EXHIBIT 10.19
================================================================================
CONTRIBUTION AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
AND THE CONTRIBUTORS LISTED ON EXHIBIT A
AND
▇▇▇▇▇▇▇ PROPERTIES, L.P.,
A MARYLAND LIMITED PARTNERSHIP
DATED AS OF NOVEMBER 11, 2002
================================================================================
TABLE OF CONTENTS
PAGE
----
RECITALS.......................................................................1
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTERESTS AND EXCHANGE FOR
PARTNERSHIP UNITS...................................................2
Section 1.1 Contribution of Partnership Interests.........................2
Section 1.2 Contribution of Assets........................................3
Section 1.3 Excluded Assets...............................................3
Section 1.4 Assumed Liabilities...........................................3
Section 1.5 Consideration and Exchange of Partnership Units...............3
Section 1.6 Adjusted Consideration........................................4
Section 1.7 Treatment as Contribution.....................................4
Section 1.8 Allocation of Total Consideration.............................4
Section 1.9 Term of Agreement.............................................5
Section 1.10 Final Year Allocations........................................5
Section 1.11 Sale Limitations and Debt Guarantees..........................5
ARTICLE 2. CLOSING.............................................................6
Section 2.1 Conditions Precedent..........................................6
Section 2.2 Time and Place................................................7
Section 2.3 Closing Deliveries............................................7
Section 2.4 Closing Costs.................................................8
ARTICLE 3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES......................8
Section 3.1 Representations and Warranties of the Operating Partnership...8
Section 3.2 Representations and Warranties of Contributor.................9
Section 3.3 Indemnification...............................................9
ARTICLE 4. COVENANTS..........................................................10
Section 4.1 Covenants of Contributors....................................10
Section 4.2 Tax Covenants................................................11
ARTICLE 5. RELEASES AND WAIVERS...............................................12
Section 5.1 General Release of Operating Partnership.....................12
Section 5.2 General Release of Contributors..............................12
Section 5.3 Waiver of Section 1542 Protections...........................12
Section 5.4 Waiver of Rights Under Partnership Agreements; Consents
With Respect to Partnership Interests........................13
ARTICLE 6. POWER OF ATTORNEY..................................................14
Section 6.1 Grant of Power of Attorney...................................14
Section 6.2 Limitation on Liability......................................15
Section 6.3 Ratification; Third Party Reliance...........................15
ARTICLE 7. MISCELLANEOUS......................................................16
Section 7.1 Dispute Resolution...........................................16
Section 7.2 Further Assurances...........................................17
Section 7.3 Counterparts.................................................17
Section 7.4 Governing Law................................................17
Section 7.5 Amendment; Waiver............................................17
i
Section 7.6 Entire Agreement.............................................17
Section 7.7 Assignability................................................17
Section 7.8 Titles.......................................................17
Section 7.9 Third Party Beneficiary......................................17
Section 7.10 Severability.................................................18
Section 7.11 Equitable Remedies...........................................18
Section 7.12 Confidentiality..............................................18
Section 7.13 Time Of The Essence..........................................18
Section 7.14 Reliance.....................................................18
Section 7.15 Survival.....................................................18
Section 7.16 Notice.......................................................19
ii
EXHIBIT LIST
SECTION FIRST
EXHIBITS REFERENCED
-------- -------------
A Contributors' Partnership Interests and Contributed Assets......Recital D
B-1 Contribution and Assumption Agreement...........................1.1
B-2 Contribution and Assumption Agreement...........................1.2
C Form of Quitclaim...............................................1.1
D Representations, Warranties and Indemnities of Contributor......3.2
E Power of Attorney...............................................2.3(e)
F Sale Limitations and Debt Guarantee.............................1.12
G Form of Pledge Agreement........................................2.3(f)
H Form of Estoppel Certificate....................................2.3(k)
SCHEDULES
1.1 List of Excluded Notes and Related Agreements..................1.1
1.2 List of Contributed Assets.....................................1.2
1.4 List of Assumed Liabilities....................................1.4
2.1(e) List of Tenant Estoppels.......................................2.1(e)
APPENDICES
A Disclosure Schedule............................................3.2
iii
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (including all exhibits, hereinafter
referred to as this "Agreement") is made and entered into as of November 11,
2002 by and between ▇▇▇▇▇▇▇ Properties, L.P., a Maryland limited partnership
(the "Operating Partnership"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, an individual ("RFM"),
each of the entities listed on Exhibit A attached hereto (each, a "Contributor"
and collectively, the "Contributors") and the other entities listed thereon.
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office and other properties (the "Participating Properties")
located in Southern California and Texas through a series of transactions (the
"Formation Transactions") whereby the Operating Partnership will acquire direct
or indirect interests in the Participating Properties by acquiring direct
interests in the Participating Properties (the "Property Interests") or,
directly or indirectly, some or all of the interests in certain limited
partnerships, certain limited liability companies and certain other entities
(collectively, the "Participating Partnerships") which currently own directly or
indirectly the Participating Properties, or a combination of the foregoing.
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock of ▇▇▇▇▇▇▇ Properties,
Inc., a Maryland corporation (the "Company"), which will operate as a
self-administered and self-managed real estate investment trust ("REIT") within
the meaning of Section 856 of the Internal Revenue Code of 1986, as amended (the
"Code") and which is the sole general partner of the Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships will either transfer their unencumbered Property
Interests or unencumbered interests in the Participating Partnerships, as
applicable, to the Operating Partnership in exchange for cash or contribute such
unencumbered interests directly to the Operating Partnership in exchange for
units of limited partnership interest ("Partnership Units") in the Operating
Partnership.
D. Each Contributor owns interests in certain of the Participating
Partnerships as set forth on Exhibit A (each, a "Partnership", and collectively,
the "Partnerships") which Partnerships own directly or indirectly interests in
certain of the Participating Properties as set forth on Exhibit A (each, a
"Property" and together the "Properties"). As used herein, "Partnership
Agreement" means the respective partnership agreement, limited liability company
agreement or membership agreement, as applicable, under which each Partnership
was formed (including all amendments or restatements).
E. Each Contributor desires to, and the Operating Partnership desires
each Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, free and clear of all Liens (as defined in Exhibit D), as a
partner or member in each of the Partnerships, including, without limitation,
all of its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in and to the Partnerships (such right, title and interest in and to
the Partnerships are hereinafter collectively referred to as the "Partnership
Interests"), in exchange for Partnership Units, on the terms and subject to the
conditions set forth herein.
F. Each Contributor acknowledges that the Operating Partnership may
decide that, rather than acquiring all of the direct and indirect interests in
the entity that owns a certain Property or acquiring a Partnership Interest by
direct transfer, it is more desirable for the Operating Partnership to acquire a
particular Property by a direct contribution of such Property from the
Partnership that owns such Property (a "Direct Contribution"), or by a merger of
such Contributor (if such Contributor is an entity) or
1
a Partnership with and into the Company, the Operating Partnership or an
affiliate of either of them (a "Merger"), or to divide a Partnership into more
than one partnership to facilitate the Formation Transactions (a "Division");
and each Contributor desires to give the Operating Partnership the right, in the
Operating Partnership's sole discretion, to engage in any Direct Contribution,
Merger or Division on the terms and conditions described herein without the need
to seek any further consent or action of such Contributor, and will give hereby
an irrevocable power of attorney as set forth in Article 6 hereof and
irrevocable consents as set forth in Section 5.4 hereof.
G. In addition to the contribution of Partnership Interests contemplated
hereby, as part of the Formation Transactions, one of the Contributors, ▇▇▇▇▇▇▇
Partners Development, Ltd. (formerly ▇▇▇▇▇▇▇/▇▇▇▇▇▇ Partners Development, Ltd.)
("Development") desires to contribute certain management assets, including
contracts and employees, and liabilities to the Operating Partnership in
exchange for Partnership Units, and the Operating Partnership desires to acquire
such assets and liabilities. It is presently intended that the Operating
Partnership will contribute certain of these assets and liabilities to a taxable
REIT subsidiary within the meaning of Section 856(1) of the Code in exchange for
capital stock of such corporation.
H. The parties acknowledge that the Operating Partnership's acquisition
of the Partnership Interests, the Contributed Assets (as defined in Section
1.2(a) below) and the Assumed Agreements (as defined below), and the assumption
of the Assumed Liabilities (as defined in Section 1.4 below) is in connection
with and subject to the consummation of the Formation Transactions and the
Public Offering. It is understood that the Operating Partnership may acquire
interests in additional properties with the proceeds of the Public Offering.
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
TERMS OF AGREEMENT
ARTICLE 1.
CONTRIBUTION OF PARTNERSHIP INTERESTS
AND EXCHANGE FOR PARTNERSHIP UNITS
Section 1.1 Contribution of Partnership Interests.
At the Closing (as defined in Section 2.2 herein) and subject to the
terms and conditions contained in this Agreement, each Contributor shall
contribute, transfer, assign, convey and deliver to the Operating Partnership,
absolutely and unconditionally, and free and clear of all Liens, all of its
Partnership Interests and Property Interests (if any), including all of such
Contributor's rights and interests to the Partnerships and all rights to
indemnification in favor of such Contributor under the agreements pursuant to
which such Contributor or its affiliates acquired the Partnership Interests and
Property Interests (if any) transferred pursuant to this Agreement; provided
however, that the Contributors are not contributing any of the related
promissory notes and other side letters and ancillary agreements listed on
Schedule 1.1. The contribution of each Contributor's Partnership Interests shall
be evidenced by a Contribution and Assumption Agreement in substantially the
form of Exhibit B-1 attached hereto. Furthermore, each Contributor shall execute
or shall cause each of its individual constituent partners and/or members (as
applicable) to execute and have duly acknowledged an individual quitclaim deed
for each Property in the form of Exhibit C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties;
provided, however, any direct transfer of title to a Property shall be made by
way of a grant deed. The parties shall take such additional actions and execute
such
2
additional documentation as may be required by each relevant Partnership
Agreement and the Amended and Restated Agreement of Limited Partnership of
the Operating Partnership (the "OP Agreement") or as requested in the
reasonable judgment of counsel to the Operating Partnership in order to
effect the transactions contemplated hereby.
Section 1.2 Contribution of Assets. At the Closing and subject to the terms
and conditions contained in this Agreement:
(a) Development shall contribute, transfer, assign convey and deliver to
the Operating Partnership, and the Operating Partnership shall acquire and
accept, all of Development's right, title and interest in and to those certain
properties, assets and rights (contractual and otherwise) listed on Schedule
1.2, free and clear of any and all Liens (the "Contributed Assets");
(b) ▇▇▇▇▇▇▇ Partners - WFC Holdings, LLC shall contribute and assign to
the Operating Partnership all of its right, title and interest in, under and to
the Membership Interest Transfer Agreement and Joint Escrow Instructions made
and entered into as of May 8, 2002 with GD&C Trust (the "Membership Interest
Transfer Agreement");
(c) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III shall contribute and assign to the Operating
Partnership all of his right, title and interest in, under and to the specific
portion of those certain Option Agreements identified on Exhibit A (the "Option
Agreements," and together with the Membership Interest Transfer
Agreement, the "Assumed Agreements"); and
(d) ▇▇▇▇▇▇▇ Partners -- Hope Place, Ltd. and ▇▇▇▇▇▇▇ Partners BGHS, LLC
will cause Bunker Hill Equity, LLC, upon the prior consent of all of the members
of Bunker Hill Equity, including the preferred equity member, to restructure and
contribute certain assets to the Operating Partnership in exchange for
Partnership Units.
The contribution of the Contributed Assets and the Assumed
Agreements and the assumption of all obligations thereunder shall be evidenced
by a Contribution and Assumption Agreement in substantially the form of Exhibit
B-2 attached hereto. The parties shall take such additional actions and execute
such additional documentation as may be required by the OP Agreement or as
requested in the reasonable judgment of counsel to the Operating Partnership in
order to effect the transactions contemplated hereby.
Section 1.3 Excluded Assets. Notwithstanding anything contained in this
Agreement, the parties expressly acknowledge and agree that all assets and
properties of Development which are not identified herein as Contributed Assets
shall be "Excluded Assets."
Section 1.4 Assumed Liabilities. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, the Operating Partnership shall
assume from Development and thereafter pay, perform or discharge in accordance
with their terms all of the liabilities of Development listed on Schedule 1.4
(the "Assumed Liabilities"). All liabilities of Development other than the
Assumed Liabilities are collectively referred to as the "Excluded Liabilities."
Section 1.5 Consideration and Exchange of Partnership Units.
Subject to Section 1.6, the Operating Partnership shall, in exchange for
the Partnership Interests, the Property Interests (if any), the Contributed
Assets, the Assumed Liabilities and the Assumed Agreements, transfer to each
Contributor the number of Partnership Units having a value, based on one
Partnership Unit being equal in value to the Public Offering price for one share
of the Company's
3
common stock, equal to the value of such Contributor's Total Consideration
indicated on Exhibit A. The transfer of the Partnership Units to each
Contributor shall be evidenced by either an amendment (the "Amendment") to the
OP Agreement or by certificates relating to such Partnership Units (the
"Certificates") in either case, as determined by the Operating Partnership, in
such form as shall be reasonably acceptable to each such Contributor. The
parties shall take such additional actions and execute such additional
documentation as may be required by the relevant Partnership Agreements and the
OP Agreement in order to effect the transactions contemplated hereby.
Section 1.6 Adjusted Consideration.
The Operating Partnership reserves the right not to acquire any
particular interest that constitutes part of the Partnership Interests, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership. Each Contributor hereby agrees that, in such event, such
Contributor's Total Consideration as indicated on Exhibit A may be reduced by an
amount determined in accordance with Exhibit A.
The risk of loss relating to each Contributor's Partnership Interests
and the underlying Properties prior to Closing shall be borne by such
Contributor. If, prior to the Closing, any Property is partially or totally
destroyed or damaged by fire or other casualty, or is taken by eminent domain or
through condemnation proceedings, then the Operating Partnership may, at its
option, determine not to acquire the particular interest in the Partnership that
directly or indirectly owns the Property that has been partially or totally
destroyed, damaged or taken. After the occurrence of any such casualty or
condemnation affecting a Property, the Operating Partnership may also, at its
option, elect to (a) acquire each Contributor's particular interest in any such
Partnership that directly or indirectly owns the affected Property, (b) direct
each Contributor to pay or cause to be paid to the Operating Partnership any
sums collected under any policies of insurance or award proceeds relating to
such casualty or condemnation and otherwise assign to the Operating Partnership
all rights to collect such sums as may then be uncollected, and/or (c) adjust or
settle any insurance claim or condemnation proceeding. Under such circumstances,
such Contributor's Total Consideration shall be reduced by its pro rata share of
the amount of any deductibles under the applicable insurance policies or award.
Insurance on the transferred Partnership Interests shall be assigned to the
Operating Partnership at the Closing.
Section 1.7 Treatment as Contribution.
The transfer, assignment and exchange effectuated pursuant to this
Agreement shall constitute a "Capital Contribution" to the Operating Partnership
pursuant to Article 4 of the OP Agreement and is intended to be governed by
Section 721(a) of the Code, and each Contributor (including any transferor in
connection with a Direct Contribution, if any, as provided hereunder) hereby
consents to such treatment.
Section 1.8 Allocation of Total Consideration.
The Total Consideration shall be allocated in a manner reasonably agreed
upon by the Operating Partnership and each Contributor. The Operating
Partnership and each Contributor agree to (i) be bound by the allocation, (ii)
act in accordance with the allocation in the preparation of financial statements
and filing of all tax returns and in the course of any tax audit, tax review or
tax litigation relating thereto and (iii) take no position and cause their
affiliates to take no position inconsistent with the allocation for income tax
purposes.
4
Section 1.9 Term of Agreement.
If the Closing does not occur by June 30, 2003 (the "Termination Date"),
this Agreement shall be deemed terminated and shall be of no further force and
effect and neither the Operating Partnership nor any Contributor shall have any
further obligations hereunder except as specifically set forth herein.
Section 1.10 Final Year Allocations.
To the extent a Partnership Agreement does not provide for final year
tax allocations, the parties hereto agree to use the "interim closing of the
books" method as provided in Section 706 of the Code to allocate income and loss
for the year.
Section 1.11 Sale Limitations and Debt Guarantees.
In connection with the Formation Transactions, the Operating Partnership
has agreed to certain limitations on its ability to sell its direct or indirect
interests in the Participating Properties and to make certain debt available to
be guaranteed by certain Contributors, as set forth on Exhibit F.
Section 1.12 Pre-Closing Transactions.
Attached to Schedule 1.2 hereto is a schedule of intercompany
obligations of Development, its affiliates, and certain individuals and other
entities, as of September 30, 2002 (the "Intercompany Schedule").
Contemporaneously with or prior to the Closing Date, all accounts receivable or
payable from or to a Participating Partnership or Entity (as defined in Exhibit
D) that will be owned in whole (denoted by "I" on the attached Intercompany
Schedule) or in part (denoted by "%"on the attached Intercompany Schedule),
directly or indirectly, by the Operating Partnership upon consummation of the
Formation Transactions, on the one hand, to or from a partnership, entity or RFM
or his affiliates that will not be owned in whole or in part, directly or
indirectly, by the Operating Partnership upon consummation of the Formation
Transactions (denoted by "O" on the attached Intercompany Schedule), on the
other hand, will be contributed/distributed, contributed, paid, merged,
satisfied, written-off or forgiven, to the extent such action would be shown on
an intercompany schedule updated as of the Closing Date, based on the principles
used in and the method of preparation of the Intercompany Schedule as attached
hereto (the "Closing Intercompany Schedule"). Notwithstanding anything to the
contrary in this Agreement, the Operating Partnership shall have no right to
acquire, directly or indirectly, any receivable that will result in a direct or
indirect extension of credit, in the form of a personal loan, to or for any
director or executive officer of the Company within the meaning of Section 402
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, and any such receivable not previously
satisfied or distributed shall be deemed to have been distributed by the
relevant Participating Partnership or Entity to its owners immediately prior to
the Closing, or if necessary, shall be forgiven effective as of the Closing.
