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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): July 16, 1997
USAA Real Estate Income Investments II Limited Partnership
(Exact name of registrant as specified in its charter)
Texas 0-17094 74-2473951
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
8000 Robert F. McDermott Fwy., IH 10 West, Suite 600,
San Antonio, Texas 78230-3884
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(210) 498-7391
N/A
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On July 7, 1997, American Industrial Properties REIT (NYSE:IND) (the
"Trust") signed definitive merger agreements with USAA Real Estate Income
Investments I, A California Limited Partnership, USAA Real Estate Income
Investments II Limited Partnership, USAA Income Properties III Limited
Partnership, and USAA Income Properties IV Limited Partnership (collectively,
the "RELPs") pursuant to which the RELPs will be merged into the Trust (the
"Merger"). As a result of the Merger, the Trust will acquire nine real estate
properties consisting of three office buildings totaling 550,000 square feet,
two industrial properties totaling 320,000 square feet, three office/research
and development properties totaling 156,000 square feet, and one retail
property totaling 77,000 square feet. In addition, the Trust will acquire a
55.84% joint venture interest in a 291,000 square foot office property. The
agreed value of the interests in these properties, including assumption of
$31,704,000 in related debt, is $89,622,000.
Pursuant to the terms of the agreements, the Trust will issue an aggregate
of 22,064,147 shares of beneficial interest at $2.625 per share (for a total
value of $57,918,385) in exchange for the limited partnership interests in the
RELPs. The number of Shares to be issued to each RELP will be equal to the net
asset value for each RELP (as agreed by the Trust and each RELP) divided by
$2.625. The number of Shares to be received by a limited partner in each RELP
will be computed in accordance with such partner's percentage interest in the
RELP. The general partner of each RELP has waived any right it may have to
receive Shares to which it may be entitled in exchange for its general
partnership interest.
The Merger, which has been approved by the Trust's Board of Trust Managers
and the Board of Directors of each of the general partners of the RELPs, is
subject to due diligence by both parties and certain other conditions,
including approval by the shareholders of the Trust and the limited partners of
each of the RELPs. The Merger is a taxable transaction to the partners in the
RELPs and will be subject to the completion of a joint proxy
statement/prospectus filed on Form S-4 with the Securities and Exchange
Commission. No date has been scheduled for the shareholder meeting for the
Trust and limited partner meetings for the RELPs to vote on the proposed
transaction. Prudential Securities Inc., on behalf of the Trust, and Houlihan
Lokey Howard & Zukin on behalf of the RELPs, have rendered opinions to their
respective parties that the transaction is fair from a financial point of view.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(C) EXHIBITS
10.1 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments II Limited Partnership dated as of
June 30, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
USAA REAL ESTATE INCOME INVESTMENTS II
LIMITED PARTNERSHIP (Registrant)
BY: USAA INVESTORS II, INC.,
General Partner
July 21, 1997 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration and
Finance/Treasurer
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INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
10.1 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments II Limited Partnership dated as of
June 30, 1997
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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
30, 1997, is entered into by and between American Industrial Properties REIT, a
Texas real estate investment trust ("AIP") , and USAA Real Estate Income
Investments II Limited Partnership, a Texas limited partnership ("RELP"). USAA
Real Estate Company, a Delaware corporation ("Realco"), is a party to this
Agreement solely for the purpose of binding itself to the provisions of Section
7.10 hereunder.
RECITALS
A. The Board of Trust Managers of AIP (the "Board of Trust
Managers") and the general partner of RELP have each determined that a business
combination between AIP and RELP is in the best interests of their shareholders
and partners, respectively, and presents an opportunity for their respective
businesses to achieve strategic and financial benefits, and accordingly have
agreed to effect a merger subject to the terms and conditions set forth herein.
B. AIP and RELP desire to make certain representations,
warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, AIP and
RELP hereby agree as follows:
ARTICLE I. THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), RELP shall be
merged with and into AIP in accordance with this Agreement and the Plan of
Merger (the "Plan of Merger") in substantially the form attached hereto as
Exhibit A, with such completions, additions and substitutions conforming to the
terms of this Agreement as the parties shall approve, such approval to be
conclusively evidenced by their causing the Plan of Merger containing such
completions, additions or substitutions to be filed in accordance with
applicable laws; and the separate existence of RELP shall thereupon cease (the
"Merger"). AIP shall be the surviving entity in the Merger (sometimes
hereinafter referred to as the "Survivor"). The Merger shall have the effects
specified in Section 23.60 of the Texas Real Estate Investment Trust Act, as
amended (the "Texas REIT Act") and Section 2.11 of the Texas Revised Limited
Partnership Act (the "LP Act").
1.2. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell, Sapp"),
located at 2200 Ross Avenue, Suite 900, Dallas, Texas at 10:00 a.m., local
time, within five business days after receipt of approval of the Merger by
AIP's shareholders and RELP's partners, or at such other time, date or place as
AIP and RELP may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
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1.3. Effective Time. If all the conditions to the Merger set forth
in Article VIII shall have been fulfilled or waived (and this Agreement shall
not have been terminated as provided in Article IX), AIP and RELP shall cause
Articles of Merger satisfying the requirements of the Texas REIT Act and
Articles of Merger satisfying the requirements of the LP Act to be properly
executed, verified and delivered for filing in accordance with the LP Act and
the Texas REIT Act on the Closing Date. The Merger shall become effective for
accounting and all other purposes to the fullest extent permitted by law as of
the close of business on December 31, 1997 (the "Effective Time") or such other
date as may be agreed to by the parties. For state law purposes, the Merger
shall become effective upon the issuance of a certificate of merger by the
Secretary of State of the State of Texas in accordance with the LP Act or at
such later time which AIP and RELP shall have agreed upon and designated in
such filings in accordance with applicable law.
ARTICLE II. DECLARATION OF TRUST
AND BYLAWS OF THE SURVIVOR
2.1. Declaration of Trust. The Declaration of Trust of AIP in
effect immediately prior to the Effective Time shall be the Declaration of
Trust of the Survivor until duly amended in accordance with applicable law.
2.2. Bylaws. The Bylaws of AIP in effect immediately prior to the
Effective Time shall be the Bylaws of the Survivor until duly amended in
accordance with applicable law.
ARTICLE III. TRUST MANAGERS AND OFFICERS OF AIP
3.1. Trust Managers. The Trust Managers of AIP immediately prior
to the Effective Time shall be the Trust Managers of AIP as of the Effective
Time.
3.2. Officers. The officers of AIP immediately prior to the
Effective Time shall be the officers of AIP as of the Effective Time.
ARTICLE IV. RELP PARTNERSHIP INTERESTS
4.1. Conversion of the RELP Partnership Interest. (a) At the
Effective Time, each Common Share of Beneficial Interest of AIP outstanding
immediately prior to the Effective Time shall remain outstanding and shall
represent one Common Share of Beneficial Interest of AIP.
