Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 18, 1998
LNR PROPERTY CORPORATION
(Exact name of Registrant as Specified in its Charter)
Delaware 1-3223 65-0777234
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification Number)
Incorporation)
760 Northwest 107th Avenue
Miami, Florida 33172
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(305) 485-2000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 18, 1998, LNR Property Corporation ("LNR" or the
"Company"), a Delaware corporation, entered into an agreement (the "Purchase and
Sale Agreement") to purchase from Pacific Harbor Capital, Inc., a wholly owned
subsidiary of PacificCorp, controlling interests in a group of entities as well
as certain direct partnership interests, known as the Affordable Housing Group,
which own 40 multi-family and senior housing properties, with approximately
5,700 residential rental apartments, many of which qualify for low-income tax
credits under Section 42 of the Internal Revenue Code. The properties should
generate approximately $147 million of low-income tax credits through 2009, as
well as generate operating cash flow.
On May 1, 1998, LNR completed the purchase of certain interests which
own 34 of the properties. The Company anticipates purchasing the remaining
interests representing six properties upon receiving the necessary consents and
approvals. Assuming all of the entities and partnerships interests are
purchased, the aggregate amount of consideration will be approximately $81
million, subject to certain post-closing adjustments. The source of funds for
the acquisition is the Company's revolving credit agreement. The Company expects
that Affordable Housing Group, as part of LNR, will continue developing,
acquiring and operating residential rental apartments which qualify for
low-income tax credits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
It is impracticable to file with this Form 8-K the financial
statements and pro forma financial statements and pro forma
financial information required with respect to the transaction
described above. Those financial statements and the pro forma
financial information will be filed by amendment to this Form
8-K as soon as practicable and, in any event, within 60 days
after the required filing date for this Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION
See Item 7(a)
(c) EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Purchase and Sale Agreement between LNR
Property Corporation as Buyer and Pacific
Harbor Capital, Inc. as Seller
2.2 Amendment No. 1 Purchase and Sale Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
LNR PROPERTY CORPORATION
Date: May 18, 1998 BY: /S/ SHELLY RUBIN
---------------------
Name: Shelly Rubin
Title: Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Purchase and Sale Agreement between LNR Property Corporation
as Buyer and Pacific Harbor Capital, Inc. as Seller
2.2 Amendment No. 1 Purchase and Sale Agreement
PURCHASE AND SALE AGREEMENT
BETWEEN
LNR PROPERTY CORPORATION
as Buyer
AND
PACIFIC HARBOR CAPITAL, INC.
as Seller
February 18, 1998
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TABLE OF CONTENTS
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1. DEFINITIONS........................................................................1
2. PURCHASE AND SALE OF ACQUIRED ASSETS...............................................6
(a) BASIC TRANSACTION.........................................................6
(b) PURCHASE PRICE............................................................6
(c) THE CLOSING...............................................................7
(d) DELIVERIES AT THE CLOSING; RIGHTS OF SELLER POST-CLOSING..................7
(e) ADJUSTMENTS...............................................................7
(f) THE DEPOSIT...............................................................9
(g) SOLICITATION OF CONSENTS AND APPROVALS; WITHDRAWAL OF PROJECTS............9
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.........................10
(a) REPRESENTATIONS AND WARRANTIES OF SELLER.................................10
(b) REPRESENTATIONS AND WARRANTIES OF BUYER..................................12
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE AFFORDABLE HOUSING GROUP............14
(a) ORGANIZATION, QUALIFICATION, AND POWER...................................14
(b) NONCONTRAVENTION.........................................................14
(c) BROKERS' FEES............................................................15
(d) TITLE TO PROJECTS........................................................15
(e) AFFORDABLE HOUSING GROUP.................................................15
(f) FINANCIAL STATEMENTS.....................................................16
(g) MATERIAL CHANGE..........................................................16
(h) LEGAL COMPLIANCE.........................................................17
(i) TAX MATTERS..............................................................17
(j) CONTRACTS AND COMMITMENTS................................................18
(k) LITIGATION...............................................................19
(l) EMPLOYEES; EMPLOYEE BENEFITS.............................................19
(m) ENVIRONMENTAL MATTERS....................................................19
(n) INSURANCE................................................................20
(o) PERMITS..................................................................20
(p) TAX CREDIT MATTERS CONCERNING OPERATING PROJECTS.........................21
(q) TAX CREDIT MATTERS CONCERNING DEVELOPMENT PROJECTS.......................23
(r) MISCELLANEOUS DISCLOSURE ITEMS...........................................25
(s) INFORMATION SUPPLIED.....................................................25
(t) DISCLAIMER OF REPRESENTATIONS AND WARRANTIES.............................25
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5. PRE-CLOSING COVENANTS..............................................................26
(a) GENERAL...................................................................26
(b) NOTICES AND CONSENTS......................................................26
(c) OPERATION OF BUSINESS.....................................................26
(d) FULL ACCESS...............................................................28
(e) EXCLUSIVITY...............................................................28
6. POST-CLOSING COVENANTS.............................................................29
(a) GENERAL...................................................................29
(b) LITIGATION SUPPORT........................................................29
(c) EMPLOYEE MATTERS..........................................................29
(d) ASSUMPTION OF OBLIGATIONS BY BUYER; AFFORDABLE HOUSING GROUP
OBLIGATIONS...............................................................31
(f) USE OF NAME...............................................................33
(g) DELIVERY AND RETENTION OF RECORDS.........................................33
(h) CONSTRUCTION LOANS........................................................34
(i) HASTINGS LOAN.............................................................35
(j) SPACE.....................................................................35
(k) COOPERATION ON AUDIT......................................................35
(l) INDEMNIFICATION RELATING TO FENIX REDEVELOPMENT PARTNERSHIP, LTD..........36
7. CONDITIONS TO OBLIGATION TO CLOSE..................................................36
(a) CONDITIONS TO OBLIGATION OF BUYER.........................................36
(b) CONDITIONS TO OBLIGATION OF SELLER........................................37
8. REMEDIES FOR BREACHES OF THIS AGREEMENT............................................38
(a) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS.............38
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER...........................38
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER..........................39
(d) MATTERS INVOLVING THIRD PARTIES...........................................40
9. TAX MATTERS........................................................................40
(a) INCOME TAX SHARING AGREEMENTS.............................................40
(b) RETURNS FOR PERIODS THROUGH THE CLOSING DATE..............................40
(c) AUDITS....................................................................41
(d) CARRYBACKS................................................................41
(e) RETENTION OF CARRYOVERS...................................................41
(f) INDEMNIFICATION FOR POST-CLOSING TRANSACTIONS.............................41
(g) POST-CLOSING TRANSACTIONS NOT IN THE ORDINARY COURSE......................41
(h) ALLOCATION OF PURCHASE PRICE..............................................42
(i) SECTION 338(H)(10) ELECTION...............................................42
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(j) NOTICE OF INCOME TAX PROCEEDINGS; CONTEST PROCEDURE.......................42
(k) INTERIM CLOSING OF THE BOOKS..............................................44
10. TERMINATION........................................................................45
(a) TERMINATION OF AGREEMENT..................................................45
(b) EFFECT OF TERMINATION.....................................................45
(c) SPECIFIC PERFORMANCE......................................................47
11. MISCELLANEOUS......................................................................47
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS...................................47
(b) NO THIRD PARTY BENEFICIARIES..............................................47
(c) SUCCESSION AND ASSIGNMENT.................................................48
(d) COUNTERPARTS..............................................................48
(e) HEADINGS..................................................................48
(f) NOTICES...................................................................48
(g) GOVERNING LAW.............................................................49
(h) AMENDMENTS AND WAIVERS....................................................49
(i) SEVERABILITY..............................................................49
(j) EXPENSES; TRANSFER TAXES..................................................49
(k) CONSTRUCTION..............................................................50
(l) INCORPORATION OF EXHIBITS AND SCHEDULES...................................50
(M) ENTIRE AGREEMENT..........................................................50
Exhibit A Form of Opinion of Counsel to Sellers
Exhibit B Form of Opinion of Counsel to Buyer
Exhibit C Form of Parent Guaranty
Exhibit D Form of Escrow Agreement
Exhibit E Form of Construction Loan Documents
Schedule 1.1 Directly-Owned Companies and Directly-Owned Partnership Interests
Schedule 1.2 Indirectly-Owned Companies and Indirectly-Owned Partnership Interests
Schedule 1.3 Projects
Schedule 1.4 Additional Affordable Housing Group Assets
Schedule 1.5 Scheduled Capital Contributions
Schedule 1.6 Pro Forma Amount of Tax Credits
Schedule 2(a) Budgets for "Pool IV" Projects
Schedule 2(g) Allocation of Purchase Price for Projects if Potential Withdrawn Projects
Schedule 3(a) Exceptions to Seller's Representations and Warranties
Concerning the Transaction
Schedule 3(b) Exceptions to Buyer's Representations and Warranties
Concerning the Transaction
Schedule 4 Disclosure Schedule - Exceptions to Representations and
Warranties Concerning the Affordable Housing Group
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Schedule 5(c) Conduct Pending Closing
Schedule 5(g) Seller Obligations
Schedule 6(c) Employee List
Schedule 6(d) Assumed Liabilities
Schedule 6(h) Construction Loans
Schedule 9(h) Allocation Schedule
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is entered
into as of February 18, 1998, by and among LNR PROPERTY CORPORATION, a Delaware
corporation (the "BUYER"), and PACIFIC HARBOR CAPITAL, INC., a Delaware
corporation (the "SELLER"). Buyer and Seller are referred to collectively herein
as the "PARTIES."
RECITALS
WHEREAS, Seller owns all of the outstanding capital stock of
the corporations reflected on attached Schedule 1.1 as Directly-Owned Companies
(collectively, the "DIRECTLY-OWNED COMPANIES");
WHEREAS, Seller owns partnership interests reflected on
attached Schedule 1.1 as Directly-Owned Partnership Interests (collectively, the
"DIRECTLY-OWNED PARTNERSHIP INTERESTS");
WHEREAS, Seller, through the Directly-Owned Companies and the
Directly-Owned Partnership Interests has an indirect interest in each of the
affordable housing projects described on attached Schedule 1.3 (such projects
and any New Projects (as defined below) approved in accordance with Section 5(c)
hereof, referred to herein as the "PROJECTS");
WHEREAS, Seller owns the "Additional Affordable Housing Group
Assets" (as such term is defined below);
WHEREAS, this Agreement contemplates a transaction in which
Buyer will purchase from Seller, and Seller will sell to Buyer, all of the
outstanding capital stock of the Directly-Owned Companies, all of the
Directly-Owned Partnership Interests and all of the Additional Affordable
Housing Group Assets in return for cash;
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS
"ACQUIRED ASSETS" has the meaning set forth in Section 2(a)
hereof.
"ADDITIONAL AFFORDABLE HOUSING GROUP ASSETS" means each of the
following to the extent not already owned by a member of the Affordable Housing
Group: (i) all contracts necessary for the operation and development of the
Projects and owned by Seller or any Affiliate of Seller (other than Affiliates
included in the Affordable Housing Group); (ii) all rights of Seller and any
Affiliate of Seller (other than Affiliates included in the Affordable Housing
Group) to receive development and other fees, loan and capital repayments and
other payments, in each
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case relating to the Projects; provided that it shall not include that certain
$80,000 loan from PacifiCorp Financial Services, Inc. to Gerald E. Anderson and
Associates, Inc. to be made on or about the date hereof; (iii) all rights of
Seller and any Affiliate of Seller (other than Affiliates included in the
Affordable Housing Group) to software developed by Seller or any of its
Affiliates to monitor Tax Credit compliance, including all rights to future
payments with respect thereto and related products and services; and (iv)
furnishings (excluding conference room facilities), office equipment, computers
(excluding parent company servers and related software), computer and hardcopy
files and all such other items necessary or related to the ownership,
development and operation of the Projects, in the case of clauses (i) through
(iv), to the extent such assets relate to the operation of the Affordable
Housing Group. The Additional Affordable Housing Group Assets shall include, but
shall not be limited to, the assets set forth on attached Schedule 1.4.
"ADJUSTMENTS" means adjustments to the Purchase Price
contemplated under Section 2(e) or 2(g) hereof.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act. For purposes of
covenants after the Closing, Buyer's Affiliates shall include members of the
Affordable Housing Group acquired directly or indirectly by Buyer.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code section 1504.
"AFFORDABLE HOUSING GROUP" means the Directly-Owned Companies,
the Directly-Owned Partnerships, the Indirectly-Owned Companies and the
Indirectly-Owned Partnerships.
"ASSUMED OBLIGATIONS" has the meaning set forth in Section
6(d).
"BUYER" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents (including marketable
securities and short-term investments) calculated in accordance with GAAP.
"CLOSING" has the meaning set forth in Section 2(d) below.
"CLOSING DATE" has the meaning set forth in Section 2(c)
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSIONS" means, as to any state, the applicable
commission or agency charged with administering the Tax Credit program for such
state.
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"COMMISSION APPROVALS" means the notices to and/or approvals
of certain Commissions as set forth in Section 4(b)-1 of the attached Disclosure
Schedule.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality
Agreement between Buyer and PaineWebber Incorporated dated October 7, 1997.
"CONSTRUCTION LOANS" has the meaning set forth in Section 6(h)
hereof.
"DEPOSIT" means $2,000,000.
"DEVELOPMENT PROJECTS" means all of the Projects which are not
Operating Projects, such Projects being identified as "Development Projects" in
Section 4(d)-1 of the attached Disclosure Schedule.
"DIRECTLY-OWNED COMPANIES" has the meaning set forth in the
preface above.
"DIRECTLY-OWNED COMPANY SHARE" means a share of the common
stock of any Directly-Owned Company.
"DIRECTLY-OWNED PARTNERSHIP INTERESTS" has the meaning set
forth in the preface above.
"DIRECTLY-OWNED PARTNERSHIPS" means each partnership in which
Seller has a Directly-Owned Partnership Interest, which partnerships are listed
on attached Schedule 1.1.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4
below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
that is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement that is an Employee Pension Benefit Plan, or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA section 3(1).
"ENCUMBRANCE" means any mortgage, pledge, lien, encumbrance,
charge, other security interest or defect in title.
"ENVIRONMENTAL LAW" or "ENVIRONMENTAL LAWS" has the meaning
given to that term in Section 4(m) of this Agreement.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"GAAP" means U.S. generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL AUTHORITY" means the United States and any
state, county, city or other political subdivision, agency, court or
instrumentality.
"HAZARDOUS SUBSTANCES" means all hazardous, toxic and
radioactive materials, substances and wastes which, because of the risk that
their improper handling, use, treatment, transportation or disposal would pose
to public health or the environment, are regulated under any Environmental Law.
"INCOME TAX" means any federal, state, local, or foreign
income tax, including any interest, penalty, or addition thereto, whether or not
disputed.
"INCOME TAX RETURN" means any return, declaration, report,
claim for refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d)
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d)
below.
"INDIRECTLY-OWNED COMPANIES" means the corporations or limited
liability companies set forth on attached Schedule 1.2.
"INDIRECTLY-OWNED COMPANY" means one of the Indirectly-Owned
Companies.
"INDIRECTLY-OWNED COMPANY SHARE" means a share of the common
stock of any Indirectly-Owned Company.
"INDIRECTLY-OWNED PARTNERSHIP INTERESTS" means the partnership
interests in the Indirectly-Owned Partnerships reflected on attached Schedule
1.2.
"INDIRECTLY-OWNED PARTNERSHIPS" means the partnerships
reflected on attached Schedule 1.2 as Indirectly-Owned Partnerships.
"LAWS" means any constitution, statute, code, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any applicable Governmental Authority.
"NEW PROJECTS" has the meaning set forth in Section 5(c)
below.
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"NONCONTROLLED PARTNERSHIPS" means Fenix Redevelopment
Partnership, Ltd., a Colorado limited partnership, Lake Wood Ranch Limited
Partnership, an Idaho limited partnership, Morris Glen Limited Partnership, a
Virginia limited partnership, and Virginia Gardens Associates Limited
Partnership, a Virginia limited partnership.
"OPERATING PROJECTS" means each of the Projects which has been
placed in service prior to January 1, 1998 and for which final certificates of
occupancy and Internal Revenue Service Form 8609's have been issued with respect
to all buildings in the Project requiring such certificate or form, such
Projects being identified as "Operating Projects" in Section 4(d)-1 of the
attached Disclosure Schedule.