Contributors each acknowledge that no accounts payable, that the Operating
Partnership, directly or indirectly, will assume immediately following
consummation of the Formation Transactions, after taking into account all
contributions, distributions, payments, mergers, satisfactions, write-offs or
other forgiveness, will be owed to RFM or any of his affiliates (including the
other Contributors).
5
ARTICLE 2.
CLOSING
Section 2.1 Conditions Precedent.
The effectiveness of the Company's registration statement to be
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") after the execution of this Agreement is a condition
precedent to the obligations of all parties to this Agreement to effect the
transactions contemplated by this Agreement on the Closing Date (as defined
below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions precedent:
(a) The representations and warranties of each Contributor contained in
this Agreement shall have been true and correct in all material respects on the
date such representations and warranties were made, and shall be true and
correct in all material respects on the Closing Date as if made at and as of
such date;
(b) The obligations of each Contributor contained in this Agreement to
be performed by it shall have been duly performed by it on or before the Closing
Date and such Contributor shall not have breached any of its covenants contained
herein in any material respect;
(c) Concurrently with the Closing, each Contributor, directly or through
the Attorney-in-Fact, shall have executed and delivered to the Operating
Partnership the documents required to be delivered pursuant to Section 2.3
hereof;
(d) Each Contributor shall have obtained and delivered to the Operating
Partnership any consents or approvals of any Governmental Entity (as defined in
Exhibit D) or third parties (including, without limitation, any lenders and
lessors) required to consummate the transactions contemplated hereby and the
Formation Transactions as listed in the Disclosure Schedule;
(e) No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or Governmental Entity that
prohibits the consummation of the transactions contemplated hereby, and no
litigation or governmental proceeding seeking such an order shall be pending or
threatened;
(f) There shall not have occurred between the date hereof and the
Closing Date any material adverse change in any of the assets, business,
financial condition, results or prospects of operation of the Partnerships and
the Participating Properties, taken as a whole;
(g) The contribution of the Partnership Interests and Property Interests
(if any) is approved by the Participating Partnerships' respective partners and
members to the extent such approval is required by the applicable limited
partnership agreements and limited liability company operating agreements; and
(h) All employment agreements (whether written or oral) between the
employees and the Participating Partnerships or Development shall have been
terminated in writing, and except to the extent liabilities thereunder have been
assumed by the Operating Partnership, all obligations thereunder shall have been
satisfied.
6
Any or all of the foregoing conditions may be waived by the
Operating Partnership in its sole and absolute discretion.
Section 2.2 Time and Place.
The date, time and place of the transactions contemplated hereunder
shall be the day the Operating Partnership receives the proceeds from the Public
Offering from the underwriter(s), at 10:00 a.m. in the office of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the
"Closing" or "Closing Date"). The transfers of assets and the assumption of
liabilities described in Article 1 of this Agreement, all closing deliveries and
the consummation of the Public Offering shall be deemed concurrent for all
purposes.
Section 2.3 Closing Deliveries.
At the Closing, the parties shall make, execute, acknowledge and
deliver, or cause to be made, executed, acknowledged and delivered through the
Attorney-in-Fact (see Section 6.1 below), the legal documents and other items
(collectively the "Closing Documents") necessary to carry out the intention of
this Agreement, which Closing Documents and other items shall include, without
limitation, the following:
(a) A Contribution and Assumption Agreement for each Contributor's
Partnership Interests in the form attached hereto as Exhibit B-1;
(b) A Contribution and Assumption Agreement for the Contributed Assets,
the Assumed Agreements and the Assumed Liabilities in the form attached hereto
as Exhibit B-2;
(c) An individual quitclaim deed for each Property fully executed and
duly acknowledged by each Contributor, if an individual, or by each of the
individual constituent partners and/or members of such Contributor in the form
attached hereto as Exhibit C;
(d) The Amendment or the Certificates evidencing the transfer of
Partnership Units to each Contributor;
(e) A Power of Attorney fully executed and duly acknowledged from each
Contributor substantially in the form attached hereto as Exhibit E;
(f) A Pledge Agreement fully executed by one or more Contributors in the
form attached hereto as Exhibit G;
(g) All books and records, title insurance policies, leases, lease
files, contracts, stock certificates, original promissory notes, and other
indicia of ownership with respect to each Partnership (and any subsidiary
Participating Partnership) which are in each Contributor's possession or which
can be obtained through such Contributor's reasonable efforts;
(h) An affidavit from each Contributor, stating under penalty of
perjury, such Contributor's United States Taxpayer Identification Number and
that such Contributor is not a foreign person pursuant to Section 1445(b)(2) of
the Code and a comparable affidavit satisfying California and any other
withholding requirements;
(i) Any other documents reasonably requested by the Operating
Partnership or reasonably necessary or desirable to assign, transfer, convey,
contribute and deliver such Contributor's
7
Partnership Interests or, if the Operating Partnership elects, the Properties
directly, free and clear of all Liens (subject to the Permitted Liens if the
Properties are transferred directly) and effectuate the transactions
contemplated hereby, including, without limitation, and only to the extent
applicable, quitclaim deeds and/or grant deeds (if transferred directly),
assignments of ground leases, air space leases and space leases, bills of sale,
assignments, and such documents as may be necessary to enable a title insurance
company (acceptable to the Operating Partnership in its sole discretion) to
issue to the Operating Partnership at Closing an ALTA owner or leasehold
policies of title insurance with such endorsements the Operating Partnership may
reasonably request (including, without limitation, non-imputation endorsements
to the extent available) with an aggregate of eighty percent (80%) coverage for
each of the Properties (with a tie-in endorsement with respect to the Properties
located in California) and levels of reinsurance for the Properties as
reasonably acceptable to the Operating Partnership, insuring fee simple and/or
leasehold title to all real property and improvements comprising all or any part
of the Property Interests to the Operating Partnership as the Operating
Partnership may designate, subject only to the Permitted Liens (collectively,
the "Title Policies"), and all state and local transfer tax returns and any
filings with any applicable governmental jurisdiction in which the Operating
Partnership is required to file its partnership documentation or the recording
of the Contribution and Assumption Agreement or deed or other Property Interests
transfer documents is required;
(j) If requested by the Operating Partnership, a certified copy of all
appropriate corporate resolutions or partnership actions authorizing the
execution, delivery and performance by each Contributor of this Agreement, any
related documents and the documents listed in this Section 2.3;
(k) Estoppel certificates from the tenants listed on Schedule 2.1(e),
substantially in the form of Exhibit H attached hereto; and
(l) Option Agreements with respect to the "option properties" identified
in the Prospectus (as defined in Exhibit D), duly executed by the relevant
Contributors (the "Option Agreements") and substantially in the form of Exhibit
I attached hereto.
Section 2.4 Closing Costs.
The Operating Partnership shall pay any documentary transfer taxes,
escrow charges, title charges and recording taxes or fees incurred in connection
with the transactions contemplated hereby. Each Contributor shall be responsible
for its own legal costs.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES AND INDEMNITIES
Section 3.1 Representations and Warranties of the Operating Partnership.
The Operating Partnership hereby represents and warrants to and
covenants with each Contributor that:
(a) Organization; Authority. The Operating Partnership has been duly
formed and is validly existing under the laws of the jurisdiction of its
formation, and has all requisite power and authority to enter this Agreement,
each agreement contemplated hereby and to carry out the transactions
contemplated hereby and thereby, and own, lease or operate its property and to
carry on its business as presently conducted and, to the extent required under
applicable law, is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
8
(b) Due Authorization. The execution, delivery and performance of this
Agreement by the Operating Partnership has been duly and validly authorized by
all necessary action of the Operating Partnership. This Agreement and each
agreement, document and instrument executed and delivered by or on behalf of the
Operating Partnership pursuant to this Agreement constitutes, or when executed
and delivered will constitute, the legal, valid and binding obligation of the
Operating Partnership, each enforceable against the Operating Partnership in
accordance with its terms, as such enforceability may be limited by bankruptcy
or the application of equitable principles.
(c) Consents and Approvals. Except in connection with the Public
Offering, no consent, waiver, approval or authorization of any third party or
governmental authority or agency is required to be obtained by the Operating
Partnership in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
Section 3.2 Representations and Warranties of Contributor.
Each Contributor jointly and severally represents and warrants to
the Operating Partnership as provided in Exhibit D attached hereto (subject to
qualification by the disclosures in the disclosure schedule attached hereto as
Appendix A (the "Disclosure Schedule") and the Prospectus, including, without
limitation, any matters for which a reserve has been established as reflected in
the pro forma financial statements contained in the Prospectus), and
acknowledges and agrees to be bound by the indemnification provisions contained
therein. Each Contributor hereby agrees promptly to give the Operating
Partnership written notice of any information which makes any representation or
warranty made by such Contributor hereunder on the date hereof untrue, and in
any event no later than five (5) business days of obtaining such information.
Section 3.3 Indemnification.
From and after the Closing Date, the Operating Partnership shall
indemnify and hold harmless each Contributor and each Contributor's directors,
officers, employees, agents, representatives and affiliates (each of which is an
"Indemnified Contributor Party") from and against any and all claims, losses,
damages, liabilities and expenses, including without limitation, amounts paid in
settlement, reasonable attorneys' fees, costs of investigation, costs of
investigative judicial or administrative proceedings or appeals therefrom and
costs of attachment or similar bonds (collectively, "Losses,") asserted against,
imposed upon or incurred by the Indemnified Contributor Party in connection with
or as a result of: (i) any breach of a representation, warranty or covenant of
the Operating Partnership contained in this Agreement or in any agreement,
Schedule, Exhibit, certificate or affidavit, or in any other document delivered
by the Operating Partnership pursuant to this Agreement, (ii) all fees, costs
and expenses of the Operating Partnership in connection with the transactions
contemplated by this Agreement, including without limitation any and all costs
associated with the transfers contemplated herein, (iii) the ownership of any of
the Properties after the Closing Date, (iv) the failure of the Operating
Partnership after the Closing Date to perform any obligation required to be
performed pursuant to any contract or obligation assigned to and assumed by the
Operating Partnership (including the Assumed Agreements), (v) the operation of
the business of the Company, the Operating Partnership and their subsidiaries
and affiliates subsequent to the Closing Date, and (vi) the Assumed Liabilities.
Section 3.4 Gross Negligence, Willful Misconduct. Notwithstanding
anything in this Agreement to the contrary, the Operating Partnership shall have
no obligation under this Agreement to indemnify or hold harmless any Contributor
from (i) any Losses arising as a direct result of such Contributor's breach of
this Agreement, gross negligence, willful misconduct or fraud or (ii) any Losses
arising as a result of the operation of the business to be conducted by the
Operating Partnership or the
9
ownership and operation of the Properties, outside of the ordinary course of
Contributors' business prior to the Closing Date.
ARTICLE 4.
COVENANTS
Section 4.1 Covenants of Contributors.
(a) From the date hereof through the Closing, and except in connection
with the Formation Transactions, no Contributor shall:
(i) Sell, transfer (or agree to sell or transfer) or otherwise
dispose of, or cause the sale, transfer or disposition of (or agree to do any of
the foregoing) all or any portion of its Partnership Interests or Contributed
Assets;
(ii) Sell, transfer or otherwise dispose of, or cause the sale,
transfer or disposition of (or agree to do any of the foregoing) all or any
portion of the Properties or the Property Interests; or
(iii) Except as otherwise disclosed in the Disclosure Schedule or
Prospectus, mortgage, pledge or encumber (or permit to become encumbered) all or
any portion of its Partnership Interests or Contributed Assets.
(b) From the date hereof through the Closing, and except in connection
with the Formation Transactions, each Contributor, shall to the extent within
his or its control, conduct the Partnership's business in the ordinary course of
business, consistent with past practice, and shall, to the extent within his or
its control, not permit any Partnership, without the prior written consent of
the Operating Partnership, to:
(i) Enter into any material transaction not in the ordinary course
of business with respect to the Partnership Interest;
(ii) Sell, transfer or dispose of, or cause the sale, transfer or
disposition of (or agree to do any of the foregoing) any assets of such
Partnership, except in the ordinary course of business consistent with past
practice;
(iii) Except as otherwise disclosed in the Disclosure Schedule or
Prospectus, mortgage, pledge or encumber (or permit to become encumbered) any
assets of such Partnership, except (A) liens for taxes not due, (B) purchase
money security interests in the ordinary course of such Partnership's business,
and (C) mechanics' liens being disputed by such Partnership in good faith and by
appropriate proceeding in the ordinary course of such Partnership's business
(provided such mechanics liens are released from the Property Interest prior to
or on the Closing Date at no cost to the Operating Partnership);
(iv) Amend, modify or terminate any lease, contract or other
instruments relating to the Partnership Interests or the Property Interests to
which such Partnership is a party, except in the ordinary course of the
Partnership's business consistent with past practice;
(v) Cause or permit any Partnership to change the existing use of
any Property;
10
(vi) Cause or permit any Partnership to enter into any new lease or
terminate any existing Lease except in the ordinary course of the Partnership's
business consistent with past practice;
(vii) Cause or take any action that would render any of the
representations or warranties regarding the Properties as set forth herein
untrue in any material respect;
(viii) Terminate or amend any existing insurance policies affecting
the Properties that results in a material reduction in insurance coverage for
one or more Properties;
(ix) Knowingly cause or permit the Partnership to violate or fail to
use commercially reasonable efforts to cure any violation of any applicable
laws;
(x) Materially alter the manner of keeping such Partnership's books,
accounts or records or the accounting practices therein reflected; or
(xi) Make any distribution to its partners, except in the ordinary
course of business consistent with past practices or as disclosed in the
financial statements or pro forma financial statements included in the
Prospectus.
(c) From the date hereof and subsequent to the Closing, each Contributor
agrees to provide the Operating Partnership with such tax information relating
to the Partnership Interests as reasonably requested by the Operating
Partnership and to cooperate with the Operating Partnership with respect to its
filing of tax returns.
(d) Notwithstanding anything to the contrary contained herein, any
failure by any Contributor to comply with or fulfill the covenants contained in
this Section 4.1 shall not constitute an indemnifiable claim under Article 3 of
Exhibit D attached hereto, but shall constitute an unfulfilled condition
precedent pursuant to Section 2.1(b), provided such failure is identified to or
otherwise becomes known to the Operating Partnership prior to Closing.
Section 4.2 Tax Covenants.
(a) Each Contributor and the Operating Partnership shall provide each
other with such cooperation and information relating to any of the Partnership
Interests as the parties reasonably may request in (i) filing any tax return,
amended tax return or claim for tax refund, (ii) determining any liability for
taxes or a right to a tax refund, or (iii) conducting or defending any
proceeding in respect of taxes. The Operating Partnership shall promptly notify
the applicable Contributor in writing upon receipt by the Operating Partnership
or any of its affiliates of notice of (i) any pending or threatened tax audits
or assessments with respect to the Partnerships and (ii) any pending or
threatened federal, state, local or foreign tax audits or assessments of the
Operating Partnership or any of its affiliates, in each case which may affect
the liabilities for taxes of such Contributor with respect to any tax period
ending on or before the Closing Date. Each Contributor shall promptly notify the
Operating Partnership in writing upon receipt by such Contributor of notice of
any pending or threatened federal, state, local or foreign tax audits or
assessments relating to the income, properties or operations of any of the
Partnerships. Each of the Operating Partnership, and each Contributor may
participate at its own expense in the prosecution of any claim or audit with
respect to taxes attributable to any taxable period ending on or before the
Closing Date, provided, that such Contributor shall have the right to control
the conduct of any such audit or proceeding or portion thereof for which such
Contributor (or its owners) has acknowledged liability (except as a partner of
the Operating Partnership) for the payment of any additional tax liability, and
the Operating Partnership shall have the right to control any other audits and
proceedings. Notwithstanding the foregoing, neither the Operating Partnership
nor any
11
Contributor may settle or otherwise resolve any such claim, suit or proceeding
which could have an adverse tax effect on the other party or its owners without
the consent of the other party, such consent not to be unreasonably withheld.
Each Contributor and the Operating Partnership shall retain all tax returns,
schedules and work papers, and all material records and other documents relating
thereto, until the expiration of the statute of limitations (and, to the extent
notified by any party, any extensions thereof) of the taxable years to which
such tax returns and other documents relate and until the final determination of
any tax in respect of such years.
(b) With respect to each Property that is contributed to the Operating
Partnership pursuant to this Agreement, the Operating Partnership and each
Contributor agrees that the Operating Partnership shall use the "traditional
method", as described in Regulations Section 1.704-3(b), to make allocations of
taxable income and loss among the partners of the Operating Partnership.
ARTICLE 5.
RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this Article 5 shall
become effective only upon the Closing of the contribution and exchange of the
Partnership Interests pursuant to Articles 1 and 2 herein.
Section 5.1 General Release of Operating Partnership.
As of the Closing, each Contributor irrevocably waives, releases and
forever discharges the Operating Partnership and the Operating Partnership's
affiliates, partners (including the Company), agents, attorneys, successors and
assigns of and from, any and all charges, complaints, claims, liabilities,
damages, actions, causes of action, losses and costs of any nature whatsoever
(collectively, "Contributor Claims"), known or unknown, suspected or
unsuspected, arising out of or relating to any Partnership Agreement, the
Properties or any other matter which exists at the Closing, except for
Contributor Claims arising from the Assumed Liabilities or from the breach of
any representation, warranty, covenant or obligation by the Operating
Partnership under this Agreement (including, without limitation, Section 1.12),
any agreement contemplated hereby or the governing documents of the Operating
Partnership and the Company.
Section 5.2 General Release of Contributors.
As of the Closing, the Operating Partnership irrevocably waives,
releases and forever discharges each Contributor and each Contributor's agents,
attorneys, successors and assigns of and from, any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Operating Partnership Claims"), known or
unknown, suspected or unsuspected, arising out of or relating to any Partnership
Agreement, the Properties or any other matter which exists at the Closing,
except for Operating Partnership Claims arising from any Excluded Liabilities or
from the breach of any representation, warranty, covenant or obligation by any
Contributor under this Agreement, any agreement contemplated hereby, any
agreement pursuant to which such Contributor guarantees debt of the Operating
Partnership or its affiliates or the governing documents of the Operating
Partnership and the Company.
Section 5.3 Waiver of Section 1542 Protections.