(b) At the Effective Time, the general and limited partnership
interests of RELP (each a "RELP Interest"), issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of holder thereof, be converted into the right
to receive Common Shares of Beneficial Interest, $0.10 par value per share (the
"AIP Common Shares"), of AIP. The aggregate number of AIP Common Shares to be
issued to the RELP partners in connection with the Merger shall be equal to
$10,200,000 (the "Purchase Price") divided by the Share Price (the "Total
Shares"). If RELP repays any mortgage indebtedness existing on the date hereof
during the period from the date hereof to and including the Closing Date, the
Purchase Price shall be appropriately adjusted. The term "Share Price" shall
mean $2.625. The number of AIP
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Common Shares to be received by a partner shall be equal to the Total Shares
multiplied by such partner's percentage interest in RELP plus each limited
partner's pro rata portion of the general partnership interest of the RELP's
general partner.
(c) As a result of the Merger and without any action on the part
of the holder thereof, at the Effective Time, all RELP Interests shall cease
to be outstanding and shall be canceled and retired, and each holder of a RELP
Interest shall thereafter cease to have any rights with respect to such RELP
Interest, except the right to receive, without interest, the AIP Common Shares
and cash for fractional shares of AIP Common Shares in accordance with Sections
4.1(b) and 4.2(e).
4.2. Exchange of RELP Interests. (a) As of the Effective Time,
AIP shall deposit, or shall cause to be deposited, with an exchange agent
selected by AIP, which shall be AIP's Transfer Agent or such other party
reasonably satisfactory to RELP (the "Exchange Agent"), for the benefit of the
holders of RELP Interests, for exchange in accordance with this Article IV,
certificates representing the Total Shares and the cash in lieu of fractional
shares (such cash and certificates for the Total Shares together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") to be issued pursuant to Section 4.1 and paid pursuant
to this Section 4.2 in exchange for outstanding RELP Interests.
(b) Promptly after the Effective Time, AIP shall cause the
Exchange Agent to mail to each holder of record of a RELP Interest (x) a
certificate representing the number of whole shares of AIP Common Shares and
(y) a check representing the amount of cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, which such holder has the
right to receive in respect of the RELP Interest surrendered pursuant to the
provisions of this Article IV, after giving effect to any required withholding
tax. No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
RELP Interests. In the event of a transfer of ownership of RELP Interests
which is not registered in the transfer records of RELP, a certificate
representing the proper number of AIP Common Shares, together with a check for
the cash to be paid in lieu of fractional shares, may be issued to such a
transferee if such holder presents to the Exchange Agent, all documents
required to evidence and effect such transfer and to evidence that any
applicable transfer taxes have been paid.
(c) At and after the Effective Time, there shall be no transfers
on the transfer books of RELP of RELP Interests which were outstanding
immediately prior to the Effective Time.
(d) No fractional AIP Common Shares shall be issued pursuant
hereto. In lieu of the issuance of any fractional AIP Common Shares pursuant to
Section 4.1(b), cash adjustments will be paid to holders in respect of any
fractional AIP Common Shares that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to such fractional proportion of the
Share Price.
(e) Any portion of the Exchange Fund (including the proceeds of
any investments thereof and any AIP Common Shares) that remains unclaimed by
the former partners of RELP one year after the Effective Time shall be
delivered to AIP. Any former partners of RELP who have not theretofore complied
with this Article IV shall thereafter look only to AIP for delivery of their
AIP Common
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Shares, and payment of cash in lieu of fractional shares and unpaid dividends
and distributions on the AIP Common Shares deliverable in respect of each RELP
Interest such partners hold as determined pursuant to this Agreement, in each
case, without any interest thereon.
(f) None of AIP, RELP, the Exchange Agent or any other person
shall be liable to any former holder of RELP Interests for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF RELP
RELP represents and warrants to AIP as set forth below. As
contemplated below, a "RELP Disclosure Letter" will be delivered to AIP on or
before August 11, 1997. The RELP Disclosure Letter shall provide the
information or exceptions described below and shall list all of the assets of
the RELP that will not be transferred in connection with the Merger. The RELP
Disclosure Letter shall be amended prior to Closing to cause such
representations and warranties to be materially true and correct on the Closing
Date, but RELP shall remain liable for any material breach of such
representations and warranties reflected in such amendment only as provided in
Section 9.5(d), below.
5.1. Existence; Good Standing; Authority; Compliance with Law. (a)
RELP is a limited partnership, duly formed, validly existing and in good
standing under the laws of the State of Texas. To its actual knowledge, RELP
is duly licensed or qualified to do business as a foreign limited partnership
and is in good standing under the laws of any other state of the United States
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the business, results of operations or financial condition of RELP (a
"RELP Material Adverse Effect"). RELP has all requisite power and authority to
own, operate, lease and encumber its properties and carry on its business as
now conducted.
(b) To the RELP's actual knowledge, it is not in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which RELP or any of its
properties or assets is subject, where such violation would have a RELP
Material Adverse Effect. RELP has obtained all licenses, permits and other
authorizations and has taken all actions required by applicable law or
governmental regulations in connection with its business as now conducted,
where the failure to obtain any such item or to take any such action would have
a RELP Material Adverse Effect. A copy of RELP's Agreement of Limited
Partnership and Certificate of Limited Partnership (collectively, the "RELP
Organizational Documents") have been delivered or made available to AIP and its
counsel and such documents will be listed in the RELP Disclosure Letter and
were or will be true and correct when delivered or made available.
5.2. Authorization, Validity and Effect of Agreements. RELP has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions
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contemplated by this Agreement (the "RELP Ancillary Agreements"). Subject only
to the approval of this Agreement and the transactions contemplated hereby in
accordance with the Agreement of Limited Partnership of the RELP, the
consummation by RELP of this Agreement, the RELP Ancillary Agreements and the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of RELP. In reliance upon the legal opinion described in
Section 8.2(e), RELP believes this Agreement constitutes, and the RELP
Ancillary Agreements (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of RELP,
enforceable against RELP in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity (collectively, "Equitable
Remedies").
5.3. Future Issuances. To RELP's actual knowledge, there are not
at the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate RELP to issue, transfer or sell any RELP Interests.
After the Effective Time, AIP will have no obligation to issue, transfer or
sell any RELP Interest.
5.4. Other Interests. Except as set forth in the RELP Disclosure
Letter, RELP does not own directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
5.5. No Violation. To RELP's actual knowledge, neither the
execution and delivery by RELP of this Agreement nor the consummation by RELP
of the transactions contemplated hereby in accordance with the terms hereof,
will: (i) conflict with or result in a breach of any provisions of the
Agreement of Limited Partnership of RELP; (ii) except as contemplated by the
RELP Ancillary Agreements or as will be set forth in the RELP Disclosure
Letter, violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance required
by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of RELP under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which RELP is a party, or by which RELP
or any of its properties is bound or affected, except for any of the foregoing
matters which, individually or in the aggregate, would not have a RELP Material
Adverse Effect; or (iii) other than the filings provided for in Article I, any
filings required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Securities Act or applicable state securities and "Blue
Sky" laws (collectively, the "Regulatory Filings"), require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority would not have
an RELP Material Adverse Effect.
