an adjustment to the
"Gross Asset Values" of UpREIT assets, as described in clause (b) of the
definition thereof, or (B) the allocation of Nonrecourse Deductions under the
proviso within [Section 6.3.A.(3)] of the Partnership Agreement;
(v) The UpREIT not being the owner of the Xxxxx Properties for
federal income tax purposes as of the relevant Adjustment Date;
(vi) Immediately after the relevant Adjustment Date, any Xxxxx
Indemnitee's share of Partnership Minimum Gain under Regulations Section 1.704-
2(g)(1) not being as shown on Exhibit B attached hereto;
(vii) (1) any change in, or amendment to, the Code or any other
federal tax statute, which is effective on or after the relevant Adjustment
Date, (2) any final or temporary regulation, which is enacted or adopted after
the relevant Adjustment Date, or (3) any court decision issued after the
relevant Adjustment Date;
(viii) No Xxxxx Indemnitee is or will be a tax-exempt entity or
person;
(ix) A determination that any Xxxxx Indemnitee did not enter the
transactions contemplated by the Partnership Agreement for profit or with a
sufficient business purpose;
(x) A voluntary or involuntary sale, assignment, transfer or other
disposition by any Xxxxx Indemnitee of any interest in the UpREIT or any part
thereof;
(xi) The failure of any Xxxxx Indemnitee to claim or to follow the
proper procedure in claiming in a timely manner any UpREIT item allocated to
such Xxxxx Indemnitee by the Partnership;
(xii) The failure of any Xxxxx Indemnitee to take timely action or
follow the proper procedures in reporting his distributive share from the UpREIT
or contesting a claim made by the Internal Revenue Service in accordance with
the Partnership Agreement;
(xiii) The gross negligence or the willful misconduct of any Xxxxx
Indemnitee or any affiliate thereof;
(xiv) Any breach by any Xxxxx Indemnitee of any of its
representations, warranties or covenants in Sections [7.1.A. or 8.2 of the
Partnership Agreement (prior to the GP Termination Date), Sections 10.5,
11.3.A., 11.6.A., D or E.,] of the Partnership Agreement, Sections 2 or 6 of
this Agreement, or the Contribution Agreement;
(xv) Any guarantee by any Xxxxx Indemnitee or a person related to
any Xxxxx Indemnitee of any Nonrecourse Liability encumbering a Xxxxx Property
or Xxxxx Interest or any other debt of the UpREIT or its affiliates;
(xvi) Any Xxxxx Indemnitee recognizing taxable income under Code
Section 704(c), except to the extent such income results from either a sale or
other disposition of a Xxxxx Property or income under Code Section 704(c) in
excess of that allocable to such Xxxxx Indemnitee under the "traditional method"
of Regulations Section 1.704-3(b);
(xvii) Any recapture under Code Section 1245 or 1250 of depreciation
attributable to Xxxxx Properties that was allocated to any Xxxxx Indemnitee
after the relevant Adjustment Date.;
(xviii) the sale, transfer or other disposition of any Xxxxx Property
after the fifth anniversary of the GP Termination Date; provided, however, that
the UpREIT uses its best efforts to cause such sale, transfer or other
disposition to be on a tax-deferred or tax-exempt basis; or
(xix) the sale, transfer or other disposition of all or any portion
of the land described in Exhibit D hereto (the "Land"); provided, however, that
the UpREIT uses its best efforts to cause such sale, transfer or other
disposition of the Land that occurs within the period ending on or prior to the
fifth anniversary of the GP Termination Date, to be on a tax-deferred or tax-
exempt basis.
(b) Further, notwithstanding anything to the contrary within this
Agreement, after taking into account any amounts thereof excluded under Section
5(a), the cumulative Income Inclusions for all Xxxxx Indemnitees in respect of
Section 3(a), 3(b) and 3(c) that will be indemnifiable by the UpREIT shall not
exceed the following:
(i) For any Income Inclusion under Section 3(b),the aggregate negative
Capital Accounts of all Xxxxx Indemnitees as set forth on Exhibit B;
(ii) For any Income Inclusion under Section 3(a), the aggregate
Minimum Gain of all Xxxxx Indemnitees as set forth on Exhibit B; and
(iii) For any Income Inclusion under Section 3(c), the excess of the
aggregate Gross Asset Value of the Xxxxx Properties contributed to the UpREIT on
the relevant Adjustment Dates, over the aggregate initial adjusted tax bases of
such Xxxxx Properties on such relevant Adjustment Dates.