As of the Closing, each Contributor and the Operating Partnership
expressly acknowledge that it has had, or has had and waived, the opportunity to
be advised by independent legal counsel and hereby waives and relinquishes all
rights and benefits afforded by Section 1542 of the
12
California Civil Code and does so understanding and acknowledging the
significance and consequence of such specific waiver of Section 1542 which
provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED THE
SETTLEMENT WITH THE DEBTOR.
Section 5.4 Waiver of Rights Under Partnership Agreements; Consents With
Respect to Partnership Interests.
(a) As of the Closing, each Contributor waives and relinquishes all
rights and benefits otherwise afforded to such Contributor under any Partnership
Agreement including, without limitation, any rights of appraisal, rights of
first offer or first refusal, buy/sell agreements, and any right to consent to
or approve of the sale or contribution by the other partners or members of each
Partnership of their Partnership Interests to the Operating Partnership, the
Company or any direct or indirect subsidiary thereof. Each Contributor
acknowledges that the agreements contained herein and the transactions
contemplated hereby and any actions taken in contemplation of the transactions
contemplated hereby may conflict with, and may not have been contemplated by,
certain Partnership Agreements or other agreements among one or more holders of
such Partnership Interests or one or more of the partners of any such
Partnership. With respect to each Partnership and each Property in which a
Partnership Interest of such Contributor represents a direct or indirect
interest, such Contributor expressly gives all Consents (and any consents
necessary to authorize the proper parties in interest to give all Consents) and
Waivers necessary or desirable to (i) facilitate any Conveyance Action (as
hereinafter defined) relating to such Partnership or Property, (ii) cause the
Partnership to have authority to transfer the Partnership Interests or
Properties to the Operating Partnership, and (iii) receive Partnership Units
directly from the Partnership if the Partnership or one or more of the
Partnership's subsidiaries transfers assets or interests directly to the
Operating Partnership (rather than such Contributor contributing its or his
Partnership Interests hereunder) and to reduce the consideration otherwise
payable by the Operating Partnership hereunder as a result of such direct
transfer by the Partnership or its subsidiaries on account of such Contributor
receiving any amount reduced hereunder from such Partnership or its subsidiaries
making such direct transfer. In addition, if the transaction occurs this
Agreement shall be deemed to be an amendment to any Partnership Agreement to the
extent the terms herein conflict with the terms thereof, including without
limitation, terms with respect to allocations, distributions and the like. In
the event the transactions contemplated by this Agreement do not occur, nothing
in this Agreement shall be deemed to or construed as an amendment or
modification of, or commitment of any kind to amend or modify, the Partnership
Agreements, which shall remain in full force and effect without modification.
(b) As used herein, the term "Conveyance Action" means, with respect to
any Partnership having a direct or indirect ownership interest in any Property
Interest, (i) the transfer, conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein (whether or not such
partner or holder is the Contributor hereunder) directly, by Direct
Contribution, Merger, Division or otherwise of its direct or indirect interest
in such Partnership or Property to the Operating Partnership or the Company or
(ii) the entering into by any such partner or holder any agreement relating to
(x) the formation of the Operating Partnership or the Company, or (y) the direct
or indirect acquisition by the Operating Partnership or the Company of any such
direct or indirect interest or (iii) the taking by any such partner or holder of
any action necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing): any sale or distribution to any Person of a
direct or indirect interest in such Partnership or Property, the entering into
any agreement with any Person that grants to such Person the right to purchase a
direct or indirect interest in such
13
Partnership or Property, and the giving of the Consents and Waivers contained in
this Section or consents or waivers similar thereto in form or purpose.
(c) As used herein, the term "Consents" means, with respect to any such
Partnership or Property, any consent necessary or desirable under any
Partnership Agreement or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred to therein
(i) to cause the Partnership to have authority to permit any and all Conveyance
Actions relating to such Partnership or Property or to amend any such
Partnership Agreement and/or other agreements so that no provision thereof
prohibits, restricts, impairs or interferes with any Conveyance Action (such
amendments to include, without limitation, the deletion of provisions which
cause a default under such agreement if interests therein are transferred for
cash), (ii) to admit the Operating Partnership as a substitute limited partner
or general partner of such Partnership upon the Operating Partnership's
acquisition of a limited or general Partnership Interest therein, respectively,
and to adopt such amendment as is necessary or desirable to effect such
admission, (iii) to adopt any amendment to a Partnership Agreement as may be
deemed desirable by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of any interest therein, and (iv) to
continue such Partnership following the transfer of interest therein to the
Operating Partnership.
(d) As used herein, the term "Waivers" means, with respect to a
Partnership or a Property of which a Partnership Interest of such Contributor
represents a direct or indirect interest, the waiving of any and all rights that
such Contributor may have with respect to, and (to the extent possible) that any
other Person may have with respect to, or that may accrue to such Contributor or
other Person upon the occurrence of, a Conveyance Action relating to such
Partnership or Property, including, but not limited to, the following rights:
rights of notice, rights to response periods, rights to purchase the direct or
indirect interests of another partner in such Partnership or Property or to sell
such Contributor's or other Person's direct or indirect interest therein to
another partner, rights to sell such Contributor's or other Person's direct or
indirect interest therein at a price other than as provided herein, or rights to
prohibit, limit, invalidate, otherwise restrict or impair any such Conveyance
Action or to cause a termination or dissolution of such Partnership because of
such Conveyance Action. Each Contributor further covenants that such Contributor
will take no action to enjoin, or seek damages resulting from, any Conveyance
Action by any holder of a direct or indirect interest in a Partnership or a
Property in which a Partnership Interest of such Contributor represents a direct
or indirect interest.
(e) The Waivers and Consents contained in this Section shall terminate
upon the termination of this Agreement, except as to transactions completed
hereunder prior to termination.
ARTICLE 6.
POWER OF ATTORNEY
Section 6.1 Grant of Power of Attorney.
Each Contributor hereby irrevocably appoints the Operating
Partnership (or its designee) and any successor thereof from time to time (such
Operating Partnership or designee or any such successor of any of them acting in
his, her or its capacity as attorney-in-fact pursuant hereto, the
"Attorney-In-Fact") as the true and lawful attorney-in-fact and agent of such
Contributor, to act in the name, place and stead of such Contributor to make,
execute, acknowledge and deliver all such other deeds (including grant deeds if
applicable), assignments, contracts, orders, receipts, notices, requests,
instructions, certificates, consents, letters and other writings (including
without limitation the execution of any Closing Documents or other documents
relating to the acquisition by the Operating Partnership of such Contributor's
Partnership Interests, the Contributed Assets, the Assumed Agreements or the
Assumed Liabilities including, but not limited to, any registration rights
agreements and any lock-up
14
agreements), to provide information to the Securities and Exchange Commission
and others about the transactions contemplated hereby and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole discretion
may consider necessary or proper in connection with or to carry out the
transactions contemplated by this Agreement, as fully as could such Contributor
if personally present and acting (the "Power of Attorney"). Further, each
Contributor hereby grants to Attorney-in-Fact a proxy (the "Proxy") to vote such
Contributor's Partnership Interests on any matter related to the Formation
Transactions presented to any of the Partnerships' partners for a vote,
including, but not limited to, the transfer of interests in any Partnership by
the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of such Contributor, by operation of law or
by the occurrence of any other event or events, and if any other such act or
events shall occur before the completion of the transactions contemplated by
this Agreement, the Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such other act or events had
not occurred and regardless of notice thereof. Each Contributor agrees that, at
the request of Operating Partnership it will promptly execute and deliver to the
Operating Partnership a separate power of attorney and proxy on the same terms
set forth in this Article 6, such execution to be witnessed and notarized, and
in recordable form (if necessary). Each Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
Each Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Agreement.
Section 6.2 Limitation on Liability.
It is understood that the Attorney-in-Fact assumes no responsibility
or liability to any person by virtue of the Power of Attorney or Proxy granted
by each Contributor hereby. The Attorney-in-Fact makes no representations with
respect to and shall have no responsibility for the Formation Transactions or
the Public Offering, or the acquisition of the Partnership Interests, the
Contributed Assets or the Assumed Agreements by the Operating Partnership or the
assumption of the Assumed Liabilities by the Operating Partnership and shall not
be liable for any error or judgment or for any act done or omitted or for any
mistake of fact or law except for its own gross negligence or bad faith. Each
Contributor agrees to indemnify the Attorney-in-Fact for and to hold the
Attorney-in-Fact harmless against any loss, claim, damage or liability
(including reasonably attorneys' fees) incurred on its part arising out of or in
connection with it acting as the Attorney-in-Fact under the Power of Attorney or
Proxy created by such Contributor hereby, as well as the cost and expense of
investigating and defending against any such loss, claim, damage or liability,
except to the extent such loss, claim, damage or liability is due to the gross
negligence or bad faith of the Attorney-in-Fact. Each Contributor agrees that
the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to such Contributor hereunder, release, amend
or modify any other power of attorney or proxy granted by any other person under
any related agreement.
Section 6.3 Ratification; Third Party Reliance.
Each Contributor hereby ratifies and confirms that the
Attorney-in-Fact shall lawfully do or cause to be done by virtue of the exercise
of the powers granted unto it by such Contributor under this
15
Article 6, and each Contributor authorizes the reliance of third parties on this
Power of Attorney and waives its rights, if any, as against any such third party
for its reliance hereon.
ARTICLE 7.
MISCELLANEOUS
Section 7.1 Dispute Resolution.
The parties hereby agree that, in order to obtain prompt and
expeditious resolution of any disputes under this Agreement, each claim, dispute
or controversy of whatever nature, arising out of, in connection with, or in
relation to the interpretation, performance or breach of this Agreement (or any
other agreement contemplated by or related to this Agreement or any other
agreement between the parties), including without limitation any claim based on
contract, tort or statute, or the arbitrability of any claim hereunder (an
"Arbitrable Claim"), shall, subject to Section 7.1(i) below, be settled by final
and binding arbitration conducted in Los Angeles, California. The arbitrability
of any Arbitrable Claims under this Agreement shall be resolved in accordance
with a two-step dispute resolution process administered by Judicial Arbitration
& Mediation Services, Inc. ("JAMS") involving, first, mediation before a retired
judge from the JAMS panel, followed, if necessary, by final and binding
arbitration before the same, or if requested by either party, another JAMS
panelist. Such dispute resolution process shall be confidential and shall be
conducted in accordance with California Evidence Code Section 1119.
(i) Mediation. In the event any Arbitrable Claim is not resolved by
an informal negotiation between the parties within fifteen (15) days after
either party receives written notice that a Arbitrable Claim exists, the matter
shall be referred to the Los Angeles, California office of JAMS, or any other
office agreed to by the parties, for an informal, non-binding mediation
consisting of one or more conferences between the parties in which a retired
judge will seek to guide the parties to a resolution of the Arbitrable Claims.
The parties shall select a mutually acceptable neutral arbitrator from among the
JAMS panel of mediators. In the event the parties cannot agree on a mediator,
the Administrator of JAMS will appoint a mediator. The mediation process shall
continue until the earliest to occur of the following: (i) the Arbitrable Claims
are resolved, (ii) the mediator makes a finding that there is no possibility of
resolution through mediation, or (iii) thirty (30) days have elapsed since the
Arbitrable Claim was first scheduled for mediation.
(ii) Arbitration. Should any Arbitrable Claims remain after the
completion of the mediation process described above, the parties agree to submit
all remaining Arbitrable Claims to final and binding arbitration administered by
JAMS in accordance with the then existing JAMS Arbitration Rules. Neither party
nor the arbitrator shall disclose the existence, content, or results of any
arbitration hereunder without the prior written consent of all parties. Except
as provided herein, the California Arbitration Act shall govern the
interpretation, enforcement and all proceedings pursuant to this subparagraph.
The arbitrator is without jurisdiction to apply any substantive law other than
the laws selected or otherwise expressly provided in this Agreement. The
arbitrator shall render an award and a written, reasoned opinion in support
thereof. Such award may include reasonable attorneys' fees to the prevailing
party. Judgment upon the award may be entered in any court having jurisdiction
thereof.
(iii) Costs. The parties shall bear their respective costs incurred
in connection with the procedures described in this Section 7.1, except that the
parties shall equally share the fees and expenses of the mediator or arbitrator
and the costs of the facility for the hearing.
(iv) Survivability. This dispute resolution process shall survive
the termination of this Agreement. The parties expressly acknowledge that by
signing this Agreement, they are giving up their respective right to a jury
trial.
16
Section 7.2 Further Assurances.
Each Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
Section 7.3 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
Section 7.4 Governing Law.
This Agreement shall be governed by the internal laws of the State
of California, without regard to the choice of laws provisions thereof.
Section 7.5 Amendment; Waiver.
Any amendment hereto shall be in writing and signed by all parties
hereto. No waiver of any provisions of this Agreement shall be valid unless in
writing and signed by the party against whom enforcement is sought.
Section 7.6 Entire Agreement.
This Agreement and all related agreements referred to herein
constitute the entire agreement and supersede conflicting provisions set forth
in all other prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
Section 7.7 Assignability.
This Agreement shall be binding upon, and shall be enforceable by
and inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and assigns; provided, however, that this
Agreement may not be assigned (except by operation of law) by any party without
the prior written consent of the other parties, and any attempted assignment
without such consent shall be void and of no effect, except that the Operating
Partnership, may assign its rights and obligations hereunder to an affiliate.
Section 7.8 Titles.
The titles and captions of the Articles, Sections and paragraphs of
this Agreement are included for convenience of reference only and shall have no
effect on the construction or meaning of this Agreement.
Section 7.9 Third Party Beneficiary.
Except as may be expressly provided in any other agreement to which
the Contributors are a party, no provision of this Agreement is intended, nor
shall it be interpreted, to provide or create any third party beneficiary rights
or any other rights of any kind in any customer, affiliate, stockholder,
partner, member, director, officer or employee of any party hereto or any other
person or entity.
17
Section 7.10 Severability.
If any provision of this Agreement, or the application thereof, is
for any reason held to any extent to be invalid or unenforceable, the remainder
of this Agreement and application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
Section 7.11 Equitable Remedies.
Each Contributor agrees that irreparable damage would occur to the
Operating Partnership in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Operating Partnership shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
by such Contributor and to enforce specifically the terms and provisions hereof
in any federal or state court located in California (as to which the parties
agree to submit to jurisdiction for the purposes of such action), this being in
addition to any other remedy to which the Operating Partnership is entitled
under this Agreement or otherwise at law or in equity. Notwithstanding the
foregoing, this Agreement shall not bar any equitable remedies available to
Contributor with respect to the terms and provisions contained in Exhibit F.
Section 7.12 Confidentiality.
All press releases or other public communications of any kind
relating to the Public Offering or the transactions contemplated herein, and the
method and timing of release for publication thereof, will be subject to the
prior written approval of the Operating Partnership.
Section 7.13 Time Of The Essence.
TIME IS OF THE ESSENCE with respect to all obligations of each
Contributor under this Agreement.
Section 7.14 Reliance.
Each party to this Agreement acknowledges and agrees that it is not
relying on tax advice or other advice from the other party to this Agreement,
and that it has or will consult with its own advisors.
Section 7.15 Survival.
It is the express intention and agreement of the parties hereto that
the representations, warranties and covenants of each Contributor and the
Operating Partnership set forth in this Agreement shall survive the consummation
of the transactions contemplated hereby. The provisions of this Agreement that
contemplate performance after the Closing and the obligations of the parties not
fully performed at the Closing shall survive the Closing and shall not be deemed
to be merged into or waived by the instruments of Closing.
18
Section 7.16 Notice.
Any notice to be given hereunder by any party to the other shall be
given in writing by either (i) personal delivery, (ii) registered or certified
mail, postage prepaid, return receipt requested, or (iii) facsimile transmission
(provided such facsimile is followed by an original of such notice by mail or
personal delivery as provided herein), and any such notice shall be deemed
communicated as of the date of delivery (including delivery by overnight
courier, certified mail or facsimile). Mailed notices shall be addressed as set
forth below, but any party may change the address set forth below by written
notice to other parties in accordance with this paragraph.
To any Contributor:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
c/o Maguire Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To the Operating Partnership:
▇▇▇▇▇▇▇ Properties, L.P.
c/o Maguire Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ Lammas
[signature page to follow]
19
IN WITNESS WHEREOF, the parties have executed this Contribution
Agreement as of the date first written above.
"OPERATING PARTNERSHIP"
▇▇▇▇▇▇▇ Properties, L.P.,
a Maryland limited partnership
By: ▇▇▇▇▇▇▇ Properties, Inc.,
a Maryland corporation
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Chief Financial Officer
"CONTRIBUTOR"
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
▇▇▇▇▇▇▇ PARTNERS, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS SCS, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS BGHS, LLC,
a California limited liability company
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
S-1
▇▇▇▇▇▇▇ PARTNERS PASADENA GEN-PAR, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS DEVELOPMENT, LTD.,
a California limited partnership
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS -- WFC HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇/▇▇▇▇▇▇ PARTNERS INVESTMENTS,
a California limited partnership
(which intends to convert to ▇▇▇▇▇▇▇
Partners - Investments, LLC, a California
limited liability company prior to or
contemporaneously with the Closing)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
"OTHER PARTY"
▇▇▇▇▇▇▇ PARTNERS -- HOPE PLACE, LTD.,
a California limited partnership
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
S-2
EXHIBIT D
TO
CONTRIBUTION AGREEMENT
REPRESENTATIONS, WARRANTIES AND INDEMNITIES OF CONTRIBUTOR
ARTICLE 1 -- ADDITIONAL DEFINED TERMS
For purposes of this Exhibit D, the following terms have the meanings
set forth below. Terms which are not defined below shall have the meaning set
forth for those terms as defined in the Agreement to which this Exhibit D is
attached:
Actions: Means all actions, litigations, complaints, charges,
accusations, investigations, petitions, suits, arbitrations, mediations or other
proceedings, whether civil or criminal, at law or in equity, or before any
arbitrator or Governmental Entity.
Agreement: Means the Contribution Agreement to which this Exhibit D is
attached.
Disclosure Schedule: Means that disclosure schedule attached as Appendix
A to the Agreement.