5.6. SEC Documents. (a) RELP has made available or will make
available to AIP prior to July 31, 1997, each registration statement, report,
proxy statement or information statement and
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all exhibits thereto prepared by it or relating to its properties (including
registration statements covering mortgage pass-through certificates) since
January 1, 1994, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "RELP Reports"). The RELP
Reports, which were or will be filed with the SEC in a timely manner,
constitute all forms, reports and documents required to be filed by RELP under
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act
and the rules and regulations promulgated thereunder (collectively the
"Securities Laws") for the periods stated above.
(b) To the RELP's actual knowledge, as of their respective dates,
the RELP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did 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 made therein, in the
light of the circumstances under which they were made, not misleading. To the
RELP's actual knowledge, each of the balance sheets of RELP included in or
incorporated by reference into the RELP Reports (including the related notes
and schedules) fairly presents the financial position of RELP as of its date
and each of the consolidated statements of income, retained earnings and cash
flows of RELP included in or incorporated by reference into the RELP Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings and cash flows, as the case may be, of RELP for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, as permitted
by the Securities Laws.
(c) Except as and to the extent set forth on the balance sheet of
RELP at March 31, 1997, including all notes thereto, or as set forth in the
RELP Reports, RELP has no material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of RELP or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date which would not have a RELP Material Adverse
Effect.
5.7. Litigation. To the RELP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which RELP is a party or by which any of its
properties or assets are bound or to which USAA Investors II, Inc. (the
"General Partner") or the General Partner's, directors, officers, or
affiliates is a party or by which any of their properties or assets are bound,
and (ii) except as will be set forth in the RELP Disclosure Letter, no actions,
suits or proceedings pending against RELP or against the General Partner or the
General Partner's directors, officers or affiliates or, to the knowledge of the
General Partner, threatened against RELP or against the General Partner or the
General Partner's directors, officers or affiliates, at law or in equity, or
before or by any federal or state commission, board, bureau, agency or
instrumentality, that in the case of clauses (i) or (ii) above are reasonably
likely, individually or in the aggregate, to have a RELP Material Adverse
Effect.
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5.8. Absence of Certain Changes. Except as disclosed in the RELP
Reports filed prior to the date hereof, since March 31, 1997, (i) RELP
conducted its business only in the ordinary course of such business (which for
purposes of this section only, shall include all acquisitions of real estate
properties and financing arrangements made in connection therewith or otherwise
will be set forth in the RELP Disclosure Letter); (ii) there has not been any
RELP Material Adverse Effect; (iii) there has not been any distribution,
setting aside or payment of any distribution with respect to any RELP Interest,
and (iv) there has not been any material change in RELP's accounting
principles, practices or methods.
5.9. Taxes. (a) Except as may be set forth in the RELP Disclosure
Letter, RELP (i) has timely filed all federal, state and foreign tax returns
including, without limitation, information returns and reports required to be
filed by it for tax periods ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such request has been
granted and has not expired and all such returns are accurate and complete in
all material respects, (ii) has paid or accrued all taxes shown to be due and
payable on such returns or which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by it and
(iii) has properly accrued all taxes for such periods and periods subsequent to
the periods covered by such returns. RELP has not received notice that the
federal, state and local income and franchise tax returns of RELP has been or
will be examined by any taxing authority. RELP has not executed or filed with
the Internal Revenue Service (the "IRS") or any other taxing authority any
agreement now in effect extending the period for assessment or collection of
any income or other taxes.
(b) Except as may be set forth in the RELP Disclosure Letter, RELP
is not a party to any pending action or proceeding by any governmental
authority for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income or franchise tax returns filed by
RELP since January 1, 1991 and all communications relating thereto have been
delivered to AIP or made available to representatives of AIP or will be so
delivered or made available prior to July 31, 1997. RELP does not hold any
asset (i) the disposition of which could be subject to rules similar to Section
1374 of the Internal Revenue Code of 1986, as amended (the "Code") as a result
of an election under IRS Notice 88-19 or (ii) that is subject to a consent
filed pursuant to Section 341(f) of the Code and regulations thereunder. For
purposes of this Section 5.9, "taxes" includes any interest, penalty or
additional amount payable with respect to any tax.
5.10. Books and Records. The books of account and other financial
records of RELP are in all material respects true, complete and correct, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
RELP Reports.
5.11. Properties. (a) RELP owns fee simple title to each of the
real properties reflected on the most recent balance sheet of RELP included in
the RELP Reports or as may be identified in the RELP Disclosure Letter (the
"RELP Properties"), which are all of the real estate properties owned by it,
free and clear of liens, mortgages or deeds of trust, claims against title,
charges which are liens or security interests ("Encumbrances") except as will
be noted in the RELP Disclosure
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Letter. To RELP's actual knowledge, the RELP Properties are not subject to any
rights of way, written agreements, laws, ordinances and regulations affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions"), except for (i) Encumbrances and
Property Restrictions that will be set forth in the RELP Disclosure Letter,
(ii) Property Restrictions imposed or promulgated by law or any governmental
body or authority with respect to real property, including zoning regulations,
provided they do not materially adversely affect the current use of the
property, (iii) Encumbrances and Property Restrictions disclosed on existing
title reports or current surveys (in either case copies of which title reports
and surveys have been or will be delivered or made available to AIP July 31,
1997), (iv) mechanics', carriers', workmen's, repairmen's liens and other
Encumbrances, Property Restrictions and other limitations of any kind, if any,
which have heretofore been bonded (and that will be listed in the RELP
Disclosure Letter) or which individually or in the aggregate do not exceed
$100,000, do not materially detract from the value of or materially interfere
with the present use of any of the RELP Properties subject thereto or affected
thereby, and do not otherwise materially impair business operations conducted
by RELP and which have arisen or been incurred only in its construction
activities or in the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
either (a) RELP's fee simple title to the RELP Properties or (b) first mortgage
liens thereon, subject only to the matters disclosed above and as may be set
forth in the RELP Disclosure Letter, and such policies are, at the date hereof,
in full force and effect and no claim has been made against any such policy. To
RELP's actual knowledge, except as will be set forth in the RELP Disclosure
Letter: (i) there is no certificate, permit or license from any governmental
authority having jurisdiction over any of the RELP Properties or any agreement,
easement or other right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the RELP Properties or
which is necessary to permit the lawful use and operation of all driveways,
roads and other means of egress and ingress to and from any of the RELP
Properties that has not been obtained and is not in full force and effect, or
of any pending threat of modification or cancellation of any of same; (ii) RELP
has not received written notice of any material violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting any
portion of any of the RELP Properties issued by any governmental authority;
(iii) there are no structural defects relating to the RELP Properties and no
RELP Properties whose building systems are not in working order in any material
respect; and (iv) there is (A) no physical damage to any RELP Property in
excess of $100,000 for which there is no insurance in effect covering the cost
of the restoration, (B) no current renovation to any RELP Property the cost of
which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any RELP Property, the cost of which exceeds $100,000.
