SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
--------------
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 19, 1997
(Date of Earliest Event Reported)
---------------------------------
COMMISSION FILE NO. 0-13693
---------------------------
VININGS INVESTMENT PROPERTIES TRUST
A MASSACHUSETTS BUSINESS TRUST
------------------------------
I.R.S. EMPLOYER IDENTIFICATION NO. 13-6850434
3111 PACES MILL ROAD
ATLANTA, GEORGIA 30339
TELEPHONE: (770) 984-9500
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 19, 1997, Vinings Investment Properties Trust (collectively
with its subsidiaries, the "Trust") through Vinings Communities, L.P., a
Delaware limited partnership and wholly owned subsidiary of the Trust, acquired
Windrush Apartments, a 202-unit apartment complex located in Atlanta, Georgia
(the "Community"). The Community was acquired from Windrush Partners, Ltd.
("Windrush"), a Georgia limited partnership. The occupancy rate of the
Community's 202 apartment homes was approximately 95% as of December 19, 1997.
The Community was acquired for a purchase price of $7,555,000,
consisting of the issuance of 224,330 limited partnership units in Vinings
Investment Properties L.P. (the "Operating Partnership," of which the Trust is
the sole general partner) ("Units") and the assumption of debt which includes an
existing mortgage in the amount of $6,490,488 and notes payable to Hallmark
Group Real Estate Services Corp., the general partner of Windrush ("Hallmark")
and its affiliates. Windrush, through Hallmark, is an affiliate of the officers
and certain trustees of the Trust. As general partner, Hallmark did not receive
any economic benefit from the sale of the Community. Furthermore, MFI Realty,
Inc., also an affiliate of the officers and certain trustees of the Trust,
received a fee from Windrush in connection with the transaction.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements of Business Acquired
At the time of the filing of this Form 8-K it is impracticable for the
Registrant to provide the required financial information concerning the
acquired assets. The Financial Statements required by Item 7(a) will be
filed by the Registrant by amendment of this Current Report on Form 8-K no
later than March 4, 1998.
b) Pro Forma Financial Information
At the time of the filing of this Form 8-K it is impracticable for the
Registrant to provide the required financial information concerning the
acquired assets. The Pro Forma Financial Information required by Item 7(b)
will be filed by the Registrant by amendment of this Current Report on Form
8-K no later than March 4, 1998.
(c) Exhibits
Exhibit
No. Description
- ------------ -------------------------------------------------------------------
10.1 Agreement to Contribute, dated April 1, 1997 (excluding exhibits)
10.2 Amendment to Agreement to Contribute, dated August 11, 1997
10.3 Second Amendment to Agreement to Contribute, dated October 30, 1997
<PAGE>
SIGNATURE
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.
VININGS INVESTMENT
PROPERTIES TRUST
Date: December 29, 1997 By: /s/ Stephanie A. Reed
---------------------
Stephanie A. Reed
Vice President
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
- ------------ -------------------------------------------------------------------
10.1 Agreement to Contribute, dated April 1, 1997 (excluding exhibits)
10.2 Amendment to Agreement to Contribute, dated August 11, 1997
10.3 Second Amendment to Agreement to Contribute, dated October 30, 1997
AGREEMENT TO CONTRIBUTE
Dated as of April 1, 1997
AGREEMENT TO CONTRIBUTE
THIS AGREEMENT TO CONTRIBUTE ("Agreement"), is made and entered into as
of the Effective Date (as hereinafter defined), by and between VININGS
INVESTMENT PROPERTIES, L.P., a Delaware Limited Partnership (the "Partnership")
and its assignees or designees, and WINDRUSH PARTNERS, LTD., a Georgia Limited
Partnership ("Contributor");
WITNESSETH:
WHEREAS, Contributor desires to contribute and convey certain real
estate and personal property to Partnership in return for an ownership interest
in Partnership and admission as a limited partner in Partnership, in a manner to
be treated as a Contribution of property to a partnership in exchange for an
interest therein to be governed for tax purposes by Section 721 of the Internal
Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Contributor and Partnership hereby agree as follows:
1. CONVEYANCE OF PROPERTY. Subject to majority approval of the Limited
Partners of Contributor ("Limited Partners' Consent"), which Contributor's
General Partner will use its best efforts to obtain, and in accordance with all
of the terms and conditions hereinafter set out, Contributor agrees to
contribute to Partnership and Partnership agrees to cause Partnership to accept
from Contributor, the following described property (all of which is herein
collectively referred to as the "Property"):
(a) all that certain real estate more particularly described
in Exhibit A, attached hereto and incorporated herein by reference, together
with all rights, ways, privileges and easements appurtenant thereto and
Contributor's right, title and interest, if any, in and to all streets, public
or private alleys and public or private ways adjoining or crossing the same (the
"Land");
(b) all of the buildings, structures, fixtures, facilities, installations
and other improvements of every kind and description now or hereafter in, on,
over and under the Land, including, without limitation, any and all plumbing,
air conditioning, heating, ventilating, mechanical, electrical and other utility
systems, parking lots and facilities, landscaping, roadways, sidewalks, swimming
pools and other recreational facilities, security devices, signs and light
fixtures (collectively, the "Improvements") (the Land and Improvements are
collectively referred to herein as the "Premises");
(c) all furniture, furnishings, fixtures, equipment, machinery, maintenance
vehicles and equipment, tools, parts, recreational equipment, carpeting, window
treatments, stationery and other office supplies, and other tangible personal
property of every kind and description situated in, on, over and under the
Premises or used in connection therewith, owned by Contributor or in which
Contributor otherwise has an interest as a lessee thereof (to the extent any
such lease is, by its terms, assignable without the consent of any third party)
and which is not owned by tenants under the Leases (as hereinafter defined),
together with all replacements and substitutions therefore (the foregoing,
together with the intangible personal property hereinafter identified, being
collectively referred to herein as the "Personal Property"), including the
itemization of Personal Property attached hereto as Exhibit B;
(d) all existing surveys, blue prints, drawings, plans and specifications
(including, without limitation, architectural, civil, structural, electrical,
mechanical and plumbing plans and specifications) and other documentation for or
with respect to the Property or any part thereof which are in Contributor's
possession or control; all marketing artwork, construction drawings, soil tests,
environmental reports; appraisals and police reports which are in Contributor's
possession or control; all available tenant lists and data, correspondence with
past, present and prospective tenants, vendors, suppliers, utility companies and
other third parties, booklets, manuals and promotional and advertising materials
concerning the Property or any part thereof; and such other existing books,
records and documents (including, without limitation, those relating to ad
valorem taxes and leases) used in connection with the operation of the Property
or any part thereof which are in Contributor's possession or control; and
(e) all right, title and interest of Contributor in and to the Leases and
Service Contracts (as hereinafter defined), elected by Partnership and the other
intangible personal property (including cash and account receivables as of the
closing date) now or hereafter owned by Contributor or in which Contributor
otherwise has an interest and used in connection with or arising from the
business now or hereafter conducted on or from the Property or any part thereof,
including, without limitation, claims, chooses in action, lease and other
contract rights, names, and, if available, telephone exchange numbers. A summary
of all current tenant leases affecting the Premises or any part thereof (the
"Leases," with such summary being referred to herein as the "Rent Roll"),
including each tenant's name, a description of the space leased, the amount of
rent due and the amount of any security, pet, redecorating or other deposit
paid, the term of each Lease, and a description of any right to renew or extend
each Lease is attached hereto as Exhibit C. A list of all employment, union,
purchase, service and maintenance agreements, equipment leases and any other
agreement contracts, licenses and permits (and any and all amendments thereto)
affecting or pertaining in any way to the Property or any part thereof
(collectively, the "Service Contracts") is attached hereto as Exhibit D.
2. EARNEST MONEY.
(a) Within two (2) days after the Effective Date (as hereinafter defined),
Partnership shall deposit with Specialized Title Services, Inc. (the "Escrow
Agent"), the sum of One Thousand Dollars ($1,000.00) (the "Earnest Money"). The
Earnest Money shall thereafter be held by Escrow Agent and be invested, applied,
disbursed or disposed of by Escrow Agent as provided in this Agreement and the
Earnest Money Escrow Agreement attached hereto as Exhibit E. All interest earned
on the Earnest Money shall become part of the Earnest Money to be applied,
disbursed or disposed of in the same manner as the Earnest Money.
(b) On the Closing Date (as hereinafter defined), the Earnest Money shall
be returned by Escrow Agent to the Purchaser .
3. PURCHASE PRICE AND PAYMENT.
(a) The purchase price of the Property shall be the sum of Seven Million
Five Hundred Fifty Five Thousand Dollars ($7,555,000.00) (the "Purchase Price")
and shall be delivered as follows:
(i) The assumption by Partnership of Contributor's indebtedness
(including accrued interest) to Reilly Mortgage Group, Inc. ("Lender") to
which the Property is subject.
(ii) The admission of Contributor as an Additional Limited Partner (as
defined in that certain Agreement of Limited Partnership of Vinings
Investment Properties, L.P., dated as of June 11, 1996, (the "Partnership
Agreement")) in Partnership and the issuance by Partnership to Contributor
of Partnership Units (as defined in the Partnership Agreement) and a
corresponding Partnership Interest (as defined in the Partnership
Agreement). The number of Partnership Units to be issued to Contributor
pursuant to this Section 3 shall be 242,546 units.
(b) Contributor acknowledges that it owes the General Partner a total of
$91,078 which was advanced to the Contributor (the "Partner Advances") and that
the General Partner will be issued a total of 18,216 units of the total 242,546
units to be issued in repayment of the Partner Advances.
(c) The balance of Partnership Units to be issued to the Contributor
pursuant to this Section 3 after payment of the Partner Advances will be
distributed to the limited partners of the Contributor (the "Limited Partners")
in proportion to their prorata share of ownership in the Contributor as shown on
Exhibit G attached hereto.
(d) Contributor acknowledges that the market price of the REIT Shares as
defined below may vary considerably between the Effective Date and the Closing
Date, and, Contributor has agreed to assume such risk with respect to the
Partnership Units to be received by Contributor pursuant to Section 3. Such
changes in price may result from changes in prevailing interest rates, industry
or company performance, stock market fluctuations, or other reasons.
(e) The following applies to the Partnership Units (and the real estate
investment trust "REIT" Shares that may be issued by the REIT upon presentation
of the Partnership Units for redemption) that are being offered and may be
issued and sold hereby:
THE SECURITIES OFFERED HEREBY ARE NOT REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR STATE SECURITIES LAWS AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT
AND SUCH LAWS. FOR THIS REASON, AS WELL AS THE RESTRICTIONS ON TRANSFER OF SUCH
SECURITIES DESCRIBED IN THE MATERIAL ENCLOSED OR PROVIDED IN CONNECTION
HEREWITH, AN INVESTOR MAY BE REQUIRED TO BEAR THE FINANCIAL RISK OF HIS OR HER
INVESTMENT IN THE COMPANY FOR AN INDEFINITE PERIOD OF TIME.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT,
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
ANY OFFEREE HAVING QUESTIONS REGARDING THIS OFFERING, OR DESIRING ANY
ADDITIONAL INFORMATION OR DOCUMENTS TO VERIFY OR SUPPLEMENT THE INFORMATION
CONTAINED IN THIS MEMORANDUM, SHOULD CONTACT THE PARTNERSHIP BY CALLING (770)
984-9500.