Entity: Means each Partnership and each partnership, limited liability
company or other legal entity that is a direct or indirect subsidiary of a
Contributor and that directly or indirectly owns any Property.
Environmental Law: Means all applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, demands, approvals, authorizations
and similar items of any Governmental Entity and all applicable judicial,
administrative and regulatory decrees, judgments and orders relating to the
protection of human health or the environment as in effect on the Closing Date,
including but not limited to those pertaining to reporting, licensing,
permitting, investigation, removal and remediation of Hazardous Materials,
including without limitation: (x) the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Air
Act (42 U.S.C. Section 7401 et seq.), the Federal Water Pollution Control Act
(33 U.S.C. Section 1251), the Safe Drinking Water Act (42 U.S.C. 300f et seq.),
the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), the Endangered
Species Act (16 U.S.C. 1531 et seq.), the Emergency Planning and Community
Right-to-Know Act of 1986 (42 U.S.C. 11001 et seq.), and (y) applicable state
and local statutory and regulatory laws, statutes and regulations pertaining to
Hazardous Materials.
Environmental Permits: Means any and all licenses, certificates,
permits, directives, requirements, registrations, government approvals,
agreements, authorizations, and consents that are required under or are issued
pursuant to any Environmental Laws.
FIRPTA: Means Foreign Investment in Real Estate Property Tax Act.
Governmental Entity: Means any governmental agency or quasi-governmental
agency, bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government, whether
federal, state or local, domestic or foreign.
Hazardous Material: Means any substance:
Exhibit D-1
(i) the presence of which requires investigation or remediation under
any Environmental Law action or policy, administrative request or civil
complaint under the foregoing or under common law; or
(ii) which is controlled, regulated or prohibited under any
Environmental Law as in effect as of the Closing Date, including the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.) and the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.); or
(iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and as of the
Closing Date is regulated by any Governmental Entity; or
(iv) the presence of which on, under or about, a Property poses a hazard
to the health or safety of persons on or about such Property; or
(v) which contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls (PCBs) or asbestos or
asbestos-containing materials or urea formaldehyde foam insulation; or
(vi) radon gas.
Indemnifying Party: Means any party required to indemnify any other
party under Article 3.2 of this Exhibit D.
Knowledge: Means, with respect to any representation or warranty so
indicated, the actual knowledge, without inquiry or duty of inquiry, of ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ III, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ Lammas, ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇.
Liens: Means, with respect to any real and personal property, all
mortgages, pledges, liens, options, charges, security interests, mortgage deed,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, purchase rights, rights of others, licenses, easements, voting
agreements, liabilities or claims of any kind or nature whatsoever, direct or
indirect, including, without limitation, interests in or claims to revenues
generated by such property.
Partnership Units: Shall have the meaning set forth in the OP Agreement.
Permitted Liens: Means
(a) Liens securing taxes, the payment of which is not delinquent or the
payment of which is actively being contested in good faith by appropriate
proceedings diligently pursued and which, if material in amount, are disclosed
in the Prospectus (including, without limitation, any matters for which a
reserve has been established as reflected in the pro forma financial statements
contained in the Prospectus);
(b) Zoning laws and ordinances applicable to the Properties which are
not violated by the existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's and
mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations arising in the ordinary course of
business not more than 60 days past due or which are being contested in
Exhibit D-2
good faith by appropriate proceedings diligently pursued and which, if material
in amount, are disclosed in the Prospectus (including, without limitation, any
matters for which a reserve has been established as reflected in the pro forma
financial statements contained in the Prospectus);
(d) non-exclusive easements for public utilities that do not have a
material adverse effect upon, or interfere with the use of, the Properties; and
(e) any exceptions contained in the Preliminary Title Reports identified
in the Disclosure Schedule (collectively, the "Preliminary Title Reports") for
purposes of the conditions to closing in Section 2.1(a) of the Agreement, and
any exceptions contained in the Title Policies for all other purposes under the
Agreement or this Exhibit D.
Person: Means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
Prospectus: Means the Company's final prospectus, as delivered to
investors in the Public Offering (including, without limitation, the pro forma
financial statements contained therein and any matters for which a reserve has
been established as reflected in such pro forma financial statements).
REIT Shares: Shall have the meaning set forth in the Partnership
Agreement.
Release: Shall have the same meaning as the definition of "release" in
the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) at 42 U.S.C. Section 9601(22), but not including the exclusions
identified in that definition, at subparts (A) through (D).
ARTICLE 2 -- REPRESENTATIONS AND WARRANTIES
OF CONTRIBUTOR
Except as set forth in the Disclosure Schedule or referred to in the
Prospectus (including, without limitation, any matters for which a reserve has
been established as reflected in the pro forma financial statements contained in
the Prospectus), each Contributor jointly and severally represents and warrants
to the Operating Partnership as set forth below in this Article 2, which
representations and warranties are (i) true and correct as of the date hereof
and will (except to the extent relating to a specified date) be true and correct
as of the date of Closing, and (ii) only made as to the Participating Properties
and do not relate to the "option properties" or "excluded properties" as
described in the Prospectus:
2.1 Organization; Authority; Qualification. Each Contributor if a
natural person, has the legal capacity to enter the Agreement, each agreement
contemplated thereby and to carry out the transactions contemplated thereby; if
not a natural person, is duly formed, validly existing and in good standing (to
the extent applicable) under the laws of the jurisdiction of its formation. Each
Contributor has all requisite power and authority to enter the Agreement, each
agreement contemplated thereby and to carry out the transactions contemplated
thereby, and own, lease or operate its property and to carry on its business as
presently conducted and, to the extent required under applicable law, is
qualified to do business and is in good standing in each jurisdiction in which
the nature of its business or the character of its property make such
qualification necessary. Each Entity is duly formed, validly existing and in
good standing (to the extent applicable) under the laws of the jurisdiction of
formation and each Entity has the requisite power and authority to carry on its
business as it is presently conducted and, to the extent required under
applicable law, is qualified to do business in each jurisdiction in which the
nature of its business or the character of its property make such qualification
necessary, except where failure to be so qualified would not have a material
adverse effect on the assets, business or financial condition of such
Exhibit D-3
Entity. The general partner, managing member or administrative member of each
Entity has made available to the Operating Partnership true and correct copies
of each Entity's organizational documents, with all amendments as in effect on
the date of this Agreement (collectively, the "Organizational Documents"). The
Disclosure Schedule lists each Entity, its jurisdiction of formation and each
partner, member or other equity owner of such Entity as of the date hereof. The
Disclosure Schedule lists the percentage interest of third party holders of
interests (direct or indirect) in the ▇▇▇▇▇ Fargo Tower and Glendale Center as
of the date hereof.
2.2 Due Authorization. The execution, delivery and performance of the
Agreement by each Contributor has been duly and validly authorized by all
necessary action of each Contributor. This Agreement and each agreement,
document and instrument executed and delivered by or on behalf of each
Contributor pursuant to this Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of each
Contributor, each enforceable against each Contributor in accordance with its
terms, as such enforceability may be limited by bankruptcy or the application of
equitable principles.
2.3 Consents and Approvals. Except as shall have been satisfied prior to
the Closing Date and, for informational purposes, as set forth in the Disclosure
Schedule, as of the date hereof, no consent, waiver, approval or authorization
of any third party or governmental authority or agency is required to be
obtained by any Contributor or any Entity in connection with the execution,
delivery and performance of the Agreement and the transactions contemplated
hereby, except for those consents, waivers, approvals or authorizations, the
failure of which to obtain would not have a material adverse effect on the
assets, business, financial condition and results of operation of the Company,
the Operating Partnership and their subsidiaries, taken as a whole (a "Material
Adverse Effect").
2.4 Ownership of the Partnership Interests; Contributed Assets. The
Partnership Interest and Property Interests (if any) listed on Exhibit A
attached hereto constitute all of the issued and outstanding interests owned
(directly or indirectly) by the Contributors in the Partnerships, the Entities
and the Properties. Except as set forth in the Disclosure Schedule, each
Contributor is the sole owner of its Partnership Interests or, if applicable,
the Contributed Assets, beneficially and of record free and clear of any Liens
of any nature and has full power and authority to convey the Partnership
Interests or, if applicable, the Contributed Assets, free and clear of any
Liens, and, upon delivery of consideration for such Partnership Interests or, if
applicable, the Contributed Assets as herein provided, the Operating Partnership
will acquire good and valid title thereto, free and clear of any Liens except
Liens created in favor of the Operating Partnership by the transactions
contemplated hereby. Except as set forth in the Disclosure Schedule or for those
to be acquired by a Contributor or the Operating Partnership, or relinquished,
in connection with the Formation Transactions, there are no rights to purchase,
subscriptions, warrants, options, conversion rights, preemptive rights,
agreements, instruments or similar understandings of any kind outstanding (i)
relating to the Partnership Interests, any Property Interests, any interest in
any Entity, or if applicable, the Contributed Assets, or (ii) to purchase,
transfer or to otherwise acquire, or to in any way encumber, any of the
interests which comprise the Partnership Interests, any Property Interests, any
interest in any Entity, or, if applicable, the Contributed Assets, or any
securities or obligations of any kind convertible into any of the interests
which comprise the Partnership Interests, any Property Interests, any interest
in any Entity, or, if applicable, the Contributed Assets, or other equity
interests or profit participation of any kind in any of the Entities (other than
in connection with management agreements). Except as contemplated in connection
with the Formation Transactions or as permitted by Section 4.1(b)(ii) of the
Agreement, none of the Contributors will consent or participate in or in any way
cause the transfer of any Property Interest, Partnership Interest, any interest
in any Entity, or, if applicable, the Contributed Assets prior to the Closing.
Except as set forth in the Disclosure Schedule or the Prospectus, none of the
Contributors has an equity interest, either direct or indirect, in the
Properties, except for the Partnership Interests which are the subject of this
Agreement. Except as
Exhibit D-4
contemplated in the Formation Transactions or as otherwise disclosed in the
Disclosure Schedule, none of the Contributors has any commitment or legal
obligation, absolute or contingent, to any other Person other than the Operating
Partnership to sell, assign, transfer or effect a sale of any right, title or
interest in or to any of the Contributed Assets, Partnership Interests, Property
Interests, or interests in any Entity.
2.5 No Violation. Except as shall have been cured, consented to or
waived in writing by the Operating Partnership prior to the Closing Date or as
set forth in the Disclosure Schedule, none of the execution, delivery or
performance of the Agreement, any agreement contemplated thereby and the
transactions contemplated hereby and thereby does or will, with or without the
giving of notice, lapse of time, or both, (i) violate, conflict with, result in
a breach of, or constitute a default under or give to others any right of
termination, acceleration, cancellation or other right adverse to the Operating
Partnership of (A) the organizational documents, including the charters and
bylaws, if any, of any Contributor or any of the Entities, (B) any agreement,
document or instrument to which any Contributor is a party or by which any
Contributor, the Partnership Interests, Property Interests (if any), any Entity
or the Contributed Assets are bound or (C) to Contributors' Knowledge, any term
or provision of any judgment, order, writ, injunction, or decree, or require any
approval, consent or waiver of, or make any filing with, any person or
governmental or regulatory authority or foreign, federal, state, local or other
law binding on any Contributor or the Entities or by which any Contributor,
Entity or any of their assets or properties (including the Contributed Assets)
are bound or subject; provided in the case of (B) and (C) above, unless any such
violation, conflict, breach or default would not have a Material Adverse Effect
or (ii) result in the creation of any Lien upon any of the Partnership
Interests, the Contributed Assets, or any Entity or any interests therein.
Except as shall have been cured, consented to or waived prior to the Closing
Date or as set forth in the Disclosure Schedule, none of the Contributors or, to
Contributors' Knowledge, the other Entities, is in violation of the
Organizational Documents.
2.6 Non-Foreign Status. Each Contributor is a United States person (as
defined in Section 7701(a)(30) of the Code), and is, therefore, not subject to
the provisions of the Code relating to the withholding of sales proceeds to
foreign persons, and is not subject to any state withholding requirements. Each
Contributor will provide affidavits at the Closing to this effect as provided
for in Section 2.3(g) of the Agreement.
2.7 Withholding. Each Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions, including without limitation
those referred to in Section 2.6 above. If any Contributor fails to provide such
certificates or affidavits, the Operating Partnership may withhold a portion of
any payments otherwise to be made to such Contributor as required by the Code or
applicable state law.
2.8 Investment Purposes. Each Contributor acknowledges his, her or its
understanding that the offering and issuance of the Partnership Units to be
acquired pursuant to the Agreement are intended to be exempt from registration
under the Securities Act of 1933, as amended and the rules and regulations in
effect thereunder (the "Act") and that the Operating Partnership's reliance on
such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Contributor contained herein. In
furtherance thereof, each Contributor represents and warrants to the Company as
follows:
2.8.1 Investment. Each Contributor is acquiring the Partnership
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. Each
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the Partnership Units unless (i) the
Transfer is pursuant to an effective registration statement under the Act and
Exhibit D-5
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for each Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership, to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws. The term "Transfer" shall not include any redemption of the Partnership
Units or exchange of the Partnership Units for REIT Shares pursuant to Section
8.6 of the OP Agreement. Notwithstanding the foregoing, no Transfer shall be
made unless it is permitted under the OP Agreement.
2.8.2 Knowledge. Each Contributor is knowledgeable, sophisticated
and experienced in business and financial matters; each Contributor has
previously invested in securities similar to the Partnership Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Agreement. Each Contributor is able to bear the economic
risk of holding the Partnership Units for an indefinite period and is able to
afford the complete loss of his, her or its investment in the Partnership Units;
each Contributor has received and reviewed all information and documents about
or pertaining to the Company, the Operating Partnership, the business and
prospects of the Company and the Operating Partnership and the issuance of the
Partnership Units as each Contributor deems necessary or desirable, has had cash
flow and operations data for the Properties made available by the Operating
Partnership upon request and has been given the opportunity to obtain any
additional information or documents and to ask questions and receive answers
about such information and documents, the Company, the Operating Partnership,
the Properties, the business and prospects of the Company and the Operating
Partnership and the Partnership Units which each Contributor deems necessary or
desirable to evaluate the merits and risks related to his, her or its investment
in the Partnership Units and to conduct its own independent valuation of the
Properties; and each Contributor understands and has taken cognizance of all
risk factors related to the purchase of the Partnership Units. Each Contributor
is a sophisticated real estate investor. Each Contributor is relying upon its
own independent analysis and assessment (including with respect to taxes), and
the advice of each Contributor's advisors (including tax advisors), and not upon
that of the Operating Partnership or any of the Operating Partnership's
affiliates, for purposes of evaluating, entering into, and consummating the
transactions contemplated by this Agreement.
2.8.3 Holding Period. Each Contributor acknowledges that he, she or
it has been advised that (i) the Partnership Units and the common stock of the
Company into which the Partnership Units may be exchanged in certain
circumstances (the "Common Stock") must be held indefinitely, and each
Contributor must continue to bear the economic risk of the investment in the
Partnership Units (and any Common Stock that might be exchanged therefor),
unless they are subsequently registered under the Act or an exemption from such
registration is available (it being understood that the Operating Partnership
has no intention of so registering the Partnership Units), (ii) a restrictive
legend in the form hereafter set forth shall be placed on the certificates
representing the Partnership Units (and any Common Stock that might be exchanged
therefor), and (iii) a notation shall be made in the appropriate records of the
Operating Partnership (and the Company) indicating that the Partnership Units
(and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.8.4 Accredited Investor. Each Contributor is an "accredited
investor" (as such term is defined in Rule 501 (a) of Regulation D under the
Act). Each Contributor has previously provided the Operating Partnership with a
duly executed Accredited Investor Questionnaire. No event or circumstance has
occurred since delivery of such Questionnaire to make the statements contained
therein false or misleading.
Exhibit D-6
2.8.5 Legending. Each certificate representing the Partnership Units
(and any Common Stock that might be exchanged therefor) shall bear the following
legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION,
UNLESS THE TRANSFEROR DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE
PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED
WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS;
In addition, the Common Stock for which the Partnership Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP
AND TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF
ITS STATUS AS A REAL ESTATE INVESTMENT TRUST ("REIT") UNDER THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUBJECT
TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED
IN THE CORPORATION'S ARTICLES OF AMENDMENT AND RESTATEMENT, (i)
NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE
CORPORATION'S COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY
NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE
OUTSTANDING COMMON STOCK OF THE CORPORATION; (ii) NO PERSON MAY
BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF COMMON STOCK THAT
WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD" UNDER
SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (iii) NO PERSON MAY TRANSFER
SHARES OF COMMON STOCK IF SUCH TRANSFER WOULD RESULT IN THE
CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100
PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR
ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF COMMON
STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY
NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER
OR OWNERSHIP ARE VIOLATED, THE SHARES OF COMMON STOCK
REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE
TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE
BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM SHARES
UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS
DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY
VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE
OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION
OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL
TERMS IN THIS LEGEND THAT ARE DEFINED IN THE ARTICLES OF
AMENDMENT AND RESTATEMENT OF THE CORPORATION SHALL HAVE THE
MEANINGS ASCRIBED TO THEM IN THE ARTICLES OF AMENDMENT AND
RESTATEMENT OF THE CORPORATION, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON
TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF
SHARES OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE.
Exhibit D-7
REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL OFFICE.
2.9 No Brokers. Except as set forth in the Disclosure Schedule and other
than in connection with incentive arrangements with an employee, no Contributor
nor any of such Contributor's respective officers, directors or employees, to
the extent applicable, has employed or made any agreement with any broker,
finder or similar agent or any person or firm which will result in the
obligation of the Operating Partnership or any of its affiliates to pay any
finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Agreement and each Contributor shall
indemnify and hold harmless the Operating Partnership for all costs and expenses
(including reasonable attorneys' fees) incurred by the Operating Partnership as
a result of a breach of this representation. The provisions of this Section 2.9
shall survive the expiration or sooner termination of this Agreement.
2.10 Solvency. Each Contributor and Entity has been and will be solvent
at all times prior to and immediately following the transfer of the Partnership
Interests and the Contributed Assets to the Operating Partnership.