(c) Except as will be set forth in the RELP Disclosure Letter,
RELP has not received notice to the effect that and there are no (A)
condemnation or rezoning proceedings that are pending or threatened with
respect to any of the RELP Properties or (B) zoning, building or similar laws,
codes, ordinances, orders or regulations that are or will be violated by the
continued maintenance, operation or use of any buildings or other improvements
on any of the RELP Properties or by the continued maintenance, operation or use
of the parking areas. All work to be performed, payments to be made and actions
to be taken by RELP prior to the date hereof pursuant to any agreement entered
into with a governmental body or authority in connection with a site approval,
zoning
<PAGE> 9
reclassification or other similar action relating to the RELP Properties (e.g.,
Local Improvement District, Road Improvement District, Environmental
Mitigation) has been performed, paid or taken, as the case may be, and RELP is
not aware of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, except as will be
set forth in the RELP Disclosure Letter.
5.12. Environmental Matters. To RELP's actual knowledge, RELP has
not caused (i) the unlawful presence of any hazardous substances, hazardous
materials, toxic substances or waste materials (collectively, "Hazardous
Materials") on any of the RELP Properties, or (ii) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the RELP Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have a RELP Material
Adverse Effect; and in connection with the construction on or operation and use
of the RELP Properties, RELP has not failed to comply, in any material respect,
with any applicable local, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials.
5.13. Labor Matters. RELP is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
General Partner, threatened against RELP relating to its business, except for
any such proceeding which would not have a RELP Material Adverse Effect. To the
knowledge of the General Partner, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made
or threatened involving employees of RELP or any of its Subsidiaries.
5.14. No Brokers. Except the fee that is to be paid to Houlihan
Lokey Howard & Zukin ("Houlihan") by RELP as described in Section 5.15 below,
RELP has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of RELP or AIP to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby. RELP is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
5.15. Opinion of Financial Advisor. RELP has retained Houlihan to
review the transaction contemplated by this Agreement and to issue an opinion
to the effect that, as of the date of such opinion, the Purchase Price is fair
to the holders of RELP Interests from a financial point of view.
5.16. Related Party Transactions. Except as set forth in the RELP
Disclosure Letter, there are no arrangements, agreements or contracts entered
into by RELP with (i) any consultant, (ii) any person who is an officer,
director or affiliate of RELP or its General Partner, any relative of any of
the foregoing or any entity of which any of the foregoing is an affiliate, or
(iii) any person who acquired RELP Interests in a private placement.
<PAGE> 10
5.17. Contracts and Commitments. The RELP Disclosure Letter will
set forth (i) all unsecured notes or other obligations of RELP which
individually may result in total payments in excess of $100,000, (ii) all
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the RELP Properties or personal property of RELP, and (iii) each commitment
entered into by RELP which may result in total payments or liability in excess
of $100,000. Copies of the foregoing will be delivered or made available to AIP
prior to July 31, 1997, will be listed on the RELP Disclosure Letter and will
be materially true and correct when delivered or made available. RELP has not
received any notice of a default that has not been cured under any of the
documents described in clause (i) above or is in default respecting any payment
obligations thereunder beyond any applicable grace periods. All options of RELP
to purchase real property will be set forth on the RELP Disclosure Letter and
such options and RELP's rights thereunder are in full force and effect. All
joint venture agreements to which RELP is a party will be set forth on the RELP
Disclosure Letter and RELP is not in default with respect to any obligations,
which individually or in the aggregate are material, thereunder.
5.18. Development Rights. Set forth in the RELP Disclosure Letter
will be a list of all material agreements entered into by RELP relating to the
development, rehabilitation, capital improvement or construction of office
buildings, industrial facilities or other real estate properties, which
development or construction has not been substantially completed as of the date
of this Agreement. Such agreements, true and correct copies of all of which
will be delivered or made available to AIP prior to July 31, 1997, will be
listed in the RELP Disclosure Letter, have not been modified and are valid and
binding in accordance with their respective terms.
5.19. Convertible Securities. To RELP's actual knowledge, RELP has
no outstanding options, warrants or other securities exercisable for, or
convertible into, RELP Interests, the terms of which would require any anti-
dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
ARTICLE VI . REPRESENTATIONS AND WARRANTIES OF AIP
AIP represents and warrants to RELP as set forth below. As
contemplated below, an "AIP Disclosure Letter" will be delivered to RELP on or
before August 11, 1997. The AIP Disclosure Letter shall provide the
information or exceptions described below. The AIP Disclosure Letter shall be
amended prior to Closing to cause such representations and warranties to be
materially true and correct on the Closing Date, but AIP shall remain liable
for any material breach of such representations and warranties reflected in
such amendment only as provided in Section 9.5(d), below.
6.1. Existence; Good Standing; Authority; Compliance with Law.
(a) AIP is a real estate investment trust duly organized and validly existing
under the laws of the State of Texas. To AIP's actual knowledge, AIP is duly
licensed or qualified to do business and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business makes
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, results
<PAGE> 11
of operations or financial condition of AIP and its subsidiaries taken as a
whole (an "AIP Material Adverse Effect"). AIP has all requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now conducted. Each of AIP's Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the requisite power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good
standing would not have an AIP Material Adverse Effect.
(b) To AIP's actual acknowledge, neither AIP nor any AIP
Subsidiary is in violation of any order of any court, governmental authority or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which AIP or any AIP Subsidiary or any of their respective
properties or assets is subject, where such violation would have an AIP
Material Adverse Effect. AIP and its Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business as
now conducted, where the failure to obtain any such item or to take any such
action would have an AIP Material Adverse Effect. Copies of AIP's and its
Subsidiaries' Declaration of Trust, Articles of Incorporation, Bylaws,
organizational documents and partnership and joint venture agreements have been
or will be prior to July 31, 1997, delivered or made available to RELP and such
documents will be listed in the AIP Disclosure Letter and were or will be true
and correct when delivered or made available. For the purposes of the
immediately preceding sentence, the term "Subsidiary"shall include the entities
set forth in the AIP Disclosure Letter, which are all of AIP's Subsidiaries.
6.2. Authorization, Validity and Effect of Agreements. AIP has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions contemplated by this
Agreement to which it is a party (the "AIP Ancillary Agreements"). Subject only
to the approval of the issuance of AIP Common Shares pursuant to the Merger
contemplated hereby by the holders of two-thirds of the outstanding AIP Common
Shares, present and voting thereon, the consummation by AIP of this Agreement,
the AIP Ancillary Agreements and the transactions contemplated hereby have been
duly authorized by all requisite action on the part of AIP. This Agreement
constitutes, and the AIP Ancillary Agreements (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of AIP enforceable against AIP in accordance with their
respective terms, subject to Equitable Remedies.