4. INSPECTION PERIOD.
(a) The Partnership shall have until 5:00 p.m., Atlanta, Georgia time, on
the fifteenth (15th) day immediately following the Trigger Date (as hereinafter
defined), within which to inspect the Property and review the assumption
documents to be used in connection with the assumption of the Lender Loan (as
hereinafter defined) (the "Inspection Period"). If for any reason whatsoever the
Partnership determines that the Property and said assumption documents are not
suitable for its purposes, in its sole and absolute discretion, and notifies
Contributor in writing of such decision prior to the expiration of the
Inspection Period, this Agreement shall automatically terminate and the Earnest
Money shall be returned to Partnership, less One Hundred Dollars ($100.00),
which Escrow Agent shall pay to Contributor as due consideration for this
Agreement, and thereafter no party hereto shall have any rights or obligations
under this Agreement, except as otherwise specifically set forth herein.
Partnership's failure to so notify Contributor prior to the expiration of the
Inspection Period shall be deemed a waiver by Partnership of its right to
terminate this Agreement pursuant to this Section 4(a), and this Agreement shall
continue in full force and effect. From the Effective Date through the
expiration of the Inspection Period, Partnership and its agents, engineers,
surveyors, appraisers, auditors and other representatives shall have the right
to enter upon the Property at reasonable times to inspect, examine, survey,
obtain engineering inspections, appraise, and otherwise do that which, in the
opinion of Partnership, is reasonably necessary to determine the boundaries,
acreage and condition of the Property and to determine the suitability of the
Property for the uses intended by Partnership (including, without limitation,
inspect, review and copy any and all documents in the possession or control of
Contributor, its agents, contractors or employees, and which pertain to the
construction, ownership, use, occupancy or operation of the Property or any part
thereof). Also, from the Effective Date through the expiration of the Inspection
Period, Partnership shall have the right to examine all of Contributor's books,
files and records relating in any way to the Property. Contributor shall make
such books, files and records available for examination by Partnership and
Partnership's agents and representatives, who shall have the right to make
copies of such books, files and records and to extract therefrom such
information as Partnership may desire, and who shall have the right to audit and
have certified, thoroughly and completely, all income and expenses, profits and
losses, and operational results of the Property. Partnership shall, and it does
hereby agree to indemnify and hold Contributor, Contributor's property manager
and Contributor's asset manager, harmless from and against any and all claims,
demands, liabilities, judgments, causes of actions, costs, expenses and fees
(including reasonable attorneys' fees and expenses incurred on account of any of
the foregoing) arising or in any way relating to any damage or injury to any of
the improvements or any person on or about the Premises while the Partnership or
any employee, agent representatives, or consultant is present thereon to the
extent caused by Partnership or any employee, agent, representative or
consultant of Partnership and not the result of Contributor's, or its property
manager's, asset manager's, representatives', or agents, willful misconduct or
negligence; provided, however, Partnership shall not be liable for any
consequential or incidental damages. Except as otherwise provided in this
Agreement, Partnership does hereby covenant and warrant unto Contributor that it
will pay all expenses incurred by Partnership to its consultants on account of
any of Partnership's investigations on or about the Property and will promptly
remove any lien or judgment which may hereinafter encumber the Property or any
part thereof on account of such failure to pay such expense.
(b) As soon as possible after the Effective Date, Contributor shall deliver
to Partnership copies of the following which Contributor has in its possession
or under its control relating to the Property: (i) all monthly and quarterly
income and expense statements for the Property; (ii) all audited annual
financial statements for the Property; (iii) the real and personal property tax
assessments and tax bills with respect to the Property, together with proof of
payment thereof, for the past three (3) tax years; (iv) all available warranties
and guaranties, including, without limitation, the warranties and guaranties
specifically set forth in Exhibit F attached hereto; (v) licenses, approvals,
entitlements and permits relating to the development and operation of the
Property; (vi) soil, geological and engineering studies and reports, if any;
(vii) maintenance work orders (or requests) and other maintenance reports, if
any; (viii) all equipment lease agreements, including any and all amendments
thereto and related correspondence; (ix) all other contracts, and any amendments
thereto; (x) any notices of violations of law received by Contributor; (xi) the
standard form lease for the Property, if any; (xii) the management contract for
the Property, and any amendments thereto; (xiii) all environmental studies and
reports; (xiv) certificates of insurance currently in effect, together with a
statement of the premiums payable with respect thereto; (xv) copies of all
Certificates of Occupancy for the Property; (xvi) all construction documents
including site plans, zoning approvals, building permits, plans and
specifications (including, but not limited to, plans, specifications, drawings
and designs for architectural, civil, structural, mechanical, electrical,
plumbing and landscaping); (xvii) any document, report or item not specifically
enumerated herein but which has been or will be delivered to Lender; (xviii) all
documents executed in connection with the Lender Loan and all documents to be
used in connection with Partnership's assumption thereof. For purposes of this
Agreement, the term "Trigger Date" shall mean the date on which Partnership
shall have received both the last of the items described in this Section 4(b)
and a written notice from Contributor stating that the item(s) accompanying said
written notice are the last of the items described in this Section 4(b) and that
all of the other items described in this Section 4(b) have been delivered to
Partnership.
(c) The foregoing notwithstanding, in the event this transaction fails to
close for any reason, Partnership shall immediately repair any damage to the
improvements it or any of its employees, agents, representatives or consultants
may have caused to the Property or any part thereof while conducting any one or
more of the studies, audits, examinations, inspections or other due diligence
activities pursuant to the terms of this Section 4 and return the Property
substantially to its condition existing immediately prior to such damage, all at
Partnership's sole cost and expense. In the event this transaction fails to
close for any reason, Partnership shall promptly return to Contributor all
information, material, reports, surveys, appraisals, financial information,
books and records and all other information of and relating to the Property
received from Contributor or any agent, consultant, representative or employee
of Contributor or otherwise compiled by Partnership or any employee, agent,
representative or consultant of Partnership (excluding, however, any
internally-generated documents), together with all copies of any of the
foregoing. Partnership acknowledges that all of the foregoing information,
material and reports, are confidential and proprietary to Contributor, and
Partnership has taken and will continue to take all reasonable actions necessary
and proper to protect Contributor's confidential and proprietary information,
material and reports from any and all unauthorized disclosures to any party
other than the investors, lenders, attorneys and other consultants related to or
retained or consulted by Partnership.
(d) The obligations and indemnifications set forth above shall survive the
Closing and/or any termination of this Agreement and remain fully enforceable
against Partnership for a period of six (6) months from the Effective Date, at
which time all such obligations and indemnifications shall terminate.
(e) Notwithstanding anything to the contrary set forth in this Agreement,
in the event this Agreement has not been terminated in accordance with the terms
of Section 4(a) above and provided that, as of the expiration of the Inspection
Period, Partnership shall have notified Contributor that all issues relating in
any way to Partnership's assumption of the Lender Loan have not been resolved
and/or satisfied, as determined by Partnership in its sole and absolute
discretion, then the Inspection Period (as it relates solely to the assumption
of the Lender Loan) shall be automatically extended until Partnership notifies
Contributor that all issues related to Partnership's assumption of the Lender
Loan have been satisfied, as determined by Partnership in its sole and absolute
discretion; provided, always, however, that, this Agreement shall automatically
terminate on June 1, 1997 unless the parties hereto expressly agree in writing
to the contrary.
5. SURVEY.
(a) Within ten (10) days after the Effective Date, Contributor, at its
expense, shall deliver to Partnership an "As-Built" survey (the "Survey") of the
Premises prepared by a surveyor selected by Contributor and reasonably
acceptable to Partnership. Said Survey shall be sufficient to remove the
standard survey exception found in ALTA title insurance policies, shall indicate
the exact metes, bounds and acreage of the Premises, shall be a class "A" survey
and shall show the exact location of all encroachments, easements, utility
lines, rights-of-way, set-back lines and encumbrances affecting the Premises.
The Survey also shall indicate the number and location of all surface parking
spaces, carports, garages and storage buildings located on the Property. The
Survey shall be certified to Contributor, Partnership and Title Insurer (as
hereinafter defined), and the certification on the Survey shall include: (i) a
certification that no part of the Premises is located within an area known as a
"special flood hazard area" as defined in the Flood Disaster Protection Act of
1973; (ii) a certification that there are no visible encumbrances or
restrictions on the Premises other than those shown on the Survey; (iii) a
certification that all easements, restrictions, set back lines and other matters
which are reflected on the Title Report (as hereinafter defined) are shown on
the Survey; and (iv) all other certifications reasonably required by Partnership
or Title Insurer. After said Survey shall have been completed and approved by
Partnership as set forth below, Exhibit A hereto shall automatically be amended
to conform to the legal description appearing in said Survey, and, thereafter,
said new legal description shall be the legal description of the Premises for
all purposes relating to this Agreement. At the request of either Contributor or
Partnership, the parties hereto shall execute and deliver a written amendment to
this Agreement setting forth said new legal description; however, no such
written amendment shall be necessary.
(b) If the Survey (i) is not acceptable to Title Insurer; or (ii) shows
easements, encroachments or other conditions that are not approved by
Partnership or if the legal description contained in the Survey is unacceptable
to Partnership for any reasonable reason, then Partnership shall notify
Contributor in writing of such Survey objections on or before the expiration of
the Inspection Period. Within three (3) days of its receipt of Partnership's
Survey objections, Contributor shall deliver written notice to Partnership
stating which of Partnership's Survey objections Contributor elects to either
cure or satisfy on or before Closing and which of such objections Contributor
either will not or cannot cure (those which Contributor either cannot or will
not cure being hereinafter referred to as "Disputed Survey Objections").
Contributor's failure to respond within said three (3) day period shall be
deemed a refusal by Contributor to cure or satisfy Partnership's Survey
objections. In the event Contributor notifies Partnership of any Disputed Survey
Objections, Partnership may either (A) waive any such Disputed Survey Objection
and proceed to Closing with no reduction in the Purchase Price, in which event
each such Disputed Survey Objection shall become a Permitted Exception (as
hereinafter defined), or (B) terminate this Agreement and receive a full refund
of the Earnest Money, less One Hundred Dollars ($100.00), which Escrow Agent
shall pay to Contributor as due consideration for this Agreement, and neither
party shall have any further rights or obligations hereunder, except as
otherwise expressly set forth herein. If any Survey objection which Contributor
elects to cure is not cured or satisfied by Contributor prior to Closing,
Partnership shall be entitled to the rights and remedies set forth in this
Section 5(b), unless such Survey objection results from a default by Contributor
under this Agreement in which case Partnership shall have the right to exercise
its remedies under Section 19 hereof. If Contributor does so cure or satisfy
such Survey objection, then this Agreement shall continue in full force and
effect.
6. TITLE.
(a) Contributor covenants to convey to Partnership at Closing good and
marketable title in and to the Property. For the purposes of this Agreement,
"good and marketable title" shall mean, with respect to the tangible Personal
Property and the items covered by Sections 1 (a), and 1 (b) and 1 (c) hereof,
ownership which is free of all claims, liens and encumbrances of any kind or
nature whatsoever other than the Permitted Exceptions; and, with respect to the
Premises, fee simple ownership which is insurable by Title Insurer at the then
current standard rates under its standard form of owner's policy of title
insurance (1992 ALTA Owner's Policy Form), with the standard printed exceptions
therein deleted and without exception other than for the Permitted Exceptions
and with such affirmative insurance or endorsements as Partnership shall
require.