(c) Finally, notwithstanding anything to the contrary within this
Agreement, after taking into account any amounts thereof excluded under Sections
5(a) and 5(b), UpREIT shall not be liable for indemnification under this
Agreement in respect of an Income Inclusion under Section 3(a) or (b), to the
extent of that such Income Inclusion arises from a Final Determination that the
amount of debt of UpREIT allocable to such Xxxxx Indemnitee for purposes of
Section 752 of the Code and Regulations Section 1.752-3(a)(3) is less than the
amount of debt such Xxxxx Indemnitee would be allocated if the UpREIT allocated
the Xxxxx Indemnitees collectively an aggregate amount of debt, using the
Indemnity Debt Allocation Method for purposes of Section 752 of the Code and
Regulations Section 1.752-3(a)(3), of at least $43 million; provided, however,
that UpREIT actually allocates to the Xxxxx Indemnitee, collectively, on the
UpREIT's federal, applicable state and Xxxx Ridge income tax returns, at least
such aggregate amount of debt.
Section 6. Contests.
(a) Nothing in this Agreement shall be construed to prevent UpREIT
from contesting, through its Tax Matters Partner in accordance with the
Partnership Agreement as part of the unified audit of the UpREIT, any claim in
respect of any "partnership" item of the UpREIT that, if successful, would
result in an Income Inclusion (a "Partnership Level Issue").
(b) If UpREIT contests a Partnership Level Issue that, if successful,
would result in an Income Inclusion, UpREIT's liability for indemnification
under Section 4 hereof (other than reasonable costs and expenses described in
Section 6(f) of the Agreement) shall, at UpREIT's election, be deferred until
thirty (30) days after a Final Determination of such Xxxxx Indemnitee's federal
income tax liability in respect of an Income Inclusion.
(c) If any audit or proceeding involving an indemnifiable adjustment
is being conducted in a proceeding involving such Xxxxx Indemnitee, which cannot
be transferred to the UpREIT as a partnership item (a "Xxxxx Level Issue"), such
Xxxxx Indemnitee hereby agrees (i) promptly to notify UpREIT in writing of such
adjustment (and the failure of such Xxxxx Indemnitee to so notify UpREIT shall
preclude any indemnity hereunder to the extent UpREIT's right to effect its
contest rights hereunder has been precluded by such failure), and (ii) upon
UpREIT's delivery to of a written opinion of nationally recognized tax counsel
reasonably
acceptable to such Xxxxx Indemnitee ("Tax Counsel") to the effect that there is
a Realistic Possibility of Success upon contest of such Xxxxx Level Issue, such
Xxxxx Indemnitee will contest that adjustment by filing a protest and
administrative appeal and prosecuting the same in good faith; provided, however,
that such Xxxxx Indemnitee will not be obligated to pursue an administrative
appeal if such Xxxxx Indemnitee instead pursues relief in Tax Court or a court
having refund jurisdiction.
(d) If, within 30 days following the failure of such administrative
proceedings with respect to a Xxxxx Level Issue, UpREIT delivers to a Xxxxx
Indemnitee a written opinion of Tax Counsel to the effect that there is a
Realistic Possibility of Success if the proposed adjustment is presented to a
court for resolution, then such Xxxxx Indemnitee will contest the proposed
adjustment in good faith in the Tax Court or by paying the tax (and any
applicable interest and penalties) and suing for refund in the Court of Federal
Claims or appropriate Federal District Court. If, within 30 days following a
final adverse decision of such court with respect to such Xxxxx Level Issue,
UpREIT delivers to such Xxxxx Indemnitee a written opinion of Tax Counsel to the
effect that it is more likely than not that such decision would be reversed on
appeal, then such Xxxxx Indemnitee will appeal such decision to the appropriate
Federal Court of Appeals. With respect to any of the above-described
proceedings, such Xxxxx Indemnitee will keep UpREIT and its counsel informed as
to the progress of such proceedings, give UpREIT and its counsel the opportunity
to review and comment in advance on all written submissions and filings relevant
to indemnifiable issues (after making appropriate redactions to preserve the
confidentiality of the such Xxxxx Indemnitee return as to other issues), and
consider in good faith any suggestions made by UpREIT or its counsel.