"ORDINARY COURSE OF BUSINESS" means ordinary business activity
of such entity, conducted in a commercially reasonable and businesslike manner,
having no unusual or special features, and being such as a corporation or other
entity of similar nature and size and engaged in a similar business might
reasonably be expected to carry out from time to time.
"PAINEWEBBER" means PaineWebber Incorporated.
"PARENT" shall mean PacifiCorp Financial Services, Inc., an
Oregon corporation.
"PARTY" has the meaning set forth in the preface above.
"PERMITTED ENCUMBRANCES" means any of the following: (i) any
liens for taxes and assessments not yet delinquent and (ii) any obligations or
duties reserved to or vested in any municipality or other Governmental Authority
to regulate any Acquired Asset in any manner including all applicable Laws.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PROJECTS" has the meaning set forth in the preface above.
"QUALIFIED TENANT" means any individual renting a rental unit
in the applicable Project for an initial term of at least six months who meets
the income limitations for such unit applicable to the Project under Section
42(g) of the Code.
"PURCHASE PRICE" has the meaning set forth in Section 2(b)
below.
"SCHEDULED CAPITAL CONTRIBUTIONS" means the Capital
Contributions required to be made by Seller or any member in the Affordable
Housing Group with respect to the Projects as set forth on attached Schedule
1.5.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
5
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"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
"SELLER" has the meaning set forth in the preface above.
"SELLER CONSENTS" means (i) the consents listed in Section
4(b)-2 of the attached Disclosure Schedule, and (ii) with respect to the Cascade
Crossing Project, Lake Wood Ranch Project, Morris Glen Project, Park at Emerald
Village Project, River Ridge Project, and Virginia Gardens Project, an amendment
of the current options in favor of the non-profit or governmental agency general
partners to convert such options to rights of first refusal contemplated under
Code Section 42(i)(7) (including limitations as to assignment to qualified
entities), it being acknowledged that with respect to Cascade Crossing Project,
Park at Emerald Village Project, and River Ridge Project, the options can remain
if they are amended to reflect a minimum price equal to the amount payable under
Code Section 42(i)(7).
"SPECIAL THIRD PARTY CLAIM" has the meaning set forth in
Section 8(a) below.
"TAX CREDITS" means federal income tax credits available under
Section 42 of the Code.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8(d)
below.
2. PURCHASE AND SALE OF ACQUIRED ASSETS
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, Buyer agrees to purchase from Seller, and Seller agree to sell
to Buyer, for the Purchase Price specified below in this Section 2 and the
assumption of certain obligations as contemplated herein, the Directly-Owned
Company Shares set forth on attached Schedule 1.1, constituting all of the
issued and outstanding equity securities of the Directly-Owned Companies, the
Directly-Owned Partnership Interests set forth on attached Schedule 1.1, and the
Additional Affordable Housing Group Assets (such securities, interests and
assets collectively referred to as the "ACQUIRED ASSETS"). Notwithstanding
anything contained herein to the contrary, Buyer may elect, by written notice to
Seller at least ten (10) business days prior to Closing to acquire an interest
in any Project by acquiring any Indirectly Owned Company or Indirectly Owned
Partnership, instead of a Directly Owned Company or Directly Owned Partnership;
provided, however, that (i) no additional consents shall be triggered as a
result of such election, (ii) the Purchase Price shall not be reduced as a
result of such election and (iii) Buyer shall be solely responsible for, and
shall pay on demand, any increased costs to Seller which arise because of such
election.
(b) PURCHASE PRICE. Buyer agrees to pay to Seller the Purchase Price in
the following manner: (i) Buyer will pay Seller at the signing of this
Agreement, the Deposit, which Seller will retain and apply as a partial payment
of the Purchase Price; (ii) Buyer will pay Seller in cash at Closing the sum of
(A) $81,151,063, plus (B) an amount equal to all Scheduled Capital
6
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Contributions which have been made after December 31, 1997 and prior to Closing
from funds provided by Seller (and not from funds provided by the Affordable
Housing Group) for the benefit of any Projects listed as "Pool III" Projects in
Schedule 1.5, plus (C) an amount equal to all capital contributions which have
been made after December 31, 1997 and prior to Closing from funds provided by
Seller (and not from funds provided by the Affordable Housing Group) for the
benefit of any Projects listed as "Pool IV" Projects in Schedule 1.5 within the
limits and for the purposes set forth in the applicable budget for such Projects
attached hereto as Schedule 2(b) (such sum referred to herein as the "PURCHASE
PRICE"), which cash amount shall be payable in part by crediting the Deposit
with the remainder payable by wire transfer or delivery of other immediately
available U.S. funds subject to Adjustments (as defined below), if any, under
Section 2(e) or (g), and (iii) Buyer shall assume the obligation to make the
Scheduled Capital Contributions which have not been made by the Affordable
Housing Group prior to Closing.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Stoel Rives LLP,
900 SW Fifth Avenue, Suite 2600, Portland, Oregon, 97204, commencing at 9:00
a.m. local time on March 31, 1998, or such later day as is the fifth business
day following the satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions each Party will take at the Closing itself)
or such other date as Buyer and Seller may mutually determine (the "CLOSING
DATE").
(d) DELIVERIES AT THE CLOSING; RIGHTS OF SELLER POST-CLOSING. At the
Closing, (i) Seller will deliver to Buyer the various certificates, instruments,
and documents referred to in Section 7(a) below, (ii) Buyer will deliver to
Seller the various certificates, instruments, and documents referred to in
Section 7(b) below, (iii) Seller will deliver to Buyer stock certificates
representing all of the outstanding issued Directly-Owned Company Shares,
endorsed in blank or accompanied by duly executed assignment documents, (iv)
Seller will withdraw as a general partner or a limited partner, as the case may
be, in each Directly-Owned Partnership and Buyer will be admitted and
substituted as a general partner or a limited partner, as the case may be, in
each Directly-Owned Partnership, and (v) Buyer will deliver to Seller the
Purchase Price specified in Section 2(b) above, as adjusted by Section 2(e) or
(g). After the Closing, neither Seller nor any of the Affiliates of Seller shall
have any claim with respect to the Acquired Assets, including, without
limitation, any Projects, except for (w) the rights of Seller under this
Agreement, (x) any Projects retained by Seller pursuant to Section 2(g) hereof,
(y) the rights of Seller or any Affiliate of Seller under any Construction Loan
and the documentation relating thereto, (z) the rights of Seller with respect to
any Tax Credits or other tax benefits for periods prior to Closing.
(e) ADJUSTMENTS. Each of the following adjustments shall take into
account the withdrawal of any Projects pursuant to Section 2(g) hereof. Without
limiting the foregoing, in the event the Purchase Price is reduced by virtue of
Withdrawn Projects pursuant to Section 2(g) hereof and Buyer has elected to pay
accrued interest to Seller on a monthly basis pursuant to clause (ii), an amount
equal to the interest attributable to such reduction shall be immediately
returned to Buyer.
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(i) With respect to the period from January 1, 1998, through and
including February 15, 1998, the remaining and scheduled
aggregate annual Tax Credits which have been allocated to the
Projects (other than New Projects) by any of the Commissions
(whether or not such Projects have been constructed) and which
are projected to be available to Buyer on or after February
16, 1998 shall be compared (through preparation of a separate
schedule on a "fiscal year" basis, commencing February 16,
1998; such schedule, the "ADJUSTED SCHEDULE") to the amount of
such annual Tax Credits set forth on attached Schedule 1.6
(the "PRO FORMA AMOUNT OF TAX CREDITS"), and the Purchase
Price shall be decreased by an amount equal to the present
value (determined from the respective fiscal year ends to
February 15, 1998) of the aggregate differences (adding
positive differences and subtracting negative differences)
between (A) the annual total credits for each year in the Pro
Forma Schedule attached as Schedule 1.6 (adjusted, if
appropriate to take into account the withdrawal of any
Projects pursuant to Section 2(g) hereof) and (B) the annual
total credits for each year in the Adjusted Schedule
(adjusted, if appropriate to take into account the withdrawal
of any Projects pursuant to Section 2(g) hereof and comparing
the first fiscal year in the Adjusted Schedule to 1998 in the
Pro Forma Schedule, and so on). The present value shall be
determined by discounting the difference on an annual basis at
a discount rate of ten percent (10%) per annum, from the end
of each fiscal year reflected in the Adjusted Schedule to
February 16, 1998.
(ii) With respect to the period from and including February 16,
1998, to but excluding the Closing Date, the Purchase Price
shall be increased by an amount equal to the interest which
would have been earned on $81,151,063 from and including
February 16, 1998, to but excluding the Closing Date at the
rate of fourteen percent (14%) per annum, compounded monthly;
provided, that in lieu of compounding, Buyer may pay the
accrued interest to Seller on a monthly basis, commencing
March 16, 1998.
(iii) With respect to the period from and including February 16,
1998, to but excluding the Closing Date, the Purchase Price
shall be decreased by an amount equal to $1 for every $1
dollar of such Tax Credits set forth on attached Schedule 1.6
which are available to Seller (other than Tax Credits
available to Seller with respect to the period from January 1,
1998 to and including February 15, 1998).
(iv) With respect to the period from and including February 16,
1998, to but excluding the Closing Date, the Purchase Price
shall be decreased by an amount equal to $0.38 for every $1
dollar of Projected Tax Losses set forth on attached Schedule
1.6 which are available to Seller (excluding
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any such Projected Tax Losses available to Seller with respect
to the period from January 1, 1998 to and including February
15, 1998).
(v) With respect to the period from and including April 1, 1998,
to but excluding the Closing Date, the Purchase Price shall be
increased by an amount equal to any cash invested by Seller in
the Affordable Housing Group during such period (other than
investments contemplated under clauses (B) and (C) of Section
2(b)).
(vi) In addition to the other adjustments contemplated hereunder,
for any New Projects which have been approved by Buyer as
contemplated under Section 5(c) hereof, the cash portion of
the Purchase Price shall be automatically increased to fully
reimburse Seller for any out-of-pocket expenditures, including
capital contributions, with respect to the New Projects. In
addition to the Scheduled Capital Contributions, Buyer shall
assume the obligation to make future capital contributions for
such New Projects (in an amount equal to the capital
contributions approved by Buyer pursuant to Section 5(c)
hereof).
(f) THE DEPOSIT. The Deposit will be held by First Security Bank, as
escrow agent (the "ESCROW AGENT"), until (a) the Closing occurs under this
Agreement, in which event the Deposit will be applied by Seller in partial
payment of the Purchase Price, in accordance with Section 2(b), or (b) the
Closing fails to occur as contemplated by the terms and conditions of this
Agreement, in which event the Deposit will be paid to Buyer or retained by
Seller in accordance with Section 10(b)(ii) or 10(b)(iii), as the case may be.
Buyer, Seller and Escrow Agent shall enter into an Escrow Agreement in
substantially the form of attached Exhibit D. Buyer shall be entitled to direct
the investment of the Deposit in securities contemplated by the Escrow
Agreement. Buyer and Seller shall each be responsible for the half of the fees
and expenses of the Escrow Agent.
(g) SOLICITATION OF CONSENTS AND APPROVALS; WITHDRAWAL OF PROJECTS.
Seller agrees to use its reasonable best efforts (not including the payment of
consent fees unless provided for in the applicable contract, which applicable
contract amounts shall be the responsibility of Seller) in obtaining the Seller
Consents and the Commission Approvals (as set forth in Schedule 4(b)-1). Buyer
agrees to reasonably cooperate with Seller at Seller's request (reasonable
cooperation to include arranging for appropriate persons to travel to and meet
with parties from whom Seller Consents and Commission Approvals are to be
requested (the "CONSENTING PARTIES"), and making written undertakings for the
benefit of such Consenting Parties consistent with the Assumed Obligations) in
obtaining the Seller Consents and Commission Approvals. If Seller or Buyer
reasonably determines with respect to one or more Projects (a "POTENTIAL
WITHDRAWN PROJECT") that,
(i) the representations and warranties will not be met in all
material respects at Closing; or
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(ii) the required Seller Consents or Commission Approvals will
not be obtained at or before Closing;
then the Party so determining shall provide the other Party with written notice
of the same at least five (5) business days before the Closing (it being
acknowledged that, unless the parties otherwise agree, if such notice comes
within the period less than five (5) business days before the Closing, the
Closing Date shall be extended to the fifth business day after such notice). In
such event, unless Buyer in its sole discretion elects to waive compliance with
such representations and warranties or Seller Consents or Commission Approvals
with respect to any such Potential Withdrawn Project (in which event no
withdrawal with respect to any Project for which such waiver has been made shall
occur), the relevant shares or partnership interests representing such Project
shall not be sold under this Agreement (such Project, a "WITHDRAWN PROJECT"),
and the Purchase Price will be reduced by the allocated Purchase Price relating
to such Project as set forth on attached Schedule 2(g). Seller agrees to
continue to use its reasonable best efforts and Buyer agrees to reasonably
cooperate (in each case, as contemplated above) during the 180-day period
following Closing to obtain any Seller Consents or Commission Approvals or to
cure representations and warranties with respect to Withdrawn Projects. Buyer
agrees to manage any Withdrawn Project during this period for a market rate
management fee, payable at the end of the period; provided, however, that the
management fee shall only be payable if the Withdrawn Project is not acquired by
Buyer. With respect to the Withdrawn Projects, if Seller Consents and Commission
Approvals are obtained or the misrepresentation is cured within 180 days after
Closing, Buyer will purchase the Withdrawn Project pursuant to the Purchase and
Sale Agreement (the purchase price of such Withdrawn Project to be equal to the
allocated Purchase Price relating to such Project as set forth on attached
Schedule 2(g),as adjusted consistent with the provisions of Section 2(b), with
respect to additional capital contributions after December 31, 1997, and Section
2(e)). In the event Seller sells a Withdrawn Project to a third party at any
time within 12 months after Closing, Seller shall pay to Buyer any net proceeds
received for such sale over the adjusted purchase price allocated for such
project in the Purchase and Sale Agreement (said adjusted purchase price of such
Withdrawn Project to be equal to the allocated Purchase Price relating to such
Project as set forth on attached Schedule 2(g),as adjusted consistent with the
provisions of Section 2(b), with respect to additional capital contributions
after December 31, 1997, and Section 2(e)).
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
(a) REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer that the statements contained in this Section 3(a) are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3(a)), except
as set forth in Schedule 3(a) attached hereto.
(i) ORGANIZATION OF SELLER. Seller is a corporation duly
organized, validly existing, and in good standing
under the laws of the state of Delaware.
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(ii) AUTHORIZATION OF TRANSACTION. Seller has full power
and authority (including full corporate power and
authority) to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation
of Seller, enforceable against Seller in accordance
with its terms and conditions, subject, however, to
the effects of bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally, and to general
principles of equity (regardless of whether such
enforceability is considered in a proceeding in
equity or at law). Seller need not give any notice
to, make any filing with, or obtain any
authorization, consent, or approval of any government
or governmental agency in order to consummate the
transactions contemplated by this Agreement, except
for the Commission Approvals.
(iii) NONCONTRAVENTION. Assuming the Seller Consents have
been obtained and the Commission Approvals have been
made or obtained, as the case may be, neither the
execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which
Seller is subject or any provision of its charter or
bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the
acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which
Seller is a party or by which it is bound or to which
any of its assets is subject.
(iv) BROKERS' FEES. Parent has retained PaineWebber in
connection with the transaction contemplated
hereunder and shall be solely responsible for the
fees payable to PaineWebber in connection herewith.
Subject to the foregoing, neither Parent nor Seller
has any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with
respect to the transactions contemplated by this
Agreement.
(v) CAPITALIZATION AND OWNERSHIP OF THE DIRECTLY-OWNED
COMPANIES. The entire authorized capital stock of the
Directly-Owned Companies consists of the
Directly-Owned Company Shares set forth on attached
Schedule 1.1, all of which are issued and
outstanding. All of the issued and outstanding
Directly-Owned Company Shares for each DirectlyOwned
Company have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held
of record by Seller free and clear of restrictions on
transfer (other than Seller Consents and restrictions
under
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the Securities Act and state securities laws), taxes,
and Encumbrances. Except as set forth on attached
Schedule 3(a), there are no outstanding or authorized
options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other
contracts, commitments, equities, claims, or demands
that could require any of the Directly-Owned
Companies to issue, sell, or otherwise cause to
become outstanding any of its capital stock or that
could require Seller to sell, transfer, or otherwise
dispose of the Directly-Owned Company Shares (other
than this Agreement). Seller is not a party to any
voting trust, proxy, or other agreement or
understanding with respect to the voting of any
capital stock of the Directly-Owned Companies. There
are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar
rights with respect to the Directly-Owned Companies.