(b) Within ten (10) days after the Effective Date, Contributor, at its
expense, shall obtain or cause to be obtained a title insurance commitment
issued by Escrow Agent (sometimes also referred to herein as "Title Insurer")
setting forth the condition of title to the Premises and the requirements to be
fulfilled as a condition to insuring good and marketable title to the Premises,
and true, correct and legible copies of all instruments creating or evidencing
exceptions to title (collectively, the "Title Report") and shall immediately
deliver a copy to Partnership upon receipt of same.
(c) Except as expressly permitted by the terms hereof, at or prior to
Closing, Contributor shall comply with the requirements to be fulfilled and
which may be fulfilled by Contributor without the payment of money, unless
otherwise required to be fulfilled by this Agreement, as a condition to Title
Insurer insuring good and marketable title to the Premises, including, but not
limited to, paying all taxes, assessments and any other monetary liens of sums
certain which constitute a lien upon the Premises (other than those not then due
and payable for the current calendar year or those arising from Partnership's
inspection of the Property) and paying all indebtedness secured by the Premises
(excluding, however, any indebtedness expressly assumed pursuant to the terms
hereof).
(d) Partnership shall have until the expiration of the Inspection
Period to give written notice to Contributor specifying any objections
Partnership may have to the Title Report, and/or the Survey (those exceptions to
either the Survey or the Title Report to which Partnership does not object prior
to said date are referred to herein as "Permitted Exceptions"). Within three (3)
days of its receipt of Partnership's title objections, Contributor shall deliver
written notice to Partnership stating which of such title objections Contributor
elects to either cure or satisfy on or before Closing and which of the title
objections Contributor either will not or cannot cure (those which Contributor
either cannot or will not cure being hereinafter referred to as "Disputed Title
Objections"). Contributor's failure to respond within said three (3) day period
shall be deemed a refusal by Contributor to cure or satisfy Partnership's title
objections. In the event Contributor notifies Partnership of any Disputed Title
Objections, Partnership may either (i) waive any such Disputed Title Objection
and proceed to Closing with no reduction in the Purchase Price, in which event
such Disputed Title Objection shall become a Permitted Exception, or (ii)
terminate this Agreement and receive a full refund of the Earnest Money, less
One Hundred Dollars ($100.00), which Escrow Agent shall pay to Contributor as
due consideration for this Agreement, and neither party shall have any further
rights or obligations hereunder, except as otherwise expressly set forth herein.
If any title objection which Contributor elects to cure is not cured or
satisfied by Contributor prior to Closing, Partnership shall be entitled to the
rights and remedies set forth in this Section 6(d), unless such title objection
results from a default by Contributor under this Agreement, in which case
Partnership shall have the right to exercise its remedies under Section 19
hereof. If Contributor does so cure or satisfy such title objection, then this
Agreement shall continue in full force and effect.
(e) If, after the condition of title to the Premises has been approved
by Partnership in accordance with the terms of Sections 5 and 6 hereof, the
Premises becomes encumbered or subject to any matter other than a Permitted
Exception or a matter created by Partnership or with Partnership's written
consent, or any update or certification to the Survey or the Title Report that
may be required by Title Insurer or requested by Partnership indicates that the
Premises has become subject to any matter other than the Permitted Exceptions or
a matter created by Partnership or with Partnership's written consent, and
Contributor is unable or unwilling to remove any such matter prior to Closing,
then Partnership shall have the option to either (i) waive such matter and
proceed to Closing with no reduction in the Purchase Price, or (ii) terminate
this Agreement and receive a full refund of the Earnest Money, less One Hundred
Dollars ($100.00), which Escrow Agent shall pay to Contributor as due
consideration for this Agreement, and thereafter neither party shall have any
further rights or obligations hereunder, except as otherwise expressly set forth
herein, unless such matter results from a default by Contributor under this
Agreement, in which case Partnership shall have the right to exercise its
remedies under Section 19 hereof.
7. CLOSING.
(a) Subject to all conditions precedent set forth and provided that
this Agreement has not been previously terminated in accordance with the terms
hereof, the "Closing" of the transaction contemplated hereby (that is, the
payment of the Purchase Price, the transfer of title to the Property, and the
satisfaction of all other terms and conditions of this Agreement) shall be held
at the offices of the Partnership, and shall commence at 10:00 A.M., Atlanta,
Georgia time, on the fifteenth (15th) day following the expiration of the
Inspection Period, or on such other date as Partnership and Contributor may
mutually agree in writing (the "Closing Date").
8. CLOSING PRORATIONS AND ADJUSTMENTS.
(a) All matters involving prorations or adjustments to be made in
connection with the Closing and not specifically provided for in some other
provision of this Agreement have been calculated and the value of such
prorations has been taken into account and included in the number of operating
partnership units to be issued in connection herewith other than the prorations
or adjustments listed in (b) below.
(b) Such prorations or adjustments shall be made as follows:
(i) All costs and expenses of operating the Property which
have accrued as of the Closing Date shall be paid by Contributor, on or before
the Closing Date, or promptly upon receipt of bills therefor. All costs and
expenses of operating the Property which are accrued on or after the Closing
Date shall be paid by Partnership. Contributor shall transfer to Partnership at
Closing an amount equal to the aggregate amount of all security, pet,
redecorating or other deposits refundable to tenants under the Leases.
Partnership will accept such transfer of funds and agree to hold harmless and
indemnify Contributor for any claim, liability and/or expense relating thereto
and accruing after the Closing Date.
(ii) Final readings and final billings for utilities shall be
made as of the Closing Date. Contributor shall pay all outstanding amounts due
as of such time. Contributor shall also be entitled to, and may, following
Closing, obtain any applicable refunds of security deposits with any utility
companies. If final readings and billings cannot be obtained as of Closing, the
final bills, when received, shall be prorated based upon the number of days
Contributor owned the Property in such final billing period. Partnership shall,
at or prior to the Closing, make any deposits required from and after closing
for utilities and other services of the Property.
(iii) Partnership shall have the right, in the exercise of its
sole discretion, to approve all Service Contracts pertaining to the Property
which shall survive the Closing. Contributor shall pay all charges for
deliveries made and services rendered up to the Closing Date and any date after
the Closing Date if the deliveries made and services rendered thereafter relate
to Service Contracts not accepted in the manner described herein and which were
not terminated or canceled by Contributor as required by the terms hereof. Any
items on order but undelivered as of the Closing Date shall be reviewed and
accepted or canceled as desired by Partnership; only those items accepted by
Partnership shall be paid for by Partnership. On or before the expiration of the
Inspection Period, Partnership shall deliver written notice to Contributor
specifying which of the Service Contracts described in Exhibit D attached hereto
will be accepted by Partnership. Partnership hereby reserves the right to
approve or disapprove any and all other Service Contracts which may affect the
Property. Those Service Contracts not accepted by Partnership shall be
terminated or canceled by Contributor at its expense on or before the Closing
Date. Partnership's failure to notify Contributor as required in this Section
8(b)(iii) shall be deemed a rejection by Partnership of all of the Service
Contracts. Notwithstanding anything to the contrary set forth herein, in no
event shall Partnership be bound by the terms of the contracts between
Contributor and its management company and Contributor and its asset management
company which are in effect as of the Effective Date.
(iv) Notwithstanding anything to the contrary contained in
this Agreement, Contributor shall pay any management fee due as of the Closing
Date on account of the Property to its property management company.
(c) The provisions of this Section 8 shall survive the Closing and remain
fully enforceable against Partnership, Contributor and the General Partner.
Because Partnership is assuming all cash balances after payment of property,
operating expenses incurred by Contributor in accordance with Section 8 (b)(i)
hereof, Partnership hereby agrees to pay all closing costs incurred in
connection with the closing including the Contributor's closing fee in the
amount of $75,550 to MFI Realty and Contributor's legal fees incurred in
connection herewith.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) In order to induce the Partnership to consummate the transaction
contemplated hereby, Contributor and the General Partner hereby jointly and
severally represent, warrant and covenant to Partnership to the best of their
knowledge that the following are true statements as of the Effective Date, and
Contributor and the General Partner agree to deliver a certificate at Closing
specifying any changes occurring between the Effective Date and the Closing, in
accordance with Section 12 hereof.
(i) Contributor is a validly organized and existing Limited
Partnership in the State of Georgia with Hallmark Group Real Estate Services
Corp. ("Hallmark") being its sole General Partner. Contributor, subject to the
Limited Partners Consent and Hallmark, in its capacity as General Partner of
Contributor have full power and authority to enter into and fully perform and
comply with the terms of this Agreement.
(ii) Contributor is the sole owner of, and has good and
marketable fee simple title to, the Property, and the Property is free and clear
of all liens, encumbrances, claims, demands, easements, covenants, conditions,
restrictions and encroachments of any kind or nature other than the Permitted
Exceptions. Contributor will not enter into any agreement to lease, sell,
mortgage or otherwise encumber or dispose of its interest in the Property or any
part thereof, except for this Agreement, the Permitted Exceptions, or as
otherwise specifically set forth in this Agreement.
(iii) No written notice of default that remains uncured and
that would have the effect of binding Partnership after the Closing has been
received by Contributor under any agreement, instrument or document to which it
is a party or under any policy of insurance affecting the Property.
(iv) Contributor has not received any written notice from a
Governmental Authority (as hereinafter defined), and otherwise has no knowledge,
of the violation of any applicable federal, state, county, municipal, or other
governmental or quasi-governmental statute, law, ordinance, judgment, writ,
decree, injunction, rule, ruling, regulation, restriction or order (all of the
foregoing being hereinafter collectively referred to as the "Legal
Requirements") affecting the Property or the construction, development, use,
operation, maintenance or management thereof, which violation has not been
corrected.
(v) Contributor has not received written notice of any
judgment, writ, decree, injunction or order entered in any action, suit or
proceeding brought by any federal, state, county, municipal or other
governmental or quasi-governmental agency, department, board, commission,
bureau, or other entity or instrumentality (each, a "Governmental Authority") or
any other person enjoining or restraining it in respect of any business practice
or the conduct of business in any respect relating to the Property which, if not
complied with, would materially and adversely affect the present use or
operation of the Property.
(vi) Contributor has not received written notice of any
action, suit, or other proceeding that is pending nor is there any action, suit
or proceeding pending, contemplated or threatened by or against Contributor, the
General Partner or the property which would, if adversely determined, materially
and adversely affect the rights of Partnership, or Contributor's or the General
Partner's ability to perform under this Agreement, any agreement required
hereunder to be executed or delivered or any transaction contemplated hereby and
thereby.
(vii) No written notice has been received by Contributor with
respect to any requirement by any insurance company which has issued an
insurance policy with respect to the Property or by any board of fire
underwriters or other body exercising similar functions, as to which there has
been no compliance.
(viii) Contributor has not received written notice, and
otherwise has no knowledge that any consent, authorization, variance, license,
permit or approval (collectively, the "Approvals") relating to or required for
the operation or occupancy of the Property and required in order for Contributor
to carry out the transaction contemplated hereby has not been validly and
unconditionally obtained (or, if there existed any condition with respect
thereto, such condition has been satisfied) or is not in full force and effect.
True, accurate and complete copies of all Approvals in Contributor's possession
will be delivered to Partnership prior to the Closing. All fees, charges, and
other payments in connection with the Approvals have been paid in full. Without
the prior written approval of Partnership, as of Closing, there will be no
application for any Approval which is pending.
(ix) A list of all employment, union, purchase, service and
maintenance agreements, equipment leases and any other agreement contracts,
licenses and permits (and any and all amendments thereto) affecting or
pertaining in any way to the Property or any part thereof (collectively, the
"Service Contracts") is attached hereto as Exhibit D. Contributor has delivered
to Partnership true, accurate and complete copies of the Service Contracts.