2.11 Taxes. To the Contributors' Knowledge, the transactions
contemplated hereby will not result in any income tax liability to any Entity,
the Company or the Operating Partnership, and no tax lien or other charge exists
or will exist upon consummation of the transactions contemplated hereby with
respect to any Property, except such tax liens for which the tax is not due and
has been properly reserved for payment by the Entities or tax liens or other
charges which individually or in the aggregate would not have a Material Adverse
Effect. The copies of the real property tax bills for each Property for the
current tax year which have been furnished or made available to the Operating
Partnership are true and correct copies of all of the tax bills for such tax
year actually received by any Holder or such Holder's agents for the Property.
For federal income tax purposes, each Entity is, and at all times during its
existence has been, a partnership or limited liability company taxable as a
partnership (rather than an association or a publicly traded partnership taxable
as a corporation). Each Entity has timely and properly filed all tax returns
required to be filed by it and has timely paid all taxes required to be paid by
it. No Entity has requested any extension of time or agreed to any extension of
the applicable statue of limitations within which to file any pending tax
returns. Except as may be set forth in the Disclosure Schedule, none of the tax
returns filed by any of the Entities is the subject of a pending or ongoing
audit, and no federal, state, local or foreign taxing authority has asserted any
tax deficiency or other assessment against a Property or an Entity.
2.12 Litigation. Except as set forth in the Disclosure Schedule, and
except for Actions covered by the policies of insurance described in Section
2.29 below, there is no Action, litigation, claim or other proceeding, either
judicial or administrative (including, without limitation, any governmental
action or proceeding), pending or, to Contributors' Knowledge, overtly
threatened in the last twelve months, affecting all or any portion of the
Contributors' Partnership Interests, any Property Interests, the Contributed
Assets, the Entities or the Contributors' ability to consummate the transactions
contemplated hereby. Contributors have no Knowledge of any outstanding order,
writ, injunction or decree of any court, Governmental Entity or arbitration
against or affecting all or any portion of its Partnership Interests, Property
Interests (if any), the Contributed Assets, or any Entity which in any such case
would impair the Contributors ability to enter into and perform all of its
obligations under the Agreement or would have a Material Adverse Effect.
2.13 NASD Affiliation. Each Contributor represents severally that
neither it nor any affiliate of such Contributor is a member, affiliate of a
member or person associated with a member of the National Association of
Securities Dealers, Inc. ("NASD"). Such Contributor further represents severally
Exhibit D-8
that neither it nor any of its affiliates owns any stock or other securities of
any NASD member not purchased in the open market, or has made any outstanding
subordinated loans to a NASD member. (A company or natural person is presumed to
control a member of the NASD and is therefore presumed to constitute an
affiliate of such member if the Company or person is the beneficial owner of 10%
or more of the outstanding securities of a member which is a corporation.
Additionally, a natural person is presumed to control a member of the NASD and
is therefore presumed to constitute an affiliate of such a member if such person
has the power to direct or cause the direction of the management or policies of
such member.)
2.14 Compliance With Laws. In connection with the operation of the
Properties, to the Contributors' Knowledge, except as set forth in the
Disclosure Schedule or in the Prospectus, the Properties have been maintained
and on the date hereof are, and as of the Closing Date will be, maintained and
substantially comply in all material respects with all applicable laws,
ordinances, rules, regulations, codes, orders and statutes (including, without
limitation, those currently relating to fire safety, conservation, parking,
Americans with Disabilities Act, zoning and building laws) whether federal,
state or local, foreign, statutory or common, and neither the Contributors nor,
to the Contributors' Knowledge, any third party have been informed in writing of
any material violation of any such laws, rules or regulations, or that any
investigation has been commenced or is contemplated respecting any such possible
violation. Compliance with Environmental Laws is not addressed by this Section
2.14, but rather solely by Section 2.18.
2.15 Eminent Domain. There is no existing or, to the Contributors'
Knowledge, proposed or threatened condemnation, eminent domain or similar
proceeding, or private purchase in lieu of such a proceeding, which would affect
all or any portion of the Properties in any material respect.
2.16 Licenses and Permits. To Contributors' Knowledge, except as set
forth in the Disclosure Schedule, all notices, licenses, permits, certificates
(including certificates of occupancy), rights, privileges, franchises and
authority required in connection with the construction, use, occupancy,
management, leasing and operation of the Properties have been obtained, are in
full force and effect, are in good standing and (to the extent required pursuant
to the transactions contemplated hereby) are assignable to the Operating
Partnership, except for those licenses, permits and certificates, the failure of
which to obtain or maintain in good standing or be assignable, would not have a
material adverse effect on any Property. To the Contributors' Knowledge, neither
the Contributors, nor the Participating Partnerships, nor any Entity, nor any
other third party has taken any action that would (or failed to take any action
the omission of which would) result in the revocation, suspension or termination
of such notices, licenses, permits, certificates (including certificates of
occupancy), rights, privileges, franchises and authority that would have a
material adverse effect on any Property, nor has any of them received any
written notice of violation from any Governmental Entity or written notice of
the intention of any entity to revoke any of them, that in each case has not
been cured or otherwise resolved to the satisfaction of such Governmental
Entity.
2.17 Real Property.
(a) None of the Contributors, the Partnerships, nor, to
Contributors' Knowledge, except as set forth in the Disclosure Schedule, any
other party to any material agreement affecting the Properties, has given or
received any notice of any uncured default with respect to any material
agreement affecting the Properties which would have a material adverse effect on
one or more Properties, and, no event has occurred or, to the Contributors'
Knowledge, is threatened, which through the passage of time or the giving of
notice, or both, would constitute a material default thereunder or would cause
the acceleration of any material obligation of any party thereto or the creation
of a Lien upon any Property, except for Permitted Liens. For purposes of this
Section 2.17, the term "material
Exhibit D-9
agreement" shall be defined with reference to the Property to which such
agreement relates, and shall include, without limitation, participation
agreements, development agreements, reciprocal easement agreements and any
agreement which is not terminable by the Operating Partnership upon 90 days
prior written notice and which is for a contract amount greater than $100,000
per annum. To the Contributors' Knowledge, such agreements are valid and binding
and in full force and effect, have not been materially amended, modified or
supplemented since such time as such agreements were made available to the
Operating Partnership, except for such amendments, modifications and supplements
delivered or made available to the Operating Partnership.
(b) To Contributors' Knowledge, except as set forth in the
Disclosure Schedule or in the Prospectus, the Entity that owns fee title to an
underlying Property as described in the Preliminary Title Reports has insurable
fee simple title to such Property.
2.18 Environmental Compliance.
(a) To the Contributors' Knowledge, except as may be disclosed in
the Disclosure Schedule or the environmental reports listed therein (the
"Environmental Reports") (true and correct copies of which have been made
available to the Operating Partnership), the Properties are currently in
compliance with all Environmental Laws and Environmental Permits. The
Contributors have not received any written notice from the United States
Environmental Protection Agency or any other federal, state, county or municipal
entity or agency that regulates Hazardous Materials or public health risks or
other environmental matters or any other private party or Person claiming any
violation of, or requiring compliance with, any Environmental Laws or
Environmental Permits or demanding payment or contribution for any Release or
other environmental damage in, on, under, or upon any of the Properties. To the
Contributors' Knowledge, no investigation or litigation with respect to
Hazardous Materials located in, on, under or upon any of the Properties is
pending or has been overtly threatened in the last twelve months by any
Governmental Entity or any third party. To Contributors' Knowledge, except as
may be disclosed in the Disclosure Schedule or the Environmental Reports, no
environmental conditions exist at, on, under, upon or affecting the Properties
or any portion thereof that would reasonably be likely to result in any material
claim, liability or obligation under any Environmental Laws or Environmental
Permit or any material claim by any third party.
(b) To the Contributors' Knowledge, except as may be disclosed in
the Disclosure Schedule or the Environmental Reports, (i) there are no
underground storage tanks, PCB-containing equipment, asbestos containing
materials, lead based paints, or dry cleaning facilities situated in, on, under,
upon or affecting any of the Properties, (ii) there has not been any Release of
any reportable quantities of Hazardous Materials at the Properties in violation
of any Environmental Laws or Environmental Permits, and (iii) the Partnerships
have not stored, transported, disposed of or treated, or arranged for the
transportation, disposal or treatment of, any Hazardous Materials from any or to
any of the Properties or any portion thereof except in compliance with all
Environmental Laws.
2.19 Trademarks and Tradenames; Proprietary Rights.
(a) There are no actions or other judicial or administrative
proceedings involving any Contributor, the Partnerships, or the Properties
pending, or to Contributors' Knowledge, threatened in the last twelve months,
that concern any copyrights, copyright application, trademarks, trademark
registrations, trade names, service marks, service ▇▇▇▇ registrations, trade
names and trade name registrations or any trade secrets being transferred to the
Operating Partnership hereunder (the "Proprietary Rights"). There are no patents
or patent applications relating to the operations of the Properties as conducted
prior to the Closing.
Exhibit D-10
(b) Except as would not have a Material Adverse Effect, each
applicable Contributor has the right and authority to use the Proprietary Rights
necessary in connection with the operation of the Properties in the manner in
which it is currently used, and to convey such right and authority to the
Operating Partnership at the Closing. To Contributors' Knowledge, the current
use of the Proprietary Rights does not conflict with, infringe upon or violate
any copyright, trade secret, trademark or registration of any other person.
2.20 Condition of Property. To Contributors' Knowledge, except as set
forth in the property condition assessment reports and other similar reports
prepared for the Properties and made available to the Operating Partnership in
connection with the Formation Transactions, including those listed in the
Disclosure Schedule (collectively, the "Property Reports"), there is no material
defect in the structural condition of any Property, the roof thereon, the
improvements thereon, the structural elements thereof and the mechanical systems
thereon (including, without limitation, all HVAC, plumbing, electrical,
elevator, security, utility, sprinkler and safety systems), nor any material
damage from casualty or other cause, nor any soil condition of any Property that
will not support all of the improvements thereon without the need for unusual or
new subsurface excavations, fill, footings, caissons or other installations,
except for any such defect, damage or condition that has been corrected or will
be corrected in the ordinary course of the business of the Property as part of
its scheduled annual maintenance and improvement program. To Contributors'
Knowledge, except as set forth in the Preliminary Title Reports or the Property
Reports, as of the date hereof, or may be disclosed in the Title Policies as of
the Closing, there have been no alterations to the exteriors of any of the
buildings or other improvements on any Property that would render any surveys or
plans provided to the Operating Partnership in connection with the Formation
Transactions materially inaccurate or otherwise reflect a material deficiency in
title to such improvements.
2.21 Leases. With respect to each Property, the information regarding
the leases, licenses, tenancies, possession agreements and occupancy agreements
with the tenants referenced under the captions "Business and Properties--Tenant
Diversification" and "Business and Properties -- Existing Portfolio" in the
Prospectus (the "Leases") is accurate in all material respects. The Entity that
owns fee or leasehold title to the underlying Property (the "Holder") holds the
lessor's interest under such Leases; a true and complete copy of all such Leases
have been made available to the Operating Partnership; to Contributors'
Knowledge, such Leases are in full force and effect, except as indicated
otherwise in the Disclosure Schedule, the Prospectus or in any estoppel
certificate made available or delivered to the Operating Partnership prior to
the Closing; the Holder, as lessor under such Leases, has not received any
notice that it is in default of any of its obligations under such Leases beyond
any applicable grace period which has not been cured; to Contributors'
Knowledge, except as set forth in the Disclosure Schedule, no tenant is in
default under any Lease except to the extent such default would not have a
Material Adverse Effect; fixed rent and additional rent are being billed to the
tenants in accordance with the Leases, as applicable; no tenant is entitled to
"free" rent, rent concessions, rebates, rent abatements, set-offs, or offsets
against rent except as set forth in the Lease with such tenant and no tenant
under any such Lease claims a right to any of the foregoing, except as set forth
in the Disclosure Schedule, the Prospectus or in any estoppel certificate made
available or delivered to the Operating Partnership prior to the Closing; the
Holder has received no written notice that any tenant under any such Lease
contests its pro rata shares of tax increases as required by its Lease or that
any tenant under any such Lease contests its pro rata shares of tax increases as
required by its Lease or that any tenant contests any rent, escalation or other
charges billed to it, except as set forth in the Disclosure Schedule, the
Prospectus or in any estoppel certificate made available or delivered to the
Operating Partnership prior to the Closing; no assignment of the Holder's rights
under any Lease is in effect on the date hereof other than collateral
assignments to secure mortgage or mezzanine indebtedness; and, except as set
forth in the Disclosure Schedule, the Prospectus or in any estoppel certificate
made available or delivered to the Operating Partnership prior to the Closing,
with respect to any Leases entered into by such Holder, no brokerage commissions
will be due
Exhibit D-11
upon the failure of any tenant under any such Lease to exercise any cancellation
right granted in its Lease or upon any extension or renewal of such Leases. To
the Contributors' Knowledge, all material obligations of the lessor under the
Leases that have accrued to the date hereof have been performed or satisfied. To
Contributors' Knowledge, no tenants under any of the Leases is presently the
subject of any voluntary or involuntary bankruptcy or insolvency proceedings.
2.22 Ground Leases. The ground leases and air space leases referenced in
the Prospectus or the Disclosure Schedule (the "Ground Leases") are the only
material ground leases or air space leases in which any of the Partnerships
holds an interest as lessee or tenant. A true and complete copy of all such
Ground Leases have been made available to the Operating Partnership. To
Contributors' Knowledge, such Ground Leases are in full force and effect, except
as indicated otherwise in the Disclosure Schedule, the Prospectus or in any
estoppel certificate made available or delivered to the Operating Partnership
prior to the Closing. To Contributors' Knowledge, the Partnerships have not
received any written notice from any ground lessor under any of the Ground
Leases alleging the existence of any default on the part of the Partnerships
thereunder, which default has not been cured. To the Contributors' Knowledge, no
ground lessor under any of the Ground Leases is in default or is presently the
subject of any voluntary or involuntary bankruptcy or insolvency proceedings. To
Contributors' Knowledge, none of the Partnerships are in default under any
Ground Lease, and no event has occurred which with the passage of time or the
giving of notice (or both) would constitute a default under any Ground Lease,
except to the extent any such default would not have a Material Adverse Effect.
2.23 Tangible Personal Property. The Partnerships own or lease all of
the tangible personal property constituting "Fixtures and Personal Property" (as
defined below) which are used in and, individually or in the aggregate with
other such property, is material to the operation of any of the Properties.
"Fixtures and Personal Property" shall mean all fixtures, furniture,
furnishings, apparatus and fittings, equipment, machinery, appliances, building
supplies, tools, and other items of personal property located on the Properties
and used in connection with the operation or maintenance of the Properties;
excluding, however, all fixtures, furniture, furnishings, apparatus and
fittings, equipment, machinery, appliances, building supplies, tools, and other
items of personal property owned by tenants, subtenants, guests, invitees,
employees, easement holders, service contractors and other Persons who own any
such property located on the Properties. To the Contributors' Knowledge, except
as set forth in the Disclosure Schedule, such Fixtures and Personal Property are
free and clear of all Liens, other than Liens pursuant to the agreements
pursuant to which such Fixtures and Personal Property are leased and other than
Liens and security interests under any equipment and capital improvement leases
that would not have a Material Adverse Effect.
2.24 Employees and Contracts. Except as set forth in the Disclosure
Schedule, (a) there are no employees of any Partnership or Entity as of the date
hereof, nor (b) service or maintenance contracts affecting any Property which
are not cancelable upon thirty (30) days notice or less or which are for a
contract amount greater than $100,000 per annum; true and correct copies of the
service, equipment, franchise, operating, management, parking, supply, utility
and maintenance agreements relating to any Property (the "Service Contracts")
have been made available to the Operating Partnership and the same are in full
force and effect and have not been modified or amended except in the ordinary
course of the applicable Partnership's business. To Contributors' Knowledge, no
event of default exists (which remains uncured) under any of the Service
Contracts which would have a Material Adverse Effect. To Contributors'
Knowledge, there are no union contracts or similar agreements between
Development and the employees of Development. Listed on Schedule 2.24 are
employment agreements entered into as of November 8, 2002 by and between the
Operating Partnership and each of the eleven senior executives listed thereon
(the "Senior Executives Employment Agreements"). Other than the Senior
Executives Employment Agreements, prior to or concurrently with the Closing, all
employment agreements between any employees and the Participating Partnerships
or Development shall be
Exhibit D-12
terminated in writing and, except to the extent ordinary course benefits made
available to all similarly situated employees, including paid time off, and
other ordinary course liabilities thereunder have been assumed by the Operating
Partnership, all obligations under such employment agreements shall have been
satisfied. Other than as agreed to in the Senior Executive Employment
Agreements, no employee is entitled to receive annual compensation (including
bonus) from any Partnership, Entity, Development or the Operating Partnership in
excess of $250,000.
2.25 Existing Loans. The Disclosure Schedule, Prospectus and/or
Preliminary Title Reports list all secured loans presently encumbering the
Properties or any direct or indirect interest in any Entity, and any unsecured
loans to be assumed by the Operating Partnership or any subsidiary of the
Operating Partnership at Closing, as of the date hereof (the "Existing Loans"),
the approximate outstanding aggregate principal balance of which is
approximately $1,445,567,349 as of the date hereof based on the calculation of
the loans listed on Schedule 2.25. To Contributors' Knowledge, the Existing
Loans and the documents entered into in connection therewith (collectively, the
"Loan Documents") are in full force and effect as of the date hereof. To
Contributors' Knowledge, no event of default or event that with the passage of
time or giving of notice or both would constitute an event of default has
occurred as of the date hereof under any of the Loan Documents which would have
a Material Adverse Effect. True and correct copies of the existing Loan
Documents have been made available to the Operating Partnership.
2.26 Real Property Taxes; Zoning. The Partnerships have not received any
notification of any material new or increased general or special tax assessments
for any of the Properties except as may be disclosed in the Preliminary Title
Reports, as of the date hereof, or as may be disclosed in the Title Policies as
of the Closing. Except as set forth in the Disclosure Schedule, each of the
Properties is assessed for real property tax through one tax ▇▇▇▇ and each
Property is comprised of one or more independent tax lots. The Contributors have
not received any written notice (which remains uncured) from any governmental
authority stating that any of the Properties is currently violating any zoning,
land use or other similar rules or ordinances in any material respect that would
reasonably be expected to have a Material Adverse Effect. Notwithstanding the
foregoing, the parties acknowledge that the assessed value of the Properties for
purposes of California real property tax liability will be adjusted to fair
market value as a result of the consummation of the Formation Transactions.