(vi) OWNERSHIP OF THE DIRECTLY-OWNED PARTNERSHIPS AND
DIRECTLY-OWNED PARTNERSHIP Interests. The outstanding
partnership interests and the current partners of
each of the Directly-Owned Partnerships are
accurately set forth in Section 4(e) of the
Disclosure Schedule. All of the issued and
outstanding Directly-Owned Partnership Interests for
each Directly-Owned Partnership have been duly
authorized and are validly issued, are subject to
only the capital contribution obligations, loan, fee
or other financial obligations set forth on attached
Schedule 6(d) and are held of record by Seller free
and clear of restrictions on transfer (other than
Seller Consents and restrictions under the Securities
Act and state securities laws), taxes, and
Encumbrances. Except as set forth on attached
Schedule 3(a), there are no outstanding or authorized
options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other
contracts, commitments, equities, claims, or demands
that could require any of the Directly-Owned
Partnerships to issue, sell, or otherwise cause to
become outstanding any of its partnership interests
or that could require Seller to sell, transfer, or
otherwise dispose of the Directly-Owned Partnership
Interests (other than this Agreement). Seller is not
party to any voting trust, proxy, or other agreement
or understanding with respect to the voting of any of
the Directly-Owned Partnership Interests.
(b) REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that the statements contained in this Section 3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3(b)), except as set forth in Schedule 3(b) attached hereto.
(i) ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing, and in good standing
under the laws of Delaware.
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(ii) AUTHORIZATION OF TRANSACTION. Buyer has full power
and authority (including full corporate power and
authority) to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation
of Buyer, enforceable in accordance with its terms
and conditions, subject, however, to the effects of
bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting creditors' rights generally
and to general principles of equity (regardless of
whether such enforceability is considered in a
proceeding in equity or at law). Buyer need not give
any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government
or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and delivery
of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate
any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental
agency, or court to which Buyer is subject or any
provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
Party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it
is bound or to which any of its assets is subject.
(iv) BROKERS' FEES. Buyer has no liability or obligation
to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions
contemplated by this Agreement.
(v) INVESTMENT. Buyer acknowledges that none of the
Acquired Assets have been registered under the
Securities Act of 1933, as amended (the "33 ACT"),
nor have any of the Acquired Assets been registered
or qualified under any state securities laws. Buyer
acknowledges that to the extent any of the Acquired
Assets may constitute a "security" under the 33 Act
or any applicable state securities laws, such
Acquired Assets may not be offered for sale, sold,
transferred, pledged, or hypothecated to any person
in the absence of an exemption from, or an effective
registration or qualification under, the 33 Act and
applicable state securities laws. Buyer, together
with its directors and executive officers and
advisors, is familiar with investments of the nature
of the Acquired Assets, including the Directly-Owned
Company Shares and the Directly-Owned Partnership
Interests, understands that this investment involves
substantial risks, has adequately investigated the
Affordable Housing Group and the Projects and has
substantial knowledge and experience in financial and
business
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<PAGE>
matters such that it is capable of evaluating, and
has evaluated, the merits and risks inherent in
purchasing the Acquired Assets, including the
Directly-Owned Company Shares and the Directly-Owned
Partnership Interests, and is able to bear the
economic risks of such investment.
(vi) FINANCING. Buyer has sufficient cash, available lines
of credit or other sources of immediately available
funds (excluding financing tied specifically to or
secured primarily by the Affordable Housing Group) to
enable it to make payment of the Purchase Price at
Closing.
4. REPRESENATIONS AND WARRANTIES CONCERNING THE AFFORDABLE HOUSING
GROUP. The Seller represents and warrants to Buyer that the statements contained
in this Section 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4), except as set forth in the disclosure schedule
initialed by the Parties and attached hereto as Schedule 4 (the "DISCLOSURE
SCHEDULE"); provided, however, that with respect to Noncontrolled Partnerships,
notwithstanding anything contained herein to the contrary, each of the
representations and warranties set forth below are limited to the actual
knowledge of Seller, except for those representations and warranties with
respect to Noncontrolled Partnerships set forth in Sections 4(p) and 4(q) (other
than in clause (i) of each such section), which are not so limited.
(a) ORGANIZATION, QUALIFICATION, AND POWER. Each Directly-Owned Company
Shares, Directly-Owned Partnership, Indirectly-Owned Company and the
Indirectly-Owned Partnership (i) is an organization duly organized and validly
existing, under the laws of the jurisdiction of its organization; (ii) is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required; and (iii) has full corporate
or partnership power and authority, as the case may be, to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. With respect to each entity in the Affordable Housing Group which
directly owns a Project, the Project (and assets related thereto) is such
entity's only asset. With respect to each entity in the Affordable Housing Group
which indirectly owns a Project, such entity and all other entities owned
directly or indirectly by it have no assets other than one or more Projects or
the indirect ownership interests leading to ownership of one or more Projects.
(b) NONCONTRAVENTION. Assuming the Seller Consents have been obtained
and the Commission Approvals have been made or obtained, as the case may be,
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
any entity in the Affordable Housing Group is subject, or (ii) any provision of
the charter, bylaws, partnership agreement, limited liability company agreement
or other organizing document of any entity in the Affordable Housing Group or
(iii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to
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accelerate, terminate, modify, cancel, or exercise any adverse remedy with
respect to (including the rescission or reduction of Tax Credits, other than by
lapse of time) or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any entity in the Affordable
Housing Group is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Encumbrance upon any of its
assets). Except for the Commission Approvals and Seller Consents, no entity in
the Affordable Housing Group needs to give notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement.
(c) BROKERS' FEES. No entity in the Affordable Housing Group has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(d) TITLE TO PROJECTS. The respective entities in the Affordable
Housing Group reflected on Section 4(e) of the Disclosure Schedule as owning the
Projects, own such Projects free and clear of all Encumbrances, except for (1)
Permitted Encumbrances, and (2) the Encumbrances disclosed in Section 4(d)-2 of
the Disclosure Schedule.
(e) AFFORDABLE HOUSING GROUP. Section 4(e) of the Disclosure Schedule
lists each entity in the Affordable Housing Group, its name and jurisdiction of
organization, the percentage interest in such entity beneficially owned,
directly or indirectly, by Seller, and, where applicable, the Project owned by
such entity, and, where applicable, the percentage interest owned by any entity
which is not an Affiliate of Seller. All of the issued and outstanding
Indirectly-Owned Company Shares for each Indirectly-Owned Company have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by Seller free and clear of restrictions on transfer (other than Seller
Consents and restrictions under the Securities Act and state securities laws),
taxes, and Encumbrances. Except as set forth on Section 4(e) of the Disclosure
Schedule, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts, commitments, equities, claims, or demands that could require any of
the Indirectly-Owned Companies to issue, sell, or otherwise cause to become
outstanding any of its capital stock or that could require Seller to sell,
transfer, or otherwise dispose of the Indirectly-Owned Company Shares (other
than this Agreement). Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Indirectly-Owned Companies. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Indirectly-Owned Companies. All of the issued and outstanding
Indirectly-Owned Partnership Interests for each Indirectly-Owned Partnership
have been duly authorized and are validly issued, are subject to only the
capital contribution obligations set forth on attached Schedule 6(d) and are
held of record by Seller free and clear of restrictions on transfer (other than
Seller Consents and restrictions under the Securities Act and state securities
laws), taxes, and Encumbrances. Except as set forth on Section 4(e) of the
Disclosure Schedule, there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange
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rights, or other contracts, commitments, equities, claims, or demands that could
require any of the Indirectly-Owned Partnerships to issue, sell, or otherwise
cause to become outstanding any of its partnership interests or that could
require Seller to sell, transfer, or otherwise dispose of the Indirectly-Owned
Partnership Interests (other than this Agreement). Seller is not a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any of the Indirectly-Owned Partnership Interests.
(f) FINANCIAL STATEMENTS. Section 4(f) of the Disclosure Schedule sets
forth the unaudited balance sheets as of December 31, 1997 of each entity in the
Affordable Housing Group which directly owns a Project and, the unaudited
balance sheets as of December 31, 1997, of each other entity in the Affordable
Housing Group. These balance sheets present fairly, in all material respects,
the financial positions of the entities to which they relate. Each account
receivable reflected on the balance sheets represents the genuine, valid and
legally enforceable indebtedness of the account debtor and, except as set forth
in Section 4(f) of the Disclosure Schedule, no contra account, set-off, defense,
counterclaim, allowance, or adjustment has been asserted or, to the knowledge of
Seller, is threatened against any individual account receivable. The Affordable
Housing Group does not have any liabilities, whether absolute, accrued, or
contingent and whether due or to become due, that were not reserved against or
disclosed in the unaudited balance sheet of such entity as of the date thereof.
Except as set forth on Section 4(f) of the Disclosure Schedule, the Projects are
not subject to any liabilities, whether absolute, accrued, or contingent and
whether due or to become due, that were not disclosed in the appropriate balance
sheet of an entity in the Affordable Housing Group as of the date thereof.
(g) MATERIAL CHANGE. Except as set forth in Section 4(g) of the
Disclosure Schedule, since December 31, 1997:
(i) there has not been any change which is reasonably
likely to be materially adverse to the business,
operation, properties, financial condition, assets or
liabilities of any Project individually or the
Affordable Housing Group taken as a whole;
(ii) to Seller's knowledge, the Affordable Housing Group
and the Projects have been operated and maintained in
a prudent manner in the Ordinary Course of Business;
(iii) there has not been any material damage, destruction
or loss to any material portion of any Project,
whether or not covered by insurance;
(iv) there has been no issuance by any entity in the
Affordable Housing Group of any shares of its capital
stock, partnership interests or membership interests,
as the case may be, or any repurchase or redemption
by any Subsidiary of any shares of its capital stock,
partnership interests or membership interests, as the
case may be;
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(v) there has been no merger or consolidation of any
entity in the Affordable Housing Group with any other
Person or any acquisition by any entity in the
Affordable Housing Group of the stock or business of
any other Person;
(vi) there has been no borrowing of funds, agreement to
borrow funds or guaranty by any entity in the
Affordable Housing Group except for borrowings made
or entered into in the Ordinary Course of Business in
connection with development and construction of
Development Projects pursuant to the Construction
Loans or borrowings which would have been permitted
pursuant to Section 5(c)(v)(B) hereof;
(vii) no entity in the Affordable Housing Group has made or
entered into any employment, consulting, severance,
or indemnification agreement with any of its
employees;
(viii) there has been no actual, pending, or to the
knowledge of Seller, threatened change in the
relationship of any entity in the Affordable Housing
Group or affecting the Projects, with any managers,
residents, suppliers or other contractors, except
such as has not, and is not reasonably expected to,
materially adversely affect the business, operation,
properties, financial condition, assets or
liabilities of any Project individually or the
Affordable Housing Group taken as a whole; and
(ix) there is no contract, commitment or agreement to do
any of the foregoing, except as expressly permitted
hereby and except for contracts, commitments or
agreements made or entered into in the Ordinary
Course of Business.
(h) LEGAL COMPLIANCE. Each entity in the Affordable Housing Group has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof),
including, without limitation, compliance with regulations governing security
deposits.
(i) TAX MATTERS.
(i) Each entity in the Affordable Housing Group has filed
all Income Tax Returns that it was required to file
and has paid all Income Taxes required to be paid,
including Income Taxes shown on such Income Tax
Returns as owing.
(ii) Section 4(i) of the Disclosure Schedule lists all
Income Tax Returns filed with respect to each entity
in the Affordable Housing Group for taxable
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periods ended on or after December 31, 1995,
indicates those Income Tax Returns that have been
audited, and indicates those Income Tax Returns that
currently are the subject of audit.
(iii) Except as set forth on Section 4(i) of the Disclosure
Schedule, no entity in the Affordable Housing Group
has waived any statute of limitations with respect to
Income Taxes or agreed to any extension of time with
respect to an Income Tax assessment or deficiency.
(iv) No entity in the Affordable Housing Group is a party
to any Income Tax allocation or sharing agreement.
(v) No entity in the Affordable Housing Group has, since
December 31, 1995, been a member of an Affiliated
Group filing a consolidated federal Income Tax Return
other than a group, the common parent of which is
PacifiCorp.
(vi) Such Affiliated Group has filed all Income Tax
Returns that it was required to file for each taxable
period during which any entity in the Affordable
Housing Group was a member of the group, and has paid
all Income Taxes shown thereon as owing.
(vii) No entity in the Affordable Housing Group has any
liability for the Income Taxes of any Person other
than the Affordable Housing Group, and the Affiliated
Group, the common parent of which is PacifiCorp,
under Treas. Reg. Section 1.1502-6.
(j) CONTRACTS AND COMMITMENTS. Section 4(j) of the Disclosure Schedule
includes a list of all material contracts and commitments (including, without
limitation, (i) any agreements for borrowed money, (ii) any HUD contracts, and
(iii) any contract, lease, agreement or commitment, written or oral, providing
for receipt or payment, contingent or otherwise, of $50,000 or more or which may
not be terminated without payment or penalty, contingent or otherwise, of
$50,000 or more or which may not be terminated without payment or penalty with
notice of ninety (90) days or less) relating to the continued ownership and
operation of the Projects (other than contracts and agreements to which no
entity in the Affordable Housing Group is a party) (the "CONTRACTS"), and each
such Contract is in full force and effect. The Affordable Housing Group has in
all respects performed all obligations required to be performed by each entity
in the Affordable Housing Group to date under the Contracts, and no entity in
the Affordable Housing Group is in default under any obligation of any such
Contract. To the knowledge of Seller, no other party to any Contract is in
default thereunder. Except for assignments as security to lenders to individual
Projects, no entity in the Affordable Housing Group has assigned to any other
person any of its rights under any Contract. Except amendments and waivers
reflected in Schedule 4(j), no entity in the Affordable Housing Group has waived
any rights under any Contract. The Acquired Assets shall include all contracts
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reasonably necessary for the continued operation and development of the Projects
in substantially the same manner as such Projects have been operated and/or
developed prior to the date hereof. The Contracts set forth on Section 4(j) of
the Disclosure Schedule contain all of the rights of third parties with respect
to the Projects (other than such rights as would be set forth in contracts which
are not material).
(k) LITIGATION. Section 4(k) of the Disclosure Schedule sets forth each
instance in which any entity in the Affordable Housing Group or any of the
Projects (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge, or (ii) is a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction, or (iii) where, to
the knowledge of Seller, any such action, suit, proceeding, hearing, or
investigation contemplated under the foregoing clause (ii) is threatened.
(l) EMPLOYEES; EMPLOYEE BENEFITS. None of the entities constituting the
Affordable Housing Group now has, or has ever had, any employees. None of the
entities constituting the Affordable Housing Group has ever made or had any
obligation to make any contributions to any Employee Benefit Plan. The
Affordable Housing Group has no liability with respect to any Employee Benefit
Plan maintained by PacifiCorp or its Affiliates.
(m) ENVIRONMENTAL MATTERS. Except as set forth in Section 4(m) of the
Disclosure Schedule:
(i) Each Project and entity in the Affordable Housing
Group, as the case may be, is in compliance with all
applicable federal, state and local laws (including
common law), ordinances, rules and regulations
relating to protection or enhancement of the
environment including, without limitation, the
Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C.
section 9601, et seq., the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. section
6901, et seq., the Clean Air Act, as amended, 42
U.S.C. section 7401, et seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C. section
1251, et seq., and the Oil Pollution Act of 1990, 33
U.S.C. section 2701, et seq. (collectively, the
"ENVIRONMENTAL LAWS" and individually an
"ENVIRONMENTAL LAW").
(ii) Each Project and entity in the Affordable Housing
Group, as the case may be, has obtained all permits,
licenses, franchises, authorities, consents, and
approvals, and has made all filings and maintained
all material information, documentation, and records,
as necessary under applicable Environmental Laws for
operating its assets and business as it is presently
conducted, and all such permits, licenses,
franchises, authorities, consents, approvals, and
filings remain in full force and effect. Any remedial
action
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required by applicable law or recommended in any
Level 1 Environmental review has been completed.
(iii) There are no pending or, to Seller's knowledge,
threatened claims, demands, actions, administrative
proceedings, lawsuits or, investigations against any
entity in the Affordable Housing Group or any
Project, as the case may be, under any Environmental
Laws.
(iv) No Project or any other real property owned or
operated by the Affordable Housing Group is: (A)
listed on the National Priorities List or any similar
state list of sites requiring remedial action; (B) to
the knowledge of Seller, being considered for
possible inclusion on the National Priorities List or
on any such similar state list; or (C) to the
knowledge of Seller, the subject of any regulatory
action that may lead to claims against the Affordable
Housing Group under any Environmental Law.