(x) Contributor has not done anything to cause any hook-up or
connection fee, non-recurrent charge or assessment in connection with any
utility serving the Property to be payable after the Closing.
(xi) Other than the Leases and the Permitted Exceptions, there
are no other lease amendments or agreements between Contributor and the tenants
under the Leases. Contributor has made and knows of no other agreements (whether
written or oral) in the nature of a lease affecting the Property except a
Section 8 contract affecting forty (40) units.
(xii) A summary of all current tenant leases affecting the
Premises or any part thereof (the "Leases," with such summary being referred to
herein as the "Rent Roll"), including each tenant's name, a description of the
space leased, the amount of rent due and the amount of any security, pet,
redecorating or other deposit paid, and the term of each Lease is attached
hereto as Exhibit C. The Rent Roll is true, complete and correct and a true and
accurate Rent Roll for the Property updated as of the Closing Date, satisfactory
to Partnership in its sole discretion, will be delivered to Partnership at
Closing. Except as otherwise expressly disclosed on the attached Rent Roll and
the updated Rent Roll to be delivered to and approved by Partnership (in its
sole discretion) at Closing, Contributor represents and warrants that (A) those
tenants referenced in the Rent Roll are in occupancy of the Property pursuant to
the Leases, (B) the tenants have commenced to pay full rent on a monthly basis
under the Leases, (C) no advance payment or prepayment of rents, fees, or other
charges for more than the current month have been made under the Leases, (D)
there are no security deposits (whether in the form of cash or other forms of
deposits) or other monies which have been received or are being held by or on
behalf of Contributor for the account of the tenants pursuant to the Leases
which have not been credited or transferred to Partnership, (E) the tenants are
not in arrears in the payment of any rent or any sum due under the Leases other
than as provided in the rent rolls and documents submitted to Partnership, (F)
all rents and other sums payable under the Leases were paid without offset,
concession, rebate, abatement, deduction or allowance, (G) the Leases are valid
and binding on the parties thereto and are in full force and effect, (H)
Contributor has neither given, caused to be given, nor received any outstanding
notice that any default not heretofore owed exists under any of the Leases, and
Contributor has no knowledge of any uncured event of default or event which,
with the passage of time or the giving of notice or both, would constitute an
event of default under the Leases, and (I) except for the Leases, neither
Contributor nor anyone acting on its behalf, has entered into or made or given
any binding commitment or option to lease space with respect to the Property, or
any portion thereof.
(xiii) Contributor has not received written notice from any
tenant, and otherwise has no knowledge, that any tenant disputes the computation
of any rents or other sums payable pursuant to a Lease or claims a breach of any
covenant, representation or warranty made by the Contributor or its agent under
any Lease.
(xiv) All brokerage commissions, finder's fees, and similar
payments, however denominated, due or owing with respect to any of the Leases or
otherwise with respect to the Property have been paid.
(xv) As of the Closing Date and except as required in
connection with the Lender Loan, no right or interest of Contributor under any
of the Leases will be assigned, mortgaged, hypothecated, or otherwise encumbered
by or through Contributor.
(xvi) No proceeding seeking reduction in real estate taxes
imposed upon the Property or the assessed valuation of any portion thereof (the
"Tax Assessment Proceeding") have been instituted by Contributor which are
currently pending.
(xvii) There are no employees of Contributor employed in
connection with the use, operation, maintenance or management of the Property
whom Partnership would be obligated to retain or compensate or provide benefits
for after the Closing Date.
(xviii) Except as disclosed in any report, study, audit, or
other materials delivered to Partnership by Contributor: (A) no Hazardous
Substance (as hereinafter defined) is located on the property in violation of
Environmental Laws (as hereinafter defined); (B) no underground storage tanks
are located on the Property; (C) the Property has never been used as a dump for
waste material; (D) the Property complies with, and at all times has complied
with, all applicable Environmental Laws; (E) the materials incorporated into the
Premises (including, but not limited to, any landfill) do not include asbestos,
urea formaldehyde, lead or other materials generally known to be potentially
toxic; and (F) there is not and has never been landfill containing decomposable
material, petroleum wells, mineral bearing mines, sewage treatment facilities,
underground storage tanks, radon or other toxic emissions within 2,000 feet of
any boundary of the Land.
As used herein, a "Hazardous Substance" shall be defined as any substance
which (1) is designated as hazardous, toxic or dangerous or similarly designated
under any Environmental Laws, (2) is regulated under any Environmental Laws or
by any governmental or quasi-governmental agency, or (3) could be a hazard to
health, safety or property values. Without limiting the foregoing, the term
"Hazardous Substance" shall also include underground storage tanks, asbestos,
urea formaldehyde insulation, polychlorinated biphenyls (PCBs), dioxins and
petroleum products. Moreover, the term "Hazardous Substance" also shall mean any
form of explosive, radioactive material, hazardous waste, toxic substance, or
related material, any material which is in fact hazardous to life or property
and any other substances and/or material defined or designated as a hazardous or
toxic substance, or waste by any federal, state or local law or environmental
statute, regulation, or ordinance.
As used herein, the term "Environmental Laws" means all law relating to
hazardous waste, chemical substances or mixtures or hazardous, toxic, dangerous
or unhealthy substances or conditions or relating to the interaction of the use
or ownership of property and the environment, whether such law is: (1) criminal
or civil, (2) federal, state or local, or (3) statutory, common law or
administrative rules, regulations, orders and/or decrees.
(xix) Neither the execution, delivery and performance of this
Agreement or any other agreement contemplated hereunder nor the carrying out by
Contributor of the transaction contemplated hereby or thereby will conflict
with, result in a breach of, constitute a default under or accelerate the
maturity of (A) any applicable provision of Contributor's organizational
documents or other governing instrument, (B) any applicable Legal Requirement
affecting Contributor or the Property or (C) any other agreement, indenture or
instrument to which Contributor is a party or by which Contributor or all or any
portion of the Property is or may be bound or affected. No consent of any third
party is required in order for Contributor to enter into this Agreement or any
other agreement contemplated hereunder or for Contributor to carry out the
transaction contemplated hereby or thereby.
(xx) There are no outstanding or unpaid judgments against
Contributor with respect to the Property or against the Property.
(xxi) Contributor knows of no (A) pending or contemplated
condemnation proceeding affecting, or which may affect, all or any portion of
the Property, (B) proposed or pending proceeding to change or redefine the
zoning classification of all or any portion of the Property, or (C) proposed
change in road patterns or grades which may adversely affect access to the roads
providing a means of ingress to or egress from the Property.
(xxii) The construction, operation, and present use of the
Property comply in all respects with all applicable zoning statutes, ordinances,
regulations, and laws including, without limitation, the Americans with
Disabilities Act and all applicable fair housing laws, rules, ordinances and
regulations (collectively, the "Classification") and restrictions, covenants,
easements, and cross-easements affecting the Property. As of Closing, the
Classification is not subject to any conditional variance or conditional permit
granted with respect to the Property, and does not require any further approval
nor any other action. The conveyance of the Property to Partnership for the uses
and in the manner now prevailing will not affect the Classification.
(xxiii) The Property, and all components thereof, including,
but not limited to, parking lots, electrical systems, roofs, air-conditioning
systems, plumbing systems and heating systems are and, on the Closing Date, will
be in good condition and repair and in working order, will perform the work or
function for which intended, will be free of any and all physical, structural
and/or mechanical defects, and will comply with all applicable building codes,
rules and regulations.
(xxiv) All necessary utilities required for the present use,
operation, maintenance, and management of the Property, as fully occupied,
including, without limitation, electricity, natural gas, storm sewer and
drainage, sanitary sewer, water, fire protection facilities, telephone, and
similar systems, have been completed, are in good working order, and comply with
all Legal Requirements, and all fees and assessments associated therewith, based
on current and projected usage, are paid in full or are payable by tenants.
(xxv) All utilities required for the use, operation,
maintenance and management of the Property either enter the Property through
adjoining public streets or, if they pass through adjoining private land, do so
in accordance with valid public easements or private easements inuring to the
benefit of Partnership.
(xxvi) The improvements include sufficient parking spaces to
comply with: (A) all Legal Requirements, including, but not limited to, zoning
requirements; and (B) all parking commitments contained in the Leases.
(xxvii) True, accurate and complete copies of all personal
property tax bills, if any, with respect to the Property payable for the current
and immediately preceding tax year have been delivered by Contributor to
Partnership. All personal property taxes due and payable with respect to the
Property and all interest and penalties payable with respect thereto, if any,
have been fully paid.
(xxviii) Contributor has good title to all of the Personal Property,
it is all in good working order, none of it is leased or subject to any liens or
conditional sales contracts, and the Personal Property is sufficient to comply
with all requirements of the Leases for the Property.
(xxix) The Improvements, including all landscaping, have been
completed and there are no known interior or exterior structural defects in the
Improvements or any material defect in the plumbing, electrical, mechanical,
heating, ventilating or air conditioning systems or other systems. All such
systems are in good working order, and all roofs and basements, if any, of the
Improvements are in good condition and free of known leaks.
(xxx) All oil and/or gas burners, incinerators, furnaces and
other fuel burning devises at the Property comply in all material respects with
all Legal Requirements, including, without limitation, all air pollution and
environmental control laws, orders, rules and regulations.
(xxxi) There has been no damage to any portion of the Property
caused by fire or casualty which has not been fully repaired or restored.
(xxxii) All conditions and requirements of all Approvals have been
fully satisfied. Except for the existing Approvals, there are no Approvals
required to fully and completely use, operate, maintain and manage the Property
as the same is now used, operated, maintained and managed. The consummation of
the transaction contemplated hereby will not increase any obligations or affect
any time periods under any existing Approval or cause any existing Approval to
lapse. All of the Approvals are transferable with the Property to Partnership
without charge.
(xxxiii) All representations contained in the Leases made by the
Contributor or its agents, as the landlord thereunder, are true and correct.
(xxxiv) There is no pending imposition of any special or other
assessments for public betterments or otherwise, any proposed or pending special
assessments affecting the Property or any portion thereof, or any penalties or
interest due with respect to real estate taxes assessed against all or any
portion of the Property that are payable by the owner of the Property or could
result in a lien against the Property.
(xxxv) The Property is in compliance with any applicable
restrictive or protective covenants or conditions of record, and with any
conditions or restrictions in any deed of record.
(xxxvi) No part of the Property contains a cemetery or burial
ground and no part of the Property has been designated as wetlands under any
federal, state or local law or regulation or by any governmental agency.
(xxxvii) Contributor and the General Partner have had an
opportunity to review the Partnership Agreement and other materials relating to
Partnership and the REIT and understand the risks of, and other considerations
relating to, the purchase of the Partnership Units and the REIT Shares.
Contributor and the General Partners, by reason of their individual business and
financial experience, together with the business and financial experience of
those persons, if any, retained by them to represent or advise them with respect
to the investment in the Partnership Units and the REIT Shares (A) have such
knowledge, sophistication and experience in financial and business matters and
in making investment decisions of this type that Contributor and the General
Partners are capable of evaluating the merits and risks of an investment in the
Partnership and the REIT and of making an informed investment decision, (B) are
capable of protecting their own interest or have engaged representatives or
advisors to assist them in protecting their interest, and (C) are capable of
bearing the economic risk of such investment. If Contributor and/or the General
Partners have retained a person to represent or advise them with respect to
their investment in Partnership Units and REIT Shares that may be made hereby,
then, at Partnership's request, Contributor and/or the General Partners, as the
case may be, shall, prior to or at Closing, (1) acknowledge in writing such
representation, and (2) cause such representative or advisor to deliver a
certificate to Partnership containing such representations as are reasonably
requested by Partnership.