6.3. Capitalization. On June 15, 1997, the authorized capital
stock of AIP consists of 10,000,000 Common Shares. As of the date hereof, all
10,000,000 Common Shares are outstanding. AIP has no outstanding bonds,
debentures, notes or other obligations (other than to Realco), the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of AIP on any
matter. Except as set forth in the AIP Disclosure Letter, all such issued and
outstanding of AIP Common Shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in the
AIP Disclosure Letter, there are not at the date of this Agreement any existing
options, warrants, calls,
<PAGE> 12
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate AIP or any of its Subsidiaries to issue, transfer or
sell any shares or other equity interest of AIP or any of its Subsidiaries
except under any employee incentive plan approved by AIP's shareholders. There
are no agreements or understandings to which AIP is a party with respect to the
voting of any AIP Common Shares or which restrict the transfer of any such
shares, except in order to protect its REIT status.
6.4. Subsidiaries. Except as set forth in the AIP Disclosure
Letter, AIP owns directly or indirectly each of the outstanding shares of
capital stock or all of the partnership or other equity interests of each of
AIP's Subsidiaries free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local law which are
not material.
6.5. Other Interests. Except as will be disclosed in the AIP
Disclosure Letter and except for interests in the AIP Subsidiaries, neither AIP
nor any AIP Subsidiary owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
6.6. No Violation. Neither the execution and delivery by AIP of
this Agreement nor the consummation by AIP of the transactions contemplated
hereby in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of AIP's Declaration of Trust; (ii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of AIP or its Subsidiaries under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which AIP or any of its Subsidiaries is
a party, or by which AIP or any of its Subsidiaries or any of their properties
is bound or affected, except for any of the foregoing matters which,
individually or in the aggregate, would not have an AIP Material Adverse
Effect; or (iii) other than the Regulatory Filings require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
AIP Material Adverse Effect.
6.7. SEC Documents. (a) AIP has made available or will make
available to RELP prior to July 31, 1997, the registration statements of AIP
filed with the SEC in connection with public offerings of AIP securities since
January 1, 1994 and all exhibits, amendments and supplements thereto (the "AIP
Registration Statements"), and each registration statement, report, proxy
statement or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the latest AIP
Registration Statement, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "AIP Reports"). The AIP Reports,
which were or will be filed with the SEC in a timely manner, constitute all
forms, reports and documents required to be filed by AIP under the Securities
Laws.
<PAGE> 13
(b) To AIP's actual knowledge, as of their respective dates, the
AIP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws, and (ii) did 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 made therein, in the
light of the circumstances under which they were made, not misleading. To AIP's
actual acknowledge, each of the consolidated balance sheets of AIP included in
or incorporated by reference into the AIP Reports (including the related notes
and schedules) fairly presents the consolidated financial position of AIP and
the AIP Subsidiaries as of its date and each of the consolidated statements of
income, retained earnings and cash flows of AIP included in or incorporated by
reference into the AIP Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of AIP and the AIP Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and except, in the
case of the unaudited statements, as permitted by the Securities Laws.
(c) Except as and to the extent set forth on the consolidated
balance sheet of AIP and its Subsidiaries at March 31, 1997, including all
notes thereto, or as set forth in the AIP Reports, neither AIP nor any of the
AIP Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of AIP or in the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied, except liabilities arising in the ordinary course of
business since such date which would not have an AIP Material Adverse Effect.
6.8. Litigation. To AIP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which AIP or any AIP Subsidiary is a party or by
which any of its properties or assets are bound or, to which any of its
directors, officers, or affiliates is a party or by which any of their
properties or assets are bound, and (ii) except as will be set forth in the AIP
Disclosure Letter, no actions, suits or proceedings pending against AIP or any
AIP Subsidiary or, to the knowledge of AIP, against any of its Trust Managers,
officers, or affiliates or, to the knowledge of AIP, threatened against AIP or
any AIP Subsidiary or against any of its Trust Managers, officers, or
affiliates, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clauses (i) or (ii) above are reasonably likely, individually or in the
aggregate, to have an AIP Material Adverse Effect.
6.9. Absence of Certain Changes. Except as disclosed in the AIP
Reports filed with the SEC prior to the date hereof, (i) AIP and its
Subsidiaries have conducted their business only in the ordinary course of such
business (which, for purposes of this section only, shall include all
acquisitions of real estate properties and financing arrangements made in
connection therewith); (ii) there has not been any AIP Material Adverse Effect;
(iii) there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to the AIP Common Shares; and (iv)
there has not been any material change in AIP's accounting principles,
practices or methods.
<PAGE> 14
6.10. Taxes. (a) Except as may be set forth in the AIP Disclosure
Letter, AIP and each of its Subsidiaries (i) has timely filed all federal,
state and foreign tax returns including, without limitation, information
returns and reports required to be filed by any of them for tax periods ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request has been granted and has not expired and all such
returns are absolute and complete in all material respects, (ii) has paid or
accrued all taxes shown to be due and payable on such returns or which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter or other notice received by it and (iii) has properly accrued all taxes
for such periods subsequent to the periods covered by such returns. Neither AIP
nor any of its Subsidiaries has received notice that the federal, state and
local income and franchise tax returns of AIP or any such Subsidiary has been
or will be examined by any taxing authority. Neither AIP nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement now in effect extending the period for assessment or collection
of any income or other taxes.
(b) Except as will be disclosed in the AIP Disclosure Letter,
neither AIP nor any of its Subsidiaries is a party to any pending action or
proceeding by any governmental authority for assessment or collection of taxes,
and no claim for assessment or collection of taxes has been asserted against
it. True, correct and complete copies of all federal, state and local income or
franchise tax returns filed by AIP and each of its Subsidiaries and all
communications relating thereto have been delivered to RELP or made available
to representatives of RELP or will be so delivered or made available prior to
July 31, 1997. AIP (i) has qualified to be taxed as a REIT pursuant to Sections
856 through 859 of the Code for its taxable years ended December 31, 1985
through 1996, inclusive (ii) has operated, and intends to continue to operate,
in such a manner as to qualify to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable year ended on the effective date of the
Merger, and (iii) has not taken or omitted to take any action which could
result in, and each of the executive officers of AIP, each acting in his
respective capacity as such, has no actual knowledge of, a challenge to its
status as a REIT. AIP represents that each of its Subsidiaries is a Qualified
REIT Subsidiary as defined in Section 856 (i) of the Code. Neither AIP nor any
of its Subsidiaries holds any asset (i) the disposition of which could be
subject to rules similar to Section 1374 of the Code as a result of an election
under IRS Notice 88-19 or (ii) that is subject to a consent filed pursuant to
Section 341(f) of the Code and regulations thereunder. For purposes of this
Section 6.10, "taxes" includes any interest, penalty or additional amount
payable with respect to any tax.
6.11. Books and Records. (a) The books of account and other
financial records of AIP and its Subsidiaries are in all material respects
true, complete and correct, have been maintained in accordance with good
business practices, and are accurately reflected in all material respects in
the financial statements included in the AIP Reports.
(b) The minute books and other records of AIP and its Subsidiaries
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
shareholders and Trust Managers and any committees of the Board of Trust
Managers of AIP and its Subsidiaries.