(e) Such Xxxxx Indemnitee shall present any settlement offer provided
to such Xxxxx Indemnitee pursuant to a Xxxxx Level Issue to UpREIT. If UpREIT
recommends acceptance of a settlement offer of a Xxxxx Level Issue or if the Tax
Matters Partner recommends acceptance of a settlement offer in respect of a
Partnership Level Issue, but such Xxxxx Indemnitee declines to accept such offer
in writing within 30 days (if such Xxxxx Indemnitee does not respond within 30
days, such lack of response shall be treated as acceptance of UpREIT's or the
Tax Matters Partner's recommendation, respectively), (1) the obligation of
UpREIT to make indemnity payments as the result of any such contest or
proceedings shall not thereafter exceed the obligation that it would have had if
such contest had been settled or proceeding terminated on the basis recommended
by UpREIT or the Tax Matters Partner, as applicable, and (2) in the case of a
Xxxxx Level Issue, UpREIT shall have no further liability for costs or other
expenses in respect of such contest.
(f) Notwithstanding the foregoing, such Xxxxx Indemnitee will have no
obligation to contest any action with respect to a Xxxxx Level Issue (i) unless
such items could give rise to a federal income tax liability (disregarding other
items in the assessment and considering effects in future years) in excess of $
__________ , (ii) without UpREIT paying when due, reasonable third-party costs
and out-of-pocket expenses including reasonable legal, witness and accounting
fees and other expenses and, in the case of proceedings before the Court of
Federal Claims or Federal District Court, the amount of tax (and any applicable
interest and
penalties) for which refund is claimed, and (iii) to the extent such Xxxxx
Indemnitee waives in writing UpREIT's obligation to indemnify such Xxxxx
Indemnitee for such items, in which case all third-party costs and out-of-pocket
expenses described in clause (ii) thereafter incurred and all taxes would be
paid by such Xxxxx Indemnitee.
(g) such Xxxxx Indemnitee shall not settle any such Xxxxx Level Issue
without UpREIT's consent; provided that such Xxxxx Indemnitee shall not be
required to contest any proposed adjustment and may settle any such proposed
adjustment if such Xxxxx Indemnitee shall waive its right to indemnity under
this Agreement with respect to such adjustment and any Income Inclusion that
results from such adjustment and, in the case of proceedings before the Court of
Federal Claims or Federal District Court, shall pay to UpREIT the amount of tax
(and any applicable interest and penalties) previously paid or advanced by
UpREIT with respect to such adjustment or the contest of such adjustment under
Section 6(f), plus interest at ___% computed from the time such amounts were
paid or advanced by UpREIT.
(h) Within thirty (30) days after a Final Determination of the
liability of such Xxxxx Indemnitee in respect of a Xxxxx Level Issue, UpREIT and
each Indemnitee agree to pay each other, as applicable, the net amount of (i)
the payment owed by the UpREIT to such Xxxxx Indemnitee of any indemnification
hereunder, not theretofore paid resulting from the outcome of such contest, and
(ii) in the case of proceedings before the Court of Federal Claims or Federal
District Court, the repayment owed by such Xxxxx Indemnitee to UpREIT of the
amount of tax (and any applicable interest and penalties) previously paid or
advanced by UpREIT with respect to such adjustment or the contest of such
adjustment under Section 6(f), together with any interest received by or
credited to such Xxxxx Indemnitee that is attributable to such advance.
Section 7. Tax Savings.