(xxxviii) Contributor and the General Partner understand that an
investment in the Partnership and the REIT involves substantial risks.
Contributor and the General Partner have been given the opportunity to make a
thorough investigation of the proposed activities of the Partnership and the
REIT and have been furnished with materials relating to the Partnership and the
REIT and its proposed activities. Contributor and the General Partner have been
afforded the opportunity to obtain any additional information deemed necessary
by Contributor and/or the General Partner, as the case may be, to verify the
accuracy of any representations made or information conveyed to Contributor and
the General Partner. Contributor and the General Partner confirm that all
documents, records, and books pertaining to their investment in the Partnership
and the REIT and requested by Contributor and/or the General Partner have been
made available or delivered to Contributor and/or the General Partner, as the
case may be. Contributor and the General Partner have had an opportunity to ask
questions of and receive answers from the Partnership and the REIT, or from a
person(s) or entity acting on the Partnership's and the REIT's behalf concerning
the terms and conditions of this investment.
(xxxix) The Partnership Units to be issued to Contributor in
connection with the transactions contemplated hereby, and any REIT Shares of
REIT subsequently issued in consideration therefor, will be acquired by
Contributor for its own account for investment only and not with a view to, or
with any intention of, a distribution except as specified in Section 3b and 3c
or resale thereof, in whole or in part, or the grant of any participation
therein, without prejudice, however, to Contributor's right (subject to the
terms of the Partnership Units) at all times to (A) sell or otherwise dispose of
all or any part of its Partnership Units and REIT Shares under an exemption from
such registration available under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws (including, without
limitation, by way of a distribution of the Partnership Units by Contributor to
the General Partner as substitute limited partners being hereby given), and (B)
obtain cash or REIT Shares of the REIT, pursuant to the terms of Section 8.6 of
the Partnership Agreement, and sell any such Shares pursuant to an effective
registration statement, or an exemption from registration under the Securities
Act, and subject, nevertheless, to the disposition of its assets being at all
times within its control.
(xl) Contributor, Limited Partners, and the General Partner
acknowledge that (A) the Partnership Units to be issued to Contributor in
connection with the transactions contemplated hereby, and any REIT Shares
subsequently issued in consideration therefore, have not been registered under
the Securities Act or state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and applicable state
securities laws and, if such Partnership Units and REIT Shares are represented
by certificates, such certificates will bear a legend to such effect, (B) the
REIT's and Partnership's reliance on such exemptions is predicated in part on
the accuracy and completeness of the representations and warranties of
Contributor and the General Partner contained herein, as well as those to be
made by the limited partners in their consent solicitation documentation. (C)
such Partnership Units and REIT Shares, therefore, cannot be resold unless
registered under the Securities Act and applicable state securities laws, or
unless an exemption from registration is available, (D) there is no public
market for such Partnership Units, (E) Partnership has no obligation or
intention to register such Partnership Units or REIT Shares for resale under the
Securities Act or any state securities laws or to take any action that would
make available any exemption from the registration requirements of such laws,
(F) Contributor is organized and existing under and by virtue of the laws of the
State of Georgia and is in good standing thereunder, and (G) the General Partner
is organized and existing under the laws of Georgia and is in Good Standing
thereunder. Contributor and the General Partner hereby acknowledge that because
of the restrictions on transfer or assignment of such Partnership Units to be
issued hereunder which are set forth in the Partnership Agreement, Contributor
may have to bear the economic risk of the investment commitment evidenced by
this Agreement and any Partnership Units purchased hereby for an indefinite
period of time, although (1) under the terms of the Partnership Agreement,
Partnership Units will be redeemable at the request of the holder thereof at any
time for cash or, at the election of the REIT, exchanged for REIT Shares and (2)
the holder of any such Shares issued upon a presentation of Partnership Units
for redemption will be afforded certain rights to have such REIT Shares
registered for resale under the Securities Act or applicable state securities
laws under the Registration Rights Agreement attached hereto as Exhibit I.
(xli) Contributor and the General Partner are "accredited
investors" as defined in Regulation D promulgated under the Securities Act.
(xlii) Contributor agrees that it will only transfer or distribute the
Partnership Units (and General Partner agrees that it will only transfer any
Partnership Units that it may receive from Contributor) to persons or entities
that make representations to the Partnership and the REIT of the type set forth
herein, and otherwise so as to cause no violation of applicable federal and
state securities laws by the Partnership and the REIT, and no transfer in
contravention of such agreement shall be recognized by Partnership.
(xliii) Contributor and General Partner acknowledge that the balance of the
Partner Advances total $91,078 and will not accrue interest through the Closing
Date.
(b) The foregoing warranties, representations and covenants of
Contributor and the General Partner shall survive the execution and delivery of
this Agreement, the Closing and delivery of all documents and any and all
performances required by this Agreement.
(c) Notwithstanding anything to the contrary set forth herein, the
representations and warranties of this Section 9 are made to the "best of
Contributor's and the General Partner's knowledge." For purposes of this
Agreement, the phrase "best of Contributor's and the General Partner's
knowledge" means the actual knowledge, information or belief of the General
Partner, but shall not include within such term or phrase the knowledge,
information and belief of any other person.
(d) Availability of Records. Upon written request of the Partnership,
for a period of two (2) years after the Closing, Contributor shall (i) make its
records available to the Partnership for inspection, copying and audit by the
General Partner's designated accountants at Partnership's sole cost and expense,
and (ii) cooperate with Partnership to the extent reasonably necessary to obtain
any applicable Licenses not in existence on the Closing Date and necessary for
the operation of all or any portion of the Property. Without limiting the
foregoing and in addition thereto, for the period of time commencing on the date
of this Agreement and continuing through the second (2nd) anniversary of the
Closing Date, each Contributor shall, from time to time, upon reasonable advance
notice from Partnership, provide Partnership and its representatives, agents and
employees with access to all financial and other information in its possession
pertaining to the period of such Contributor's ownership in and operation of, as
the case may be, the applicable Property, which information is relevant and
reasonably necessary, in the opinion of Partnership's outside, third party
accountants (the "Accountants"), to enable Partnership and its Accountants to
prepare financial statements in compliance with any or all of (a) Rule 3-14 of
Regulation S-X of the Commission; (b) any other rule issued by the Commission
and applicable to Partnership; and (c) any registration statement, report or
disclosure statement filed with the Commission by, or on behalf of, Partnership;
provided, however, that in any such event(s), the General Partner shall
reimburse such Contributor for those third party, out-of-pocket costs and
expenses that such Contributor incurs in order to comply with the foregoing
requirements. Contributor acknowledges and agrees that the following is a
representative description of the information and documentation that Partnership
and the Accountants may require in order to comply with (a), (b), and (c) above.
Contributor shall provide such information, and documentation, if available.
Contributor's obligations under this Section shall survive the Closing.
(i) Applicable Rent Rolls for the calendar month in which the Closing
occurs and the eleven (11) calendar months immediately preceding the calendar
month in which the Closing occurs;
(ii) Contributor's internally-prepared operating statements; (iii) Access
to applicable Leases; (iv) Contributor's budgeted annual and monthly income and
expenses, and actual annual and monthly income and expenses; (v) Access to
Contributor's cash receipt journal(s) and bank statements for the Property; (vi)
Contributor's general ledger with respect to the Property; (vii) Contributor's
schedule of expense reimbursements required under applicable Leases in effect on
the Closing Date, if one exists; (viii)Schedule, if one exists, of those items
of repairs and maintenance performed by, or at the direction of Contributor,
during Contributor's final fiscal year in which Contributor owned and operated
the applicable Property (the "Final Fiscal Year");
(ix) Schedule, if one exists, of those capital improvements and fixed asset
additions made by, or at the direction of, Contributor during the Final Fiscal
Year; (x) Access to Contributor's invoices with respect to expenditures made
during the Final Fiscal Year; (xi)Access (during normal and customary business
hours) to responsible personnel to answer accounting questions; and
(xii) A representation letter, signed by the individual(s) responsible for
Contributor's financial reporting, as prescribed by generally accepted auditing
standards promulgated by the Auditing Standards Division of the American
Institute of Certified Public Accountants, which representation letter may be
required to assist the Accountants in rendering an opinion on such financial
statements.
10. PARTNERSHIP'S WARRANTIES.
In order to induce Contributor to consummate the transaction contemplated
hereby, Partnership hereby represents and warrants to Contributor that the
following are true statements as of the Effective Date or will be true
statements as of the Closing Date, and Partnership agrees to deliver a
certificate at Closing specifying any changes occurring between the Effective
Date and the Closing, in accordance with Section 12 hereof.
(a) Partnership has full power and authority to enter into and fully
perform and comply with the terms of this Agreement.
(b) Partnership will make an on-site inspection of the Property,
including all Personal Property, Leases and the books and records relating to
the operation of the Property, and will investigate the Property to
Partnership's satisfaction; and, except as specifically provided in this
Agreement to the contrary, Contributor is released from all responsibility and
liability regarding the condition, valuation or utility of the Property. Except
as specifically provided in Section 9 hereof, Partnership has not relied on any
warranties, promises, understandings or representations, express or implied, of
Contributor or any agent of Contributor relating to the Property. Partnership
acknowledges that any and all general leasing information (i.e., general
information concerning the leasing of real property in Decatur, DeKalb County,
Georgia, but excluding any specific information concerning the Property and any
information contained in the Rent Roll), feasibility or marketing reports, or
other general information of any type that Partnership has received or may
receive from Contributor or Contributor's agents and which is not specifically
related to the Property was or is furnished on the express condition that
Partnership shall or would make an independent verification of the accuracy of
any and all such information, all such information being furnished without any
warranty whatsoever, except as specifically provided in this Agreement.
Partnership agrees that, except as specifically provided in Section 9 hereof,
Partnership will not attempt to assert any liability against Contributor and/or
its agents for furnishing such information.
(c) The Partnership Units and admission of Contributor as an Additional
Limited Partner have been duly approved by all necessary authority.
(d) The Partnership Agreement, a copy of which is attached hereto as
Exhibit H, is true, correct and complete.
(e) This Agreement and the Registration Rights Agreement have been duly
approved and the REIT Shares which Contributor may receive pursuant to the terms
of Section 8.6 of the Partnership Agreement, have been authorized, but not
issued.
(f) There has been no material adverse change in the legal status of
the REIT between December 31, 1996 and the Effective Date.
(g) The foregoing warranties and representation of Partnership shall
survive the execution and delivery of this Agreement, the Closing and delivery
of all documents and any and all performances required by this Agreement.
11. CONTRIBUTOR'S ENVIRONMENTAL INDEMNITY.
Notwithstanding anything to the contrary set forth herein, from the Closing
Date and thereafter, Contributor agrees to indemnify, defend and hold harmless
Partnership and their respective successors and assigns from and against any and
all loss, cost or damage including, but not limited to, reasonable attorneys'
fees and court costs suffered or incurred by Partnership and their respective
successors and assigns as a result of any third party action brought against
Partnership under Environmental Laws pertaining to any matter, condition or act
on the Property involving Environmental Laws or Hazardous Substances which
existed or arose between the date Contributor took title to the Property and the
Closing Date, whether or not Contributor has knowledge thereof as of the Closing
Date.
