UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 25, 1997
ASR INVESTMENTS CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 1-9646 86-0587826
--------------- --------------------- ---------------------
(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)
335 North Wilmot, Suite 250, Tucson, Arizona 85711
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(Address of principal executive office) (Zip Code)
(520) 748-2111
Registrant's telephone number, including area code:
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Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ASR INVESTMENTS CORPORATION
Current Report on Form 8-K
ITEM 5. OTHER EVENTS.
ASR Investments Corporation (the "Company") has entered into agreements
to acquire, subject to the satisfaction and waiver of certain terms and
conditions, from independent third parties three apartment communities ("MTP
Properties") containing a total of 900 units in the Dallas, Texas area. The
sellers would contribute the properties to Hertage Communities L.P. of which the
Company is the general partner. The Company would (i) assume or refinance
mortgage debt totalling $18,035,000, (ii) issue 374,581 shares of the Company's
common stock, (iii) issue limited partnership units in Heritage Communities L.P.
that are convertible into 27,721 shares of the Company's common stock after one
year, and (iv) pay $2,400,000 in cash to the sellers. Below is a description of
the three apartment communities.
Gentry Place. The Gentry Place Apartments, located in Grand Prairie,
Texas (a suburb of Dallas, Texas), are comprised of 360 units built in 1984. The
company anticipates completing the acquisition of the property by September,
1997. As of June 30, 1997, the Gentry Place Apartments had an average monthly
rent of $568, or $.62 a square foot per month, and an average occupancy rate of
96%. The property's main competition for tenants comes from existing multifamily
apartment projects in the surrounding Grand Prairie area of west Dallas. The
Company plans to substantially improve the property by investing approximately
$600,000 in improvements. These improvements include replacement of all roofs,
replacing approximately 50% of the flooring, complete repaint of the property,
installation of access gates and perimeter fencing and installation of ice
makers in 100% of the units.
Park on Preston The Park on Preston Apartments, located in Dallas,
Texas, are comprised of 286 units built in 1983. The Company anticipates
completing the acquisition of the property by September, 1997. As of June 30,
1997, the Park on Preston Apartments had an average monthly rent of $521, or
$.82 a square foot per month, and an average occupancy rate of 95%. The
property's main competition for tenants comes from existing multifamily
apartment projects in the surrounding Plano area north of Dallas. The Company
plans to substantially improve the property by investing approximately $600,000
in improvements. These improvements includes replacing approximately 50% of the
flooring, complete repaint of the property, washer and dryer installation in
approximately 50% of the units, and installation of ice makers in 70% of the
units.
Smith Summit. The Smith Summit Apartments, located in Mesquite, Texas
(a suburb of Dallas, Texas), are comprised of 254 units built in 1983. The
Company anticipates completing the acquisition of the property by September,
1997. As of June 30, 1997, the Smith Summit Apartments had an average monthly
rent of $605, or $.63 a square foot per month, and an average occupancy rate of
96%. The property's main competition for tenants comes from existing multifamily
apartment projects in the surrounding Mesquite area of east Dallas. The Company
plans to substantially improve the property by investing approximately $250,000
in improvements. These improvements include replacing approximately 50% of the
flooring, exterior paint touchup of the property, and installation of ice makers
in 100% of the units.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION, AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF PROPERTIES ACQUIRED
Independent Auditors Report
Combined Historical Summary of Revenues and Certain Operating
Expenses of MTP Properties for the year ended December 31,
1996 and the six months ended June 30, 1997 (unaudited)
Notes to Combined Historical Summary of Revenues and Certain
Operating Expenses of MTP Properties
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
ASR Investments Corporation:
We have audited the accompanying combined historical summary of revenues and
certain operating expenses (the "Summary") of the MTP Properties (as described
in Note 2), for the year ended December 31, 1996. The Summary is the
responsiblity of the management of the MTP Properties. Our responsibility is to
express an opinion on the Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Summary. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall Summary presentation. We believe that our audit provides
a reasonable basis for our opinion.
The accompanying Summary was prepared for the purpose of complying with Rule
3-14 of Regulation S-X of the Securities and Exchange Commission for
incorporation in ASR Investments Corporation's Registration Statement on Form
S-3 as described in Note 1 to the Summary and is not intended to be a complete
presentation of the MTP Properties' revenues and expenses.
In our opinion, such Summary presents fairly, in all material respects, the
combined revenues and certain operating expenses, as defined above, of the MTP
Properties for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Tucson, Arizona
August 27, 1997
<PAGE>
MTP PROPERTIES
COMBINED HISTORICAL SUMMARY OF REVENUES AND
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
1996 1997
------- -------
(Unaudited)
Rental income ..................................... $ 5,521 $ 2,833
Other apartment operating income .................. 154 86
------- -------
Total revenue ..................................... 5,675 2,919
------- -------
Certain Operating Expenses
Operating and maintenance expenses .............. 2,007 1,029
Real estate taxes and insurance ................. 736 391
------- -------
Total certain operating expenses .................. 2,743 1,420
------- -------
Excess of revenue over certain operating expenses . $ 2,932 $ 1,499
======= =======
See accompanying notes to the historical summary of
revenues and certain operating expenses.
<PAGE>
MTP PROPERTIES
NOTES TO COMBINED HISTORICAL SUMMARY OF REVENUES
AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
1. BASIS OF PRESENTATION
The combined historical summary of revenues and certain operating expenses
(the "Summary") has been prepared in accordance with Rule 3-14 of Regulation S-X
of the Securities and Exchange Commission ("Rule 3-14"). The Summary reflects
the historical revenues and certain operating expenses of the three apartment
communities as listed in Note 2 (the "MTP Properties"). ASR Investments
Corporation ("ASR") has entered into agreements to acquire the MTP Properties
from unaffiliated third parties. In accordance with Rule 3-14, the Summary
includes certain operating and maintenance costs, real estate taxes and
insurance expenses, but excludes mortgage interest, depreciation and corporate
expenses as they are dependent upon a particular owner, purchase price or other
financial arrangement. Accordingly, the expenses reflected in the Summary may
not be comparable to the expenses to be incurred by ASR in the operations of the
properties. ASR is not aware of any material factors relating to the Winton
Properties other than those set forth herein that would cause the Summary not to
be indicative of the future operating results of the properties.
In the opinion of management, the unaudited combined historical summary of
revenues and certain operating expenses for the six months ended June 30, 1997
includes all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation for such period. These interim operating
results are not necessarily indicative of the results that may be expected for
the entire year.
The Summary has been prepared on the accrual method of accounting. The
apartment communities have operating leases with terms generally of one year or
less. Rental income is recognized as earned.
2. MTP PROPERTIES
Below is certain information relating to the MTP Properties:
PROPERTY NAME LOCATION NO. OF UNITS
- ------------------------------- ------------------- --------------
Gentry Place........................... Grand Praire, Texas 360
Park on Preson......................... Dallas, Texas 286
Smith Summit........................... Mesquite, Texas 254
3. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect some of the amounts reported in the consolidated financial statements.
Actual results could differ from those estimates.
<PAGE>
(b) PRO FORMA FINANCIAL STATEMENTS
Introduction
Unaudited Pro forma Financial Statements as of June 30, 1997
and for the year ended December 31, 1996 and the six months
ended June 30, 1997
Notes to Unaudited Pro Forma Combined Financial Statements
<PAGE>
Unaudited Pro Forma Combined Financial Statements
The following unaudited pro forma combined income statements give effect to
(a) the following transactions (collectively the "Previously Reported
Transactions") that occurred during the period from April 1, 1997 to May 30,
1997: (i) the acquisition of the Winton Properties, (ii) the acquisition of
Winton & Associates, (iii) the acquisition of Pima Mortgage Limited Partnership
and Pima Realty Advisors, Inc. (the "Pima Entities"), (iv) the acquisition of
London Park Apartments, (v) the acquisition of the remaining 85% interest in La
Privada Apartments L.L.C. and the related sale of the interests in the other
five joint ventures, (vi) the acquisitions of Ivystone/Woodsedge Apartments and
The Court Apartments, and (vii) the issuance of 187,847 shares of Common Stock
for cash in April and May; and (b) the pending acquisition of three apartment
communities (the "MTP Properties") from a group of independent third parties.
The pro forma combined income statements for the year ended December 31, 1996
and the six months ended June 30, 1997 have been prepared as if the Previously
Reported Transactions and the acquisition of the MTP Properties had been
consummated as of January 1, 1996. The pro forma combined balance sheet as of
June 30, 1997 gives effect to the acquisition of the MTP Properties and has been
prepared as if the acquisition had occurred on June 30, 1997. Adjustments
necessary to reflect these assumptions and to restate the historical combined
financial statements are presented in the Pro Forma Adjustments columns and are
described in the Notes thereto.
The historical financial information for the Company is derived from the
audited consolidated financial statements of the Company as of and for the year
ended December 31, 1996 and the unaudited consolidated financial statements as
of and for the six months ended June 30, 1997. The historical financial
information for the properties and entities acquired is derived from unaudited
financial statements of the properties or entities, as adjusted to reflect
certain preacquisition transactions.
The unaudited pro forma combined financial statements are not necessarily
indicative of what the actual financial position would have been at June 30,
1997 or the actual results of operations for the year ended December 31, 1996
and the six months ended June 30, 1997 had the acquisitions occurred on the
assumed dates described above, nor does it purport to present the future
financial position or results of operations of the Company.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Proforma Combined Balance Sheet As of June 30, 1997 08/27/97
(In thousands except for per share data)
ASR MTP Pro Forma Pro Forma
Historical Properties Adjustments Combined
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Real Estate Investments
Properties, net of depreciation $ 188,487 $ 25,792 $ 3,604 (A) $ 217,883
Construction in progress 20,368 20,368
Land held for investment 925 925
Other real estate 565 565
--------- --------- --------- ---------
Total real estate investments 210,345 25,792 3,604 239,741
Restricted cash and deferred loan cost 7,770 641 300 (B) 8,711
Cash 17,701 (3,391) (C) 14,310
Goodwill 1,391 1,391
Other assets 1,953 1,953
--------- --------- --------- ---------
$ 239,160 $ 26,433 $ 513 $ 266,106
========= ========= ========= =========
LIABILITIES & EQUITY
Liabilities
Real estate loans $ 128,340 $ 18,035 $ 146,375
Construction loan payable 12,761 12,761
Securities deposits and deferred rental income 1,730 1,730
Other liabilities 7,026 7,026
--------- --------- ---------
Total liabilities 149,857 18,035 167,892
Stockholders' Equity 89,303 8,398 $ 513 (D) 98,214
--------- --------- --------- ---------
Total liabilities and
Stockholders' Equity $ 239,160 $ 26,433 $ 513 $ 266,106
========= ========= ========= =========
Outstanding common shares and LP Units 5,381 5,781
========= =========
Book value per share (M) $ 16.60 $ 16.99
========= =========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
<PAGE>
Unaudited Pro Forma Combined Income Statement for Year Ended December 31, 1996
(In thousands except for per share data)
<TABLE>
<CAPTION>
Previously
ASR Reported MTP Pro Forma Pro Forma
Historical Transactions Properties Adjustments Combined
---------- ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Operations
Rental income $ 14,581 $ 21,169 $ 5,675 $ 41,425
Property management fees 1,859 ($ 1,103) (E) 756
Commission & other income 34 34
-------- -------- ------- ------- ---------
Total real estate income 14,581 23,062 5,675 (1,103) 42,215
-------- -------- ------- ------- ---------
Operating & maintenance (5,404) (8,620) (2,007) 1,103 (E) (14,928)
Real estate taxes & insurance (1,451) (2,558) (736) (4,745)
Interest expense (4,348) (7,850) (J) (12,198)
Depreciation and amortization (2,819) (6,060) (I) (8,879)
-------- -------- ------- ------- ---------
Total Operating Expenses (14,022) (11,178) (2,743) (12,807) (40,750)
-------- -------- ------- ------- ---------
Real estate operating income 559 11,884 2,932 (13,910) 1,465
-------- -------- ------- ------- ---------
Mortgage Asset Income
Prospective yield income 2,630 193 (F) 2,823
Income from redemptions and dale 9,461 9,461
Interest expense (181) (181)
-------- ------- ---------
Income from mortgage assets 11,910 193 12,103
-------- ------- ---------
Other Income & Expense
Amortization of goodwill (70) (H) (70)
Management fees 575 (575) (F) 0
Interest and other income (expense), net (425) 70 (760) (G) (1,115)
Administrative expenses (3,203) (593) 638 (F) (3,158)
-------- -------- ------- ---------
Other income & expense (3,628) 52 (767) (4,343)
-------- -------- ------- ---------
Net Income $ 8,841 $ 11,936 $ 2,932 ($14,484) $ 9,225
======== ======== ======= ======= =========
Net Income per share $ 2.80 $ 1.60
======== =========
Dividends declared per share $ 2.00 $ 2.00
======== =========
Weighted Average common shares O/S 3,153 5,781
======== =========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
<PAGE>
Unaudited Pro Forma Combined Income Statement for Six Months Ended June 30, 1997
(In thousands except for per share data)
<TABLE>
<CAPTION>
Previously
ASR Reported MTP Pro Forma Pro Forma
Historical Acquisitions Properties Adjustments Combined
---------- ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Operations
Rental income $10,888 $7,002 2,919 $20,809
Property management fees 520 ($400) (E) 120
Commission & other income 2 2
------- ------ ----- ------ -------
Total real estate income 10,888 7,524 2,919 (400) 20,931
------- ------ ----- ------ -------
Operating & maintenance (3,991) (2,786) (1,029) 400 (E) (7,406)
Real estate taxes & insurance (1,149) (876) (391) (2,416)
Interest expense (3,377) (2,785) (J) (6,162)
Depreciation and amortization (2,032) (2,329) (I) (4,361)
------- ------ ----- ------ -------
Total operating expenses (10,549) (3,662) (1,420) (4,714) (20,345)
------- ------ ----- ------ -------
Real estate operating income 339 3,862 1,499 (5,114) 586
------- ------ ----- ------ -------
Gain on sale of real estate 474 474
------- -------
Mortgage Asset Income
Prospective yield income 588 52 (F) 640
Income from redemptions and sale 16,650 16,650
Interest expense (25) (25)
------- ------ -------
Income from mortgage assets 17,213 52 17,265
------- ------ -------
Other Income & Expense
Amortization of goodwill (12) (24) (H) (36)
Management fees 219 (219) (F) 0
Interest and other income (expense), net 307 108 (227) (G) 188
Administrative expenses (1,932) (52) 107 (F) (1,877)
Acquisition-related expense (6,215) (6,215)
------- ------ ------ -------
Other income & expense (7,852) 275 (363) (7,940)
------- ------ ------ -------
Net Income $10,174 $4,137 $1,499 ($5,425) $10,385
======= ====== ===== ====== =======
Net Income per share $2.58 $1.80
===== =====
Dividends declared per share $1.00 $1.00
===== =====
Weighted average common shares outstanding 3,938 5,781
===== =====
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
<PAGE>
Notes to Unaudited Pro Forma Combined Financial Statements
Pro Forma Combined Balance Sheet Adjustments as of June 30, 1997
(A) The pending acquisition of the MTP Properties would be accounted for as
a purchase in accordance with generally accepted accounting principles
and accordingly, the properties and liabilities acquired are presented
at the estimated fair values. The common stock of the Company and the
limited partnership units (LP Units) of Heritage Communities L.P. are
valued at $22.25 per share, the price agreed to between the Company and
the sellers. The pro forma adjustments are as follows (in thousands):
Purchase of properties............................ $29,346
Estimated closing costs........................... 50
Less: historical carrying value of the properties. (25,792)
-------
Increase in real estate................. $ 3,604
=======
(B) To reflect the estimated loan assumption or origination costs.
(C) To reflect the estimated cash used for the acquisition (in thousands):
Cash paid to sellers............................ $ 2,400
Estimated closing costs......................... 50
Estimated mortgage loan costs................... 300
Loan escrow deposits............................ 641
-------
Decrease in cash....................... $ 3,391
=======
(D) To reflect the excess of the fair value of the common stock of the
Company and LP Units issued over the historical carrying value of the
equity in the properties (in thousands):
Fair value of common stock and LP Units issued... $ 8,911
Less historical carrying value of equity......... (8,398)
-------
Increase in stockholders equity......... $ 513
=======
Pro Forma Combined Income Statements Adjustments for the Year Ended December 31,
1996 and the Six Months Ended June 30, 1997
<PAGE>
(E) Winton & Associates provided property management services relating to the
Winton Properties, and Pima Realty provided property management services on
the Company's properties. The adjustments to eliminate the property
management fees previously charged are as follows (in thousands):
1996 1997
------ ------
Pima Realty ................................ $ 472 $ 190
Winton & Associates ........................ 631 210
------ ------
$1,103 $ 400
====== ======
(F) Pima Mortgage provided advisory and bond administration services to the
Company on a fee basis pursuant to a management agreement. The Company has
entered into employment agreements with the three officers of the corporate
partners of Pima Mortgage. The Company expects to eliminate the expenses
incurred by Pima Mortgage (consisting of salaries to the officers of the
corporate partners) offset by costs incurred by the Company under the
employment agreements. The adjustments to reflect elimination of the
advisory and bond administration fees, elimination of the Pima Mortgage
expenses, and the addition of salaries to be paid by the Company are as
follows (in thousands):
1996 1997
----- -----
Elimination of bond administration fees expense .......... $ 193 $ 52
===== =====
Elimination of management fee income
Bond administration fee income .......................... ($193) ($ 52)
Management fee income .................................... (382) (167)
----- -----
Total .................................................. ($575) ($219)
===== =====
Elimination of management fees expense and
addition of salary expense
Elimination of management fee expense ................... $ 382 $ 167
Elimination of Pima Mortgage salary expenses ............. 593 52
Addition of salaries under employment agreements ......... (337) (112)
----- -----
Reduction in operating expenses ........................ $ 638 $ 107
===== =====
(G) To eliminate interest and dividend income on certain assets of the Pima
Entities not acquired by the Company and to reduce the Company's interest
income to reflect cash used in the Transactions (in thousands).
1996 1997
---- ----
Elimination of the Pima Entities' income ............... $ 70 $ 12
Reduction of the Company's interest income ............. 690 215
---- ----
Reduction of other income ............................ $760 $227
==== ====
(H) To amortize the recorded purchase price of Winton & Associates over a
20-year period.
(I) Increase in depreciation and amortization charges to reflect depreciation
and amortization based on ASR's acquisition costs calculated utilizing an
estimated life of 27.5 years on the property, seven years on personal
property and improvements, and the remaining life on loan costs. The
acquisition costs are allocated 15% to land and 85% to buildings and
improvements in accordance with ASR's estimated allocations.
<PAGE>
The resulting pro forma depreciation and amortization expense is (in thousands):
1996 1997
------ ------
Previously Reported Transactions.............. $4,860 $1,729
MTP Properties................................ 1,200 600
------ ------
Total Pro Forma ............................ $6,060 $2,329
Adjustment
====== ======
(J) The pro forma adjustments to the interest expense reflecting mortgage loans
obtained or assumed are as follows (in thousands):
1996 1997
------ ------
Previously Reported Transactions.................. $6,408 $2,071
MTP Properties.................................... 1,442 714
------ ------
Total .......................................... $7,850 $2,785
====== ======
<PAGE>
(c) EXHIBITS
Exhibit No. Description of Exhibit
----------- ----------------------
2(e) Exchange and Contribution Agreement by and among Merit
Preston Park Apartments Limited Partnership, MTP, Inc.
ASR Investments Corporation, Heritage SGP Corporation,
and Heritage Communities L.P.
2(f) Addendum to the Exchange and Contribution Agreement by
and among Merit Preston Park Apartments Limited
Partnership, MTP, Inc., ASR Investments Corporation,
Heritage SGP Corporation, and Heritage Communities L.P.
2(g) Exchange and Contribution Agreement by and among Gentry
Place Apartments Limited Partnership, MTP, Inc., ASR
Investments Corporation, Heritage SGP Corporation, and
Heritage Communities L.P.
2(h) Addendum to the Exchange and Contribution Agreement by
and among Gentry Place Apartments Limited Partnership,
MTP, Inc., ASR Investments Corporation, Heritage SGP
Corporation, and Heritage Communities L.P.
2(i) Exchange and Contribution Agreement by and among Smith
Summit Apartments Partnership, Lincor/Smith Summit
Apartments Limited Partnership, 3636 Colorado, Inc.,
ASR Investments Corporation, Heritage SGP Corporation,
and Heritage Communities L.P.
**********
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.
ASR INVESTMENTS CORPORATION
By: /s/ Joseph Chan
-------------------------------------
Name: Joseph Chan
Its: Executive Vice President, Chief
Operating Officer, Secretary and
Treasurer
August 28, 1997
EXCHANGE AND CONTRIBUTION AGREEMENT
AMONG THE MTP PARTIES
AND THE REIT PARTIES
THIS EXCHANGE AND CONTRIBUTION AGREEMENT ("Agreement") is made as of
the ____ day of July, 1997, among Merit Preston Park Apartments Limited
Partnership, a Texas limited partnership ("Preston Park LP" or "Transferor");
MTP, Inc., a Texas corporation ("MTP" and, together with Preston Park LP, the
"MTP Parties"); ASR Investments Corporation, a Maryland corporation (the
"REIT"); Heritage SGP Corporation, an Arizona corporation wholly owned by the
REIT ("Heritage SGP"); and Heritage Communities L.P., a Delaware limited
partnership ("Heritage LP" and, together with the REIT and Heritage SGP, the
"REIT Parties").
A. Preston Park LP is the owner of Park On Preston Apartments ("Park On
Preston"), which is a 286-unit apartment community located in Dallas, Texas. All
of the Real Property, the Tangible Personal Property and the interests in the
Leases and the Intangible Personal Property relating to Park On Preston is
collectively referred to herein as the "Property".
B. The REIT is a self-administered and self-managed real estate
investment trust that owns primarily apartment communities. The REIT and
Heritage SGP are the sole general partners of Heritage LP.
C. Concurrently with the execution of this Agreement, the REIT Parties
will enter into an agreement (the "Smith Summit Agreement") with Smith Summit
Apartments Partnership, a Texas general partnership ("Smith Summit GP"), to
acquire the Smith Summit Apartments ("Smith Summit"), a 254-unit apartment
community located in Mesquite, Texas.
D. Concurrently with the execution of this Agreement, the REIT Parties
will enter into an agreement (the "Gentry Place Agreement") with Gentry Place
Apartments Limited Partnership, a Texas limited partnership ("Gentry Place"), to
acquire the Merit Place Apartments ("Merit Place"), a 360-unit apartment
community located in Grand Prairie, Texas.
E. Certain partners of the Transferor desire to obtain shares of REIT
Stock and the REIT desires to obtain partnership interests in the Transferor.
The MTP Parties desire to contribute the Property to Heritage LP and Heritage LP
desires to acquire the Property upon the terms and conditions, and for the
consideration, set forth herein. To accomplish the foregoing, the parties hereto
agree to enter into all, but not less than all, of the transactions described
below on the terms and conditions herein provided:
1. The REIT shall make a tender offer (the "Exchange Offer")
to each owner of partnership interests in Transferor (the "Transferor Partners")
that is an Accredited Investor to tender partnership interests in Transferor
(the "Transferor Partnership Interests") in exchange
<PAGE>
for shares of the REIT's common stock, par value $.01 per share (the "REIT
Stock"), pursuant to the terms and conditions of this Agreement and a Letter of
Transmittal and Custody Agreement in the form of Exhibit A hereto (the "Letter
of Transmittal") to be executed by each Transferor Partner desiring to tender
their Transferor Partnership Interests in the Exchange Offer.
2. Upon the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, Transferor, or the partners of Transferor
as designated by Transferor on Schedule VIII attached hereto, as updated
pursuant to Section 6.2(a) hereof, shall enter into the Second Amended and
Restated Agreement of Limited Partnership of Heritage LP in the form of Exhibit
B attached hereto (the "Partnership Agreement") pursuant to which the REIT and
Heritage SGP will make certain cash contributions (the "REIT Capital
Contribution") to Heritage LP in exchange for general partnership interests in
Heritage LP ("GP Units"), and Transferor will contribute the Property in
exchange for limited partnership interests in Heritage LP ("LP Units") and cash.
The LP Units will be issued by Heritage LP in Transferor's name or in the names
of the partners of Transferor, as designated by Transferor on Schedule VIII
attached hereto as updated pursuant to Section 6.2(a) hereof. The GP Units and
the LP Units shall be exchangeable for REIT Stock at any time following the
first anniversary of the Closing Date. Transferor, the REIT and Heritage LP
shall enter into a registration agreement in the form of Exhibit C attached
hereto (the "Asset Transfer Registration Agreement") pursuant to which the REIT
shall agree to register under federal securities laws the shares of REIT Stock
to be issued in exchange for the LP Units. The contributions of the REIT Capital
Contribution in exchange for GP Units and the Property in exchange for LP Units
and cash are collectively referred to herein as the "Asset Transfer."
The Partnership Agreement and the Asset Transfer Registration Agreement
are sometimes hereinafter collectively referred to as the "Related Agreements."
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
EXCHANGE OFFER
--------------
1.1 The Exchange Offer.
(a) Offer to Purchase. Provided that nothing shall have
occurred that would result in a failure to satisfy any of the terms or
conditions set forth in Article 7 of this Agreement, as promptly as practicable
following the execution of this Agreement, the REIT shall commence the Exchange
Offer by delivering the Exchange Offer Documents (as defined below) to each
Transferor Partner. Each Transferor Partner that is an Accredited Investor shall
have
2
<PAGE>
the right to tender all or any part of Transferor Partnership Interests owned by
such Transferor Partner (such tendered Transferor Partnership Interests
hereinafter referred to as "Tendered Interests") by executing and delivering
prior to the Commitment Date to MTP, as custodian (the "Custodian"), a Letter of
Transmittal pursuant to which MTP will make and accept deliveries by and on
behalf of the Transferor Partners as provided in the Custody Agreement. The
obligations of the REIT to accept for purchase and to purchase any Tendered
Interests tendered by the Transferor Partners of Transferor shall be subject
only to the conditions set forth in this Agreement. The REIT shall not be
entitled to accept for purchase or purchase the Tendered Interests unless all of
the conditions to the consummation of the transactions contemplated in this
Agreement are satisfied or waived as provided herein.
(b) Purchase Price. Subject to the conditions set forth in
Article 7 of this Agreement, on the Closing Date, the Custodian shall deliver
the Letters of Transmittal to the REIT, and the REIT shall deliver to the
Custodian, as agent for each Transferor Partner on whose behalf the Custodian
delivered a Letter of Transmittal, a certificate registered in such Transferor
Partner's name for the number of shares of REIT Stock equal to (i) the Exchange
Value of all of the Transferor Partnership Interests tendered by such Transferor
Partner and accepted for purchase divided by (ii) the REIT Stock Price. For
purposes of determining the number of shares of REIT Stock to be issued in the
Exchange Offer, Transferor Partnership Interests held by one person in multiple
accounts shall be aggregated. The REIT Stock to be issued in accordance with the
Exchange Offer will be duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right and,
subject to compliance with the Securities Act and the Exchange Act, will be
eligible for listing on the American Stock Exchange. On or prior to the Closing
Date, the REIT shall have caused the effectiveness of a registration statement
(the "Registration Statement") under the Securities Act and under any applicable
state securities laws covering the resale of the shares of REIT Stock to be
issued in accordance with the Exchange Offer.
(c) Exchange Offer Documents. As soon as practicable after the
Commitment Date, the REIT shall prepare the Registration Statement covering the
resale of shares of REIT Stock to be offered in the Exchange Offer, which will
comply in all material respects with the provisions of applicable federal and
state securities laws, and will prepare the Letter of Transmittal and a Custody
Agreement appointing MTP the Transferor Partners' Custodian to make deliveries
for the Transferor Partners at the Closing (the Registration Statement, the
Letters of Transmittal and the Custody Agreement, together with any supplements
or amendments thereto, are referred to herein collectively as the "Exchange
Offer Documents"). The REIT shall prepare and make all filings under applicable
state Blue Sky Laws to qualify or exempt from qualification the REIT Stock
offered pursuant to the Exchange Offer.
(d) Election to Tender Transferor Partnership Interests. The
election of a Transferor Partner to tender all or a part of the Transferor
Partnership Interests owned by the Transferor Partner shall be made by such
Transferor Partner's execution of a Letter of Transmittal and the return of the
Letter of Transmittal to the Custodian for delivery to the REIT
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pursuant to the Custody Agreement. Following the Commitment Date the tender of
Transferor Partnership Interests shall be irrevocable.
(e) Consent to Admission of REIT as Partner. The Letter of
Transmittal shall provide that each Transferor Partner tendering a Transferor
Partnership Interest in Transferor consents to the admission of the REIT as a
substituted limited partner upon the purchase of such Transferor Partnership
Interest. MTP, as general partner of Preston Park LP, consents to the admission
of the REIT as a substituted limited partner of Transferor as of the Closing
Date. Promptly following the Closing Date, Transferor shall file any
certificates necessary to reflect the admission of the REIT as a substituted
limited partner.
(f) Term. The Exchange Offer shall remain open until the
commitment date, which shall be 5:00 p.m., Dallas, Texas time on August 11,
1997, unless extended by the REIT and MTP (the "Commitment Date"). The Exchange
Offer shall expire on the Expiration Date. If the Exchange Offer is not
consummated prior to the Expiration Date, the Custodian shall promptly return
the Letter of Transmittal and all other materials delivered to the Custodian by
the Transferor Partner pursuant to this Agreement to the Transferor Partner.
Prior to the Commitment Date, the REIT shall not amend or modify the terms of
the Exchange Offer without the prior consent of MTP. After the Commitment Date,
the Exchange Offer shall not be amended or modified.
1.2 Tender of MTP's Transferor Partnership Interests. Upon the terms
and subject to the conditions set forth in this Agreement, on the Commitment
Date, MTP shall have the right to tender all or any part of its right to receive
all or a portion of distributions as a general partner in Transferor to the REIT
in exchange for shares of REIT Stock pursuant to the Exchange Offer on the same
terms and subject to the same conditions as set forth in Section 1.1 above. At
the Closing, the REIT shall accept for payment all assignments of the right to
receive distributions as a general partner tendered by MTP in Transferor. If the
tender of the right to receive general partner distributions is accepted, the
REIT shall acquire all right, title and interest to all distributions made by
Transferor with respect to the interest acquired, but the REIT shall not be
substituted as a general partner. MTP shall remain as the general partner of
Transferor.
1.3 Internal Revenue Code Section 754 Election. Unless Transferor has a
valid election in place pursuant to Internal Revenue Code Section 754,
Transferor hereby agrees to make such an election effective for Transferor's
taxable year in which the Exchange Offer is consummated.
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ARTICLE 2
ASSET TRANSFER
--------------
2.1 The Asset Transfer. Provided that nothing shall have occurred that
would result in a failure to satisfy any of the terms or conditions set forth in
this Agreement, immediately following the transactions set forth in Article 1
hereof, the REIT and Transferor shall consummate the Asset Transfer. The REIT
and Heritage SGP shall make a cash capital contribution to Heritage LP in
accordance with Section 2.2(a) hereof and will continue to be the sole general
partners of Heritage LP. Transferor shall contribute and convey the Property to
Heritage LP in exchange for LP Units and cash as set forth in Section 2.2(b)
hereof. Pursuant to the terms of the Partnership Agreement, the LP Units shall
be exchangeable for REIT Stock at any time following the first anniversary of
the Closing Date. Pursuant to the Asset Transfer Registration Agreement, the
REIT shall agree to register for resale under federal securities laws the shares
of REIT Stock to be issued upon conversion of the LP Units.
2.2 Contribution of Property to Heritage LP.
(a) Capital Contributions. On the Closing Date, the REIT,
Heritage SGP and Transferor shall make the following capital contributions to
Heritage LP:
(i) The REIT and Heritage SGP shall make a cash
capital contribution equal on an aggregate basis to the REIT Capital
Contribution which shall be the sum of:
(A) that portion of the Mortgage Debt to be
repaid or cancelled by Heritage LP in accordance with Section 2.3 hereof
including, without limitation, any prepayment fees or premiums, assumption fees
and other costs associated therewith, plus
(B) the amount required to satisfy any
monetary liens which the REIT elects to satisfy pursuant to Section 2.3(d), plus
(C) the Property Closing Costs paid and to
be paid by Heritage LP or the REIT pursuant to Section 8.9, plus or minus, as
appropriate
(D) the Prorations, plus
(E) all costs and expenses incurred and to
be incurred by Heritage LP, the REIT or Heritage SGP (on behalf of Heritage LP)
in the performance of its due diligence hereunder, plus
(F) any amounts required to satisfy the
obligations of the REIT or Heritage SGP to make capital contributions to
Heritage LP pursuant to Section2 4.1.2 or Section 4.1.6 of the Partnership
Agreement, and plus
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(G) cash in the amount of the Cash Payment
(as defined herein).
(ii) Transferor shall contribute and convey the
Property owned by Transferor to Heritage LP as hereinafter provided subject only
to the Transferred Debt as described in Section 2.3 hereof.
(iii) Notwithstanding the foregoing, if, taking into
consideration the proposed contributions to the capital of Heritage LP by the
REIT, Heritage SGP, and Transferor in accordance with Section 2.2(a) hereof,
Heritage LP would not be consolidated with the REIT for financial accounting and
reporting purposes because the respective Partnership Interests of the REIT or
Heritage SGP in Heritage LP is insufficient, then at the Closing the REIT or
Heritage SGP may contribute cash to Heritage LP in exchange for an amount of GP
Units equal to such cash contribution divided by the REIT Stock Price. Such cash
will be contributed in the minimum amount sufficient to permit Heritage LP to be
consolidated with the REIT for financial accounting and reporting purposes.
(b) Distribution of Cash and LP Units. In exchange for the
capital contribution made by Transferor provided in Section 2.2(a) hereof,
Heritage LP shall distribute the following on the Closing Date:
(i) Cash Payment. At the Closing, Transferor shall
receive by wire transfer an amount (the "Cash Payment") equal to the sum of (i)
the Cash Allocation set forth on Schedule V attached hereto and (2) such other
escrowed amounts held by Lender including, but not limited to, taxes, insurance
and such other reserves held by Lender on Transferor's behalf if elected by
Transferor pursuant to Section 8.15(a) herein, less the Earnest Deposit.
(ii) LP Units. At the Closing, Transferor, or certain
partners of Transferor designated by Transferor on Schedule VIII attached hereto
as updated pursuant to Section 6.2(a) hereof, shall collectively receive a
number of LP Units that shall be equal to (A) the difference between the
Exchange Value attributable to Transferor and the amount of the Cash Payment
pursuant to clause (i), divided by (B) the REIT Stock Price.
(c) Distribution of GP Units. In exchange for the REIT Capital
Contribution provided in Section 2.2(a) hereof, Heritage LP shall issue on the
Closing Date to the REIT and Heritage SGP a number of GP Units (rounded to a
whole unit) equal to the REIT Capital Contribution divided by the REIT Stock
Price allocated between them on a pro rata basis based upon their respective
contributions.
2.3 Assumption of Mortgage Debt.
(a) Mortgage Debt. The REIT, Heritage LP and Transferor
acknowledge and agree that the Property is subject to the Mortgage Debt from the
lender (the "Lender") as described on Schedule II attached hereto. The Property
shall be acquired by Heritage LP subject
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to the Mortgage Debt, provided that the Lender of such Mortgage Debt shall
execute a consent, estoppel letter, transfer agreement, and modification with
respect to such Mortgage Debt as shall be acceptable to Heritage LP, acting
reasonably; provided, however, the Lender will not be required to amend any of
the material legal or business terms of the Mortgage Debt.
(b) Lender Consent. From and after the date hereof and
continuing for 60 days thereafter (the "Lender Consent Period"), the parties
shall proceed in good faith and with due diligence to attempt to secure any
lender consent and estoppel letter from the Lender and to negotiate any transfer
agreement or modifications to the Loan Documents in order for Heritage LP to
acquire the Property subject to such Mortgage Debt. Heritage LP agrees that it
shall accept the Property subject to the Mortgage Debt, provided that the Lender
agrees that such Mortgage Debt shall be non-recourse to Heritage LP on the same
terms that such Mortgage Debt is currently non-recourse to Transferor and the
Lender executes the agreements contemplated by Section 2.3(a). Any Mortgage Debt
to which the Property is subject upon transfer to Heritage LP is herein referred
to as "Transferred Debt."
(c) Refinancing of Mortgage Debt. In the event that the Lender
does not agree to the transfer of the Mortgage Debt as contemplated by Section
2.3(a) and Section 2.3(b), or if for any reason Heritage LP is unable to acquire
the Property subject to the Mortgage Debt within the Lender Consent Period,
Heritage LP shall have the right to (i) refinance all or a portion of such
Mortgage Debt on terms it determines to be acceptable to it in its sole
discretion; (ii) pay all or any portion of such Mortgage Debt from the proceeds
of the REIT Capital Contribution; or (iii) terminate this Agreement, which
rights shall be exercised within the Lender Consent Period.
(d) Indebtedness Other Than Mortgage Debt. Transferor shall
satisfy all pecuniary encumbrances (other than the Mortgage Debt) or otherwise
have all such encumbrances removed as liens against the Property on or before
the Closing at its own expense. Transferor shall not place any consensual lien,
encumbrance or easement against the Property following the date of execution of
this Agreement without the prior written consent of the REIT, such consent not
to be unreasonably withheld or delayed. If Transferor fails to satisfy or remove
any monetary lien on or prior to Closing, the REIT may proceed to retain a
portion of the Exchange Value equal to the amount of the monetary lien (the
"Holdback Amount") and reduce the Exchange Value of the Property accordingly.
The Holdback Amount shall be paid to Transferor at such time as Transferor
extinguishes such monetary lien. In the event that Transferor does not
extinguish such monetary lien within 120 days of the Closing Date, the REIT
shall apply the Holdback Amount to satisfy the monetary lien. Transferor shall
be required to deposit any additional funds at Closing to satisfy any remaining
monetary liens against the Property.
2.4 Earnest Money Deposit. Within five (5) days following the Execution
Date, the REIT shall deposit $50,000 in escrow with the Title Company (the
"Earnest Deposit") on account of the REIT Capital Contribution. The Earnest
Deposit shall be placed in an interest-
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bearing account. At the Closing, the Earnest Deposit shall be applied against
the Cash Payment. In the event this Agreement is terminated for any reason other
than as a result of a termination pursuant to Section 10.3(c), the Earnest
Deposit required by this Section 2.4 shall be returned to the REIT. In the event
this Agreement is terminated by Transferor pursuant to Section 10.3(c), the
Earnest Deposit required by this Section 2.4 shall be paid to MTP on behalf of
Transferor.
ARTICLE 3
PARTNER APPROVAL; SECURITIES LAW CONSIDERATIONS
-----------------------------------------------
3.1 Approval by MTP as General Partner. MTP hereby approves and
consents to the Exchange Offer and Asset Transfer and represents and warrants
that it has approved this Agreement and the transactions contemplated hereby.
3.2 Federal and State Securities Law Considerations. The REIT Parties
shall take all actions necessary in accordance with federal and state securities
laws including, without limitation, prepare and make all filings under
applicable federal and state law to qualify or exempt from qualification the
securities offered pursuant to the Exchange Offer and Asset Transfer.
3.3 Asset Transfer Registration Agreement. In connection with the
conversion of the LP Units, the REIT shall enter into the Asset Transfer
Registration Agreement pursuant to which the REIT shall agree to file and use
its best efforts to have declared effective on the date the LP Units are first
convertible into REIT Stock, a registration statement, including a form of
prospectus, and one or more amendments thereto, on Form S-3 or other appropriate
form, covering such shares of REIT Stock to be issued upon conversion of the LP
Units issued pursuant to the Asset Transfer as set forth in Section 2.2 hereof.
3.4 Information Respecting Transferor and MTP. Transferor shall furnish
in writing for inclusion in the Registration Statement such information about
Transferor and MTP that may be requested by the REIT Parties in writing.
Transferor represents and warrants that the information so supplied, as it may
be revised from time to time in writing by Transferor, shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.5 Amendments to the Registration Statement. If, at any time prior to
the Expiration Date, it shall be necessary to amend or supplement the
Registration Statement to correct any statement or omission with respect to the
REIT, MTP, Transferor or their subsidiaries or assets, or in order to comply
with any applicable legal requirements, Transferor shall supply the necessary
information to the REIT. To the extent necessary to comply with applicable legal
requirements, the REIT shall amend or supplement the Registration Statement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 Transferor Representations and Warranties. As a material inducement
to the REIT Parties to execute this Agreement and to the REIT Parties to
consummate the transactions contemplated hereunder, Transferor and MTP jointly
and severally represent and warrant to the REIT Parties with respect to itself
and the Property, that as of the date hereof and as of the Closing Date:
(a) Transferor Organizational Representations and Warranties.
(i) Organization and Authority. Transferor has been
duly organized and is validly existing and in good standing under the laws of
its jurisdiction of organization and, if different, is qualified to do business
and in good standing in the state in which the Property is located. Transferor
has the full right and authority to enter into this Agreement. Transferor has
the full and right authority to transfer the Property and to consummate or cause
to be consummated the transactions contemplated herein. This Agreement has been
duly authorized and properly executed by Transferor and, assuming the due
authorization, execution and delivery hereof by the other parties hereto,
constitutes the valid and binding obligation of Transferor, enforceable against
Transferor in accordance with its terms.
(ii) Conflicts. The execution of and performance by
Transferor of its obligations under this Agreement does not and will not
conflict with the terms of Transferor's constituent documents and does not
breach or violate any applicable law, rule or regulation of any governmental
authority. Subject to obtaining the required consents and approvals by the
Lender, there is no agreement to which Transferor is a party or binding on
Transferor, which will be breached by or which is in conflict with the execution
of or performance by Transferor of its obligations under this Agreement or with
the rights granted to Transferor hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending, or to Transferor's knowledge, threatened against Transferor
or the Property which would, if adversely determined, have a material adverse
effect on the financial condition or results of operations of Transferor. There
is no action or proceeding pending, or to Transferor's knowledge, threatened
against Transferor which challenges or impairs Transferor's ability to execute,
deliver or perform under this Agreement, to transfer all of the Property
hereunder or to consummate the transactions contemplated herein.
(b) Transferor's Property Representations and Warranties.
(i) Contractors and Suppliers. All contractors,
subcontractors, suppliers, architects, engineers and others that have performed
services or labor or supplied material in connection with Transferor's
acquisition, development, ownership or management
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of the Property have been, or will be in the ordinary course of business, paid
in full prior to Closing and all liens arising therefrom (or claims which with
the passage of time or notice or both, could mature into liens) have been, or
will be in the ordinary course of business, satisfied and released prior to
Closing. On the Closing Date, Transferor shall provide the REIT a list of all
contracts that are not terminable upon 30 days written notice without penalty.
The Transferor shall not be required to pay any termination fees or penalties in
connection with contracts the REIT wishes to terminate, as such amounts shall be
the sole responsibility of the REIT.
(ii) Leases and Rent Roll. The Rent Roll delivered by
Transferor hereunder for its Real Property is true, accurate and complete in all
material respects. Except as set forth in the Rent Roll or applicable Permitted
Exceptions, there are no leases or occupancy agreements or rights of possession
affecting the Real Property. Except as otherwise specifically and expressly set
forth in the Rent Roll for the Real Property: (1) no presently effective rent
concessions have been given to any tenants; (2) no rent has been paid in advance
by any tenants respecting a period subsequent to the Closing (except for the
month in which the Closing occurs); (3) no tenants have any claim against
Transferor for any deposits, other than pursuant to the terms of its Lease with
respect to sums specified as deposits in the Rent Roll; (4) no tenants have any
options or rights of first refusal to extend or renew their Leases or to rent
additional space or to purchase the Property; (5) there are no tenant
improvements which are incomplete or which have not been fully paid for by
Transferor except as otherwise specified in this Agreement; and (6) there are no
leasing fees or commissions due, nor will any become due, in connection with any
Lease or any renewal or extension of any Lease. Except as set forth in the Rent
Roll, no understanding or agreement with any party exists as to payment of any
leasing or other fees or commissions regarding future leases or as to procuring
of tenants for the Real Property. To Transferor's knowledge, no default or
breach exists on the part of any tenant. Transferor has not received any notice
of any material default or breach on the part of the landlord under any Lease.
(iii) Operating and Financial Statements. Each
Operating and Financial Statement for the Real Property shows all material items
of income and expense (operating and capital) incurred in connection with
Transferor's ownership, operation and management of such Real Property for the
periods indicated and are true, correct and complete in all material respects.
(iv) Notice of Violations. To Transferor's knowledge,
Transferor has not received notice that the Property or the use thereof violates
any laws, rules and regulations of any federal, state, city or county government
or any agency, body or subdivision thereof having any jurisdiction over Property
that have not been resolved to the satisfaction of the issuer of the notice.
(v) Zoning, Applicable Laws Governing Operation and
Restrictions. To Transferor's knowledge, neither the Property or Transferor's
current use or operation thereof
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fails to comply or is in violation, in any material respect, with current
applicable laws, regulations, ordinances, building codes and rules of all
applicable municipal, local, state and federal jurisdictions, including, without
limitation, zoning ordinances, parking requirements, building codes and laws
governing access for handicapped persons, and with restrictions, covenants or
similar agreements affecting such Property.
(vi) Taxes and Assessments. To Transferor's
knowledge, all taxes for the current year and all prior years for the Property
which are due and payable have been paid, except for installments due and not
yet delinquent and supplemental taxes not yet assessed, and no taxes are
delinquent. All impact fees or other assessments, fees or charges, however
denominated, which may constitute a lien or charge on the Property or which have
been assessed or charged as a result of any permit, license or approval obtained
for the Property have been paid in full, and there is not presently pending any
such assessment, fees or charges of any nature with respect to the Property or
any part thereof, nor has Transferor received any notice of any such
assessments, fees or charges being contemplated. No areas within the Real
Property are subject to any existing improvement districts, except as may be
disclosed by the applicable Title Report and any amendments thereto. All taxes
with respect to Transferor and the ownership and operation of the Property
during Transferor's ownership, including, without limitation, income, gross
receipts, net proceeds, ad valorem, turnover, personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational and interest equalization,
windfall profits, severance and employees' income withholding and Social
Security taxes imposed by the United States or any foreign country or by any
state, municipality, subdivision or instrumentality of the United States or of
any foreign country or by any other tax authority, including all applicable
penalties and interest (the "Other Taxes"), which are due and payable, have been
paid as disclosed on the returns to the extent due. Transferor has duly and
timely filed all tax returns of every nature required to be filed by it with
respect to the Other Taxes, in every jurisdiction in which the same may have
been so required, and has paid all Other Taxes disclosed on such returns to the
extent due. All Other Taxes of which notice has been received or which shall
accrue on or prior to the Closing Date have been paid to the extent due.