2.27 Hotel Management Agreements. All of the hotel management agreements
are listed in the Disclosure Schedule and are in full force and effect and no
Partnership or, to the Knowledge of the Contributors, other party to such hotel
management agreements is in default thereunder.
2.28 No Agreements. Except as set forth in the Partnership Agreements,
the Organizational Documents, the Disclosure Schedule or the Prospectus, no
Property is subject to any outstanding agreement of sale or ground lease, option
to purchase or other right of any third party to acquire any interest (other
than under the leases with tenants at each Property entered into in the ordinary
course of business) therein.
2.29 Insurance. Each Holder currently has in place public liability,
casualty and other insurance coverage with reputable insurance companies with
respect to its Property in customary amounts for projects similar to the
Properties in the markets in which such Properties are located, and in all cases
in compliance with the existing financing arrangements. To Contributors'
Knowledge, each of such policies is in full force and effect, and all premiums
due and payable thereunder have been fully paid when due. No written notice of
cancellation, default or non-renewal has been received or to Contributors'
Knowledge threatened with respect thereto.
Exhibit D-13
ARTICLE 3 - INDEMNIFICATION
3.1 Survival Of Representations And Warranties; Remedy For Breach.
(a) Subject to Section 3.7 of this Exhibit D, all representations
and warranties contained in this Exhibit D (as qualified by the Disclosure
Schedule and the Prospectus) or in any Schedule or certificate delivered
pursuant hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the Agreement or
this Exhibit D, no Contributor shall be liable under this Exhibit D or the
Agreement for monetary damages (or otherwise) for breach of any of its
representations, warranties, covenants and obligations contained in this Exhibit
D or the Agreement, or in any agreement, Schedule, Exhibit, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this Article 3, which shall be the sole and exclusive
remedy with respect thereto.
3.2 General Indemnification.
(a) The Contributors shall indemnify and hold harmless the Operating
Partnership, the Company and each of their respective directors, officers,
employees, agents, representatives and affiliates (each of which is an
"Indemnified Party") from and against any and all Claims, losses, damages,
liabilities and expenses, including, without limitation, amounts paid in
settlement, reasonable attorneys' fees, costs of investigation, costs of
investigative, judicial or administrative proceedings or appeals therefrom, and
costs of attachment or similar bonds (collectively, "Losses"), asserted against,
imposed upon or incurred by the Indemnified Party in connection with or as a
result of any breach of a representation, warranty or covenant of the
Contributors contained in the Agreement (as qualified by all items set forth in
the Disclosure Schedule and the Prospectus (including, without limitation, any
matters for which a reserve has been established as reflected in the pro forma
financial statements contained in the Prospectus) or in any agreement, Schedule,
Exhibit, certificate or affidavit or in any other document delivered by the
Contributors pursuant to the Agreement.
(b) The Contributors shall also indemnify and hold harmless the
Indemnified Parties from and against any and all Losses asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributors in connection with
the transactions contemplated by the Agreement; and
(ii) any Excluded Liabilities.
(c) With respect to any claim of an Indemnified Party required to be
indemnified by the Contributors pursuant to this Section 3.2, (i) to the extent
available, the Operating Partnership agrees to use diligent good faith efforts
to pursue and collect all available proceeds under any insurance policy which
covers the matter which is the subject of the indemnification prior to seeking
indemnification from the Contributors until all proceeds, if any, to which the
Operating Partnership or the Indemnified Party is entitled pursuant to such
insurance policy have been exhausted, and (ii) if the Indemnified Party receives
insurance proceeds with respect to any Losses paid by the Contributors to or for
the benefit of the Indemnified Party, then the Indemnified Party shall reimburse
the Contributors in an amount equivalent to such proceeds up to the amount
actually expended by the Contributors in connection with such indemnification.
Exhibit D-14
3.3 Pledge Agreement. Certain Contributors shall execute a Pledge
Agreement (in the form of Exhibit G to the Agreement) pursuant to which the
Contributors' indemnity contained in this Article III shall be secured by a
pledge of Partnership Units.
3.4 Agent for Pledgees.
(a) Each Indemnified Party hereby designates and appoints the
Operating Partnership as its agent under the Pledge Agreement, and each
Indemnified Party hereby irrevocably authorizes the Operating Partnership to
take such action or to refrain from taking such action on its behalf under the
provisions of the Pledge Agreement and to exercise such powers as are set forth
therein, together with such other powers as are reasonably incidental thereto.
The Operating Partnership is authorized and empowered to amend, modify or waive
any provisions of the Pledge Agreement on behalf of the Indemnified Parties. The
Operating Partnership agrees to act as such on the express conditions contained
in this Section 3.4. The provisions of this Section 3.4 are solely for the
benefit of the Operating Partnership and the Indemnified Parties and no
Contributor shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under the Pledge
Agreement, the Operating Partnership shall act solely as an administrative
representative of the Indemnified Parties and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for the Indemnified Parties, by or through its agents or employees.
(b) The Operating Partnership shall have no duties, obligations or
responsibilities to the Indemnified Parties except those expressly set forth in
this Section 3.4 or in the Pledge Agreement. Neither the Operating Partnership
nor any of its officers, directors, employees or agents shall be liable to any
Indemnified Party for any action taken or omitted by them under this Section 3.4
or under the Pledge Agreement, or in connection with this Section 3.4 or the
Pledge Agreement, except that the Operating Partnership shall be obligated on
the terms set forth in this Section 3.4 for performance of its express
obligations under the Pledge Agreement. In performing its functions and duties
under the Pledge Agreement, the Operating Partnership shall exercise the same
care which it would exercise in dealing with a security interest in collateral
held for its own account, but the Operating Partnership shall not be responsible
to any Indemnified Party for any recitals, statements, representations or
warranties in the Pledge Agreement or for the execution, effectiveness,
genuineness, validity, enforceability or sufficiency of the Pledge Agreement or
the Collateral or the transactions contemplated thereby. The Operating
Partnership shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of the
Pledge Agreement.
(c) The Operating Partnership shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message or other communication (including any writing, telex, telecopy
or telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper person, and with respect to all matters
pertaining to this Section 3.4 and the Pledge Agreement and its duties under
this Section 3.4 or the Pledge Agreement, upon advice of counsel selected by it.
The Operating Partnership shall be entitled to rely upon the advice of legal
counsel, independent accountants, and other experts selected by the Operating
Partnership in its sole discretion.
(d) Each Indemnified Party shall, jointly and severally, reimburse
and indemnify the Operating Partnership and its directors, officers, employees
and agents for any damage, expense, loss, cost, claim or liability which may be
imposed on, incurred by, or asserted against the Operating Partnership or such
other persons in any way relating to or arising out of this Section 3.4 or the
Pledge Agreement or any action taken or omitted by the Operating Partnership or
such other persons under this
Exhibit D-15
Section 3.4 or the Pledge Agreement. The obligations of the Indemnified Parties
under this Section 3.4(d) shall survive the termination of this Agreement and
the Pledge Agreement.
3.5 Notice and Defense of Claims. As soon as reasonably practicable
after receipt by the Indemnified Party of notice of any liability or claim
incurred by or asserted against the Indemnified Party that is subject to
indemnification under this Article 3, the Indemnified Party shall give notice
thereof to the Contributors, including liabilities or claims to be applied
against the indemnification baskets established pursuant to Section 3.6 hereof.
The Indemnified Party may at its option demand indemnity under this Article 3 as
soon as a claim has been threatened by a third party, regardless of whether an
actual Loss has been suffered, so long as the Indemnified Party shall in good
faith determine that such claim is not frivolous and that the Indemnified Party
may be liable for, or otherwise incur, a Loss as a result thereof and shall give
notice of such determination to Contributors. The Indemnified Party shall permit
the Contributors, at the Contributors' option and expense, to assume the defense
of any such claim by counsel selected by the Contributors and reasonably
satisfactory to the Indemnified Party, and to settle or otherwise dispose of the
same; PROVIDED, HOWEVER, that the Indemnified Party may at all times participate
in such defense at its expense; and PROVIDED FURTHER, HOWEVER, that Contributors
shall not, in defense of any such claim, except with the prior written consent
of the Indemnified Party in its sole and absolute discretion, consent to the
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in question
to the Indemnified Party and its affiliates a release of all liabilities in
respect of such claims, or that does not result only in the payment of money
damages which is paid in full by the Contributors. If the Contributors shall
fail to undertake such defense within 30 days after such notice, or within such
shorter time as may be reasonable under the circumstances or as required by
applicable law, then the Indemnified Party shall have the right to undertake the
defense, compromise or settlement of such liability or claim on behalf of and
for the account of Contributors at the Contributors' sole cost and expense;
PROVIDED, HOWEVER, that the Contributors will not be obligated to indemnify the
Indemnified Parties for any compromise or settlement entered into without the
Contributors' prior written consent, which consent shall not be unreasonably
withheld.
3.6 Limitations on Indemnification Under Section 3.2.
(a) The Contributors shall not be liable under Section 3.2 hereof
unless and until (i) each individual amount otherwise due the Indemnified
Parties exceeds one hundred thousand dollars ($100,000) (excluding legal fees
and expenses) and (ii) the total amount recoverable by the Indemnified Parties
from the Contributors under Section 3.2 exceeds five hundred thousand dollars
($500,000), in the aggregate; PROVIDED, HOWEVER, that claims for Losses arising
out of a breach of representation or warranty contained in sections 2.1, 2.2,
2.4, 2.6, 2.7, 2.9, 2.11 and 2.12 hereof shall not be subject to such threshold
amounts but shall be recoverable from the first dollar of Losses. Any individual
amount not exceeding the threshold under clause (i) shall not apply against the
aggregate threshold set forth in clause (ii), and once the threshold in clause
(ii) is exceeded, all amounts exceeding the threshold set forth in clause (i)
shall be recoverable from the first dollar of Losses.
(b) Notwithstanding anything contained herein to the contrary, the
maximum liability of all Contributors in the aggregate under Section 3.2 hereof
shall not exceed twenty million dollars ($20,000,000). Notwithstanding anything
contained herein to the contrary, the Indemnified Parties shall look, solely,
first to available insurance proceeds pursuant to Section 3.2(c) above, and then
to each Contributor's Partnership Units pledged pursuant to the Pledge
Agreement, for indemnification under this Article 3, valuing such Partnership
Units based upon the initial public offering price of the Company's Common Stock
(and agree to treat any return of Partnership Units as an adjustment to the
consideration delivered to the Contributors pursuant to the Formation
Transactions). No Indemnified Party shall have recourse to any other assets of
any of the Contributors other than the Partnership Units
Exhibit D-16
pledged pursuant to the Pledge Agreement. Notwithstanding anything to the
contrary in this Agreement, no Contributor shall be liable to the Indemnified
Parties for any indirect, special or consequential damages, loss of profits,
taxes relating to tax years beginning on or after the closing of the Formation
Transactions, loss of value or other similar speculative damages asserted or
claimed by the Indemnified Parties.
3.7 Limitation Period.
(a) Notwithstanding the foregoing, any claim for indemnification
under Section 3.2 hereof must be asserted in writing by the Indemnified Party,
stating the nature of the Losses and the basis for indemnification therefore
within one year after the Closing.
(b) If so asserted in writing within one year after the Closing,
such claims for indemnification shall survive until resolved by mutual agreement
between each Contributor and the Indemnified Party or by judicial determination.
Any claim for indemnification not so asserted in writing within one year after
the Closing shall not thereafter be asserted and shall forever be waived.
Exhibit D-17
EXHIBIT F
TO
CONTRIBUTION AGREEMENT
SALE LIMITATIONS AND DEBT GUARANTEES
ARTICLE 1--ADDITIONAL DEFINED TERMS
Agreement: Means the Contribution Agreement to which this Exhibit F is
attached.
Code: Means the Internal Revenue Code of 1986, as amended, and
references to sections of the Code shall include any successor provisions
thereto.
Disposition: Means any sale, assignment, pledge, encumbrance,
hypothecation, mortgage, exchange, or any swap agreement or other arrangement
that transfers all or a portion of the economic consequences associated with the
Partnership Units of the Contributors as a group, provided that the following
shall not constitute Dispositions: (i) a pledge of all or a portion of the
Partnership Units of the Contributors to secure bona fide indebtedness that does
not exceed sixty percent (60%) of the value of the pledged Partnership Units of
the Contributors at the time such indebtedness is incurred so long as no
foreclosure has occurred; (ii) any pledge of Partnership Units to the Operating
Partnership; and (iii) a Permitted Disposition.
General Partner: Means the general partner of the Operating Partnership.
Guarantee Agreement: Means an agreement between the Operating
Partnership, a Contributor or another Guarantee Partner and possibly a lender
(or with a lender as a third party beneficiary), pursuant to which such
Contributor or such other Guarantee Partner guarantees debt of the Operating
Partnership, which guarantee may be on a "bottom dollar basis" provided it is on
a pari passu basis with the other Guarantee Partners and/or other partners of
the Operating Partnership, and which agreement may be in the form of a guarantee
or contribution agreement. The initial Guarantee Agreement shall be entered into
prior to or contemporaneously with the closing of the Public Offering.
Guarantee Amount: Shall mean an amount specified by each Contributor
with respect to each Contributor which is set forth in the Guarantee Agreement
for each such Contributor, provided the aggregate Guarantee Amount for all of
the Contributors shall not exceed Four Hundred Forty Three Million Seven Hundred
Fifty Thousand Dollars ($443,750,000).
Guaranteed Debt: Means the debt guaranteed by a Contributor or other
Guarantee Partner pursuant to a Guaranty Agreement.
Guarantee Opportunity: Shall have the meaning set forth in Section 3(a).
Guarantee Partner: Means a person who guarantees debt of the Operating
Partnership in connection with (i) their contribution of property to the
Operating Partnership in exchange for Partnership Units in the Formation
Transactions; or (ii) their contribution of
Exhibit F-1
property to the Operating Partnership pursuant to the Operating Partnership's
exercise of rights under an Option Agreement.
Option Agreement: Means an agreement entered into or acquired by the
Operating Partnership in connection with the Formation Transactions pursuant to
which the Operating Partnership has the right to require the contribution of
certain properties (or indirect interests therein) to the Operating Partnership,
to the extent such contribution may be made in exchange for Partnership Units.
Partnership Units Sale Restriction: The Contributors shall have
satisfied this requirement with respect to a period if at the end of such
period, aggregate Dispositions by the Contributors of Partnership Units received
in the Formation Transactions or pursuant to an Option Agreement have not caused
the Partnership Units then owned by the Contributors to be less than fifty
percent (50%) of the aggregate Partnership Units issued to the Contributors in
connection with the Formation Transactions and pursuant to an Option Agreement.
In the event that Contributors cease to satisfy this requirement, Contributors
shall notify the parties listed, at the addresses provided, in Article 5 of this
Exhibit F.
Permitted Disposition: Means a Disposition to (i) a member of the
immediate family or an affiliate of the applicable Contributor, (ii) a
charitable organization a contribution to which would be deductible pursuant to
Section 170 of the Code, (iii) any partnership, limited liability company or
trust, the partners, members or beneficiaries, as applicable, of which are
exclusively one or more of the Contributors or members of the immediate family
or affiliates of such Contributors and/or a charitable organization a
contribution to which would be deductible pursuant to Section 170 of the Code,
or (iv) a beneficiary, partner, member or shareholder by the trust, partnership,
limited liability company or corporation in which such person owns an interest,
provided that any such Disposition shall not involve a Disposition for value
(other than the issuance or redemption of an interest in the transferor or a
reduction in the transferor's share of liabilities of the Operating
Partnership); provided further that for purposes of the Partnership Units Sale
Restriction, a Contributor shall be treated as continuing to own any Partnership
Units which were subject to a Permitted Disposition unless and until there has
been a Disposition by a permitted transferee, which shall be treated as a
Disposition by such Contributor.
Protected Period: Means with respect to each Contributor for each
Property and the Guarantee Opportunity, the period commencing on the closing
date of the Formation Transactions and ending on the "Initial Period"
anniversary of the closing date of the Formation Transactions, provided,
however, that the Protected Period shall be increased by successive one-year
extension periods, if the Contributors satisfy the Partnership Units Sale
Restriction at the expiration of the prior period, with the Contributors' final
extension period ending on the "Final Period" anniversary of the closing date of
the Formation Transactions.
The Initial Period and Final Period for each Property and the Guarantee
Opportunity are as follows:
Property Initial Period Final Period
-------- -------------- ------------
Gas Company Tower 9th 12th
Exhibit ▇-▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ 12th
KPMG Tower 9th 12th
Plaza Las ▇▇▇▇▇▇▇ 7th 10th
(excluding the hotel)
▇▇▇▇▇ Fargo Tower 7th 10th
Glendale Center None None
Plaza Las ▇▇▇▇▇▇▇ Hotel None None
808 South Olive None None
Guarantee Opportunity 9th 12th
Qualifying Debt: Means indebtedness of the Operating Partnership that is
described in (i), (ii) or (iii) below:
(i) In the case of indebtedness secured by any property or other
asset of the Operating Partnership and not recourse to all of the assets
of the Operating Partnership, the aggregate amount of all indebtedness
secured by such property must not exceed seventy-five percent (75%) of
the fair market value (as determined by the Board in its reasonable
judgment) of such property at the time that the Guarantee Opportunity is
first effective. Nonrecourse debt of a subsidiary of the Operating
Partnership shall be treated as debt of the Operating Partnership
provided the Operating Partnership guarantees such debt and will permit
the Contributor to indemnify the Operating Partnership from certain
losses associated with such guarantee on terms which are similar to
those set forth in such Contributor's Guarantee Agreement and reasonably
acceptable to the Operating Partnership and the Contributor;
(ii) In the case of indebtedness that is recourse to all of the
assets of the Operating Partnership, the indebtedness is at all times
the most senior indebtedness recourse to all the assets of the Operating
Partnership (but there shall not be a prohibition against other
indebtedness that is pari passu with such indebtedness) and the amount
of the indebtedness outstanding is at all times at least equal to one
hundred fifty percent (150%) of the aggregate amount of the guarantees
provided with respect to such indebtedness; or
(iii) Any other indebtedness approved by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III (or
his successor or designee) in his sole and absolute discretion.