12. CLOSING DOCUMENTS.
(a) At or prior to Closing, each party shall deliver to the other party
appropriate evidence to establish the authority of such party to enter into and
close the transaction contemplated hereby. Without limiting the foregoing,
Contributor shall deliver to Partnership a copy of the Limited Partners'
Consent. Additionally, Contributor and/or, as the case may be, the General
Partner shall execute and deliver to Partnership at Closing:
(i) a warranty deed duly executed and acknowledged, subject
only to the Permitted Exceptions, sufficient to transfer and convey to
Partnership fee simple title to the Premises as required by this Agreement, and
otherwise in form and substance acceptable to Partnership and Title Insurer;
(ii) the Title Policy;
(iii) a bill of sale sufficient to transfer to Partnership
title to the tangible Personal Property and containing appropriate warranties of
title as required by this Agreement;
(iv) a letter in form and substance satisfactory to
Partnership, advising tenants under the Leases of the change in ownership of the
Premises, of Partnership's future liability for tenant security, pet,
redecorating or other deposits refundable under the Leases, and directing them
to pay rent to Partnership or as Partnership may direct;
(v) any and all affidavits, certificates or other documents
required by Title Insurer in order to cause it to issue an owner's title
insurance policy in the form and condition required by this Agreement;
(vi) a counterpart of an assignment of the Leases (together with a transfer
of all security deposits listed in the Rent Roll delivered by Contributor
pursuant to Section 12(a)(viii) below) and those Service Contracts accepted by
Partnership with an assumption of the duties and obligations thereunder arising
on or after the Closing Date, (the counterpart delivered pursuant to this
provision shall contain indemnification provisions providing that Contributor
shall indemnify Partnership against any claims arising under the Leases and/or
the Service Contracts accruing on or before the Closing Date and that
Partnership shall similarly indemnify Contributor against those claims accruing
after the Closing Date, said indemnification provisions being in form and
substance reasonably acceptable to Contributor, Partnership and their
attorneys);
(vii) an updated Rent Roll certified by Contributor as being
true, accurate and complete in all material respects as of the Closing Date;
(viii) all of the original Leases and written Service
Contracts to be assumed by Partnership (provided that Contributor shall have the
right to make all such original Leases and Service Contracts available to
Partnership at the Premises), and, to the extent in Contributor's possession or
control, any and all building plans, surveys, site plans, engineering plans and
studies, utility plans, landscaping plans, development plans, specifications,
drawings, marketing artwork, construction drawings, environmental reports, soil
tests, complete warranty book including all contractors and subcontractors and
other documentation concerning all or any part of the Property (all of which
shall be made available to Partnership at the Premises);
(ix) any warranties or guaranties which are in any way
applicable to the Property or any part thereof and which by their terms are
freely transferable to Partnership;
(x) to the extent in the possession or control of Contributor,
all keys for the Property, with identification of the lock to which each such
key relates (which shall be made available to Partnership at the Premises);
(xi) Contributor's affidavit stating, under penalty of
perjury, Contributor's U.S. taxpayer identification number and that Contributor
is not a foreign person within the meaning of Section 1445 of the Code;
(xii) a certificate specifying any changes occurring between
the Effective Date and the Closing Date with respect to the representations and
warranties made by Contributor and the General Partner in this Agreement;
(xiii) a duly executed Amendment to the Partnership Agreement
and signature page thereto admitting Contributor as an Additional Limited
Partner;
(xiv) an assignment or such other document(s) as are required
by Partnership or Lender to transfer all reserve accounts held by the Lender for
the benefit of the Contributor which are being assumed by the Partnership;
(xv) a Registration Rights Agreement executed by Contributor
and substantially in the form of Exhibit I, attached hereto;
(xvi) all other documents reasonably required by Partnership
in order to perfect the conveyance, transfer and assignment of the Property to
Partnership (including, without limitation, an assignment of Contributor's
rights or interests in general intangibles pertaining to the Premises, an
assignment of the currently effective Certificate of Occupancy for the Premises
if required by applicable law.
(b) Partnership also shall deliver or cause to be delivered to
Contributor at Closing:
(i) the Purchase Price;
(ii) such documents, instruments, or certificates as are
reasonably required by Title Insurer for Partnership to acquire the Property
pursuant to this Agreement;
(iii) a certificate specifying any changes occurring between
the Effective Date and the Closing Date with respect to the representations and
warranties made by Partnership in this Agreement;
(iv) a counterpart of an assignment of the Leases (together
with a transfer of all security deposits listed in the Rent Roll delivered by
Contributor pursuant to Section 12(a)(viii) above) and those Service Contracts
accepted by Partnership's assumption of the duties and obligations thereunder
arising on or after the Closing Date (the counterpart delivered pursuant to this
provision shall contain indemnification provisions providing that Contributor
shall indemnify Partnership against any claims arising under the Leases and/or
the Service Contracts accruing on or before the Closing Date and that
Partnership shall similarly indemnify Contributor against those claims accruing
after the Closing Date, said indemnification provisions being in form and
substance reasonably acceptable to Contributor, Partnership and their
attorneys);
(v) Lender's assumption agreement;
(vi) a duly executed Amendment to the Partnership Agreement
admitting Contributor as an Additional Limited Partner; and
(vii) a Registration Rights Agreement executed by the REIT and
substantially in the form of Exhibit I, attached hereto.
13. CLOSING COSTS.
(a) Partnership agrees to pay all closing costs, transfer taxes, and
fees associated with the transfer including Contributor's legal costs.
Contributor agrees to transfer all cash balances to Partnership after payment of
all prorated expenses as specified in Section 8.
14. BROKER AND BROKER'S COMMISSION.
(a) Partnership and Contributor each represent and warrant to the other
that, except as provided in Section 14(b) below, such party has not employed a
real estate broker, agent or consultant in connection with the transaction
contemplated hereby. Contributor hereby covenants and agrees to defend,
indemnify and hold harmless Partnership against and from any and all loss,
expense, liability, cost, claim, demand, damages, action, cause of action, and
suit arising out of or in any manner relating to the alleged employment or use
by Contributor of any real estate broker, agent or consultant in connection with
this transaction. Partnership hereby covenants and agrees to defend, indemnify,
and hold harmless Contributor against and from any and all loss, expense,
liability, cost, claim, demand, damages, action, cause of action and suit
arising out of or in any manner relating to the alleged employment or use by
Partnership of any real estate broker, agent or consultant in connection with
this transaction. The indemnities set forth in this Section 14(a) shall survive
the Closing.
(b) Contributor hereby represents that Contributor has engaged MFI
Realty, as its financial advisor (the "Financial Advisor") to assist in the
structuring and consummation of the transactions contemplated by this Agreement
in accordance with Contributor's separate agreement with Financial Advisor.
15. CASUALTY LOSS AND CONDEMNATION. If, prior to Closing, the Property or any
part thereof (a) shall be destroyed or materially damaged by fire or other
casualty (that is, damage or destruction which Partnership reasonably believes
could be in excess of $50,000.00) or (b) shall be the subject of a condemnation
proceeding and actual notice of such proceeding shall have been served on
Contributor, Partnership shall have the option either to terminate this
Agreement or to consummate the transaction contemplated by this Agreement
notwithstanding such condemnation, destruction or material damage. Within two
(2) days of any casualty to or destruction of all or any part of the Property or
Contributor's receipt of actual notice of a condemnation proceeding affecting
the Property, Contributor shall deliver notice thereof to Partnership. After its
receipt of such notice, Partnership shall have sixty (60) days within which to
deliver notice to Contributor stating which of the options available to
Partnership pursuant to the terms of this Section 15 Partnership has elected to
pursue. Notwithstanding anything to the contrary set forth in this Agreement, in
the event the Closing Date is scheduled during this sixty (60) day decision
period, then, in such event, the Closing Date automatically shall be extended to
allow Partnership the full benefit of said sixty (60) day decision period. If
the Closing Date is so extended and Partnership elects to consummate the
transaction contemplated by this Agreement, then, the Closing shall occur on the
fifth (5th) business day following Contributor's receipt of Partnership's notice
stating that Partnership has elected to consummate the transaction contemplated
by this Agreement, or at such earlier date as Contributor and Partnership may
mutually agree in writing. Partnership's failure to deliver notice to
Contributor as required in this Section 15 shall be deemed an election by
Partnership to terminate this Agreement. If Partnership elects to consummate the
transaction contemplated by this Agreement, Partnership shall be entitled to
receive the condemnation proceeds or take part in the settlement of the loss
under all policies of insurance applicable to the destruction or damage and
receive the proceeds of insurance applicable thereto, and Contributor shall, at
Closing and thereafter, execute and deliver to Partnership all required proofs
of loss, assignments of claims and other similar items. If Partnership elects to
terminate this Agreement, the Earnest Money shall be returned to Partnership by
the Escrow Agent, less One Hundred Dollars ($100.00), which Escrow Agent shall
pay to Contributor as due consideration for this Agreement, at which time this
Agreement shall terminate and neither party shall have any further rights or
obligations under this Agreement, except as specifically set forth herein. If
there is any other damage or, destruction (that is, damage or destruction which
Partnership reasonably believes could be $50,000.00 or less), to the Property or
any part thereof, Contributor, at its election, shall either assign all
insurance claims pertaining to such damage or destruction to Partnership by
executing and delivering to Partnership at Closing and thereafter all required
proofs of loss, assignments of claims and other similar items, or allow
Partnership a credit against the Purchase Price in an amount reasonably
acceptable to both Contributor and Partnership equal to the reasonably estimated
cost of repair. If Partnership elects to take, or Contributor elects to make, an
assignment of all insurance claims as provided for in this Section 15,
Partnership shall receive at Closing a credit against the Purchase Price in an
amount equal to any deductible(s) and uninsured amounts applicable thereto.
16. OPERATION OF PROPERTY THROUGH CLOSING. Contributor hereby agrees that from
the Effective Date through the Closing Date:
(a) Except as otherwise provided in this Section 16, Contributor shall
manage and operate the Property in accordance with sound and prudent business
practices in the same manner as Contributor has heretofore operated the
Property, and keep the Premises and the tangible Personal Property in good
condition and repair, ordinary wear and tear excepted. Contributor will not make
any change in its normal and customary billing practices, and shall continue to
apply rents and hold security deposits in the ordinary course of business and
pursuant to the applicable provisions of the Leases.
(b) Except with respect to the Lender Loan and without the prior
written consent of Partnership, Contributor shall not sell, mortgage, pledge,
hypothecate or otherwise transfer or dispose of all or any part of the Property
or any interest therein, nor shall Contributor initiate, consent to, approve or
otherwise take any action with respect to zoning or any other governmental rules
or regulations presently applicable to all or any part of the Property.
(c) Without the prior written consent of Partnership, Contributor shall
not terminate, modify, extend, amend or renew any Service Contract or enter into
any new Service Contract, except Service Contracts entered into or renewed after
the Effective Date which will be terminated or otherwise canceled on or before
the Closing Date. Additionally, Contributor shall not terminate, modify, extend,
amend or renew any Lease from and after the date hereof except in the normal
course of Contributor's business.
(d) Any new Lease or Service Contract entered into after the Effective
Date hereof shall be subject to the covenants, representations and warranties
set forth in this Agreement with respect to Leases and Service Contracts.
(e) Contributor will continue to operate and maintain the Premises in
the same manner in which Contributor has heretofore operated and maintained the
Premises and in accordance with the standard operating practices and procedures
that Contributor has heretofore followed in its operation of the Premises.