(vii) Hazardous Materials. The environmental reports
for the Property delivered to the REIT by Transferor constitute true, accurate
and complete copies of all of the environmental reports prepared for Transferor
for the Property. To Transferor's knowledge, the Real Property is not in
noncompliance or in violation of Environmental Laws, except as disclosed in any
environmental reports in Transferor's possession that have been delivered to the
REIT.
(viii) Withholding Obligation. To Transferor's
knowledge, the convey- ance to Heritage LP of the Property is not subject to any
federal, state or local withholding obligation of Transferor under the tax laws
applicable to Transferor or the Property, including without limitation, any
"bulk sales" or other similar laws.
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(ix) Condemnation. No condemnation, claims, actions,
suits or proceedings relating to the Real Property are pending or, to
Transferor's knowledge, threatened.
(x) Insurance. The schedule of all insurance carried
and the costs thereof with respect to the Property provided by Transferor is
true, accurate and complete. Transferor has not received any notice from any
insurance company or board of fire underwriters of any defects or inadequacies
in, on or about any of the Real Property or any part or component thereof that
would adversely affect the insurability of the Real Property or cause an
increase in the premiums for the Property that have not been cured or repaired
to the satisfaction of the party issuing the notice. All insurance policies
insuring the Real Property are in full force and effect.
(xi) Ownership. Transferor is the owner and has title
to the Real Property free and clear of any and all claims, taxes, assessments,
reservations in patents, easements, rights-of-way, encumbrances, liens,
covenants, conditions, restrictions, obligations and liabilities other than
those specifically set forth herein or in the Title Report or approved in
writing as set forth above.
(xii) Flood Area. Except as may be disclosed on the
survey respecting the Real Property, to Transferor's knowledge, no portion of
the Real Property is within any flood plain area as designated by the maps of
the Federal Emergency Management Agency (FEMA maps) or any other governmental or
quasi-governmental flood control agency.
(xiii) Future Transfer Obligations. Except as
disclosed in the Title Report for the Real Property and the Grant of Reciprocal
Easements and Joint Development Agreement, there are no agreements, commitments
or understandings by or between Transferor and any third party pursuant to which
Transferor or its successors-in-interest are required to dedicate any part of
the Real Property or to grant any easement, water rights, rights-of-way, road or
license for ingress and egress or other use in respect to any part of the Real
Property.
(xiv) Creditors. There are no attachments, levies,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or
pursuant to any other debtor or relief laws contemplated by Transferor or
pending in any current judicial or administrative proceedings against
Transferor.
(xv) Loan Documents. The Loan Documents delivered by
Transferor to the REIT constitute true, accurate and complete copies of all of
the documents and instruments in effect with respect to the Mortgage Debt
applicable to Transferor in all material respects. The Schedule of Loan
Documents delivered to the REIT by Transferor is in all material respects true,
accurate and complete. Transferor has not received any notice that Transferor is
in default under such Loan Documents, nor to Transferor's knowledge does any
default or breach exist, nor any event or circumstance that, with the giving of
notice, or passage
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of time, or both, would constitute a default or breach under such Loan
Documents. The unpaid principal balance under the Loan Documents delivered to
the REIT by Transferor after taking into account the July 1997 mortgage payment
applicable to Transferor's Property is set forth in Schedule II attached hereto.
(xvi) Solvency. To Transferor's knowledge, Transferor
is, and at all times during the period beginning on the date hereof and ending
on and including the Closing Date will be, solvent. As used herein, solvent
means with respect to an entity that such entity (i) does not have debts greater
than the fair value of such entity's assets; (ii) is paying and anticipates that
it will continue to pay such entity's debts as they become due; and (iii) has
sufficient capital to run such entity's business.
(xvii) Brokers' Fees. Except for CB Commercial, who
shall be paid solely by Transferor, no real estate broker, salesperson or finder
has engaged by Transferor in connection with the transactions contemplated
hereby that may result in claims for commissions or fees in connection
therewith.
(xviii) Full Disclosure. Transferor has made
available or accessible to the REIT all material documents, files, written
information, books and records in Transferor's possession or control and
relating to the Property.
(c) Transferor's Securities Representations.
(i) Investment Purpose. In the event that Transferor
receives LP Units, Transferor will acquire the LP Units for the purpose of
transferring such LP Units to its partners who intend to hold the LP Units for
investment and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act.
(ii) Sufficient Knowledge and Experience. Transferor
has sufficient knowledge and experience in financial and business matters to
enable it to evaluate the merits and risks of investment in the LP Units.
Transferor has the ability to bear the economic risk of acquiring the LP Units.
(iii) Access to Information. Transferor has been
supplied with, or had access to, information to which a reasonable investor
would attach significance in making investment decisions, including, but not
limited to, all publicly available filings by the REIT under the Securities Act
and the Exchange Act, and the REIT's annual and quarterly reports to
stockholders, any information with respect to Heritage LP's financial condition,
business and prospects, and any other information Transferor has requested, to
answer all of its inquiries about Heritage LP and the REIT, and to enable it to
make its decision to acquire the LP Units.
(iv) Restrictions on Transfer. Transferor hereby
acknowledges that neither the LP Units nor the REIT Stock for which LP Units may
be exchanged are registered
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under the Securities Act or any state securities laws and cannot be resold
without registration thereunder or exemption therefrom. Transferor agrees that,
other than the transfers contemplated to its partners, it will not transfer all
or any portion of the LP Units or the underlying Shares unless such transfer has
been registered or is exempt from registration under the Securities Act and any
applicable state securities laws. The LP Units contain a prominent legend with
respect to the restrictions on transfer under the Securities Act and under
applicable state securities laws.
(d) ERISA Representation and Warranty. Transferor holds no
"plan assets," within the meaning of Department of Labor regulations at 29
C.F.R. section 2510.3- 101, of any employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the
transactions contemplated by this Agreement are not part of an agreement,
arrangement or understanding designed to benefit a party in interest with
respect to any employee benefit plan subject to ERISA that invests in
Transferor.
The term "to Transferor's knowledge" as it is used in this
Section 4.1 shall mean that the officers and directors of MTP have no actual
conscious knowledge of facts inconsistent with the matters stated. In connection
with the foregoing representations, Transferor has made no specific examination
of files or records, nor has Transferor made inquiry of any other employee of
Transferor, its advisor, or any management company engaged by Transferor. No
constructive knowledge of any matter shall be imputed to Transferor as to
matters not within the actual conscious knowledge of the above-named persons,
and no personal liability shall attach to such persons as a result of any
violation of any representation or warranty. A breach of a representation set
forth in this Section 4 by Transferor or MTP shall constitute a failure of the
condition set forth in Section 7.1(a) hereof.
4.2 Further Representations and Warranties of MTP. As a material
inducement to the REIT and Heritage LP to execute this Agreement and consummate
the transactions contemplated hereunder, MTP represents and warrants to the REIT
and Heritage LP that as of the date hereof and as of the Closing Date:
(a) Approval by MTP as General Partner. MTP hereby approves
and consents to the transactions contemplated herein and represents and warrants
that it has approved this Agreement and the transactions hereby contemplated.
(b) Power of MTP to Execute Agreement. MTP has full power and
authority to execute, deliver, and perform this Agreement, and this Agreement is
the legal and binding obligation of MTP and is enforceable against it in
accordance with the terms of this Agreement.
(c) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or
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constitute a default under, or conflict with, or cause the acceleration of any
obligation under, any agreement or other instrument of any description to which
Transferor or MTP is a party or by which Transferor or MTP is bound, or any
judgment, decree, order, or award of any court, governmental body, or
arbitrator, or to the knowledge of MTP, any applicable law, rule or regulation.
4.3 The REIT's Representations and Warranties. As a material inducement
to the MTP Parties to execute this Agreement and consummate the transactions
contemplated hereunder, the REIT represents and warrants to the MTP Parties that
as of the date hereof and as of the Closing Date:
(a) REIT Organizational Representations and Warranties.
(i) Organization and Authority. The REIT has been
duly organized, is validly existing as a corporation under the laws of its state
of incorporation and is in good standing in such state and, if different, is
qualified to do business and in good standing in the jurisdictions in which the
property owned by the REIT or the business conducted by the REIT requires such
qualification. Each of the REIT's subsidiaries has been duly organized and is
validly existing under the laws of its organization and, if different, is
qualified to do business in the jurisdictions in which the property owned by
such subsidiary or the business conducted by such subsidiary requires such
qualification. The REIT has the full corporate right and authority and has
obtained any and all consents required therefor to enter into this Agreement.
The persons signing this Agreement on behalf of the REIT are authorized to do
so. This Agreement and all of the documents to be delivered by the REIT at the
Closing have been or will be authorized and properly executed and do or will
constitute the valid and binding obligations of the REIT, enforceable against
the REIT in accordance with their terms.
(ii) Conflicts. The execution of and performance by
the REIT under this Agreement does not and will not conflict with the Amended
and Restated Articles of Incorporation or By-Laws of the REIT and does not
breach or violate any applicable law, rule or regulation of any governmental
authority. There is no agreement to which the REIT is a party or, to the REIT's
knowledge, binding on the REIT which will be breached by or which is in conflict
with its execution of or performance of its obligations under this Agreement or
with the rights granted to the REIT hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending or, to the REIT's knowledge, threatened against the REIT or
any of its properties, which would, if adversely determined, have a material
adverse effect on the financial condition or results of operations of the REIT.
There is no action or proceeding pending or, to the REIT's knowledge, threatened
against the REIT which challenges or impairs the REIT's ability to execute,
deliver and perform under this Agreement.
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(b) REIT Securities Representations and Warranties.
(i) Reserved Shares. From the authorized capital
stock of the REIT, a sufficient number of shares of REIT Stock shall have been
reserved by the REIT at Closing for issuance to Transferor Partners in the
Exchange Offer and to Transferor upon exchange of the LP Units therefor in
accordance with Articles One and Two of this Agreement.
(ii) REIT Common Stock. The REIT Stock to be issued
in accordance with this Agreement will be duly authorized, validly issued, fully
paid and nonassessable and will not be subject to any preemptive or similar
right and, subject to compliance with the Securities Act and the Exchange Act,
will be eligible for listing on the American Stock Exchange. On or prior to the
Closing Date, the REIT shall have caused the effectiveness of the Registration
Statement under the Securities Act and under any applicable state securities
laws covering the resale of the shares of REIT Stock to be issued in accordance
with the Exchange Offer; provided, however, in the event that this Agreement is
terminated by the REIT pursuant to Section 10.3(d) or Section 10.3(f) herein,
the REIT shall be entitled to the prompt reimbursement for all out-of-pocket
costs (including, without limitation, attorneys' fees, filing fees, and
disbursements) incurred by the REIT in connection with its preparation and
filing of the Registration Statement and any amendments and supplements thereto.
(iii) Registration Statement and Prospectus. When the
Registration Statement becomes effective, (i) the Registration Statement and the
prospectus included therein (the "Prospectus"), and any amendments and
supplements thereto, will contain all statements and information that are
required to be included therein in accordance with the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission (the
"Rules and Regulations") and will comply in all material respects with the
requirements of the Securities Act and the Rules and Regulations; and (ii)
neither the Registration Statement nor the Prospectus, nor any amendment to
supplement thereto, will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the REIT makes no
representations and warranties as to information contained in or omitted from
the Registration Statement or Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with information furnished to the
REIT by Transferor or MTP specifically for use in preparation thereof.
(c) Brokers' Fees. No real estate broker, salesperson or
finder has been engaged by the REIT in connection with the transactions
contemplated hereby that may result in claims for commissions or fees in
connection therewith.
The term "to the REIT's knowledge" as used in this Section 4.3
shall mean that the officers and directors of the REIT have no actual conscious
knowledge of facts inconsistent with the matters stated. In connection with the
foregoing representations, the REIT has made no specific examination of files or
records, nor has the REIT made inquiry of any other
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employee of the REIT, its advisor, or any management company of the REIT. No
constructive knowledge of any matter shall be imputed to the REIT as to matters
not within the actual conscious knowledge of the above-named persons, and no
personal liability shall attach to such persons as a result of any violation of
any representation or warranty. A breach of a representation set forth in this
Section 4 by the REIT shall constitute a failure of the condition set forth in
Section 7.2(a).
4.4 Heritage LP's Representations and Warranties. As a material
inducement to the MTP Parties to execute this Agreement and consummate the
transactions contemplated hereunder, Heritage LP represents and warrants to the
MTP Parties that as of the date hereof and as of the Closing Date:
(a) Partnership Organization and Authority. Heritage LP has
been duly organized under the Delaware Revised Uniform Limited Partnership Act,
is validly existing as a Delaware limited partnership, and is in good standing
in the State of Delaware. [The Subsidiary Partnership will be duly organized,
validly existing, and in good standing in the state of its organization at the
Closing.] Heritage LP is and, at the Closing the Subsidiary Partnership will be,
qualified to do business and in good standing under the laws of each
jurisdiction in which the Property owned or to be owned by Heritage LP or the
Subsidiary Partnership or the business conducted or to be conducted by Heritage
LP or the Subsidiary Partnership requires such qualification. The REIT and
Heritage SGP are the sole general partners of Heritage LP and Heritage SGP will
be the sole general partner of the Subsidiary Partnership. Heritage LP will be
the sole limited partner of the Subsidiary Partnership. Heritage LP has the full
right and authority and has obtained any and all consents required therefor to
enter into this Agreement and to consummate or cause to be consummated the
transactions contemplated herein. The persons signing this Agreement on behalf
of Heritage LP at the Closing have been authorized to do so. This Agreement and
all of the documents to be delivered by Heritage LP at the Closing have been or
will be authorized and properly executed and do or will constitute the valid and
binding obligations of Heritage LP, enforceable against Heritage LP in
accordance with their terms.
(b) Conflicts. The execution of and performance of this
Agreement does not and will not conflict with the Partnership Agreement or the
Certificate of Limited Partnership of Heritage LP. There is no agreement to
which Heritage LP is a party or, to Heritage LP's knowledge, binding on Heritage
LP which will be breached by or is in conflict with its execution of or
performance under this Agreement.
(c) Pending Actions. There is no action or proceeding pending
or, to Heritage LP's knowledge, threatened against Heritage LP or any of
Heritage LP's properties, which would, if adversely determined, have a material
adverse effect on the financial condition or results of operations of Heritage
LP. There is no action or proceeding pending or, to Heritage LP's knowledge,
threatened against Heritage LP which challenge or impair Heritage LP's ability
to execute, deliver and perform under this Agreement.
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The term "to Heritage LP's knowledge" as used in this Section
4.4 shall mean that the general partners of Heritage LP has no actual conscious
knowledge of facts inconsistent with the matters stated. In connection with the
foregoing representations, Heritage LP has made no specific examination of files
or records, nor has Heritage LP made inquiry of any other employee of Heritage
LP, its advisor, or any management company of Heritage LP. No constructive
knowledge of any matter shall be imputed to Heritage LP as to matters not within
the actual conscious knowledge of the above-named persons, and no personal
liability shall attach to such persons as a result of any violation of any
representation or warranty. A breach of a representation set forth in this
Section 4 by Heritage LP shall constitute a failure of the condition set forth
in Section 7.2(a).
4.5 Disclaimer of Warranty. Except as expressly set forth in this
Agreement, the contribution of the Property to Heritage LP is made on an "AS IS"
basis. The REIT Parties acknowledge that, except as expressly provided in this
Agreement, neither Transferor nor any of its agents have made any
representations, warranties, promises, covenants or guaranties of any kind or
character whatsoever, express or implied, oral or written, with respect to the
Property or the suitability or fitness of the Property for any particular use or
purpose.
ARTICLE 5
CONTINUATION AND SURVIVAL
OF REPRESENTATIONS AND WARRANTIES
---------------------------------
Each of the representations and warranties contained in this
Agreement shall be true and correct on and as of the Closing Date and at all
times between the execution of this Agreement and the Closing Date with the same
force and effect as if made at each of such times, except to the extent, if any,
that such representations and warranties shall be affected by transactions
contemplated by this Agreement. All such representations and warranties shall
survive the consummation of the transactions contemplated by this Agreement for
a period of six months following the Closing Date irrespective of any
investigations or inquiries made by any party or any knowledge which any party
may now possess or which may hereafter come to any party's attention, and each
party shall be entitled to rely upon such representations and warranties
irrespective of any investigations, inquiries or knowledge.
ARTICLE 6
COVENANTS
---------
6.1 Covenants of MTP Parties. The MTP Parties agree that, unless the
REIT otherwise agrees in writing, at all times prior to the Closing Date:
(a) Preservation of Business. The MTP Parties shall use their
best efforts to (i) preserve intact the present business organization of
Transferor; (ii) preserve the present
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goodwill and advantageous relationships of Transferor with all persons having
business dealings with Transferor; and (iii) preserve and maintain in force all
licenses, registrations, franchises, patents, trademarks, copyrights, bonds and
other similar rights of Transferor. The MTP Parties and its subsidiaries shall
maintain in force all property, casualty, crime, directors, and officers and
other forms of insurance which they are presently carrying.
(b) Actions With Respect to the Property Prior to Closing.
(i) Transferor agrees that prior to the Closing it
shall continue to operate and manage the Real Property in the ordinary course of
business in accordance with past practice (which includes the maintenance and
management of the Property) and shall perform regular maintenance, maintain
existing insurance coverage, perform its obligations under all leases with
tenants, Service Contracts and Loan Documents applicable to the Real Property,
commit no waste to the Property and pay and discharge, in the ordinary course of
business, liabilities and obligations relating to the Real Property. Transferor
shall not, without the prior consent of the REIT, which consent shall not be
unreasonably withheld or delayed, incur, create or assume any new indebtedness,
other than accounts payable, taxes and similar amounts incurred in the ordinary
course of business, nor grant any new lien, mortgage, security interest or
pledge of any kind on the Real Property prior to the Closing.
(ii) Transferor agrees that prior to the Closing it
shall consult with the REIT prior to terminating any Lease or Service Contract
(except in the ordinary course of business) or entering into or modifying any
contract or agreements relating to the Real Property which would be binding on
Heritage LP or the REIT after the Closing. The REIT shall have the right to
approve, such approval not to be unreasonably withheld or delayed, any material
new contracts or contract modifications which are proposed by Transferor.
(iii) Transferor may enter into new Leases and modify
existing Leases relating to the Real Property without the REIT's consent so long
as such leases comply with the leasing standards existing on the date hereof
with respect to the applicable property with such exceptions as are typically
made in the ordinary course of business and are on Transferor's standard form,
subject to customary modifications thereto.
(iv) Transferor shall notify the REIT of any matters
that may arise prior to the Closing that could have a material adverse effect on
the Property and become known to the Transferor, such as pending or threatened
litigation, notices of violations from governmental or quasi-governmental
authorities or agencies, tenant defaults, bankruptcies or insolvencies and
asserted landlord defaults.
(v) Except with the prior written consent of the REIT
(which consent shall not to be unreasonably withheld or delayed), Transferor
shall not accept rents or occupancy payments from any tenant at the Real
Property for more than one month in advance except in the ordinary course of
business.
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(c) Books and Records. Transferor shall maintain its books,
accounts and records in the usual, regular and ordinary manner, and on a basis
consistent with prior years, and shall comply with all laws applicable to it or
to the conduct of its business.
(d) Consents and Approvals. The MTP Parties shall obtain all
necessary consents and approvals of other persons and governmental authorities
to the performance by the MTP Parties of the transactions contemplated by this
Agreement. The MTP Parties shall make or cause to be made all filings,
applications, statements and reports to all federal and state government
agencies or entities that are required to be made prior to the Closing Date by
or on behalf of the MTP Parties pursuant to any statute, rule or regulation in
connection with the transactions contemplated by this Agreement.
(e) Access to Property. During the Due Diligence Period, and
at all times prior to the Closing Date, Transferor and MTP shall provide the
REIT and Heritage LP as well as their respective employees, contractors,
consultants, agents and representatives, with complete access to all files,
books, records and other materials in the possession or control of Transferor or
MTP and relating to the Property and the right to examine, inspect and make
copies of such materials as they may deem appropriate. Transferor shall also
provide for such parties to have reasonable access to the Real Property
(including the Improvements thereon) for the purpose of conducting surveys,
architectural, drainage, soils, mechanical systems, engineering, geotechnical
and environmental inspections and tests (including sampling and invasive testing
for the presence of Hazardous Materials performed in connection with Phase I and
Phase II environmental audits), feasibility studies and any other inspections,
studies or tests reasonably required by them. The REIT shall also have the right
to conduct a "walk-through" of the Property prior to the Closing Date upon
appropriate notice, subject to the rights of all tenants under their Leases.
(f) Information Regarding the Property. It is the intention of
the parties that Transferor and MTP will disclose to the REIT and the other
parties performing the due diligence review herein provided for any and all
information in the possession or control of such parties, their property
managers, and any other affiliated entity to the extent it relates to the
Property. In the course of its investigations, the REIT may make inquiries to
third parties including, without limitation, tenants, the Lender, contractors,
property managers, parties to other contracts and municipal, local and other
government officials and representatives, and the Transferor consents to such
inquiries. Transferor and MTP shall also make available to the REIT all the
books and records, financial statements, income tax returns, contracts, employee
records and other information with respect to Transferor as may be reasonably
required by the REIT in order to perform its due diligence review of Transferor.
(g) Truth of Representations and Warranties. None of the MTP
Parties shall take or suffer or permit any action that would render untrue any
of the representations or warranties of the MTP Parties in any material respect
herein contained, nor shall the MTP
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Parties omit to take any action, the omission of which would render untrue any
such representation or warranty in any material respect.
6.2 Further Covenants of the MTP Parties. The MTP Parties agree that,
unless the REIT otherwise agrees in writing, on or prior to the Commitment Date
Transferor shall deliver:
(a) Identification of LP Unit Recipients. An updated list
substantially in the form of Schedule VIII attached hereto designating (i) the
names of the partners of Transferor that shall receive LP Units and (ii) the
number of LP Units to be received by each such partner of Transferor.
(b) Representation Letters. Representation Letters
substantially in the form of Exhibit H attached hereto duly executed by each
partner of Transferor designated by Transferor in Schedule VIII attached hereto
and updated pursuant to Section 6.2(a) hereof.
6.3 Covenants of the REIT Parties. The REIT Parties agree that unless
MTP otherwise agrees in writing, at all times prior to the Closing Date:
(a) Books and Records. The REIT Parties shall maintain their
books, accounts and records in the usual, regular and ordinary manner, and on a
basis consistent with prior years, and shall comply with all laws applicable to
them or to the conduct of their business.
(b) No Organic Change. The REIT Parties shall not (i) amend
their Articles of Incorporation or bylaws other than the amendment to the REIT's
Articles of Incorporation set forth in the REIT's proxy statement relating to
the REIT's annual meeting of stockholders to be held on August 20, 1997; (ii)
make any change in their capital stock by reclassification, subdivision,
reorganization or otherwise; or (iii) change the character of their business.
(c) Consents and Approvals. The REIT Parties shall use their
best efforts to obtain all necessary consents and approvals of other persons and
governmental authorities to the performance by them of the transactions
contemplated by this Agreement. The REIT Parties shall make or cause to be made
all filings, applications, statements and reports to all federal and state
government agencies or entities that are required to be made prior to the
Closing Date by or on behalf of the REIT Parties pursuant to any statute, rule
or regulation in connection with the transactions contemplated by this
Agreement.
(d) Truth of Representations and Warranties. The REIT Parties
shall not take or suffer or permit any action that would render untrue in any
material respect any of the representations or warranties of the REIT Parties
herein contained, nor shall the REIT Parties omit to take any action, the
omission of which would render untrue any such representation or warranty in any
material respect.
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(e) Indemnity. Prior to the Closing, the REIT shall not place
any liens on the Property and will indemnify, defend and hold Transferor
harmless from all claims and liabilities (including reasonable attorneys' fees
and expenses actually incurred) asserted against Transferor or its owners as a
result of any entry by or on behalf of the REIT onto the Property. If any
inspection or test disturbs the Property, the REIT will cause the damaged
property to be restored to the same condition as existed prior to any such
inspections or tests.
6.4 Mutual Consent to Use Best Efforts. Subject to the terms and
conditions of this Agreement, and subject to fiduciary duties under applicable
law, as advised by counsel, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
using its best efforts to make all necessary, proper or advisable registrations
and filings and obtain all necessary, proper or advisable permits, consents,
authorizations, requests and approvals of third parties and governmental
authorities. It at any time after the Closing Date, any further action is
necessary or desirable to carry out the purposes of this Agreement (including
providing any information in any way related to the assets to be purchased
pursuant to this Agreement), the proper partners, officers and directors of each
party to this Agreement shall take all such action.
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to REIT Parties Obligation to Close. Notwithstanding
anything to the contrary herein, the REIT Parties obligations at the Closing to
consummate the transactions contemplated hereunder (including the REIT's
obligations to accept for payment or pay for any Transferor Partnership
Interests tendered by a Transferor Partner and Heritage LP's obligations to
consummate the Asset Transfer) shall be contingent on the satisfaction of the
following conditions at the Closing (or the waiver thereof by each of the REIT
Parties in their sole and absolute discretion):
(a) Accuracy of Representations and Warranties. The
representations and warranties of Transferor contained herein shall be true and
correct in all material respects at Closing as if made as of the Closing Date
(however, if a particular representation or warranty shall be made only to
Transferor's knowledge, then the condition under this Section 7.1(a) shall not
be deemed to be fulfilled with respect to such items unless the same would be
fulfilled if such limitation did not exist; provided, however, in the event that
Transferor receives notice of a condition within 15 days of the Expiration Date
that would render a particular representation or warranty untrue or incorrect,
such Transferor shall be entitled 15 calendar days from such notice to cure such
condition and, if necessary, the Expiration Date shall be extended accordingly).
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(b) Absence of Action or Proceeding. No action or proceeding
by any governmental agency shall have been instituted or threatened that would
enjoin, restrain or prohibit, or that could reasonably be expected to result in
substantial damages in respect of the Property that in the reasonable judgment
of the REIT Parties make it inadvisable to consummate such transaction, and no
court order shall have been issued in any action or proceeding instituted by any
person that enjoins, restrains or prohibits the consummation of the transactions
contemplated by this Agreement with respect to Transferor and no proceeding for
such an order shall have been instituted that in the reasonable judgment of the
REIT or Heritage LP is likely to result in the issuance of such an order.
(c) Transferor's Deliveries. Transferor shall have delivered,
or caused to be delivered, each of the items specified in Section 8.3 and
Section 8.6 hereof that Transferor is required to deliver and Transferor shall
have performed in all material respects each of the other obligations required
to be performed by it under this Agreement.
(d) Compliance with Agreements and Covenants. Each of the MTP
Parties shall have performed and complied with each of their agreements,
covenants, and obligations to be performed on or prior to the Closing Date
except those calling for performance after the Closing Date.
(e) Letters of Transmittal Delivery. The Custodian shall have
delivered, or caused to be delivered to the REIT, a properly completed and
executed Letter of Transmittal for each Transferor Partner participating in the
Exchange Offer.
(f) Performance or Waiver of Due Diligence. Prior to 15 days
after receipt of each of the Title Report, the Survey, the UCC Searches, the
Loan Documents or other information to be provided or made available by
Transferor (the "Due Diligence Period"), the REIT shall have performed or waived
its due diligence review and examination of such Title Report, Survey, UCC
Searches, Loan Documents and all information to be provided or made available by
Transferor and shall have determined in its sole and absolute discretion, to
proceed with the transactions contemplated under this Agreement. It is agreed
that as of the date hereof, the REIT has accepted the physical condition of the
Property as it exists on the date hereof in all respects; therefore, the REIT
Parties shall not be entitled to terminate this Agreement due to the physical
condition of the Property. Except to the extent covered by a representation or
warranty made in this Agreement, a failure of the REIT to timely terminate this
Agreement within the Due Diligence Period shall be a deemed acceptance by the
REIT of all aspects of the condition of the Property, the Title Report, and the
Survey by the REIT.
(g) Approval of Title Report, Survey or UCC Searches. The REIT
shall have approved, in its sole discretion, all matters disclosed by the Title
Report, Survey or UCC Searches. If any person subsequently issues any amendment
to the Title Report, Survey or UCC Searches disclosing any additional matters or
changes in the legal description or additional requirements of the REIT, the
REIT shall have approved any such matter not disclosed by the
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Title Report, Survey or UCC Searches or any previous amendment thereto. On or
before fifteen (15) days after the Title Company has delivered to the REIT the
Title Report, Survey or UCC Searches (or any amendments thereto) the REIT shall
give written notice of such approval or objection to Transferor and the Title
Company specifying in reasonable detail any matter to which the REIT objects. If
the REIT delivers any notice of objection to any matter, within five (5) days
after receipt of such objection, Transferor shall notify in writing the REIT and
the Title Company whether Transferor is unable or unwilling to remove or satisfy
such matter objected to by the REIT on or before Closing. If the REIT fails to
notify Transferor and the Title Company at least twenty (20) days prior to the
Closing Date of any objections to the Title Report, Survey or UCC Searches or
any amendment or modification thereto, then the REIT shall be deemed to not
object to any matter in the Title Report, Survey or UCC Searches or any
modification thereto.
(h) Title Company Deliveries. At the Closing, as a condition
to the REIT Parties obligation to close, the Title Company shall deliver to the
REIT (i) an Owner's Policy of Title Insurance (the "Title Policy") issued by the
Title Company, covering the Property in the form prescribed by the State Board
of Insurance for use in Texas, the Title Policy to be dated the date of the
recording of the applicable deed covering the Real Property covered thereby and
to be in the amount of the Deemed Value of the respective Real Property covered
thereby (which allocation shall be provided by Transferor), insuring Heritage LP
as owner of good and indefeasible title to the Survey legal description of the
Real Property covered thereby and subject only to the Permitted Exceptions that
are applicable to such Real Property and such exceptions as are required by
applicable Texas law to be included in Schedule B to each such policy of title
insurance; and (ii) updated UCC searches from the State of Texas disclosing no
security interests or liens affecting the Property other than those to be
released at the Closing and other than those created pursuant to the Transferred
Debt. Transferor shall comply with all requirements to the issuance of the Title
Policy to be delivered at Closing and shall execute at Closing such affidavits
and indemnities as may be appropriate under applicable facts and as reasonably
required by the Title Company in order for it to issue such above-referenced
Title Policy.
(i) Mortgage Debt. The Lender shall have consented to the
transfer of the Property subject to the Transferred Debt as contemplated by
Section 2.3, or Heritage LP shall have agreed to refinance or pay off such
Mortgage Debt.
(j) Receipt of Opinion of Counsel. The REIT and Heritage LP
shall have received a favorable opinion of Kim Lawrence, Esq., counsel for
Transferor, in form and substance satisfactory to the REIT's and Heritage LP's
counsel, dated the Closing Date, and confirming the matters set forth on Exhibit
F attached hereto, subject to customary qualifications.
(k) Governmental and Agency Approvals. The REIT or Heritage LP
shall have received all governmental and agency approvals for (i) the issuance
of REIT Stock, LP Units and GP Units in connection with the transactions hereby
contemplated, (ii) the listing of
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the REIT Stock issued in connection with the Exchange Offer hereby contemplated
on the American Stock Exchange, and (iii) the registration for resale of REIT
Stock issued in connection with the Exchange Offer.
(l) Updating of Rent Roll. The Rent Roll shall have been
updated to the Closing in the form of Schedule IX attached hereto.
(m) Acquisition of Smith Summit. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Smith Summit Agreement shall be consummated.
(n) Acquisition of Merit Place. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Gentry Place Agreement shall be consummated.
7.2 Conditions to Transferor's Obligations to Close. Notwithstanding
anything to the contrary herein, Transferor's obligations at the Closing to
consummate the transactions contemplated hereunder shall be contingent on the
satisfaction of each of the following conditions at the Closing (or the waiver
thereof by Transferor in its sole and absolute discretion):
(a) Accuracy of Representations and Warranties. The REIT's and
Heritage LP's representations and warranties contained herein shall be true and
correct in all material respects at Closing as if made as of the Closing Date.
(b) REIT's Deliveries. The REIT shall have delivered, or
caused to be delivered, each of the items specified in Section 8.5 and Section
8.7 hereof and shall have performed each of the other obligations required to be
performed hereunder.
(c) Heritage LP's Deliveries. Heritage LP shall have
delivered, or caused to be delivered, each of the items specified in Section 8.8
hereof and shall have performed each of the other obligations required to be
performed hereunder.
(d) Absence of Action or Proceeding. No action or proceeding
by any governmental agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in respect
of this Agreement or the consummation of the transactions contemplated by this
Agreement, and would in the reasonable judgment of the REIT Parties make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any other party which enjoins,
restrains or prohibits this Agreement or consummation of the transactions
contemplated by this Agreement.
(e) Receipt of Opinion of Counsel. Transferor shall have
received a favorable opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, P.A.
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("O'Connor Cavanagh"), counsel for REIT, in form and substance satisfactory to
Transferor's counsel, dated the Closing Date, and confirming the matters set
forth on Exhibit E attached hereto, subject to customary qualifications.
(f) Acquisition of Smith Summit. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Smith Summit Agreement shall be consummated.
(g) Acquisition of Merit Place. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Gentry Place Agreement shall be consummated.
ARTICLE 8
CLOSING
-------
8.1 Closing Date. The consummation of the transactions contemplated
hereby with respect to the Property, Transferor, Transferor Partners
participating in the Exchange Offer, and the REIT Parties (the "Closing") shall
occur at the offices of the Title Company in Dallas, Texas or such other place
to which the parties may agree on a date (the "Closing Date") that shall be
selected by the REIT, but in no event shall be earlier than August 15, 1997 or
later than September 12, 1997, unless extended by (i) the mutual consent of the
REIT and MTP or (ii) MTP pursuant to Section 7.1(a) (the "Expiration Date"). A
pre-closing conference shall commence at least three (3) business days prior to
the Closing Date, during which all deliveries (other than the REIT Capital
Contribution) shall be made into an escrow between the parties. All deliveries
made during this pre-closing period shall be deemed deliveries made at the
Closing.
8.2 Sequence of Closings. Deliveries of all documents to effect each of
the transactions contemplated by this Agreement shall be deemed to be made
simultaneously and in escrow. The Closing of each of the transactions
contemplated by this Agreement shall be contingent on the satisfaction of
conditions for each other transaction contemplated by this Agreement. The
transactions shall be deemed to occur in the following order:
first, the Exchange Offer shall be deemed to close and the
REIT shall be substituted as a limited partner of Transferor if partnership
interests in Transferor are tendered in the Exchange Offer; and
second, the Asset Transfer shall be deemed to close, and the
Property shall be contributed to Heritage LP in exchange for the Cash Payment
and the LP Units.
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8.3 Transferor Partners' Deliveries to Close the Exchange Offer. At the
Closing, each Transferor Partner who has tendered a Transferor Partner Interest
pursuant to the Exchange Offer shall cause the Custodian to deliver to the REIT
the following pursuant to the Custody Agreement:
(a) Letters of Transmittal. A Letter of Transmittal, completed
and duly executed by such Transferor Partner, in the form of Exhibit A hereto;
(b) Transferor Partner Interests. All right, title and
interest in and to the Transferor Partner Interests owned by Transferor Partner;
and
(c) Other Documents. Any other documents called for by the
Letter of Transmittal.
8.4 Custodian's Deliveries to Close the Exchange Offer. At the Closing,
the Custodian shall deliver to the REIT a copy of the Custody Agreement, which
was executed by the Custodian and each Transferor Partner who tendered
Transferor Partner Interests in the Exchange Offer and which were accepted for
purchase by the REIT.
8.5 REIT's Deliveries to Close the Exchange Offer. At the Closing, the
REIT shall deliver to each Transferor Partner who tendered Transferor Partner
Interests in the Exchange Offer by delivery to the Custodian pursuant to the
Custody Agreement, the following:
(a) REIT Stock. A certificate representing the number of
validly issued, fully paid, and non-assessable shares of REIT Stock each in the
amounts calculated pursuant to Section 1.1 hereof attributable to all Transferor
Partner Interests tendered by such Transferor Partner, with such certificate
registered in the name of each respective Transferor Partner.
(b) Officer's Certificate. A certificate signed by a duly
authorized officer of the REIT stating that the REIT's representations and
warranties contained herein are true and correct on and as of the Closing Date
with the same force and effect as if made on the Closing Date and that all
covenants and agreements required to be performed by the REIT under this
Agreement prior to the Closing have been performed in accordance with the terms
of this Agreement.
(c) Opinion. A copy of the opinion of counsel addressed to the
Custodian on behalf of such Transferor Partner as to the matters set forth in
Exhibit E attached hereto, subject to customary qualifications.
8.6 Transferor's Deliveries to Close the Asset Transfer. At the
Closing, Transferor shall deliver or cause to be delivered to Heritage LP the
following:
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(a) Partnership Agreement. The Partnership Agreement duly
executed by Transferor or any partner of Transferor that will receive LP Units
in the Asset Transfer.
(b) Deed. Special Warranty Deed for the Real Property,
executed and acknowledged by Transferor, conveying to Heritage LP indefeasible,
fee simple title to the Real Property with appropriate provisions reflecting
that the conveyance made by Special Warranty Deed is made and accepted subject
to the Permitted Exceptions applicable to the Real Property and any title
exceptions insured over by the Title Company, in such form and containing such
terms and provisions as shall be satisfactory to and approved by the parties to
the Special Warranty Deed.
(c) Assignment of Leases. An Assignment and Assumption of
Leases, executed and acknowledged by Transferor and Heritage LP, vesting in
Heritage LP all right, title and interest of the landlord under the Leases,
containing a warranty by Transferor that the right, title and interest assigned
by it is free and clear of liens and charges and is not subject to any other
assignment, transfer or hypothecation, other than those existing pursuant to the
Transferred Debt, if applicable, and containing an assumption by Heritage LP of
all obligations of Transferor, as lessor, under the Leases arising after
Closing.
(d) Bill of Sale. Bill of sale, executed and acknowledged by
Transferor, transferring and assigning to Heritage LP all of the Tangible
Personal Property and containing a limited or special warranty of title and a
warranty by Transferor that such property conveyed by it is free and clear of
liens and charges and is not subject to any other assignment, transfer or
hypothecation, other than those existing pursuant to the Transferred Debt, if
applicable, in such form and containing such terms and provisions as shall be
satisfactory to and approved by the parties to such Bill of Sale.
(e) Assignment of Intangible Personal Property. Assignment of
Intangible Personal Property, executed and acknowledged by Transferor,
transferring and assigning, without recourse, warranty or representation except
as otherwise expressly provided herein, to Heritage LP Transferor's right, title
and interest in and to all of the Intangible Personal Property and containing a
warranty by Transferor that such right, title and interest is free and clear of
liens or charges and is not subject to any other assignment, transfer or
hypothecation, other than those existing pursuant to the Transferred Debt, if
applicable.
(f) FIRPTA. A Foreign Investment in Real Property Tax Act
affidavit executed by each Transferor.
(g) Tenant Notification. Notification letters to be delivered
to all tenants at the Real Property, executed by Transferor, providing notice
that the interest of Transferor in Lease has been assigned to Heritage LP, and
providing notice of the address for the future payment of rents and other
charges and fees.
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(h) Updated Rent Roll, Schedule of Service Contracts, Schedule
of Tenant Improvement Agreements and Operating Statements. For the Real
Property, an updated Rent Roll, Schedule of Service Contracts and Operating
Statement, certified by Transferor as true, accurate and complete as of the
Closing Date.
(i) Title Policies and UCC Searches. The Title Policy
delivered within a reasonable time after the Closing if that is the custom for
the locality, provided that the Title Company at the Closing issues a duly
executed "marked-up" Title Commitment, or otherwise irrevocably commits to issue
a title policy in accordance with Heritage LP's instructions, effective the time
and date of the recording of the deed of the Real Property into Heritage LP and
irrevocably commits in writing to the Title Policy in the form of the respective
"marked-up" Title Commitment within no more than sixty (60) days after the
Closing Date, together with updated UCC Searches.
(j) Certificate. A certificate signed by MTP on behalf of
Transferor and MTP, stating that Transferor's and MTP's representations and
warranties contained herein are true and correct in all material respects on and
as of the Closing Date with the same force and effect as if made on the Closing
Date.
(k) Authority. Evidence of organization, existence and
authority of Transferor and the authority of the person executing documents on
behalf of Transferor reasonably satisfactory to the REIT.
(l) Opinion. An opinion of counsel of Transferor in the form
attached hereto as Exhibit F and subject to such customary qualifications as may
be reasonably acceptable to the REIT.
(m) Tax Reporting Documents. Any and all document stamps,
transfer taxes, affidavits of property value, and other documents required by
states in connection with the transfer of real property.
(n) Asset Transfer Registration Agreement. The Asset Transfer
Registration Agreement duly executed by Transferor.
(o) State Law Disclosures. Such disclosures and reports,
including any applicable certificate of residence or exemption with respect to
withholding requirements required by applicable state and local law in
connection with the conveyance of real property.
(p) Loan Documents. All instruments and agreements required by
the Lender in connection with the transfer of the Transferred Debt to Heritage
LP; including (i) the consents and estoppels of the Lender ("Lender Consents")
to the transfer of the Property subject to the Transferred Debt, on such terms
as are acceptable to the REIT, without change in any of the
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material terms of the Loan Documents governing the Transferred Debt, including,
without limitation, amortization, interest rate and maturity date provisions.
(q) Contracts Not Terminable. A certificate duly executed by
the general partner of Transferor setting forth those contracts relating to
services provided under Section 4.1(b)(i) that are not terminable upon 30 days
written notice without penalty.
(r) Additional Documents. Any additional documents that the
Lender or the Title Company may reasonably require for the proper consummation
of the transactions contemplated by this Agreement.
8.7 REIT's Deliveries to Close the Asset Transfer. At the Closing, the
REIT and Heritage SGP shall deliver to Heritage LP, or cause to be delivered,
the following:
(a) Partnership Agreement. The Partnership Agreement, executed
by the REIT and Heritage SGP, together with all filings with any governmental
authority or agency required to be made by or on behalf of Heritage LP.
(b) REIT Capital Contribution. Payment of the REIT Capital
Contribution by the REIT and Heritage SGP to Heritage LP in immediately
available funds.
(c) Officers' Certificate. A certificate of the Chairman and
Chief Financial Officer of the REIT stating that the REIT's representations and
warranties contained herein are true and correct in all material respects on and
as of the Closing Date with the same force and effect as if made on the Closing
Date.
(d) Authority. Evidence of organization, existence and
authority of the REIT and the authority of any person executing documents on
behalf of the REIT.
(e) Additional Documents. Any additional documents that the
Lender or the Title Company may reasonably require for the proper consummation
of the transactions contemplated by this Agreement.
(f) Asset Transfer Registration Agreement. The Asset Transfer
Registration Agreement duly executed by the REIT.
8.8 Heritage LP's Delivery to Close the Asset Transfer. At the Closing,
Heritage LP shall deliver, or cause to be delivered, to each Transferor, the
following:
(a) Cash and LP Units. That number of LP Units and amount of
cash as calculated in accordance with Section 2.2(b).
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(b) Conveyance Documents. All acceptances and assumptions set
forth in the conveyance and assignment documents for the Property, executed and
acknowledged by Heritage LP.
(c) Loan Documents. All instruments and agreements reasonably
required by the Lender in connection with the transfer of the Transferred Debt
to Heritage LP, executed by Heritage LP, if required; and the disbursements by
Heritage LP of the REIT Capital Contribution to the Lender on behalf of Heritage
LP in accordance with Section 2.3 hereof in order to repay in full such portion
of the Mortgage Debt that is not Transferred Debt.
(d) Opinion. An opinion of counsel of O'Connor Cavanagh as to
the matters set forth in Exhibit E attached hereto and subject to such customary
qualifications as may be reasonably acceptable to the general partner of
Transferor.
(e) State Law Disclosures. Such disclosures and reports
required by applicable state and local law in connection with the conveyance of
real property.
(f) General Partner's Certificate. A certificate of an
authorized officer of the REIT, as general partner of Heritage LP, stating that
the representations and warranties of Heritage LP set forth herein are true and
correct in all material respects as of the Closing Date with the same force and
effect as if made at the Closing Date.
8.9 Property Closing Costs. All transfer fees or stamp taxes and
recording fees required to be paid to record the deeds and any loan assignment
documents with respect to the Property together with any commissions set forth
in Schedule IV shall be paid by Transferor. The costs of the Title Report, the
Survey and the UCC Searches and the costs of recording any documents required to
satisfy or release Title Objections shall be paid one-half by the REIT on behalf
of Heritage LP and one-half by the Transferor subject to the Title Report,
Survey, or UCC search. The premiums for the standard Title Policy shall be paid
one hundred percent (100%) by Transferor immediately prior to the Closing. The
cost of any additional endorsement or upgrades to the Title Policy shall be paid
one hundred percent (100%) by the REIT. Notwithstanding the foregoing, in
connection with the transfer of the Property and Smith Summit and Park On
Preston (collectively, the "Other Properties"), Transferor's obligation to pay
the premiums for the Title Policy shall be limited to the amount of premiums
that would be payable if the Property and the Other Properties were insured
together in a single title policy, and Heritage LP shall pay the premiums in
excess of such amount; provided, however, if the Lender or the lenders of the
mortgage debt to which the Other Properties are subject require separate title
policies for the Property and each of the Other Properties, Transferor shall
have the obligation to pay the full amount of the premiums for such separate
title policy for the Property. In no event shall the Transferor be liable for
the payment of the title premium associated with amending the survey for the
Property. Any prepayment fees or premiums or assumption fees or costs in
connection with the assumption or repayment of any Mortgage Debt by Heritage LP
shall be paid by the REIT. All costs and expenses described in this Section 8.9
are herein called
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the "Property Closing Costs." The parties acknowledge that certain Property
Closing Costs may not be paid at Closing but will be paid in ordinary course
following the Closing.
8.10 Prorations. The items in this Section 8.10 with respect to the
Real Property shall be apportioned or prorated between the Transferor and
Heritage LP as of the end of the day preceding the Closing Date in order to
determine the amount of the Proration with respect to such Property. If the Cash
Payment considered payable to Transferor pursuant to Section 2.2(b) is not
received by the Title Company before 1:00 p.m., Dallas, Texas time, on the
Closing Date, the prorations shall be made as of the date in which the Closing
occurs (i.e., each Transferor shall receive rents and pay expenses for the day
of Closing with respect to such Transferor's Property). All prorations other
than the Dividend Distribution Offset set forth in Section 8.10(j) shall be
based upon a fraction determined by dividing the number of days elapsed through
the date of the Closing by 365. The parties shall compute or estimate all
prorations prior to the Closing Date, and Transferor shall supply Heritage LP
before the Closing satisfactory supporting evidence for all such adjustments:
(a) Taxes and Assessments. General real estate taxes and
assessments imposed by governmental authority ("Taxes") and any assessments by
private covenant constituting a lien or charge on the Real Property for the
then-current calendar year or other current tax period not yet due and payable,
together with, if applicable, state and local taxes thereon. If the Closing
occurs prior to the receipt of the tax bill for the Real Property for the
calendar year or other applicable tax period for the Real Property in which the
Closing occurs, Taxes for such calendar year or other applicable tax period for
the Real Property shall be prorated based upon the most recent ascertainable
assessed values and tax rates.