<PAGE> 15
6.12. Properties. (a) AIP and its Subsidiaries own fee simple
title to each of the real properties reflected on the most recent balance sheet
of AIP included in the AIP Reports or as may be identified in the AIP
Disclosure Letter (the "AIP Properties"), which are all of the real estate
properties owned by them, free and clear of Encumbrances. To AIP's actual
knowledge, the AIP Properties are not subject to any rights of way, written
agreements, laws, ordinances and regulations affecting building use or
occupancy, or reservations of an interest in title (collectively, "Property
Restrictions"), except for (i) Encumbrances and Property Restrictions that will
be set forth in the AIP Disclosure Letter, (ii) Property Restrictions imposed
or promulgated by law or any governmental body or authority with respect to
real property, including zoning regulations, provided they do not materially
adversely affect the current use of the property, (iii) Encumbrances and
Property Restrictions disclosed on existing title reports or surveys (in either
case copies of which title reports and surveys have been or will be delivered
or made available to RELP prior to July 31, 1997), and (iv) mechanics',
carriers', workmen's, repairmen's liens and other Encumbrances, Property
Restrictions and other limitations of any kind, if any, which have heretofore
been bonded (and that will be listed in the AIP Disclosure Letter) or which
individually or in the aggregate, do not exceed $100,000, do not materially
detract from the value of or materially interfere with the present use of any
of the AIP Properties subject thereto or affected thereby, and do not otherwise
materially impair business operations conducted by AIP and its Subsidiaries and
which have arisen or been incurred only in its construction activities or in
the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
AIP's or any of its Subsidiaries' fee simple title to the AIP Properties,
subject only to the matters disclosed above and as may be set forth in the AIP
Disclosure Letter, and such policies are, at the date hereof, in full force and
effect and no material claim has been made against any such policy. To AIP's
actual knowledge, except as will be set forth in the AIP Disclosure Letter, (i)
there is no certificate, permit or license from any governmental authority
having jurisdiction over any of the AIP Properties or any agreement, easement
or other right which is necessary to permit the lawful use and operation of the
buildings and improvements on any of the AIP Properties or which is necessary
to permit the lawful use and operation of all driveways, roads and other means
of egress and ingress to and from any of the AIP Properties that has not been
obtained and is not in full force and effect, or of any pending threat of
modification or cancellation of any of same; (ii) neither AIP nor its
Subsidiaries has received written notice of any material violation of any
federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the AIP Properties issued by any governmental
authority; (iii) there are no structural defects relating to the AIP Properties
and no AIP Properties whose building systems are not in working order in any
material respect; and (iv) there is (A) no physical damage to any AIP Property
in excess of $100,000 for which there is no insurance in effect covering the
cost of the restoration, (B) no current renovation to any AIP Property the cost
of which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any AIP Property the cost of which exceeds $100,000.
(c) Except as will be set forth in the AIP Disclosure Letter, AIP
or its Subsidiaries have received no notice to the effect that and there are no
(A) condemnation or rezoning proceedings that are pending or threatened with
respect to any of the AIP Properties or (B) any zoning, building or similar
laws, codes, ordinances, orders or regulations that are or will be violated by
the continued maintenance, operation or use of any buildings or other
improvements on any of the AIP Properties
<PAGE> 16
or by the continued maintenance, operation or use of the parking areas in any
material respect. All work to be performed, payments to be made and actions to
be taken by AIP or its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection with
a site approval, zoning reclassification or other similar action relating to
the AIP Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) has been performed, paid or taken, as the
case may be, and AIP is not aware of any planned or proposed work, payments or
actions that may be required after the date hereof pursuant to such agreements,
except as will be set forth in the AIP Disclosure Letter.
6.13. Environmental Matters. To the actual knowledge of AIP, none
of AIP, any of its Subsidiaries or, any other person has caused or permitted
(i) the unlawful presence of any Hazardous Materials on any of the AIP
Properties, or (ii) any unlawful spills, releases, discharges or disposal of
Hazardous Materials to have occurred or be presently occurring on or from the
AIP Properties as a result of any construction on or operation and use of such
properties, which presence or occurrence would, individually or in the
aggregate, have an AIP Material Adverse Effect; and in connection with the
construction on or operation and use of the AIP Properties, AIP and its
Subsidiaries have not failed to comply, in any material respect, with any
applicable local, state and federal environmental laws, regulations, ordinances
and administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials.
6.14. Labor Matters. Neither AIP nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of the executive officers of AIP, threatened against AIP or
its Subsidiaries relating to their business, except for any such proceeding
which would not have an AIP Material Adverse Effect. To the knowledge of AIP,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of AIP or any of its Subsidiaries.
6.15. No Brokers. Except for the fee payable to Prudential
Securities Incorporated ("Prudential") as described in Section 6.16 below, AIP
has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of AIP or RELP to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby. AIP is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
6.16. Opinion of Financial Advisor. AIP has retained Prudential to
review the transaction contemplated by this Agreement and to issue an opinion
as to the fairness to AIP, from a financial point of view, of the consideration
to be paid by AIP pursuant to the Merger.
6.17. RELP Share Ownership. Except as may be set forth in the AIP
Disclosure Letter, neither AIP nor any of its Subsidiaries owns any RELP
Interests or other securities convertible into RELP interests.
<PAGE> 17
6.18. AIP Common Shares. The issuance and delivery by AIP of AIP
Common Shares in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary action on the part of AIP except for
the approval of its shareholders contemplated by this Agreement. The AIP Common
Shares to be issued in connection with the Merger and this Agreement, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, except that shareholders may be subject to
further assessment with respect to certain claims for tort, contract, taxes,
statutory liability and otherwise in some jurisdictions to the extent such
claims are not satisfied by AIP.
6.19. Convertible Securities. AIP has no outstanding options,
warrants or other securities exercisable for, or convertible into, shares of
AIP Common Shares, the terms of which would require any anti-dilution
adjustments by reason of the consummation of the transactions contemplated
hereby, except the preemptive rights held by certain clients of Morgan Stanley
Asset Management, Inc. and held by MS Real Estate Special Situations, Inc. and
the convertible debt securities held by Realco.
6.20. Related Party Transactions. Set forth in the AIP Disclosure
Letter will be a list of all arrangements, agreements and contracts entered
into by AIP or any of its Subsidiaries with (i) any person who is an officer,
Trust Manager or affiliate of AIP or any of its Subsidiaries, any relative of
any of the foregoing or any entity of which any of the foregoing is an
affiliate or (ii) any person who acquired AIP Common Shares in a private
placement. The copies of such documents, all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, are or will be
true, complete and correct when delivered or made available.
6.21. Contracts and Commitments. The AIP Disclosure Letter will set
forth (i) all unsecured notes or other obligations of AIP and AIP Subsidiaries
which individually may result in total payments in excess of $100,000, (ii)
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the AIP Properties or personal property of AIP and its Subsidiaries, and (iii)
each commitment entered into by AIP or any of its Subsidiaries which
individually may result in total payments or liability in excess of $100,000.
Copies of the foregoing have been or will be delivered or made available to
RELP prior to July 31, 1997, will be listed on the AIP Disclosure Letter and
are or will be materially true and correct when delivered or made available.