(v) No part of any Project or any other real property
owned or operated by the Affordable Housing Group is
now being used, or has been used, by the Affordable
Housing Group as a landfill, dump, or other disposal
area for Hazardous Substances.
Seller make no representation or warranty regarding any
compliance or failure to comply with, or any actual or contingent liability
under, any Environmental Law, except as expressly set forth in this Section
4(m).
(n) INSURANCE. Section 4(n) of the Disclosure Schedule identifies, by
name of the underwriter, risk insured, policy number, and date of issuance, all
policies of casualty and liability insurance which any entity in the Affordable
Housing Group maintains as of the date of this Agreement, except for umbrella
policies maintained by Seller or its Parent. Except as set forth in Section
4(n), all such policies are currently in full force and effect and shall
transfer with the transfer of the Affordable Housing Group without the need for
any filing, notice or approval.
(o) PERMITS. Except as set forth in Section 4(o) of the Disclosure
Schedule, each entity in the Affordable Housing Group owns or holds all
franchises, licenses, permits, consents, approvals, and authorizations of all
Governmental Authorities necessary for the conduct of its business with respect
to the Projects (collectively, the "PERMITS"); except for Development Projects
which may require building permits, certificates of occupancy or similar permits
ordinarily required in connection with the development of a project (it being
acknowledged that Seller is not aware of any reason such permits will not be
issued when required). Specifically, (i) each Permit is in full force and
effect, and each entity in the Affordable Housing Group is in compliance with
all of its obligations with respect to the Permit, and (ii) no event has
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occurred that permits, or upon the giving of notice or the lapse of time or
otherwise would permit, revocation or termination of any Permit.
(p) TAX CREDIT MATTERS CONCERNING OPERATING PROJECTS. As to each
Operating Project, Seller makes the following representations and warranties:
(i) Buyer has been provided with true and correct copies
of each of the following (where applicable): (A) any
extended use agreement, restrictive use agreement or
similar agreement with respect to the Project with
any applicable Commission, (B) the original
reservation and any carryover allocation issued by
the applicable Commission, (C) any opinions provided
by tax counsel with respect to the availability of
Tax Credits from such Project, (D) any opinions or
certifications provided by independent certified
public accountants as to the "eligible basis" of the
Operating Project for the purpose of determining the
amount of the Tax Credits for the Operating Projects,
(E) the Internal Revenue Service Forms 8609 for each
Operating Project or each building in such Operating
Projects, as the case may be, (F) any elections to
fix the applicable percentage, and (G) any agreements
which impose conditions or requirements on the
Affordable Housing Group to the availability of Tax
Credits.
(ii) As to each Operating Project for which a carryover
allocation has been issued by the applicable
Commission, the owner entity's basis in such
Operating Project, including the portion of the land
properly allocable to such Operating Project, as of
December 31 of the year in which the carryover
allocation was issued (or as of such earlier date as
may be required by the applicable Commission)
exceeded ten percent of such entity's reasonably
expected basis in such Project as of December 31 of
the second year following such year in which the
carryover allocation was issued. As to each such
Operating Project where the first year of the
applicable "credit period" (as defined in Section
42(f)(1) of the Code) terminated before the Closing
Date, the minimum set-aside test contemplated under
Section 42(g) of the Code for such Project has been
satisfied. Full and complete files and records
supporting each of the representations under this
clause (ii) are available and will be transferred to
Buyer.
(iii) Assuming compliance by Buyer of its obligations under
Section 6(e) hereof, the entity in the Affordable
Housing Group owning the Operating Projects (or if
such entity is a pass-through entity for Federal
income tax purposes, the first entity which is not a
pass-through entity, including the Buyer) shall have
available the Tax Credits for the years and in the
amounts set forth in Schedule 1.6 with respect to the
Project (it being acknowledged by the parties that
the amount of Tax Credits reflected on
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said Schedule represents the portion of Tax Credits
expected to be available to Buyer and not necessarily
the total of Tax Credits available from the Project).
(iv) The Affordable Housing Group is in compliance with
and is operating each Operating Project in accordance
with the provisions of the Code and regulations
promulgated thereunder for purpose of maintaining the
availability to Buyer of the applicable Tax Credits
for the years and in the amounts set forth in
Schedule 1.6 with respect to the Project.
(v) Except as set forth in Section 4(p) of the attached
Disclosure Schedule: (A) 100% of the units of each
Operating Project which are rented are rented to
"low-income tenant" within the meaning of Section 42
of the Code; (B) all of the apartment units in each
residential building of each Operating Project are
similarly constructed to the same quality standard
within the meaning of Section 42(d)(3) of the Code;
(C) all tenant facilities serving the residential
buildings presently are, and always have been, made
available to all tenants on a comparable basis; (D)
each residential building in each Operating Project
was ready and available for occupancy on the date on
which the certificates of occupancy were issued with
respect to such residential buildings by the
applicable governmental authority responsible for the
issuance of certificates of occupancy, and such date
is accurately set forth in Section 4(p) of the
attached Disclosure Schedule; (E) during the time
that an apartment previously occupied by a Qualified
Tenant (as defined below) has been vacant, no
comparable or smaller sized apartment in the Project
has been rented to any tenant other than a Qualified
Tenant; and (F) 100% of the apartments in the Project
are "rent restricted" within the meaning of Section
42(g)(2) of the Code, and otherwise satisfy the
definition of a "low income unit" within the meaning
of Section 42(i)(3) of the Code.
(vi) Except as set forth in Section 4(p) of the attached
Disclosure Schedule, none of the entities in the
Affordable Housing Group or, to the knowledge of
Seller, any other person or entity, have directly or
indirectly funded (nor is there any commitment to so
fund) the construction or the operation of any
portion of any Operating Project by any obligation,
the interest on which is exempt from tax under
Section 103 of the Code or by any below market
federal loan. For the purpose hereof, the term "below
market federal loan" means any loan funded, in whole
or in part, with federal funds if the interest rate
payable on such loan is less than the applicable
federal rate in effect under Section 1274(d) of the
Code as of the date on which the loan was made.
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(vii) Except as set forth in Section 4(p) of the attached
Disclosure Schedule, none of the entities in the
Affordable Housing Group or, to the knowledge of
Seller, any other person or entity, have directly or
indirectly funded (nor is there any commitment to so
fund) the construction or the operation of any
portion of any Operating Project with a grant funded,
in whole or in part, with federal funds.
(viii) Set forth in Section 4(p) of the attached Disclosure
Schedule is: (A) the year in which the applicable tax
credit period for each residential building in each
Operating Project began; (B) the applicable minimum
set-aside percentage for each Operating Project; and
(C) the average occupancy rate during the six months
ended November 30, 1997.
(ix) With respect to each Project which is excepted from
the representation set forth in Section 4(p)(vi) by
reason of being funded by an obligation, the interest
on which is exempt from tax under Section 103 of the
Code, (a) at least 50% of the aggregate basis of each
building of such Project and the land on which such
building is or will be located, for purposes of
Section 42(h)(4) of the Code, will be financed during
construction and operations by the proceeds of
tax-exempt bonds which were issued under the volume
limitations pursuant to Section 146 of the Code and
to which principal payments will be applied within a
reasonable time in redemption thereof; and (b) all
determinations required under Section 42(m)(2)(D)
have been made on a timely basis.
(q) TAX CREDIT MATTERS CONCERNING DEVELOPMENT PROJECTS. As to each
Development Project, Seller makes the following representations and warranties:
(i) Buyer has been provided with true and correct copies
of (A) the application for Tax Credits to the
applicable Commission, (B) the reservation and any
carryover allocation issued by the applicable
Commission, (C) any opinions provided by tax counsel
with respect to the availability of Tax Credits from
such Project, (D) any opinions or certifications
provided by independent certified public accountants
with respect to the Development Projects, (E) any
elections to fix the applicable percentage, and (F)
any agreements which impose conditions or
requirements on the Affordable Housing Group to the
availability of Tax Credits.
(ii) As to each Development Project for which a carryover
allocation has been issued by the applicable
Commission, the owner entity's basis in such
Development Project, including the portion of the
land properly allocable to such Development Project,
as of December 31 of the year in which the carryover
allocation was issued (or as of such earlier date as
may be
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required by the applicable Commission) exceeded ten
percent of such entity's reasonably expected basis in
such Project as of December 31 of the second year
following such year in which the carryover allocation
was issued.
(iii) Assuming completion of each Development Project, the
issuance by the applicable Commission to the entity
owning such Development Project of Internal Revenue
Service Forms 8609 for each building in such
Development Project, the existence of adequate
"eligible basis" (as determined pursuant to the Code)
to support such Tax Credits (Seller having no
knowledge of any facts which would cause such
assumptions to be incorrect), and assuming compliance
by Buyer of its obligations under Section 6(e)
hereof, the entity in the Affordable Housing Group
owning the Development Projects (or if such entity is
a pass-through entity for Federal income tax
purposes, the first entity which is not a
pass-through entity, including the Buyer) shall have
available the Tax Credits for the years and in the
amounts set forth in Schedule 1.6 with respect to the
Project (it being acknowledged by the parties that
the amount of Tax Credits reflected on said Schedule
represents the portion of Tax Credits expected to be
available to Buyer and not necessarily the total of
Tax Credits available from such Development Project).
(iv) Except as set forth in Section 4(q) of the attached
Disclosure Schedule, none of the entities in the
Affordable Housing Group or, to the knowledge of
Seller, any other person or entity, have directly or
indirectly funded (nor is there any commitment to so
fund) the construction or the operation of any
portion of any Development Project by any obligation,
the interest on which is exempt from tax under
Section 103 of the Code or by any below market
federal loan. For the purpose hereof, the term "below
market federal loan" means any loan funded, in whole
or in part, with federal funds if the interest rate
payable on such loan is less than the applicable
federal rate in effect under Section 1274(d) of the
Code as of the date on which the load was made.
(v) Except as set forth in Section 4(q) of the attached
Disclosure Schedule, none of the entities in the
Affordable Housing Group or, to the knowledge of
Seller, any other person or entity, have directly or
indirectly funded (nor is there any commitment to so
fund) the construction or the operation of any
portion of any Development Project with a grant
funded, in whole or in part, with federal funds.
(vi) Set forth in Section 4(q) of the attached Disclosure
Schedule is: (A) the year in which the applicable
credit period for each residential building in
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each Development Project is expected to begin and (B)
the applicable minimum set-aside percentage for each
Operating Project.
(vii) With respect to each Project which is excepted from
the representation set forth in Section 4(q)(iv) by
reason of being funded by an obligation, the interest
on which is exempt from tax under Section 103 of the
Code, (a) at least 50% of the aggregate basis of each
building of such Project and the land on which such
building is or will be located, for purposes of
Section 42(h)(4) of the Code, will be financed during
construction and operations by the proceeds of
tax-exempt bonds which were issued under the volume
limitations pursuant to Section 146 of the Code and
to which principal payments will be applied within a
reasonable time in redemption thereof; and (b) all
determinations required under Section 42(m)(2)(D)
have been made on a timely basis.
(r) MISCELLANEOUS DISCLOSURE ITEMS. Set forth in Section 4(r) of the
Disclosure Schedule:
(i) Are the names of each bank where any entity in the
Affordable Housing Group has an account or safe
deposit box and the names of persons authorized to
draw thereon or gain access thereto; and
(ii) Are the names of all persons to whom any entity in
the Affordable Housing Group has given a power of
attorney, other than powers of attorney granted to
(A) lenders to such entities pursuant to the loan
documents, or (B) to partners in such entities as
reflected in the partnership agreements, in each case
referred to on Section 4(j) of the Disclosure
Schedule.
(s) INFORMATION SUPPLIED. Neither the representations and warranties
set forth herein or in any Schedule attached hereto, nor the information in any
certificate delivered by or on behalf of Seller pursuant hereto, contains any
untrue statement of a material fact, or omits to state a material fact necessary
to make the statements therein not misleading in light of the circumstances in
which made.
(t) DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Buyer acknowledges
that (i) it has had and pursuant to this Agreement will have before Closing
access to Seller, the Affordable Housing Group, the Projects and Parent, and the
officers and employees of Seller and the Affordable Housing Group, and Parent
and (ii) in making the decision to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer has relied solely on the basis of its
own independent investigation and upon the express representations, warranties,
covenants, and agreements set forth in this Agreement. Accordingly, Buyer
acknowledges that, except as expressly set forth in this Agreement, Seller and
Parent have not made, and Seller AND PARENT MAKE NO AND DISCLAIM ANY
REPRESENTATION OR WARRANTY,
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WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE,
REGARDING THE AVAILABILITY OF TAX CREDITS, ANY EXPECTED YIELD FROM THE
INVESTMENT, OR THE QUALITY, CONDITION, OR OPERABILITY OF ANY PROJECT, INCLUDING,
WITHOUT LIMITATION, ANY IMPROVEMENTS, PERSONAL PROPERTY, EQUIPMENT, OR FIXTURES
PART OF ANY SUCH PROJECT; IT BEING ACKNOWLEDGED BY THE PARTIES HERETO THAT THE
AFFORDABLE HOUSING GROUP AND EACH PROJECT, INCLUDING ANY IMPROVEMENTS, PERSONAL
PROPERTY, EQUIPMENT, OR FIXTURES ARE DELIVERED "AS IS, WHERE IS" IN THE
CONDITION IN WHICH THE SAME EXISTS.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the date of this Agreement and the Closing.
(a) GENERAL. Each Party will use its reasonable best efforts to take
all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
(b) NOTICES AND CONSENTS. Seller will cause each entity in the
Affordable Housing Group to give any notices to third parties and will cause
each entity in the Affordable Housing Group to use its reasonable best efforts
to obtain any third party consents (consistent with the provisions of Section
2(g) hereof) which Buyer reasonably may request in connection with the matters
referred to in Section 4(b) above, including, without limitation, Seller
Consents and the Commission Approvals. Each of the Parties will (and Seller will
cause each entity in the Affordable Housing Group to) give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in subsection 3(a)(ii), subsection
3(b)(ii), and section 4(b) above.
(c) OPERATION OF BUSINESS. Seller will, subject to the consent rights
of Buyer contained in this Agreement, continue the Ordinary Course of Business
of the Affordable Housing Group. Seller will not, without the consent of Buyer,
cause or permit any entity in the Affordable Housing Group to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, Seller
will not, without the consent of Buyer, except as expressly contemplated by this
Agreement or as contemplated by Schedule 5(c), cause or permit any entity in the
Affordable Housing Group to do any of the following, or approve actions by any
entity in the Affordable Housing Group to do any of the following:
(i) amend or otherwise change in any material respect its
charter, bylaws, partnership agreement, limited
liability company agreement or equivalent
organizational documents;
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(ii) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, or
grant of any shares of capital stock of any class or
any partnership interests, or any membership
interests of any entity in the Affordable Housing
Group, or any options, warrants, convertible
securities or other rights of any kind to acquire any
shares of such capital stock, partnership interest,
membership interests, or any other ownership interest
(including, without limitation, any phantom
interest), of any entity in the Affordable Housing
Group;
(iii) cause or allow any of the Projects to become subject
to an Encumbrance, except for Permitted Encumbrances;
(iv) from and after January 1, 1998, declare, set aside,
make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with
respect to any of its capital stock, partnership
interests or membership interests;
(v) (A) acquire (including, without limitation, by
merger, consolidation or acquisition of stock or
assets) any corporation, partnership, or other
business organization or any division thereof or any
material amount of assets other than in the Ordinary
Course of Business; (B) incur any indebtedness for
borrowed money or issue any debt securities or
assume, guarantee, endorse, or otherwise as an
accommodation become responsible for, the obligations
of any person, or make any loans or advances except
for borrowings contemplated on attached Schedule
5(c); or (C) enter into or amend a contract,
agreement, commitment, or arrangement with respect to
any matter set forth in this paragraph (v); provided
that the foregoing shall not restrict the ability of
the Affordable Housing Group to complete and file
applications to any state commissions for Tax Credits
or to enter into options or similar contracts (where
the option or similar right is under the control and
at the discretion of the Affordable Housing Group),
and non-binding proposals and term sheets with
respect to the acquisition of property or interests
of any Person, in connection with the Ordinary Course
of Business of the Affordable Housing Group; provided
further, that the exercise of the option or similar
right or the entry into binding agreements, as the
case may be, shall be subject to the approval of
Buyer in its sole discretion which decision cannot be
unreasonably delayed, it being further acknowledged
that Buyer shall respond within five business days of
receipt of a request for approval of a proposal and
information reasonably satisfactory to Buyer relating
thereto, it being further acknowledged that such
response can be a reasonable request for additional
information, in which event the Buyer shall respond
within five business days of receipt of such
additional information (any such new projects which
has been approved by Buyer referred to herein as "NEW
PROJECTS"); Seller agrees to use reasonable best
efforts to keep such person
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or persons as Buyer shall designate in writing from
time to time (initially, Bob Cherry and Marc Chasman)
reasonably informed of material developments with
respect to potential New Projects; in no event shall
Seller use funds of the Affordable Housing Group (as
distinguished from funds provided by Seller) for any
project which is not a Project;
(vi) pay, discharge or satisfy any claim, liability or
obligation (absolute or accrued, asserted or
unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the Ordinary
Course of Business and consistent with past practice,
of liabilities reflected or reserved against the
Affordable Housing Group as of December 31, 1997, as
reflected in the balance sheets described in Section
4(f), including the notes thereto, or subsequently
incurred in the Ordinary Course of Business and
consistent with past practice;
(vii) enter into any collective bargaining agreements or
change accounting practices; or
(viii) amend or terminate in any material respect any
material contract or agreement (for purposes hereof,
any contract or agreement providing for receipt or
payment of $10,000 or more) to which the Affordable
Housing Group is a party.