(b) Collected Rent. All collected rent and other income (and
any applicable state or local tax on rent) under Leases in effect at the Closing
but excluding payments that may constitute rent but are provided for in other
subparagraphs of this Section 8.10. Transferor shall be charged with any rentals
collected by Transferor before the Closing, but applicable to any period of time
after such Closing. Any rent and other income delinquent as of the Closing shall
not be prorated. Heritage LP shall use reasonable efforts (which efforts shall
not require Heritage LP or the REIT to initiate any lawsuit) to collect any rent
delinquent as of the Closing, and any rent delinquent as of the Closing but
collected after the Closing shall be applied first to current rent obligations
then to delinquent rent in inverse order of incurrence, with any amounts applied
to any period prior to the Closing remitted to Transferor. Heritage LP may treat
any rent received after the 27th of any month as rent for the next month. Once
the Closing has occurred, Transferor shall not have any right to seek by legal
action or otherwise collection of any rents delinquent for any period prior to
the Closing, unless the tenant has vacated the premises under the Lease before
the Closing and the Lease is not assigned to Heritage LP.
(c) Utilities. To the extent such expenses are the obligation
of Transferor and not tenants under Leases, utilities, including water, sewer,
electric, and gas, based upon the last reading of meters prior to the Closing.
If the utility company will not issue separate bills,
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Transferor's portion will be charged against Transferor and Heritage LP will pay
the entire bill after the Closing. If Transferor has paid any utilities in
advance in the ordinary course of business, then Transferor shall be credited
for Heritage LP's portion of such payment at the Closing. The amount of
deposits, if any, with utility companies that are transferrable and that are
assigned by Transferor to Heritage LP at the Closing shall be credited to
Transferor. The amount of any deposits with utility companies that are not
transferable and that are not assigned by Transferor to Heritage LP at the
Closing shall remain the property of Transferor.
(d) Fees and Charges Under Service Contracts. To the extent
such expenses are the obligations of Transferor and not of a tenant's under its
Lease, fees and charges under any Service Contracts that are being assigned to
and assumed by Heritage LP at the Closing on the basis of the periods to which
such Service Contracts relate.
(e) Transferred Debt. Interest accrued through the day prior
to the Closing Date and not yet due and payable and any principal, interest and
other amounts due and payable at the Closing Date pursuant to the Transferred
Debt; provided, however, transfer fees due and payable to holders of Transferred
Debt shall be paid in accordance with Section 8.9 hereof.
(f) Insurance. Premiums or other fees payable in connection
with any insurance policies that are being assigned to and assumed by Heritage
LP at the Closing.
(g) Other Expenses. All other liabilities related to the
ownership or operation of the Property that Heritage LP may agree to assume or
take subject to in writing.
(h) Contractors and Suppliers. Amounts payable to contractors,
subcontractors, designers, suppliers, architects, engineers and others who have
performed services or labor or supplied material in connection with the
Property.
(i) Leasing Commissions. Leasing or other fees or commissions
payable in connection with any Lease or any renewal or extension of any Lease,
but only to the extent that such fees or commissions have been disclosed to
Heritage LP and the REIT on the Rent Roll. For the avoidance of doubt, the
parties acknowledge that with respect to the majority of Leases, all commissions
due to brokers for the initial term of such Leases have been previously paid by
the Transferor on a "cash out" basis and there will be no proration of those
commissions at Closing; however, Heritage LP acknowledges that, as described on
the Rent Rolls, commissions for renewals and extensions of such Leases may be
due and payable in the future on a "cash out" basis at the time of the
applicable tenant's exercise of a renewal or option to extend or may be payable,
for such extension or renewal, on a monthly basis.
(j) Dividend Distribution Offset. An amount (the "Dividend
Distribution Offset") equal to (i) the product of (A) the total number of shares
of REIT Stock and LP Units issued in connection with the transactions
contemplated by this Agreement and (B) $.50 (the "Dividend Amount"), multiplied
by (ii) the ratio of (A) the difference between the total number
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of calendar days during the quarter in which the Closing occurs (the "Closing
Quarter") and the number of calendar days during the Closing Quarter prior to
the Closing Date and (B) the total number of calendar days during the Closing
Quarter shall be deposited in escrow by Transferor on the Closing Date. On the
date of distribution of the dividend payment for the Closing Quarter (the
"Dividend Distribution Date"), the Dividend Distribution Offset shall be
released to the REIT; provided, however, in the event that the REIT does not
issue a dividend in the Closing Quarter, the Dividend Distribution Offset as
calculated with the Dividend Amount shall be released to the Transferor on the
Dividend Distribution Date or in the event that the REIT issues a dividend of
less than $.50 in the Closing Quarter (the "Reduced Dividend Amount"), a portion
of the Dividend Distribution Offset equal to the amount of the difference
between (a) the Dividend Distribution Offset as calculated with the Dividend
Amount, and (b) the Dividend Distribution Offset as calculated with the Reduced
Dividend Amount shall be released to Transferor and the remaining amount of the
Dividend Distribution Offset shall be released to the REIT on the Dividend
Distribution Date.
8.11 Tenant Deposits. All tenant deposits, including without
limitation, refundable security deposits, refundable pet deposits and key
deposits, and advance rental deposits (and interest thereon if required by law
or contract to be earned thereon) shall be transferred to Heritage LP at the
Closing, and Heritage LP shall assume the obligations to refund such deposits to
such tenants in accordance with their respective Leases after Closing, but only
to the extent the obligation to refund such deposits arises after Closing.
8.12 Income and Sales Taxes. All income, sales, gross receipts or
compensation taxes and similar taxes and fees imposed upon Transferor under
applicable local or state law shall be paid by Transferor at the Closing.
8.13 Permit Fees. Customary fees payable with respect to the transfer
of permits and licenses assigned by Transferor to Heritage LP at the Closing
with the consent or approval, if required, of the issuer thereof shall be paid
by Heritage LP.
8.14 Wages. Transferor shall pay the wages, employment taxes and fringe
benefits applicable thereto payable to employees, if any, of Transferor as of
their discharge on the Closing Date.
8.15 Escrow Accounts. The parties acknowledge that the Transferred Debt
to be assumed has Escrow Accounts. Upon the Closing (a) if requested by
Transferor, Heritage LP shall reimburse Transferor for the amount Transferor has
deposited into the Escrow Account with respect to the Real Property, whereupon
Transferor shall assign to Heritage LP, and Heritage LP shall have sole right
and ownership of, all funds in such Escrow Account; or (b) each Transferor shall
withdraw all funds that it has deposited in each Escrow Account, whereupon
Heritage LP shall make the appropriate deposits into the Escrow Account.
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ARTICLE 9
RISK OF LOSS
------------
9.1 Damage. The risk of loss of or damage to the Real Property by
reason of any insured or uninsured casualty during the period up to and
including the Closing Date shall be borne by Transferor. In the event of any
material damage to or destruction of the Real Property or any portion thereof
(notice of which shall promptly be given to the REIT by Transferor), the REIT
may, at its option by notice to Transferor given within ten (10) days after the
REIT is notified of such damage or destruction (and the Closing shall be
extended, if necessary to give the REIT such 10-day period to respond to such
notice) (i) elect to proceed under this Agreement with respect to the Property,
in which event Transferor shall, at the Closing, assign to Heritage LP all
insurance proceeds (including rent loss insurance to the period from and after
the Closing Date) for the damage, Heritage LP shall assume responsibility for
the repair of the Real Property, and Heritage LP shall receive a credit at the
Closing for any uninsured portion of the damage and any deductible under the
insurance policy; or (ii) terminate this Agreement. In the event of any damage
to or destruction of the Real Property or any portion thereof is not material
(notice of which shall promptly be given to the REIT Parties by Transferor),
Transferor shall, at the Closing, assign to Heritage LP all insurance proceeds
(including rent loss insurance to the period from and after the Closing Date)
for the damage, the REIT shall assume responsibility for the repair of the Real
Property, and Heritage LP shall receive a credit at the Closing for any
uninsured portion of the damage and any deductible under the insurance policy.
"Material damage" and "materially damaged" means, with respect
to the applicable Real Property, damage for which the cost to repair reasonably
exceeds ten percent (10%) of such Property's Deemed Value.
9.2 Condemnation. In the event of any threatened, commenced or
consummated proceedings in eminent domain, including, without limitation, any
conveyance in lieu thereof (notice of which shall promptly be given to the REIT
by Transferor) (a "Condemnation Proceeding"), which would constitute a material
condemnation respecting Real Property, the REIT may, at its option, by notice to
Transferor given within ten (10) days after the REIT is notified of such actual
or possible proceedings (and the Closing shall be extended, if necessary, to
give the REIT such 10-day period to respond to such notice) (i) elect to proceed
under this Agreement with respect to the Property, in which event Transferor
shall, at the Closing, assign to Heritage LP its entire right, title and
interest in and to any condemnation award, and Heritage LP shall have the sole
right prior to Closing (subject to Transferor's approval which shall not be
unreasonably withheld or delayed) and after the Closing to negotiate and
otherwise deal with the condemning authorities in respect of such matters; or
(ii) terminate this Agreement. In the event that a Condemnation Proceeding would
not constitute a material condemnation respecting the Real Property, Transferor
shall, at the Closing, assign to Heritage LP its entire right, title and
interest in and to any condemnation award, and Heritage LP shall have the sole
right prior to Closing (subject to Transferor's approval that shall not be
unreasonably withheld or delayed)
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and after the Closing to negotiate and otherwise deal with the condemning
authorities with respect of such matters.
"Material condemnation" means with respect to the Real
Property, a taking of (i) more than ten percent (10%) of the land constituting
the Real Property, (ii) more than ten percent (10%) of the parking for the
buildings on the Real Property (unless the same can, on the remaining Real
Property so affected, be replaced), (iii) any part of the buildings on the Real
Property, (iv) a means of access to the Real Property unless alternative means
of access exist which in the REIT's judgment are adequate to serve the Real
Property, or (v) materially adversely affect the use or value of the Real
Property.
ARTICLE 10
WAIVER; MODIFICATION; TERMINATION; REMEDIES
-------------------------------------------
10.1 Waivers. The failure of the MTP Parties to comply with any of
their respective obligations, agreements or conditions as set forth herein may
be waived expressly in writing by the REIT, by action of its Board of Directors.
The failure of the REIT Parties to comply with any of its obligations,
agreements or conditions as set forth herein may be waived expressly in writing
by the MTP Parties by action of MTP as general partner.
10.2 Modification. This Agreement may be modified at any time in any
respect by the mutual consent of all of the parties, notwithstanding prior
approval by the Transferor Partners; provided, however, the terms of the
Exchange Offer shall not be amended or modified after the Commitment Date as set
forth in Section 1.1(f). Any such modification may be approved for the REIT by
its Board of Directors or for Transferor by its general partner.
10.3 Termination. This Agreement may be terminated at any time before
the Closing Date, by the Board of Directors of the REIT or by Transferor (by
action of its general partner or partners):
(a) By either Transferor or the REIT if the Closing Date shall
not have occurred on or before the Expiration Date; provided, however, that
Transferor's right to terminate this Agreement under this Section 10.3(a) shall
not be available if one of the MTP Parties' failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing Date to occur before the Expiration Date and the REIT's right to
terminate this Agreement under this Section 10.3(a) shall not be available if
one of the REIT Parties' failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing Date to occur
prior to the Expiration Date;
(b) By either Transferor or the REIT if a court of competent
jurisdiction or governmental regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties shall use
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their commercially reasonably efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and non-appealable;
(c) By Transferor if a REIT Party shall have breached, or
failed to comply with, in any material respect any of its obligations under this
Agreement or any Related Agreement, and such breach or failure is not cured
within 30 days following written notice thereof by Transferor;
(d) By the REIT if a MTP Party shall have breached, or failed
to comply with, in any material respect any of the obligations under this
Agreement or any Related Agreement, and such breach or failure is not cured
within 30 days following written notice thereof by the REIT;
(e) By Transferor if a representation or warranty of a REIT
Party made in this Agreement or a Related Agreement is not true and correct in
any material respect;
(f) By the REIT if a representation or warranty of a MTP Party
made in this Agreement or a Related Agreement is not true and correct in any
material respect;
(g) By the REIT in its sole and absolute discretion prior to
the expiration of the Due Diligence Period, by delivery to Transferor of notice
of termination pursuant to this Section 10.3(g); or
(h) By mutual written consent of the general partner of
Transferor and the REIT.
(i) By the REIT in its sole and absolute discretion pursuant
to Section 9.1 or Section 9.2 as a result of material damage to or condemnation
of all or a portion of the Property.
(j) By either Transferor or the REIT if the transactions
contemplated by the Smith Summit Agreement and the Gentry Place Agreement are
not consummated simultaneously with the transactions contemplated herein.
10.4 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.3 hereof, this Agreement shall forthwith
become void and there shall be no liability on the parties hereto, except as
provided in this Section 10.4:
(a) Breach by REIT Parties. If this Agreement is terminated by
the Transferor under Section 10.3(c) or Section 10.3(e), the MTP Parties shall
be entitled to immediately receive the Earnest Deposit.
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<PAGE>
(b) Breach by MTP Parties.
(i) If this Agreement is terminated by the REIT under
Section 10.3(d) or Section 10.3(f), (1) the REIT Parties shall be entitled to
the prompt reimbursement from the Transferor of all out-of-pocket costs
(including, without limitation, attorney's fees and disbursements) incurred by
the REIT Parties in connection with the transactions contemplated by this
Agreement, (2) the REIT Parties, jointly and severally, shall have all rights
and remedies to which they may be entitled in equity and under this Agreement,
including, without limitation, specific performance, and (3) in the event that
the REIT seeks specific performance of the transactions contemplated herein, the
REIT Parties shall be entitled to all out-of-pocket costs (including, without
limitation, attorney's fees and disbursements) incurred by the REIT Parties in
connection with seeking such specific performance. In the event that this
Agreement is terminated by the REIT pursuant to Section 10.3(d), the REIT shall
return all documents delivered or prepared for the REIT Parties relating to the
Property.
(ii) If this Agreement is terminated by the REIT
Parties pursuant to Section 10.3(d) or Section 10.3(f) herein, the REIT Parties
shall be entitled to the prompt reimbursement for all out-of-pocket costs
(including, without limitation, attorneys' fees, filing fees, and disbursements)
incurred by the REIT Parties in connection with its preparation and filing of
the Registration Statement and any amendments or supplements thereto.
ARTICLE 11
DEFINITIONS
-----------
"Accredited Investor" shall mean an accredited investor as defined in Regulation
D promulgated under the Securities Act.
"Asset Transfer" has the meaning set forth in the recitals hereof.
"Asset Transfer Registration Agreement" has the meaning set forth in the
recitals hereof.
"Cash Allocation" has the meaning set forth on Schedule V attached hereto.
"Cash Payment" has the meaning set forth in Section 2.2(b)(i) hereof.
"CERCLA" has the meaning set forth in the definition of Environmental Laws
hereof.
"Closing" has the meaning set forth in Section 8.1 hereof.
"Closing Date" has the meaning set forth in Section 8.1 hereof.
"Commitment Date" has the meaning set forth in Section 1.1(f) hereof.
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"Condemnation Proceeding" has the meaning set forth in Section 9.2 hereof.
"Custodian" has the meaning set forth in Section 1.1 hereof.
"Deemed Value" with respect to a Property shall be equal to the value allocated
to such Property in Schedule VII attached hereto.
"Dividend Distribution Offset" has the meaning set forth in Section 8.10(j)
hereof.
"Due Diligence Period" has the meaning set forth in Section 7.1(f) hereof.
"Earnest Deposit" has the meaning set forth in Section 2.4 hereof.
"Environmental Laws" shall include, without limitation, the Clean Air Act; the
Clean Water Act and the Water Quality Act of 1987; the Federal Insecticide
Fungicide, and Rodenticide Act; the Marine Protection, Research, and Sanctuaries
Act; the National Environmental Policy Act; the Noise Control Act; the
Occupational Safety and Health Act; the Resource Conservation and Recovery Act,
as amended by the Hazardous and Solid Waste Amendments of 1984, the Safe
Drinking Water Act; the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
and the Emergency Planning and Community Right-to-Know Act; the Toxic Substance
Control Act ("TSCA"); and the Atomic Energy Act, all as may have been amended as
of the date of this Agreement, together with their implementing regulations and
guidelines as of the date of this Agreement. "Environmental Laws" shall also
include all state, regional, county, municipal and other local laws,
regulations, and ordinances that are equivalent or similar to the federal laws
recited above or that purport to regulate Hazardous Materials.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exchange Offer" has the meaning set forth in the recitals hereof.
"Exchange Value" shall mean with respect to Transferor, the Value of the
Property; and with respect to any partner of Transferor shall mean the Exchange
Value of Transferor multiplied times the percentage interest of such partner in
Transferor.
"Execution Date" shall mean the date of execution of this Agreement.
"Expiration Date" has the meaning set forth in Section 8.1 hereof.
"FIFRA" has the meaning set forth in the definition of Environmental Laws
hereof.
"Gentry Place" has the meaning set forth in the preamble hereof.
39
<PAGE>
"Gentry Place Agreement" has the meaning set forth in the preamble hereof.
"GP Unit" has the meaning set forth in the recitals hereof.
"Grant of Reciprocal Easements and Joint Development Agreement" shall mean that
certain agreement entered into by and among Kwik Industries, Inc., Shurgard
Storage Centers, Inc., 17950 Partners Ltd., and Merit Preston Park Place
Apartments Limited Partnership.
"Hazardous Materials" shall include, without limitation: any hazardous
substance, pollutant, or contaminant regulated under CERCLA; oil and petroleum
products and natural gas, natural gas liquids, liquefied natural gas, and
synthetic gas usable for fuel; pesticides regulated under FIFRA; asbestos,
polychlorinated biphenyls, and other substances regulated under TSCA; source
material, special nuclear material, and by-product materials regulated under the
Atomic Energy Act; and industrial process and pollution control wastes to the
extent regulated under applicable Environmental Laws.
"Heritage LP" has the meaning set forth in the preamble hereof.
"Heritage SGP" has the meaning set forth in the preamble hereof.
"Holdback Amount" has the meaning set forth in Section 2.3(d) hereof.
"Improvements" shall mean with respect to a Real Property, all improvements
located thereon, including, without limitation, all heating, ventilation,
electrical, plumbing and other mechanical or operational systems.
"Intangible Personal Property" shall be a collective reference to all intangible
personal property related to the Real Property, including, without limitation:
all trade names and trade marks associated with the Real Property, together with
the goodwill related thereto, including Transferor's rights and interests in the
name of the Property set forth in Schedule I attached hereto and the names
(unless the same include proper names) of the Transferor; all rights to the
plans and specifications and other architectural and engineering drawings for
the Improvements; contract rights related to the construction, operation,
ownership or management of the Real Property (but excluding the obligations of
any of Transferor thereunder, except those expressly assumed pursuant to this
Agreement); warranties, zoning approvals, building permits and licenses (to the
extent assignable); tenant lists, correspondence with tenants and records
(including, but not limited to, those relating to taxes, insurance, maintenance,
repairs, capital improvements and services), booklets, manuals, advertising and
promotional materials, including, without limitation, photographs and negatives,
correspondence with suppliers, and telephone exchange numbers (if available);
excluding, however, cash or accounts receivable, except to the extent
specifically provided herein with respect to prorations and adjustments and
Rehabilitation Reserves (when the term "Intangible Personal Property" is used in
connection with
40
<PAGE>
a single Real Property, such term shall only be a collective reference to the
Intangible Personal Property applicable to such Real Property).
"Leases" shall be a collective reference to all leases of space within the
Improvements, including leases that may be made by Transferor after the date
hereof and prior to the Closing (as defined herein).
"Lender" shall mean the holder of the Note as set forth in Schedule II hereof.
"Loan Documents" shall mean a collective reference to the mortgages, bonds,
deeds of trusts and other security instruments that create liens on the Real
Property to secure the payment of the loan and related Note.
"LP Units" shall mean the limited partnership units of Heritage LP.
"Material Condemnation" has the meaning set forth in Section 9.2 hereof.
"Material Damage" has the meaning set forth in Section 9.1 hereof.
"Merit Place" has the meaning set forth in the preamble hereof.
"Mortgage Debt" shall mean the debt evidenced by a Note secured by a lien on
such Real Property, the Mortgage Debt evidenced by such Note and the Lender
which is the holder of such Note. The Mortgage Debt is set forth on Schedule II
attached hereto.
"MTP" has the meaning set forth in the preamble hereof.
"MTP Parties" has the meaning set forth in the preamble hereof.
"Notes" and "Note" shall mean the promissory notes and bonds evidencing the
Mortgage Debt.
"Operating and Financial Statements" shall mean copies of operating and
financial statements (balance sheets, income, proformas, expense and capital
improvements) detailing the operating history of the properties for the last
three years including year-to-date information.
"Other Taxes" has the meaning set forth in Section 4.1(b)(vi) hereof.
"Park on Preston" has the meaning set forth in the preamble hereof.
"Partnership Agreement" has the meaning set forth in the recitals hereof.
"Permitted Exceptions" shall mean Transferred Debt and all exceptions to title
to the Real Property (other than monetary liens and those other matters which
Transferor have agreed to
41
<PAGE>
cure in accordance with Section 2.3(d) hereof), which have not been cured and
which the Title Insurer has not agreed to insure over or waive during the Due
Diligence Period and which the REIT shall have approved by its approval of the
related Title Report as provided in Section 7.1(g).
"Preston Park LP" has the meaning set forth in the preamble hereof.
"Property" shall mean all of the Real Property, the Tangible Personal Property
and the interests in the Leases and the Intangible Personal Property.
"Property Closing Costs" has the meaning set forth in Section 8.9 hereof.
"Prorations" has the meaning set forth in Section 8.10 hereof.
"Real Property" shall be a reference to the real property described in Schedule
I attached hereto, together with (i) all Improvements located thereon, (ii) all
the rights, benefits, privileges, easements, tenements, hereditaments and
appurtenances thereon or in any way appertaining to such real properties, and
(iii) all right, title and interest of Transferor in and to all strips and gores
and any land lying in the bed of any street, road or alley, open or proposed,
adjoining any of such real properties. When the Survey is issued, the
description in the Survey shall be accepted by the parties as the correct
description of the Real Property, even if it should differ from Schedule I.
"Registration Statement" has the meaning set forth in Section 1.1(b) hereof.
"REIT" has the meaning set forth in the preamble hereof.
"REIT Capital Contribution" has the meaning set forth in the recitals hereof.
"REIT Parties" has the meaning set forth in the preamble hereof.
"REIT Stock" has the meaning set forth in the recitals hereof.
"REIT Stock Price" shall mean the average closing price of REIT Stock in the
American Stock Exchange Composite Transactions as reported in The Wall Street
Journal for the 10 consecutive trading days preceding the fifth trading day
prior to the Closing Date.
"Related Agreements" has the meaning set forth in the recitals hereof.
"Rent Roll" shall mean a current rent roll and delinquency report for the Real
Property.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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<PAGE>
"Service Contracts" shall mean all management, marketing, service, supply,
material, equipment lease or maintenance contracts which pertain to the
furnishing of services, materials, leasehold equipment, or maintenance to the
Property and similar agreements.
"Smith Summit" has the meaning set forth in the preamble hereof.
"Smith Summit Agreement" has the meaning set forth in the preamble hereof.
"Smith Summit GP" has the meaning set forth in the preamble hereof.
"Subsidiary" or "Subsidiary Partnership" shall mean each of the subsidiaries of
the REIT, Heritage LP and Heritage SGP formed for the purpose of acquiring the
Property.
"Survey" shall mean survey (including field notes) made by survey civil
engineers approved by the REIT and duly licensed in the state where the Real
Property is located in accordance with and containing the certification set
forth in Exhibit G attached hereto and addressed to such parties as the REIT may
designate.
"Tangible Personal Property" shall be a collective reference to all equipment,
machinery, furniture, furnishings, supplies and other tangible personal property
owned by Transferor and any interest of Transferor in any such property leased
by Transferor, now or hereafter located in and used in connection with the
operation, ownership or management of the Real Property.
"Taxes" has the meaning set forth in Section 8.10(a) hereof.
"Title Company" shall mean Commonwealth Land Title of Dallas, 1700 Pacific,
Suite 4740, Dallas, Texas 75201.
"Title Policy" has the meaning set forth in Section 7.1(h) hereof.
"Title Report" shall mean a currently dated preliminary title commitment issued
by the Title Company for the Real Property.
"Transferor" shall have the meaning set forth in the preamble hereof.
"Transferor Partner" shall have the meaning set forth in the recitals hereof.
"Transferor Partnership Interest" has the meaning set forth in the recitals
hereof.
"Transferred Debt" has the meaning set forth in Section 2.3(b) hereof.
"TSCA" has the meaning set forth in the definition of Environmental Laws hereof.
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<PAGE>
"UCC Searches" shall mean copies of current Uniform Commercial Code searches
issued by the Title Company or a search company acceptable to the REIT.
"Value" of the Property shall be equal to (i) the Deemed Value allocated to the
Property minus (ii) the Mortgage Debt applicable to the Property as of the
Closing Date and immediately prior to any repayment, purchase, refinancing,
replacement or reduction thereof by Heritage LP or the REIT in accordance with
Section 2.3 (without taking into consideration any discount of such Mortgage
Debt), minus (iii) the Holdback Amount and, plus or minus, as appropriate, (iv)
the Prorations relating to the Property determined in accordance with Section
8.10.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Subsidiaries. The parties acknowledge and agree that, if required
by the Lender as a condition to its consent to the transfer of the Property
subject to the related Mortgage Debt as contemplated hereby, the Property may be
transferred to a limited purpose entity owned by Heritage LP and any reference
herein to Heritage LP shall mean, with respect to such Property, such limited
purpose entity.
12.2 Parties Bound. Prior to the Closing, except as provided in Section
12.1 hereof, no party may assign its rights or obligations under this Agreement
without the prior written consent of the other parties hereto, and any such
prohibited assignment shall be void. This Agreement and all provisions hereof,
including, without limitation, all representations and warranties made
hereunder, shall inure to the benefit of and be binding upon the respective
heirs, devisees, legal representatives, successors, assigns and beneficiaries of
the parties hereto; provided, however, that no assignment shall relieve the
assignor of any obligation under this Agreement whether arising before or after
such assignment.
12.3 Headings. The article and paragraph headings of this Agreement are
for convenience only and shall in no way limit or enlarge the scope or meaning
of the language hereof.
12.4 Invalidity. If any portion of this Agreement is held invalid or
inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be deemed valid and operative and effect shall be given to the
intent manifested by the portion held invalid or inoperative. The failure by
either party to enforce against the other any term or provision of this
Agreement shall be deemed not to be a waiver of such party's right to enforce
against the other party the same or any other such term or provision.
12.5 Governing Law. Except where the laws of another jurisdiction are
mandatorily applicable, this Agreement shall, in all respects, be governed,
construed, applied and enforced in accordance with the internal laws (and not
the choice of law rules) of the State of Texas.
44
<PAGE>
12.6 Independent Review. Transferor acknowledges and agrees that
neither the REIT nor Heritage LP has made any representation or warranty with
respect to the tax or accounting consequences of the transactions contemplated
by this Agreement, and that Transferor has been represented by counsel or
received advice in connection with entering into this Agreement and has received
such tax and accounting information as Transferor deems necessary to
knowledgeably consummate the transactions contemplated by this Agreement.
12.7 No Third Party Beneficiary. This Agreement is not intended to give
or confer any benefits, rights, privileges, claims, actions or remedies to any
person or entity as a third party beneficiary, including without limitation, the
Lender.
12.8 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings relating to the Property. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
12.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of such counterparts shall constitute one Agreement. To facilitate execution and
delivery of this Agreement, the parties may execute and exchange counterparts of
the signature pages by telefax. The signature of any party to any counterparts
may be appended to any other counterpart. The Title Company shall be entitled to
accept and treat such fax signatures as original signatures.
12.10 Further Assurances. To the extent that any Schedule to be
attached to this Agreement or to any of the Exhibits attached hereto is not
completed or prepared on the date hereof, the party responsible for completing
or preparing such Schedule shall deliver such Schedule to the other parties
hereto as soon as possible after the date hereof and, in any event, prior to the
Closing. In addition to the acts and deeds recited herein and contemplated to be
performed, executed and/or delivered by Transferor at the Closing, Transferor
agrees to perform, execute and/or deliver or cause to be executed and/or
delivered, on or after the Closing, any and all further acts, deeds and
assurances as may be reasonably necessary to consummate the transactions
contemplated hereby and/or to further perfect and deliver to Heritage LP the
conveyance, transfer and assignment of the Property and all rights related
thereto.
12.11 Time. Time is of the essence in the performance of each and every
term, condition and covenant contained in this Agreement.
12.12 Confidentiality. The REIT Parties and MTP Parties, for the
benefit of each other, hereby agree that until the Closing Date, they will not
release or cause or permit to be released, any press notices, publicity (oral or
written) or advertising promotion relating to, or otherwise announce or disclose
or cause or permit to be announced or disclosed, in any manner whatsoever, the
terms, conditions or substance of this Agreement or any of the Related
45
<PAGE>
Agreements, or the transactions contemplated herein or therein, without first
obtaining the written consent of the other parties hereto; provided, however,
the REIT, in its sole discretion, may release or cause or permit to be released,
any press notices, publicity (oral or written) or advertising promotion relating
to, or otherwise announce or disclose or cause or permit to be announced or
disclosed, in any manner whatsoever, the terms, conditions or substance of this
Agreement, or the transactions contemplated herein, or any information relating
to the Property in connection with the REIT causing the effectiveness of the
Registration Statement under the Securities Act or any applicable state laws and
pursuant to the rules of the American Stock Exchange. It is understood that the
foregoing shall not preclude either party from discussing the substance or any
relevant details of such transactions with any of its attorneys, accountants,
professional consultants or potential lenders, as the case may be, or prevent
either party hereto from seeking to obtain any and all approvals or consents
necessary in connection with the transactions contemplated hereby, making all
filings with governmental authorities required in connection with the
transactions contemplated hereby and complying with laws, rules, regulations and
court orders, including without limitation, governmental regulatory, disclosure,
tax and reporting requirements. After the Closing Date, Transferor agrees that
the REIT may release any press notices, publicity (oral or written) or
advertising promotion relating to, or otherwise announce or disclose, in any
manner whatsoever, the terms, conditions and substances of this Agreement or any
of the Related Agreements, or the transactions contemplated herein or therein,
without first obtaining the written consent of the other parties hereto.
12.13 Attorneys' Fees. Should either party employ attorneys to enforce
any of the provisions hereof, the party losing in any final judgment agrees to
pay the prevailing party all reasonable costs, charges and expenses, including
attorneys' fees and disbursements, expended or incurred in connection therewith
whether at trial, on appeal or on petition for review.
12.14 Use of Pronouns. The use of the neuter singular pronoun to refer
to a party shall be deemed a proper reference, even though such party may be an
individual, partnership or a group of two or more individuals. The necessary
grammatical changes required to make the provisions of this Agreement apply in
the plural sense where there is more than one seller or purchaser and to either
partnerships or individuals (male or female) shall in all instances be assumed
as though in each case fully expressed.
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12.15 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the following address:
If to Transferor or
MTP: MTP, Inc.
3636 North Central Avenue
Suite 402
Phoenix, Arizona 85012
Attn: Edward P. Zinman
Telephone: (602) 222-4040
Telefax: (602) 222-4009
With a copy to: Kim Lawrence, Esq.
12700 Preston Road
Suite 235
Dallas, Texas 75230
Telephone: (972) 661-2145
Telefax: (972) 661-3283
If to the REIT, Heritage SGP or Heritage LP:
c/o ASR Investments Corporation
335 North Wilmot, Suite 250
Tucson, Arizona 85711
Telephone: (520) 748-2111
Telefax: (520) 750-8865
Attn: Jon A. Grove
With a copy to: O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback, Suite 1100
Phoenix, Arizona 85012
Telephone: (602) 263-2606
Telefax: (602) 263-2900
Attn: Robert S. Kant, Esq.
Any such notices shall be either (a) sent by certified mail, return
receipt requested in which case notice shall be deemed delivered three (3)
business days after deposit, postage prepaid in the U.S. Mail, (b) sent by
overnight delivery using a nationally recognized overnight courier, in which
case it shall be deemed delivered one business day after deposit with such
courier, (c) sent by telefax, in which case notice shall be deemed delivered
upon confirmed transmission of such notice, or (d) sent by personal delivery.
The above addresses may be changed by written notice to the other party;
provided, however, that no notice of a change of address shall be effective
until actual receipt of such notice. Copies of notices are for
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<PAGE>
informational purposes only, and a failure to give or receive copies of any
notice shall not be deemed a failure to give notice.
12.16 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
12.17 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designed period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday, in which event the period shall run until the
end of the next day which is neither a Saturday, Sunday, or legal holiday.
12.18 Information and Audit Cooperation. Transferor agrees to provide
to Heritage LP's designated independent auditor (a) access to the books and
records of the Property and all related information regarding the period for
which Heritage LP is required to have the Property audited under the regulations
of the Securities and Exchange Commission, and (b) any representation letters
regarding the books and records of the Property as such auditor shall reasonably
request in connection with the normal course of auditing the Property in
accordance with generally accepted auditing standards.
12.19 No Assumption. Except as otherwise expressly assumed by Heritage
LP or the REIT pursuant to the terms of this Agreement, neither Heritage LP nor
the REIT shall assume or be deemed to have assumed any obligations or
liabilities whatsoever of Transferor with respect to the Property or otherwise.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.
MTP: TRANSFEROR OR PRESTON
PARK LP:
MTP, INC.,
a Texas corporation MERIT PRESTON PARK
APARTMENTS LIMITED
PARTNERSHIP, a Texas limited
By: partnership
--------------------------------
Its: By: MTP, Inc.
------------------------------- Its: General Partner
THE REIT:
By:
ASR INVESTMENTS CORPORATION, -----------------------
a Maryland corporation Its:
----------------------
By:
--------------------------------
Its:
-------------------------------
HERITAGE LP:
HERITAGE COMMUNITIES L.P.,
a Delaware limited partnership
By: ASR Investments Corporation
Its: General Partner
By:
-----------------------
Its:
----------------------
HERITAGE SGP:
HERITAGE SGP CORPORATION, an
Arizona corporation
By:
--------------------------------
Its:
-------------------------------
<PAGE>
ADDENDUM
TO THE
EXCHANGE AND CONTRIBUTION AGREEMENT
-----------------------------------
THIS "ADDENDUM TO THE EXCHANGE AND CONTRIBUTION AGREEMENT" is hereby
made a part of that certain Exchange and Contribution Agreement dated as of July
_____, 1997 (the "Contribution Agreement"), by and among MERIT PRESTON PARK
APARTMENTS LIMITED PARTNERSHIP, a Texas limited partnership ("Transferor"); MTP,
INC., a Texas corporation and the general partner of Transferor ("MTP"); ASR
INVESTMENTS CORPORATION, a Maryland corporation (the "REIT"); HERITAGE SGP
CORPORATION, an Arizona corporation wholly owned by the REIT ("Heritage SGP");
and HERITAGE COMMUNITIES L.P., a Delaware limited partnership ("Heritage LP" and
together with Transferor, MTP, the REIT, and Heritage SGP, the "Contribution
Agreement Parties").
The Contribution Agreement Parties hereby agree to make the following
additions and amendments to the Contribution Agreement:
1. Recital 1 on page 1 of the Contribution Agreement shall be amended
and restated in its entirety to read as follows:
1. The REIT shall make a tender offer (the "Exchange Offer")
to each owner of partnership interests in Transferor (the "Transferor
Partners") that is an Accredited Investor to tender partnership
interests in Transferor (the "Transferor Partnership Interests") in
exchange for shares of the REIT's common stock, par value $.01 per
share (the "REIT Stock"), pursuant to the terms and conditions of this
Agreement and a Letter of Transmittal and Assignment in the form of
Exhibit A hereto (the "Letter of Transmittal") to be executed by each
Transferor Partner desiring to tender their Transferor Partnership
Interests in the Exchange Offer. The REIT and the Custodian (as defined
herein) shall enter into a registration agreement in the form of
Exhibit I attached hereto (the "Exchange Offer Registration Agreement")
pursuant to which the REIT shall agree to register for resale under
federal securities laws the shares of REIT Stock to be issued in the
Exchange Offer.
2. Recital 2 on page 2 of the Contribution Agreement shall be amended
to read as follows:
2. Upon the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, Transferor, or the partners of
Transferor as designated by Transferor on Schedule VIII attached
hereto, as updated pursuant to Section 6.2(a) hereof, shall enter into
the Second Amended and Restated Agreement of Limited Partnership of
Heritage LP in the form of Exhibit B
<PAGE>
attached hereto (the "Partnership Agreement") pursuant to which the
REIT and Heritage SGP will make certain cash contributions (the "REIT
Capital Contribution") to Heritage LP in exchange for general
partnership interests in Heritage LP ("GP Units"), and Transferor will
contribute the Property in exchange for limited partnership interests
in Heritage LP ("LP Units") and cash. The LP Units will be issued by
Heritage LP in Transferor's name or in the names of the partners of
Transferor, as designated by Transferor on Schedule VIII attached
hereto as updated pursuant to Section 6.2(a) hereof. The GP Units and
the LP Units shall be exchangeable for REIT Stock at any time following
the first anniversary of the Closing Date. Transferor, the REIT and
Heritage LP shall enter into a registration agreement in the form of
Exhibit C attached hereto (the "Asset Transfer Registration Agreement")
pursuant to which the REIT shall agree to register under federal
securities laws the shares of REIT Stock to be issued in exchange for
the LP Units. The contributions of the REIT Capital Contribution in
exchange for GP Units and the Property in exchange for LP Units and
cash are collectively referred to herein as the "Asset Transfer."
The Exchange Offer Registration Agreement, the Partnership
Agreement and the Asset Transfer Registration Agreement are sometimes
hereinafter collectively referred to as the "Related Agreements."
3. Article 5 of the Contribution Agreement shall be amended and
restated in its entirety to read as follows:
ARTICLE 5
CONTINUATION AND SURVIVAL
OF REPRESENTATIONS AND WARRANTIES
---------------------------------
Each of the representations and warranties contained in this
Agreement shall be true and correct on and as of the Closing Date and
at all times between the execution of this Agreement and the Closing
Date with the same force and effect as if made at each of such times,
except to the extent, if any, that such representations and warranties
shall be affected by transactions contemplated by this Agreement.
Except for the representations and warranties set forth in Section
4.3(b) hereof, all such representations and warranties shall survive
the consummation of the transactions contemplated by this Agreement for
a period of six months following the Closing Date irrespective of any
investigations or inquiries made by any party or any knowledge which
any party may now possess or which may hereafter come to any party's
attention, and each party shall be entitled to rely upon such
representations and warranties irrespective of any investigations,
inquiries or knowledge. The representations and warranties set forth in
Section 4.3(b) hereof shall survive the consummation of the
transactions contemplated by this Agreement for a period of two years
following the Closing
<PAGE>
Date irrespective of any investigations or inquiries made by any party
or any knowledge which any party may now possess or which may hereafter
come to any party's attention, and each party shall be entitled to rely
upon such representations and warranties irrespective of any
investigations, inquiries or knowledge. The provisions of this Article
5 shall not operate to limit or effect the terms and provisions of the
Exchange Offer Registration Agreement or the Asset Transfer
Registration Agreement.
4. Section 7.1(e) of the Contribution Agreement shall be amended and
restated in its entirety to read as follows:
(e) Delivery of Letters of Transmittal and Custody Agreements.
The Custodian shall have delivered, or caused to be delivered
to the REIT, a properly completed and executed Letter of
Transmittal and Custody Agreement for each Transferor Partner
participating in the Exchange Offer.
5. Section 8.3(d) shall be added to the Contribution Agreement to read
as follows:
(d) Exchange Offer Registration Agreement. The Exchange Offer
Registration Agreement duly executed by the Custodian on
behalf of each Transferor Partner who has tendered a
Transferor Partner Interest in the Exchange Offer.
6. Section 8.5(d) shall be added to the Contribution Agreement to read
as follows:
(d) Prospectus. A sufficient number of copies of the
prospectus in conformity with the requirements of the
Securities Act, to facilitate the disposition of shares of
REIT Stock acquired by Transferor Partners in the Exchange
Offer.
7. Section 8.5(e) shall be added to the Contribution Agreement to read
as follows:
(e) Exchange Offer Registration Agreement. The Exchange Offer
Registration Agreement duly executed by the REIT.
8. Section 8.5(f) shall be added to the Contribution Agreement to read
as follows:
(f) Evidence of Registration. Sufficient evidence that the
Registration Statement has been declared effective by the
Securities and Exchange Commission on or prior to the Closing
Date.
9. Section 8.6(s) shall be added to the Contribution Agreement to read
as follows:
<PAGE>
(s) Certificates of Non-Foreign Status. A Certificate of Non-
Foreign Status duly executed by Transferor and each Transferor
Partner designated by Transferor to receive LP Units in the
Asset Transfer.
10. Section 8.6(t) shall be added to the Contribution Agreement to read
as follows:
(t) Form W-9. A Form W-9 setting forth Transferor's tax
identification number duly executed by Transferor and a Form
W-9 duly executed by each Transferor Partner designated by
Transferor to receive LP Units in the Asset Transfer.
11. The first paragraph of Section 8.10 of the Contribution Agreement
shall be amended and restated in its entirety to read as follows:
8.10 Prorations. The items in this Section 8.10 with respect
to the Real Property shall be apportioned or prorated between the
Transferor and Heritage LP as of the end of the day preceding the
Closing Date in order to determine the amount of the Proration with
respect to such Property. If the Cash Payment considered payable to the
Custodian pursuant to Section 2.2(b) is not received by the Title
Company before 1:00 p.m., Dallas, Texas time, on the Closing Date, the
prorations shall be made as of the date in which the Closing occurs
(i.e., each Transferor shall receive rents and pay expenses for the day
of Closing with respect to such Transferor's Property). All prorations
other than the Dividend Distribution Offset set forth in Section
8.10(j) shall be based upon a fraction determined by dividing the
number of days elapsed through the date of the Closing by 365. The
parties shall compute or estimate all prorations prior to the Closing
Date, and Transferor shall supply Heritage LP before the Closing
satisfactory supporting evidence for all such adjustments. In the event
that any of the items in this Section 8.10 cannot be calculated
accurately on the Closing Date, then they shall be calculated as soon
after the Closing Date as feasible. Either party owing the other party
a sum of money based on such subsequent proration(s) shall promptly pay
said sum to the other party, together with interest thereon at the rate
of the lesser of (A) two percent (2%) over the average "prime rate" (as
announced from time to time in the Wall Street Journal) per annum or
(B) the highest legally permitted rate, from the Closing Date to the
date of payment if payment is not made within ten (10) days after
delivery of a bill therefor. The provisions of this Section 8.10 shall
survive the Closing.
12. The definition of REIT Stock Price as set forth in the Contribution
Agreement shall be amended and restated in its entirety to read as follows:
"REIT Stock Price" shall mean $22.25.
<PAGE>
13. Exhibit H to the Contribution Agreement shall be amended and
restated in its entirety as set forth in Appendix I hereto.
14. Exhibit I shall be added to the Contribution Agreement as set forth
in its entirety in Appendix II hereto.
Except as set forth in this Addendum, all provisions of the
Contribution Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Addendum to the Contribution Agreement this _____ day of _______________,
1997.
MTP: HERITAGE SGP:
MTP, INC., HERITAGE SGP CORPORATION, an
a Texas corporation Arizona corporation
By:
-------------------------------- By:
Its: --------------------------------
------------------------------- Its:
-------------------------------
THE REIT:
TRANSFEROR:
ASR INVESTMENTS CORPORATION,
a Maryland corporation MERIT PRESTON PARK
APARTMENTS LIMITED
PARTNERSHIP, a Texas limited
By: partnership
--------------------------------
Its: By: MTP, Inc.
------------------------------- Its: General Partner
HERITAGE LP:
By:
HERITAGE COMMUNITIES L.P., -----------------------
a Delaware limited partnership Its:
----------------------
By: ASR Investments Corporation
Its: General Partner
By:
-----------------------
Its:
----------------------
EXCHANGE AND CONTRIBUTION AGREEMENT
AMONG THE MTP PARTIES
AND THE REIT PARTIES
THIS EXCHANGE AND CONTRIBUTION AGREEMENT ("Agreement") is made as of
the ____ day of July, 1997, among Gentry Place Apartments Limited Partnership, a
Texas limited partnership ("Gentry Place" or "Transferor"); MTP, Inc., a Texas
corporation ("MTP" and, together with Gentry Place, the "MTP Parties"); ASR
Investments Corporation, a Maryland corporation (the "REIT"); Heritage SGP
Corporation, an Arizona corporation wholly owned by the REIT ("Heritage SGP");
and Heritage Communities L.P., a Delaware limited partnership ("Heritage LP"
and, together with the REIT and Heritage SGP, the "REIT Parties").
A. Gentry Place is the owner of Merit Place Apartments ("Merit Place"),
which is a 360-unit apartment community located in Grand Prairie, Texas. All of
the Real Property, the Tangible Personal Property and the interests in the
Leases and the Intangible Personal Property relating to Merit Place is
collectively referred to herein as the "Property".
B. The REIT is a self-administered and self-managed real estate
investment trust that owns primarily apartment communities. The REIT and
Heritage SGP are the sole general partners of Heritage LP.
C. Concurrently with the execution of this Agreement, the REIT Parties
will enter into an agreement (the "Smith Summit Agreement") with Smith Summit
Apartments Partnership, a Texas general partnership ("Smith Summit GP"), to
acquire the Smith Summit Apartments ("Smith Summit"), a 254-unit apartment
community located in Mesquite, Texas.
D. Concurrently with the execution of this Agreement, the REIT Parties
will enter into an agreement (the "Merit Preston Park Agreement") with Merit
Preston Park Apartments Limited Partnership, a Texas limited partnership
("Preston Park LP"), to acquire the Park On Preston Apartments ("Park On
Preston"), a 286-unit apartment community located in Dallas, Texas.
E. Certain partners of the Transferor desire to obtain shares of REIT
Stock and the REIT desires to obtain partnership interests in the Transferor.