None of AIP or any of its Subsidiaries has received any notice of a default
that has not been cured under any of the documents described in clause (i) or
(ii) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All options of AIP or any of its
Subsidiaries to purchase real property will be set forth on the AIP Disclosure
Letter and such options and AIP's or its Subsidiaries' rights thereunder are in
full force and effect. All joint venture agreements to which AIP or any of its
Subsidiaries is a party will be set forth on the AIP Disclosure Letter and AIP
or its Subsidiaries are not in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
6.22. Development Rights. Set forth in the AIP Disclosure Letter
will be a list of all material agreements entered into by AIP or any of its
Subsidiaries relating to the development, rehabilitation, capital improvement
or construction of office buildings, industrial facilities or other
<PAGE> 18
real estate properties which development or construction has not been
substantially completed as of the date of this Agreement. Such agreements,
true, complete and correct copies of all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, will be listed in
the AIP Disclosure Letter.
6.23. Certain Payments Resulting From Transactions. The execution
of, and performance of the transactions contemplated by, this Agreement will
not (either alone or upon the occurrence of any additional or subsequent
events) (i) constitute an event under any AIP Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "Employee
Arrangements") that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee, director or consultant of AIP or any of its Subsidiaries
unless such rights have been waived by any such person, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of AIP
or RELP to amend or terminate any Employee Arrangement and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will be
required to be made pursuant to the terms of any agreement, commitment or AIP
Benefit Plan, as a result of the transactions contemplated by this Agreement,
to any officer, director or employee of AIP or any of its Subsidiaries, will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
ARTICLE VII. COVENANTS
7.1. Acquisition Proposals. Prior to the Effective Time, RELP and
AIP each agree (i) that neither of them nor any of their Subsidiaries shall,
and each of them shall direct and use its best efforts to cause its respective
officers, General Partner, limited partners, Trust Managers, employees, agents,
affiliates and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries), as
applicable, not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders) with respect to
a merger, acquisition, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities (or any debt securities convertible into equity
securities) of, such party or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (ii) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and each will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 7.1; and (iii) that it will notify the
other party immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of the
General Partner of RELP (the "Board of Directors") or the Board of Trust
Managers from (x)
<PAGE> 19
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Acquisition Proposal,
if, and only to the extent that, (A) the Board of Directors or Board of Trust
Managers, as applicable, determines in good faith that such action is required
for it to comply with its fiduciary duties to limited partners or shareholders,
as applicable, imposed by law as advised by counsel, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, such party provides written notice to the other party to this
Agreement to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which such party determined in good faith
was required to be executed in order for the Board of Directors or Board of
Trust Managers, as applicable, to comply with its fiduciary duties to limited
partners or shareholders, as applicable, imposed by law as advised by
counsel), such party keeps the other party to this Agreement informed of the
status (but not the terms) of any such discussions or negotiations; and (y) to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
Nothing in this Section 7.1 shall (i) permit any party to terminate
this Agreement (except as specifically provided in Article IX hereof), (ii)
permit any party to enter into any agreement with respect to an Acquisition
Proposal during the term of this Agreement (it being agreed that during the
term of this Agreement, no party shall enter into any agreement with any person
that provides for, or in any way facilitates, an Acquisition Proposal (other
than a confidentiality agreement in customary form)), or (iii) affect any other
obligation of any party under this Agreement.
7.2. Conduct of Businesses.
(i) Prior to the Effective Time, except as may be set forth in
the RELP Disclosure Letter or the AIP Disclosure Letter or as contemplated by
this Agreement, unless the other party has consented in writing thereto, AIP
and RELP:
(a) Shall use their reasonable efforts, and shall cause each of
their respective Subsidiaries to use their reasonable efforts,
to preserve intact their business organizations and goodwill
and keep available the services of their respective officers
and employees;
(b) Shall confer on a regular basis with one or more
representatives of the other to report operational matters of
materiality and, subject to Section 7.1, any proposals to
engage in material transactions;
(c) Shall promptly notify the other of any material emergency or
other material change in the condition (financial or
otherwise) of the business, properties, assets or
liabilities, or any material governmental complaints,
investigations or hearings (or communications indicating that
the same may be contemplated), or the breach in any material
respect of any representation, warranty, covenant or agreement
contained herein;
(d) Shall not pay quarterly dividends or make distributions
payable with respect to the AIP Common Shares and RELP
Partnership Interests, respectively; and
<PAGE> 20
(e) Shall promptly deliver to the other true and correct copies of
any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(ii) Prior to the Effective Time, except as may be set forth in the
RELP Disclosure Letter, unless AIP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, RELP:
(a) Shall conduct its operations according to its usual, regular
and ordinary course in substantially the same manner as
heretofore conducted;
(b) Shall not amend the RELP Organizational Documents;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this
Agreement, issue any RELP Interests, make any distribution,
effect any recapitalization or other similar transaction, (ii)
grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any
RELP Interest, (iii) increase any compensation or enter into
or amend any employment agreement with any of its present or
future officers or directors of the General Partner, or (iv)
adopt any new employee benefit plan or amend any existing
employee benefit plan in any material respect, except for
changes which are less favorable to participants in such
plans;
(d) Shall not declare, set aside or make any distribution or
payment with respect to any RELP Interest or directly or
indirectly redeem, purchase or otherwise acquire any RELP
Interest, or make any commitment for any such action;
(e) Shall not sell or otherwise dispose of (i) any RELP
Properties, or (ii) except in the ordinary course of business,
any of its other assets which are material, individually or in
the aggregate;
(f) Shall not make any loans, advances or capital contributions
to, or investments in, any other person;
(g) Shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent
with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of RELP included in the RELP Reports or
incurred in the ordinary course of business consistent with
past practice;
<PAGE> 21
(h) Shall not enter into any commitment which individually may
result in total payments or liability by or to it in excess of
$250,000 in the case of any one commitment or in excess of
$500,000 for all commitments;
(i) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment with any officer, director or
affiliate of RELP or its General Partner except to the extent
the same occur in the ordinary course of business consistent
with past practice and would not have a RELP Material Adverse
Effect; and
(j) Shall not enter into or terminate any lease representing
annual revenues of $100,000 or more.