(d) FULL ACCESS. Seller will permit, and Seller will cause each entity
in the Affordable Housing Group to permit, representatives of Buyer to have full
access at all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Affordable Housing Group, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to each entity in the Affordable Housing Group. Any
information obtained by Buyer, its employees, representatives, consultants,
attorneys, agents, lenders and other advisors under this Section 5(d) shall be
subject to the confidentiality and use restrictions contained in the
Confidentiality Agreement. Without limiting the foregoing, Seller will permit,
and Seller will cause each entity in the Affordable Housing Group to permit,
representatives of Buyer to have access to the Projects for purposes of
conducting a Phase I environmental audit, at Buyer's expense.
(e) EXCLUSIVITY. Seller will not (and Seller will not cause or permit
any entity in the Affordable Housing Group to) solicit, initiate, or encourage
the submission of any proposal or offer from, or negotiate with, any Person
relating to the acquisition of all or substantially all of the Directly-Owned
Company Shares, the Directly-Owned Partnership Interests, or the Projects
(including any acquisition structured as a merger, consolidation, or share
exchange).
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6. POST-CLOSING COVENANTS. The Parties agree as follows:
(a) GENERAL. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as the other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 8 below).
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or before
the Closing Date involving any entity in the Affordable Housing Group, the other
Party shall cooperate with the contesting or defending Party and its counsel in
the defense or contest, make available its personnel, and provide such testimony
and access to its books and records as shall be necessary in connection with the
defense or contest, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
(c) EMPLOYEE MATTERS.
(i) Part I of Schedule 6(c) sets forth all of the
employees of Seller who have significant
responsibilities with respect to the Affordable
Housing Group. Buyer shall, no later than 30 days
after the execution hereof, deliver to Seller a list
of the employees of Seller listed on Part I of
Schedule 6(c) that Buyer does not wish to employ
after the closing (the "LIST OF NON-HIRED
EMPLOYEES"). Seller shall cause all employees listed
on the List of Non-Hired Employees, at or before
Closing, to be terminated or transferred to other
employment of Seller, and shall be responsible for
any severance obligations to these employees. Buyer
shall, at Closing, offer employment to all employees
listed on Part I of Schedule 6(c) who are not
included on the List of Non-Hired Employees. In the
event any employee listed on Part I of Schedule 6(c)
declines to accept such employment with Buyer, Seller
shall be responsible for any severance obligations.
(ii) After the Closing Date, Buyer agrees to provide
salaries and wages to any employees of Seller who
transfer to the employment of Buyer or its Affiliates
(the "EMPLOYEES") that are at least as great as the
salaries and wages as paid by Seller on the date
immediately preceding the Closing Date; provided,
however, that (A) any bonus or similar incentive
payments shall be based upon Buyer's practices and
not the practices of Seller, and (B) any raises in
base salary in excess of 10% from the base salary in
place at December 31, 1997, shall only be considered
in Buyer's
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sole discretion. Buyer also agrees to provide
Employees (under employee plans sponsored by Buyer)
the same employee benefits plans as provided to
similarly situated employees of Buyer or its
Affiliates. Further, Buyer shall (A) waive, or cause
the Affordable Housing Group or any Affiliate of
Buyer to waive, any preexisting condition limitations
applicable to the Employees and any covered
dependents under the group medical plan of Buyer or
its Affiliates, (B) ensure that Employees are given
full credit for all copayments and deductibles
incurred by such Employees and covered dependents
under the applicable group medical plan of Seller or
the Affordable Housing Group for the 1997 and 1998
plan year, and (C) cause any Employee Pension Benefit
Plan that is intended to be qualified under section
401 of the Code to credit Employees for participation
and vesting purposes under such plan for their period
of employment with Seller and its predecessors to the
extent such predecessor employment was recognized by
any tax-qualified pension plan of Seller, and credit
Employees for their period of employment with Seller
for purposes of participation or accruals under any
vacation, sick leave or other service-based plan or
policy of Buyer or its Affiliates.
(iii) Buyer agrees that, if any employee of Seller who
accepts employment with Buyer, any entity in the
Affordable Housing Group or Affiliate of Buyer, is
terminated from employment by any entity in the
Affordable Housing Group, Buyer or any Affiliate of
Buyer on or after the Closing Date but on or before
the first anniversary of the Closing Date for any
reason other than cause, or is required to transfer
to a job location that is more than 25 miles from his
or her current job location or to take a reduction in
base rate of pay, but refuses such transfer or
reduction and terminates his or her employment with
Buyer or any Affiliate of Buyer or a Directly-Owned
Company, Buyer shall provide, or cause the
Directly-Owned Company or any Affiliate of Buyer to
provide, the employee with (A) a lump sum cash
severance payment equal to two weeks' base pay, plus
three weeks' base pay for each year of service
(taking into account service with Seller and its
Affiliates and service with predecessor employers
that is considered by Seller and its Affiliates under
its existing severance programs) and rounding up any
partial year of at least six months to at least one
full year of service, with a total severance payment
of not less than 12 weeks' base pay, and (B)
continued health insurance coverage for the employee
and his or her dependents under Part 6 of Title I of
ERISA (COBRA) at a cost to the employee that is not
in excess of the cost of coverage for active
employees of Buyer or its Affiliates (including the
Directly-Owned Company after the Closing Date) who
were formerly employed by Seller or its Affiliates.
For purposes of this subparagraph (iii), termination
shall be for cause if it is for conduct such as
fraud, embezzlement, theft,
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commission of a felony, or any other criminal act
against Buyer or its Affiliates (including the
Directly-Owned Company after the Closing Date).
(iv) Seller shall be responsible for payment of the
retention bonuses which it has agreed to pay the
Employees and for any other payment obligations which
it has to the Employees for any periods prior to
Closing.
(d) ASSUMPTION OF OBLIGATIONS BY BUYER; AFFORDABLE HOUSING GROUP
OBLIGATIONS. Upon Closing, Buyer shall assume, discharge, and perform, and shall
cause each entity in the Affordable Housing Group to discharge and perform all
obligations and liabilities of any nature whatsoever that are set forth in
attached Schedule 6(d) or otherwise reflected on Section 4(f) of the Disclosure
Schedule (the "ASSUMED OBLIGATIONS"). Except for the rights of indemnification
provided in this Agreement, Buyer hereby waives any claim or cause of action
pursuant to common or statutory law or otherwise against Seller or its
Affiliates regarding the Assumed Obligations. If reasonably possible in
connection with the sale contemplated hereunder, Seller shall attempt to obtain
and Buyer shall cooperate in such efforts, at no cost to the Buyer, a release of
Seller and its Affiliates (other than the Affordable Housing Group) with respect
to any or all of the Assumed Obligations. Buyer shall indemnify, reimburse, hold
harmless and protect Seller against any action by any third party against Seller
and any of its Affiliates arising from the Assumed Obligations. Subject to the
foregoing indemnification, Seller agrees to leave in place for their current
terms, with no fees or similar charges to Buyer (with no extensions) (i) that
certain letter of credit issued by ABN AMRO, N.V. for the benefit of LIH Realty,
Inc., and (ii) that certain completion guaranty for the benefit of the lender in
connection with the Quail Run Project.
(e) OPERATION OF PROJECTS BY BUYER; MANAGEMENT OF PROPERTIES AFFECTED
BY NON-CONTROLLED EVENTS. From and after Closing, Buyer agrees to operate,
maintain and manage each of the Projects consistent with the requirements of
Section 42 of the Code, the regulations of the Internal Revenue Service related
thereto, the rules and regulations of any Commission applicable to any such
Project, and any extended use or other similar agreement with any Commission, so
that neither Seller nor any Affiliate shall suffer a recapture under Section
42(j) of the Code of any Tax Credits claimed with respect to any Project for any
period prior to Closing (a "TAX CREDIT RECAPTURE") and shall promptly pay to
Seller, on demand, the amount of any Tax Credit Recapture, plus interest and
penalties thereon, caused by the failure of Buyer to so operate, maintain and
manage such Projects; provided, however, that Buyer shall not be responsible to
Seller to the extent any Tax Credit Recapture arose solely and directly from
actions of Seller, either directly or indirectly, prior to Closing.
Notwithstanding the foregoing, in the event the Tax Credit Recapture arises or
threatens to arise solely and directly from a "Non-controlled Event" (as defined
below) the obligations of Buyer shall be as follows:
(i) Promptly after Buyer has knowledge of a
Non-controlled Event or the likelihood that a
Non-controlled Event will occur, Buyer shall notify
Seller in writing of the facts giving rise to such
event or the likelihood of such event;
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(ii) Seller, in consultation with Buyer, shall develop a
budget of the projected costs (the "RECAPTURE
AVOIDANCE COSTS") to cure or avoid the effect of such
"Non-controlled Event" so that such Tax Credit
Recapture will not occur or such that as little as
possible of such Tax Credit Recapture will occur;
(iii) If Seller determines in its sole discretion that the
Recapture Avoidance Costs should be spent to cure or
avoid such Non-controlled Event as contemplated in
clause (ii), then Seller and Buyer shall be
responsible to loan to the entity owning the Project
(the "PROJECT OWNER") their "Recapture Avoidance
Share" (as defined below) of the Recapture Avoidance
Costs in the amounts and at the times contemplated in
the budget (which loans shall be made in cash but can
be made by payments directly to the person or entity
providing services or materials to the Project
Owner); provided, however, that, if Buyer determines
that the scheduled Recapture Avoidance Costs are not
reasonably sufficient to cure or avoid such
Non-controlled Event, then Buyer may notify Seller of
the higher amount of the Recapture Avoidance Costs
reasonably required to cure or avoid such
Non-controlled Event and such higher amount shall be
the amount of the Recapture Avoidance Costs for
purposes of this section;
(iv) If Seller fails to loan to the Project Owner Seller's
Recapture Avoidance Share of the Recapture Avoidance
Costs, and such failure continues for three (3)
business days after written notice thereof from
Buyer, then Buyer shall not be obligated to make any
loan to such Project Owner and Buyer shall have no
liability to Seller with respect to such Tax Credit
Recapture;
(v) If Buyer fails to loan to the Project Owner Buyer's
Recapture Avoidance Share of the Recapture Avoidance
Costs, and such failure continues for three (3)
business days after written notice thereof from
Seller, then Seller shall not be obligated to make
any loan to such Project Owner and Buyer shall
immediately pay to Seller the full amount of such Tax
Credit Recapture; and
(vi) Any loan made pursuant to this Section shall (A)
mature at the end of the "compliance period" (as such
term is defined in Code Section 42) applicable to
such Project (without regard to any extended use
periods; such period, the "COMPLIANCE PERIOD"), (B)
be payable from available net cash flow, and (C) bear
interest at the lowest applicable federal rate.
For purposes hereof, a "NON-CONTROLLED EVENT" shall mean an event which is
outside the control of Buyer, either directly or through any of its Affiliates
(for purposes of this Section 6(e), except as specifically provided below,
"Affiliates" of Buyer shall include any transferee of Buyer or its Affiliates of
any direct or indirect interest in the Project); provided, however, that an
event
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shall be deemed to have been in the control of Buyer and its Affiliates if
(1) the event was caused by the negligence, mismanagement or misconduct of the
Buyer, any of its Affiliates or any of their respective agents or employees, (2)
the event could have been avoided by the maintenance of insurance for any
Project in amounts and covering risks normally carried by businesses such as the
Affordable Housing Group and for projects such as the Projects, regardless of
whether or not there were sufficient cash flow from the operation of the
Project, (3) the event arose because of the failure of Buyer to perform any of
the Assumed Obligations which were originally the recourse obligations of Seller
or PacifiCorp Financial Services, Inc., or (4) the event could have been avoided
by the application of cash flow available to Seller at the time of the event
from the Projects (including Projects other than the affected Project), directly
or indirectly through its Affiliates (excluding transferees), it being
acknowledged that cash flow which is required to be distributed or paid to any
Person who is not an Affiliate (excluding from such definition, transferees) and
any cash flow from a Project other than an affected Project which is not
permitted to be distributed by the entity owning the Project to Seller or its
other Affiliates for use in the affected Project shall not be considered
available. For purposes hereof, "RECAPTURE AVOIDANCE SHARE" shall be the
relative percentage interest of Buyer and Seller in the adverse consequences
which would arise from such Non-controlled Event, computed as follows: (1) the
Seller's share of the adverse consequences shall be equal to the amount Tax
Credit Recapture which it would suffer from such event, including any penalties
and interest thereon, and (2) the Buyer's share of the adverse consequences
shall be equal to the sum of (A) the amount tax credit recapture which it or its
Affiliates would suffer from such event, including any penalties and interest
thereon, (B) the present value of any Tax Credits (determined by discounting at
a rate of 10% per annum from the projected date of such availability as set
forth on Schedule 1.6 attached hereto) which would have been available to Buyer
or its Affiliates after such date, assuming the Non-controlled Event had not
occurred, and (C) the then current fair market value (determined without regard
to the Tax Credits), if positive, of the Project, assuming the Recapture
Avoidance Costs have been spent, as determined by an independent third party
appraisal. In the event that the Recapture Avoidance Share of Seller of the
Recapture Avoidance Costs as to any Project is $250,000 or more, Seller may
demand that the Project be managed by an independent nationally recognized
management company experienced in tax credit projects, selected by Seller. In
such event, the management of such property shall be transferred as soon as
possible (in any event, within sixty (60) calendar days after demand).
(f) USE OF NAME. As soon as practicable, but in any event within 120
days after the Closing Date, Buyer shall remove the words "PacifiCorp" or
"Pacific Harbor" or "PHC" or any words or expressions similar thereto from the
Projects. As soon as practicable, but in any event within 7 days after the
Closing Date, Buyer shall (i) change the name of each entity in the Affordable
Housing Group to remove such words and (ii) cease using any of such words for
all purposes including, without limitation, as a corporate, partnership, or
assumed name.
(g) DELIVERY AND RETENTION OF RECORDS. On or within 15 days after the
Closing Date, Seller will deliver or cause to be delivered to Buyer all files,
records, information, and data relating to the Affordable Housing Group, each
entity therein and the Projects that are in the
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possession or control of Seller (together with all of Seller's contractual
rights to request other such files, records, information, and data from any
third party), including without limitation, the original corporate minute and
stock record books and organizational documents, as the case may be, for each
entity in the Affordable Housing Group (the "RECORDS"). Seller are entitled to
keep copies of all Records and any portion of thereof. Buyer agrees to hold the
Records and not to destroy or dispose of any thereof for ten years from the
Closing Date or such longer time as may be required by law or regulation
(including, without limitation, any requirements under Section 42 of the Code or
the regulations adopted thereunder, or any requirements of any Commission with
respect to such Records). In the event that Buyer desires to destroy or dispose
of such Records, it will first offer in writing at least 60 days before such
destruction or disposition to surrender them to Seller and if Seller does not
accept such offer within 20 days after receipt of such offer, Buyer may take
such action. Buyer agrees that, after the Closing Date, it shall afford Seller,
its accountants, and counsel, during normal business hours, upon reasonable
request, at any time, full access to the Records and to Buyer's employees to the
extent that such access may be requested for any legitimate purpose at no cost
to Seller (other than for reasonable out-of-pocket expenses); PROVIDED, HOWEVER,
that such access will not be construed to require the disclosure of Records that
would cause the waiver of any attorney-client, work product or like privilege;
provided, further, that in the event of any litigation nothing herein shall
limit either Party's rights of discovery under applicable law. Buyer shall have
the same rights, and Seller shall have the same obligations, as are set forth in
this Section with respect to any copies of the Records of Seller pertaining to
the Records that are retained by Seller, with the exception of tax Returns
retained by Seller, provided that such access will not be construed to require
the disclosure of Records that would cause the waiver of any attorney-client,
work product, or like privilege. Seller shall maintain the Records as
confidential except for (i) information which is or becomes available to the
public without disclosure by Seller in breach hereof, (ii) disclosure to
employees and agents of Seller, (iii) disclosure which is required by law or any
regulatory or administrative proceeding (including, without limitation,
disclosures required to be made to the Internal Revenue Service), (iv)
disclosure in any legal proceedings involving Buyer and Seller with respect to
this Agreement.