The MTP Parties desire to contribute the Property to Heritage LP and Heritage LP
desires to acquire the Property upon the terms and conditions, and for the
consideration, set forth herein. To accomplish the foregoing, the parties hereto
agree to enter into all, but not less than all, of the transactions described
below on the terms and conditions herein provided:
1. The REIT shall make a tender offer (the "Exchange Offer")
to each owner of partnership interests in Transferor (the "Transferor Partners")
that is an Accredited Investor to tender partnership interests in Transferor
(the "Transferor Partnership Interests") in exchange
<PAGE>
for shares of the REIT's common stock, par value $.01 per share (the "REIT
Stock"), pursuant to the terms and conditions of this Agreement and a Letter of
Transmittal and Custody Agreement in the form of Exhibit A hereto (the "Letter
of Transmittal") to be executed by each Transferor Partner desiring to tender
their Transferor Partnership Interests in the Exchange Offer.
2. Upon the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, Transferor, or the partners of Transferor
as designated by Transferor on Schedule VIII attached hereto as updated pursuant
to Section 6.2(a) hereof, shall enter into the Second Amended and Restated
Agreement of Limited Partnership of Heritage LP in the form of Exhibit B
attached hereto (the "Partnership Agreement") pursuant to which the REIT and
Heritage SGP will make certain cash contributions (the "REIT Capital
Contribution") to Heritage LP in exchange for general partnership interests in
Heritage LP ("GP Units"), and Transferor will contribute the Property in
exchange for limited partnership interests in Heritage LP ("LP Units") and cash.
The LP Units will be issued by Heritage LP in Transferor's name or in the names
of the partners of Transferor as designated by Transferor on Schedule VIII
attached hereto as updated pursuant to Section 6.2(a) hereof. The GP Units and
the LP Units shall be exchangeable for REIT Stock at any time following the
first anniversary of the Closing Date. Transferor, the REIT and Heritage LP
shall enter into a registration agreement in the form of Exhibit C attached
hereto (the "Asset Transfer Registration Agreement") pursuant to which the REIT
shall agree to register under federal securities laws the shares of REIT Stock
to be issued in exchange for the LP Units. The contributions of the REIT Capital
Contribution in exchange for GP Units and the Property in exchange for LP Units
and cash are collectively referred to herein as the "Asset Transfer."
The Partnership Agreement and the Asset Transfer Registration Agreement
are sometimes hereinafter collectively referred to as the "Related Agreements."
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
EXCHANGE OFFER
--------------
1.1 The Exchange Offer.
(a) Offer to Purchase. Provided that nothing shall have
occurred that would result in a failure to satisfy any of the terms or
conditions set forth in Article 7 of this Agreement, as promptly as practicable
following the execution of this Agreement, the REIT shall commence the Exchange
Offer by delivering the Exchange Offer Documents (as defined below) to each
Transferor Partner. Each Transferor Partner that is an Accredited Investor shall
have
2
<PAGE>
the right to tender all or any part of Transferor Partnership Interests owned by
such Transferor Partner (such tendered Transferor Partnership Interests
hereinafter referred to as "Tendered Interests") by executing and delivering
prior to the Commitment Date to MTP, as custodian (the "Custodian"), a Letter of
Transmittal pursuant to which MTP will make and accept deliveries by and on
behalf of the Transferor Partners as provided in the Custody Agreement. The
obligations of the REIT to accept for purchase and to purchase any Tendered
Interests tendered by the Transferor Partners of Transferor shall be subject
only to the conditions set forth in this Agreement. The REIT shall not be
entitled to accept for purchase or purchase the Tendered Interests unless all of
the conditions to the consummation of the transactions contemplated in this
Agreement are satisfied or waived as provided herein.
(b) Purchase Price. Subject to the conditions set forth in
Article 7 of this Agreement, on the Closing Date, the Custodian shall deliver
the Letters of Transmittal to the REIT, and the REIT shall deliver to the
Custodian, as agent for each Transferor Partner on whose behalf the Custodian
delivered a Letter of Transmittal, a certificate registered in such Transferor
Partner's name for the number of shares of REIT Stock equal to (i) the Exchange
Value of all of the Transferor Partnership Interests tendered by such Transferor
Partner and accepted for purchase divided by (ii) the REIT Stock Price. For
purposes of determining the number of shares of REIT Stock to be issued in the
Exchange Offer, Transferor Partnership Interests held by one person in multiple
accounts shall be aggregated. The REIT Stock to be issued in accordance with the
Exchange Offer will be duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right and,
subject to compliance with the Securities Act and the Exchange Act, will be
eligible for listing on the American Stock Exchange. On or prior to the Closing
Date, the REIT shall have caused the effectiveness of a registration statement
(the "Registration Statement") under the Securities Act and under any applicable
state securities laws covering the resale of the shares of REIT Stock to be
issued in accordance with the Exchange Offer.
(c) Exchange Offer Documents. As soon as practicable after the
Commitment Date, the REIT shall prepare the Registration Statement covering the
resale of shares of REIT Stock to be offered in the Exchange Offer, which will
comply in all material respects with the provisions of applicable federal and
state securities laws, and will prepare the Letter of Transmittal and a Custody
Agreement appointing MTP the Transferor Partners' Custodian to make deliveries
for the Transferor Partners at the Closing (the Registration Statement, the
Letters of Transmittal and the Custody Agreement, together with any supplements
or amendments thereto, are referred to herein collectively as the "Exchange
Offer Documents"). The REIT shall prepare and make all filings under applicable
state Blue Sky Laws to qualify or exempt from qualification the REIT Stock
offered pursuant to the Exchange Offer.
(d) Election to Tender Transferor Partnership Interests. The
election of a Transferor Partner to tender all or a part of the Transferor
Partnership Interests owned by the Transferor Partner shall be made by such
Transferor Partner's execution of a Letter of Transmittal and the return of the
Letter of Transmittal to the Custodian for delivery to the REIT
3
<PAGE>
pursuant to the Custody Agreement. Following the Commitment Date the tender of
Transferor Partnership Interests shall be irrevocable.
(e) Consent to Admission of REIT as Partner. The Letter of
Transmittal shall provide that each Transferor Partner tendering a Transferor
Partnership Interest in Transferor consents to the admission of the REIT as a
substituted limited partner upon the purchase of such Transferor Partnership
Interest. MTP, as general partner of Gentry Place, consents to the admission of
the REIT as a substituted limited partner of Transferor as of the Closing Date.
Promptly following the Closing Date, Transferor shall file any certificates
necessary to reflect the admission of the REIT as a substituted limited partner.
(f) Term. The Exchange Offer shall remain open until the
commitment date, which shall be 5:00 p.m., Dallas, Texas time on August 11,
1997, unless extended by the REIT and MTP (the "Commitment Date"). The Exchange
Offer shall expire on the Expiration Date. If the Exchange Offer is not
consummated prior to the Expiration Date, the Custodian shall promptly return
the Letter of Transmittal and all other materials delivered to the Custodian by
the Transferor Partner pursuant to this Agreement to the Transferor Partner.
Prior to the Commitment Date, the REIT shall not amend or modify the terms of
the Exchange Offer without the prior consent of MTP. After the Commitment Date,
the Exchange Offer shall not be amended or modified.
1.2 Tender of MTP's Transferor Partnership Interests. Upon the terms
and subject to the conditions set forth in this Agreement, on the Commitment
Date, MTP shall have the right to tender all or any part of its right to receive
all or a portion of distributions as a general partner in Transferor to the REIT
in exchange for shares of REIT Stock pursuant to the Exchange Offer on the same
terms and subject to the same conditions as set forth in Section 1.1 above. At
the Closing, the REIT shall accept for payment all assignments of the right to
receive distributions as a general partner tendered by MTP in Transferor. If the
tender of the right to receive general partner distributions is accepted, the
REIT shall acquire all right, title and interest to all distributions made by
Transferor with respect to the interest acquired, but the REIT shall not be
substituted as a general partner. MTP shall remain as the general partner of
Transferor.
1.3 Internal Revenue Code Section 754 Election. Unless Transferor has a
valid election in place pursuant to Internal Revenue Code Section 754,
Transferor hereby agrees to make such an election effective for Transferor's
taxable year in which the Exchange Offer is consummated.
4
<PAGE>
ARTICLE 2
ASSET TRANSFER
--------------
2.1 The Asset Transfer. Provided that nothing shall have occurred that
would result in a failure to satisfy any of the terms or conditions set forth in
this Agreement, immediately following the transactions set forth in Article 1
hereof, the REIT and Transferor shall consummate the Asset Transfer. The REIT
and Heritage SGP shall make a cash capital contribution to Heritage LP in
accordance with Section 2.2(a) hereof and will continue to be the sole general
partners of Heritage LP. Transferor shall contribute and convey the Property to
Heritage LP in exchange for LP Units and cash as set forth in Section 2.2(b)
hereof. Pursuant to the terms of the Partnership Agreement, the LP Units shall
be exchangeable for REIT Stock at any time following the first anniversary of
the Closing Date. Pursuant to the Asset Transfer Registration Agreement, the
REIT shall agree to register for resale under federal securities laws the shares
of REIT Stock to be issued upon conversion of the LP Units.
2.2 Contribution of Property to Heritage LP.
(a) Capital Contributions. On the Closing Date, the REIT,
Heritage SGP and Transferor shall make the following capital contributions to
Heritage LP:
(i) The REIT and Heritage SGP shall make a cash
capital contribution equal on an aggregate basis to the REIT Capital
Contribution which shall be the sum of:
(A) that portion of the Mortgage Debt to be
repaid or cancelled by Heritage LP in accordance with Section 2.3 hereof
including, without limitation, any prepayment fees or premiums, assumption fees
and other costs associated therewith, plus
(B) the amount required to satisfy any
monetary liens which the REIT elects to satisfy pursuant to Section 2.3(d), plus
(C) the Property Closing Costs paid and to
be paid by Heritage LP or the REIT pursuant to Section 8.9, plus or minus, as
appropriate
(D) the Prorations, plus
(E) all costs and expenses incurred and to
be incurred by Heritage LP, the REIT or Heritage SGP (on behalf of Heritage LP)
in the performance of its due diligence hereunder, plus
(F) any amounts required to satisfy the
obligations of the REIT or Heritage SGP to make capital contributions to
Heritage LP pursuant to Section 4.1.2 or Section 4.1.6 of the Partnership
Agreement, and plus
5
<PAGE>
(G) cash in the amount of the Cash Payment
(as defined herein).
(ii) Transferor shall contribute and convey the
Property owned by Transferor to Heritage LP as hereinafter provided subject only
to the Transferred Debt as described in Section 2.3 hereof.
(iii) Notwithstanding the foregoing, if, taking into
consideration the proposed contributions to the capital of Heritage LP by the
REIT, Heritage SGP, and Transferor in accordance with Section 2.2(a) hereof,
Heritage LP would not be consolidated with the REIT for financial accounting and
reporting purposes because the respective Partnership Interests of the REIT or
Heritage SGP in Heritage LP is insufficient, then at the Closing the REIT or
Heritage SGP may contribute cash to Heritage LP in exchange for an amount of GP
Units equal to such cash contribution divided by the REIT Stock Price. Such cash
will be contributed in the minimum amount sufficient to permit Heritage LP to be
consolidated with the REIT for financial accounting and reporting purposes.
(b) Distribution of Cash and LP Units. In exchange for the
capital contribution made by Transferor provided in Section 2.2(a) hereof,
Heritage LP shall distribute the following on the Closing Date:
(i) Cash Payment. At the Closing, Transferor shall
receive by wire transfer an amount (the "Cash Payment") equal to the sum of (1)
the Cash Allocation set forth on Schedule V attached hereto and (2) such other
escrowed amounts held by Lender including, but not limited to, taxes, insurance
and such other reserves held by Lender on Transferor's behalf if elected by
Transferor pursuant to Section 8.15(a) herein, less the Earnest Deposit.
(ii) LP Units. At the Closing, Transferor, or certain
partners of Transferor designated by Transferor on Schedule VIII attached hereto
as updated pursuant to Section 6.2(a) hereof, shall collectively receive a
number of LP Units that shall be equal to (A) the difference between the
Exchange Value attributable to Transferor and the Cash Payment pursuant to
clause (i), divided by (B) the REIT Stock Price.
(c) Distribution of GP Units. In exchange for the REIT Capital
Contribution provided in Section 2.2(a) hereof, Heritage LP shall issue on the
Closing Date to the REIT and Heritage SGP a number of GP Units (rounded to a
whole unit) equal to the REIT Capital Contribution divided by the REIT Stock
Price allocated between them on a pro rata basis based upon their respective
contributions.
2.3 Assumption of Mortgage Debt.
(a) Mortgage Debt. The REIT, Heritage LP and Transferor
acknowledge and agree that the Property is subject to the Mortgage Debt from the
lender (the "Lender") as
6
<PAGE>
described on Schedule II attached hereto. The Property shall be acquired by
Heritage LP subject to the Mortgage Debt, provided that the Lender of such
Mortgage Debt shall execute a consent, estoppel letter, transfer agreement, and
modification with respect to such Mortgage Debt as shall be acceptable to
Heritage LP, acting reasonably; provided, however, the Lender will not be
required to amend any of the material legal or business terms of the Mortgage
Debt.
(b) Lender Consent. From and after the date hereof and
continuing for 60 days thereafter (the "Lender Consent Period"), the parties
shall proceed in good faith and with due diligence to attempt to secure any
lender consent and estoppel letter from the Lender and to negotiate any transfer
agreement or modifications to the Loan Documents in order for Heritage LP to
acquire the Property subject to such Mortgage Debt. Heritage LP agrees that it
shall accept the Property subject to the Mortgage Debt, provided that the Lender
agrees that such Mortgage Debt shall be non-recourse to Heritage LP on the same
terms that such Mortgage Debt is currently non-recourse to Transferor and the
Lender executes the agreements contemplated by Section 2.3(a). Any Mortgage Debt
to which the Property is subject upon transfer to Heritage LP is herein referred
to as "Transferred Debt."
(c) Refinancing of Mortgage Debt. In the event that the Lender
does not agree to the transfer of the Mortgage Debt as contemplated by Section
2.3(a) and Section 2.3(b), or if for any reason Heritage LP is unable to acquire
the Property subject to the Mortgage Debt within the Lender Consent Period,
Heritage LP shall have the right to (i) refinance all or a portion of such
Mortgage Debt on terms it determines to be acceptable to it in its sole
discretion; (ii) pay all or any portion of such Mortgage Debt from the proceeds
of the REIT Capital Contribution; or (iii) terminate this Agreement, which
rights shall be exercised within the Lender Consent Period.
(d) Indebtedness Other Than Mortgage Debt. Transferor shall
satisfy all pecuniary encumbrances (other than the Mortgage Debt) or otherwise
have all such encumbrances removed as liens against the Property on or before
the Closing at its own expense. Transferor shall not place any consensual lien,
encumbrance or easement against the Property following the date of execution of
this Agreement without the prior written consent of the REIT, such consent not
to be unreasonably withheld or delayed. If Transferor fails to satisfy or remove
any monetary lien on or prior to Closing, the REIT may proceed to retain a
portion of the Exchange Value equal to the amount of the monetary lien (the
"Holdback Amount") and reduce the Exchange Value of the Property accordingly.
The Holdback Amount shall be paid to Transferor at such time as Transferor
extinguishes such monetary lien. In the event that Transferor does not
extinguish such monetary lien within 120 days of the Closing Date, the REIT
shall apply the Holdback Amount to satisfy the monetary lien. Transferor shall
be required to deposit any additional funds at Closing to satisfy any remaining
monetary liens against the Property.
2.4 Earnest Money Deposit. Within five (5) days following the Execution
Date, the REIT shall deposit $50,000 in escrow with the Title Company (the
"Earnest Deposit") on
7
<PAGE>
account of the REIT Capital Contribution. The Earnest Deposit shall be placed in
an interest-bearing account. At the Closing, the Earnest Deposit shall be
applied against the Cash Payment. In the event this Agreement is terminated for
any reason other than as a result of a termination pursuant to Section 10.3(c),
the Earnest Deposit required by this Section 2.4 shall be returned to the REIT.
In the event this Agreement is terminated by Transferor pursuant to Section
10.3(c), the Earnest Deposit required by this Section 2.4 shall be paid to MTP
on behalf of Transferor.
ARTICLE 3
PARTNER APPROVAL; SECURITIES LAW CONSIDERATIONS
-----------------------------------------------
3.1 Approval by MTP as General Partner. MTP hereby approves and
consents to the Exchange Offer and Asset Transfer and represents and warrants
that it has approved this Agreement and the transactions contemplated hereby.
3.2 Federal and State Securities Law Considerations. The REIT Parties
shall take all actions necessary in accordance with federal and state securities
laws including, without limitation, prepare and make all filings under
applicable federal and state law to qualify or exempt from qualification the
securities offered pursuant to the Exchange Offer and Asset Transfer.
3.3 Asset Transfer Registration Agreement. In connection with the
conversion of the LP Units, the REIT shall enter into the Asset Transfer
Registration Agreement pursuant to which the REIT shall agree to file and use
its best efforts to have declared effective on the date the LP Units are first
convertible into REIT Stock, a registration statement, including a form of
prospectus, and one or more amendments thereto, on Form S-3 or other appropriate
form, covering such shares of REIT Stock to be issued upon conversion of the LP
Units issued pursuant to the Asset Transfer as set forth in Section 2.2 hereof.
3.4 Information Respecting Transferor and MTP. Transferor shall furnish
in writing for inclusion in the Registration Statement such information about
Transferor and MTP that may be requested by the REIT Parties in writing.
Transferor represents and warrants that the information so supplied, as it may
be revised from time to time in writing by Transferor, shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.5 Amendments to the Registration Statement. If, at any time prior to
the Expiration Date, it shall be necessary to amend or supplement the
Registration Statement to correct any statement or omission with respect to the
REIT, MTP, Transferor or their subsidiaries or assets, or in order to comply
with any applicable legal requirements, Transferor
8
<PAGE>
shall supply the necessary information to the REIT. To the extent necessary to
comply with applicable legal requirements, the REIT shall amend or supplement
the Registration Statement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 Transferor Representations and Warranties. As a material inducement
to the REIT Parties to execute this Agreement and to the REIT Parties to
consummate the transactions contemplated hereunder, Transferor and MTP jointly
and severally represent and warrant to the REIT Parties with respect to itself
and the Property, that as of the date hereof and as of the Closing Date:
(a) Transferor Organizational Representations and Warranties.
(i) Organization and Authority. Transferor has been
duly organized and is validly existing and in good standing under the laws of
its jurisdiction of organization and, if different, is qualified to do business
and in good standing in the state in which the Property is located. Transferor
has the full right and authority to enter into this Agreement. Transferor has
the full and right authority to transfer the Property and to consummate or cause
to be consummated the transactions contemplated herein. This Agreement has been
duly authorized and properly executed by Transferor and, assuming the due
authorization, execution and delivery hereof by the other parties hereto,
constitutes the valid and binding obligation of Transferor, enforceable against
Transferor in accordance with its terms.
(ii) Conflicts. The execution of and performance by
Transferor of its obligations under this Agreement does not and will not
conflict with the terms of Transferor's constituent documents and does not
breach or violate any applicable law, rule or regulation of any governmental
authority. Subject to obtaining the required consents and approvals by the
Lender, there is no agreement to which Transferor is a party or binding on
Transferor, which will be breached by or which is in conflict with the execution
of or performance by Transferor of its obligations under this Agreement or with
the rights granted to Transferor hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending, or to Transferor's knowledge, threatened against Transferor
or the Property which would, if adversely determined, have a material adverse
effect on the financial condition or results of operations of Transferor. There
is no action or proceeding pending, or to Transferor's knowledge, threatened
against Transferor which challenges or impairs Transferor's ability to execute,
deliver or perform under this Agreement, to transfer all of the Property
hereunder or to consummate the transactions contemplated herein.
9
<PAGE>
(b) Transferor's Property Representations and Warranties.
(i) Contractors and Suppliers. All contractors,
subcontractors, suppliers, architects, engineers and others that have performed
services or labor or supplied material in connection with Transferor's
acquisition, development, ownership or management of the Property have been, or
will be in the ordinary course of business, paid in full prior to Closing and
all liens arising therefrom (or claims which with the passage of time or notice
or both, could mature into liens) have been, or will be in the ordinary course
of business, satisfied and released prior to Closing. On the Closing Date,
Transferor shall provide the REIT a list of all contracts that are not
terminable upon 30 days written notice without penalty. The Transferor shall not
be required to pay any termination fees or penalties in connection with
contracts the REIT wishes to terminate, as such amounts shall be the sole
responsibility of the REIT. Notwithstanding the foregoing statements, Gentry
Place agrees to negotiate on the REIT's behalf for the termination/cancellation
of an existing security monitoring agreement between Gentry Place and Network
Multi-Family Security Corporation, with such termination to be effective on
August 1, 1998. The REIT agrees and Gentry Place acknowledges that the REIT will
bear the cost of $160,000, as a fee to affect the termination of said contract
(the "Buyout Amount"). The REIT agrees and Gentry Place acknowledges that Gentry
Place will (a) be entitled to any savings obtained if the Buyout Amount is less
than $160,000, and (b) bear the responsibility for any amount in excess of the
Buyout Amount for Merit Place Apartments. Such amount in excess of the Buyout
Amount for Merit Place Apartments shall be credited to the REIT with regard to
Transferor at Closing and such amount less than the Buyout Amount shall be
credited to Transferor at Closing.
(ii) Leases and Rent Roll. The Rent Roll delivered by
Transferor hereunder for its Real Property is true, accurate and complete in all
material respects. Except as set forth in the Rent Roll or applicable Permitted
Exceptions, there are no leases or occupancy agreements or rights of possession
affecting the Real Property. Except as otherwise specifically and expressly set
forth in the Rent Roll for the Real Property: (1) no presently effective rent
concessions have been given to any tenants; (2) no rent has been paid in advance
by any tenants respecting a period subsequent to the Closing (except for the
month in which the Closing occurs); (3) no tenants have any claim against
Transferor for any deposits, other than pursuant to the terms of its Lease with
respect to sums specified as deposits in the Rent Roll; (4) no tenants have any
options or rights of first refusal to extend or renew their Leases or to rent
additional space or to purchase the Property; (5) there are no tenant
improvements which are incomplete or which have not been fully paid for by
Transferor except as otherwise specified in this Agreement; and (6) there are no
leasing fees or commissions due, nor will any become due, in connection with any
Lease or any renewal or extension of any Lease. Except as set forth in the Rent
Roll, no understanding or agreement with any party exists as to payment of any
leasing or other fees or commissions regarding future leases or as to procuring
of tenants for the Real Property. To Transferor's knowledge, no default or
breach exists on the part of any tenant. Transferor has not received any notice
of any material default or breach on the part of the landlord under any Lease.
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(iii) Operating and Financial Statements. Each
Operating and Financial Statement for the Real Property shows all material items
of income and expense (operating and capital) incurred in connection with
Transferor's ownership, operation and management of such Real Property for the
periods indicated and are true, correct and complete in all material respects.
(iv) Notice of Violations. To Transferor's knowledge,
Transferor has not received notice that the Property or the use thereof violates
any laws, rules and regulations of any federal, state, city or county government
or any agency, body or subdivision thereof having any jurisdiction over Property
that have not been resolved to the satisfaction of the issuer of the notice.
(v) Zoning, Applicable Laws Governing Operation and
Restrictions. To Transferor's knowledge, neither the Property or Transferor's
current use or operation thereof fails to comply or is in violation, in any
material respect, with current applicable laws, regulations, ordinances,
building codes and rules of all applicable municipal, local, state and federal
jurisdictions, including, without limitation, zoning ordinances, parking
requirements, building codes and laws governing access for handicapped persons,
and with restrictions, covenants or similar agreements affecting such Property.
(vi) Taxes and Assessments. To Transferor's
knowledge, all taxes for the current year and all prior years for the Property
which are due and payable have been paid, except for installments due and not
yet delinquent and supplemental taxes not yet assessed, and no taxes are
delinquent. All impact fees or other assessments, fees or charges, however
denominated, which may constitute a lien or charge on the Property or which have
been assessed or charged as a result of any permit, license or approval obtained
for the Property have been paid in full, and there is not presently pending any
such assessment, fees or charges of any nature with respect to the Property or
any part thereof, nor has Transferor received any notice of any such
assessments, fees or charges being contemplated. No areas within the Real
Property are subject to any existing improvement districts, except as may be
disclosed by the applicable Title Report and any amendments thereto. All taxes
with respect to Transferor and the ownership and operation of the Property
during Transferor's ownership, including, without limitation, income, gross
receipts, net proceeds, ad valorem, turnover, personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational and interest equalization,
windfall profits, severance and employees' income withholding and Social
Security taxes imposed by the United States or any foreign country or by any
state, municipality, subdivision or instrumentality of the United States or of
any foreign country or by any other tax authority, including all applicable
penalties and interest (the "Other Taxes"), which are due and payable, have been
paid as disclosed on the returns to the extent due. Transferor has duly and
timely filed all tax returns of every nature required to be filed by it with
respect to the Other Taxes, in every jurisdiction in which the same may have
been so required, and has paid all Other Taxes disclosed on such returns to the
extent
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due. All Other Taxes of which notice has been received or which shall accrue on
or prior to the Closing Date have been paid to the extent due.
(vii) Hazardous Materials. The environmental reports
for the Property delivered to the REIT by Transferor constitute true, accurate
and complete copies of all of the environmental reports prepared for Transferor
for the Property. To Transferor's knowledge, the Real Property is not in
noncompliance or in violation of Environmental Laws, except as disclosed in any
environmental reports in Transferor's possession that have been delivered to the
REIT.
(viii) Withholding Obligation. To Transferor's
knowledge, the convey- ance to Heritage LP of the Property is not subject to any
federal, state or local withholding obligation of Transferor under the tax laws
applicable to Transferor or the Property, including without limitation, any
"bulk sales" or other similar laws.
(ix) Condemnation. No condemnation, claims, actions,
suits or proceedings relating to the Real Property are pending or, to
Transferor's knowledge, threatened.
(x) Insurance. The schedule of all insurance carried
and the costs thereof with respect to the Property provided by Transferor is
true, accurate and complete. Transferor has not received any notice from any
insurance company or board of fire underwriters of any defects or inadequacies
in, on or about any of the Real Property or any part or component thereof that
would adversely affect the insurability of the Real Property or cause an
increase in the premiums for the Property that have not been cured or repaired
to the satisfaction of the party issuing the notice. All insurance policies
insuring the Real Property are in full force and effect.
(xi) Ownership. Transferor is the owner and has title
to the Real Property free and clear of any and all claims, taxes, assessments,
reservations in patents, easements, rights-of-way, encumbrances, liens,
covenants, conditions, restrictions, obligations and liabilities other than
those specifically set forth herein or in the Title Report or approved in
writing as set forth above.
(xii) Flood Area. Except as may be disclosed on the
survey respecting the Real Property, to Transferor's knowledge, no portion of
the Real Property is within any flood plain area as designated by the maps of
the Federal Emergency Management Agency (FEMA maps) or any other governmental or
quasi-governmental flood control agency.
(xiii) Future Transfer Obligations. Except as
disclosed in the Title Report for the Real Property, there are no agreements,
commitments or understandings by or between Transferor and any third party
pursuant to which Transferor or its successors-in-interest are required to
dedicate any part of the Real Property or to grant any easement, water rights,
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rights-of-way, road or license for ingress and egress or other use in respect to
any part of the Real Property.
(xiv) Creditors. There are no attachments, levies,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or
pursuant to any other debtor or relief laws contemplated by Transferor or
pending in any current judicial or administrative proceedings against
Transferor.
(xv) Loan Documents. The Loan Documents delivered by
Transferor to the REIT constitute true, accurate and complete copies of all of
the documents and instruments in effect with respect to the Mortgage Debt
applicable to Transferor in all material respects. The Schedule of Loan
Documents delivered to the REIT by Transferor is in all material respects true,
accurate and complete. Transferor has not received any notice that Transferor is
in default under such Loan Documents, nor to Transferor's knowledge does any
default or breach exist, nor any event or circumstance that, with the giving of
notice, or passage of time, or both, would constitute a default or breach under
such Loan Documents. The unpaid principal balance under the Loan Documents
delivered to the REIT by Transferor after taking into account the July 1997
mortgage payment applicable to Transferor's Property is set forth in Schedule II
attached hereto.
(xvi) Solvency. To Transferor's knowledge, Transferor
is, and at all times during the period beginning on the date hereof and ending
on and including the Closing Date will be, solvent. As used herein, solvent
means with respect to an entity that such entity (i) does not have debts greater
than the fair value of such entity's assets; (ii) is paying and anticipates that
it will continue to pay such entity's debts as they become due; and (iii) has
sufficient capital to run such entity's business.
(xvii) Brokers' Fees. Except for CB Commercial, who
shall be paid solely by Transferor, no real estate broker, salesperson or finder
has engaged by Transferor in connection with the transactions contemplated
hereby that may result in claims for commissions or fees in connection
therewith.
(xviii) Full Disclosure. Transferor has made
available or accessible to the REIT all material documents, files, written
information, books and records in Transferor's possession or control and
relating to the Property.
(c) Transferor's Securities Representations.
(i) Investment Purpose. In the event that Transferor
receives LP Units, Transferor will acquire the LP Units for the purpose of
transferring such LP Units to its partners who intend to hold the LP Units for
investment and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act.
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(ii) Sufficient Knowledge and Experience. Transferor
has sufficient knowledge and experience in financial and business matters to
enable it to evaluate the merits and risks of investment in the LP Units.
Transferor has the ability to bear the economic risk of acquiring the LP Units.
(iii) Access to Information. Transferor has been
supplied with, or had access to, information to which a reasonable investor
would attach significance in making investment decisions, including, but not
limited to, all publicly available filings by the REIT under the Securities Act
and the Exchange Act, and the REIT's annual and quarterly reports to
stockholders, any information with respect to Heritage LP's financial condition,
business and prospects, and any other information Transferor has requested, to
answer all of its inquiries about Heritage LP and the REIT, and to enable it to
make its decision to acquire the LP Units.
(iv) Restrictions on Transfer. Transferor hereby
acknowledges that neither the LP Units nor the REIT Stock for which LP Units may
be exchanged are registered under the Securities Act or any state securities
laws and cannot be resold without registration thereunder or exemption
therefrom. Transferor agrees that, other than the transfers contemplated to its
partners, it will not transfer all or any portion of the LP Units or the
underlying Shares unless such transfer has been registered or is exempt from
registration under the Securities Act and any applicable state securities laws.
The LP Units contain a prominent legend with respect to the restrictions on
transfer under the Securities Act and under applicable state securities laws.
(d) ERISA Representation and Warranty. Transferor holds no
"plan assets," within the meaning of Department of Labor regulations at 29
C.F.R. section 2510.3- 101, of any employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the
transactions contemplated by this Agreement are not part of an agreement,
arrangement or understanding designed to benefit a party in interest with
respect to any employee benefit plan subject to ERISA that invests in
Transferor.
The term "to Transferor's knowledge" as it is used in this
Section 4.1 shall mean that the officers and directors of MTP have no actual
conscious knowledge of facts inconsistent with the matters stated. In connection
with the foregoing representations, Transferor has made no specific examination
of files or records, nor has Transferor made inquiry of any other employee of
Transferor, its advisor, or any management company engaged by Transferor. No
constructive knowledge of any matter shall be imputed to Transferor as to
matters not within the actual conscious knowledge of the above-named persons,
and no personal liability shall attach to such persons as a result of any
violation of any representation or warranty. A breach of a representation set
forth in this Section 4 by Transferor or MTP shall constitute a failure of the
condition set forth in Section 7.1(a) hereof.
4.2 Further Representations and Warranties of MTP. As a material
inducement to the REIT and Heritage LP to execute this Agreement and consummate
the transactions
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contemplated hereunder, MTP represents and warrants to the REIT and Heritage LP
that as of the date hereof and as of the Closing Date:
(a) Approval by MTP as General Partner. MTP hereby approves
and consents to the transactions contemplated herein and represents and warrants
that it has approved this Agreement and the transactions hereby contemplated.
(b) Power of MTP to Execute Agreement. MTP has full power and
authority to execute, deliver, and perform this Agreement, and this Agreement is
the legal and binding obligation of MTP and is enforceable against it in
accordance with the terms of this Agreement.
(c) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which Transferor or MTP is a party or
by which Transferor or MTP is bound, or any judgment, decree, order, or award of
any court, governmental body, or arbitrator, or to the knowledge of MTP, any
applicable law, rule or regulation.
4.3 The REIT's Representations and Warranties. As a material inducement
to the MTP Parties to execute this Agreement and consummate the transactions
contemplated hereunder, the REIT represents and warrants to the MTP Parties that
as of the date hereof and as of the Closing Date:
(a) REIT Organizational Representations and Warranties.
(i) Organization and Authority. The REIT has been
duly organized, is validly existing as a corporation under the laws of its state
of incorporation and is in good standing in such state and, if different, is
qualified to do business and in good standing in the jurisdictions in which the
property owned by the REIT or the business conducted by the REIT requires such
qualification. Each of the REIT's subsidiaries has been duly organized and is
validly existing under the laws of its organization and, if different, is
qualified to do business in the jurisdictions in which the property owned by
such subsidiary or the business conducted by such subsidiary requires such
qualification. The REIT has the full corporate right and authority and has
obtained any and all consents required therefor to enter into this Agreement.
The persons signing this Agreement on behalf of the REIT are authorized to do
so. This Agreement and all of the documents to be delivered by the REIT at the
Closing have been or will be authorized and properly executed and do or will
constitute the valid and binding obligations of the REIT, enforceable against
the REIT in accordance with their terms.
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(ii) Conflicts. The execution of and performance by
the REIT under this Agreement does not and will not conflict with the Amended
and Restated Articles of Incorporation or By-Laws of the REIT and does not
breach or violate any applicable law, rule or regulation of any governmental
authority. There is no agreement to which the REIT is a party or, to the REIT's
knowledge, binding on the REIT which will be breached by or which is in conflict
with its execution of or performance of its obligations under this Agreement or
with the rights granted to the REIT hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending or, to the REIT's knowledge, threatened against the REIT or
any of its properties, which would, if adversely determined, have a material
adverse effect on the financial condition or results of operations of the REIT.
There is no action or proceeding pending or, to the REIT's knowledge, threatened
against the REIT which challenges or impairs the REIT's ability to execute,
deliver and perform under this Agreement.
(b) REIT Securities Representations and Warranties.
(i) Reserved Shares. From the authorized capital
stock of the REIT, a sufficient number of shares of REIT Stock shall have been
reserved by the REIT at Closing for issuance to Transferor Partners in the
Exchange Offer and to Transferor upon exchange of the LP Units therefor in
accordance with Articles One and Two of this Agreement.
(ii) REIT Common Stock. The REIT Stock to be issued
in accordance with this Agreement will be duly authorized, validly issued, fully
paid and nonassessable and will not be subject to any preemptive or similar
right and, subject to compliance with the Securities Act and the Exchange Act,
will be eligible for listing on the American Stock Exchange. On or prior to the
Closing Date, the REIT shall have caused the effectiveness of the Registration
Statement under the Securities Act and under any applicable state securities
laws covering the resale of the shares of REIT Stock to be issued in accordance
with the Exchange Offer; provided, however, in the event that this Agreement is
terminated by the REIT pursuant to Section 10.3(d) or Section 10.3(f) herein,
the REIT shall be entitled to the prompt reimbursement for all out-of-pocket
costs (including, without limitation, attorneys' fees, filing fees, and
disbursements) incurred by the REIT in connection with its preparation and
filing of the Registration Statement and any amendments and supplements thereto.
(iii) Registration Statement and Prospectus. When the
Registration Statement becomes effective, (i) the Registration Statement and the
prospectus included therein (the "Prospectus"), and any amendments and
supplements thereto, will contain all statements and information that are
required to be included therein in accordance with the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission (the
"Rules and Regulations") and will comply in all material respects with the
requirements of the Securities Act and the Rules and Regulations; and (ii)
neither the Registration Statement nor the Prospectus, nor any amendment to
supplement thereto, will include an untrue statement of a material fact
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or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the REIT
makes no representations and warranties as to information contained in or
omitted from the Registration Statement or Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with information
furnished to the REIT by Transferor or MTP specifically for use in preparation
thereof.
(c) Brokers' Fees. No real estate broker, salesperson or
finder has been engaged by the REIT in connection with the transactions
contemplated hereby that may result in claims for commissions or fees in
connection therewith.
The term "to the REIT's knowledge" as used in this Section 4.3
shall mean that the officers and directors of the REIT have no actual conscious
knowledge of facts inconsistent with the matters stated. In connection with the
foregoing representations, the REIT has made no specific examination of files or
records, nor has the REIT made inquiry of any other employee of the REIT, its
advisor, or any management company of the REIT. No constructive knowledge of any
matter shall be imputed to the REIT as to matters not within the actual
conscious knowledge of the above-named persons, and no personal liability shall
attach to such persons as a result of any violation of any representation or
warranty. A breach of a representation set forth in this Section 4 by the REIT
shall constitute a failure of the condition set forth in Section 7.2(a).
4.4 Heritage LP's Representations and Warranties. As a material
inducement to the MTP Parties to execute this Agreement and consummate the
transactions contemplated hereunder, Heritage LP represents and warrants to the
MTP Parties that as of the date hereof and as of the Closing Date:
(a) Partnership Organization and Authority. Heritage LP has
been duly organized under the Delaware Revised Uniform Limited Partnership Act,
is validly existing as a Delaware limited partnership, and is in good standing
in the State of Delaware. The Subsidiary Partnership will be duly organized,
validly existing, and in good standing in the state of its organization at the
Closing. Heritage LP is and, at the Closing the Subsidiary Partnership will be,
qualified to do business and in good standing under the laws of each
jurisdiction in which the Property owned or to be owned by Heritage LP or the
Subsidiary Partnership or the business conducted or to be conducted by Heritage
LP or the Subsidiary Partnership requires such qualification. The REIT and
Heritage SGP are the sole general partners of Heritage LP and Heritage SGP will
be the sole general partner of the Subsidiary Partnership. Heritage LP will be
the sole limited partner of the Subsidiary Partnership. Heritage LP has the full
right and authority and has obtained any and all consents required therefor to
enter into this Agreement and to consummate or cause to be consummated the
transactions contemplated herein. The persons signing this Agreement on behalf
of Heritage LP at the Closing have been authorized to do so. This Agreement and
all of the documents to be delivered by Heritage LP at the Closing have been or
will be authorized and properly executed and do or will constitute the valid
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and binding obligations of Heritage LP, enforceable against Heritage LP in
accordance with their terms.
(b) Conflicts. The execution of and performance of this
Agreement does not and will not conflict with the Partnership Agreement or the
Certificate of Limited Partnership of Heritage LP. There is no agreement to
which Heritage LP is a party or, to Heritage LP's knowledge, binding on Heritage
LP which will be breached by or is in conflict with its execution of or
performance under this Agreement.
(c) Pending Actions. There is no action or proceeding pending
or, to Heritage LP's knowledge, threatened against Heritage LP or any of
Heritage LP's properties, which would, if adversely determined, have a material
adverse effect on the financial condition or results of operations of Heritage
LP. There is no action or proceeding pending or, to Heritage LP's knowledge,
threatened against Heritage LP which challenge or impair Heritage LP's ability
to execute, deliver and perform under this Agreement.
The term "to Heritage LP's knowledge" as used in this Section
4.4 shall mean that the general partners of Heritage LP has no actual conscious
knowledge of facts inconsistent with the matters stated. In connection with the
foregoing representations, Heritage LP has made no specific examination of files
or records, nor has Heritage LP made inquiry of any other employee of Heritage
LP, its advisor, or any management company of Heritage LP. No constructive
knowledge of any matter shall be imputed to Heritage LP as to matters not within
the actual conscious knowledge of the above-named persons, and no personal
liability shall attach to such persons as a result of any violation of any
representation or warranty. A breach of a representation set forth in this
Section 4 by Heritage LP shall constitute a failure of the condition set forth
in Section 7.2(a).
4.5 Disclaimer of Warranty. Except as expressly set forth in this
Agreement, the contribution of the Property to Heritage LP is made on an "AS IS"
basis. The REIT Parties acknowledge that, except as expressly provided in this
Agreement, neither Transferor nor any of its agents have made any
representations, warranties, promises, covenants or guaranties of any kind or
character whatsoever, express or implied, oral or written, with respect to the
Property or the suitability or fitness of the Property for any particular use or
purpose.
ARTICLE 5
CONTINUATION AND SURVIVAL
OF REPRESENTATIONS AND WARRANTIES
---------------------------------
Each of the representations and warranties contained in this
Agreement shall be true and correct on and as of the Closing Date and at all
times between the execution of this Agreement and the Closing Date with the same
force and effect as if made at each of such times, except to the extent, if any,
that such representations and warranties shall be affected by
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transactions contemplated by this Agreement. All such representations and
warranties shall survive the consummation of the transactions contemplated by
this Agreement for a period of six months following the Closing Date
irrespective of any investigations or inquiries made by any party or any
knowledge which any party may now possess or which may hereafter come to any
party's attention, and each party shall be entitled to rely upon such
representations and warranties irrespective of any investigations, inquiries or
knowledge.
ARTICLE 6
COVENANTS
---------
6.1 Covenants of MTP Parties. The MTP Parties agree that, unless the
REIT otherwise agrees in writing, at all times prior to the Closing Date:
(a) Preservation of Business. The MTP Parties shall use their
best efforts to (i) preserve intact the present business organization of
Transferor; (ii) preserve the present goodwill and advantageous relationships of
Transferor with all persons having business dealings with Transferor; and (iii)
preserve and maintain in force all licenses, registrations, franchises, patents,
trademarks, copyrights, bonds and other similar rights of Transferor. The MTP
Parties and its subsidiaries shall maintain in force all property, casualty,
crime, directors, and officers and other forms of insurance which they are
presently carrying.
(b) Actions With Respect to the Property Prior to Closing.
(i) Transferor agrees that prior to the Closing it
shall continue to operate and manage the Real Property in the ordinary course of
business in accordance with past practice (which includes the maintenance and
management of the Property) and shall perform regular maintenance, maintain
existing insurance coverage, perform its obligations under all leases with
tenants, Service Contracts and Loan Documents applicable to the Real Property,
commit no waste to the Property and pay and discharge, in the ordinary course of
business, liabilities and obligations relating to the Real Property. Transferor
shall not, without the prior consent of the REIT, which consent shall not be
unreasonably withheld or delayed, incur, create or assume any new indebtedness,
other than accounts payable, taxes and similar amounts incurred in the ordinary
course of business, nor grant any new lien, mortgage, security interest or
pledge of any kind on the Real Property prior to the Closing.
(ii) Transferor agrees that prior to the Closing it
shall consult with the REIT prior to terminating any Lease or Service Contract
(except in the ordinary course of business) or entering into or modifying any
contract or agreements relating to the Real Property which would be binding on
Heritage LP or the REIT after the Closing. The REIT shall have the right to
approve, such approval not to be unreasonably withheld or delayed, any material
new contracts or contract modifications which are proposed by Transferor.
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(iii) Transferor may enter into new Leases and modify
existing Leases relating to the Real Property without the REIT's consent so long
as such leases comply with the leasing standards existing on the date hereof
with respect to the applicable property with such exceptions as are typically
made in the ordinary course of business and are on Transferor's standard form,
subject to customary modifications thereto.
(iv) Transferor shall notify the REIT of any matters
that may arise prior to the Closing that could have a material adverse effect on
the Property and become known to the Transferor, such as pending or threatened
litigation, notices of violations from governmental or quasi-governmental
authorities or agencies, tenant defaults, bankruptcies or insolvencies and
asserted landlord defaults.
(v) Except with the prior written consent of the REIT
(which consent shall not to be unreasonably withheld or delayed), Transferor
shall not accept rents or occupancy payments from any tenant at the Real
Property for more than one month in advance except in the ordinary course of
business.
(c) Books and Records. Transferor shall maintain its books,
accounts and records in the usual, regular and ordinary manner, and on a basis
consistent with prior years, and shall comply with all laws applicable to it or
to the conduct of its business.
(d) Consents and Approvals. The MTP Parties shall obtain all
necessary consents and approvals of other persons and governmental authorities
to the performance by the MTP Parties of the transactions contemplated by this
Agreement. The MTP Parties shall make or cause to be made all filings,
applications, statements and reports to all federal and state government
agencies or entities that are required to be made prior to the Closing Date by
or on behalf of the MTP Parties pursuant to any statute, rule or regulation in
connection with the transactions contemplated by this Agreement.
(e) Access to Property. During the Due Diligence Period, and
at all times prior to the Closing Date, Transferor and MTP shall provide the
REIT and Heritage LP as well as their respective employees, contractors,
consultants, agents and representatives, with complete access to all files,
books, records and other materials in the possession or control of Transferor or
MTP and relating to the Property and the right to examine, inspect and make
copies of such materials as they may deem appropriate. Transferor shall also
provide for such parties to have reasonable access to the Real Property
(including the Improvements thereon) for the purpose of conducting surveys,
architectural, drainage, soils, mechanical systems, engineering, geotechnical
and environmental inspections and tests (including sampling and invasive testing
for the presence of Hazardous Materials performed in connection with Phase I and
Phase II environmental audits), feasibility studies and any other inspections,
studies or tests reasonably required by them. The REIT shall also have the right
to conduct a "walk-through" of the Property prior to the Closing Date upon
appropriate notice, subject to the rights of all tenants under their Leases.
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(f) Information Regarding the Property. It is the intention of
the parties that Transferor and MTP will disclose to the REIT and the other
parties performing the due diligence review herein provided for any and all
information in the possession or control of such parties, their property
managers, and any other affiliated entity to the extent it relates to the
Property. In the course of its investigations, the REIT may make inquiries to
third parties including, without limitation, tenants, the Lender, contractors,
property managers, parties to other contracts and municipal, local and other
government officials and representatives, and the Transferor consents to such
inquiries. Transferor and MTP shall also make available to the REIT all the
books and records, financial statements, income tax returns, contracts, employee
records and other information with respect to Transferor as may be reasonably
required by the REIT in order to perform its due diligence review of Transferor.
(g) Truth of Representations and Warranties. None of the MTP
Parties shall take or suffer or permit any action that would render untrue any
of the representations or warranties of the MTP Parties in any material respect
herein contained, nor shall the MTP Parties omit to take any action, the
omission of which would render untrue any such representation or warranty in any
material respect.
6.2 Further Covenants of the MTP Parties. The MTP Parties agree that,
unless the REIT otherwise agrees in writing, on or prior to the Commitment Date
Transferor shall deliver:
(a) Identification of LP Unit Recipients. An updated list
substantially in the form of Schedule VIII attached hereto designating (i) the
names of the partners of Transferor that shall receive LP Units and (ii) the
number of LP Units to be received by each such partner of Transferor.