In addition, debt which satisfies requirement (i) or (ii) above (but not
requirement (iii) above) will not be Qualifying Debt if and when either of the
following occurs:
(i) There are other guarantees with respect to the same indebtedness
that are prior to (i.e., with less economic risk) the Guarantee
Opportunity provided to the Contributors pursuant hereto; or
(ii) There are other guarantees with respect to the same
indebtedness that are pari passu with the Guarantee Opportunity provided
to the Contributor
Exhibit F-3
pursuant hereto, and the amount of all such guarantees (including the
Contributor's guarantee) exceed seventy five percent (75%) of the fair
market value of the real estate which is security for such indebtedness
measured at the time any such guarantee is first effective (as
determined by the Board in its reasonable judgment).
Notwithstanding the foregoing, there shall be no prohibition on
guarantees of other portions of Qualifying Debt, and the above limitations shall
not apply with respect to any guarantee of such debt by the Company, provided
each Contributor is offered the opportunity to enter into an agreement with the
Company providing that such Contributor will indemnify the Company from certain
losses associated with such debt on terms which are similar to those set forth
in the Contributors' Guarantee Agreement with respect to the debt of the
Operating Partnership.
ARTICLE 2--SALE RESTRICTION ON PROTECTED PROPERTY
(a) The Operating Partnership agrees for the benefit of each
Contributor, for the term of the Protected Period, not to directly or indirectly
sell, exchange, or otherwise dispose of any Property or any interest therein
(including without limitation, by way of merger, sale of assets or otherwise)
without the consent of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III (or his successor or designee),
which may be given or withheld in his sole and absolute discretion.
(b) Section 2(a) shall not apply to the disposition of a Property if (i)
such disposition qualifies as a like-kind exchange under Section 1031 of the
Code, or an involuntary conversion under Section 1033 of the Code, or other
transaction (including, but not limited to, a contribution of property to any
entity that qualifies for the nonrecognition of gain under Section 721 or
Section 351 of the Code, or a merger or consolidation of the Operating
Partnership with or into another entity that qualifies for taxation as a
"partnership" for federal income tax purposes (a "Successor Partnership")), in
each case that does not result in the recognition of any taxable income or gain
to the Contributor with respect to the Contributor's Partnership Units;
provided, however, that: (1) in the event of a disposition of a Property under
Section 1031 or Section 1033 of the Code or pursuant to another tax deferred
transaction, any property that is acquired in exchange for or as a replacement
for such Property shall thereafter be considered that Property for purposes of
this Exhibit F; (2) if a Property is transferred to another entity in a
transaction in which gain or loss is not recognized, the interest of the
Operating Partnership in such entity shall thereafter be considered that
Property for purposes of this Exhibit F, and if the acquiring entity's
disposition of such Property would cause the Contributor to recognize gain or
loss as a result thereof, the transferred Property still shall be considered
that Property for purposes of this Exhibit F; and (3) in the event of a merger
or consolidation involving the Operating Partnership and a Successor
Partnership, the Successor Partnership shall have agreed in writing for the
benefit of the Contributor that all of the restrictions of this Exhibit F shall
apply with respect to each Property, or (ii) with respect to each Contributor,
the adjusted taxable basis of the Property has increased in the hands of the
Operating Partnership to fair market value as a result of a taxable disposition
of the Partnership Units received in the Formation Transactions or otherwise,
such that a taxable disposition of such Property by the Operating Partnership
would not result in the allocation of taxable gain to the Contributor pursuant
to Section 704(c) of the Code.
Exhibit F-4
(c) Notwithstanding any provision of this Exhibit F, the rights and
remedies of the Contributor for a breach or violation of the covenants set forth
in Section 2(a) shall include a claim for damages (including, without
limitation, incidental, consequential, indirect and special damages, lost
profits, lost revenues and loss of business, whether foreseeable or not) against
the Operating Partnership or any Successor Partnership. All such damages shall
be indemnifiable under Section 3.3 of the Agreement and shall be treated as
"Losses" for purposes thereof. Any claim, dispute or controversy arising out of,
or in connection with, or in relation to the interpretation, performance or
breach of this Exhibit F shall be subject to the provisions of Section 7.1 of
the Agreement.
ARTICLE 3--AVAILABILITY OF GUARANTEES
(a) During the Protected Period, the Operating Partnership shall use
commercially reasonable efforts to make available to each Contributor the
opportunity (a "Guarantee Opportunity") to make a guarantee of Qualifying Debt
of the Operating Partnership pursuant to a Guaranty Agreement in an amount at
least equal to the Guarantee Amount. Each Contributor may provide its Guarantee
Agreement provided such agreement shall not expand Contributor's rights
hereunder and shall be subject to the reasonable comments and approval of the
Operating Partnership. During the Protected Period, if Guaranteed Debt is to be
repaid and, immediately after such repayment, the outstanding amount of such
Guaranteed Debt would be less than the Guarantee Amount with respect to such
Guaranteed Debt, the Operating Partnership shall use commercially reasonable
efforts to provide to each Contributor a new Guarantee Opportunity with respect
to Qualifying Debt in an amount equal to the Guaranteed Debt being repaid. In
the event that the Operating Partnership is required to use commercially
reasonable efforts to offer a Guarantee Opportunity pursuant to this Section
3(a), the Operating Partnership will provide the Contributor notice of the type,
amount and other relevant attributes of the Qualifying Debt with respect to
which the Guarantee Opportunity is offered at least ten (10) business days, to
the extent reasonably practicable, but in no event less than five (5) business
days prior to the earlier of the closing of the incurrence of such debt and the
scheduled repayment of the existing Guaranteed Debt. In the event that the
Operating Partnership or a related party repurchases outstanding Guaranteed
Debt, whether or not such debt is retired, the repurchase thereof shall be
treated as a repayment of the Guaranteed Debt for purposes of this Article 3.
(b) Each Contributor acknowledges that Guarantee Partners other than
such Contributor have the right to guarantee debt of the Operating Partnership
on terms which are similar to the terms set forth in this Exhibit F. The
Operating Partnership shall use commercially reasonable efforts to offer each
Guarantee Opportunity to the Guarantee Partners (including the Contributors) on
a pro rata basis, based on the proportion of each Guarantee Partner's Guarantee
Amount to the aggregate Guarantee Amounts of all Guarantee Partners, unless the
Guarantee Partners agree to accept Guarantee Opportunities on other than a pro
rata basis.
(c) The Operating Partnership agrees to file its tax returns taking the
position that the Guaranteed Debt is allocable to the Contributor guaranteeing
such debt for purposes of Section 752 of the Code, absent a determination to the
contrary by the Internal Revenue Service. However, the Operating Partnership
makes no representation or warranty to Contributor that any guarantee entered
into pursuant to Section 3(a) shall be respected for federal income tax purposes
Exhibit F-5
so as to enable Contributor to be considered to bear the "economic risk of loss"
with respect to the indebtedness thereby guaranteed by Contributor for purposes
of either Section 752 or Section 465 of the Code.
(d) Notwithstanding any provision of this Exhibit F, the rights and
remedies of each Contributor for a breach or violation of the covenants set
forth in Section 3(a) shall include a claim for damages (including, without
limitation, incidental, consequential, indirect and special damages, lost
profits, lost revenues, and loss of business, whether foreseeable or not)
against the Operating Partnership or any Successor Partnership. All such damages
shall be indemnifiable under Section 3.3 of the Agreement and shall be treated
as "Losses" for purposes thereof. Any claim dispute or controversy arising out
of, or in connection with, or in relation to the interpretation, performance or
breach of this Exhibit F shall be subject to the provisions of Section 7.1 of
the Agreement.
(e) The Operating Partnership shall not be obligated to undertake
efforts to maintain any level of indebtedness in excess of the amounts
specifically required to meet the obligations set forth above in this Article 3.
ARTICLE 4-- CALCULATION OF DAMAGES
The Operating Partnership acknowledges that any breach or violation by
it of its obligations under this Exhibit F would cause substantial harm to the
applicable Contributor or Contributors, and the Operating Partnership agrees
that any calculation of damages payable to the applicable Contributor or
Contributors based solely on the time value of money would not adequately
compensate the Contributor or Contributors for the harm caused by any breach by
the Operating Partnership of its obligations pursuant to Articles 2 or Article 3
hereof. In addition, for purposes of determining any damages payable by the
Operating Partnership or a Successor Partnership to a Contributor pursuant to
Articles 2 or 3 hereof, the tax effect on the Contributor or Contributors of any
breach or violation of this Exhibit F by the Operating Partnership shall be
considered.
ARTICLE 5 -- NOTICE
In the event that the Contributors cease to satisfy the requirements of
the Partnership Units Sale Restriction, the Contributors shall notify the
parties listed below. Any notice to be given hereunder shall be given in writing
by personal delivery or by registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed communicated as of the date of personal
delivery (including delivery by overnight courier). Mailed notices shall be
addressed as set forth below, but any party may change the address set forth
below by written notice to Contributors.
Philadelphia Plaza -- Phase II
c/▇ ▇▇▇▇▇▇ Development Partners
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Exhibit F-6
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Partners -- Master Investments, LLC
c/▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Wilshire Palisades Building
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Exhibit F-7
EXHIBIT G
TO
CONTRIBUTION AGREEMENT
Form of Pledge Agreement
THIS PLEDGE AGREEMENT (this "Agreement"), dated ___________, 2002, is
entered into by and between ▇▇▇▇▇▇▇ Properties, L.P., a Maryland limited
partnership (the "Operating Partnership" or the "Pledgee"), and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ III, an individual and each of the entities listed on Exhibit A attached
hereto (each, a "Pledgor" and collectively, the "Pledgors").
WHEREAS, the Pledgors are contributing their interests in the Properties
to the Operating Partnership in exchange for Partnership Units pursuant to that
certain Contribution Agreement dated the date hereof by and between the Pledgors
and the Operating Partnership (the "Contribution Agreement"); capitalized terms
used herein but not otherwise defined herein shall have the meanings assigned to
such terms in the Contribution Agreement;
WHEREAS, ▇▇▇▇▇▇▇ Properties, Inc., a Maryland corporation (the
"Company") is the sole general partner of the Operating Partnership;
WHEREAS, the Pledgors have made the representations and warranties set
forth in Article 2 of Exhibit D to the Contribution Agreement in favor of the
Operating Partnership;
WHEREAS, the Pledgors have agreed to indemnify the Operating
Partnership, the Company and their affiliates and each of their respective
directors, officers, employees, agents and representatives (each, an
"Indemnified Party") for certain losses as set forth in Article 3 of Exhibit D
to the Contribution Agreement (the "Secured Obligations"); and
WHEREAS, in order to secure the full and timely performance of the
Secured Obligations, pursuant to the Contribution Agreement each of the Pledgors
agreed to pledge and grant to the Pledgee, for the Pledgee's own benefit and the
benefit of each Indemnified Party, a lien and security interest in, to and under
a number of Partnership Units having a value of twenty million dollars
($20,000,000), based on the price per share of common stock in the Public
Offering, as more fully described on Exhibit B attached hereto (the "Pledged
Units").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
(b) Grant of Security Interest. As collateral security for the payment,
performance and observance of the Secured Obligations, now existing or hereafter
arising, absolute or contingent, whether or not due and payable, each of the
Pledgors pledges to the Pledgee, for its own benefit and for the benefit of each
Indemnified Party, and grants to the Pledgee, for its own benefit and the
benefit of each Indemnified Party, a security interest in the following property
(collectively, the "Collateral"):
(i) the Pledged Units, as more particularly described in Exhibit
B attached hereto;
1
(ii) any additional partnership interests in the Operating
Partnership ("Partnership Interests") and/or obligations of the Operating
Partnership which may at any time hereafter be acquired by any Pledgor in
connection with the Pledged Units and the certificates or other instruments or
documents evidencing the same;
(iii) all rights of Pledgor in and to all distributions in kind
declared in respect of any or all of the foregoing; and
(iv) all proceeds and profits of any or all of the foregoing.
(c) Delivery of Certificates and Instruments. The Pledgors shall deliver
to the Pledgee: (a) the original certificates or other instruments or documents
evidencing the Pledged Units concurrently with the execution and delivery of
this Agreement, and (b) the original certificates or other instruments or
documents evidencing all other Collateral (except for Collateral which this
Agreement specifically permits the Pledgors to retain) within ten days after a
Pledgor's receipt thereof. All Collateral which is certificated securities shall
be in bearer form or, if in registered form, shall be issued in the name of the
Pledgee or endorsed to the Pledgee or in blank.
(d) Pledgors Remain Liable. Notwithstanding anything herein to the
contrary, (a) the applicable Pledgors shall remain liable under the agreements
(including, without limitation, the partnership agreement of Operating
Partnership (the "Operating Partnership Agreement")) included in the Collateral
to the extent set forth therein to perform all of their duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Pledgee of any of its rights hereunder shall not release any
Pledgor from any of its duties or obligations under the agreements (including,
without limitation, the Operating Partnership Agreement) included in the
Collateral, except to the extent that such duties and obligations may have been
terminated by reason of a sale, transfer or other disposition of the Collateral
pursuant hereto, and (c) the Pledgee shall have no obligation or liability under
the agreements (including, without limitation, the Operating Partnership
Agreement) included in the Collateral by reason of this Agreement, nor shall the
Pledgee be obligated to perform any of the obligations or duties of any Pledgor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
(e) Representations, Warranties and Covenants. Each Pledgor represents,
warrants and covenants as follows:
(i) Set forth on Exhibit B attached hereto is a complete and
accurate list and description of all Pledged Units delivered by such Pledgor and
such Pledgor is the sole holder of record and sole beneficial owner of the
Pledged Units set forth opposite its name free and clear of all claims,
mortgages, pledges, liens, encumbrances and security interests of every nature
whatsoever, except in favor of the Pledgee. All other Collateral hereafter
delivered by such Pledgor to the Pledgee will be held of record and beneficially
owned by such Pledgor free and clear of all claims, mortgages, pledges, liens,
encumbrances and security interests of every nature whatsoever, except in favor
of the Pledgee.
(ii) With respect to each Pledgor which is an entity, the address of
its chief executive office and principal place of business, and the location of
its books and records
2
relating to the Collateral, is set forth in Section 21 hereof. With respect to
each Pledgor which is an individual, the addresses of its principal business is
set forth in Section 21 hereof. No Pledgor will change said address or location,
or merge or consolidate with any person or change its name, without at least 15
days' prior written notice to the Pledgee, and with respect to any such change
in address or name or merger or consolidation, each Pledgor shall execute and
deliver to the Pledgee such documents and take such actions as the Pledgee
reasonably deems necessary to perfect and protect the Pledgee's security
interests in and to the Collateral.
(iii) Such Pledgor will not create, incur, assume or permit to exist
any security interest in the Collateral other than the security interest created
pursuant to this Agreement or sell, transfer, assign, pledge or grant a security
interest in the Collateral to any person other than the Pledgee.
(iv) The Collateral consisting of Partnership Interests are fully
paid and are not subject to any options to purchase or similar rights of any
kind of any person.
(v) Such Pledgor, if an entity, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own its properties
and to transact the business in which it is engaged.
(vi) Such Pledgor has the requisite power and authority and, if an
individual, full legal right and capacity, to execute and deliver, and to
perform its obligations under, this Agreement, and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement.
Such Pledgor, if an individual living in a community property state, has
obtained all consents, approvals or authorizations required under applicable
laws relating to the transfer of community property to execute, deliver and
perform its obligations under this Agreement.
(vii) This Agreement constitutes the legal, valid and binding
obligation of such Pledgor, enforceable in accordance with its terms.
(viii) The execution, delivery and performance of this Agreement
will not violate (as applicable) any law or regulation, or any order or decree
of any court or governmental instrumentality, or any provision of the charter or
by-laws of, or any securities issued by, such Pledgor, and will not conflict
with, or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which such Pledgor is
a party or by which it is bound, and will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the property of such
Pledgor pursuant to the provisions of any of the foregoing.
(ix) No consent of any other person (including, without limitation,
as applicable, stockholders and creditors of such Pledgor) and no consent,
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental
instrumentality is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except for the filing
of any financing statements required hereunder.
3
(x) The pledge of the Collateral pursuant to this Agreement creates
a valid and perfected first priority security interest in such Collateral,
subject to any filings or actions required pursuant to the California Uniform
Commercial Code or otherwise.
(xi) It will defend the Pledgee's security interest in the
Collateral against the claims and demands of all persons whomsoever.
(xii) It will take any and all actions necessary to maintain such
Pledgor's status as a limited partner of the Operating Partnership and the
limited liability represented by the Pledged Units.
(xiii) Such Pledgor will not enter into or assume any other
agreement containing a negative pledge with respect to the Collateral.
(f) Registration. At any time and from time to time the Pledgee may
cause all or any of the Collateral to be transferred to or registered in its
name or the name of its nominee or nominees.
(g) Claims; Value of Collateral.