(h) CONSTRUCTION LOANS. Seller will provide and/or carry, as the case
may be, construction financing for the Projects listed on attached Schedule 6(h)
in the aggregate amount set forth for such Project as reflected in the "Maximum
Amount" column (each, a "CONSTRUCTION LOAN"; collectively referred to as
"CONSTRUCTION LOANS"). Construction Loans shall (i) be secured by a first
priority lien on the Project to which the Construction Loan relates, (ii) bear
interest at the prime rate, (iii) mature at the earlier of twenty-four (24)
months after the first advance (the date of such advance for each such Project
other than Cascade Crossing to be set at July 1, 1997) pursuant to such
Construction Loan or 6 months after the date the Project is placed in service,
(iv) be recourse to Buyer, and (v) the loan documentation shall be in
substantially the form of that certain Construction Loan Agreement, dated as of
August 20, 1997, between Emerald Housing Limited Partnership, an Oregon limited
partnership, as borrower, and Seller, as lender, and the "Loan Documents"
contemplated thereunder. Upon the receipt by Cascade Crossing, LLC of a firm
commitment from a commercial bank to provide a construction loan on terms
approved by Buyer, such approval not to be unreasonably withheld
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or delayed, and which shall be granted if the terms are commercially reasonable
for loans of this type, including recourse to Buyer (the "CASCADE LOAN
COMMITMENT"), the obligation of Seller to provide a Construction Loan for the
Cascade Project shall be reduced by the amount of the Cascade Loan Commitment.
(i) HASTINGS LOAN. The Parties acknowledge that Seller has provided a
$7,000,000 secured loan (the "HASTINGS LOAN") to PHC Hastings Limited, Inc.
("PHC HASTINGS"), which loan is nonrecourse, bears interest at 8.5% per annum,
does not amortize and is due in 9 months from the Closing. Seller shall consult
with Buyer, but Seller shall control and Buyer shall cooperate with Seller in
(A) the creation of a new partnership or limited liability company (the
"HASTINGS PARTNERSHIP"), to hold the Project owned by PHC Hastings ("HASTINGS
PARK"), with Nehemiah Progressive Housing Development Corporation, Inc., or
another non-profit entity (the "NON-PROFIT Partner") selected by Seller to act
as the managing general partner or member, as the case may be, with the
organizational document to contain provisions reflecting control by the
Non-Profit Partner sufficient to take advantage of the California property tax
exemption (such provisions expected to be similar to those contained in the
partnership agreement for Santa Rosa Housing Partners Limited Partnership); (B)
the transfer by PHC Hastings of Hastings Park to the Hastings Partnership, and
(C) the refinancing of the Hastings Loan with permanent financing (the "HASTINGS
PERMANENT FINANCING") which shall have a minimum of a 10-year term and a 25-year
amortization period and shall be nonrecourse to the Hastings Partnership and all
of its partners or members and shall have such other terms approved by Buyer,
such approval not to be unreasonably withheld or delayed, and which shall be
granted if the terms are commercially reasonable for loans of this type. Seller
shall be permitted to maximize the amount of the Hastings Permanent Financing
and sixty percent (60%) of any amount in excess of the amounts owing under the
Hastings Loan shall be retained by Seller as a reimbursement with respect to
excess equity invested by Seller in PHC Hastings prior to Closing. In the event
the Hastings Permanent Financing is less than the amount owing under the
Hastings Loan, Buyer shall reimburse Seller for the shortfall. Seller shall use
its reasonable best efforts to complete the tasks set forth in clauses (A) and
(B) prior to Closing. In the event that tasks set forth in clauses (A) and (B)
are not satisfied prior to Closing, Seller shall do one or both of the following
(the choice to be in Seller's sole discretion): (i) extend the due date of the
Hastings Loan for an additional 12 months, or (ii) at any time prior to the
expiration of the Hastings Loan, cause the Hastings Permanent Financing to be
closed; provided that in the event the Hastings Permanent Financing occurs prior
satisfaction of the tasks set forth in clauses (A) and (B), Buyer shall not be
obligated to reimburse Seller for any shortfall.
(j) SPACE. After Closing, Seller will permit Buyer to occupy its
current space until April 30, 1998, on market rate terms.
(k) COOPERATION ON AUDIT. Seller agrees to cooperate with Buyer, at
Buyer's expense, with reasonable requests of Buyer in connection with the
preparation by Buyer of audited financial statements of the Affordable Housing
Group for prior periods (the "FINANCIAL STATEMENTS"). In connection with the
foregoing, Seller agrees, at Buyer's expense, to make available its independent
auditors. Buyer shall indemnify, reimburse, hold harmless and protect
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Seller against any action by any third party against Seller and any of its
Affiliates arising from the use by Buyer of such Financial Statements.
(l) INDEMNIFICATION RELATING TO FENIX REDEVELOPMENT PARTNERSHIP, LTD.
In the event that the investment of Fenix Redevelopment Partnership, Ltd. in the
Fenix Project is recharacterized by the Internal Revenue Service to be other
than an investment in property, the investment of Buyer in Fenix Redevelopment
Partnership, Ltd. in the Fenix Project is recharacterized by the Internal
Revenue Service as other than a partnership interest, or the Internal Revenue
Service reallocates Tax Credits or losses in a manner inconsistent with the
allocations set forth in the partnership agreement for Fenix Redevelopment
Partnership, Ltd., and any such recharacterization or reallocation arises solely
and directly because of the presence of the Early Put and Deferred Call Option,
dated as of December 8, 1989, the Ground Call Option, dated as of December 8,
1989, the Improvements Call Option, dated as of December 8, 1989, or the Term
Put Option, dated as of December 8, 1989, or the special allocation of losses
other than depreciation to the general partner, then Seller shall indemnify
Buyer from and against any damages caused by such recharacterization or
reallocation.
7. CONDITIONS TO OBLIGATION TO CLOSE
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and
correct in all material respects at and as of the
Closing Date;
(ii) Seller shall have performed and complied with all of
its covenants hereunder in all material respects
through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated
by this Agreement;
(iv) Seller shall have delivered to Buyer a certificate to
the effect that each of the conditions specified
above in subsections 7(a)(i)-(iii) is satisfied in
all respects;
(v) Parent shall have delivered to Buyer an unconditional
guaranty in substantially the form of attached
Exhibit C;
(vii) the Seller Consents shall have been obtained in form
and substance reasonably satisfactory to Buyer, or if
not obtained with respect to any
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Project, fewer than eight (8) Projects are Withdrawn
Projects under Section 2(g) hereof;
(viii) each entity in the Affordable Housing Group shall
have received all other authorizations, consents, and
approvals of governments and governmental agencies
referred to in subsection 3(a)(ii) and Section 4(b)
above, including, without limitation, the Commission
Approvals;
(ix) Buyer shall have received from counsel to Seller an
opinion in form and substance as set forth in Exhibit
A attached hereto, addressed to Buyer, and dated as
of the Closing Date;
(x) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and
other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory
in form and substance to Buyer.
Buyer may waive any condition specified in this Section 7(a) if it executes a
writing so stating at or before the Closing.
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all of
its covenants hereunder in all material respects
through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated
by this Agreement;
(iv) Buyer shall have delivered to Seller a certificate to
the effect that each of the conditions specified
above in subsections 7(b)(i)-(iii) is satisfied in
all respects;
(v) Seller shall have received from counsel to Buyer an
opinion in form and substance as set forth in Exhibit
B attached hereto, addressed to Seller, and dated as
of the Closing Date; and
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(vi) all actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and
other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory
in form and substance to Seller.
Seller may waive any condition specified in this Section 7(b) if it executes a
writing so stating at or before the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT
(a) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS. The
representations and warranties of Seller contained in subsections (p) and (q) of
Section 4 (other than clause (i) of each such subsection) shall not survive the
Closing. All of the other representations and warranties of Seller contained in
Sections 3 and 4 above shall survive the Closing hereunder (unless Buyer knew
and did not inform Seller of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of THREE
YEARS after the Closing Date; PROVIDED, HOWEVER, that (i) the representations of
Seller contained in Section 4(i) shall survive the Closing hereunder (unless
Buyer knew and did not inform Seller of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect for a
period of FIVE YEARS after the Closing Date and (ii) the representations of
Seller contained in clauses (v) or (vi) of Section 3(a), Section 4(d), Section
4(e) or 4(m) hereof, any claim with respect to fraud, and any indemnification
for which Seller would otherwise be liable hereunder to the extent it arises
from a "Special Third Party Claim" shall survive Closing hereunder (unless Buyer
knew and did not inform Seller of any misrepresentation or breach of warranty at
the time of Closing) and continue until the applicable statute of limitations
has run. For purposes hereof, "SPECIAL THIRD PARTY CLAIM" means a claim by a
third-party against Buyer to the extent it arises from a breach by Seller of a
fiduciary obligation of Seller to such third-party or a violation by Seller of
applicable state or federal securities laws, in each case prior to the Closing.
The representations and warranties of Buyer contained in Section 3 above shall
survive the Closing (unless Seller knew and did not inform Buyer of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force for a period of THREE YEARS after the Closing Date. The covenants
contained in Section 6 shall survive the Closing indefinitely.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(i) In the event Seller breaches any of its
representations, warranties, and covenants contained
herein (other than the covenants in Section 2(a)
above), and, if there is an applicable survival
period pursuant to Section 8(a) above, provided that
Buyer makes a written claim for indemnification
against Seller pursuant to Section 11(f) below within
such survival period, then Seller agrees to indemnify
Buyer from and against any damages to the extent that
they are caused proximately by the breach and
suffered by
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Buyer through and after the date of the claim for
indemnification; PROVIDED, however, that Seller shall
not have any obligation to indemnify Buyer from and
against any such damages caused by the breach of any
representation or warranty of Seller contained in
Section 4 above (A) until Buyer has suffered damages
by reason of all such breaches in excess of a
$1,000,000 aggregate deductible (after which point
Seller will be obligated only to indemnify Buyer from
and against further such damages) or thereafter (B)
to the extent the damages Buyer has suffered by
reason of all such breaches exceeds a 75% of the
Purchase Price aggregate ceiling (after which point
Seller will have no obligation to indemnify Buyer
from and against further such damages); PROVIDED,
FURTHER, that the foregoing ceiling shall not apply
to a breach of the representations of Seller
contained in clauses (v) or (vi) of Section 3(a),
Section 4(d), Section 4(e) or 4(m) hereof, any claim
with respect to fraud or as to any indemnification
for which Seller would otherwise be liable hereunder
to the extent it arises from a Special Third Party
Claim. Notwithstanding the foregoing, Buyer shall
have no right against Seller with respect to a breach
of a representation or warranty if, at the time of
Closing, Buyer knew and did not inform Seller of the
misrepresentation or breach of warranty. To the
extent Seller has indemnified Buyer with respect to
any matter as to which Buyer has a separate
indemnification claim against a third party, Buyer
shall assign its rights to make such claim, without
recourse, to Seller.
(ii) In the event Seller breaches any of its covenants in
Section 2(a) above, or any of its representations and
warranties contained in clauses (v) or (vi) of
Section 3(a) above, or any indemnification arises for
which Seller would otherwise be liable hereunder to
the extent it arises from a Special Third Party
Claim, and, if there is an applicable survival period
pursuant to Section 8(a) above, provided that Buyer
makes a written claim for indemnification against
Seller pursuant to Section 11(f) below within such
survival period, then Seller agree to indemnify Buyer
from and against the entirety of any damages caused
proximately by the breach and suffered by Buyer
through and after the date of the claim for
indemnification.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event
Buyer breaches any of its representations, warranties, and covenants contained
herein, and, if there is an applicable survival period pursuant to Section 8(a)
above, provided that Seller make a written claim for indemnification against
Buyer pursuant to Section 11(f) below within such survival period, then Buyer
agrees to indemnify Seller from and against the entirety of any damages caused
proximately by the breach and suffered by Seller through and after the date of
the claim for indemnification (but EXCLUDING any damages Seller shall suffer
after the end of any applicable survival period).
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(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a
"THIRD PARTY CLAIM") that may give rise to a claim
for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 8, then the
Indemnified Party shall promptly (and in any event
within five business days after receiving notice of
the Third Party Claim) notify the Indemnifying Party
thereof in writing.
(ii) The Indemnifying Party will have the right to assume
and thereafter conduct the defense of the Third Party
Claim, at its expense, with counsel of its choice
reasonably satisfactory to the Indemnified Party;
PROVIDED, HOWEVER, that the Indemnifying Party will
not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party
Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves
only the payment of money damages and does not impose
an injunction or other equitable relief upon the
Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in
subsection 8(d)(ii) above, however, the Indemnified
Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party which
consent shall not be unreasonably withheld or
delayed.
9. TAX MATTERS
(a) INCOME TAX SHARING AGREEMENTS. Any Income Tax sharing agreement
between Seller or PacifiCorp or any Affiliate of PacifiCorp, and any entity in
the Affordable Housing Group, is terminated as of the Closing Date (or as of the
earlier date specified in clause (k) hereof, if applicable) and will have no
further effect for any taxable year (whether the current year, a future year, or
a past year).
(b) RETURNS FOR PERIODS THROUGH THE CLOSING DATE. Seller will cause
PacifiCorp to include the income of the Affordable Housing Group (including any
deferred income triggered into income by Treas. Reg. Section 1.1502-13 and
Treas. Reg. Section 1.1502-14 and any excess loss accounts taken into income
under Treas. Reg. Section 1.1502-19) on the PacifiCorp consolidated federal
Income Tax Returns for all periods through the Closing Date (or as of the
earlier date specified in clause (k) hereof, if applicable) and pay any federal
Income Taxes attributable to such income. The Affordable Housing Group will
furnish Income Tax information
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to PacifiCorp for inclusion in PacifiCorp's federal consolidated Income Tax
Return for the period that ends on and includes the Closing Date (or as of the
earlier date specified in clause (k) hereof, if applicable) in accordance with
the Affordable Housing Group's past custom and practice. Seller will cause
PacifiCorp to take no position on such returns, including any amended returns,
that relate to the Affordable Housing Group that would adversely affect the
Affordable Housing Group after the Closing Date (or as of the earlier date
specified in clause (k) hereof, if applicable) unless such position would be
reasonable in the case of a Person that owned the Affordable Housing Group both
before and after the Closing Date (or as of the earlier date specified in clause
(k) hereof, if applicable). The income, losses and tax benefits (including,
without limitation, the Tax Credits) of the Affordable Housing Group will be
apportioned to the period up to and including the Closing Date and the period
after the Closing Date (or, in each case, as of the earlier date specified in
clause (k) hereof, if applicable) by closing the books of the Affordable Housing
Group as of the end of the Closing Date (or as of the earlier date specified in
clause (k) hereof, if applicable). Buyer will prepare any Income Tax Returns and
other Tax Returns required to be prepared for periods including, but not ending
on, the Closing Date (or as of the earlier date specified in clause (k) hereof,
if applicable).
(c) AUDITS. PacifiCorp will keep Buyer and its counsel informed of the
status of any audits of PacifiCorp consolidated federal Income Tax Returns to
the extent that such returns relate to the Affordable Housing Group. PacifiCorp
will not settle any such audit in a manner that would adversely affect the
Affordable Housing Group after the Closing Date unless such settlement would be
reasonable in the case of a Person that owned the Affordable Housing Group both
before and after the Closing Date.
(d) CARRYBACKS. Buyer or the Affiliated Group of which Buyer is a
member agrees to waive carrybacks to the greatest extent possible pursuant to
Section 172(b)(3) of the Code or otherwise.