(b) Representation Letters. Representation Letters
substantially in the form of Exhibit H attached hereto duly executed by each
partner of Transferor designated by Transferor in Schedule VIII attached hereto
and updated pursuant to Section 6.2(a) hereof.
6.3 Covenants of the REIT Parties. The REIT Parties agree that unless
MTP otherwise agrees in writing, at all times prior to the Closing Date:
(a) Books and Records. The REIT Parties shall maintain their
books, accounts and records in the usual, regular and ordinary manner, and on a
basis consistent with prior years, and shall comply with all laws applicable to
them or to the conduct of their business.
(b) No Organic Change. The REIT Parties shall not (i) amend
their Articles of Incorporation or bylaws other than the amendment to the REIT's
Articles of Incorporation set forth in the REIT's proxy statement relating to
the REIT's annual meeting of stockholders
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to be held on August 20, 1997; (ii) make any change in their capital stock by
reclassification, subdivision, reorganization or otherwise; or (iii) change the
character of their business.
(c) Consents and Approvals. The REIT Parties shall use their
best efforts to obtain all necessary consents and approvals of other persons and
governmental authorities to the performance by them of the transactions
contemplated by this Agreement. The REIT Parties shall make or cause to be made
all filings, applications, statements and reports to all federal and state
government agencies or entities that are required to be made prior to the
Closing Date by or on behalf of the REIT Parties pursuant to any statute, rule
or regulation in connection with the transactions contemplated by this
Agreement.
(d) Truth of Representations and Warranties. The REIT Parties
shall not take or suffer or permit any action that would render untrue in any
material respect any of the representations or warranties of the REIT Parties
herein contained, nor shall the REIT Parties omit to take any action, the
omission of which would render untrue any such representation or warranty in any
material respect.
(e) Indemnity. Prior to the Closing, the REIT shall not place
any liens on the Property and will indemnify, defend and hold Transferor
harmless from all claims and liabilities (including reasonable attorneys' fees
and expenses actually incurred) asserted against Transferor or its owners as a
result of any entry by or on behalf of the REIT onto the Property. If any
inspection or test disturbs the Property, the REIT will cause the damaged
property to be restored to the same condition as existed prior to any such
inspections or tests.
6.4 Mutual Consent to Use Best Efforts. Subject to the terms and
conditions of this Agreement, and subject to fiduciary duties under applicable
law, as advised by counsel, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
using its best efforts to make all necessary, proper or advisable registrations
and filings and obtain all necessary, proper or advisable permits, consents,
authorizations, requests and approvals of third parties and governmental
authorities. It at any time after the Closing Date, any further action is
necessary or desirable to carry out the purposes of this Agreement (including
providing any information in any way related to the assets to be purchased
pursuant to this Agreement), the proper partners, officers and directors of each
party to this Agreement shall take all such action.
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to REIT Parties Obligation to Close. Notwithstanding
anything to the contrary herein, the REIT Parties obligations at the Closing to
consummate the transactions contemplated hereunder (including the REIT's
obligations to accept for payment or pay for any
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Transferor Partnership Interests tendered by a Transferor Partner and Heritage
LP's obligations to consummate the Asset Transfer) shall be contingent on the
satisfaction of the following conditions at the Closing (or the waiver thereof
by each of the REIT Parties in their sole and absolute discretion):
(a) Accuracy of Representations and Warranties. The
representations and warranties of Transferor contained herein shall be true and
correct in all material respects at Closing as if made as of the Closing Date
(however, if a particular representation or warranty shall be made only to
Transferor's knowledge, then the condition under this Section 7.1(a) shall not
be deemed to be fulfilled with respect to such items unless the same would be
fulfilled if such limitation did not exist; provided, however, in the event that
Transferor receives notice of a condition within 15 days of the Expiration Date
that would render a particular representation or warranty untrue or incorrect,
such Transferor shall be entitled 15 calendar days from such notice to cure such
condition and, if necessary, the Expiration Date shall be extended accordingly).
(b) Absence of Action or Proceeding. No action or proceeding
by any governmental agency shall have been instituted or threatened that would
enjoin, restrain or prohibit, or that could reasonably be expected to result in
substantial damages in respect of the Property that in the reasonable judgment
of the REIT Parties make it inadvisable to consummate such transaction, and no
court order shall have been issued in any action or proceeding instituted by any
person that enjoins, restrains or prohibits the consummation of the transactions
contemplated by this Agreement with respect to Transferor and no proceeding for
such an order shall have been instituted that in the reasonable judgment of the
REIT or Heritage LP is likely to result in the issuance of such an order.
(c) Transferor's Deliveries. Transferor shall have delivered,
or caused to be delivered, each of the items specified in Section 8.3 and
Section 8.6 hereof that Transferor is required to deliver and Transferor shall
have performed in all material respects each of the other obligations required
to be performed by it under this Agreement.
(d) Compliance with Agreements and Covenants. Each of the MTP
Parties shall have performed and complied with each of their agreements,
covenants, and obligations to be performed on or prior to the Closing Date
except those calling for performance after the Closing Date.
(e) Letters of Transmittal Delivery. The Custodian shall have
delivered, or caused to be delivered to the REIT, a properly completed and
executed Letter of Transmittal for each Transferor Partner participating in the
Exchange Offer.
(f) Performance or Waiver of Due Diligence. Prior to 15 days
after receipt of each of the Title Report, the Survey, the UCC Searches, the
Loan Documents or other information to be provided or made available by
Transferor (the "Due Diligence Period"), the
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REIT shall have performed or waived its due diligence review and examination of
such Title Report, Survey, UCC Searches, Loan Documents and all information to
be provided or made available by Transferor and shall have determined in its
sole and absolute discretion, to proceed with the transactions contemplated
under this Agreement. It is agreed that as of the date hereof, the REIT has
accepted the physical condition of the Property as it exists on the date hereof
in all respects; therefore, the REIT Parties shall not be entitled to terminate
this Agreement due to the physical condition of the Property. Except to the
extent covered by a representation or warranty made in this Agreement, a failure
of the REIT to timely terminate this Agreement within the Due Diligence Period
shall be a deemed acceptance by the REIT of all aspects of the condition of the
Property, the Title Report, and the Survey by the REIT.
(g) Approval of Title Report, Survey or UCC Searches. The REIT
shall have approved, in its sole discretion, all matters disclosed by the Title
Report, Survey or UCC Searches. If any person subsequently issues any amendment
to the Title Report, Survey or UCC Searches disclosing any additional matters or
changes in the legal description or additional requirements of the REIT, the
REIT shall have approved any such matter not disclosed by the Title Report,
Survey or UCC Searches or any previous amendment thereto. On or before fifteen
(15) days after the Title Company has delivered to the REIT the Title Report,
Survey or UCC Searches (or any amendments thereto) the REIT shall give written
notice of such approval or objection to Transferor and the Title Company
specifying in reasonable detail any matter to which the REIT objects. If the
REIT delivers any notice of objection to any matter, within five (5) days after
receipt of such objection, Transferor shall notify in writing the REIT and the
Title Company whether Transferor is unable or unwilling to remove or satisfy
such matter objected to by the REIT on or before Closing. If the REIT fails to
notify Transferor and the Title Company at least twenty (20) days prior to the
Closing Date of any objections to the Title Report, Survey or UCC Searches or
any amendment or modification thereto, then the REIT shall be deemed to not
object to any matter in the Title Report, Survey or UCC Searches or any
modification thereto.
(h) Title Company Deliveries. At the Closing, as a condition
to the REIT Parties obligation to close, the Title Company shall deliver to the
REIT (i) an Owner's Policy of Title Insurance (the "Title Policy") issued by the
Title Company, covering the Property in the form prescribed by the State Board
of Insurance for use in Texas, the Title Policy to be dated the date of the
recording of the applicable deed covering the Real Property covered thereby and
to be in the amount of the Deemed Value of the respective Real Property covered
thereby (which allocation shall be provided by Transferor), insuring Heritage LP
as owner of good and indefeasible title to the Survey legal description of the
Real Property covered thereby and subject only to the Permitted Exceptions that
are applicable to such Real Property and such exceptions as are required by
applicable Texas law to be included in Schedule B to each such policy of title
insurance; and (ii) updated UCC searches from the State of Texas disclosing no
security interests or liens affecting the Property other than those to be
released at the Closing and other than those created pursuant to the Transferred
Debt. Transferor shall comply with all requirements to the issuance of the Title
Policy to be delivered at Closing and shall execute at Closing such
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affidavits and indemnities as may be appropriate under applicable facts and as
reasonably required by the Title Company in order for it to issue such
above-referenced Title Policy.
(i) Mortgage Debt. The Lender shall have consented to the
transfer of the Property subject to the Transferred Debt as contemplated by
Section 2.3, or Heritage LP shall have agreed to refinance or pay off such
Mortgage Debt.
(j) Termination of Network Agreement. The security monitoring
agreement by and between Network and Gentry Place shall have been terminated in
accordance with Section 4.1(b)(i).
(k) Receipt of Opinion of Counsel. The REIT and Heritage LP
shall have received a favorable opinion of Kim Lawrence, Esq., counsel for
Transferor, in form and substance satisfactory to the REIT's and Heritage LP's
counsel, dated the Closing Date, and confirming the matters set forth on Exhibit
F attached hereto, subject to customary qualifications.
(l) Governmental and Agency Approvals. The REIT or Heritage LP
shall have received all governmental and agency approvals for (i) the issuance
of REIT Stock, LP Units and GP Units in connection with the transactions hereby
contemplated, (ii) the listing of the REIT Stock issued in connection with the
Exchange Offer hereby contemplated on the American Stock Exchange, and (iii) the
registration for resale of REIT Stock issued in connection with the Exchange
Offer.
(m) Updating of Rent Roll. The Rent Roll shall have been
updated to the Closing in the form of Schedule IX attached hereto.
(n) Acquisition of Smith Summit. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Smith Summit Agreement shall be consummated.
(o) Acquisition of Park On Preston. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Merit Preston Park Agreement shall be consummated.
7.2 Conditions to Transferor's Obligations to Close. Notwithstanding
anything to the contrary herein, Transferor's obligations at the Closing to
consummate the transactions contemplated hereunder shall be contingent on the
satisfaction of each of the following conditions at the Closing (or the waiver
thereof by Transferor in its sole and absolute discretion):
(a) Accuracy of Representations and Warranties. The REIT's and
Heritage LP's representations and warranties contained herein shall be true and
correct in all material respects at Closing as if made as of the Closing Date.
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(b) REIT's Deliveries. The REIT shall have delivered, or
caused to be delivered, each of the items specified in Section 8.5 and Section
8.7 hereof and shall have performed each of the other obligations required to be
performed hereunder.
(c) Heritage LP's Deliveries. Heritage LP shall have
delivered, or caused to be delivered, each of the items specified in Section 8.8
hereof and shall have performed each of the other obligations required to be
performed hereunder.
(d) Absence of Action or Proceeding. No action or proceeding
by any governmental agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in respect
of this Agreement or the consummation of the transactions contemplated by this
Agreement, and would in the reasonable judgment of the REIT Parties make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any other party which enjoins,
restrains or prohibits this Agreement or consummation of the transactions
contemplated by this Agreement.
(e) Receipt of Opinion of Counsel. Transferor shall have
received a favorable opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, P.A. ("O'Connor Cavanagh"), counsel for REIT, in form and substance
satisfactory to Transferor's counsel, dated the Closing Date, and confirming the
matters set forth on Exhibit E attached hereto, subject to customary
qualifications.
(f) Acquisition of Smith Summit. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Smith Summit Agreement shall be consummated.
(g) Acquisition of Park On Preston. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Merit Preston Park Agreement shall be consummated.
ARTICLE 8
CLOSING
-------
8.1 Closing Date. The consummation of the transactions contemplated
hereby with respect to the Property, Transferor, Transferor Partners
participating in the Exchange Offer, and the REIT Parties (the "Closing") shall
occur at the offices of the Title Company in Dallas, Texas or such other place
to which the parties may agree on a date (the "Closing Date") that shall be
selected by the REIT, but in no event shall be earlier than August 15, 1997 or
later than September 12, 1997, unless extended by (i) the mutual consent of the
REIT and MTP or (ii) MTP pursuant to Section 7.1(a) (the "Expiration Date"). A
pre-closing conference shall commence at least three (3) business days prior to
the Closing Date, during which all deliveries
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(other than the REIT Capital Contribution) shall be made into an escrow between
the parties. All deliveries made during this pre-closing period shall be deemed
deliveries made at the Closing.
8.2 Sequence of Closings. Deliveries of all documents to effect each of
the transactions contemplated by this Agreement shall be deemed to be made
simultaneously and in escrow. The Closing of each of the transactions
contemplated by this Agreement shall be contingent on the satisfaction of
conditions for each other transaction contemplated by this Agreement. The
transactions shall be deemed to occur in the following order:
first, the Exchange Offer shall be deemed to close and the
REIT shall be substituted as a limited partner of Transferor if partnership
interests in Transferor are tendered in the Exchange Offer; and
second, the Asset Transfer shall be deemed to close, and the
Property shall be contributed to Heritage LP in exchange for the Cash Payment
and the LP Units.
8.3 Transferor Partners' Deliveries to Close the Exchange Offer. At the
Closing, each Transferor Partner who has tendered a Transferor Partner Interest
pursuant to the Exchange Offer shall cause the Custodian to deliver to the REIT
the following pursuant to the Custody Agreement:
(a) Letters of Transmittal. A Letter of Transmittal, completed
and duly executed by such Transferor Partner, in the form of Exhibit A hereto;
(b) Transferor Partner Interests. All right, title and
interest in and to the Transferor Partner Interests owned by Transferor Partner;
and
(c) Other Documents. Any other documents called for by the
Letter of Transmittal.
8.4 Custodian's Deliveries to Close the Exchange Offer. At the Closing,
the Custodian shall deliver to the REIT a copy of the Custody Agreement, which
was executed by the Custodian and each Transferor Partner who tendered
Transferor Partner Interests in the Exchange Offer and which were accepted for
purchase by the REIT.
8.5 REIT's Deliveries to Close the Exchange Offer. At the Closing, the
REIT shall deliver to each Transferor Partner who tendered Transferor Partner
Interests in the Exchange Offer by delivery to the Custodian pursuant to the
Custody Agreement, the following:
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(a) REIT Stock. A certificate representing the number of
validly issued, fully paid, and non-assessable shares of REIT Stock each in the
amounts calculated pursuant to Section 1.1 hereof attributable to all Transferor
Partner Interests tendered by such Transferor Partner, with such certificate
registered in the name of each respective Transferor Partner.
(b) Officer's Certificate. A certificate signed by a duly
authorized officer of the REIT stating that the REIT's representations and
warranties contained herein are true and correct on and as of the Closing Date
with the same force and effect as if made on the Closing Date and that all
covenants and agreements required to be performed by the REIT under this
Agreement prior to the Closing have been performed in accordance with the terms
of this Agreement.
(c) Opinion. A copy of the opinion of counsel addressed to the
Custodian on behalf of such Transferor Partner as to the matters set forth in
Exhibit E attached hereto, subject to customary qualifications.
8.6 Transferor's Deliveries to Close the Asset Transfer. At the
Closing, Transferor shall deliver or cause to be delivered to Heritage LP the
following:
(a) Partnership Agreement. The Partnership Agreement duly
executed by Transferor or any partner of Transferor that will receive LP Units
in the Asset Transfer.
(b) Deed. Special Warranty Deed for the Real Property,
executed and acknowledged by Transferor, conveying to Heritage LP indefeasible,
fee simple title to the Real Property with appropriate provisions reflecting
that the conveyance made by Special Warranty Deed is made and accepted subject
to the Permitted Exceptions applicable to the Real Property and any title
exceptions insured over by the Title Company, in such form and containing such
terms and provisions as shall be satisfactory to and approved by the parties to
the Special Warranty Deed.
(c) Assignment of Leases. An Assignment and Assumption of
Leases, executed and acknowledged by Transferor and Heritage LP, vesting in
Heritage LP all right, title and interest of the landlord under the Leases,
containing a warranty by Transferor that the right, title and interest assigned
by it is free and clear of liens and charges and is not subject to any other
assignment, transfer or hypothecation, other than those existing pursuant to the
Transferred Debt, if applicable, and containing an assumption by Heritage LP of
all obligations of Transferor, as lessor, under the Leases arising after
Closing.
(d) Bill of Sale. Bill of sale, executed and acknowledged by
Transferor, transferring and assigning to Heritage LP all of the Tangible
Personal Property and containing a limited or special warranty of title and a
warranty by Transferor that such property conveyed by it is free and clear of
liens and charges and is not subject to any other assignment, transfer or
hypothecation, other than those existing pursuant to the Transferred Debt, if
applicable, in
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such form and containing such terms and provisions as shall be satisfactory to
and approved by the parties to such Bill of Sale.
(e) Assignment of Intangible Personal Property. Assignment of
Intangible Personal Property, executed and acknowledged by Transferor,
transferring and assigning, without recourse, warranty or representation except
as otherwise expressly provided herein, to Heritage LP Transferor's right, title
and interest in and to all of the Intangible Personal Property and containing a
warranty by Transferor that such right, title and interest is free and clear of
liens or charges and is not subject to any other assignment, transfer or
hypothecation, other than those existing pursuant to the Transferred Debt, if
applicable.
(f) FIRPTA. A Foreign Investment in Real Property Tax Act
affidavit executed by each Transferor.
(g) Tenant Notification. Notification letters to be delivered
to all tenants at the Real Property, executed by Transferor, providing notice
that the interest of Transferor in Lease has been assigned to Heritage LP, and
providing notice of the address for the future payment of rents and other
charges and fees.
(h) Updated Rent Roll, Schedule of Service Contracts, Schedule
of Tenant Improvement Agreements and Operating Statements. For the Real
Property, an updated Rent Roll, Schedule of Service Contracts and Operating
Statement, certified by Transferor as true, accurate and complete as of the
Closing Date.
(i) Title Policies and UCC Searches. The Title Policy
delivered within a reasonable time after the Closing if that is the custom for
the locality, provided that the Title Company at the Closing issues a duly
executed "marked-up" Title Commitment, or otherwise irrevocably commits to issue
a title policy in accordance with Heritage LP's instructions, effective the time
and date of the recording of the deed of the Real Property into Heritage LP and
irrevocably commits in writing to the Title Policy in the form of the respective
"marked-up" Title Commitment within no more than sixty (60) days after the
Closing Date, together with updated UCC Searches.
(j) Certificate. A certificate signed by MTP on behalf of
Transferor and MTP, stating that Transferor's and MTP's representations and
warranties contained herein are true and correct in all material respects on and
as of the Closing Date with the same force and effect as if made on the Closing
Date.
(k) Authority. Evidence of organization, existence and
authority of Transferor and the authority of the person executing documents on
behalf of Transferor reasonably satisfactory to the REIT.
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(l) Opinion. An opinion of counsel of Transferor in the form
attached hereto as Exhibit F and subject to such customary qualifications as may
be reasonably acceptable to the REIT.
(m) Tax Reporting Documents. Any and all document stamps,
transfer taxes, affidavits of property value, and other documents required by
states in connection with the transfer of real property.
(n) Asset Transfer Registration Agreement. The Asset Transfer
Registration Agreement duly executed by Transferor.
(o) State Law Disclosures. Such disclosures and reports,
including any applicable certificate of residence or exemption with respect to
withholding requirements required by applicable state and local law in
connection with the conveyance of real property.
(p) Loan Documents. All instruments and agreements required by
the Lender in connection with the transfer of the Transferred Debt to Heritage
LP; including (i) the consents and estoppels of the Lender ("Lender Consents")
to the transfer of the Property subject to the Transferred Debt, on such terms
as are acceptable to the REIT, without change in any of the material terms of
the Loan Documents governing the Transferred Debt, including, without
limitation, amortization, interest rate and maturity date provisions.
(q) Contracts Not Terminable. A certificate duly executed by
the general partner of Transferor setting forth those contracts relating to
services provided under Section 4.1(b)(i) that are not terminable upon 30 days
written notice without penalty.
(r) Additional Documents. Any additional documents that the
Lender or the Title Company may reasonably require for the proper consummation
of the transactions contemplated by this Agreement.
8.7 REIT's Deliveries to Close the Asset Transfer. At the Closing, the
REIT and Heritage SGP shall deliver to Heritage LP, or cause to be delivered,
the following:
(a) Partnership Agreement. The Partnership Agreement, executed
by the REIT and Heritage SGP, together with all filings with any governmental
authority or agency required to be made by or on behalf of Heritage LP.
(b) REIT Capital Contribution. Payment of the REIT Capital
Contribution by the REIT and Heritage SGP to Heritage LP in immediately
available funds.
(c) Officers' Certificate. A certificate of the Chairman and
Chief Financial Officer of the REIT stating that the REIT's representations and
warranties contained herein are
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true and correct in all material respects on and as of the Closing Date with the
same force and effect as if made on the Closing Date.
(d) Authority. Evidence of organization, existence and
authority of the REIT and the authority of any person executing documents on
behalf of the REIT.
(e) Additional Documents. Any additional documents that the
Lender or the Title Company may reasonably require for the proper consummation
of the transactions contemplated by this Agreement.
(f) Asset Transfer Registration Agreement. The Asset Transfer
Registration Agreement duly executed by the REIT.
8.8 Heritage LP's Delivery to Close the Asset Transfer. At the Closing,
Heritage LP shall deliver, or cause to be delivered, to each Transferor, the
following:
(a) Cash and LP Units. That number of LP Units and amount of
cash as calculated in accordance with Section 2.2(b).
(b) Conveyance Documents. All acceptances and assumptions set
forth in the conveyance and assignment documents for the Property, executed and
acknowledged by Heritage LP.
(c) Loan Documents. All instruments and agreements reasonably
required by the Lender in connection with the transfer of the Transferred Debt
to Heritage LP, executed by Heritage LP, if required; and the disbursements by
Heritage LP of the REIT Capital Contribution to the Lender on behalf of Heritage
LP in accordance with Section 2.3 hereof in order to repay in full such portion
of the Mortgage Debt that is not Transferred Debt.
(d) Opinion. An opinion of counsel of O'Connor Cavanagh as to
the matters set forth in Exhibit E attached hereto and subject to such customary
qualifications as may be reasonably acceptable to the general partner of
Transferor.
(e) State Law Disclosures. Such disclosures and reports
required by applicable state and local law in connection with the conveyance of
real property.
(f) General Partner's Certificate. A certificate of an
authorized officer of the REIT, as general partner of Heritage LP, stating that
the representations and warranties of Heritage LP set forth herein are true and
correct in all material respects as of the Closing Date with the same force and
effect as if made at the Closing Date.
8.9 Property Closing Costs. All transfer fees or stamp taxes and
recording fees required to be paid to record the deeds and any loan assignment
documents with respect to the
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Property together with any commissions set forth in Schedule IV shall be paid by
Transferor. The costs of the Title Report, the Survey and the UCC Searches and
the costs of recording any documents required to satisfy or release Title
Objections shall be paid one-half by the REIT on behalf of Heritage LP and
one-half by the Transferor subject to the Title Report, Survey, or UCC search.
The premiums for the standard Title Policy shall be paid one hundred percent
(100%) by Transferor immediately prior to the Closing. The cost of any
additional endorsement or upgrades to the Title Policy shall be paid one hundred
percent (100%) by the REIT. Notwithstanding the foregoing, in connection with
the transfer of the Property and Smith Summit and Park On Preston (collectively,
the "Other Properties"), Transferor's obligation to pay the premiums for the
Title Policy shall be limited to the amount of premiums that would be payable if
the Property and the Other Properties were insured together in a single title
policy, and Heritage LP shall pay the premiums in excess of such amount;
provided, however, if the Lender or the lenders of the mortgage debt to which
the Other Properties are subject require separate title policies for the
Property and each of the Other Properties, Transferor shall have the obligation
to pay the full amount of the premiums for such separate title policy for the
Property. In no event shall the Transferor be liable for the payment of the
title premium associated with amending the survey for the Property. Any
prepayment fees or premiums or assumption fees or costs in connection with the
assumption or repayment of any Mortgage Debt by Heritage LP shall be paid by the
REIT. All costs and expenses described in this Section 8.9 are herein called the
"Property Closing Costs." The parties acknowledge that certain Property Closing
Costs may not be paid at Closing but will be paid in ordinary course following
the Closing.
8.10 Prorations. The items in this Section 8.10 with respect to the
Real Property shall be apportioned or prorated between the Transferor and
Heritage LP as of the end of the day preceding the Closing Date in order to
determine the amount of the Proration with respect to such Property. If the Cash
Payment considered payable to Transferor pursuant to Section 2.2(b) is not
received by the Title Company before 1:00 p.m., Dallas, Texas time, on the
Closing Date, the prorations shall be made as of the date in which the Closing
occurs (i.e., each Transferor shall receive rents and pay expenses for the day
of Closing with respect to such Transferor's Property). All prorations other
than the Dividend Distribution Offset set forth in Section 8.10(j) shall be
based upon a fraction determined by dividing the number of days elapsed through
the date of the Closing by 365. The parties shall compute or estimate all
prorations prior to the Closing Date, and Transferor shall supply Heritage LP
before the Closing satisfactory supporting evidence for all such adjustments:
(a) Taxes and Assessments. General real estate taxes and
assessments imposed by governmental authority ("Taxes") and any assessments by
private covenant constituting a lien or charge on the Real Property for the
then-current calendar year or other current tax period not yet due and payable,
together with, if applicable, state and local taxes thereon. If the Closing
occurs prior to the receipt of the tax bill for the Real Property for the
calendar year or other applicable tax period for the Real Property in which the
Closing occurs, Taxes for such calendar year or other applicable tax period for
the Real Property shall be prorated based upon the most recent ascertainable
assessed values and tax rates.
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(b) Collected Rent. All collected rent and other income (and
any applicable state or local tax on rent) under Leases in effect at the Closing
but excluding payments that may constitute rent but are provided for in other
subparagraphs of this Section 8.10. Transferor shall be charged with any rentals
collected by Transferor before the Closing, but applicable to any period of time
after such Closing. Any rent and other income delinquent as of the Closing shall
not be prorated. Heritage LP shall use reasonable efforts (which efforts shall
not require Heritage LP or the REIT to initiate any lawsuit) to collect any rent
delinquent as of the Closing, and any rent delinquent as of the Closing but
collected after the Closing shall be applied first to current rent obligations
then to delinquent rent in inverse order of incurrence, with any amounts applied
to any period prior to the Closing remitted to Transferor. Heritage LP may treat
any rent received after the 27th of any month as rent for the next month. Once
the Closing has occurred, Transferor shall not have any right to seek by legal
action or otherwise collection of any rents delinquent for any period prior to
the Closing, unless the tenant has vacated the premises under the Lease before
the Closing and the Lease is not assigned to Heritage LP.
(c) Utilities. To the extent such expenses are the obligation
of Transferor and not tenants under Leases, utilities, including water, sewer,
electric, and gas, based upon the last reading of meters prior to the Closing.
If the utility company will not issue separate bills, Transferor's portion will
be charged against Transferor and Heritage LP will pay the entire bill after the
Closing. If Transferor has paid any utilities in advance in the ordinary course
of business, then Transferor shall be credited for Heritage LP's portion of such
payment at the Closing. The amount of deposits, if any, with utility companies
that are transferrable and that are assigned by Transferor to Heritage LP at the
Closing shall be credited to Transferor. The amount of any deposits with utility
companies that are not transferable and that are not assigned by Transferor to
Heritage LP at the Closing shall remain the property of Transferor.
(d) Fees and Charges Under Service Contracts. To the extent
such expenses are the obligations of Transferor and not of a tenant's under its
Lease, fees and charges under any Service Contracts that are being assigned to
and assumed by Heritage LP at the Closing on the basis of the periods to which
such Service Contracts relate.
(e) Transferred Debt. Interest accrued through the day prior
to the Closing Date and not yet due and payable and any principal, interest and
other amounts due and payable at the Closing Date pursuant to the Transferred
Debt; provided, however, transfer fees due and payable to holders of Transferred
Debt shall be paid in accordance with Section 8.9 hereof.
(f) Insurance. Premiums or other fees payable in connection
with any insurance policies that are being assigned to and assumed by Heritage
LP at the Closing.
(g) Other Expenses. All other liabilities related to the
ownership or operation of the Property that Heritage LP may agree to assume or
take subject to in writing.
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(h) Contractors and Suppliers. Amounts payable to contractors,
subcontractors, designers, suppliers, architects, engineers and others who have
performed services or labor or supplied material in connection with the
Property.
(i) Leasing Commissions. Leasing or other fees or commissions
payable in connection with any Lease or any renewal or extension of any Lease,
but only to the extent that such fees or commissions have been disclosed to
Heritage LP and the REIT on the Rent Roll. For the avoidance of doubt, the
parties acknowledge that with respect to the majority of Leases, all commissions
due to brokers for the initial term of such Leases have been previously paid by
the Transferor on a "cash out" basis and there will be no proration of those
commissions at Closing; however, Heritage LP acknowledges that, as described on
the Rent Rolls, commissions for renewals and extensions of such Leases may be
due and payable in the future on a "cash out" basis at the time of the
applicable tenant's exercise of a renewal or option to extend or may be payable,
for such extension or renewal, on a monthly basis.
(j) Dividend Distribution Offset. An amount (the "Dividend
Distribution Offset") equal to (i) the product of (A) the total number of shares
of REIT Stock and LP Units issued in connection with the transactions
contemplated by this Agreement and (B) $.50 (the "Dividend Amount"), multiplied
by (ii) the ratio of (A) the difference between the total number of calendar
days during the quarter in which the Closing occurs (the "Closing Quarter") and
the number of calendar days during the Closing Quarter prior to the Closing Date
and (B) the total number of calendar days during the Closing Quarter shall be
deposited in escrow by Transferor on the Closing Date. On the date of
distribution of the dividend payment for the Closing Quarter (the "Dividend
Distribution Date"), the Dividend Distribution Offset shall be released to the
REIT; provided, however, in the event that the REIT does not issue a dividend in
the Closing Quarter, the Dividend Distribution Offset as calculated with the
Dividend Amount shall be released to the Transferor on the Dividend Distribution
Date or in the event that the REIT issues a dividend of less than $.50 in the
Closing Quarter (the "Reduced Dividend Amount"), a portion of the Dividend
Distribution Offset equal to the amount of the difference between (a) the
Dividend Distribution Offset as calculated with the Dividend Amount, and (b) the
Dividend Distribution Offset as calculated with the Reduced Dividend Amount
shall be released to Transferor and the remaining amount of the Dividend
Distribution Offset shall be released to the REIT on the Dividend Distribution
Date.
8.11 Tenant Deposits. All tenant deposits, including without
limitation, refundable security deposits, refundable pet deposits and key
deposits, and advance rental deposits (and interest thereon if required by law
or contract to be earned thereon) shall be transferred to Heritage LP at the
Closing, and Heritage LP shall assume the obligations to refund such deposits to
such tenants in accordance with their respective Leases after Closing, but only
to the extent the obligation to refund such deposits arises after Closing.
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8.12 Income and Sales Taxes. All income, sales, gross receipts or
compensation taxes and similar taxes and fees imposed upon Transferor under
applicable local or state law shall be paid by Transferor at the Closing.
8.13 Permit Fees. Customary fees payable with respect to the transfer
of permits and licenses assigned by Transferor to Heritage LP at the Closing
with the consent or approval, if required, of the issuer thereof shall be paid
by Heritage LP.
8.14 Wages. Transferor shall pay the wages, employment taxes and fringe
benefits applicable thereto payable to employees, if any, of Transferor as of
their discharge on the Closing Date.
8.15 Escrow Accounts. The parties acknowledge that the Transferred Debt
to be assumed has Escrow Accounts. Upon the Closing (a) if requested by
Transferor, Heritage LP shall reimburse Transferor for the amount Transferor has
deposited into the Escrow Account with respect to the Real Property, whereupon
Transferor shall assign to Heritage LP, and Heritage LP shall have sole right
and ownership of, all funds in such Escrow Account; or (b) each Transferor shall
withdraw all funds that it has deposited in each Escrow Account, whereupon
Heritage LP shall make the appropriate deposits into the Escrow Account.
ARTICLE 9
RISK OF LOSS
------------
9.1 Damage. The risk of loss of or damage to the Real Property by
reason of any insured or uninsured casualty during the period up to and
including the Closing Date shall be borne by Transferor. In the event of any
material damage to or destruction of the Real Property or any portion thereof
(notice of which shall promptly be given to the REIT by Transferor), the REIT
may, at its option by notice to Transferor given within ten (10) days after the
REIT is notified of such damage or destruction (and the Closing shall be
extended, if necessary to give the REIT such 10-day period to respond to such
notice) (i) elect to proceed under this Agreement with respect to the Property,
in which event Transferor shall, at the Closing, assign to Heritage LP all
insurance proceeds (including rent loss insurance to the period from and after
the Closing Date) for the damage, Heritage LP shall assume responsibility for
the repair of the Real Property, and Heritage LP shall receive a credit at the
Closing for any uninsured portion of the damage and any deductible under the
insurance policy; or (ii) terminate this Agreement. In the event of any damage
to or destruction of the Real Property or any portion thereof is not material
(notice of which shall promptly be given to the REIT Parties by Transferor),
Transferor shall, at the Closing, assign to Heritage LP all insurance proceeds
(including rent loss insurance to the period from and after the Closing Date)
for the damage, the REIT shall assume responsibility for the repair of the Real
Property, and Heritage LP shall receive a credit at the Closing for any
uninsured portion of the damage and any deductible under the insurance policy.
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"Material damage" and "materially damaged" means, with respect
to the applicable Real Property, damage for which the cost to repair reasonably
exceeds ten percent (10%) of such Property's Deemed Value.
9.2 Condemnation. In the event of any threatened, commenced or
consummated proceedings in eminent domain, including, without limitation, any
conveyance in lieu thereof (notice of which shall promptly be given to the REIT
by Transferor) (a "Condemnation Proceeding"), which would constitute a material
condemnation respecting Real Property, the REIT may, at its option, by notice to
Transferor given within ten (10) days after the REIT is notified of such actual
or possible proceedings (and the Closing shall be extended, if necessary, to
give the REIT such 10-day period to respond to such notice) (i) elect to proceed
under this Agreement with respect to the Property, in which event Transferor
shall, at the Closing, assign to Heritage LP its entire right, title and
interest in and to any condemnation award, and Heritage LP shall have the sole
right prior to Closing (subject to Transferor's approval which shall not be
unreasonably withheld or delayed) and after the Closing to negotiate and
otherwise deal with the condemning authorities in respect of such matters; or
(ii) terminate this Agreement. In the event that a Condemnation Proceeding would
not constitute a material condemnation respecting the Real Property, Transferor
shall, at the Closing, assign to Heritage LP its entire right, title and
interest in and to any condemnation award, and Heritage LP shall have the sole
right prior to Closing (subject to Transferor's approval that shall not be
unreasonably withheld or delayed) and after the Closing to negotiate and
otherwise deal with the condemning authorities with respect of such matters.
"Material condemnation" means with respect to the Real
Property, a taking of (i) more than ten percent (10%) of the land constituting
the Real Property, (ii) more than ten percent (10%) of the parking for the
buildings on the Real Property (unless the same can, on the remaining Real
Property so affected, be replaced), (iii) any part of the buildings on the Real
Property, (iv) a means of access to the Real Property unless alternative means
of access exist which in the REIT's judgment are adequate to serve the Real
Property, or (v) materially adversely affect the use or value of the Real
Property.
ARTICLE 10
WAIVER; MODIFICATION; TERMINATION; REMEDIES
-------------------------------------------
10.1 Waivers. The failure of the MTP Parties to comply with any of
their respective obligations, agreements or conditions as set forth herein may
be waived expressly in writing by the REIT, by action of its Board of Directors.
The failure of the REIT Parties to comply with any of its obligations,
agreements or conditions as set forth herein may be waived expressly in writing
by the MTP Parties by action of MTP as general partner.
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10.2 Modification. This Agreement may be modified at any time in any
respect by the mutual consent of all of the parties, notwithstanding prior
approval by the Transferor Partners; provided, however, the terms of the
Exchange Offer shall not be amended or modified after the Commitment Date as set
forth in Section 1.1(f). Any such modification may be approved for the REIT by
its Board of Directors or for Transferor by its general partner.
10.3 Termination. This Agreement may be terminated at any time before
the Closing Date, by the Board of Directors of the REIT or by Transferor (by
action of its general partner or partners):
(a) By either Transferor or the REIT if the Closing Date shall
not have occurred on or before the Expiration Date; provided, however, that
Transferor's right to terminate this Agreement under this Section 10.3(a) shall
not be available if one of the MTP Parties' failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing Date to occur before the Expiration Date and the REIT's right to
terminate this Agreement under this Section 10.3(a) shall not be available if
one of the REIT Parties' failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing Date to occur
prior to the Expiration Date;
(b) By either Transferor or the REIT if a court of competent
jurisdiction or governmental regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties shall use their commercially reasonably
efforts to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and non-appealable;
(c) By Transferor if a REIT Party shall have breached, or
failed to comply with, in any material respect any of its obligations under this
Agreement or any Related Agreement, and such breach or failure is not cured
within 30 days following written notice thereof by Transferor;
(d) By the REIT if a MTP Party shall have breached, or failed
to comply with, in any material respect any of the obligations under this
Agreement or any Related Agreement, and such breach or failure is not cured
within 30 days following written notice thereof by the REIT;
(e) By Transferor if a representation or warranty of a REIT
Party made in this Agreement or a Related Agreement is not true and correct in
any material respect;
(f) By the REIT if a representation or warranty of a MTP Party
made in this Agreement or a Related Agreement is not true and correct in any
material respect;
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(g) By the REIT in its sole and absolute discretion prior to
the expiration of the Due Diligence Period, by delivery to Transferor of notice
of termination pursuant to this Section 10.3(g); or
(h) By mutual written consent of the general partner of
Transferor and the REIT.
(i) By the REIT in its sole and absolute discretion pursuant
to Section 9.1 or Section 9.2 as a result of material damage to or condemnation
of all or a portion of the Property.
(j) By either Transferor or the REIT if the transactions
contemplated by the Smith Summit Agreement and the Merit Preston Park Agreement
are not consummated simultaneously with the transactions contemplated herein.
10.4 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.3 hereof, this Agreement shall forthwith
become void and there shall be no liability on the parties hereto, except as
provided in this Section 10.4:
(a) Breach by REIT Parties. If this Agreement is terminated by
the Transferor under Section 10.3(c) or Section 10.3(e), the MTP Parties shall
be entitled to immediately receive the Earnest Deposit.
(b) Breach by MTP Parties.
(i) If this Agreement is terminated by the REIT under
Section 10.3(d) or Section 10.3(f), (1) the REIT Parties shall be entitled to
the prompt reimbursement from the Transferor of all out-of-pocket costs
(including, without limitation, attorney's fees and disbursements) incurred by
the REIT Parties in connection with the transactions contemplated by this
Agreement, (2) the REIT Parties, jointly and severally, shall have all rights
and remedies to which they may be entitled, in equity and under this Agreement,
including, without limitation, specific performance and (3) in the event that
the REIT seeks specific performance of the transactions contemplated herein, the
REIT Parties shall be entitled to all out-of-pocket costs (including, without
limitation, attorneys' fees and disbursements) incurred by the REIT Parties in
connection with seeking such specific performance. In the event that this
Agreement is terminated by the REIT pursuant to Section 10.3(d), the REIT shall
return all documents delivered or prepared for the REIT Parties relating to the
Property.
(ii) If this Agreement is terminated by the REIT
Parties pursuant to Section 10.3(d) or Section 10.3(f) herein, the REIT Parties
shall be entitled to the prompt reimbursement for all out-of-pocket costs
(including, without limitation, attorneys' fees, filing fees, and disbursements)
incurred by the REIT Parties in connection with its preparation and filing of
the Registration Statement and any amendments or supplements thereto.
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ARTICLE 11
DEFINITIONS
-----------
"Accredited Investor" shall mean an accredited investor as defined in Regulation
D promulgated under the Securities Act.
"Asset Transfer" has the meaning set forth in the recitals hereof.
"Asset Transfer Registration Agreement" has the meaning set forth in the
recitals hereof.
"Cash Allocation" has the meaning set forth on Schedule V attached hereto.
"Cash Payment" has the meaning set forth in Section 2.2(b)(i) hereof.
"CERCLA" has the meaning set forth in the definition of Environmental Laws
hereof.
"Closing" has the meaning set forth in Section 8.1 hereof.
"Closing Date" has the meaning set forth in Section 8.1 hereof.
"Commitment Date" has the meaning set forth in Section 1.1(f) hereof.
"Condemnation Proceeding" has the meaning set forth in Section 9.2 hereof.
"Custodian" has the meaning set forth in Section 1.1 hereof.
"Deemed Value" with respect to a Property shall be equal to the value allocated
to such Property in Schedule VII attached hereto.
"Dividend Distribution Offset" has the meaning set forth in Section 8.10(j)
hereof.
"Due Diligence Period" has the meaning set forth in Section 7.1(f) hereof.
"Earnest Deposit" has the meaning set forth in Section 2.4 hereof.
"Environmental Laws" shall include, without limitation, the Clean Air Act; the
Clean Water Act and the Water Quality Act of 1987; the Federal Insecticide
Fungicide, and Rodenticide Act; the Marine Protection, Research, and Sanctuaries
Act; the National Environmental Policy Act; the Noise Control Act; the
Occupational Safety and Health Act; the Resource Conservation and Recovery Act,
as amended by the Hazardous and Solid Waste Amendments of 1984, the Safe
Drinking Water Act; the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
and the Emergency Planning and Community Right-to-Know Act; the Toxic Substance
Control Act ("TSCA"); and
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the Atomic Energy Act, all as may have been amended as of the date of this
Agreement, together with their implementing regulations and guidelines as of the
date of this Agreement. "Environmental Laws" shall also include all state,
regional, county, municipal and other local laws, regulations, and ordinances
that are equivalent or similar to the federal laws recited above or that purport
to regulate Hazardous Materials.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exchange Offer" has the meaning set forth in the recitals hereof.
"Exchange Value" shall mean with respect to Transferor, the Value of the
Property; and with respect to any partner of Transferor shall mean the Exchange
Value of Transferor multiplied times the percentage interest of such partner in
Transferor.
"Execution Date" shall mean the date of execution of this Agreement.
"Expiration Date" has the meaning set forth in Section 8.1 hereof.
"FIFRA" has the meaning set forth in the definition of Environmental Laws
hereof.
"Gentry Place" has the meaning set forth in the preamble hereof.
"GP Unit" has the meaning set forth in the recitals hereof.
"Hazardous Materials" shall include, without limitation: any hazardous
substance, pollutant, or contaminant regulated under CERCLA; oil and petroleum
products and natural gas, natural gas liquids, liquefied natural gas, and
synthetic gas usable for fuel; pesticides regulated under FIFRA; asbestos,
polychlorinated biphenyls, and other substances regulated under TSCA; source
material, special nuclear material, and by-product materials regulated under the
Atomic Energy Act; and industrial process and pollution control wastes to the
extent regulated under applicable Environmental Laws.
"Heritage LP" has the meaning set forth in the preamble hereof.
"Heritage SGP" has the meaning set forth in the preamble hereof.
"Holdback Amount" has the meaning set forth in Section 2.3(d) hereof.
"Improvements" shall mean with respect to a Real Property, all improvements
located thereon, including, without limitation, all heating, ventilation,
electrical, plumbing and other mechanical or operational systems.
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"Intangible Personal Property" shall be a collective reference to all intangible
personal property related to the Real Property, including, without limitation:
all trade names and trade marks associated with the Real Property, together with
the goodwill related thereto, including Transferor's rights and interests in the
name of the Property set forth in Schedule I attached hereto and the names
(unless the same include proper names) of the Transferor; all rights to the
plans and specifications and other architectural and engineering drawings for
the Improvements; contract rights related to the construction, operation,
ownership or management of the Real Property (but excluding the obligations of
any of Transferor thereunder, except those expressly assumed pursuant to this
Agreement); warranties, zoning approvals, building permits and licenses (to the
extent assignable); tenant lists, correspondence with tenants and records
(including, but not limited to, those relating to taxes, insurance, maintenance,
repairs, capital improvements and services), booklets, manuals, advertising and
promotional materials, including, without limitation, photographs and negatives,
correspondence with suppliers, and telephone exchange numbers (if available);
excluding, however, cash or accounts receivable, except to the extent
specifically provided herein with respect to prorations and adjustments and
Rehabilitation Reserves (when the term "Intangible Personal Property" is used in
connection with a single Real Property, such term shall only be a collective
reference to the Intangible Personal Property applicable to such Real Property).
"Leases" shall be a collective reference to all leases of space within the
Improvements, including leases that may be made by Transferor after the date
hereof and prior to the Closing (as defined herein).
"Lender" shall mean the holder of the Note as set forth in Schedule II hereof.
"Loan Documents" shall mean a collective reference to the mortgages, bonds,
deeds of trusts and other security instruments that create liens on the Real
Property to secure the payment of the loan and related Note.
"LP Units" shall mean the limited partnership units of Heritage LP.
"Material Condemnation" has the meaning set forth in Section 9.2 hereof.
"Material Damage" has the meaning set forth in Section 9.1 hereof.
"Merit Place" has the meaning set forth in the preamble hereof.
"Merit Preston Park Agreement" has the meaning set forth in the preamble hereof.
"Mortgage Debt" shall mean the debt evidenced by a Note secured by a lien on
such Real Property, the Mortgage Debt evidenced by such Note and the Lender
which is the holder of such Note. The Mortgage Debt is set forth on Schedule II
attached hereto.
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"MTP" has the meaning set forth in the preamble hereof.
"MTP Parties" has the meaning set forth in the preamble hereof.
"Network" shall mean Network Multi-Family Security Corporation.
"Notes" and "Note" shall mean the promissory notes and bonds evidencing the
Mortgage Debt.
"Operating and Financial Statements" shall mean copies of operating and
financial statements (balance sheets, income, proformas, expense and capital
improvements) detailing the operating history of the properties for the last
three years including year-to-date information.
"Other Taxes" has the meaning set forth in Section 4.1(b)(vi) hereof.
"Park on Preston" has the meaning set forth in the preamble hereof.
"Partnership Agreement" has the meaning set forth in the recitals hereof.
"Permitted Exceptions" shall mean Transferred Debt and all exceptions to title
to the Real Property (other than monetary liens and those other matters which
Transferor have agreed to cure in accordance with Section 2.3(d) hereof), which
have not been cured and which the Title Insurer has not agreed to insure over or
waive during the Due Diligence Period and which the REIT shall have approved by
its approval of the related Title Report as provided in Section 7.1(g).
"Preston Park LP" has the meaning set forth in the preamble hereof.
"Property" shall mean all of the Real Property, the Tangible Personal Property
and the interests in the Leases and the Intangible Personal Property.
"Property Closing Costs" has the meaning set forth in Section 8.9 hereof.