Additionally, Contributor will continue to rent all unoccupied rental units at
the Premises in the normal course of its business and in accordance with the
leasing requirements established by the Lender Loan, and will not deviate from
those requirements without first obtaining Partnership's written consent, such
consent not to be unreasonably withheld. Moreover, all prospective tenants for
the unoccupied rental units shall meet the standard credit qualifications for
prospective tenants which Contributor has heretofore utilized. Any unoccupied
rental unit vacated more than three (3) days prior to Closing will be put in a
"rent-ready" condition by Contributor, and, as of Closing, all management
contracts pertaining to the Property will be terminated.
(f) Contributor shall comply in all material respects with all federal,
state, municipal and other governmental laws, ordinances, requirements, rules,
regulations, notices and orders, and all agreements, covenants, conditions,
easements and restrictions relating to the Property, including, without
limitation, any such requirements, rules, regulations, notices or orders issued
or imposed after the Effective Date, provided that, if compliance by Contributor
requires the aggregate expenditure of an amount in excess of Three Hundred
Thousand Dollars ($300,000.00), Contributor shall have the option of terminating
this Agreement, in which event Partnership shall be entitled to a return of the
Earnest Money, less One Hundred Dollars ($100.00), which Escrow Agent
shall pay to Contributor as due consideration for this Agreement, at
which time this Agreement shall terminate and neither party shall have any
rights or obligations under this Agreement, except as otherwise specifically
set forth herein.
(g) Contributor shall promptly give written notice to the Partnership
of the occurrence of any event which materially adversely affects the truth or
accuracy of any representation or warranty made or to be made by Contributor
and/or the General Partner under or pursuant to this Agreement.
(h) Partnership shall have such access to the Property as is reasonably
necessary during normal business hours for it to inspect the Property to assure
that Contributor is complying with the requirements of this Section 16.
(i) Contributor shall maintain in full force and effect its presently
existing insurance coverages.
17. CONDITIONS PRECEDENT.
(a) The obligations of Partnership under this Agreement are contingent
upon the occurrence of the following, the failure of which shall, at the
election of Partnership, acting in its sole and absolute discretion, cause this
Agreement to terminate:
(i) Contributor and the General Partner shall have performed all of their
obligations hereunder;
(ii) Contributor and/or the General Partner shall not be in default
hereunder;
(iii) The concurrent closing of the assumption of the Lender Loan by
Partnership, on terms acceptable to Partnership;
(iv) Contributor and/or the General Partner shall have made all deliveries
required hereunder; and
(v) There shall have been no material adverse change to any of
Contributor's and/or the General Partner's representations and warranties as of
Closing:
(b) The obligations of Contributor under this Agreement are contingent
upon the occurrence of the following, the failure of which shall, at the
election of Contributor, acting in its sole and absolute discretion, cause this
Agreement to terminate:
(i) Partnership shall have performed all of its obligations
hereunder includinng, without limitation, obtaining the Limited Partners'
Consent;
(ii) Partnership shall not be in default hereunder;
(iii) Partnership shall have made all deliveries required
hereunder;
(iv) There shall have been no material adverse change to any
of Partnership's representations and warranties as of Closing; and
(v) The concurrent closing of the assumption of the Lender
Loan by Partnership on terms acceptable to Contributor.
18. DEFAULT.
(a) Contributor is in default under this Agreement if any one or more
of the following shall occur:
(i) Contributor and/or the General Partner fail to comply with
or perform in any material respect any covenant, agreement, or obligation to be
complied with or performed by Contributor and/or the General Partner, as the
case may be, hereunder within the time limits and in the manner required by this
Agreement, and such noncompliance or nonperformance shall continue unremedied
for a period of three (3) days from Contributor's receipt of written notice
thereof from Partnership;
(ii) Any representation or warranty by Contributor and/or the
General Partner set out herein shall prove to be false or misleading in any
respect; or
(iii) If Contributor and/or the General Partner fails to
consummate this Agreement for any reason, except Partnership's default hereunder
or the termination of this Agreement by Partnership or Contributor pursuant to a
right granted under the terms and provisions hereof, and such failure shall
continue unremedied for a period of three (3) days from Contributor's receipt of
written notice thereof from Partnership.
(b) Partnership is in default under this Agreement if any one or more
of the following shall occur:
(i) Partnership fails to comply with or perform in any
material respect any covenant, agreement, or obligation to be complied with or
performed by Partnership hereunder within the time limits and in the manner
required by this Agreement, and such noncompliance or nonperformance shall
continue unremedied for a period of three (3) days from Partnership's receipt of
written notice thereof from Contributor;
(ii) Any representation or warranty by Partnership set out
herein shall prove to be false or misleading in any respect; or
(iii) If Partnership fails to consummate this Agreement for
any reason except Contributor's default hereunder or the termination of this
Agreement by Partnership or Contributor pursuant to a right granted under the
terms and provisions hereof, and such failure shall continue unremedied for a
period of three (3) days from Partnership's receipt of written notice thereof.
19. REMEDIES.
(a) THE PARTIES HAVE DISCUSSED AND NEGOTIATED IN GOOD FAITH UPON THE
QUESTION OF DAMAGES TO BE SUFFERED BY CONTRIBUTOR IN THE EVENT PARTNERSHIP IS IN
DEFAULT UNDER THIS AGREEMENT, AND THEY HEREBY AGREE THAT LIQUIDATED DAMAGES IN
THE AMOUNT OF THE EARNEST MONEY PLUS REASONABLE ATTORNEYS' FEES AND EXPENSES
INCURRED BY CONTRIBUTOR IN CONNECTION HEREWITH ARE AND WILL BE REASONABLE. IN
THE EVENT OF SUCH DEFAULT, CONTRIBUTOR SHALL BE ENTITLED TO AND SHALL RECEIVE
SUCH LIQUIDATED DAMAGES, AND PARTNERSHIP SHALL HAVE NO ADDITIONAL LIABILITY
WHATSOEVER.
(b) IF CONTRIBUTOR IS IN DEFAULT UNDER THIS AGREEMENT, PARTNERSHIP
SHALL HAVE THE RIGHT (I) TO TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO BOTH
CONTRIBUTOR AND ESCROW AGENT ON OR BEFORE THE CLOSING DATE AND TO RECEIVE A
REFUND OF THE EARNEST MONEY AND TO RECOVER FROM CONTRIBUTOR LIQUIDATED DAMAGES
EQUAL TO FIFTY THOUSAND DOLLARS ($50,000.00) PLUS REASONABLE ATTORNEYS' FEES AND
EXPENSES INCURRED BY PARTNERSHIP IN CONNECTION HEREWITH, OR (II) TO SEEK THE
REMEDY OR RECOURSE OF SPECIFIC PERFORMANCE.
20. BINDING EFFECT.
(a) This Agreement constitutes the entire agreement between Contributor
and Partnership with respect to the Property and shall not be modified or
amended except in a written document signed by Contributor and Partnership. Any
prior agreement or understanding between Contributor and Partnership concerning
the Property is hereby rendered null and void.
(b) This Agreement shall be binding upon and enforceable against, and
shall inure to the benefit of, Partnership and Contributor and their respective
heirs, legal representatives, successors and assigns.
21. TIME OF THE ESSENCE. Time is of the essence of this Agreement. In the
computation of any period of time provided for in this Agreement or by law, the
day of the act or event from which the period of time runs shall be excluded,
and the last day of such period shall be included, unless it is a Saturday,
Sunday, or legal holiday, in which case the period shall be deemed to run until
the end of the next day which is not a Saturday, Sunday, or legal holiday.
22. NOTICE. All notices, requests, demands or other communications required or
permitted under this Agreement shall be in writing and delivered personally or
by certified mail, return receipt requested, postage prepaid, by telecopy or
other facsimile transmission, (with hard copy to follow) or by recognized
overnight courier (such as Federal Express), addressed as follows:
(a) If to Contributor: Windrush Partners, Ltd.
c/o Hallmark Group Real Estate Services Corp.
3111 Paces Mill Road
Suite A-200
Atlanta, Georgia 30339
Attention: Martin H. Petersen
Telecopy: (770) 850-0655
With a copy to: Darla Jaben Mesnick
Attorney at Law
445 Spalding Drive
Atlanta, Georgia 30328
Telecopy: (770) 668-1653
(b) If to Partnership: Vinings Investment
Properties,L.P. c/o Vinings Investment
Properties Trust 3111 Paces Mill Road, Suite
A-200 Atlanta, GA 30339 Attention: Peter D.
Anzo, President Telecopy: (770) 850-0655
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Gilbert G. Menna, P.C.
Telecopy: (617) 523-1231
(c) If to Escrow Agent: Specialized Title Services
7000 Peachtree Dunwoody Road, N.E.
Suite 300, Building #2
Atlanta, Georgia 30328-1634
Attention: Amy Lawson
Telecopy: (404) 303-6305
All notices given in accordance with the terms hereof shall be deemed received
forty-eight (48) hours after posting, when delivered personally, or when
transmitted via telecopy or other facsimile transmission. Either party hereto
may change the address or telecopy number for receiving notices, requests,
demands or other communication by notice sent in accordance with the terms of
this Section.
23. CAPTIONS. The captions and headings used in this Agreement are for
convenience only and do not in any way restrict, modify or amplify the terms of
this Agreement.
24. EXHIBITS. Each and every exhibit referred to or otherwise mentioned in this
Agreement is attached to this Agreement and is and shall be construed to be made
a part of this Agreement by such reference or other mention at each point at
which such reference or other mention occurs, in the same manner and with the
same effect as if each exhibit were set forth in full and at length every time
it is referred to or otherwise mentioned.
25. DEFINED TERMS. Capitalized terms used in this Agreement shall have the
meaning ascribed to them at the point where first defined, irrespective of where
their use occurs, with the same effect as if the definitions of such terms were
set forth in full and at length every time such terms are used.
26. PRONOUNS. Wherever appropriate in this Agreement, personal pronouns shall be
deemed to include the other genders and the singular to include the plural.
27. SEVERABILITY. If any term, covenant, condition of provision of this
Agreement, or the application thereof to any person or circumstance, shall ever
be held to be invalid or unenforceable, then in each such event, the remainder
of this Agreement or the application of such term, covenant, condition or
provision to any other person or any other circumstance (other than those as to
which it shall be invalid or unenforceable) shall not be thereby affected, and
each term, covenant, condition and provision hereof shall remain valid and
enforceable to the fullest extent permitted by law.
28. APPLICABLE LAW. This Agreement shall be governed by, construed under and
interpreted and enforced in accordance with the laws of the State in which the
Premises is located.
29. COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed an original and all such counterparts together shall
constitute one and the same instrument.
30. JUDICIAL INTERPRETATION. Should any provision of this Agreement require
judicial interpretation, it is agreed that the court interpreting or construing
the same shall not apply a presumption that the terms hereof shall be more
strictly construed against one party by reason of the rule of construction that
a document is to be construed more strictly against the party who itself or
through its agent prepared the same, it being agreed that the agents of all
parties have participated in the preparation hereof.
31. ATTORNEYS' FEES. If either party hereto employs an attorney to enforce or
defend its rights hereunder, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs.
32. TAX MATTERS.
(a) Contributor and each of the General Partner shall provide
Partnership with all information with respect to the Property necessary to
enable Partnership to file all returns required for federal and state income tax
purposes, as determined in the reasonable discretion of Arthur Anderson LLP,
independent public accountants.
(b) Contributor and the General Partner agree to report the
transactions contemplated herein for federal and state income tax purposes, and
in any other filing or return required by law, consistently with the manner such
transactions are reported by Partnership for federal income tax purposes.