(e) RETENTION OF CARRYOVERS. Seller will cause PacifiCorp not to elect
to retain any net operating loss carryovers or capital loss carryovers of any
entities in the Affordable Housing Group under Treas. Reg. Section 1.1502-20(g).
(f) INDEMNIFICATION FOR POST-CLOSING TRANSACTIONS. Buyer agrees to
indemnify Seller and PacifiCorp for any additional tax owed by Seller or
PacifiCorp (including tax owed by Seller due to this indemnification payment)
resulting from any transaction not in the Ordinary Course of Business occurring
on the Closing Date after Buyer's purchase of the Directly-Owned Company Shares
and the Directly-Owned Partnership Interests.
(g) POST-CLOSING TRANSACTIONS NOT IN THE ORDINARY COURSE. Buyer and
Seller agree to report all transactions not in the Ordinary Course of Business
occurring on the Closing Date after Buyer's purchase of the Directly-Owned
Company Shares and the Directly-Owned Partnership Interests on Buyer's federal
Income Tax Return to the extent permitted by Treas. Reg. Section
1.1502-76(b)(1)(B).
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(h) ALLOCATION OF PURCHASE PRICE. On or before March 1, 1998, Buyer
shall deliver to Seller a schedule setting forth a reasonable estimate of the
allocation of the Purchase Price and the liabilities of the Affordable Housing
Group (plus other relevant items) to the assets of the entities in the
Affordable Housing Group for all purposes (including Income Tax and financial
accounting purposes), which shall be subject to the approval of Seller, such
approval not to be unreasonably withheld or delayed. As soon as possible after
Closing, Buyer shall prepare and deliver to Seller a schedule setting forth a
final allocation of the Purchase Price and the liabilities of the Affordable
Housing Group (plus other relevant items) to the assets of the entities in the
Affordable Housing Group which shall be subject to the approval of Seller, such
approval not to be unreasonably withheld or delayed. Buyer, Seller, the entities
in the Affordable Housing Group and PacifiCorp will file all Income Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.
(i) SECTION 338(H)(10) ELECTION. At Buyer's option, Seller will join,
and will cause the Affiliated Group to join, with Buyer in making an election
under ss.338(h)(10) of the Code (and any corresponding elections under state,
local, or foreign Tax law) (collectively a "SS.338(H)(10) ELECTION") with
respect to the purchase and sale of the stock of any corporations included in
the Affordable Housing Group hereunder; provided, however, that if Buyer chooses
to make a ss.338(h)(10) Election, then Buyer shall pay to Seller an additional
amount of Purchase Price (the "SS.338(H)(10) CONSIDERATION") equal to the total
Tax cost to Seller and the Affiliated Group of the ss.338(h)(10) Election,
including the Tax effect of receipt of the ss.338(h)(10) Consideration, so that
the net after-Tax position of Sellers and the Affiliated Group is the same after
the ss.338(h)(10) Election as it would have been had the ss.338(h)(10) Election
not been made. The amount of the ss.338(h)(10) Consideration shall be determined
by Seller in good faith. Seller shall allow Buyer an opportunity to review
Seller's computation of the ss.338(h)(10) Consideration and shall consider in
good faith any comments that Buyer may provide with respect to that computation.
Seller and the Affiliated Group shall not be required to join in the
ss.338(h)(10) Election unless and until the ss.338(h)(10) Consideration has been
paid or arrangements acceptable to Seller has been made for such payment.
(j) NOTICE OF INCOME TAX PROCEEDINGS; CONTEST PROCEDURE. Buyer or
Seller, as the case may be (the "PROCEEDING PARTY") shall promptly (in any
event, within ten (10) business days) notify the other (the "PARTICIPATING
PARTY") if Proceeding Party receives a written or proposed revenue agent's
report, a "30-day letter," a notice of a partnership's audit by adjustment or a
notice of deficiency from the Internal Revenue Service relating to an Affordable
Housing Group Claim. All information document requests and responses to the
foregoing shall be reviewed and approved by the Participating Party, such
approval not to be unreasonably withheld or delayed. For purposes hereof, an
"AFFORDABLE HOUSING GROUP CLAIM" shall mean an action by the Internal Revenue
Service described in the preceding sentence in which the Internal Revenue
Service proposes an adjustment to a Proceeding Party's federal income taxes or a
federal partnership return in which an adverse determination could, directly or
indirectly, cause Tax Credits or losses to not be available or allowable to a
Participating Party or cause a Participating Party to lose the right to claim,
or to suffer a disallowance, elimination, reduction, recapture or
disqualification of, all or any portion of, the Tax Credits or losses, in each
case to
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the extent such adjustments relate to the Affordable Housing Group either before
or after Closing. If a Participating Party promptly requests the Proceeding
Party to do so, the Proceeding Party shall contest in good faith, at the expense
of both the Participating Party and the Proceeding Party (based upon such
party's "CONTEST EXPENSE SHARE" (as defined below)), the proposed adjustment,
and shall consider in good faith any suggestion made by the Participating Party
as to the method of pursuing such contest; provided, however, that the
Proceeding Party shall not be obligated to contest such adjustment unless (i)
the Participating Party provides a written undertaking to the Proceeding Party
to cover its Contest Expense Share of the contest; (ii) Tax Counsel for the
Proceeding Party is of the opinion that there is a reasonable basis for
contesting the matter in question; and (iii) the aggregate amount of the
proposed adjustment (including the collateral effect in future or prior tax
years) as to the Participating Party is at least $100,000. The Proceeding Party
shall discuss with the Participating Party the nature of the actions to be taken
to contest such proposed adjustment, but shall have the sole discretion, acting
in good faith, to determine the nature of such action. The Proceeding Party
shall keep the Participating Party informed of the developments in any
proceeding and shall consult with and reasonably consider any suggestions of the
Participating Party; provided, however, that, except for an "Excepted Claim" (as
defined below), the Proceeding Party shall have full control over any contest.
In addition to and not in limitation of the foregoing, except for an "Excepted
Claim," the Participating Party shall have no right to participate or be present
in any meetings with the Internal Revenue Service or any hearings in connection
with the proceeding. Notwithstanding anything contained herein to the contrary,
the Proceeding Party shall not be obligated to continue any contest if the
Participating Party fails to fund on demand any expenses of the contest in an
amount equal to its Contest Expense Share and such failure continues for fifteen
(15) days after written notice of such demand. The Proceeding Party may, after
consulting in good faith with Tax Counsel for the Participating Party, decline
to contest any such Affordable Housing Group Claim or terminate such contest or
enter into a settlement with respect to any such Affordable Housing Group Claim
at any time in the Proceeding Party's sole discretion; provided that, the
Proceeding Party (i) shall have either (A) diligently contested such Claim at
least to the extent of arguing such Claim before the Appeals Division of the
Internal Revenue Service, or (B) reached a good faith settlement with the
Internal Revenue Service after full and diligent presentation by such Proceeding
Party of the arguments contesting such Affordable Housing Group Claim, (ii)
confirmed to the Participating Party by a certificate of a senior executive
officer of the Proceeding Party that such Proceeding Party would have declined
to contest, terminated the contest or agreed to such settlement with respect to
such Affordable Housing Group Claim even if it had suffered the full adverse tax
consequences of both the Proceeding Party and the Participating Party and in
declining to contest, terminating the contest or entering into such settlement,
such Proceeding Party has taken into account the relative tax and financial
interests of both the Proceeding Party and the Participating Party, and (iii)
the Proceeding Party shall have delivered to the Participating Party an opinion
of the Proceeding Party's Tax Counsel to the effect that the legal and factual
arguments in favor of such Affordable Housing Group Claim outweigh the legal and
factual arguments in opposition to such Affordable Housing Group Claim. The
Proceeding Party may, at its sole option, forego any and all administrative
appeals, proceedings, hearings and conference with the Internal Revenue Service
in respect of an Affordable Housing Group Claim
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and contest in a court of competent jurisdiction selected by such Proceeding
Party an Affordable Housing Group Claim either before or after payment of the
asserted taxes, fees or other charges. In no event shall a Proceeding Party be
required to contest an Affordable Housing Group Claim at any appellate court
level. In the event of an Excepted Claim, the Participating Party shall have the
rights and be subject to the limitations of the Proceeding Party (where an
Excepted Claim is not involved), the Proceeding Party shall have the rights and
be subject to the limitations of the Participating Party (where an Excepted
Claim is not involved) and the Proceeding Party shall provide a power of
attorney to the Participating Party to pursue such Excepted Claim. Nothing
contained in this Section 9(j) shall affect the obligations of Buyer with
respect to Tax Credit Recapture under Section 6(e) hereof, it being acknowledged
that, unless the Tax Credit Recapture is caused by a Non-controlled Event, Buyer
shall be solely responsible for the costs of any contest relating to such Tax
Credit Recapture. For purposes hereof, "CONTEST EXPENSE SHARE" shall be the
relative percentage interest of Buyer and Seller in the adverse consequences
which would arise from an adverse determination Affordable Housing Group Claim,
computed as follows: (1) the Seller's share of the adverse consequences shall be
equal to the Tax Credits or losses of Seller and its Affiliates which shall be
disallowed, eliminated, reduced, recaptured or disqualified if the Internal
Revenue Service prevailed on such Affordable Housing Group Claim, including any
penalties and interest thereon, and (2) the Buyer's share of the adverse
consequences shall be equal to the Tax Credits or losses of Buyer and its
Affiliates which shall be disallowed, eliminated, reduced, recaptured or
disqualified if the Internal Revenue Service prevailed on such Affordable
Housing Group Claim (for purposes of this Section 6(j), "AFFILIATES" of Buyer
shall include any transferee of Buyer or its Affiliates of any direct or
indirect interest in the Project), including the present value of any Tax
Credits and losses (determined by discounting at a rate of 10% per annum from
the projected date of such availability as set forth on Schedule 1.6 attached
hereto) attributable to the Project affected by such Affordable Housing Group
Claim which would have been available to Buyer or its Affiliates after such
date, assuming the Affordable Housing Group Claim was determined fully in the
favor of the Buyer. For purposes hereof, "TAX COUNSEL" shall mean, for Seller,
the firm of Stoel Rives, LLP, Portland, Oregon, or other nationally-recognized
tax counsel selected by Seller and reasonably acceptable to Buyer, and for
Buyer, the firm of Peabody & Brown, Boston, Massachusetts, or other
nationally-recognized tax counsel selected by Buyer and reasonably acceptable to
Seller. For purposes hereof, "EXCEPTED CLAIM" shall mean an Affordable Housing
Group Claim as to which all of the following are satisfied: (1) the
Participating Party's Contest Expense Share of such Affordable Housing Group
Claim is more than fifty percent (50%), (2) the Affordable Housing Group Claim
can be separately contested without involving other federal income tax issues
which affect the Proceeding Party, and (3) the Participating Party designates in
writing such Affordable Housing Group Claim to be an Excepted Claim.
(k) INTERIM CLOSING OF THE BOOKS. To the extent permitted by the Code
and applicable regulations, in the event the Closing occurs on or prior to the
15th day of a month, the parties shall treat Buyer as entering the entities
included in the Affordable Housing Group as of the first day of such month. In
the event the Closing occurs after the 15th day of a month the parties
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shall treat Buyer as entering the entities included in the Affordable Housing
Group as of Closing Date.
10. TERMINATION
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
as provided below:
(i) Buyer and Seller may terminate this Agreement by
mutual written consent at any time before the
Closing;
(ii) Buyer may terminate this Agreement by giving written
notice to Seller at any time before the Closing (A)
in the event Seller has breached any material
representation, warranty, or covenant contained in
this Agreement (other than the representations and
warranties in Section 4 above) in any material
respect, Buyer has notified Seller of the breach, and
the breach has continued without cure for a period of
10 days after the notice of breach or (B) if the
Closing shall not have occurred on or before June 30,
1998, by reason of the failure of any condition
precedent under Section 7(a) hereof (unless the
failure results primarily from Buyer itself breaching
any representation, warranty, or covenant contained
in this Agreement), except that termination of this
Agreement for failure to receive all Seller Consents
under Section 7(a)(vii) shall be made solely under
clause (iv) of this Section 10(a); and
(iii) Seller may terminate this Agreement by giving written
notice to Buyer at any time before the Closing (A) in
the event Buyer has breached any material
representation, warranty, or covenant contained in
this Agreement in any material respect, Seller has
notified Buyer of the breach, and the breach has
continued without cure for a period of 10 days after
the notice of breach or (B) if the Closing shall not
have occurred on or before June 30, 1998, by reason
of the failure of any condition precedent under
Section 7(b) hereof (unless the failure results
primarily from Seller breaching any of its
representations, warranties, or covenants contained
in this Agreement).
(iv) By either Seller or Buyer, if, pursuant to Section
2(g), it is clear that eight (8) or more Projects
will never be acquired by Buyer pursuant to this
Agreement.
(b) EFFECT OF TERMINATION.
(i) TERMINATION UNDER SECTION 10(A)(I) OR (IV). If the
Parties terminate this Agreement pursuant to Section
10(a)(i) or (iv) above, the Deposit shall be
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returned to Buyer and all rights and obligations of
the Parties hereunder shall terminate without any
liability of any Party to any other Party (except for
any liability of any Party then in breach); PROVIDED,
HOWEVER, that the confidentiality provisions
contained in the Confidentiality Agreement shall
survive termination.
(ii) BUYER'S DEFAULT; LIQUIDATED DAMAGES. In the event
Seller terminates this Agreement under Section
10(a)(iii) of this Agreement, unless it is terminated
solely because of a breach by Buyer of a
representation or warranty of which Buyer was not
actually aware was inaccurate when made, the Deposit
shall be retained by Seller as full, complete,
liquidated damages ("Liquidated Damages"), as
provided below. If Seller terminates this Agreement
under Section 10(a)(iii) of this Agreement solely
because of a breach by Buyer of a representation or
warranty of which Buyer was not actually aware was
inaccurate when made, Seller shall only retain that
portion of the Deposit necessary to reimburse its
reasonable out-of-pocket expenses in connection with
the transactions contemplated hereby and the
remaining amount of the Deposit, if any, shall be
returned to Buyer.
Notwithstanding any other provisions of this
Agreement to the contrary, Buyer and Seller agree
that, in the event that Buyer breaches a
representation or warranty (except for inaccuracies
of which Buyer was not aware, as set forth above) or
covenant contained herein or otherwise fails to
perform its obligations under this Agreement prior to
the closing hereunder, it would be impracticable or
extremely difficult to fix or determine Seller's
actual damages. Therefore, Buyer and Seller each
agree that the amount of the liquidated damages has
been agreed upon as liquidated damages after
negotiation as the parties' reasonable estimate of
Seller's damages and as Seller's exclusive remedy
against Buyer in the event of the occurrence of any
event described in the first sentence of this Section
(ii). Buyer and Seller each acknowledge that the
payment of such liquidated damages is not intended as
a forfeiture or penalty.
If Buyer defaults in any material respect in its
obligations hereunder or breaches a material
representation or material warranty or covenant
herein or otherwise fails to perform any of its
obligations under this Agreement after the Closing,
Seller shall be entitled to assert all claims and to
exercise all remedies available to it at law or in
equity; PROVIDED, HOWEVER, that Seller shall have no
right to consequential damages.
(iii) SELLER'S DEFAULT. In the event Buyer terminates the
Agreement under Section 10(a)(ii) of this Agreement
or because Seller otherwise fails to perform any of
its obligations under this Agreement before the
Closing, then the Deposit, if any, shall be returned
to Buyer and Buyer shall be
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entitled to recover (A) its reasonable out-of-pocket
expenses in connection with the transactions
contemplated hereby and (B) unless the termination
has occurred solely because of a breach by Seller of
a representation or warranty of which Seller was not
aware was inaccurate when made, for a period of one
year following the termination, an amount equal to
the excess of (1) any amount received by Seller from
any future sale of a Project or an interest in any
Project during such year, over (2) the amount Buyer
would have paid for such Project or interest
hereunder if Buyer had purchased such Project or
interest on the date such future sale referred to in
clause (1) occurs. Notwithstanding anything contained
herein to the contrary, Buyer shall be entitled to no
other monetary damages. If such default or such
breach or such failure occurs after the Closing,
Buyer shall be entitled to assert all claims and to
exercise all remedies available to it at law or in
equity with respect to any default, breach or failure
by Seller, subject to Section 8 hereof; PROVIDED,
HOWEVER, that Buyer shall have no right to
consequential damages. In no event shall Buyer have
the right to offset amounts due to Seller under any
contract or agreement between Seller and Buyer or any
Affiliate of Buyer on account of default by Seller
hereunder.