"Prorations" has the meaning set forth in Section 8.10 hereof.
"Real Property" shall be a reference to the real property described in Schedule
I attached hereto, together with (i) all Improvements located thereon, (ii) all
the rights, benefits, privileges, easements, tenements, hereditaments and
appurtenances thereon or in any way appertaining to such real properties, and
(iii) all right, title and interest of Transferor in and to all strips and gores
and any land lying in the bed of any street, road or alley, open or proposed,
adjoining any of such real properties. When the Survey is issued, the
descriptions in the Survey shall be accepted by the parties as the correct
description of the Real Property, even if it should differ from Schedule I.
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"Registration Statement" has the meaning set forth in Section 1.1(b) hereof.
"REIT" has the meaning set forth in the preamble hereof.
"REIT Capital Contribution" has the meaning set forth in the recitals hereof.
"REIT Parties" has the meaning set forth in the preamble hereof.
"REIT Stock" has the meaning set forth in the recitals hereof.
"REIT Stock Price" shall mean the average closing price of REIT Stock in the
American Stock Exchange Composite Transactions as reported in The Wall Street
Journal for the 10 consecutive trading days preceding the fifth trading day
prior to the Closing Date.
"Related Agreements" has the meaning set forth in the recitals hereof.
"Rent Roll" shall mean a current rent roll and delinquency report for the Real
Property.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Service Contracts" shall mean all management, marketing, service, supply,
material, equipment lease or maintenance contracts which pertain to the
furnishing of services, materials, leasehold equipment, or maintenance to the
Property and similar agreements.
"Smith Summit" has the meaning set forth in the preamble hereof.
"Smith Summit Agreement" has the meaning set forth in the preamble hereof.
"Smith Summit GP" has the meaning set forth in the preamble hereof.
"Subsidiary" or "Subsidiary Partnership" shall mean each of the subsidiaries of
the REIT, Heritage LP and Heritage SGP formed for the purpose of acquiring the
Property.
"Survey" shall mean survey (including field notes) made by survey civil
engineers approved by the REIT and duly licensed in the state where the Real
Property is located in accordance with and containing the certification set
forth in Exhibit G attached hereto and addressed to such parties as the REIT may
designate.
"Tangible Personal Property" shall be a collective reference to all equipment,
machinery, furniture, furnishings, supplies and other tangible personal property
owned by Transferor and any interest of Transferor in any such property leased
by Transferor, now or hereafter located in and used in connection with the
operation, ownership or management of the Real Property.
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"Taxes" has the meaning set forth in Section 8.10(a) hereof.
"Title Company" shall mean Commonwealth Land Title of Dallas, 1700 Pacific,
Suite 4740, Dallas, Texas 75201.
"Title Policy" has the meaning set forth in Section 7.1(h) hereof.
"Title Report" shall mean a currently dated preliminary title commitment issued
by the Title Company for the Real Property.
"Transferor" shall have the meaning set forth in the preamble hereof.
"Transferor Partner" shall have the meaning set forth in the recitals hereof.
"Transferor Partnership Interest" has the meaning set forth in the recitals
hereof.
"Transferred Debt" has the meaning set forth in Section 2.3(b) hereof.
"TSCA" has the meaning set forth in the definition of Environmental Laws hereof.
"UCC Searches" shall mean copies of current Uniform Commercial Code searches
issued by the Title Company or a search company acceptable to the REIT.
"Value" of the Property shall be equal to (i) the Deemed Value allocated to the
Property minus (ii) the Mortgage Debt applicable to the Property as of the
Closing Date and immediately prior to any repayment, purchase, refinancing,
replacement or reduction thereof by Heritage LP or the REIT in accordance with
Section 2.3 (without taking into consideration any discount of such Mortgage
Debt), minus (iii) the Holdback Amount and, plus or minus, as appropriate, (iv)
the Prorations relating to the Property determined in accordance with Section
8.10.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Subsidiaries. The parties acknowledge and agree that, if required
by the Lender as a condition to its consent to the transfer of the Property
subject to the related Mortgage Debt as contemplated hereby, the Property may be
transferred to a limited purpose entity owned by Heritage LP and any reference
herein to Heritage LP shall mean, with respect to such Property, such limited
purpose entity.
12.2 Parties Bound. Prior to the Closing, except as provided in Section
12.1 hereof, no party may assign its rights or obligations under this Agreement
without the prior written consent of the other parties hereto, and any such
prohibited assignment shall be void. This
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Agreement and all provisions hereof, including, without limitation, all
representations and warranties made hereunder, shall inure to the benefit of and
be binding upon the respective heirs, devisees, legal representatives,
successors, assigns and beneficiaries of the parties hereto; provided, however,
that no assignment shall relieve the assignor of any obligation under this
Agreement whether arising before or after such assignment.
12.3 Headings. The article and paragraph headings of this Agreement are
for convenience only and shall in no way limit or enlarge the scope or meaning
of the language hereof.
12.4 Invalidity. If any portion of this Agreement is held invalid or
inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be deemed valid and operative and effect shall be given to the
intent manifested by the portion held invalid or inoperative. The failure by
either party to enforce against the other any term or provision of this
Agreement shall be deemed not to be a waiver of such party's right to enforce
against the other party the same or any other such term or provision.
12.5 Governing Law. Except where the laws of another jurisdiction are
mandatorily applicable, this Agreement shall, in all respects, be governed,
construed, applied and enforced in accordance with the internal laws (and not
the choice of law rules) of the State of Texas.
12.6 Independent Review. Transferor acknowledges and agrees that
neither the REIT nor Heritage LP has made any representation or warranty with
respect to the tax or accounting consequences of the transactions contemplated
by this Agreement, and that Transferor has been represented by counsel or
received advice in connection with entering into this Agreement and has received
such tax and accounting information as Transferor deems necessary to
knowledgeably consummate the transactions contemplated by this Agreement.
12.7 No Third Party Beneficiary. This Agreement is not intended to give
or confer any benefits, rights, privileges, claims, actions or remedies to any
person or entity as a third party beneficiary, including without limitation, the
Lender.
12.8 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings relating to the Property. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
12.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of such counterparts shall constitute one Agreement. To facilitate execution and
delivery of this Agreement, the parties may execute and exchange counterparts of
the signature pages by telefax. The signature of any party to any counterparts
may be appended to any other counterpart. The Title Company shall be entitled to
accept and treat such fax signatures as original signatures.
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12.10 Further Assurances. To the extent that any Schedule to be
attached to this Agreement or to any of the Exhibits attached hereto is not
completed or prepared on the date hereof, the party responsible for completing
or preparing such Schedule shall deliver such Schedule to the other parties
hereto as soon as possible after the date hereof and, in any event, prior to the
Closing. In addition to the acts and deeds recited herein and contemplated to be
performed, executed and/or delivered by Transferor at the Closing, Transferor
agrees to perform, execute and/or deliver or cause to be executed and/or
delivered, on or after the Closing, any and all further acts, deeds and
assurances as may be reasonably necessary to consummate the transactions
contemplated hereby and/or to further perfect and deliver to Heritage LP the
conveyance, transfer and assignment of the Property and all rights related
thereto.
12.11 Time. Time is of the essence in the performance of each and every
term, condition and covenant contained in this Agreement.
12.12 Confidentiality. The REIT Parties and MTP Parties, for the
benefit of each other, hereby agree that until the Closing Date, they will not
release or cause or permit to be released, any press notices, publicity (oral or
written) or advertising promotion relating to, or otherwise announce or disclose
or cause or permit to be announced or disclosed, in any manner whatsoever, the
terms, conditions or substance of this Agreement or any of the Related
Agreements, or the transactions contemplated herein or therein, without first
obtaining the written consent of the other parties hereto; provided, however,
the REIT, in its sole discretion, may release or cause or permit to be released,
any press notices, publicity (oral or written) or advertising promotion relating
to, or otherwise announce or disclose or cause or permit to be announced or
disclosed, in any manner whatsoever, the terms, conditions or substance of this
Agreement, or the transactions contemplated herein, or any information relating
to the Property in connection with the REIT causing the effectiveness of the
Registration Statement under the Securities Act or any applicable state laws and
pursuant to the rules of the American Stock Exchange. It is understood that the
foregoing shall not preclude either party from discussing the substance or any
relevant details of such transactions with any of its attorneys, accountants,
professional consultants or potential lenders, as the case may be, or prevent
either party hereto from seeking to obtain any and all approvals or consents
necessary in connection with the transactions contemplated hereby, making all
filings with governmental authorities required in connection with the
transactions contemplated hereby and complying with laws, rules, regulations and
court orders, including without limitation, governmental regulatory, disclosure,
tax and reporting requirements. After the Closing Date, Transferor agrees that
the REIT may release any press notices, publicity (oral or written) or
advertising promotion relating to, or otherwise announce or disclose, in any
manner whatsoever, the terms, conditions and substances of this Agreement or any
of the Related Agreements, or the transactions contemplated herein or therein,
without first obtaining the written consent of the other parties hereto.
12.13 Attorneys' Fees. Should either party employ attorneys to enforce
any of the provisions hereof, the party losing in any final judgment agrees to
pay the prevailing party all
46
<PAGE>
reasonable costs, charges and expenses, including attorneys' fees and
disbursements, expended or incurred in connection therewith whether at trial, on
appeal or on petition for review.
12.14 Use of Pronouns. The use of the neuter singular pronoun to refer
to a party shall be deemed a proper reference, even though such party may be an
individual, partnership or a group of two or more individuals. The necessary
grammatical changes required to make the provisions of this Agreement apply in
the plural sense where there is more than one seller or purchaser and to either
partnerships or individuals (male or female) shall in all instances be assumed
as though in each case fully expressed.
12.15 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the following address:
If to Transferor or
MTP: MTP, Inc.
3636 North Central Avenue
Suite 402
Phoenix, Arizona 85012
Attn: Edward P. Zinman
Telephone: (602) 222-4040
Telefax: (602) 222-4009
With a copy to: Kim Lawrence, Esq.
12700 Preston Road
Suite 235
Dallas, Texas 75230
Telephone: (972) 661-2145
Telefax: (972) 661-3283
If to the REIT, Heritage SGP or Heritage LP:
c/o ASR Investments Corporation
335 North Wilmot, Suite 250
Tucson, Arizona 85711
Telephone: (520) 748-2111
Telefax: (520) 750-8865
Attn: Jon A. Grove
47
<PAGE>
With a copy to: O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback, Suite 1100
Phoenix, Arizona 85012
Telephone: (602) 263-2606
Telefax: (602) 263-2900
Attn: Robert S. Kant, Esq.
Any such notices shall be either (a) sent by certified mail, return
receipt requested in which case notice shall be deemed delivered three (3)
business days after deposit, postage prepaid in the U.S. Mail, (b) sent by
overnight delivery using a nationally recognized overnight courier, in which
case it shall be deemed delivered one business day after deposit with such
courier, (c) sent by telefax, in which case notice shall be deemed delivered
upon confirmed transmission of such notice, or (d) sent by personal delivery.
The above addresses may be changed by written notice to the other party;
provided, however, that no notice of a change of address shall be effective
until actual receipt of such notice. Copies of notices are for informational
purposes only, and a failure to give or receive copies of any notice shall not
be deemed a failure to give notice.
12.16 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
12.17 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designed period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday, in which event the period shall run until the
end of the next day which is neither a Saturday, Sunday, or legal holiday.
12.18 Information and Audit Cooperation. Transferor agrees to provide
to Heritage LP's designated independent auditor (a) access to the books and
records of the Property and all related information regarding the period for
which Heritage LP is required to have the Property audited under the regulations
of the Securities and Exchange Commission, and (b) any representation letters
regarding the books and records of the Property as such auditor shall reasonably
request in connection with the normal course of auditing the Property in
accordance with generally accepted auditing standards.
12.19 No Assumption. Except as otherwise expressly assumed by Heritage
LP or the REIT pursuant to the terms of this Agreement, neither Heritage LP nor
the REIT shall assume or be deemed to have assumed any obligations or
liabilities whatsoever of Transferor with respect to the Property or otherwise.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.
MTP: TRANSFEROR OR GENTRY PLACE:
MTP, INC., GENTRY PLACE APARTMENTS
a Texas corporation LIMITED PARTNERSHIP,
a Texas limited partnership
By: By: MTP, Inc.
-------------------------------- Its: General Partner
Its:
-------------------------------
By:
-----------------------
THE REIT: Its:
----------------------
ASR INVESTMENTS CORPORATION,
a Maryland corporation
By:
--------------------------------
Its:
-------------------------------
HERITAGE LP:
HERITAGE COMMUNITIES L.P.,
a Delaware limited partnership
By: ASR Investments Corporation
Its: General Partner
By:
-----------------------
Its:
----------------------
HERITAGE SGP:
HERITAGE SGP CORPORATION, an
Arizona corporation
By:
--------------------------------
Its:
-------------------------------
ADDENDUM
TO THE
EXCHANGE AND CONTRIBUTION AGREEMENT
-----------------------------------
THIS "ADDENDUM TO THE EXCHANGE AND CONTRIBUTION AGREEMENT" is hereby
made a part of that certain Exchange and Contribution Agreement dated as of July
_____, 1997 (the "Contribution Agreement"), by and among GENTRY PLACE APARTMENTS
LIMITED PARTNERSHIP, a Texas limited partnership ("Transferor"); MTP, INC., a
Texas corporation and the general partner of Transferor ("MTP"); ASR INVESTMENTS
CORPORATION, a Maryland corporation (the "REIT"); HERITAGE SGP CORPORATION, an
Arizona corporation wholly owned by the REIT ("Heritage SGP"); and HERITAGE
COMMUNITIES L.P., a Delaware limited partnership ("Heritage LP" and together
with Transferor, MTP, the REIT, and Heritage SGP, the "Contribution Agreement
Parties").
The Contribution Agreement Parties hereby agree to make the following
additions and amendments to the Contribution Agreement:
1. Recital 1 on page 1 of the Contribution Agreement shall be amended
and restated in its entirety to read as follows:
1. The REIT shall make a tender offer (the "Exchange Offer")
to each owner of partnership interests in Transferor (the "Transferor
Partners") that is an Accredited Investor to tender partnership
interests in Transferor (the "Transferor Partnership Interests") in
exchange for shares of the REIT's common stock, par value $.01 per
share (the "REIT Stock"), pursuant to the terms and conditions of this
Agreement and a Letter of Transmittal and Assignment in the form of
Exhibit A hereto (the "Letter of Transmittal") to be executed by each
Transferor Partner desiring to tender their Transferor Partnership
Interests in the Exchange Offer. The REIT and the Custodian (as defined
herein) shall enter into a registration agreement in the form of
Exhibit I attached hereto (the "Exchange Offer Registration Agreement")
pursuant to which the REIT shall agree to register for resale under
federal securities laws the shares of REIT Stock to be issued in the
Exchange Offer.
2. Recital 2 on page 2 of the Contribution Agreement shall be amended
to read as follows:
2. Upon the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, Transferor, or the partners of
Transferor as designated by Transferor on Schedule VIII attached
hereto, as updated pursuant to Section 6.2(a) hereof, shall enter into
the Second Amended and Restated Agreement of Limited Partnership of
Heritage LP in the form of Exhibit B
<PAGE>
attached hereto (the "Partnership Agreement") pursuant to which the
REIT and Heritage SGP will make certain cash contributions (the "REIT
Capital Contribution") to Heritage LP in exchange for general
partnership interests in Heritage LP ("GP Units"), and Transferor will
contribute the Property in exchange for limited partnership interests
in Heritage LP ("LP Units") and cash. The LP Units will be issued by
Heritage LP in Transferor's name or in the names of the partners of
Transferor, as designated by Transferor on Schedule VIII attached
hereto as updated pursuant to Section 6.2(a) hereof. The GP Units and
the LP Units shall be exchangeable for REIT Stock at any time following
the first anniversary of the Closing Date. Transferor, the REIT and
Heritage LP shall enter into a registration agreement in the form of
Exhibit C attached hereto (the "Asset Transfer Registration Agreement")
pursuant to which the REIT shall agree to register under federal
securities laws the shares of REIT Stock to be issued in exchange for
the LP Units. The contributions of the REIT Capital Contribution in
exchange for GP Units and the Property in exchange for LP Units and
cash are collectively referred to herein as the "Asset Transfer."
The Exchange Offer Registration Agreement, the Partnership
Agreement and the Asset Transfer Registration Agreement are sometimes
hereinafter collectively referred to as the "Related Agreements."
3. Article 5 of the Contribution Agreement shall be amended and
restated in its entirety to read as follows:
ARTICLE 5
CONTINUATION AND SURVIVAL
OF REPRESENTATIONS AND WARRANTIES
---------------------------------
Each of the representations and warranties contained in this
Agreement shall be true and correct on and as of the Closing Date and
at all times between the execution of this Agreement and the Closing
Date with the same force and effect as if made at each of such times,
except to the extent, if any, that such representations and warranties
shall be affected by transactions contemplated by this Agreement.
Except for the representations and warranties set forth in Section
4.3(b) hereof, all such representations and warranties shall survive
the consummation of the transactions contemplated by this Agreement for
a period of six months following the Closing Date irrespective of any
investigations or inquiries made by any party or any knowledge which
any party may now possess or which may hereafter come to any party's
attention, and each party shall be entitled to rely upon such
representations and warranties irrespective of any investigations,
inquiries or knowledge. The representations and warranties set forth in
Section 4.3(b) hereof shall survive the consummation of the
transactions contemplated by this Agreement for a period of two years
following the Closing
<PAGE>
Date irrespective of any investigations or inquiries made by any party
or any knowledge which any party may now possess or which may hereafter
come to any party's attention, and each party shall be entitled to rely
upon such representations and warranties irrespective of any
investigations, inquiries or knowledge. The provisions of this Article
5 shall not operate to limit or effect the terms and provisions of the
Exchange Offer Registration Agreement or the Asset Transfer
Registration Agreement.
4. Section 7.1(e) of the Contribution Agreement shall be amended and
restated in its entirety to read as follows:
(e) Delivery of Letters of Transmittal and Custody Agreements.
The Custodian shall have delivered, or caused to be delivered
to the REIT, a properly completed and executed Letter of
Transmittal and Custody Agreement for each Transferor Partner
participating in the Exchange Offer.
5. Section 8.3(d) shall be added to the Contribution Agreement to read
as follows:
(d) Exchange Offer Registration Agreement. The Exchange Offer
Registration Agreement duly executed by the Custodian on
behalf of each Transferor Partner who has tendered a
Transferor Partner Interest in the Exchange Offer.
6. Section 8.5(d) shall be added to the Contribution Agreement to read
as follows:
(d) Prospectus. A sufficient number of copies of the
prospectus in conformity with the requirements of the
Securities Act, to facilitate the disposition of shares of
REIT Stock acquired by Transferor Partners in the Exchange
Offer.
7. Section 8.5(e) shall be added to the Contribution Agreement to read
as follows:
(e) Exchange Offer Registration Agreement. The Exchange Offer
Registration Agreement duly executed by the REIT.
8. Section 8.5(f) shall be added to the Contribution Agreement to read
as follows:
(f) Evidence of Registration. Sufficient evidence that the
Registration Statement has been declared effective by the
Securities and Exchange Commission on or prior to the Closing
Date.
9. Section 8.6(s) shall be added to the Contribution Agreement to read
as follows:
<PAGE>
(s) Certificates of Non-Foreign Status. A Certificate of Non-
Foreign Status duly executed by Transferor and each Transferor
Partner designated by Transferor to receive LP Units in the
Asset Transfer.
10. Section 8.6(t) shall be added to the Contribution Agreement to read
as follows:
(t) Form W-9. A Form W-9 setting forth Transferor's tax
identification number duly executed by Transferor and a Form
W-9 duly executed by each Transferor Partner designated by
Transferor to receive LP Units in the Asset Transfer.
11. The first paragraph of Section 8.10 of the Contribution Agreement
shall be amended and restated in its entirety to read as follows:
8.10 Prorations. The items in this Section 8.10 with respect
to the Real Property shall be apportioned or prorated between the
Transferor and Heritage LP as of the end of the day preceding the
Closing Date in order to determine the amount of the Proration with
respect to such Property. If the Cash Payment considered payable to the
Custodian pursuant to Section 2.2(b) is not received by the Title
Company before 1:00 p.m., Dallas, Texas time, on the Closing Date, the
prorations shall be made as of the date in which the Closing occurs
(i.e., each Transferor shall receive rents and pay expenses for the day
of Closing with respect to such Transferor's Property). All prorations
other than the Dividend Distribution Offset set forth in Section
8.10(j) shall be based upon a fraction determined by dividing the
number of days elapsed through the date of the Closing by 365. The
parties shall compute or estimate all prorations prior to the Closing
Date, and Transferor shall supply Heritage LP before the Closing
satisfactory supporting evidence for all such adjustments. In the event
that any of the items in this Section 8.10 cannot be calculated
accurately on the Closing Date, then they shall be calculated as soon
after the Closing Date as feasible. Either party owing the other party
a sum of money based on such subsequent proration(s) shall promptly pay
said sum to the other party, together with interest thereon at the rate
of the lesser of (A) two percent (2%) over the average "prime rate" (as
announced from time to time in the Wall Street Journal) per annum or
(B) the highest legally permitted rate, from the Closing Date to the
date of payment if payment is not made within ten (10) days after
delivery of a bill therefor. The provisions of this Section 8.10 shall
survive the Closing.
12. The definition of REIT Stock Price as set forth in the Contribution
Agreement shall be amended and restated in its entirety to read as follows:
"REIT Stock Price" shall mean $22.25.
<PAGE>
13. Exhibit H to the Contribution Agreement shall be amended and
restated in its entirety as set forth in Appendix I hereto.
14. Exhibit I shall be added to the Contribution Agreement as set forth
in its entirety in Appendix II hereto.
Except as set forth in this Addendum, all provisions of the
Contribution Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Addendum to the Contribution Agreement this _____ day of _______________,
1997.
MTP: HERITAGE SGP:
MTP, INC., HERITAGE SGP CORPORATION, an
a Texas corporation Arizona corporation
By:
-------------------------------- By:
Its: --------------------------------
------------------------------- Its:
-------------------------------
THE REIT: TRANSFEROR:
ASR INVESTMENTS CORPORATION, GENTRY PLACE APARTMENTS
a Maryland corporation LIMITED PARTNERSHIP, a Texas
limited partnership
By: By: MTP, Inc.
-------------------------------- Its: General Partner
Its:
-------------------------------
By:
HERITAGE LP: -----------------------
Its:
HERITAGE COMMUNITIES L.P., ----------------------
a Delaware limited partnership
By: ASR Investments Corporation
Its: General Partner
By:
-----------------------
Its:
----------------------
EXCHANGE AND CONTRIBUTION AGREEMENT
AMONG THE SMITH SUMMIT PARTIES
AND THE REIT PARTIES
THIS EXCHANGE AND CONTRIBUTION AGREEMENT ("Agreement") is made as of
the 1st day of August, 1997, among Smith Summit Apartments Partnership, a Texas
general partnership ("Smith Summit GP" or "Transferor"); Lincor/Smith Summit
Apartments Limited Partnership, a Texas limited partnership ("Lincor"); 3636
Colorado, Inc., a Colorado corporation ("3636 Colorado" and, together with Smith
Summit GP and Lincor, the "Smith Summit Parties"); ASR Investments Corporation,
a Maryland corporation (the "REIT"); Heritage SGP Corporation, an Arizona
corporation wholly owned by the REIT ("Heritage SGP"); and Heritage Communities
L.P., a Delaware limited partnership ("Heritage LP" and, together with the REIT
and Heritage SGP, the "REIT Parties").
A. Smith Summit GP is the owner of Smith Summit Apartments ("Smith
Summit"), which is a 254-unit apartment community located in Mesquite, Texas.
All of the Real Property, the Tangible Personal Property and the interests in
the Leases and the Intangible Personal Property relating to Smith Summit is
collectively referred to herein as the "Property".
B. The REIT is a self-administered and self-managed real estate
investment trust that owns primarily apartment communities. The REIT and
Heritage SGP are the sole general partners of Heritage LP.
C. Concurrently with the execution of this Agreement, the REIT Parties
will enter into an agreement (the "Gentry Place Agreement") with Gentry Place
Apartments Limited Partnership, a Texas limited partnership ("Gentry Place LP"),
to acquire the Merit Place Apartments ("Merit Place"), a 360-unit apartment
community located in Grand Prairie, Texas.
D. Concurrently with the execution of this Agreement, the REIT Parties
will enter into an agreement (the "Merit Preston Park Agreement") with Merit
Preston Park Apartments Limited Partnership, a Texas limited partnership
("Preston Park LP"), to acquire the Park On Preston Apartments ("Park On
Preston"), a 286-unit apartment community located in Dallas, Texas.
E. Certain partners of the Transferor desire to obtain shares of REIT
Stock and the REIT desires to obtain partnership interests in the Transferor.
The Smith Summit Parties desire to contribute the Property to Heritage LP and
Heritage LP desires to acquire the Property upon the terms and conditions, and
for the consideration, set forth herein. To accomplish the foregoing, the
parties hereto agree to enter into all, but not less than all, of the
transactions described below on the terms and conditions herein provided:
<PAGE>
1. The REIT shall make a tender offer (the "Exchange Offer")
to each owner of partnership interests in Transferor (the "Transferor Partners")
that is an Accredited Investor to tender partnership interests in Transferor
(the "Transferor Partnership Interests") in exchange for cash and shares of the
REIT's common stock, par value $.01 per share (the "REIT Stock"), pursuant to
the terms and conditions of this Agreement and a Letter of Transmittal and
Assignment in the form of Exhibit A hereto (the "Letter of Transmittal") to be
executed by each Transferor Partner desiring to tender their Transferor
Partnership Interests in the Exchange Offer. The REIT and the Custodian (as
defined herein) shall enter into a registration agreement in the form of Exhibit
I attached hereto (the "Exchange Offer Registration Agreement") pursuant to
which the REIT shall agree to register for resale under federal securities laws
the shares of REIT Stock to be issued in the Exchange Offer.
2. Upon the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, Transferor, or the partners of Transferor
as designated by Transferor on Schedule VIII attached hereto as updated pursuant
to Section 6.2(a) hereof, shall enter into the Second Amended and Restated
Agreement of Limited Partnership of Heritage LP in the form of Exhibit B
attached hereto (the "Partnership Agreement") pursuant to which the REIT and
Heritage SGP will make certain cash contributions (the "REIT Capital
Contribution") to Heritage LP in exchange for general partnership interests in
Heritage LP ("GP Units"), and Transferor will contribute the Property in
exchange for limited partnership interests in Heritage LP ("LP Units") and cash.
The LP Units will be issued by Heritage LP in Transferor's name or in the names
of the partners of Transferor as designated by Transferor on Schedule VIII
attached hereto as updated pursuant to Section 6.2(a) hereof. The GP Units and
the LP Units shall be exchangeable for REIT Stock at any time following the
first anniversary of the Closing Date. Transferor, the REIT and Heritage LP
shall enter into a registration agreement in the form of Exhibit C attached
hereto (the "Asset Transfer Registration Agreement") pursuant to which the REIT
shall agree to register under federal securities laws the shares of REIT Stock
to be issued in exchange for the LP Units. The contributions of the REIT Capital
Contribution in exchange for GP Units and the Property in exchange for LP Units
and cash are collectively referred to herein as the "Asset Transfer."
The Exchange Offer Registration Agreement, the Partnership Agreement
and the Asset Transfer Registration Agreement are sometimes hereinafter
collectively referred to as the "Related Agreements."
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
2
<PAGE>
ARTICLE 1
EXCHANGE OFFER
--------------
1.1 The Exchange Offer.
(a) Offer to Purchase. Provided that nothing shall have
occurred that would result in a failure to satisfy any of the terms or
conditions set forth in Article 7 of this Agreement, as promptly as practicable
following the execution of this Agreement, the REIT shall commence the Exchange
Offer by delivering the Exchange Offer Documents (as defined below) to each
Transferor Partner. Each Transferor Partner that is an Accredited Investor shall
have the right to tender all or any part of Transferor Partnership Interests
owned by such Transferor Partner (such tendered Transferor Partnership Interests
hereinafter referred to as "Tendered Interests") by executing and delivering
prior to the Commitment Date to Lincor, as custodian (the "Custodian"), a Letter
of Transmittal pursuant to which Lincor will make and accept deliveries by and
on behalf of the Transferor Partners as provided in the Custody Agreement. The
obligations of the REIT to accept for purchase and to purchase any Tendered
Interests tendered by the Transferor Partners of Transferor shall be subject
only to the conditions set forth in this Agreement. The REIT shall not be
entitled to accept for purchase or purchase the Tendered Interests unless all of
the conditions to the consummation of the transactions contemplated in this
Agreement are satisfied or waived as provided herein.
(b) Purchase Price. Subject to the conditions set forth in
Article 7 of this Agreement, on the Closing Date, the Custodian shall deliver
the Letters of Transmittal to the REIT, and the REIT shall deliver to the
Custodian, as agent for each Transferor Partner on whose behalf the Custodian
delivered a Letter of Transmittal, the following:
(i) Exchange Offer Cash Payment. A wire transfer of
an amount equal to a portion of the Total Cash Payment attributable to the
Transferor Partnership Interests tendered by Transferor Partners in the Exchange
Offer (the "Exchange Offer Cash Payment"); provided, however, in no event shall
the Exchange Offer Cash Payment exceed the difference between the Total Cash
Payment and the amount of the Maximum Property Closing Costs as set forth on
Schedule VI attached hereto.
(ii) REIT Stock. A certificate registered in the name
of each Transferor Partner that tenders Transferor Partnership Interests in the
Exchange Offer for the number of shares of REIT Stock equal to (A) the
difference between (1) the Exchange Value of all of the Transferor Partnership
Interests tendered by such Transferor Partner and accepted for purchase and (2)
that portion of the Exchange Offer Cash Payment attributable to the Transferor
Partnership Interests tendered by such Transferor Partner and accepted for
purchase, divided by (B) the REIT Stock Price. For purposes of determining the
number of shares of REIT Stock to be issued in the Exchange Offer, Transferor
Partnership Interests held by one person in multiple accounts shall be
aggregated and in the event that a Transferor Partner's tender of Transferor
Partnership Interests would result in such Transferor Partner receiving a
fractional
3
<PAGE>
share of REIT Stock, such fractional share shall be rounded to the nearest whole
share of ASR Common Stock. The REIT Stock to be issued in accordance with the
Exchange Offer will be duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right and,
subject to compliance with the Securities Act and the Exchange Act, will be
eligible for listing on the American Stock Exchange. On or prior to the Closing
Date, the REIT shall have caused the effectiveness of a registration statement
(the "Registration Statement") under the Securities Act and under any applicable
state securities laws covering the resale of the shares of REIT Stock to be
issued in accordance with the Exchange Offer.
(c) Exchange Offer Documents. As soon as practicable after the
Commitment Date, the REIT shall prepare the Registration Statement covering the
resale of shares of REIT Stock to be offered in the Exchange Offer, which will
comply in all material respects with the provisions of applicable federal and
state securities laws, and will prepare the Letter of Transmittal and a Custody
Agreement appointing Lincor the Transferor Partners' Custodian to make
deliveries for the Transferor Partners at the Closing (the Registration
Statement, the Exchange Offer Registration Agreement, the Letters of Transmittal
and the Custody Agreement, together with any supplements or amendments thereto,
are referred to herein collectively as the "Exchange Offer Documents"). The REIT
shall prepare and make all filings under applicable state Blue Sky Laws to
qualify or exempt from qualification the REIT Stock offered pursuant to the
Exchange Offer.
(d) Election to Tender Transferor Partnership Interests. The
election of a Transferor Partner to tender all or a part of the Transferor
Partnership Interests owned by the Transferor Partner shall be made by such
Transferor Partner's execution of a Letter of Transmittal and the return of the
Letter of Transmittal to the Custodian for delivery to the REIT pursuant to the
Custody Agreement. Following the Commitment Date the tender of Transferor
Partnership Interests shall be irrevocable.
(e) Consent to Admission of REIT as Partner. The Letter of
Transmittal shall provide that each Transferor Partner tendering a Transferor
Partnership Interest in Transferor (i) consents to the admission of the REIT as
a substituted limited partner upon the purchase of such Transferor Partnership
Interest and (ii) waives any right of first refusal granted under the
Transferor's partnership agreement to the Transferor Partner or the Transferor
in connection with the Exchange Offer. Lincor, as a general partner of Smith
Summit GP, and 3636 Colorado, as a general partner of Smith Summit GP, consent
to the admission of the REIT as a substituted limited partner of Transferor as
of the Closing Date. Promptly following the Closing Date, Transferor shall file
any certificates necessary to reflect the admission of the REIT as a substituted
limited partner.
(f) Term. The Exchange Offer shall remain open until the
commitment date, which shall be 5:00 p.m., Dallas, Texas time on August 11,
1997, unless extended by the REIT and Lincor (the "Commitment Date"). The
Exchange Offer shall expire on the Expiration Date. If the Exchange Offer is not
consummated prior to the Expiration Date, the Custodian shall
4
<PAGE>
promptly return the Letter of Transmittal and all other materials delivered to
the Custodian by the Transferor Partner pursuant to this Agreement to the
Transferor Partner. Prior to the Commitment Date, the REIT shall not amend or
modify the terms of the Exchange Offer without the prior consent of Lincor.
After the Commitment Date, the Exchange Offer shall not be amended or modified.
1.2 Tender of Lincor's or 3636 Colorado's Transferor Partnership
Interests. Upon the terms and subject to the conditions set forth in this
Agreement, on the Commitment Date, Lincor and 3636 Colorado shall have the right
to tender all or any part of their right to receive all or a portion of
distributions as a general partner in Transferor to the REIT in exchange for
shares of REIT Stock pursuant to the Exchange Offer on the same terms and
subject to the same conditions as set forth in Section 1.1 above. At the
Closing, the REIT shall accept for payment all assignments of the right to
receive distributions as a general partner tendered by Lincor or 3636 Colorado
in Transferor. If the tender of the right to receive general partner
distributions is accepted, the REIT shall acquire all right, title and interest
to all distributions made by Transferor with respect to the interest acquired,
but the REIT shall not be substituted as a general partner. Lincor and 3636
Colorado shall remain as the general partners of Transferor.
1.3 Internal Revenue Code Section 754 Election. Unless Transferor has a
valid election in place pursuant to Internal Revenue Code Section 754,
Transferor hereby agrees to make such an election effective for Transferor's
taxable year in which the Exchange Offer is consummated.
ARTICLE 2
ASSET TRANSFER
--------------
2.1 The Asset Transfer. Provided that nothing shall have occurred that
would result in a failure to satisfy any of the terms or conditions set forth in
this Agreement, immediately following the transactions set forth in Article 1
hereof, the REIT and Transferor shall consummate the Asset Transfer. The REIT
and Heritage SGP shall make a cash capital contribution to Heritage LP in
accordance with Section 2.2(a) hereof and will continue to be the sole general
partners of Heritage LP. Transferor shall contribute and convey the Property to
Heritage LP in exchange for LP Units and cash as set forth in Section 2.2(b)
hereof. Pursuant to the terms of the Partnership Agreement, the LP Units shall
be exchangeable for REIT Stock at any time following the first anniversary of
the Closing Date. Pursuant to the Asset Transfer Registration Agreement, the
REIT shall agree to register for resale under federal securities laws the shares
of REIT Stock to be issued upon conversion of the LP Units.
5
<PAGE>
2.2 Contribution of Property to Heritage LP.
(a) Capital Contributions. On the Closing Date, the REIT,
Heritage SGP and Transferor shall make the following capital contributions to
Heritage LP:
(i) The REIT and Heritage SGP shall make a cash
capital contribution equal on an aggregate basis to the REIT Capital
Contribution which shall be the sum of:
(A) that portion of the Mortgage Debt to be
repaid or cancelled by Heritage LP in accordance with Section 2.3 hereof
including, without limitation, any prepayment fees or premiums, assumption fees
and other costs associated therewith, plus
(B) the amount required to satisfy any
monetary liens which the REIT elects to satisfy pursuant to Section 2.3(d), plus
(C) the Property Closing Costs paid and to
be paid by Heritage LP or the REIT pursuant to Section 8.9, plus or minus, as
appropriate
(D) the Prorations, plus
(E) all costs and expenses incurred and to
be incurred by Heritage LP, the REIT or Heritage SGP (on behalf of Heritage LP)
in the performance of its due diligence hereunder, plus
(F) any amounts required to satisfy the
obligations of the REIT or Heritage SGP to make capital contributions to
Heritage LP pursuant to Section 4.1.2 or Section 4.1.6 of the Partnership
Agreement, and plus
(G) cash in the amount of the Asset Transfer
Cash Payment (as defined herein).
(ii) Transferor shall contribute and convey the
Property owned by Transferor to Heritage LP as hereinafter provided subject only
to the Transferred Debt as described in Section 2.3 hereof.
(iii) Notwithstanding the foregoing, if, taking into
consideration the proposed contributions to the capital of Heritage LP by the
REIT, Heritage SGP, and Transferor in accordance with Section 2.2(a) hereof,
Heritage LP would not be consolidated with the REIT for financial accounting and
reporting purposes because the respective Partnership Interests of the REIT or
Heritage SGP in Heritage LP is insufficient, then at the Closing the REIT or
Heritage SGP may contribute cash to Heritage LP in exchange for an amount of GP
Units equal to such cash contribution divided by the REIT Stock Price. Such cash
will be contributed in the
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minimum amount sufficient to permit Heritage LP to be consolidated with the REIT
for financial accounting and reporting purposes.
(b) Distribution of Cash and LP Units. In exchange for the
capital contribution made by Transferor provided in Section 2.2(a) hereof,
Heritage LP shall distribute the following on the Closing Date:
(i) Asset Transfer Cash Payment. At the Closing,
Transferor shall receive by wire transfer an amount (the "Asset Transfer Cash
Payment") equal to the Total Cash Payment less the Exchange Offer Cash Payment.
(ii) LP Units. At the Closing, Transferor, or certain
partners of Transferor designated by Transferor on Schedule VIII attached hereto
as updated pursuant to Section 6.2(a) hereof, shall collectively receive a
number of LP Units that shall be equal to (A) the difference between the
Exchange Value attributable to Transferor and the amount of the Asset Transfer
Cash Payment pursuant to clause (i), divided by (B) the REIT Stock Price;
provided, however, if such calculation would result in the distribution to the
Transferor, or certain partners of Transferor, of a fraction of an LP Unit, such
fractional share shall be rounded to the nearest whole LP Unit. In the event
Transferor distributes the Asset Transfer Cash Payment to certain partners of
Transferor, Transferor shall distribute a number of LP Units to each of its
partners equal to (A) the difference between the Exchange Value attributable to
each partner's interest in Transferor and the amount of the Asset Transfer Cash
Payment distributed to such partner, divided by (B) the REIT Stock Price.
(c) Distribution of GP Units. In exchange for the REIT Capital
Contribution provided in Section 2.2(a) hereof, Heritage LP shall issue on the
Closing Date to the REIT and Heritage SGP a number of GP Units (rounded to a
whole unit) equal to the REIT Capital Contribution divided by the REIT Stock
Price allocated between them on a pro rata basis based upon their respective
contributions.
2.3 Assumption of Mortgage Debt.
(a) Mortgage Debt. The REIT, Heritage LP and Transferor
acknowledge and agree that the Property is subject to the Mortgage Debt from the
lender (the "Lender") as described on Schedule II attached hereto. The Property
shall be acquired by Heritage LP subject to the Mortgage Debt, provided that the
Lender of such Mortgage Debt shall execute a consent, estoppel letter, transfer
agreement, and modification with respect to such Mortgage Debt as shall be
acceptable to Heritage LP, acting reasonably; provided, however, the Lender will
not be required to amend any of the material legal or business terms of the
Mortgage Debt.
(b) Lender Consent. From and after the date hereof and
continuing for 60 days thereafter (the "Lender Consent Period"), the parties
shall proceed in good faith and with due diligence to attempt to secure any
lender consent and estoppel letter from the Lender and
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to negotiate any transfer agreement or modifications to the Loan Documents in
order for Heritage LP to acquire the Property subject to such Mortgage Debt.
Heritage LP agrees that it shall accept the Property subject to the Mortgage
Debt, provided that the Lender agrees that such Mortgage Debt shall be
non-recourse to Heritage LP on the same terms that such Mortgage Debt is
currently non-recourse to Transferor and the Lender executes the agreements
contemplated by Section 2.3(a). Any Mortgage Debt to which the Property is
subject upon transfer to Heritage LP is herein referred to as "Transferred
Debt."
(c) Refinancing of Mortgage Debt. In the event that the Lender
does not agree to the transfer of the Mortgage Debt as contemplated by Section
2.3(a) and Section 2.3(b), or if for any reason Heritage LP is unable to acquire
the Property subject to the Mortgage Debt within the Lender Consent Period,
Heritage LP shall have the right to (i) refinance all or a portion of such
Mortgage Debt on terms it determines to be acceptable to it in its sole
discretion; (ii) pay all or any portion of such Mortgage Debt from the proceeds
of the REIT Capital Contribution; or (iii) terminate this Agreement, which
rights shall be exercised within the Lender Consent Period.
(d) Indebtedness Other Than Mortgage Debt. Transferor shall
satisfy all pecuniary encumbrances (other than the Mortgage Debt) or otherwise
have all such encumbrances removed as liens against the Property on or before
the Closing at its own expense. Transferor shall not place any consensual lien,
encumbrance or easement against the Property following the date of execution of
this Agreement without the prior written consent of the REIT, such consent not
to be unreasonably withheld or delayed. If Transferor fails to satisfy or remove
any monetary lien on or prior to Closing, the REIT may proceed to retain a
portion of the Exchange Value equal to the amount of the monetary lien (the
"Holdback Amount") and reduce the Exchange Value of the Property accordingly.
The Holdback Amount shall be paid to Transferor at such time as Transferor
extinguishes such monetary lien. In the event that Transferor does not
extinguish such monetary lien within 120 days of the Closing Date, the REIT
shall apply the Holdback Amount to satisfy the monetary lien. Transferor shall
be required to deposit any additional funds at Closing to satisfy any remaining
monetary liens against the Property.
2.4 Earnest Money Deposit. Within five (5) days following the Execution
Date, the REIT shall deposit $50,000 in escrow with the Title Company (the
"Earnest Deposit") on account of the REIT Capital Contribution. The Earnest
Deposit shall be placed in an interest-bearing account. At the Closing, the
Earnest Deposit shall be applied against the Cash Allocation. In the event this
Agreement is terminated for any reason other than as a result of a termination
pursuant to Section 10.3(c), the Earnest Deposit required by this Section 2.4
shall be returned to the REIT. In the event this Agreement is terminated by
Transferor pursuant to Section 10.3(c), the Earnest Deposit required by this
Section 2.4 shall be paid to Lincor on behalf of Transferor.
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ARTICLE 3
PARTNER APPROVAL; SECURITIES LAW CONSIDERATIONS
-----------------------------------------------
3.1 Approval by Lincor and 3636 Colorado as General Partners. Lincor
and 3636 Colorado hereby approve and consent to the Exchange Offer and Asset
Transfer and represent and warrant that each has approved this Agreement and the
transactions contemplated hereby.
3.2 Federal and State Securities Law Considerations. The REIT Parties
shall take all actions necessary in accordance with federal and state securities
laws including, without limitation, prepare and make all filings under
applicable federal and state law to qualify or exempt from qualification the
securities offered pursuant to the Exchange Offer and Asset Transfer.
3.3 Asset Transfer Registration Agreement. In connection with the
conversion of the LP Units, the REIT shall enter into the Asset Transfer
Registration Agreement pursuant to which the REIT shall agree to file and use
its best efforts to have declared effective on the date the LP Units are first
convertible into REIT Stock, a registration statement, including a form of
prospectus, and one or more amendments thereto, on Form S-3 or other appropriate
form, covering such shares of REIT Stock to be issued upon conversion of the LP
Units issued pursuant to the Asset Transfer as set forth in Section 2.2 hereof.
3.4 Information Respecting Transferor, Lincor and 3636 Colorado.
Transferor shall furnish in writing for inclusion in the Registration Statement
such information about Transferor, Lincor and 3636 Colorado that may be
requested by the REIT Parties in writing. Transferor represents and warrants
that the information so supplied, as it may be revised from time to time in
writing by Transferor, shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
3.5 Amendments to the Registration Statement. If, at any time prior to
the Expiration Date, it shall be necessary to amend or supplement the
Registration Statement to correct any statement or omission with respect to the
REIT, Lincor, 3636 Colorado, Transferor or their subsidiaries or assets, or in
order to comply with any applicable legal requirements, Transferor shall supply
the necessary information to the REIT. To the extent necessary to comply with
applicable legal requirements, the REIT shall amend or supplement the
Registration Statement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 Transferor Representations and Warranties. As a material inducement
to the REIT Parties to execute this Agreement and to the REIT Parties to
consummate the transactions contemplated hereunder, Transferor, Lincor and 3636
Colorado jointly and severally represent and warrant to the REIT Parties with
respect to itself and the Property, that as of the date hereof and as of the
Closing Date:
(a) Transferor Organizational Representations and Warranties.
(i) Organization and Authority. Transferor has been
duly organized and is validly existing and in good standing under the laws of
its jurisdiction of organization and, if different, is qualified to do business
and in good standing in the state in which the Property is located. Transferor
has the full right and authority to enter into this Agreement. Transferor has
the full and right authority to transfer the Property and to consummate or cause
to be consummated the transactions contemplated herein. This Agreement has been
duly authorized and properly executed by Transferor and, assuming the due
authorization, execution and delivery hereof by the other parties hereto,
constitutes the valid and binding obligation of Transferor, enforceable against
Transferor in accordance with its terms.
(ii) Conflicts. The execution of and performance by
Transferor of its obligations under this Agreement does not and will not
conflict with the terms of Transferor's constituent documents and does not
breach or violate any applicable law, rule or regulation of any governmental
authority. Subject to obtaining the required consents and approvals by the
Lender, there is no agreement to which Transferor is a party or binding on
Transferor, which will be breached by or which is in conflict with the execution
of or performance by Transferor of its obligations under this Agreement or with
the rights granted to Transferor hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending, or to Transferor's knowledge, threatened against Transferor
or the Property which would, if adversely determined, have a material adverse
effect on the financial condition or results of operations of Transferor. There
is no action or proceeding pending, or to Transferor's knowledge, threatened
against Transferor which challenges or impairs Transferor's ability to execute,
deliver or perform under this Agreement, to transfer all of the Property
hereunder or to consummate the transactions contemplated herein.
(b) Transferor's Property Representations and Warranties.