(a) In the event that UpREIT makes an indemnity payment pursuant to
Section 4, if such Xxxxx Indemnitee shall realize with respect to any year, any
federal, applicable state or Xxxx Ridge income tax savings that would not have
been realized but for receipt of such payment, the related Income Inclusion or
the event giving rise thereto, (and which tax savings were not taken into
account in calculating UpREIT's indemnity payment to such Xxxxx Indemnitee),
such Xxxxx Indemnitee shall pay to UpREIT, on an After-Tax Basis, an amount
equal to the actual net reduction in federal, applicable state and Xxxx Ridge
income tax actually realized by such Xxxxx Indemnitee. Each Xxxxx Indemnitee
agrees to act in good faith to claim any tax benefits or savings (including
filing claims for refunds and amended tax returns) and take such other actions
as may be reasonable to minimize the net amount of any indemnity payment due
from UpREIT hereunder and to maximize the amount of its tax savings; provided,
however, that such Xxxxx Indemnitee shall not be required to take any action
which, in its good faith judgment, would have any material adverse business
consequences to it.
(b) Any payment due to UpREIT pursuant to this Section 7 shall be paid
within one business day after such Xxxxx Indemnitee has (1) received (or is
deemed to have received) a refund or (2) has filed a return that reflects or
would reflect such tax saving; provided,
however, that (A) obligations of such Xxxxx Indemnitee and UpREIT under this
Agreement will first be set off against each other, and (B) any loss of such tax
savings by such Xxxxx Indemnitee subsequent to the year of realization by such
Xxxxx Indemnitee shall be treated as an Income Inclusion that is indemnifiable
pursuant to the provisions of this Agreement.
Section 8. State and Xxxx Ridge Tax. For purposes of this Agreement,
each Indemnitee will be treated as having an Income Inclusion, realizing any
deductions, credits or other income tax benefits, having the same tax savings
and having the same tax attributes and status for applicable state income and
Xxxx Ridge tax purposes at the same time, in the same amount and in the same
manner, as such Xxxxx Indemnitee does for federal income tax purposes.
Section 9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
Section 10. Notices. All notices, demands, declarations, consents,
directions, approvals, instructions, requests and other communications required
or permitted by the terms hereof shall be given in the manner described in
Section ____ of the Partnership Agreement.
Section 11. Successors and Assigns. The terms of this Tax
Indemnification Agreement may not be assigned by any Indemnitee (including,
without limitation, by descent or will), without the written consent of UpREIT.
Section 12. Miscellaneous. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement. Any provision of this Agreement which is
prohibited and unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Neither this Agreement
nor any of the terms hereof may be terminated, amended, supplemented, waived or
modified orally, but only by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought.
Section 13. Anticipated Indemnitee Debt Allocation Methodology. UpREIT
acknowledges and agrees with each Indemnitee that the aggregate nonrecourse
indebtedness of UpREIT that is apportioned to the Indemnities collectively under
this Agreement and the Partnership Agreement pursuant to Code Section 752 and
Regulations Sections 1.702-3(a)(2) shall be apportioned among the various
Indemnitees using a method substantially similar to that within the debt
allocation model set forth on Exhibit C hereto.
Section 14. Term. The term of this Agreement shall be from the date
hereof until such time as the applicable statute of limitations under the Code
bars any claim by the Internal
Revenue Service against a Indemnitee for Inclusion Taxes otherwise indemnifiable
under this Agreement.
Section 15. Exhibits. The parties to this Agreement acknowledge and
agree that future Capital Contributions may be made to the UpREIT pursuant to
Section ___ of the Contribution Agreement, and agree to reasonably cooperate to
update the Exhibits and other factual information referenced or contained in
this Agreement to take such Capital Contributions into account.
Section 16. Assumption of Recourse Liabilities. Prior to the GP
Termination Date, upon 30 days written notice to the Managing General Partner,
the Xxxxx LLC may agree to indemnify the Managing General Partner for the debt
obligations of the UpREIT that are recourse to the general partners of the
UpREIT under relevant state law, but only to the extent necessary for the Xxxxx
LLC to be allocated a greater share of recourse liabilities of the UpREIT for
purposes of Regulations Section 1.752-2 to avoid an Income Inclusion; and,
provided, however, that such indemnification shall not be allowed to the extent
it would cause adverse tax consequences to the Managing General Partner, another
partner in the UpREIT or the REIT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective Officers thereunto duly authorized as of
the day and year first above written.
[UpREIT],
a [Maryland] corporation
By:
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Title:
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NARCO ENTERPRISES, INC., a _______ corporation
By:
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Title:
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XXXXX GROUP LIMITED, a ________ corporation
By:
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Title:
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XXXXXX X. XXXXX
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