(iv) Notwithstanding anything herein contained to the
contrary, in no event shall Seller have any liability
hereunder or at law or in equity for the payment of
money damages if the amount of such payment, when
added to the amount of all other payments made by
Seller for such purposes would exceed the Purchase
Price.
(c) SPECIFIC PERFORMANCE. In addition to the rights relating to
termination set forth herein, Buyer shall have the right of specific
performance.
11. MISCELLANEOUS
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement before the Closing without the prior written approval of Buyer
and Seller; PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
before making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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(c) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his,
her, or its rights, interests, or obligations hereunder without the prior
written approval of the other Party; provided, that LNR Property Corporation may
assign all or a portion of its rights hereunder to one or more of its Affiliates
if (i) LNR Property Corporation fully and unconditionally guarantees the
undertaking of such Affiliates and (ii) LNR Property Corporation is solely
responsible for, and shall pay on demand, any increased costs to Seller which
arise because of such assignment.
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
IF TO SELLER: Pacific Harbor Capital, Inc.
American Pacific Properties, Inc.
825 NE Multnomah, Suite 775
Portland, Oregon 97232
Attn: Craig N. Longfield
Telecopy No. (503) 797-7246
with a copy, which shall not constitute notice, to:
Gary R. Barnum
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204
Telecopy No. (503) 220-2480
IF TO BUYER: LNR Property, Corporation
760 Northwest 107th Avenue
Miami, Florida 33172
Attn: Jeffrey Krasnoff
Telecopy No. (305) 226-7691
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with a copy, which shall not constitute notice, to:
Robert Adkins
Peabody & Brown
101 Federal Street
Boston, Massachusetts 02110-1832
Telecopy No. (617) 345-1300
Brian L. Bilzin
Bilzin, Sumberg Dunn & Axelrod
2500 First Union Financial Center
Miami, Florida 33131-2336
Telecopy No. (305) 374-7593
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the addresses set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(g) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the state of Oregon without giving effect
to any choice or conflict of law provision or rule (whether of the state of
Oregon or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the state of Oregon.
(h) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(i) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) EXPENSES; TRANSFER TAXES. Each of Buyer and Seller will bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. Buyer
and Seller shall each be responsible for fifty percent (50%) of any stamp,
transfer, sales or similar taxes imposed by the State of Pennsylvania in
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connection with the transactions contemplated at Closing. Seller shall be solely
responsible for any stamp, transfer, sales or similar taxes imposed by the State
of Washington in connection with the transactions contemplated at Closing. In
the event any other state or local jurisdiction imposes any stamp, transfer,
sales or similar taxes in connection with the transactions contemplated at
Closing, Buyer, Seller or both, shall be responsible for such taxes in
accordance with the prevailing practice of such jurisdiction. Notwithstanding
the foregoing, Buyer shall be solely responsible for all out-of-pocket expenses
of Seller in connection with requests of Buyer which relate to the transition of
the operation of the Affordable Housing Group (as distinguished from the
consummation of the sale), such as any option or similar expenses incurred in
connection with obtaining substitute space for the Affordable Housing Group and
travel and lodging costs of employees of Seller traveling to the offices of
Buyer.
(k) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(l) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(M) ENTIRE AGREEMENT. THIS AGREEMENT (INCLUDING THE DOCUMENTS REFERRED
TO HEREIN) CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES AND SUPERSEDES ANY
PRIOR UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS BY OR AMONG THE PARTIES,
WRITTEN OR ORAL, TO THE EXTENT THEY HAVE RELATED IN ANY WAY TO THE SUBJECT
MATTER HEREOF.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
LNR PROPERTY CORPORATION
By:/S/ STEVEN J. SAIONTZ
-----------------------------------------
Name: Steven J. Saiontz
Title: CHIEF EXECUTIVE OFFICER
PACIFIC HARBOR CAPITAL, INC.
By:/S/ CRAIG N. LONGFIELD
-----------------------------------------
Craig N. Longfield
President
51
AMENDMENT
NO. 1
PURCHASE AND SALE AGREEMENT
This Amendment No. 1 (this "Amendment"), dated as of April 30,
1998, is made by and among LNR Property Corporation, a Delaware corporation (the
"BUYER"), and Pacific Harbor Capital, Inc., a Delaware corporation (the
"SELLER").
RECITALS
Reference is made to that certain Purchase and Sale Agreement,
dated as of February 18, 1998 (the "Purchase Agreement"), by and among the
parties hereto. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Purchase Agreement.
The initial Closing Date contemplated under the Purchase
Agreement shall be May 1, 1998.
In connection with the initial Closing, the parties hereto
desire to amend the Purchase Agreement as set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises and
undertakings in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INITIAL CLOSING.
a. EFFECTIVE DATE. Notwithstanding the dating of the various
documents delivered at the initial Closing, the parties
acknowledge and agree that the Closing shall be effective at
12:01 a.m. on May 1, 1998.
b. NEW PROJECTS. The parties acknowledge and agree that
Commencement Place Limited Partnership and the Glisan Project
are New Projects. Set forth on attached Schedule I is an
estimate of the out-of-pocket expenditures, including
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capital contributions, with respect to such New Projects,
actually expended by Seller.
c. LAKEWOOD. The parties acknowledge and agree that Amurcon
Corporation of Virginia ("AMURCON") has exercised its right of
first refusal and, unless Amurcon elects not to proceed with
such acquisition, the Lakewood Project is and shall remain a
Withdrawn Project. The Purchase Price shall be reduced by the
amount allocated to the Lakewood Project on Schedule 2(g) and
no further adjustments shall be made to the Purchase Price by
reason of the Lakewood Project; provided, however, that, if
Amurcon elects not to proceed with such the acquisition of the
Lakewood Project, the Lakewood Project shall be purchased by
Buyer and sold by Seller in accordance with Section 2(g) of
the Purchase Agreement.
d. OTHER WITHDRAWN PROJECTS. Attached hereto as Schedule II is a
list of the other Projects constituting Withdrawn Projects
which shall not be acquired at the initial Closing. With
respect to such Withdrawn Projects, the parties agree as
follows:
i. The parties shall use their commercially reasonable
best efforts and reasonably cooperate in obtaining
the remaining Seller Consents as soon as possible,
which efforts shall include, without limitation:
(1) Proceeding to promptly negotiate and execute
documentation with respect to the Park Crest
Project substantially in accordance with the
terms set forth on Exhibit A hereto;
(2) Proceeding to promptly negotiate and execute
documentation with respect to the Ashworth
Project and Wolf Project to the extent
changes are no more extensive than changes
required with respect to the Park Crest
Project;
(3) Proceeding to promptly negotiate and execute
documentation with respect to the Surrey Row
Project substantially in accordance with the
terms set forth on Exhibit B hereto;
(4) Proceeding to promptly negotiate and execute
documentation with respect to Harbor Equity
Limited Partnership No. II and Pacific
Harbor Fund Partnership in substantially the
form of the drafts distributed to General
American Life Insurance Company immediately
prior to Closing; provided, that, Buyer
shall not be obligated to obtain a letter of
credit to support the obligation to make
deficit or capital loans and, if General
American Life Insurance Company shall not
permit it, Seller agrees to not insist on
prioritization of claims;
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(5) In furtherance and not in limitation of the
undertakings of Buyer under Section 2(g)
hereof, Buyer agrees that, in connection
with the solicitation of the Seller Consents
for the Withdrawn Projects:
(a) It will execute and deliver
guarantees to third parties with
respect to the obligation to make
Scheduled Capital Contributions;
(b) It will execute and deliver
undertakings to lenders equivalent
to customary FNMA "key principal"
undertakings.
ii. As soon as possible (in any event, within three (3)
business days) after obtaining all required Seller
Consents relating to any Withdrawn Project, Seller
shall furnish copies thereof to Seller and the
parties shall cause such Withdrawn Project to be sold
by Seller to Buyer pursuant to the Purchase
Agreement. The documentation (in addition to any
documentation required in connection with applicable
Seller Consents) for such sale subsequent to the
initial Closing shall be effected as follows (with
only a legal opinion relating to Seller Consents in
the form contemplated in the Purchase Agreement to be
required):
(1) Buyer and Seller shall execute and deliver a
letter agreement specifying the Project to
be sold and the estimated Purchase Price;
(2) Seller's counsel shall prepare bills of
sale, assignments and assumption agreements
and related documentation consistent with
the documentation executed and delivered at
the initial Closing; and
(3) Buyer shall wire the Purchase Price
applicable to the Project and the Project
shall be transferred upon receipt.
2. INDEMNIFICATIONS. In addition to the other indemnification obligations
of Seller under the Purchase Agreement, Seller agrees as follows:
a. LIH REALTY CORPORATION. In the event Buyer is required to make
payments to LIH Realty Corporation ("LIH") under that certain
Unconditional Guaranty, dated on or about the date hereof (the
"GUARANTY"), from Buyer to LIH, and the obligation to make
such payment arose during any period prior to the Closing (and
to the extent such payment does not relate to projected tax
benefits for any period after the Closing), then Seller shall
indemnify Buyer from and against any payments. In the event
Buyer is required to make payments to LIH or Intel Corporation
("INTEL") under that certain Indemnification Agreement, dated
on or
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about the date hereof (the "INDEMNIFICATION AGREEMENT"), by
and among PacifiCorp Financial Services, Inc., Buyer, LIH and
Intel, then Seller shall indemnify Buyer from and against any
payments; provided, however, that (i) Buyer shall promptly
notify Seller of any claim by LIH or Intel of any claim under
the Guaranty or the Indemnification Agreement, (ii) Buyer
shall cooperate with Seller, at Seller's reasonable request
and expense, with respect to resisting payments on any such
claim, and (iii) with respect to the Indemnification
Agreement, Seller shall not be liable for any claim to the
extent such claim arose from the failure by Buyer or its
affiliates to manage Harbor Equity Limited Partnership or the
projects owned by any partnership in which HELP has an
interest in a commercially reasonable manner or any breach by
Buyer or its affiliates of its obligations under the Assumed
Obligations.
b. INDEMNIFICATION RELATING TO FENIX REDEVELOPMENT PARTNERSHIP,
LTD. Subject to the contest procedure rights in Section 9(j)
of the Purchase Agreement, in the event that the Internal
Revenue Service finally determines that Fenix Redevelopment
Partnership, Ltd. failed to achieve the minimum set-aside
requirements in the first year of the credit period applicable
to the Fenix Project, then Seller shall indemnify Buyer from
and against any loss of Credits caused by such determination.
c. INDEMNIFICATION RELATING TO PHC SOUTH FORTY LIMITED, INC.
Subject to the contest procedure rights in Section 9(j) of the
Purchase Agreement, in the event that the Internal Revenue
Service finally determines that PHC South Forty Limited, Inc.
failed to achieve the minimum set-aside requirements in the
first year of the credit period applicable to the South Forty
Project, then Seller shall indemnify Buyer from and against
any loss of Credits caused by such determination.
d. GENERAL. Seller acknowledges that the indemnification
obligations set forth in clauses (a), (b) and (c) above shall:
i. survive Closing and continue until the applicable
statute of limitations has run; and
ii. Not be included in the deductible referred to in
clause (A), or subject to the ceiling referred to in
clause (B), in each case in Section 8(b)(i) of the
Purchase Agreement.
3. POST-CLOSING ADJUSTMENTS. Promptly, in any event within thirty (30)
days after Closing (and any subsequent Closing with respect to any
Withdrawn Project), Seller shall prepare and deliver to Buyer a
detailed calculation of the Purchase Price (the "CLOSING TRUE-UP"),
including all adjustments, reimbursements and similar required payments
contemplated under the Purchase Agreement applicable to the Projects
transferred at such Closing.
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Buyer shall promptly, in any event within fifteen (15) days after
receipt of the Closing True-up provide in writing any objections or
corrections to the Closing True-up. If the parties are unable to
resolve their differences within twenty (20) days thereafter, a
nationally recognized independent accounting firm (not generally
representing the Buyer or Seller, unless the parties agree otherwise)
shall be appointed by the Buyer and Seller, which shall calculate the
Closing True-up, the determination of such accounting firm to be final.
In the event the final determination of such accounting firm causes a
decrease by more than five percent (5%) of the net amount payable to
Seller, the costs and expenses of the accounting firm for such
determination shall be for the account of Seller. In the event the
final determination of such accounting firm causes an increase by more
than five percent (5%) of the net amount payable to Seller, the costs
and expenses of the accounting firm for such determination shall be for
the account of Buyer. In all other events, the costs and expenses of
the accounting firm for such determination shall be shared equally by
Buyer and Seller. Upon the first business day following the final
determination of the Closing True-up (which shall be the fifteenth day
after receipt of the Closing True-up, if no objection is made, the date
upon which the parties resolve their differences, or the date of the
final determination of the accounting firm, as applicable), the Buyer
shall pay to Seller, or Seller shall reimburse Buyer, as the case may
be, the amount by which the Purchase Price determined by the Closing
True-up exceeds or is less than the Purchase Price paid at such
Closing.
4. POTENTIAL NEW PROJECTS. The parties acknowledge that set forth on
attached Schedule III is a list of projects in development by the
Affordable Housing Group which have not been approved by Buyer and are
not yet New Projects under the Purchase Agreement. On or before (i)
June 1, 1998, in the case of the Commerciantes Project and the Town
Center Apartments, or, (ii) in the case of the other projects listed on
Schedule III, the earlier of (A) ten days after receipt of an
allocation of tax credits from the applicable state housing agency, or
(B) December 31, 1998 (the applicable date referred to in clause (i) or
(ii) referred to as the "DETERMINATION DATE", Buyer shall do one of the
following.
a. APPROVED PROJECTS. Notify Seller that one or more such
Projects are approved by Buyer and pay to Seller by the
Determination Date the amount of out-of-pocket expenditures,
including capital contributions, with respect to such projects
which were incurred by Seller prior to Closing; or
b. NON-APPROVED PROJECTS. Notify Seller that one or more such
Projects are not to be approved by Buyer and, at Seller's
discretion, transfer the contracts and related rights to
Seller or cause such contracts and related rights to be
canceled. Seller shall indemnify Buyer from and against any
loss arising from such cancellation, unless such loss arose
from actions of Buyer after Closing (other than the
cancellation at the direction of Seller).
5. HASTINGS LOAN. In addition to the covenants set forth in Section 6(i)
of the Purchase Agreement, Seller agrees that, for a period of twelve
(12) months after the Closing, it
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shall not cause the Hastings Permanent Financing to occur unless it has
been notified in writing by the agency responsible for such decision
that the California property tax exemption shall not be provided to the
Hastings Park Project.
6. ARCS CREDITS. In the event Buyer or its Affiliates receives a credit of
the assumption fee paid to ARCS Commercial Mortgage, Co., L.P.
("ARCS"), as contemplated in that certain letter, dated March 31, 1998,
from ARCS to Thomas Kemper, Buyer shall pay to Seller in dollars,
within two (2) business days of the receipt of the credit, equal to
seventy five percent (75%) of such credit (e.g., if Buyer or its
Affiliates receives a credit to the loan fee in the amount of $50,000,
Buyer shall pay $37,500 to Seller).
7. ASHWORTH WOODS; WOLF APARTMENTS. In the event that, the parties hereto
are unable, using commercial reasonable good faith efforts, to
negotiate and execute documentation with respect to the Ashworth
Project and Wolf Project and to obtain the Seller Consents applicable
thereto consistent with the Section 1(d) above and the Purchase
Agreement on or before sixty (60) days after the date hereof, either
party may at its sole option, within twenty (20) days thereafter,
require Buyer to transfer to Seller and Seller to accept all of the
limited partnership interests in Calibre Altoona Associates, L.P. and
Calibre Boalsburg Associates, L.P. at a price which places the Buyer
and Seller in substantially the same economic position had such
transfer not occurred.
8. SCHEDULES. The Schedules to the Purchase Agreement are hereby amended
to read in their entirety as set forth on the corresponding Schedules
attached hereto.
9. NO FURTHER AMENDMENTS, ETC... Except as specifically modified herein,
the Purchase Agreement shall remain in full force and effect and no
provision hereof shall be deemed a waiver of any other provision of the
Purchase Agreement, unless expressly provided in writing.
10. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Amendment to
be executed in duplicate as of the day and year first above written.
SELLER: LNR PROPERTY CORPORATION,
a Delaware corporation
By: /S/ ROBERT CHERRY
-----------------------------------------
Robert Cherry
Vice President
BUYER: PACIFIC HARBOR CAPITAL, INC.,
a Delaware corporation
By: /S/ THOMAS K. KEMPER
----------------------------------------
Thomas J. Kemper
President
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