(i) Contractors and Suppliers. All contractors,
subcontractors, suppliers, architects, engineers and others that have performed
services or labor or supplied material in connection with Transferor's
acquisition, development, ownership or management of the Property have been, or
will be in the ordinary course of business, paid in full prior to
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Closing and all liens arising therefrom (or claims which with the passage of
time or notice or both, could mature into liens) have been, or will be in the
ordinary course of business, satisfied and released prior to Closing. On the
Closing Date, Transferor shall provide the REIT a list of all contracts that are
not terminable upon 30 days written notice without penalty. The Transferor shall
not be required to pay any termination fees or penalties in connection with
contracts the REIT wishes to terminate, as such amounts shall be the sole
responsibility of the REIT. Notwithstanding the foregoing statements, Smith
Summit GP agrees to negotiate on the REIT's behalf for the
termination/cancellation of an existing security monitoring agreement between
Smith Summit GP and Network Multi-Family Security Corporation, with such
termination to be effective on August 1, 1998. The REIT agrees and Smith Summit
GP acknowledges that the REIT will bear the cost of $120,000, as a fee to affect
the termination of said contract (the "Buyout Amount"). The REIT agrees and
Smith Summit GP acknowledges that Smith Summit GP will (a) be entitled to any
savings obtained if the Buyout Amount is less than $120,000, and (b) bear the
responsibility for any amount in excess of the Buyout Amount for Smith Summit
Apartments. Such amount in excess of the Buyout Amount for Smith Summit
Apartments shall be credited to the REIT with regard to Transferor at Closing
and such amount less than the Buyout Amount shall be credited to Transferor at
Closing.
(ii) Leases and Rent Roll. The Rent Roll delivered by
Transferor hereunder for its Real Property is true, accurate and complete in all
material respects. Except as set forth in the Rent Roll or applicable Permitted
Exceptions, there are no leases or occupancy agreements or rights of possession
affecting the Real Property. Except as otherwise specifically and expressly set
forth in the Rent Roll for the Real Property: (1) no presently effective rent
concessions have been given to any tenants; (2) no rent has been paid in advance
by any tenants respecting a period subsequent to the Closing (except for the
month in which the Closing occurs); (3) no tenants have any claim against
Transferor for any deposits, other than pursuant to the terms of its Lease with
respect to sums specified as deposits in the Rent Roll; (4) no tenants have any
options or rights of first refusal to extend or renew their Leases or to rent
additional space or to purchase the Property; (5) there are no tenant
improvements which are incomplete or which have not been fully paid for by
Transferor except as otherwise specified in this Agreement; and (6) there are no
leasing fees or commissions due, nor will any become due, in connection with any
Lease or any renewal or extension of any Lease. Except as set forth in the Rent
Roll, no understanding or agreement with any party exists as to payment of any
leasing or other fees or commissions regarding future leases or as to procuring
of tenants for the Real Property. To Transferor's knowledge, no default or
breach exists on the part of any tenant except as provided in the Rent Roll.
Transferor has not received any notice of any material default or breach on the
part of the landlord under any Lease.
(iii) Operating and Financial Statements. Each
Operating and Financial Statement for the Real Property shows all material items
of income and expense (operating and capital) incurred in connection with
Transferor's ownership, operation and management of such Real Property for the
periods indicated and are true, correct and complete in all material respects.
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(iv) Notice of Violations. To Transferor's knowledge,
Transferor has not received notice that the Property or the use thereof violates
any laws, rules and regulations of any federal, state, city or county government
or any agency, body or subdivision thereof having any jurisdiction over Property
that have not been resolved to the satisfaction of the issuer of the notice.
(v) Zoning, Applicable Laws Governing Operation and
Restrictions. To Transferor's knowledge, neither the Property or Transferor's
current use or operation thereof fails to comply or is in violation, in any
material respect, with current applicable laws, regulations, ordinances,
building codes and rules of all applicable municipal, local, state and federal
jurisdictions, including, without limitation, zoning ordinances, parking
requirements, building codes and laws governing access for handicapped persons,
and with restrictions, covenants or similar agreements affecting such Property.
(vi) Taxes and Assessments. To Transferor's
knowledge, all taxes for the current year and all prior years for the Property
which are due and payable have been paid, except for installments due and not
yet delinquent and supplemental taxes not yet assessed, and no taxes are
delinquent. All impact fees or other assessments, fees or charges, however
denominated, which may constitute a lien or charge on the Property or which have
been assessed or charged as a result of any permit, license or approval obtained
for the Property have been paid in full, and there is not presently pending any
such assessment, fees or charges of any nature with respect to the Property or
any part thereof, nor has Transferor received any notice of any such
assessments, fees or charges being contemplated. No areas within the Real
Property are subject to any existing improvement districts, except as may be
disclosed by the applicable Title Report and any amendments thereto. All taxes
with respect to Transferor and the ownership and operation of the Property
during Transferor's ownership, including, without limitation, income, gross
receipts, net proceeds, ad valorem, turnover, personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational and interest equalization,
windfall profits, severance and employees' income withholding and Social
Security taxes imposed by the United States or any foreign country or by any
state, municipality, subdivision or instrumentality of the United States or of
any foreign country or by any other tax authority, including all applicable
penalties and interest (the "Other Taxes"), which are due and payable, have been
paid as disclosed on the returns to the extent due. Transferor has duly and
timely filed all tax returns of every nature required to be filed by it with
respect to the Other Taxes, in every jurisdiction in which the same may have
been so required, and has paid all Other Taxes disclosed on such returns to the
extent due. All Other Taxes of which notice has been received or which shall
accrue on or prior to the Closing Date have been paid to the extent due.
(vii) Hazardous Materials. The environmental reports
for the Property delivered to the REIT by Transferor constitute true, accurate
and complete copies of all of the environmental reports prepared for Transferor
for the Property. To Transferor's knowledge, the Real Property is not in
noncompliance or in violation of Environmental Laws, except as
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disclosed in any environmental reports in Transferor's possession that have been
delivered to the REIT.
(viii) Withholding Obligation. To Transferor's
knowledge, the convey- ance to Heritage LP of the Property is not subject to any
federal, state or local withholding obligation of Transferor under the tax laws
applicable to Transferor or the Property, including without limitation, any
"bulk sales" or other similar laws.
(ix) Condemnation. No condemnation, claims, actions,
suits or proceedings relating to the Real Property are pending or, to
Transferor's knowledge, threatened.
(x) Insurance. The schedule of all insurance carried
and the costs thereof with respect to the Property provided by Transferor is
true, accurate and complete. Transferor has not received any notice from any
insurance company or board of fire underwriters of any defects or inadequacies
in, on or about any of the Real Property or any part or component thereof that
would adversely affect the insurability of the Real Property or cause an
increase in the premiums for the Property that have not been cured or repaired
to the satisfaction of the party issuing the notice. All insurance policies
insuring the Real Property are in full force and effect.
(xi) Ownership. Transferor is the owner and has title
to the Real Property free and clear of any and all claims, taxes, assessments,
reservations in patents, easements, rights-of-way, encumbrances, liens,
covenants, conditions, restrictions, obligations and liabilities other than
those specifically set forth herein or in the Title Report or approved in
writing as set forth above.
(xii) Flood Area. Except as may be disclosed on the
survey respecting the Real Property, to Transferor's knowledge, no portion of
the Real Property is within any flood plain area as designated by the maps of
the Federal Emergency Management Agency (FEMA maps) or any other governmental or
quasi-governmental flood control agency.
(xiii) Future Transfer Obligations. Except as
disclosed in the Title Report for the Real Property, there are no agreements,
commitments or understandings by or between Transferor and any third party
pursuant to which Transferor or its successors-in-interest are required to
dedicate any part of the Real Property or to grant any easement, water rights,
rights-of-way, road or license for ingress and egress or other use in respect to
any part of the Real Property.
(xiv) Creditors. There are no attachments, levies,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or
pursuant to any other debtor or relief laws contemplated by Transferor or
pending in any current judicial or administrative proceedings against
Transferor.
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(xv) Loan Documents. The Loan Documents delivered by
Transferor to the REIT constitute true, accurate and complete copies of all of
the documents and instruments in effect with respect to the Mortgage Debt
applicable to Transferor in all material respects. The Schedule of Loan
Documents delivered to the REIT by Transferor is in all material respects true,
accurate and complete. Transferor has not received any notice that Transferor is
in default under such Loan Documents, nor to Transferor's knowledge does any
default or breach exist, nor any event or circumstance that, with the giving of
notice, or passage of time, or both, would constitute a default or breach under
such Loan Documents. The unpaid principal balance under the Loan Documents
delivered to the REIT by Transferor after taking into account the July 1997
mortgage payment applicable to Transferor's Property is set forth in Schedule II
attached hereto.
(xvi) Solvency. To Transferor's knowledge, Transferor
is, and at all times during the period beginning on the date hereof and ending
on and including the Closing Date will be, solvent. As used herein, solvent
means with respect to an entity that such entity (i) does not have debts greater
than the fair value of such entity's assets; (ii) is paying and anticipates that
it will continue to pay such entity's debts as they become due; and (iii) has
sufficient capital to run such entity's business.
(xvii) Brokers' Fees. Except for CB Commercial, who
shall be paid solely by Transferor, no real estate broker, salesperson or finder
has engaged by Transferor in connection with the transactions contemplated
hereby that may result in claims for commissions or fees in connection
therewith.
(xviii) Full Disclosure. Transferor has made
available or accessible to the REIT all material documents, files, written
information, books and records in Transferor's possession or control and
relating to the Property.
(c) Transferor's Securities Representations.
(i) Investment Purpose. In the event that Transferor
receives LP Units, Transferor will acquire the LP Units for the purpose of
transferring such LP Units to its partners who intend to hold the LP Units for
investment and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act.
(ii) Sufficient Knowledge and Experience. Transferor
has sufficient knowledge and experience in financial and business matters to
enable it to evaluate the merits and risks of investment in the LP Units.
Transferor has the ability to bear the economic risk of acquiring the LP Units.
(iii) Access to Information. Transferor has been
supplied with, or had access to, information to which a reasonable investor
would attach significance in making investment decisions, including, but not
limited to, all publicly available filings by the REIT
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under the Securities Act and the Exchange Act, and the REIT's annual and
quarterly reports to stockholders, any information with respect to Heritage LP's
financial condition, business and prospects, and any other information
Transferor has requested, to answer all of its inquiries about Heritage LP and
the REIT, and to enable it to make its decision to acquire the LP Units.
(iv) Restrictions on Transfer. Transferor hereby
acknowledges that neither the LP Units nor the REIT Stock for which LP Units may
be exchanged are registered under the Securities Act or any state securities
laws and cannot be resold without registration thereunder or exemption
therefrom. Transferor agrees that, other than the transfers contemplated to its
partners, it will not transfer all or any portion of the LP Units or the
underlying Shares unless such transfer has been registered or is exempt from
registration under the Securities Act and any applicable state securities laws.
The LP Units contain a prominent legend with respect to the restrictions on
transfer under the Securities Act and under applicable state securities laws.
(d) ERISA Representation and Warranty. Transferor holds no
"plan assets," within the meaning of Department of Labor regulations at 29
C.F.R. section 2510.3- 101, of any employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the
transactions contemplated by this Agreement are not part of an agreement,
arrangement or understanding designed to benefit a party in interest with
respect to any employee benefit plan subject to ERISA that invests in
Transferor.
The term "to Transferor's knowledge" as it is used in this
Section 4.1 shall mean that the general partners of Smith Summit GP have no
actual conscious knowledge of facts inconsistent with the matters stated. In
connection with the foregoing representations, Transferor has made no specific
examination of files or records, nor has Transferor made inquiry of any
employees of Transferor, its advisor, or any management company engaged by
Transferor. No constructive knowledge of any matter shall be imputed to
Transferor as to matters not within the actual conscious knowledge of the
general partners of Smith Summit GP. A breach of a representation set forth in
this Section 4 by Transferor, Lincor or 3636 Colorado shall constitute a failure
of the condition set forth in Section 7.1(a) hereof.
4.2 Further Representations and Warranties of Lincor. As a material
inducement to the REIT and Heritage LP to execute this Agreement and consummate
the transactions contemplated hereunder, Lincor represents and warrants to the
REIT and Heritage LP that as of the date hereof and as of the Closing Date:
(a) Approval by Lincor as General Partner. Lincor hereby
approves and consents to the transactions contemplated herein with regard to
Smith Summit GP and represents and warrants that it has approved this Agreement
and the transactions hereby contemplated with regard to Smith Summit GP.
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(b) Power of Lincor to Execute Agreement. Lincor has full
power and authority to execute, deliver, and perform this Agreement, and this
Agreement is the legal and binding obligation of Lincor and is enforceable
against it in accordance with the terms of this Agreement.
(c) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which Smith Summit GP or Lincor is a
party or by which Smith Summit GP or Lincor is bound, or any judgment, decree,
order, or award of any court, governmental body, or arbitrator, or to the
knowledge of Lincor, any applicable law, rule or regulation.
4.3 Further Representations and Warranties of 3636 Colorado. As a
material inducement to the REIT and Heritage LP to execute this Agreement and
consummate the transactions contemplated hereunder, 3636 Colorado represents and
warrants to the REIT and Heritage LP that as of the date hereof and as of the
Closing Date:
(a) Approval by 3636 Colorado as General Partner. 3636
Colorado hereby approves and consents to the transactions contemplated herein
with regard to Smith Summit GP and represents and warrants that it has approved
this Agreement and the transactions hereby contemplated with regard to Smith
Summit GP.
(b) Power of 3636 Colorado to Execute Agreement. 3636 Colorado
has full power and authority to execute, deliver, and perform this Agreement,
and this Agreement is the legal and binding obligation of 3636 Colorado and is
enforceable against it in accordance with the terms of this Agreement.
(c) Agreement Not in Breach of Other Instruments. To 3636
Colorado's knowledge, the execution and delivery of this Agreement, the
consummation of the transactions hereby contemplated, and the fulfillment of the
terms hereof, will not result in the breach of any term or provision of, or
constitute a default under, or conflict with, or cause the acceleration of any
obligation under, any agreement or other instrument of any description to which
Smith Summit GP or 3636 Colorado is a party or by which Smith Summit GP or 3636
Colorado is bound, or any judgment, decree, order, or award of any court,
governmental body, or arbitrator, or to the knowledge of 3636 Colorado, any
applicable law, rule or regulation.
The term "to 3636 Colorado's knowledge" as used in this
Section 4.3 shall mean that the officers and directors of 3636 Colorado have no
actual conscious knowledge of facts inconsistent with the matters stated. In
connection with the foregoing representations, 3636 Colorado has made no
specific examination of files or records, nor has 3636 Colorado made inquiry of
any other employee of 3636 Colorado, its advisor, or any management company of
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3636 Colorado. No constructive knowledge of any matter shall be imputed to 3636
Colorado as to matters not within the actual conscious knowledge of the
above-named persons. A breach of a representation set forth in this Section 4 by
3636 Colorado shall constitute a failure of the condition set forth in Section
7.1(a) hereof.
4.4 The REIT's Representations and Warranties. As a material inducement
to the Smith Summit Parties to execute this Agreement and consummate the
transactions contemplated hereunder, the REIT represents and warrants to the
Smith Summit Parties that as of the date hereof and as of the Closing Date:
(a) REIT Organizational Representations and Warranties.
(i) Organization and Authority. The REIT has been
duly organized, is validly existing as a corporation under the laws of its state
of incorporation and is in good standing in such state and, if different, is
qualified to do business and in good standing in the jurisdictions in which the
property owned by the REIT or the business conducted by the REIT requires such
qualification. Each of the REIT's subsidiaries has been duly organized and is
validly existing under the laws of its organization and, if different, is
qualified to do business in the jurisdictions in which the property owned by
such subsidiary or the business conducted by such subsidiary requires such
qualification. The REIT has the full corporate right and authority and has
obtained any and all consents required therefor to enter into this Agreement.
The persons signing this Agreement on behalf of the REIT are authorized to do
so. This Agreement and all of the documents to be delivered by the REIT at the
Closing have been or will be authorized and properly executed and do or will
constitute the valid and binding obligations of the REIT, enforceable against
the REIT in accordance with their terms.
(ii) Conflicts. The execution of and performance by
the REIT under this Agreement does not and will not conflict with the Amended
and Restated Articles of Incorporation or By-Laws of the REIT and does not
breach or violate any applicable law, rule or regulation of any governmental
authority. There is no agreement to which the REIT is a party or, to the REIT's
knowledge, binding on the REIT which will be breached by or which is in conflict
with its execution of or performance of its obligations under this Agreement or
with the rights granted to the REIT hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending or, to the REIT's knowledge, threatened against the REIT or
any of its properties, which would, if adversely determined, have a material
adverse effect on the financial condition or results of operations of the REIT.
There is no action or proceeding pending or, to the REIT's knowledge, threatened
against the REIT which challenges or impairs the REIT's ability to execute,
deliver and perform under this Agreement.
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(b) REIT Securities Representations and Warranties.
(i) Reserved Shares. From the authorized capital
stock of the REIT, a sufficient number of shares of REIT Stock shall have been
reserved by the REIT at Closing for issuance to Transferor Partners in the
Exchange Offer and to Transferor upon exchange of the LP Units therefor in
accordance with Articles One and Two of this Agreement.
(ii) REIT Common Stock. The REIT Stock to be issued
in accordance with this Agreement will be duly authorized, validly issued, fully
paid and nonassessable and will not be subject to any preemptive or similar
right and, subject to compliance with the Securities Act and the Exchange Act,
will be eligible for listing on the American Stock Exchange. On or prior to the
Closing Date, the REIT shall have caused the effectiveness of the Registration
Statement under the Securities Act and under any applicable state securities
laws covering the resale of the shares of REIT Stock to be issued in accordance
with the Exchange Offer; provided, however, in the event that this Agreement is
terminated by the REIT pursuant to Section 10.3(d) or Section 10.3(f) herein,
the REIT shall be entitled to the prompt reimbursement for all out-of-pocket
costs (including, without limitation, attorneys' fees, filing fees, and
disbursements) incurred by the REIT in connection with its preparation and
filing of the Registration Statement and any amendments and supplements thereto.
(iii) Registration Statement and Prospectus. When the
Registration Statement becomes effective, (i) the Registration Statement and the
prospectus included therein (the "Prospectus"), and any amendments and
supplements thereto, will contain all statements and information that are
required to be included therein in accordance with the Securities Act and the
applicable rules and regulations of the Securities and Exchange Commission (the
"Rules and Regulations") and will comply in all material respects with the
requirements of the Securities Act and the Rules and Regulations; and (ii)
neither the Registration Statement nor the Prospectus, nor any amendment to
supplement thereto, will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the REIT makes no
representations and warranties as to information contained in or omitted from
the Registration Statement or Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with information furnished to the
REIT by Transferor, Lincor or 3636 Colorado specifically for use in preparation
thereof.
(c) Brokers' Fees. No real estate broker, salesperson or
finder has been engaged by the REIT in connection with the transactions
contemplated hereby that may result in claims for commissions or fees in
connection therewith.
The term "to the REIT's knowledge" as used in this Section 4.4
shall mean that the officers and directors of the REIT have no actual conscious
knowledge of facts inconsistent with the matters stated. In connection with the
foregoing representations, the REIT has made no specific examination of files or
records, nor has the REIT made inquiry of any employee of
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the REIT, its advisor, or any management company of the REIT. No constructive
knowledge of any matter shall be imputed to the REIT as to matters not within
the actual conscious knowledge of the above-named persons. A breach of a
representation set forth in this Section 4 by the REIT shall constitute a
failure of the condition set forth in Section 7.2(a).
4.5 Heritage LP's Representations and Warranties. As a material
inducement to the Smith Summit Parties to execute this Agreement and consummate
the transactions contemplated hereunder, Heritage LP represents and warrants to
the Smith Summit Parties that as of the date hereof and as of the Closing Date:
(a) Partnership Organization and Authority. Heritage LP has
been duly organized under the Delaware Revised Uniform Limited Partnership Act,
is validly existing as a Delaware limited partnership, and is in good standing
in the State of Delaware. The Subsidiary Partnership will be duly organized,
validly existing, and in good standing in the state of its organization at the
Closing. Heritage LP is and, at the Closing the Subsidiary Partnership will be,
qualified to do business and in good standing under the laws of each
jurisdiction in which the Property owned or to be owned by Heritage LP or the
Subsidiary Partnership or the business conducted or to be conducted by Heritage
LP or the Subsidiary Partnership requires such qualification. The REIT and
Heritage SGP are the sole general partners of Heritage LP and Heritage SGP will
be the sole general partner of the Subsidiary Partnership. Heritage LP will be
the sole limited partner of the Subsidiary Partnership. Heritage LP has the full
right and authority and has obtained any and all consents required therefor to
enter into this Agreement and to consummate or cause to be consummated the
transactions contemplated herein. The persons signing this Agreement on behalf
of Heritage LP at the Closing have been authorized to do so. This Agreement and
all of the documents to be delivered by Heritage LP at the Closing have been or
will be authorized and properly executed and do or will constitute the valid and
binding obligations of Heritage LP, enforceable against Heritage LP in
accordance with their terms.
(b) Conflicts. The execution of and performance of this
Agreement does not and will not conflict with the Partnership Agreement or the
Certificate of Limited Partnership of Heritage LP. There is no agreement to
which Heritage LP is a party or, to Heritage LP's knowledge, binding on Heritage
LP which will be breached by or is in conflict with its execution of or
performance under this Agreement.
(c) Pending Actions. There is no action or proceeding pending
or, to Heritage LP's knowledge, threatened against Heritage LP or any of
Heritage LP's properties, which would, if adversely determined, have a material
adverse effect on the financial condition or results of operations of Heritage
LP. There is no action or proceeding pending or, to Heritage LP's knowledge,
threatened against Heritage LP which challenge or impair Heritage LP's ability
to execute, deliver and perform under this Agreement.
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The term "to Heritage LP's knowledge" as used in this Section
4.5 shall mean that the general partners of Heritage LP have no actual conscious
knowledge of facts inconsistent with the matters stated. In connection with the
foregoing representations, Heritage LP has made no specific examination of files
or records, nor has Heritage LP made inquiry of any other employee of Heritage
LP, its advisor, or any management company of Heritage LP. No constructive
knowledge of any matter shall be imputed to Heritage LP as to matters not within
the actual conscious knowledge of the general partners of Heritage LP. A breach
of a representation set forth in this Section 4 by Heritage LP shall constitute
a failure of the condition set forth in Section 7.2(a).
4.6 Disclaimer of Warranty. Except as expressly set forth in this
Agreement, the contribution of the Property to Heritage LP is made on an "AS IS"
basis. The REIT Parties acknowledge that, except as expressly provided in this
Agreement, neither Transferor nor any of its agents have made any
representations, warranties, promises, covenants or guaranties of any kind or
character whatsoever, express or implied, oral or written, with respect to the
Property or the suitability or fitness of the Property for any particular use or
purpose.
ARTICLE 5
CONTINUATION AND SURVIVAL
OF REPRESENTATIONS AND WARRANTIES
---------------------------------
Each of the representations and warranties contained in this
Agreement shall be true and correct on and as of the Closing Date and at all
times between the execution of this Agreement and the Closing Date with the same
force and effect as if made at each of such times, except to the extent, if any,
that such representations and warranties shall be affected by transactions
contemplated by this Agreement. Except for the representations and warranties
set forth in Section 4.4(b) hereof, all such representations and warranties
shall survive the consummation of the transactions contemplated by this
Agreement for a period of six months following the Closing Date irrespective of
any investigations or inquiries made by any party or any knowledge which any
party may now possess or which may hereafter come to any party's attention, and
each party shall be entitled to rely upon such representations and warranties
irrespective of any investigations, inquiries or knowledge. The representations
and warranties set forth in Section 4.4(b) hereof shall survive the consummation
of the transactions contemplated by this Agreement for a period of two years
following the Closing Date irrespective of any investigations or inquiries made
by any party or any knowledge which any party may now possess or which may
hereafter come to any party's attention, and each party shall be entitled to
rely upon such representations and warranties irrespective of any
investigations, inquiries or knowledge. The provisions of this Article 5 shall
not operate to limit or effect the terms and provisions of the Exchange Offer
Registration Agreement or the Asset Transfer Registration Agreement.
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ARTICLE 6
COVENANTS
---------
6.1 Covenants of Smith Summit Parties. The Smith Summit Parties agree
that, unless the REIT otherwise agrees in writing, at all times prior to the
Closing Date:
(a) Preservation of Business. The Smith Summit Parties shall
use their best efforts to (i) preserve intact the present business organization
of Transferor; (ii) preserve the present goodwill and advantageous relationships
of Transferor with all persons having business dealings with Transferor; and
(iii) preserve and maintain in force all licenses, registrations, franchises,
patents, trademarks, copyrights, bonds and other similar rights of Transferor.
The Smith Summit Parties and its subsidiaries shall maintain in force all
property, casualty, crime, directors, and officers and other forms of insurance
which they are presently carrying.
(b) Ordinary Course. The Smith Summit Parties shall operate
the Transferor's business only in the usual, regular and ordinary course and
manner.
(c) Actions With Respect to the Property Prior to Closing.
(i) Transferor agrees that prior to the Closing it
shall continue to operate and manage the Real Property in the ordinary course of
business in accordance with past practice (which includes the maintenance and
management of the Property) and shall perform regular maintenance, maintain
existing insurance coverage, perform its obligations under all leases with
tenants, Service Contracts and Loan Documents applicable to the Real Property,
commit no waste to the Property and pay and discharge, in the ordinary course of
business, liabilities and obligations relating to the Real Property. Transferor
shall not, without the prior consent of the REIT, which consent shall not be
unreasonably withheld or delayed, incur, create or assume any new indebtedness,
other than accounts payable, taxes and similar amounts incurred in the ordinary
course of business, nor grant any new lien, mortgage, security interest or
pledge of any kind on the Real Property prior to the Closing.
(ii) Transferor agrees that prior to the Closing it
shall consult with the REIT prior to terminating any Lease or Service Contract
(except in the ordinary course of business) or entering into or modifying any
contract or agreements relating to the Real Property which would be binding on
Heritage LP or the REIT after the Closing. The REIT shall have the right to
approve, such approval not to be unreasonably withheld or delayed, any material
new contracts or contract modifications which are proposed by Transferor.
(iii) Transferor may enter into new Leases and modify
existing Leases relating to the Real Property without the REIT's consent so long
as such leases comply with the leasing standards existing on the date hereof
with respect to the applicable property with such exceptions as are typically
made in the ordinary course of business and are on Transferor's standard form,
subject to customary modifications thereto.
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(iv) Transferor shall notify the REIT of any matters
that may arise prior to the Closing that could have a material adverse effect on
the Property and become known to the Transferor, such as pending or threatened
litigation, notices of violations from governmental or quasi-governmental
authorities or agencies, tenant defaults, bankruptcies or insolvencies and
asserted landlord defaults.
(v) Except with the prior written consent of the REIT
(which consent shall not to be unreasonably withheld or delayed), Transferor
shall not accept rents or occupancy payments from any tenant at the Real
Property for more than one month in advance except in the ordinary course of
business.
(d) Books and Records. Transferor shall maintain its books,
accounts and records in the usual, regular and ordinary manner, and on a basis
consistent with prior years, and shall comply with all laws applicable to it or
to the conduct of its business.
(e) Consents and Approvals. The Smith Summit Parties shall
obtain all necessary consents and approvals of other persons and governmental
authorities to the performance by the Smith Summit Parties of the transactions
contemplated by this Agreement. The Smith Summit Parties shall make or cause to
be made all filings, applications, statements and reports to all federal and
state government agencies or entities that are required to be made prior to the
Closing Date by or on behalf of the Smith Summit Parties pursuant to any
statute, rule or regulation in connection with the transactions contemplated by
this Agreement.
(f) Access to Property. During the Due Diligence Period, and
at all times prior to the Closing Date, Transferor, Lincor and 3636 Colorado
shall provide the REIT and Heritage LP as well as their respective employees,
contractors, consultants, agents and representatives, with complete access to
all files, books, records and other materials in the possession or control of
Transferor, Lincor or 3636 Colorado and relating to the Property and the right
to examine, inspect and make copies of such materials as they may deem
appropriate. Transferor shall also provide for such parties to have reasonable
access to the Real Property (including the Improvements thereon) for the purpose
of conducting surveys, architectural, drainage, soils, mechanical systems,
engineering, geotechnical and environmental inspections and tests (including
sampling and invasive testing for the presence of Hazardous Materials performed
in connection with Phase I and Phase II environmental audits), feasibility
studies and any other inspections, studies or tests reasonably required by them.
The REIT shall also have the right to conduct a "walk-through" of the Property
prior to the Closing Date upon appropriate notice, subject to the rights of all
tenants under their Leases.
(g) Information Regarding the Property. It is the intention of
the parties that Transferor, Lincor and 3636 Colorado will disclose to the REIT
and the other parties performing the due diligence review herein provided for
any and all information in the possession or control of such parties, their
property managers, and any other affiliated entity to the extent it relates to
the Property. In the course of its investigations, the REIT may make
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inquiries to third parties including, without limitation, tenants, the Lender,
contractors, property managers, parties to other contracts and municipal, local
and other government officials and representatives, and the Transferor consents
to such inquiries. Transferor, Lincor and 3636 Colorado shall also make
available to the REIT all the books and records, financial statements, income
tax returns, contracts, employee records and other information with respect to
Transferor as may be reasonably required by the REIT in order to perform its due
diligence review of Transferor.
(h) Truth of Representations and Warranties. None of the Smith
Summit Parties shall take or suffer or permit any action that would render
untrue any of the representations or warranties of the Smith Summit Parties in
any material respect herein contained, nor shall the Smith Summit Parties omit
to take any action, the omission of which would render untrue any such
representation or warranty in any material respect.
6.2 Further Covenants of the Smith Summit Parties. The Smith Summit
Parties agree that, unless the REIT otherwise agrees in writing, on or prior to
the Commitment Date Transferor shall deliver to the REIT:
(a) Identification of LP Unit Recipients. An updated list
substantially in the form of Schedule VIII attached hereto designating (i) the
names of the partners of Transferor that shall receive LP Units and (ii) the
number of LP Units to be received by each such partner of Transferor.
(b) Representation Letters. Representation Letters
substantially in the form of Exhibit H attached hereto duly executed by each
partner of Transferor designated by Transferor in Schedule VIII attached hereto
and updated pursuant to Section 6.2(a) hereof.
6.3 Covenants of the REIT Parties. The REIT Parties agree that unless
Lincor otherwise agrees in writing, at all times prior to the Closing Date:
(a) Preservation of Business. The REIT Parties shall use their
best efforts to (i) preserve intact the present business organization of the
REIT Parties; (ii) preserve the present goodwill and advantageous relationships
of the REIT Parties with all persons having business dealings with the REIT
Parties; and (iii) preserve and maintain in force all licenses, registrations,
franchises, patents, trademarks, copyrights, bonds and other similar rights of
the REIT Parties. The REIT Parties and their subsidiaries shall maintain in
force all property, casualty, crime, directors and officers and other forms of
insurance which they are presently carrying.
(b) Ordinary Course. The REIT Parties shall operate their
business only in the usual, regular and ordinary course and manner.
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(c) Books and Records. The REIT Parties shall maintain their
books, accounts and records in the usual, regular and ordinary manner, and on a
basis consistent with prior years, and shall comply with all laws applicable to
them or to the conduct of their business.
(d) No Organic Change. The REIT Parties shall not (i) amend
their Articles of Incorporation or bylaws other than the amendment to the REIT's
Articles of Incorporation set forth in the REIT's proxy statement relating to
the REIT's annual meeting of stockholders to be held on August 20, 1997; (ii)
make any change in their capital stock by reclassification, subdivision,
reorganization or otherwise; or (iii) change the character of their business.
(e) Consents and Approvals. The REIT Parties shall use their
best efforts to obtain all necessary consents and approvals of other persons and
governmental authorities to the performance by them of the transactions
contemplated by this Agreement. The REIT Parties shall make or cause to be made
all filings, applications, statements and reports to all federal and state
government agencies or entities that are required to be made prior to the
Closing Date by or on behalf of the REIT Parties pursuant to any statute, rule
or regulation in connection with the transactions contemplated by this
Agreement.
(f) Truth of Representations and Warranties. The REIT Parties
shall not take or suffer or permit any action that would render untrue in any
material respect any of the representations or warranties of the REIT Parties
herein contained, nor shall the REIT Parties omit to take any action, the
omission of which would render untrue any such representation or warranty in any
material respect.
(g) Indemnity. Prior to the Closing, the REIT shall not place
any liens on the Property and will indemnify, defend and hold Transferor
harmless from all claims and liabilities (including reasonable attorneys' fees
and expenses actually incurred) asserted against Transferor or its owners as a
result of any entry by or on behalf of the REIT onto the Property. If any
inspection or test disturbs the Property, the REIT will cause the damaged
property to be restored to the same condition as existed prior to any such
inspections or tests.
6.4 Mutual Consent to Use Best Efforts. Subject to the terms and
conditions of this Agreement, and subject to fiduciary duties under applicable
law, as advised by counsel, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
using its best efforts to make all necessary, proper or advisable registrations
and filings and obtain all necessary, proper or advisable permits, consents,
authorizations, requests and approvals of third parties and governmental
authorities. It at any time after the Closing Date, any further action is
necessary or desirable to carry out the purposes of this Agreement (including
providing any information in any way related to the assets to be purchased
pursuant to this Agreement), the proper partners, officers and directors of each
party to this Agreement shall take all such action.
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ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to REIT Parties Obligation to Close. Notwithstanding
anything to the contrary herein, the REIT Parties obligations at the Closing to
consummate the transactions contemplated hereunder (including the REIT's
obligations to accept for payment or pay for any Transferor Partnership
Interests tendered by a Transferor Partner and Heritage LP's obligations to
consummate the Asset Transfer) shall be contingent on the satisfaction of the
following conditions at the Closing (or the waiver thereof by each of the REIT
Parties in their sole and absolute discretion):
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Smith Summit Parties contained herein
shall be true and correct in all material respects at Closing as if made as of
the Closing Date (however, if a particular representation or warranty shall be
made only to Transferor's knowledge or 3636 Colorado's knowledge, then the
condition under this Section 7.1(a) shall not be deemed to be fulfilled with
respect to such items unless the same would be fulfilled if such limitation did
not exist; provided, however, in the event that Transferor receives notice of a
condition within 15 days of the Expiration Date that would render a particular
representation or warranty untrue or incorrect, such Transferor shall be
entitled 15 calendar days from such notice to cure such condition and, if
necessary, the Expiration Date shall be extended accordingly).
(b) Absence of Action or Proceeding. No action or proceeding
by any governmental agency shall have been instituted or threatened that would
enjoin, restrain or prohibit, or that could reasonably be expected to result in
substantial damages in respect of the Property that in the reasonable judgment
of the REIT Parties make it inadvisable to consummate such transaction, and no
court order shall have been issued in any action or proceeding instituted by any
person that enjoins, restrains or prohibits the consummation of the transactions
contemplated by this Agreement with respect to Transferor and no proceeding for
such an order shall have been instituted that in the reasonable judgment of the
REIT or Heritage LP is likely to result in the issuance of such an order.
(c) Transferor's Deliveries. Transferor shall have delivered,
or caused to be delivered, each of the items specified in Section 8.3 and
Section 8.6 hereof that Transferor is required to deliver and Transferor shall
have performed in all material respects each of the other obligations required
to be performed by it under this Agreement.
(d) Compliance with Agreements and Covenants. Each of the
Smith Summit Parties shall have performed and complied with each of their
agreements, covenants, and obligations to be performed on or prior to the
Closing Date except those calling for performance after the Closing Date.
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(e) Delivery of Letters of Transmittal and Custody Agreements.
The Custodian shall have delivered, or caused to be delivered to the REIT, a
properly completed and executed Letter of Transmittal and Custody Agreement for
each Transferor Partner participating in the Exchange Offer.
(f) Performance or Waiver of Due Diligence. Prior to 15 days
after receipt of each of the Title Report, the Survey, the UCC Searches, the
Loan Documents or other information to be provided or made available by
Transferor (the "Due Diligence Period"), the REIT shall have performed or waived
its due diligence review and examination of such Title Report, Survey, UCC
Searches, Loan Documents and all information to be provided or made available by
Transferor and shall have determined in its sole and absolute discretion, to
proceed with the transactions contemplated under this Agreement. It is agreed
that as of the date hereof, the REIT has accepted the physical condition of the
Property as it exists on the date hereof in all respects; therefore, the REIT
Parties shall not be entitled to terminate this Agreement due to the physical
condition of the Property. Except to the extent covered by a representation or
warranty made in this Agreement, a failure of the REIT to timely terminate this
Agreement within the Due Diligence Period shall be a deemed acceptance by the
REIT of all aspects of the condition of the Property, the Title Report, and the
Survey by the REIT.
(g) Approval of Title Report, Survey or UCC Searches. The REIT
shall have approved, in its sole discretion, all matters disclosed by the Title
Report, Survey or UCC Searches. If any person subsequently issues any amendment
to the Title Report, Survey or UCC Searches disclosing any additional matters or
changes in the legal description or additional requirements of the REIT, the
REIT shall have approved any such matter not disclosed by the Title Report,
Survey or UCC Searches or any previous amendment thereto. On or before fifteen
(15) days after the Title Company has delivered to the REIT the Title Report,
Survey or UCC Searches (or any amendments thereto) the REIT shall give written
notice of such approval or objection to Transferor and the Title Company
specifying in reasonable detail any matter to which the REIT objects. If the
REIT delivers any notice of objection to any matter, within five (5) days after
receipt of such objection, Transferor shall notify in writing the REIT and the
Title Company whether Transferor is unable or unwilling to remove or satisfy
such matter objected to by the REIT on or before Closing. If the REIT fails to
notify Transferor and the Title Company at least twenty (20) days prior to the
Closing Date of any objections to the Title Report, Survey or UCC Searches or
any amendment or modification thereto, then the REIT shall be deemed to not
object to any matter in the Title Report, Survey or UCC Searches or any
modification thereto.
(h) Title Company Deliveries. At the Closing, as a condition
to the REIT Parties obligation to close, the Title Company shall deliver to the
REIT (i) an Owner's Policy of Title Insurance (the "Title Policy") issued by the
Title Company, covering the Property in the form prescribed by the State Board
of Insurance for use in Texas, the Title Policy to be dated the date of the
recording of the applicable deed covering the Real Property covered thereby and
to be in the amount of the Deemed Value of the respective Real Property covered
thereby (which
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allocation shall be provided by Transferor), insuring Heritage LP as owner of
good and indefeasible title to the Survey legal description of the Real Property
covered thereby and subject only to the Permitted Exceptions that are applicable
to such Real Property and such exceptions as are required by applicable Texas
law to be included in Schedule B to each such policy of title insurance; and
(ii) updated UCC searches from the State of Texas disclosing no security
interests or liens affecting the Property other than those to be released at the
Closing and other than those created pursuant to the Transferred Debt.
Transferor shall comply with all requirements to the issuance of the Title
Policy to be delivered at Closing and shall execute at Closing such affidavits
and indemnities as may be appropriate under applicable facts and as reasonably
required by the Title Company in order for it to issue such above-referenced
Title Policy.
(i) Mortgage Debt. The Lender shall have consented to the
transfer of the Property subject to the Transferred Debt as contemplated by
Section 2.3, or Heritage LP shall have agreed to refinance or pay off such
Mortgage Debt.
(j) Termination of Network Agreement. The security monitoring
agreement by and between Network and Smith Summit GP shall have been terminated
in accordance with Section 4.1(b)(i).
(k) Receipt of Opinion of Counsel. The REIT and Heritage LP
shall have received a favorable opinion of Kim Lawrence, Esq., counsel for
Transferor, in form and substance satisfactory to the REIT's and Heritage LP's
counsel, dated the Closing Date, and confirming the matters set forth on Exhibit
F attached hereto, subject to customary qualifications.
(l) Governmental and Agency Approvals. The REIT or Heritage LP
shall have received all governmental and agency approvals for (i) the issuance
of REIT Stock, LP Units and GP Units in connection with the transactions hereby
contemplated, (ii) the listing of the REIT Stock issued in connection with the
Exchange Offer hereby contemplated on the American Stock Exchange, and (iii) the
registration for resale of REIT Stock issued in connection with the Exchange
Offer.
(m) Updating of Rent Roll. The Rent Roll shall have been
updated to the Closing in the form of Schedule IX attached hereto.
(n) Acquisition of Merit Place. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Gentry Place Agreement shall be consummated.
(o) Acquisition of Park On Preston. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Merit Preston Park Agreement shall be consummated.
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7.2 Conditions to Transferor's Obligations to Close. Notwithstanding
anything to the contrary herein, Transferor's obligations at the Closing to
consummate the transactions contemplated hereunder shall be contingent on the
satisfaction of each of the following conditions at the Closing (or the waiver
thereof by Transferor in its sole and absolute discretion):
(a) Accuracy of Representations and Warranties. The REIT's and
Heritage LP's representations and warranties contained herein shall be true and
correct in all material respects at Closing as if made as of the Closing Date.
(b) REIT's Deliveries. The REIT shall have delivered, or
caused to be delivered, each of the items specified in Section 8.5 and Section
8.7 hereof and shall have performed each of the other obligations required to be
performed hereunder.
(c) Heritage LP's Deliveries. Heritage LP shall have
delivered, or caused to be delivered, each of the items specified in Section 8.8
hereof and shall have performed each of the other obligations required to be
performed hereunder.
(d) Absence of Action or Proceeding. No action or proceeding
by any governmental agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in respect
of this Agreement or the consummation of the transactions contemplated by this
Agreement, and would in the reasonable judgment of the REIT Parties make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any other party which enjoins,
restrains or prohibits this Agreement or consummation of the transactions
contemplated by this Agreement.
(e) Receipt of Opinion of Counsel. Transferor shall have
received a favorable opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, P.A. ("O'Connor Cavanagh"), counsel for REIT, in form and substance
satisfactory to Transferor's counsel, dated the Closing Date, and confirming the
matters set forth on Exhibit E attached hereto, subject to customary
qualifications.
(f) Acquisition of Merit Place. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Gentry Place Agreement shall be consummated.
(g) Acquisition of Park On Preston. Simultaneously with the
consummation of the transactions hereby contemplated, the transactions
contemplated by the Merit Preston Park Agreement shall be consummated.
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ARTICLE 8
CLOSING
-------
8.1 Closing Date. The consummation of the transactions contemplated
hereby with respect to the Property, Transferor, Transferor Partners
participating in the Exchange Offer, and the REIT Parties (the "Closing") shall
occur at the offices of the Title Company in Dallas, Texas or such other place
to which the parties may agree on a date (the "Closing Date") that shall be
selected by the REIT, but in no event shall be earlier than August 15, 1997 or
later than September 12, 1997, unless extended by (i) the mutual consent of the
REIT and Lincor or (ii) Lincor pursuant to Section 7.1(a) (the "Expiration
Date"). A pre-closing conference shall commence at least three (3) business days
prior to the Closing Date, during which all deliveries (other than the REIT
Capital Contribution) shall be made into an escrow between the parties. All
deliveries made during this pre-closing period shall be deemed deliveries made
at the Closing.
8.2 Sequence of Closings. Deliveries of all documents to effect each of
the transactions contemplated by this Agreement shall be deemed to be made
simultaneously and in escrow. The Closing of each of the transactions
contemplated by this Agreement shall be contingent on the satisfaction of
conditions for each other transaction contemplated by this Agreement. The
transactions shall be deemed to occur in the following order:
first, the Exchange Offer shall be deemed to close and the
REIT shall be substituted as a limited partner of Transferor if partnership
interests in Transferor are tendered in the Exchange Offer; and
second, the Asset Transfer shall be deemed to close, and the
Property shall be contributed to Heritage LP in exchange for the Asset Transfer
Cash Payment and the LP Units.
8.3 Transferor Partners' Deliveries to Close the Exchange Offer. At the
Closing, each Transferor Partner who has tendered a Transferor Partner Interest
pursuant to the Exchange Offer shall cause the Custodian to deliver to the REIT
the following pursuant to the Custody Agreement:
(a) Letters of Transmittal. A Letter of Transmittal, completed
and duly executed by such Transferor Partner, in the form of Exhibit A hereto.
(b) Transferor Partner Interests. All right, title and
interest in and to the Transferor Partner Interests owned by Transferor Partner.
(c) Other Documents. Any other documents called for by the
Letter of Transmittal.
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(d) Exchange Offer Registration Agreement. The Exchange Offer
Registration Agreement duly executed by the Custodian on behalf of each
Transferor Partner who has tendered a Transferor Partner Interest in the
Exchange Offer.
8.4 Custodian's Deliveries to Close the Exchange Offer. At the Closing,
the Custodian shall deliver to the REIT a copy of the Custody Agreement, which
was executed by the Custodian and each Transferor Partner who tendered
Transferor Partner Interests in the Exchange Offer and which were accepted for
purchase by the REIT.
8.5 REIT's Deliveries to Close the Exchange Offer. At the Closing, the
REIT shall deliver to each Transferor Partner who tendered Transferor Partner
Interests in the Exchange Offer by delivery to the Custodian pursuant to the
Custody Agreement, the following:
(a) REIT Stock. A certificate representing the number of
validly issued, fully paid, and non-assessable shares of REIT Stock each in the
amounts calculated pursuant to Section 1.1 hereof attributable to all Transferor
Partner Interests tendered by such Transferor Partner, with such certificate
registered in the name of each respective Transferor Partner.
(b) Officer's Certificate. A certificate signed by a duly
authorized officer of the REIT stating that the REIT's representations and
warranties contained herein are true and correct on and as of the Closing Date
with the same force and effect as if made on the Closing Date and that all
covenants and agreements required to be performed by the REIT under this
Agreement prior to the Closing have been performed in accordance with the terms
of this Agreement.
(c) Opinion. A copy of the opinion of counsel addressed to the
Custodian on behalf of such Transferor Partner as to the matters set forth in
Exhibit E attached hereto, subject to customary qualifications.
(d) Prospectus. A sufficient number of copies of the
prospectus in conformity with the requirements of the Securities Act, to
facilitate the disposition of shares of REIT Stock acquired by Transferor
Partners in the Exchange Offer.
(e) Exchange Offer Registration Agreement. The Exchange Offer
Registration Agreement duly executed by the REIT.
(f) Evidence of Registration. Sufficient evidence that the
Registration Statement has been declared effective by the Securities and
Exchange Commission on or prior to the Closing Date.
8.6 Transferor's Deliveries to Close the Asset Transfer. At the
Closing, Transferor shall deliver or cause to be delivered to Heritage LP the
following:
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(a) Partnership Agreement. The Partnership Agreement duly
executed by Transferor or any partner of Transferor that will receive LP Units
in the Asset Transfer.
(b) Deed. Special Warranty Deed for the Real Property,
executed and acknowledged by Transferor, conveying to Heritage LP indefeasible,
fee simple title to the Real Property with appropriate provisions reflecting
that the conveyance made by Special Warranty Deed is made and accepted subject
to the Permitted Exceptions applicable to the Real Property and any title
exceptions insured over by the Title Company, in such form and containing such
terms and provisions as shall be satisfactory to and approved by the parties to
the Special Warranty Deed.