(c) Notwithstanding anything to the contrary herein, it is the intent
of Partnership and Contributor that the contribution contemplated by this
Agreement be treated and reported for federal income tax purposes as a
transaction governed by Section 721 of the Code and it is the desire of
Contributor that such contribution not subject Contributor to income or gain
under Section 731 of the Code as a result of a deemed distribution of money to
Contributor by Partnership pursuant to Section 752(b) of the Code in excess of
Contributor's adjusted tax basis in Contributor's interest in Partnership.
Accordingly, as general partner of Partnership, shall:
(i) for a period of three (3) years from the Closing Date,
cause Partnership to maintain an amount of non-recourse debt secured by the
Property at least equal to Six Million Three Hundred Thousand Dollars
($6,300,000.00) (less any regularly or other scheduled principal payments on
such indebtedness);
(ii) subsequent to the three (3) year period referred to in
Section 32(c)(i) above, permit Contributor or the General Partner to enter into
a guarantee or otherwise become contractually obligated to bear the economic
risk of loss within the meaning of Treasury Regulation Section 1.752-2 with
respect to a portion of indebtedness of the Partnership, which amount shall not
exceed Six Million Three Hundred Thousand Dollars ($6,300,000.00); provided,
however, any such guarantee or other contractual obligation shall not be entered
into if such guarantee or other contractual obligation would cause any other
partner to recognize income pursuant to Section 752 of the Code if such
guarantee or other contractual obligation were entered into as of the date of
the Closing, and further provided that nothing in this Section 32(c)(ii) shall
preclude any other partner from entering into any guarantee or other contractual
obligation with regard to any indebtedness to Partnership; and
(iii) to the extent consistent with and subject to the REIT's
fiduciary and statutory obligation to all partners (both present and future) in
Partnership, and, in all events to the extent consistent with the best interests
of all such partners considered as a whole, and all of the REIT's stockholders,
for a period of three (3) years following the Closing Date, use its good faith
efforts to cause any voluntary disposition of the Property to be one hundred
percent (100%) tax deferred under the Code.
(d) Notwithstanding anything to the contrary in the Partnership
Agreement, Partnership agrees to use the "traditional allocation method," as
described in Treasury Regulation Section 1.704-3(a), with respect to the
Property.
33. SURVIVAL. No matter under this Agreement survives Closing except for those
matters for which express provision is made.
34. EFFECTIVE DATE. For purposes hereof, the term "Effective Date" shall mean
the date on which Partnership receives an original counterpart of this Agreement
which has been fully executed by each of Contributor and the General Partner.
IN WITNESS WHEREOF, Partnership and Contributor have caused this
Agreement to be executed and delivered as of the Effective Date.
PARTNERSHIP:
Date: April 1, 1997 VININGS INVESTMENT PROPERTIES, L.P.,
a Delaware Limited Partnership
By: VININGS INVESTMENT PROPERTIES TRUST,
a Massachusetts business trust, Its Sole
General Partner
By: /s/ Stephanie A. Reed
-------------------------
Stephanie A. Reed
Vice President
CONTRIBUTOR:
Date: April 1, 1997 WINDRUSH PARTNERS, LTD.
a Georgia Limited Partnership
By: Hallmark Group Real Estate
Services Corp., General Partner
By: /s/ Peter D. Anzo
---------------------
Peter D. Anzo
CEO
<PAGE>
JOINDER OF VININGS INVESTMENT PROPERTIES TRUST
Vinings Investment Properties Trust, Massachusetts business trust,
joins in the execution of this Agreement in order to agree to be bound by the
terms and provisions of Section 32(c)(i)-(iii) of this Agreement.
Date: April 1, 1997 VININGS INVESTMENT PROPERTIES TRUST,
a Massachusetts business trust
By:/s/ Stephanie A. Reed
------------------------
Stephanie A. Reed
Vice President
AMENDMENT TO AGREEMENT TO CONTRIBUTE
THIS AMENDMENT TO THE AGREEMENT TO CONTRIBUTE is made and entered into as
of the 11th day of August , 1997 by and between VININGS INVESTMENT PROPERTIES,
L.P., a Delaware Limited Partnership (the "Partnership") and its assignees or
designees, and WINDRUSH PARTNERS, LTD., a Georgia Partnership ("Contributor");
WITNESSETH:
WHEREAS, the Partnership and the Contributor have entered into that
certain Agreement to Contribute dated April 1, 1997 whereby Contributor desires
to contribute and convey to the Partnership and Partnership desires to accept
certain real estate and personal property in return for an ownership interest in
Partnership and admission as a limited partner in Partnership (the "Agreement")
and;
WHEREAS, the Partnership desires to accept and take title to the Property
in the name of Vinings Communities, L.P., a Delaware Limited Partnership of
which the Partnership is a 99% limited partner and Vinings Investment Properties
Trust, the Partnership's general partner, is the 1% general partner and;
WHEREAS, the Contributor desires to have the Partnership assume the Partner
Advances and reduce the number of Partnership Units to be issued by the
Partnership and received by the Contributor and;
WHEREAS, both the Partnership and the Contributor desire to amend the
Agreement as set forth herein;
NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Partnership and Contributor hereby agree as follows:
1. The first paragraph of Section 1 is hereby amended to read as
follows:
CONVEYANCE OF PROPERTY. Subject to majority approval of the Limited
Partners of Contributor ("Limited Partners' Consent"), which Contributor's
General Partner will use its best efforts to obtain, and in accordance with all
of the terms and conditions hereinafter set out, Contributor agrees to
contribute to Vinings Communities, L.P., a Delaware Limited Partnership and
subsidiary owned 99% by Partnership ("Communities"), and Partnership agrees to
cause Communities to accept from Contributor, the following described property
(all of which is herein collectively referred to as the "Property"):
2. All references in the Agreement to "Partnership" will include
Vinings Investments Properties, L.P. and/or Vinings Communities, L.P. as
appropriate.
3. Paragraphs (i) and (ii) of Section 3.(a) of the Agreement are hereby
deleted in their entirety and the following paragraphs are substituted in lieu
thereof:
(i) The assumption by Partnership of Contributor's
indebtedness (including accrued interest) to Reilly Mortgage Group, Inc.
("Lender") to which the Property is subject and Contributor's indebtedness to
the General Partner for advances in the amount of $91,078 (the "Partner
Advances").
(ii) The admission of Contributor as an Additional Limited
Partner (as defined in that certain Agreement of Limited Partnership of Vinings
Investment Properties, L.P., dated as of June 11, 1996, (the "Partnership
Agreement")) in Partnership and the issuance by Partnership to Contributor of
Partnership Units (as defined in the Partnership Agreement) and a corresponding
Partnership Interest (as defined in the Partnership Agreement). The number of
Partnership Units to be issued to Contributor pursuant to this Section 3 shall
be 224,330 units. These Partnership Units will be distributed to the Limited
Partners in accordance with the Amended and Restated Certificate and Agreement
of Limited Partnership of Windrush Partners, LTD.
4. Paragraph 3.(b) is deleted in its entirety.
5. Paragraph 3.(c) is deleted in its entirety.
6. Exhibit G is deleted in its entirety.
7. Except as specifically modified and amended hereby, the Agreement to
Contribute shall continue in full force and effect without change or
modification whatsoever.
IN WITNESS WHEREOF, the Partnership and Contributor have sworn to and
executed this Amended Agreement to Contribute under seal as of the day and year
first stated above.
PARTNERSHIP:
Date: August 11, 1997 VININGS INVESTMENT PROPERTIES, L.P.,
a Delaware Limited Partnership
By: VININGS INVESTMENT PROPERTIES TRUST,
a Massachusetts Business Trust,
Its Sole General Partner
By: /s/ Stephanie A. Reed
-------------------------
Stephanie A. Reed
Vice President
CONTRIBUTOR:
Date: August 12, 1997 WINDRUSH PARTNERS, LTD.,
a Georgia Limited Partnership
By: Hallmark Group Real Estate Services Corp.
General Partner
By: /s/ Peter D. Anzo
---------------------
Peter D. Anzo
CEO
SECOND AMENDMENT TO AGREEMENT TO CONTRIBUTE
THIS SECOND AMENDMENT, entered into as of the 30 day of October, 1997, by
and between VININGS INVESTMENT PROPERTIES, L.P., a Delaware limited partnership
(hereinafter referred to as the "Partnership"), and WINDRUSH PARTNERS, LTD., a
Georgia limited partnership (hereinafter referred to as "Contributor");
W I T N E S S E T H:
WHEREAS, the Partnership and the Contributor have entered into that certain
Agreement to Contribute, dated April 1, 1997, as amended by that certain
Amendment to Agreement to Contribute, dated August 11, 1997 (hereinafter
referred to as the "Agreement"); and
WHEREAS, the Partnership and the Contributor desire to amend the Agreement
as hereinbelow set forth;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100ths
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partnership and the
Contributor agree as follows:
1. Section 4 (e) of the Agreement is hereby deleted in its entirety and the
following is hereby inserted in lieu thereof:
(e) Notwithstanding anything to the contrary set forth in this
Agreement, in the event this Agreement has not been terminated in
accordance with the terms of Section 4 (a) above and provided that, as of
the expiration of the Inspection Period, all issues relating in any way to
Partnership's assumption of the Lender Loan have not been resolved and/or
satisfied, as determined by Partnership in its sole and absolute
discretion, then the Inspection Period shall be automatically extended
until thirty (30) days from and after all issues related to Partnership's
assumption of the Lender Loan have been so satisfied; provided, always,
however, that the Inspection Period shall not extend beyond December 15,
1997, unless the parties hereto expressly agree in writing to the contrary.
2. The Partnership and the Contributor hereby acknowledge and agree that
all issues related to the Partnership's assumption of the Lender Loan were
satisfied on November 13, 1997, and the Inspection Period expires on December
15, 1997.
3. Section 4(d) of the Agreement is hereby amended to delete the term
"Effective Date" in the fourth line thereof, and insert the word "Closing" in
lieu thereof.
4. Section 9(a)(xli) is hereby deleted in its entirety and the following is
hereby inserted in lieu thereof: "(xli) Contributor is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act because it has
more than $5,000,000.00 in total assets."
5. Section 22(a) is hereby amended by deleting the name and address for
"Darla Jaben Mesnick" and inserting the following in lieu thereof:
Scott C. Withrow, Esq.
Withrow, McQuade & Olsen
3379 Peachtree Road, N.E.
Suite 970
Atlanta, Georgia 30326
Telecopy: (404) 814-0009
6. Section 22(b) is hereby amended by inserting the following after the
address for Goodwin, Procter & Hoar LLP:
and to: Darla Jaben Mesnick, Esq.
445 Spalding Drive
Atlanta, Georgia 30328
Telecopy: (770) 668-1653
7. All capitalized terms used herein, not otherwise defined, shall have the
meanings ascribed thereto in the Agreement.
8. All other terms and provisions of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the Partnership and the Contributor have duly signed
and sealed this Second Amendment, effective as of the day and year first above
written.
CONTRIBUTOR:
WINDRUSH PARTNERS, LTD.,
a Georgia limited partnership
By:Hallmark Group Real Estate Services Corp.
a Georgia corporation, as general partner
By:/s/ Peter D. Anzo
--------------------
Peter D. Anzo
Title: CEO
[CORPORATE SEAL]
PARTNERSHIP:
Vinings Investment Properties, L.P.,
a Delaware limited partnership
By: Vinings Investment Properties Trust,
a Massachusetts business trust, as general
partner
By:/s/ Stephanie A. Reed
------------------------
Stephanie A. Reed
Title: Vice President