(i) Subject to Section 3.6 of Exhibit D to the Contribution
Agreement, on or prior to the date which is one year after the Closing (the
"Survival Period"), an Indemnified Party may give notice (a "Claim Notice") to
one or more of the Pledgors of any liability or claim incurred by or asserted
against the Indemnified Party which is subject to indemnification under Article
3 of Exhibit D to the Contribution Agreement. As soon as reasonably practicable
after receipt by the Indemnified Party of notice of any liability or claim
incurred by or asserted against the Indemnified Party that is subject to
indemnification, the Indemnified Party shall give a Claim Notice thereof to the
Pledgors, including liabilities or claims to be applied against the
indemnification baskets established pursuant to Section 3.6 of Exhibit D to the
Contribution Agreement. The Indemnified Party may at its option demand indemnity
as soon as a claim has been threatened by a third party, regardless of whether
an actual Loss has been suffered, so long as the Indemnified Party shall in good
faith determine that such claim is not frivolous and that the Indemnified Party
may be liable for, or otherwise incur, a Loss as a result thereof and shall give
notice of such determination to Pledgors. The Indemnified Party shall permit the
Pledgors, at the Pledgors' option and expense, to assume the defense of any such
claim by counsel selected by the Pledgors and reasonably satisfactory to the
Indemnified Party, and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that the Indemnified Party may at all times participate in such defense
at its expense; and PROVIDED FURTHER, HOWEVER, that Pledgors shall not, in
defense of any such claim, except with the prior written consent of the
Indemnified Party in its sole and absolute discretion, consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff in question
to the Indemnified Party and its affiliates a release of all liabilities in
respect of such claims, or that does not result only in the payment of money
damages which is paid in full by the Pledgors. If the Pledgors shall fail to
undertake such defense within 30 days after such notice, or within such shorter
time as may be reasonable under the circumstances or as required by applicable
law, then the Indemnified Party shall have the right to undertake the defense,
compromise or settlement of such liability or claim on behalf of and for the
account of Pledgors at the Pledgors' sole cost and
4
expense; PROVIDED, HOWEVER, that the Pledgors will not be obligated to indemnify
the Indemnified Parties for any compromise or settlement entered into without
the Pledgors' prior written consent, which consent shall not be unreasonably
withheld.
(ii) The value of Collateral (the "Value") shall be determined as
follows: (i) with respect to Collateral consisting of the Pledged Units or other
Partnership Interests, an amount equal to the initial public offering price of
shares of the Company's common stock multiplied by the number of shares for
which such Collateral is potentially exchangeable; and (ii) for all other
Collateral, the fair market value of such Collateral as determined by the
Independent Directors of the Company.
(h) Voting Rights and Certain Payments Prior to Occurrence of Secured
Obligations and Other Events.
(i) Until Collateral may be applied to satisfy a Secured Obligation
hereunder, each Pledgor shall be entitled to exercise, as it shall think fit,
but in a manner in the judgment of the Pledgee not inconsistent with the terms
hereof, the voting power with respect to any such Collateral, and for that
purpose the Pledgee shall (if such Collateral shall be registered in the name of
the Pledgee or its nominee) execute or cause to be executed from time to time,
at the expense of such Pledgor, such proxies or other instruments in favor of
such Pledgor or its nominee, in such form and for such purposes as shall be
reasonably required by such Pledgor and, if such Pledgor is an entity, shall be
specified in a written request therefor of its President or a Vice-President, to
enable it to exercise such voting power with respect to such Collateral.
(ii) Until the Independent Directors of the Company reasonably
determine that the outstanding Claims asserted by the Indemnified Parties in one
or more Claim Notices may equal or exceed the value of the Collateral then
available to satisfy such Claims, each Pledgor shall be entitled to receive and
retain for its own account any and all regular cash distributions (but not
distributions in the form of Partnership Interests or other securities,
distributions in kind or liquidating distributions) and interest at any time and
from time to time paid upon any of such Collateral.
(iii) Notwithstanding anything contained in this Agreement to the
contrary, except with the prior consent of the Pledgee, until such time as this
Agreement is terminated, no Pledgor shall have the right to exercise any of its
redemption rights under Section 8.6 of the Operating Partnership Agreement.
(i) Extraordinary Payments and Distributions. In case, upon the
dissolution or liquidation (in whole or in part) of the Operating Partnership,
any sum shall be paid as a liquidating distribution or otherwise upon or with
respect to any of the Collateral, such sum shall be paid over to the Pledgee
promptly, and in any event within ten days after receipt thereof, to be held by
the Pledgee as additional Collateral hereunder. In case any distribution of
Partnership Interests shall be made with respect to the Collateral, or
Partnership Interests or fractions thereof shall be issued pursuant to any split
involving any of the Collateral, or any distribution of capital shall be made on
any of the Collateral, or any partnership interests, shares, obligations or
other property shall be distributed upon or with respect to the Collateral
pursuant to a recapitalization or reclassification of the capital of the
Operating Partnership, or pursuant to the dissolution, liquidation (in whole or
in
5
part), bankruptcy or reorganization of the Operating Partnership, or pursuant to
the merger or consolidation of the Operating Partnership with or into another
entity, the partnership interests, shares, obligations or other property so
distributed shall be delivered to the Pledgee promptly, and in any event within
ten days after receipt thereof, to be held by the Pledgee as additional
Collateral hereunder, and all of the same (other than cash) shall constitute
Collateral for all purposes hereof.
(j) Pledgors Obligations Not Affected. The obligations of each Pledgor
hereunder shall remain in full force and effect and shall not be impaired by:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any other Pledgor;
(ii) any amendments to or modifications of any instrument (other
than this Agreement) securing any of the Secured Obligations;
(iii) the taking or additional security for, or any guaranty of, any
of the Secured Obligations or the release or discharge or termination of any
security or guaranty for any of the Secured Obligations; or
(iv) the lack of enforceability of any of the Secured Obligations
against such Pledgor or any other person, whether or not such Pledgor shall have
notice or knowledge of any of the foregoing.
(k) Voting Rights and Certain Payments After Occurrence of Secured
Obligation and Certain Other Events.
(i) At such time that Collateral may be applied to satisfy a Secured
Obligation hereunder, all rights of any Pledgor to exercise or refrain from
exercising all voting power with respect to such Collateral and to otherwise
exercise all ownership rights arising from such Collateral shall cease, and
thereupon the Pledgee shall be entitled to exercise all voting power with
respect to such Collateral and otherwise exercise such ownership rights as
though the Pledgee were the outright owner of such Collateral. In the event that
the Independent Directors of the Company reasonably determine that the
outstanding claims asserted by the Indemnified Parties in one or more Claim
Notices may equal or exceed the value of the Collateral then available to
satisfy such claims, the Pledgor(s) shall no longer be the owner of such
Collateral for tax purposes and all rights of any Pledgor to receive and retain
the distributions and interest which it would otherwise be authorized to receive
and retain pursuant to Section 7 hereof shall cease, and thereupon the Pledgee
shall be entitled to receive and retain, as additional Collateral hereunder, any
and all distributions and interest at any time and from time to time paid upon
any of such Collateral, provided that, concurrent with making such
determination, the Pledgee gives notice thereof to the affected Pledgor(s). Upon
receipt of any such notice, a Pledgor may submit the matter to arbitration in
accordance with the provisions of the Contribution Agreement, and the decision
of the arbitrators as to the retention of any such distributions and interest
shall be final and binding between the parties and shall be enforceable in any
court of competent jurisdiction.
(ii) All payments, distributions or other property or assets which
are received by any Pledgor contrary to the provisions of paragraph (a) of this
Section 10 shall be
6
received and held in trust for the benefit of the Pledgee, shall be segregated
from other funds of such Pledgor and shall be forthwith paid over to the
Pledgee.
(l) Application of Cash Collateral. Any cash received and retained by
the Pledgee as additional Collateral pursuant to Section 8 hereof may at any
time and from time to time be applied (in whole or in part) by the Pledgee, at
its option, to the payment of the Secured Obligations to which such Collateral
is subject (in such order as the Pledgee shall in its sole discretion
determine).
(m) Application of Proceeds. Except as otherwise expressly provided
herein, any cash received and retained pursuant to Section 8 hereof shall be
applied by the Pledgee: first to the payment of the costs and other expenses
arising out of such transaction, including reasonable out-of-pocket costs and
expenses of the Pledgee and the fees and expenses of its agents and counsel;
second to the payment in full of the Secured Obligations; and finally, to the
payment to the Pledgor, or his heirs, executives, administrators, successors or
assigns or as a court of competent jurisdiction may direct, of any surplus then
remaining.
(n) Remedies With Respect to the Collateral.
(i) At such time that a claim becomes a Secured Obligation, the
Pledgee, without obligation to resort to other security, shall have the right at
any time and from time to time receive all or any part of Collateral with a
Value equal to the amount of the Secured Obligation, in one or more parcels at
the same or different times, and all right, title and interest, claim and demand
therein and right of redemption thereof. Recourse against the Pledgors is
limited to the rights of the Pledgors in any such Collateral that is applied to
satisfy a Secured Obligation.
(ii) No demand, advertisement or notice, all of which are hereby
expressly waived, shall be required in connection with any transfer of
Collateral to the Pledgee pursuant to this Agreement.
(iii) The remedies provided herein in favor of the Pledgee shall not
be deemed exclusive, but shall be cumulative, and shall be in addition to all
other remedies in favor of the Pledgee existing at law or in equity.
(o) Care of Collateral. The Pledgee shall have no duty as to the
collection or protection of the Collateral or any income thereon or as to the
preservation of any rights pertaining thereto, beyond the safe custody of any
thereof actually in its possession. With respect to any maturities, calls,
conversions, exchanges, redemptions, offers, tenders or similar matters relating
to any of the Collateral (herein called "events"), the Pledgee's duty shall be
fully satisfied if (i) the Pledgee exercises reasonable care to ascertain the
occurrence and to give reasonable notice to the Pledgors of any events
applicable to any Collateral which are registered and held in the name of the
Pledgee or its nominee, (ii) the Pledgee gives the Pledgors reasonable notice of
the occurrence of any events, of which the Pledgee has received actual
knowledge, as to any securities which are in bearer form or are not registered
and held in the name of the Pledgee or its nominee (the Pledgors agreeing to
give the Pledgee reasonable notice of the occurrence of any events applicable to
any securities in the possession of the Pledgee of which the Pledgors have
received knowledge), and (iii) (a) the Pledgee endeavors to take such action
with respect to any of the events as the Pledgors
7
may reasonably and specifically request in writing in sufficient time for such
action to be evaluated and taken or (b) if the Pledgee determines that the
action requested might adversely affect the value of the Collateral, the
collection of the Secured Obligations, or otherwise prejudice the interests of
the Pledgee, the Pledgee gives reasonable notice to the Pledgors that any such
requested action will not be taken and if the Pledgee makes such determination
or if any Pledgor fails to make such timely request, the Pledgee takes such
other action as it deems advisable in the circumstances. Except as hereinabove
specifically set forth, the Pledgee shall have no further obligation to
ascertain the occurrence of, or to notify the Pledgors with respect to, any
events and shall not be deemed to assume any such further obligation as a result
of the establishment by the Pledgee of any internal procedures with respect to
any securities in its possession. Except for any claims, causes of action or
demands arising out of the Pledgee's failure to perform its agreements set forth
in this Section, the Pledgors release the Pledgee from any claims, causes of
action and demands at any time arising out of or with respect to this Agreement,
the Collateral and/or any actions taken or omitted to be taken by the Pledgee
with respect thereto, and the Pledgors hereby agree to hold the Pledgee harmless
from and with respect to any and all such claims, causes of action and demands.
(p) Power of Attorney. Each Pledgor hereby appoints the Pledgee as such
Pledgor's attorney-in-fact for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Pledgee may deem necessary or advisable to accomplish the purposes hereof.
Without limiting the generality of the foregoing, the Pledgee shall have the
right and power (a) upon application of any Collateral to satisfy a Secured
Obligation, to receive, endorse and collect all checks and other orders for the
payment of money made payable to a Pledgor representing any interest or other
distribution payable in respect of such Collateral or any part thereof and to
give full discharge for the same, and (b) to execute endorsements, assignments
or other instruments of conveyance or transfer with respect to all or any of the
Collateral.
(q) Further Assurances. The Pledgors shall, at their sole cost and
expense, upon request of the Pledgee, duly execute and deliver, or cause to be
duly executed and delivered, to the Pledgee such further instruments and
documents and take and cause to be taken such further actions as may be
necessary or proper in the reasonable opinion of the Pledgee to carry out more
effectually the provisions and purposes of this Agreement.
(r) No Waiver. No failure on the part of the Pledgee to exercise, and no
delay on the part of the Pledgee or of any Covered Party in exercising, any of
its options, powers, rights or remedies hereunder, or partial or single exercise
thereof, shall constitute a waiver thereof or preclude any other or further
exercise thereof or the exercise of any other option, power, right or remedy.
(s) Security Interest Absolute. All rights of the Pledgee hereunder,
grant of a security interest in the Collateral and all obligations of the
Pledgors hereunder, shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Representations Agreement, any of the
Secured Obligations or any Grantor Agreement or any other agreement or
instrument relating thereto or relating to the Transactions, (b) any change in
any term of all or any of the Secured Obligations or any other amendment or
waiver of, or any consent to any departure from, the Representations Agreement,
any Grantor Agreement or any other agreement or instrument
8
or (c) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, any Pledgor in respect of the Secured
Obligations or in respect of this Agreement.
(t) Expenses. Pledgor agrees to pay the Pledgee all reasonable
out-of-pocket expenses of the Pledgee (including reasonable expenses for legal
services of every kind) of, or incident to the enforcement of, any provisions of
this Agreement.
(u) Return of Collateral. Upon the termination of the Survival Period,
the Pledgors shall be entitled to the return of all of the Collateral and all
other cash held as additional Collateral hereunder which have not been used or
applied toward the payment of the Secured Obligations, unless claims asserted in
one or more Claim Notices pursuant to Section 6(a) hereof remain outstanding, in
which case Collateral with a Value equal to the aggregate dollar amount of such
claims shall be retained by the Pledgee pursuant to the terms hereof pending
resolution of such claims pursuant to Section 6 hereof (such retained Collateral
to consist of Collateral delivered by any Pledgor which may be liable for such
claims or, if more than one Pledgor may be liable as to any claim, then in
proportion to such Pledgors' potential liability so long as the Pledgee holds
sufficient Collateral of each such Pledgor, and otherwise in any proportion).
The assignment by the Pledgee to the Pledgors of such Collateral shall be
without representation or warranty of any nature whatsoever and wholly without
recourse. Notwithstanding the foregoing, the Pledgors' release of the Pledgee
and agreement to hold the Pledgee harmless set forth in the last sentence of
Section 14 hereof shall survive any return of Collateral or termination of this
Agreement.
(v) Notices. All notices and other communications in connection with
this Agreement shall be made in writing by hand delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
To the Operating Partnership:
▇▇▇▇▇▇▇ Properties, L.P.
c/o Maguire Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ Lammas
To any Pledgor:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
c/o Maguire Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(w) Amendments and Waivers. No amendment or waiver of any provision of
this Agreement shall in any event be effective unless the same shall be in
writing and signed by the Pledgee and each Pledgor.
9
(x) Governing Law. This Agreement and the rights and obligations of the
Pledgee and the Pledgors hereunder shall be construed in accordance with and
governed by the law of the State of California (without giving effect to the
conflict of law principles thereof).
(y) Submission to Jurisdiction.
(i) Any legal action or proceeding with respect to this Agreement
may be brought in the courts of the State of California or of the United States
of America located in California, and, by execution and delivery of this
Agreement, each Pledgor hereby accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Pledgor hereby irrevocably waives, in connection with any such
action or proceeding, (i) trial by jury, (ii) any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions and (iii) the right
to interpose any setoff, counterclaim or cross-claim.
(ii) Each Pledgor irrevocably consents to the service of process of
any of the aforementioned courts in any such action or proceeding by the mailing
of copies thereof by certified mail, postage prepaid, to such Pledgor at its
address determined pursuant to Section 21 hereof.
(iii) Nothing herein shall affect the right of the Pledgee to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Pledgor in any other jurisdiction.
(z) Transfer or Assignment. Except with respect to any assignment or
transfer by the Pledgee to an affiliate (which shall not require any Pledgor's
consent but as to which the Pledgee will give notice to the Pledgors), none of
the Pledgors or Pledgee may assign or transfer any of their respective rights
under and interests in this Agreement without the prior written consent of the
Pledgors (if the assignor/transferee is the Pledgee) or of the Pledgee (if the
assignor/transferee is any Pledgor), which consent shall not be unreasonably
withheld or delayed; provided, however, that no consent of any of the Pledgors
is required hereunder for (a) the assignment or transfer by the Operating
Partnership of any of its rights under and interests in the Contribution
Agreement to any permitted assignee under the Contribution Agreement or (b) the
Pledgee to act hereunder as agent on behalf of any person who becomes a
Indemnified Party. Upon receipt of such consent (if required under this Section
25), the Pledgee may deliver the Collateral or any portion thereof to its
assignee/transferee who shall thereupon, to the extent provided in the
instrument of assignment, have all of the rights of the Pledgee hereunder with
respect to the Collateral, and the Pledgee shall thereafter be fully discharged
from any responsibility with respect to the Collateral so delivered to such
assignee/transferee. However, no such assignment or transfer shall relieve such
assignee/transferee of those duties and obligations of the Pledgee specified
hereunder.
(aa) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Pledgors and the Pledgee and their respective heirs,
successors and permitted assigns, and all subsequent holders of the Secured
Obligations.
10
(bb) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original and all of which
shall together constitute one and the same agreement.
(cc) Captions. The captions of the sections of this Agreement have been
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
(dd) Complete Agreement. This Agreement and the Contribution Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede all other understandings, oral or written, with
respect to the subject matter hereof.
(ee) Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.
11
IN WITNESS WHEREOF, the Pledgors have duly executed this Agreement, and
the Pledgee has caused this Agreement to be duly executed by its officers duly
authorized, as of the day and year first above written.
PLEDGORS:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
▇▇▇▇▇▇▇ PARTNERS, INC.,
a California corporation
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS SCS, INC.,
a California corporation
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS BGHS, LLC,
a California limited liability company
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS PASADENA GEN-PAR, INC.,
a Delaware corporation
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
S-1
▇▇▇▇▇▇▇ PARTNERS DEVELOPMENT, LTD.,
a California limited partnership
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇ PARTNERS -- WFC HOLDINGS, LLC,
a Delaware limited liability company
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
▇▇▇▇▇▇▇/▇▇▇▇▇▇ PARTNERS INVESTMENTS,
a California general partnership
(which intends to convert to ▇▇▇▇▇▇▇
Partners - Investments, LLC, a California
limited liability company prior to or
contemporaneously with the Closing)
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III
Title:
PLEDGEE:
▇▇▇▇▇▇▇ PROPERTIES, L.P.,
a Maryland limited partnership
By:
----------------------------------------
Name:
Title:
S-2