(c) Assignment of Leases. An Assignment and Assumption of
Leases, executed and acknowledged by Transferor and Heritage LP, vesting in
Heritage LP all right, title and interest of the landlord under the Leases,
containing a warranty by Transferor that the right, title and interest assigned
by it is free and clear of liens and charges and is not subject to any other
assignment, transfer or hypothecation, other than those existing pursuant to the
Transferred Debt, if applicable, and containing an assumption by Heritage LP of
all obligations of Transferor, as lessor, under the Leases arising after
Closing.
(d) Bill of Sale. Bill of sale, executed and acknowledged by
Transferor, transferring and assigning to Heritage LP all of the Tangible
Personal Property and containing a limited or special warranty of title and a
warranty by Transferor that such property conveyed by it is free and clear of
liens and charges and is not subject to any other assignment, transfer or
hypothecation, other than those existing pursuant to the Transferred Debt, if
applicable, in such form and containing such terms and provisions as shall be
satisfactory to and approved by the parties to such Bill of Sale.
(e) Assignment of Intangible Personal Property. Assignment of
Intangible Personal Property, executed and acknowledged by Transferor,
transferring and assigning, without recourse, warranty or representation except
as otherwise expressly provided herein, to Heritage LP Transferor's right, title
and interest in and to all of the Intangible Personal Property and containing a
warranty by Transferor that such right, title and interest is free and clear of
liens or charges and is not subject to any other assignment, transfer or
hypothecation, other than those existing pursuant to the Transferred Debt, if
applicable.
(f) FIRPTA. A Foreign Investment in Real Property Tax Act
affidavit executed by each Transferor.
(g) Tenant Notification. Notification letters to be delivered
to all tenants at the Real Property, executed by Transferor, providing notice
that the interest of Transferor in Lease has been assigned to Heritage LP, and
providing notice of the address for the future payment of rents and other
charges and fees.
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(h) Updated Rent Roll, Schedule of Service Contracts, Schedule
of Tenant Improvement Agreements and Operating Statements. For the Real
Property, an updated Rent Roll, Schedule of Service Contracts and Operating
Statement, certified by Transferor as true, accurate and complete as of the
Closing Date.
(i) Title Policies and UCC Searches. The Title Policy
delivered within a reasonable time after the Closing if that is the custom for
the locality, provided that the Title Company at the Closing issues a duly
executed "marked-up" Title Commitment, or otherwise irrevocably commits to issue
a title policy in accordance with Heritage LP's instructions, effective the time
and date of the recording of the deed of the Real Property into Heritage LP and
irrevocably commits in writing to the Title Policy in the form of the respective
"marked-up" Title Commitment within no more than sixty (60) days after the
Closing Date, together with updated UCC Searches.
(j) Certificate. A certificate signed by the general partners
of Transferor on behalf of Transferor, and on behalf of themselves, stating that
Transferor's and each of the general partners' representations and warranties
contained herein are true and correct in all material respects on and as of the
Closing Date with the same force and effect as if made on the Closing Date.
(k) Authority. Evidence of organization, existence and
authority of Transferor and the authority of the person executing documents on
behalf of Transferor reasonably satisfactory to the REIT.
(l) Opinion. An opinion of counsel of Transferor in the form
attached hereto as Exhibit F and subject to such customary qualifications as may
be reasonably acceptable to the REIT.
(m) Tax Reporting Documents. Any and all document stamps,
transfer taxes, affidavits of property value, and other documents required by
states in connection with the transfer of real property.
(n) Asset Transfer Registration Agreement. The Asset Transfer
Registration Agreement duly executed by Transferor.
(o) State Law Disclosures. Such disclosures and reports,
including any applicable certificate of residence or exemption with respect to
withholding requirements required by applicable state and local law in
connection with the conveyance of real property.
(p) Loan Documents. All instruments and agreements required by
the Lender in connection with the transfer of the Transferred Debt to Heritage
LP; including (i) the consents and estoppels of the Lender ("Lender Consents")
to the transfer of the Property subject to the Transferred Debt, on such terms
as are acceptable to the REIT, without change in any of the
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material terms of the Loan Documents governing the Transferred Debt, including,
without limitation, amortization, interest rate and maturity date provisions.
(q) Contracts Not Terminable. A certificate duly executed by
the general partner of Transferor setting forth those contracts relating to
services provided under Section 4.1(b)(i) that are not terminable upon 30 days
written notice without penalty.
(r) Certificates of Non-Foreign Status. A Certificate of
Non-Foreign Status duly executed by Transferor and each Transferor Partner
designated by Transferor to receive LP Units in the Asset Transfer.
(s) Form W-9. A Form W-9 setting forth Transferor's tax
identification number duly executed by Transferor and a Form W-9 duly executed
by each Transferor Partner designated by Transferor to receive LP Units in the
Asset Transfer.
(t) Additional Documents. Any additional documents that the
Lender or the Title Company may reasonably require for the proper consummation
of the transactions contemplated by this Agreement.
8.7 REIT's Deliveries to Close the Asset Transfer. At the Closing, the
REIT and Heritage SGP shall deliver to Heritage LP, or cause to be delivered,
the following:
(a) Partnership Agreement. The Partnership Agreement, executed
by the REIT and Heritage SGP, together with all filings with any governmental
authority or agency required to be made by or on behalf of Heritage LP.
(b) REIT Capital Contribution. Payment of the REIT Capital
Contribution by the REIT and Heritage SGP to Heritage LP in immediately
available funds.
(c) Officers' Certificate. A certificate of the Chairman and
Chief Financial Officer of the REIT stating that the REIT's representations and
warranties contained herein are true and correct in all material respects on and
as of the Closing Date with the same force and effect as if made on the Closing
Date.
(d) Authority. Evidence of organization, existence and
authority of the REIT and the authority of any person executing documents on
behalf of the REIT.
(e) Additional Documents. Any additional documents that the
Lender or the Title Company may reasonably require for the proper consummation
of the transactions contemplated by this Agreement.
(f) Asset Transfer Registration Agreement. The Asset Transfer
Registration Agreement duly executed by the REIT.
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8.8 Heritage LP's Delivery to Close the Asset Transfer. At the Closing,
Heritage LP shall deliver, or cause to be delivered, to each Transferor, the
following:
(a) Cash and LP Units. That number of LP Units and amount of
cash as calculated in accordance with Section 2.2(b).
(b) Conveyance Documents. All acceptances and assumptions set
forth in the conveyance and assignment documents for the Property, executed and
acknowledged by Heritage LP.
(c) Loan Documents. All instruments and agreements reasonably
required by the Lender in connection with the transfer of the Transferred Debt
to Heritage LP, executed by Heritage LP, if required; and the disbursements by
Heritage LP of the REIT Capital Contribution to the Lender on behalf of Heritage
LP in accordance with Section 2.3 hereof in order to repay in full such portion
of the Mortgage Debt that is not Transferred Debt.
(d) Opinion. An opinion of counsel of O'Connor Cavanagh as to
the matters set forth in Exhibit E attached hereto and subject to such customary
qualifications as may be reasonably acceptable to the general partner of
Transferor.
(e) State Law Disclosures. Such disclosures and reports
required by applicable state and local law in connection with the conveyance of
real property.
(f) General Partner's Certificate. A certificate of an
authorized officer of the REIT, as general partner of Heritage LP, stating that
the representations and warranties of Heritage LP set forth herein are true and
correct in all material respects as of the Closing Date with the same force and
effect as if made at the Closing Date.
8.9 Property Closing Costs. All transfer fees or stamp taxes and
recording fees required to be paid to record the deeds and any loan assignment
documents with respect to the Property together with any commissions set forth
in Schedule IV shall be paid by Transferor. The costs of the Title Report, the
Survey and the UCC Searches and the costs of recording any documents required to
satisfy or release Title Objections shall be paid one-half by the REIT on behalf
of Heritage LP and one-half by the Transferor subject to the Title Report,
Survey, or UCC search. The premiums for the standard Title Policy shall be paid
one hundred percent (100%) by Transferor immediately prior to the Closing. The
cost of any additional endorsement or upgrades to the Title Policy shall be paid
one hundred percent (100%) by the REIT. Notwithstanding the foregoing, in
connection with the transfer of the Property and Smith Summit and Park On
Preston (collectively, the "Other Properties"), Transferor's obligation to pay
the premiums for the Title Policy shall be limited to the amount of premiums
that would be payable if the Property and the Other Properties were insured
together in a single title policy, and Heritage LP shall pay the premiums in
excess of such amount; provided, however, if the Lender or the lenders of the
mortgage debt to which the Other Properties are subject require separate
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title policies for the Property and each of the Other Properties, Transferor
shall have the obligation to pay the full amount of the premiums for such
separate title policy for the Property. In no event shall the Transferor be
liable for the payment of the title premium associated with amending the survey
for the Property. Any prepayment fees or premiums or assumption fees or costs in
connection with the assumption or repayment of any Mortgage Debt by Heritage LP
shall be paid by the REIT. All costs and expenses described in this Section 8.9
are herein called the "Property Closing Costs." The parties acknowledge that
certain Property Closing Costs may not be paid at Closing but will be paid in
ordinary course following the Closing.
8.10 Prorations. The items in this Section 8.10 with respect to the
Real Property shall be apportioned or prorated between the Transferor and
Heritage LP as of the end of the day preceding the Closing Date in order to
determine the amount of the Proration with respect to such Property. If the
Exchange Offer Cash Payment considered payable to the Custodian pursuant to
Section 1.1(b) and the Asset Transfer Cash Payment considered payable to
Transferor pursuant to Section 2.2(b) are not received by the Title Company
before 1:00 p.m., Dallas, Texas time, on the Closing Date, the prorations shall
be made as of the date in which the Closing occurs (i.e., each Transferor shall
receive rents and pay expenses for the day of Closing with respect to such
Transferor's Property). All prorations other than the Dividend Distribution
Offset set forth in Section 8.10(j) shall be based upon a fraction determined by
dividing the number of days elapsed through the date of the Closing by 365. The
parties shall compute or estimate all prorations prior to the Closing Date, and
Transferor shall supply Heritage LP before the Closing satisfactory supporting
evidence for all such adjustments. In the event that any of the items in this
Section 8.10 cannot be calculated accurately on the Closing Date, then they
shall be calculated as soon after the Closing Date as feasible. Either party
owing the other party a sum of money based on such subsequent proration(s) shall
promptly pay said sum to the other party, together with interest thereon at the
rate of the lesser of (A) two percent (2%) over the average "prime rate" (as
announced from time to time in the Wall Street Journal) per annum or (B) the
highest legally permitted rate, from the Closing Date to the date of payment if
payment is not made within ten (10) days after delivery of a bill therefor. The
provisions of this Section 8.10 shall survive the Closing.
(a) Taxes and Assessments. General real estate taxes and
assessments imposed by governmental authority ("Taxes") and any assessments by
private covenant constituting a lien or charge on the Real Property for the
then-current calendar year or other current tax period not yet due and payable,
together with, if applicable, state and local taxes thereon. If the Closing
occurs prior to the receipt of the tax bill for the Real Property for the
calendar year or other applicable tax period for the Real Property in which the
Closing occurs, Taxes for such calendar year or other applicable tax period for
the Real Property shall be prorated based upon the most recent ascertainable
assessed values and tax rates.
(b) Collected Rent. All collected rent and other income (and
any applicable state or local tax on rent) under Leases in effect at the Closing
but excluding payments that may constitute rent but are provided for in other
subparagraphs of this Section 8.10. Transferor shall
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be charged with any rentals collected by Transferor before the Closing, but
applicable to any period of time after such Closing. Any rent and other income
delinquent as of the Closing shall not be prorated. Heritage LP shall use
reasonable efforts (which efforts shall not require Heritage LP or the REIT to
initiate any lawsuit) to collect any rent delinquent as of the Closing, and any
rent delinquent as of the Closing but collected after the Closing shall be
applied first to current rent obligations then to delinquent rent in inverse
order of incurrence, with any amounts applied to any period prior to the Closing
remitted to Transferor. Heritage LP may treat any rent received after the 27th
of any month as rent for the next month. Once the Closing has occurred,
Transferor shall not have any right to seek by legal action or otherwise
collection of any rents delinquent for any period prior to the Closing, unless
the tenant has vacated the premises under the Lease before the Closing and the
Lease is not assigned to Heritage LP.
(c) Utilities. To the extent such expenses are the obligation
of Transferor and not tenants under Leases, utilities, including water, sewer,
electric, and gas, based upon the last reading of meters prior to the Closing.
If the utility company will not issue separate bills, Transferor's portion will
be charged against Transferor and Heritage LP will pay the entire bill after the
Closing. If Transferor has paid any utilities in advance in the ordinary course
of business, then Transferor shall be credited for Heritage LP's portion of such
payment at the Closing. The amount of deposits, if any, with utility companies
that are transferrable and that are assigned by Transferor to Heritage LP at the
Closing shall be credited to Transferor. The amount of any deposits with utility
companies that are not transferable and that are not assigned by Transferor to
Heritage LP at the Closing shall remain the property of Transferor.
(d) Fees and Charges Under Service Contracts. To the extent
such expenses are the obligations of Transferor and not of a tenant's under its
Lease, fees and charges under any Service Contracts that are being assigned to
and assumed by Heritage LP at the Closing on the basis of the periods to which
such Service Contracts relate.
(e) Transferred Debt. Interest accrued through the day prior
to the Closing Date and not yet due and payable and any principal, interest and
other amounts due and payable at the Closing Date pursuant to the Transferred
Debt; provided, however, transfer fees due and payable to holders of Transferred
Debt shall be paid in accordance with Section 8.9 hereof.
(f) Insurance. Premiums or other fees payable in connection
with any insurance policies that are being assigned to and assumed by Heritage
LP at the Closing.
(g) Other Expenses. All other liabilities related to the
ownership or operation of the Property that Heritage LP may agree to assume or
take subject to in writing.
(h) Contractors and Suppliers. Amounts payable to contractors,
subcontractors, designers, suppliers, architects, engineers and others who have
performed services or labor or supplied material in connection with the
Property.
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(i) Leasing Commissions. Leasing or other fees or commissions
payable in connection with any Lease or any renewal or extension of any Lease,
but only to the extent that such fees or commissions have been disclosed to
Heritage LP and the REIT on the Rent Roll. For the avoidance of doubt, the
parties acknowledge that with respect to the majority of Leases, all commissions
due to brokers for the initial term of such Leases have been previously paid by
the Transferor on a "cash out" basis and there will be no proration of those
commissions at Closing; however, Heritage LP acknowledges that, as described on
the Rent Roll, commissions for renewals and extensions of such Leases may be due
and payable in the future on a "cash out" basis at the time of the applicable
tenant's exercise of a renewal or option to extend or may be payable, for such
extension or renewal, on a monthly basis.
(j) Dividend Distribution Offset. An amount (the "Dividend
Distribution Offset") equal to (i) the product of (A) the total number of shares
of REIT Stock and LP Units issued in connection with the transactions
contemplated by this Agreement and (B) $.50 (the "Dividend Amount"), multiplied
by (ii) the ratio of (A) the difference between the total number of calendar
days during the quarter in which the Closing occurs (the "Closing Quarter") and
the number of calendar days during the Closing Quarter prior to the Closing Date
and (B) the total number of calendar days during the Closing Quarter shall be
deposited in escrow by Transferor on the Closing Date. On the date of
distribution of the dividend payment for the Closing Quarter (the "Dividend
Distribution Date"), the Dividend Distribution Offset shall be released to the
REIT; provided, however, in the event that the REIT does not issue a dividend
for the Closing Quarter, the Dividend Distribution Offset as calculated with the
Dividend Amount shall be released to the Transferor on the Dividend Distribution
Date or in the event that the REIT issues a dividend of less than $.50 in the
Closing Quarter (the "Reduced Dividend Amount"), a portion of the Dividend
Distribution Offset equal to the amount of the difference between (a) the
Dividend Distribution Offset as calculated with the Dividend Amount, and (b) the
Dividend Distribution Offset as calculated with the Reduced Dividend Amount
shall be released to Transferor and the remaining amount of the Dividend
Distribution Offset shall be released to the REIT on the Dividend Distribution
Date.
8.11 Tenant Deposits. All tenant deposits, including without
limitation, refundable security deposits, refundable pet deposits and key
deposits, and advance rental deposits (and interest thereon if required by law
or contract to be earned thereon) shall be transferred to Heritage LP at the
Closing, and Heritage LP shall assume the obligations to refund such deposits to
such tenants in accordance with their respective Leases after Closing, but only
to the extent the obligation to refund such deposits arises after Closing.
8.12 Income and Sales Taxes. All income, sales, gross receipts or
compensation taxes and similar taxes and fees imposed upon Transferor under
applicable local or state law shall be paid by Transferor at the Closing.
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8.13 Permit Fees. Customary fees payable with respect to the transfer
of permits and licenses assigned by Transferor to Heritage LP at the Closing
with the consent or approval, if required, of the issuer thereof shall be paid
by Heritage LP.
8.14 Wages. Transferor shall pay the wages, employment taxes and fringe
benefits applicable thereto payable to employees, if any, of Transferor as of
their discharge on the Closing Date.
8.15 Escrow Accounts. The parties acknowledge that the Transferred Debt
to be assumed has Escrow Accounts. Upon the Closing (a) if requested by
Transferor, Heritage LP shall reimburse Transferor for the amount Transferor has
deposited into the Escrow Account with respect to the Real Property, whereupon
Transferor shall assign to Heritage LP, and Heritage LP shall have sole right
and ownership of, all funds in such Escrow Account; or (b) each Transferor shall
withdraw all funds that it has deposited in each Escrow Account, whereupon
Heritage LP shall make the appropriate deposits into the Escrow Account.
ARTICLE 9
RISK OF LOSS
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9.1 Damage. The risk of loss of or damage to the Real Property by
reason of any insured or uninsured casualty during the period up to and
including the Closing Date shall be borne by Transferor. In the event of any
material damage to or destruction of the Real Property or any portion thereof
(notice of which shall promptly be given to the REIT by Transferor), the REIT
may, at its option by notice to Transferor given within ten (10) days after the
REIT is notified of such damage or destruction (and the Closing shall be
extended, if necessary to give the REIT such 10-day period to respond to such
notice) (i) elect to proceed under this Agreement with respect to the Property,
in which event Transferor shall, at the Closing, assign to Heritage LP all
insurance proceeds (including rent loss insurance to the period from and after
the Closing Date) for the damage, Heritage LP shall assume responsibility for
the repair of the Real Property, and Heritage LP shall receive a credit at the
Closing for any uninsured portion of the damage and any deductible under the
insurance policy; or (ii) terminate this Agreement. In the event of any damage
to or destruction of the Real Property or any portion thereof is not material
(notice of which shall promptly be given to the REIT Parties by Transferor),
Transferor shall, at the Closing, assign to Heritage LP all insurance proceeds
(including rent loss insurance to the period from and after the Closing Date)
for the damage, the REIT shall assume responsibility for the repair of the Real
Property, and Heritage LP shall receive a credit at the Closing for any
uninsured portion of the damage and any deductible under the insurance policy.
"Material damage" and "materially damaged" means, with respect
to the applicable Real Property, damage for which the cost to repair reasonably
exceeds ten percent (10%) of such Property's Deemed Value.
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9.2 Condemnation. In the event of any threatened, commenced or
consummated proceedings in eminent domain, including, without limitation, any
conveyance in lieu thereof (notice of which shall promptly be given to the REIT
by Transferor) (a "Condemnation Proceeding"), which would constitute a material
condemnation respecting Real Property, the REIT may, at its option, by notice to
Transferor given within ten (10) days after the REIT is notified of such actual
or possible proceedings (and the Closing shall be extended, if necessary, to
give the REIT such 10-day period to respond to such notice) (i) elect to proceed
under this Agreement with respect to the Property, in which event Transferor
shall, at the Closing, assign to Heritage LP its entire right, title and
interest in and to any condemnation award, and Heritage LP shall have the sole
right prior to Closing (subject to Transferor's approval which shall not be
unreasonably withheld or delayed) and after the Closing to negotiate and
otherwise deal with the condemning authorities in respect of such matters; or
(ii) terminate this Agreement. In the event that a Condemnation Proceeding would
not constitute a material condemnation respecting the Real Property, Transferor
shall, at the Closing, assign to Heritage LP its entire right, title and
interest in and to any condemnation award, and Heritage LP shall have the sole
right prior to Closing (subject to Transferor's approval that shall not be
unreasonably withheld or delayed) and after the Closing to negotiate and
otherwise deal with the condemning authorities with respect of such matters.
"Material condemnation" means with respect to the Real
Property, a taking of (i) more than ten percent (10%) of the land constituting
the Real Property, (ii) more than ten percent (10%) of the parking for the
buildings on the Real Property (unless the same can, on the remaining Real
Property so affected, be replaced), (iii) any part of the buildings on the Real
Property, (iv) a means of access to the Real Property unless alternative means
of access exist which in the REIT's judgment are adequate to serve the Real
Property, or (v) materially adversely affect the use or value of the Real
Property.
ARTICLE 10
WAIVER; MODIFICATION; TERMINATION; REMEDIES
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10.1 Waivers. The failure of the Smith Summit Parties to comply with
any of their respective obligations, agreements or conditions as set forth
herein may be waived expressly in writing by the REIT, by action of its Board of
Directors. The failure of the REIT Parties to comply with any of its
obligations, agreements or conditions as set forth herein may be waived
expressly in writing by the Smith Summit Parties by action of Lincor as general
partner.
10.2 Modification. This Agreement may be modified at any time in any
respect by the mutual consent of all of the parties, notwithstanding prior
approval by the Transferor Partners; provided, however, the terms of the
Exchange Offer shall not be amended or modified after the Commitment Date as set
forth in Section 1.1(f). Any such modification may be approved for the REIT by
its Board of Directors or for Transferor by its general partner.
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10.3 Termination. This Agreement may be terminated at any time before
the Closing Date, by the Board of Directors of the REIT or by Transferor (by
action of its general partner or partners):
(a) By either Transferor or the REIT if the Closing Date shall
not have occurred on or before the Expiration Date; provided, however, that
Transferor's right to terminate this Agreement under this Section 10.3(a) shall
not be available if one of the Smith Summit Parties' failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing Date to occur before the Expiration Date and the REIT's
right to terminate this Agreement under this Section 10.3(a) shall not be
available if one of the REIT Parties' failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the Closing
Date to occur prior to the Expiration Date;
(b) By either Transferor or the REIT if a court of competent
jurisdiction or governmental regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties shall use their commercially reasonably
efforts to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and non-appealable;
(c) By Transferor if a REIT Party shall have breached, or
failed to comply with, in any material respect any of its obligations under this
Agreement or any Related Agreement, and such breach or failure is not cured
within 30 days following written notice thereof by Transferor;
(d) By the REIT if a Smith Summit Party shall have breached,
or failed to comply with, in any material respect any of the obligations under
this Agreement or any Related Agreement, and such breach or failure is not cured
within 30 days following written notice thereof by the REIT;
(e) By Transferor if a representation or warranty of a REIT
Party made in this Agreement or a Related Agreement is not true and correct in
any material respect;
(f) By the REIT if a representation or warranty of a Smith
Summit Party made in this Agreement or a Related Agreement is not true and
correct in any material respect;
(g) By the REIT in its sole and absolute discretion prior to
the expiration of the Due Diligence Period, by delivery to Transferor of notice
of termination pursuant to this Section 10.3(g); or
(h) By mutual written consent of the general partner of
Transferor and the REIT.
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<PAGE>
(i) By the REIT in its sole and absolute discretion pursuant
to Section 9.1 or Section 9.2 as a result of material damage to or condemnation
of all or a portion of the Property.
(j) By either Transferor or the REIT if the transactions
contemplated by the Gentry Place Agreement and the Merit Preston Park Agreement
are not consummated simultaneously with the transactions contemplated herein.
10.4 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.3 hereof, this Agreement shall forthwith
become void and there shall be no liability on the parties hereto, except as
provided in this Section 10.4:
(a) Breach by REIT Parties. If this Agreement is terminated by
the Transferor under Section 10.3(c) or Section 10.3(e), the Smith Summit
Parties shall be entitled to immediately receive the Earnest Deposit.
(b) Breach by Smith Summit Parties.
(i) If this Agreement is terminated by the REIT under
Section 10.3(d) or Section 10.3(f), (1) the REIT Parties shall be entitled to
the prompt reimbursement from the Transferor of all out-of-pocket costs
(including, without limitation, attorney's fees and disbursements) incurred by
the REIT Parties in connection with the transactions contemplated by this
Agreement, (2) the REIT Parties, jointly and severally, shall have all rights
and remedies to which they may be entitled in equity and under this Agreement,
including, without limitation, specific performance and (3) in the event that
the REIT seeks specific performance of the transactions contemplated herein, the
REIT Parties shall be entitled to all out-of-pocket costs (including, without
limitation, attorney's fees and disbursements) incurred by the REIT Parties in
connection with seeking such specific performance. In the event that this
Agreement is terminated by the REIT pursuant to Section 10.3(d), the REIT shall
return all documents delivered or prepared for the REIT Parties relating to the
Property.
(ii) If this Agreement is terminated by the REIT
Parties pursuant to Section 10.3(d) or Section 10.3(f) herein, the REIT Parties
shall be entitled to the prompt reimbursement for all out-of-pocket costs
(including, without limitation, attorneys' fees, filing fees, and disbursements)
incurred by the REIT Parties in connection with its preparation and filing of
the Registration Statement and any amendments or supplements thereto.
ARTICLE 11
DEFINITIONS
-----------
"3636 Colorado" has the meaning in the preamble hereof.
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"Accredited Investor" shall mean an accredited investor as defined in Regulation
D promulgated under the Securities Act.
"Asset Transfer" has the meaning set forth in the recitals hereof.
"Asset Transfer Cash Payment" has the meaning set forth in Section 2.2(b)(i)
hereof.
"Asset Transfer Registration Agreement" has the meaning set forth in the
recitals hereof.
"Cash Allocation" has the meaning set forth on Schedule V attached hereto.
"CERCLA" has the meaning set forth in the definition of Environmental Laws
hereof.
"Closing" has the meaning set forth in Section 8.1 hereof.
"Closing Date" has the meaning set forth in Section 8.1 hereof.
"Commitment Date" has the meaning set forth in Section 1.1(f) hereof.
"Condemnation Proceeding" has the meaning set forth in Section 9.2 hereof.
"Custodian" has the meaning set forth in Section 1.1 hereof.
"Deemed Value" with respect to a Property shall be equal to the value allocated
to such Property in Schedule VII attached hereto.
"Dividend Distribution Offset" has the meaning set forth in Section 8.10(j)
hereof.
"Due Diligence Period" has the meaning set forth in Section 7.1(f) hereof.
"Earnest Deposit" has the meaning set forth in Section 2.4 hereof.
"Environmental Laws" shall include, without limitation, the Clean Air Act; the
Clean Water Act and the Water Quality Act of 1987; the Federal Insecticide
Fungicide, and Rodenticide Act; the Marine Protection, Research, and Sanctuaries
Act; the National Environmental Policy Act; the Noise Control Act; the
Occupational Safety and Health Act; the Resource Conservation and Recovery Act,
as amended by the Hazardous and Solid Waste Amendments of 1984, the Safe
Drinking Water Act; the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
and the Emergency Planning and Community Right-to-Know Act; the Toxic Substance
Control Act ("TSCA"); and the Atomic Energy Act, all as may have been amended as
of the date of this Agreement, together with their implementing regulations and
guidelines as of the date of this Agreement. "Environmental Laws" shall also
include all state, regional, county, municipal and other local
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laws, regulations, and ordinances that are equivalent or similar to the federal
laws recited above or that purport to regulate Hazardous Materials.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exchange Offer" has the meaning set forth in the recitals hereof.
"Exchange Offer Cash Payment" has the meaning set forth in Section 1.1(b)
hereof.
"Exchange Offer Registration Agreement" has the meaning set forth in the
recitals hereof.
"Exchange Value" shall mean with respect to Transferor, the Value of the
Property; and with respect to any partner of Transferor shall mean the Exchange
Value of Transferor multiplied times the percentage interest of such partner in
Transferor.
"Execution Date" shall mean the date of execution of this Agreement.
"Expiration Date" has the meaning set forth in Section 8.1 hereof.
"FIFRA" has the meaning set forth in the definition of Environmental Laws
hereof.
"Gentry Place" has the meaning set forth in the preamble hereof.
"Gentry Place Agreement" has the meaning set forth in the preamble hereof.
"GP Unit" has the meaning set forth in the recitals hereof.
"Hazardous Materials" shall include, without limitation: any hazardous
substance, pollutant, or contaminant regulated under CERCLA; oil and petroleum
products and natural gas, natural gas liquids, liquefied natural gas, and
synthetic gas usable for fuel; pesticides regulated under FIFRA; asbestos,
polychlorinated biphenyls, and other substances regulated under TSCA; source
material, special nuclear material, and by-product materials regulated under the
Atomic Energy Act; and industrial process and pollution control wastes to the
extent regulated under applicable Environmental Laws.
"Heritage LP" has the meaning set forth in the preamble hereof.
"Heritage SGP" has the meaning set forth in the preamble hereof.
"Holdback Amount" has the meaning set forth in Section 2.3(d) hereof.
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<PAGE>
"Improvements" shall mean with respect to a Real Property, all improvements
located thereon, including, without limitation, all heating, ventilation,
electrical, plumbing and other mechanical or operational systems.
"Intangible Personal Property" shall be a collective reference to all intangible
personal property related to the Real Property, including, without limitation:
all trade names and trade marks associated with the Real Property, together with
the goodwill related thereto, including Transferor's rights and interests in the
name of the Property set forth in Schedule I attached hereto and the names
(unless the same include proper names) of the Transferor; all rights to the
plans and specifications and other architectural and engineering drawings for
the Improvements; contract rights related to the construction, operation,
ownership or management of the Real Property (but excluding the obligations of
any of Transferor thereunder, except those expressly assumed pursuant to this
Agreement); warranties, zoning approvals, building permits and licenses (to the
extent assignable); tenant lists, correspondence with tenants and records
(including, but not limited to, those relating to taxes, insurance, maintenance,
repairs, capital improvements and services), booklets, manuals, advertising and
promotional materials, including, without limitation, photographs and negatives,
correspondence with suppliers, and telephone exchange numbers (if available);
excluding, however, cash or accounts receivable, except to the extent
specifically provided herein with respect to prorations and adjustments and
Rehabilitation Reserves (when the term "Intangible Personal Property" is used in
connection with a single Real Property, such term shall only be a collective
reference to the Intangible Personal Property applicable to such Real Property).
"Leases" shall be a collective reference to all leases of space within the
Improvements, including leases that may be made by Transferor after the date
hereof and prior to the Closing (as defined herein).
"Lender" shall mean the holder of the Note as set forth in Schedule II hereof.
"Lincor" has the meaning set forth in the preamble hereof.
"Loan Documents" shall mean a collective reference to the mortgages, bonds,
deeds of trusts and other security instruments that create liens on the Real
Property to secure the payment of the loan and related Note.
"LP Units" shall mean the limited partnership units of Heritage LP.
"Material Condemnation" has the meaning set forth in Section 9.2 hereof.
"Material Damage" has the meaning set forth in Section 9.1 hereof.
"Merit Preston Park Agreement" has the meaning set forth in the preamble hereof.
44
<PAGE>
"Mortgage Debt" shall mean the debt evidenced by a Note secured by a lien on
such Real Property, the Mortgage Debt evidenced by such Note and the Lender
which is the holder of such Note. The Mortgage Debt is set forth in Schedule II
attached hereto.
"Network" shall mean Network Multi-Family Security Corporation.
"Notes" and "Note" shall mean the promissory notes and bonds evidencing the
Mortgage Debt.
"Operating and Financial Statements" shall mean copies of operating and
financial statements (balance sheets, income, proformas, expense and capital
improvements) detailing the operating history of the properties for the last
three years including year-to-date information.
"Other Taxes" has the meaning set forth in Section 4.1(b)(vi) hereof.
"Park on Preston" has the meaning set forth in the preamble hereof.
"Partnership Agreement" has the meaning set forth in the recitals hereof.
"Permitted Exceptions" shall mean Transferred Debt and all exceptions to title
to the Real Property (other than monetary liens and those other matters which
Transferor have agreed to cure in accordance with Section 2.3(d) hereof), which
have not been cured and which the Title Insurer has not agreed to insure over or
waive during the Due Diligence Period and which the REIT shall have approved by
its approval of the related Title Report as provided in Section 7.1(g).
"Preston Park LP" has the meaning set forth in the preamble hereof.
"Property" shall mean all of the Real Property, the Tangible Personal Property
and the interests in the Leases and the Intangible Personal Property.
"Property Closing Costs" has the meaning set forth in Section 8.9 hereof.
"Prorations" has the meaning set forth in Section 8.10 hereof.
"Real Property" shall be a reference to the real property described in Schedule
I attached hereto, together with (i) all Improvements located thereon, (ii) all
the rights, benefits, privileges, easements, tenements, hereditaments and
appurtenances thereon or in any way appertaining to such real properties, and
(iii) all right, title and interest of Transferor in and to all strips and gores
and any land lying in the bed of any street, road or alley, open or proposed,
adjoining any of such real properties. When the Survey is issued, the
description in the Survey shall be accepted by the parties as the correct
description of the Real Property, even if it should differ from Schedule I.
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<PAGE>
"Registration Statement" has the meaning set forth in Section 1.1(b) hereof.
"REIT" has the meaning set forth in the preamble hereof.
"REIT Capital Contribution" has the meaning set forth in the recitals hereof.
"REIT Parties" has the meaning set forth in the preamble hereof.
"REIT Stock" has the meaning set forth in the recitals hereof.
"REIT Stock Price" shall mean $22.25.
"Related Agreements" has the meaning set forth in the recitals hereof.
"Rent Roll" shall mean a current rent roll and delinquency report for the Real
Property.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Service Contracts" shall mean all management, marketing, service, supply,
material, equipment lease or maintenance contracts which pertain to the
furnishing of services, materials, leasehold equipment, or maintenance to the
Property and similar agreements.
"Smith Summit" has the meaning set forth in the preamble hereof.
"Smith Summit GP" has the meaning set forth in the preamble hereof.
"Smith Summit Parties" has the meaning set forth in the preamble hereof.
"Subsidiary" or "Subsidiary Partnership" shall mean each of the subsidiaries of
the REIT, Heritage LP and Heritage SGP formed for the purpose of acquiring the
Property.
"Survey" shall mean survey (including field notes) made by survey civil
engineers approved by the REIT and duly licensed in the state where the Real
Property is located in accordance with and containing the certification set
forth in Exhibit G attached hereto and addressed to such parties as the REIT may
designate.
"Tangible Personal Property" shall be a collective reference to all equipment,
machinery, furniture, furnishings, supplies and other tangible personal property
owned by Transferor and any interest of Transferor in any such property leased
by Transferor, now or hereafter located in and used in connection with the
operation, ownership or management of the Real Property.
"Taxes" has the meaning set forth in Section 8.10(a) hereof.
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<PAGE>
"Title Company" shall mean Commonwealth Land Title of Dallas, 1700 Pacific,
Suite 4740, Dallas, Texas 75201.
"Title Policy" has the meaning set forth in Section 7.1(h) hereof.
"Title Report" shall mean a currently dated preliminary title commitment issued
by the Title Company for the Real Property.
"Total Cash Payment" shall mean (A) the sum of (i) the Cash Allocation set forth
on Schedule V attached hereto and (ii) such other escrowed amounts held by
Lender including, but not limited to, taxes, insurance and such other reserves
held by Lender on Transferor's behalf if elected by Transferor pursuant to
Section 8.15(a) hereof, less (B) the Earnest Deposit.
"Transferor" shall have the meaning set forth in the preamble hereof.
"Transferor Partner" shall have the meaning set forth in the recitals hereof.
"Transferor Partnership Interest" has the meaning set forth in the recitals
hereof.
"Transferred Debt" has the meaning set forth in Section 2.3(b) hereof.
"TSCA" has the meaning set forth in the definition of Environmental Laws hereof.
"UCC Searches" shall mean copies of current Uniform Commercial Code searches
issued by the Title Company or a search company acceptable to the REIT.
"Value" of the Property shall be equal to (i) the Deemed Value allocated to the
Property minus (ii) the Mortgage Debt applicable to the Property as of the
Closing Date and immediately prior to any repayment, purchase, refinancing,
replacement or reduction thereof by Heritage LP or the REIT in accordance with
Section 2.3 (without taking into consideration any discount of such Mortgage
Debt), minus (iii) the Holdback Amount and, plus or minus, as appropriate, (iv)
the Prorations relating to the Property determined in accordance with Section
8.10.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Subsidiaries. The parties acknowledge and agree that, if required
by the Lender as a condition to its consent to the transfer of the Property
subject to the related Mortgage Debt as contemplated hereby, the Property may be
transferred to a limited purpose entity owned by Heritage LP and any reference
herein to Heritage LP shall mean, with respect to such Property, such limited
purpose entity.
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<PAGE>
12.2 Parties Bound. Prior to the Closing, except as provided in Section
12.1 hereof, no party may assign its rights or obligations under this Agreement
without the prior written consent of the other parties hereto, and any such
prohibited assignment shall be void. This Agreement and all provisions hereof,
including, without limitation, all representations and warranties made
hereunder, shall inure to the benefit of and be binding upon the respective
heirs, devisees, legal representatives, successors, assigns and beneficiaries of
the parties hereto; provided, however, that no assignment shall relieve the
assignor of any obligation under this Agreement whether arising before or after
such assignment.
12.3 Headings. The article and paragraph headings of this Agreement are
for convenience only and shall in no way limit or enlarge the scope or meaning
of the language hereof.
12.4 Invalidity. If any portion of this Agreement is held invalid or
inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be deemed valid and operative and effect shall be given to the
intent manifested by the portion held invalid or inoperative. The failure by
either party to enforce against the other any term or provision of this
Agreement shall be deemed not to be a waiver of such party's right to enforce
against the other party the same or any other such term or provision.
12.5 Governing Law. Except where the laws of another jurisdiction are
mandatorily applicable, this Agreement shall, in all respects, be governed,
construed, applied and enforced in accordance with the internal laws (and not
the choice of law rules) of the State of Texas.
12.6 Independent Review. Transferor acknowledges and agrees that
neither the REIT nor Heritage LP has made any representation or warranty with
respect to the tax or accounting consequences of the transactions contemplated
by this Agreement, and that Transferor has been represented by counsel or
received advice in connection with entering into this Agreement and has received
such tax and accounting information as Transferor deems necessary to
knowledgeably consummate the transactions contemplated by this Agreement.
12.7 No Third Party Beneficiary. This Agreement is not intended to give
or confer any benefits, rights, privileges, claims, actions or remedies to any
person or entity as a third party beneficiary, including without limitation, the
Lender.
12.8 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings relating to the Property. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
12.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of such counterparts shall constitute one Agreement. To facilitate execution and
delivery of this Agreement, the
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<PAGE>
parties may execute and exchange counterparts of the signature pages by telefax.
The signature of any party to any counterparts may be appended to any other
counterpart. The Title Company shall be entitled to accept and treat such fax
signatures as original signatures.
12.10 Further Assurances. To the extent that any Schedule to be
attached to this Agreement or to any of the Exhibits attached hereto is not
completed or prepared on the date hereof, the party responsible for completing
or preparing such Schedule or Exhibit shall deliver such Schedule or Exhibit to
the other parties hereto as soon as possible after the date hereof and, in any
event, prior to the Closing. In addition to the acts and deeds recited herein
and contemplated to be performed, executed and/or delivered by Transferor at the
Closing, Transferor agrees to perform, execute and/or deliver or cause to be
executed and/or delivered, on or after the Closing, any and all further acts,
deeds and assurances as may be reasonably necessary to consummate the
transactions contemplated hereby and/or to further perfect and deliver to
Heritage LP the conveyance, transfer and assignment of the Property and all
rights related thereto.
12.11 Time. Time is of the essence in the performance of each and every
term, condition and covenant contained in this Agreement.
12.12 Confidentiality. The REIT Parties and Smith Summit Parties, for
the benefit of each other, hereby agree that until the Closing Date, they will
not release or cause or permit to be released, any press notices, publicity
(oral or written) or advertising promotion relating to, or otherwise announce or
disclose or cause or permit to be announced or disclosed, in any manner
whatsoever, the terms, conditions or substance of this Agreement or any of the
Related Agreements, or the transactions contemplated herein or therein, without
first obtaining the written consent of the other parties hereto; provided,
however, the REIT, in its sole discretion, may release or cause or permit to be
released, any press notices, publicity (oral or written) or advertising
promotion relating to, or otherwise announce or disclose or cause or permit to
be announced or disclosed, in any manner whatsoever, the terms, conditions or
substance of this Agreement, or the transactions contemplated herein, or any
information relating to the Property in connection with the REIT causing the
effectiveness of the Registration Statement under the Securities Act or any
applicable state laws and pursuant to the rules of the American Stock Exchange.
It is understood that the foregoing shall not preclude either party from
discussing the substance or any relevant details of such transactions with any
of its attorneys, accountants, professional consultants or potential lenders, as
the case may be, or prevent either party hereto from seeking to obtain any and
all approvals or consents necessary in connection with the transactions
contemplated hereby, making all filings with governmental authorities required
in connection with the transactions contemplated hereby and complying with laws,
rules, regulations and court orders, including without limitation, governmental
regulatory, disclosure, tax and reporting requirements. After the Closing Date,
Transferor agrees that the REIT may release any press notices, publicity (oral
or written) or advertising promotion relating to, or otherwise announce or
disclose, in any manner whatsoever, the terms, conditions and substances
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<PAGE>
of this Agreement or any of the Related Agreements, or the transactions
contemplated herein or therein, without first obtaining the written consent of
the other parties hereto.
12.13 Attorneys' Fees. Should either party employ attorneys to enforce
any of the provisions hereof, the party losing in any final judgment agrees to
pay the prevailing party all reasonable costs, charges and expenses, including
attorneys' fees and disbursements, expended or incurred in connection therewith
whether at trial, on appeal or on petition for review.
12.14 Use of Pronouns. The use of the neuter singular pronoun to refer
to a party shall be deemed a proper reference, even though such party may be an
individual, partnership or a group of two or more individuals. The necessary
grammatical changes required to make the provisions of this Agreement apply in
the plural sense where there is more than one seller or purchaser and to either
partnerships or individuals (male or female) shall in all instances be assumed
as though in each case fully expressed.
12.15 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the following address:
If to Transferor or Lincor: c/o MTP, Inc.
3636 North Central Avenue
Suite 402
Phoenix, Arizona 85012
Telephone: (602) 222-4040
Telefax: (602) 222-4009
Attn: Edward P. Zinman
With a copy to: Kim Lawrence, Esq.
12700 Preston Road
Suite 235
Dallas, Texas 75230
Telephone: (972) 661-2145
Telefax: (972) 661-3283
If to 3636 Colorado: 3636 Colorado, Inc.
One Canada Centre
447 Portage Avenue
Winnipeg, Manitoba Canada R3C3B6
Telephone: (204) 956-8656
Telefax: (204) 942-1931
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<PAGE>
With a copy to: 3636 Colorado, Inc.
One Canada Centre
447 Portage Avenue
Winnipeg, Manitoba Canada R3C3B6
Telephone: (204) 956-8656
Telefax: (204) 942-1931
Attn: B.S. Toni
If to the REIT, Heritage SGP or Heritage LP:
c/o ASR Investments Corporation
335 North Wilmot, Suite 250
Tucson, Arizona 85711
Telephone: (520) 748-2111
Telefax: (520) 750-8865
Attn: Jon A. Grove
With a copy to: O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback, Suite 1100
Phoenix, Arizona 85012
Telephone: (602) 263-2606
Telefax: (602) 263-2900
Attn: Robert S. Kant, Esq.
Any such notices shall be either (a) sent by certified mail, return
receipt requested in which case notice shall be deemed delivered three (3)
business days after deposit, postage prepaid in the U.S. Mail, (b) sent by
overnight delivery using a nationally recognized overnight courier, in which
case it shall be deemed delivered one business day after deposit with such
courier, (c) sent by telefax, in which case notice shall be deemed delivered
upon confirmed transmission of such notice, or (d) sent by personal delivery.
The above addresses may be changed by written notice to the other party;
provided, however, that no notice of a change of address shall be effective
until actual receipt of such notice. Copies of notices are for informational
purposes only, and a failure to give or receive copies of any notice shall not
be deemed a failure to give notice.
12.16 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
12.17 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designed period of time begins to run is not to be included and the
last day of the period so computed is to be
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<PAGE>
included, unless such last day is a Saturday, Sunday or legal holiday, in which
event the period shall run until the end of the next day which is neither a
Saturday, Sunday, or legal holiday.
12.18 Information and Audit Cooperation. Transferor agrees to provide
to Heritage LP's designated independent auditor (a) access to the books and
records of the Property and all related information regarding the period for
which Heritage LP is required to have the Property audited under the regulations
of the Securities and Exchange Commission, and (b) any representation letters
regarding the books and records of the Property as such auditor shall reasonably
request in connection with the normal course of auditing the Property in
accordance with generally accepted auditing standards.
12.19 No Assumption. Except as otherwise expressly assumed by Heritage
LP or the REIT pursuant to the terms of this Agreement, neither Heritage LP nor
the REIT shall assume or be deemed to have assumed any obligations or
liabilities whatsoever of Transferor with respect to the Property or otherwise.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.
3636 COLORADO: HERITAGE SGP:
3636 COLORADO, INC., HERITAGE SGP CORPORATION, an
a Colorado corporation Arizona corporation
By: By:
------------------------------- -------------------------------
Its: Its:
------------------------------ ------------------------------
LINCOR/SMITH SUMMIT
APARTMENTS LIMITED TRANSFEROR OR
PARTNERSHIP, a Texas SMITH SUMMIT GP:
limited partnership
SMITH SUMMIT APARTMENTS
By: MTP, Inc. PARTNERSHIP, a Texas general
Its: General Partner partnership
By: Lincor/Smith Summit Apartments
By: Limited Partnership
---------------------- Its: General Partner
Its:
--------------------- By: MTP, Inc.
Its: General Partner
THE REIT:
By:
ASR INVESTMENTS CORPORATION, ----------------------
a Maryland corporation Its:
---------------------
By: By: 3636 Colorado, Inc.
------------------------------- Its: General Partner
Its:
------------------------------ By:
----------------------
Its:
HERITAGE LP: ---------------------
HERITAGE COMMUNITIES L.P.,
a Delaware limited partnership
By: ASR Investments Corporation
Its: General Partner
By:
----------------------
Its:
---------------------
53