(iii) Prior to the Effective Time, except as may be set forth in the
AIP Disclosure Letter, unless RELP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, AIP:
(a) Shall, and shall cause each of its Subsidiaries to, conduct
its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore
conducted;
(b) Shall not amend its Declaration of Trust or Bylaws except as
contemplated by this Agreement;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
(including AIP's existing dividend reinvestment plan) existing
on the date hereof and disclosed pursuant to this Agreement,
issue any shares of its capital stock, effect any share split,
reverse share split, share dividend, recapitalization or other
similar transaction, (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the
date hereof to acquire any shares of its capital shares
(except pursuant to any employee incentive plan approved by
shareholders), (iii) amend any employment agreement with any
of its present or future officers or Trust Managers, or (iv)
adopt any new employee benefit plan (including any share
option, share benefit or share purchase plan) except the
employee incentive plan to be voted on at its shareholder
meeting for the fiscal year ended December 31, 1995;
(d) Shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any Common
Shares or directly or indirectly redeem, purchase or otherwise
acquire any Common Shares or capital stock of any of its
Subsidiaries, or make any commitment for any such action;
(e) Except as will be set forth in the AIP Disclosure Letter,
shall not, and shall not permit any of its Subsidiaries to,
sell or otherwise dispose of (i) any AIP Properties or any of
its capital stock of or other interests in Subsidiaries or
(ii) except in the ordinary course of business, any of its
other assets which are material, individually or in the
aggregate;
<PAGE> 22
(f) Shall not, and shall not permit any of its Subsidiaries to,
make any loans, advances or capital contributions to, or
investments in, any other person other than in connection with
the sale of properties;
(g) Shall not, and shall not permit any of its Subsidiaries to,
pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent
with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of AIP included in the AIP Reports or incurred
in the ordinary course of business consistent with past
practice;
(h) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment which individually may result in
total payments or liability by or to it in excess of $500,000
in the case of any one commitment or in excess of $500,000 for
all commitments; and
(i) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment with any officer, Trust Manager or
affiliate of AIP or any of its Subsidiaries, except as herein
or in the AIP Disclosure Letter provided and except in the
ordinary course of business.
For purposes of this Section 7.2, any consent shall be deemed to be
unreasonably delayed if notice of consent or withholding of consent is not
received within three days of request. Further, if no response is received by
the end of business on such third day, the party receiving the request shall be
deemed to have consented to such action.
7.3 Meetings of Shareholders and Partners. Each of AIP and RELP
will take all action necessary in accordance with applicable law and its
organizational documents to convene a meeting of its shareholders or partners,
as applicable, as promptly as practicable to consider and vote upon or
otherwise to obtain the consent of its shareholders or partners, as applicable,
to (i) in the case of AIP, approve this Agreement and the transactions
contemplated hereby, and (ii) in the case of RELP, approve this Agreement and
the transactions contemplated hereby. The Board of Trust Managers and the
General Partner shall each recommend such approval and AIP and RELP shall each
take all lawful action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement/Prospectus (as defined in Section 7.7);
provided, however, that such recommendation or solicitation is subject to any
action taken by, or upon authority of, the Board of Trust Managers or the
General Partner, as the case may be, in the exercise of its good faith judgment
as to its fiduciary duties to its shareholders or partners, as applicable,
imposed by law as advised by counsel. AIP and RELP shall coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day.
7.4. Filings; Other Action. Subject to the terms and conditions
herein provided, RELP and AIP shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals,
<PAGE> 23
permits or authorizations are required to be obtained prior to the Effective
Time from governmental or regulatory authorities of the United States and the
several states in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; (b) use all reasonable efforts to obtain in writing
any consents required from third parties in form reasonably satisfactory to
RELP and AIP necessary to effectuate the Merger; and (c) use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purpose of this Agreement, the proper officers and directors of AIP and
the General Partner shall take all such necessary action.
7.5. Inspection of Records. From the date hereof to the Effective
Time, each of RELP and AIP shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of RELP and AIP
and their respective Subsidiaries.
7.6. Publicity. RELP and AIP shall, subject to their respective
legal obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to
agree upon the text of any press release before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
7.7. Registration Statement. AIP and RELP shall cooperate and
promptly prepare and AIP shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the AIP Common Shares issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the shareholders and partners, respectively, of AIP
and RELP in connection with the Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. AIP shall use all reasonable efforts, and RELP will cooperate with
AIP to have the Form S-4 declared effective by the SEC as promptly as
practicable. AIP shall use its best efforts to obtain, prior to the effective
date of the Form S-4, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. AIP agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of shareholders and
partners, respectively, of AIP and RELP, or, in the case of the Form S-4 and
each amendment or supplement thereto, at the time it is filed or becomes
effective, will not 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, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
<PAGE> 24
material fact was made by AIP in reliance upon and in conformity with written
information concerning RELP furnished to AIP by RELP specifically for use in
the Proxy Statement/Prospectus. RELP agrees that the written information
provided by it specifically for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof and at the
time of the respective meetings of shareholders and partners, respectively, of
AIP and RELP, or, in the case of written information provided by RELP
specifically for inclusion in the Form S-4 or any amendments or supplement
thereto, at the time it is filed or becomes effective, will not 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, in light of
the circumstances under which they were made, not misleading. AIP will advise
RELP, promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the AIP
Common Shares issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
7.8. Listing Application. AIP shall promptly prepare and submit to
the NYSE a listing application covering the AIP Common Shares issuable in the
Merger, and shall use its reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such AIP Common Shares, subject to official
notice of issuance.
7.9. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performances set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
7.10. Expenses. Subject to Section 9.5, if the Merger is approved
by RELP's partners, all transaction costs of the proposed consolidation shall
be paid by AIP. If three of the four limited partnerships party to the Proxy
Statement/Prospectus (the "Other RELPS") do not approve their proposed merger
into AIP, Realco shall reimburse AIP for AIP's expenses relating to the
proposed merger up to $250,000. If RELP and the Other RELPS approve their
proposed merger into AIP, but the shareholders of AIP do not approve the
proposer merger, and if Realco voted its AIP Common Shares in favor of such
mergers, AIP will reimburse RELP and the Other RELPS for all expenses they
incurred in connection with the proposed merger. Any expenses to be reimbursed
hereunder shall include, but not be limited to, costs of fairness opinions,
property appraisals, engineering and environmental reports, title policies,
accounting fees, legal fees, printing and solicitation expenses. RELP will
bear the costs of preparing its initial fairness opinion, with later
reimbursement by AIP in the event the Merger is approved by RELP's partners.
If the limited partners of RELP fail to approve the proposed Merger, then
Realco will reimburse AIP for the RELP's expenses (to the extent paid by AIP)
as follows: the actual cost of such RELP's fairness opinion, legal fees up to
$80,000, and the actual cost or the Allocable Share (if the actual cost is not
separately determined), of RELP's accounting fees, engineering and
environmental reports, printing and solicitation expenses. Allocable Share,
for this purpose, shall be the ratio of such RELP's net book value of assets at
March 31, 1997 to the total net book value of all of the assets of RELP and the
Other RELPS at March 31, 1997.
<PAGE> 25
7.11. Indemnification. For a period of six years from and after the
Effective Time, AIP shall indemnify the partners, or agents of RELP who at any
time prior to the Effective Time were entitled to indemnification under the
Agreement of Limited Partnership of RELP existing on the date hereof to the
same extent as such partners or agents are entitled to indemnification under
such Agreement of Limited Partnership in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement).
7.12. Reorganization. From and after the date and until the
Effective Time, neither AIP nor RELP nor any of their respective Subsidiaries
or other affiliates shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code; or (ii)
enter into any contract, agreement, commitment or arrangement with respect to
the foregoing. Following the Effective Time, AIP shall use its best efforts to
conduct its business in a manner that would not jeopardize the characterization
of the Merger as a reorganization within the meaning of Section 368(a)(1)(A) of
the Code.
7.13. Survival of RELP Obligations; Assumption of RELP Liabilities
by AIP. All of the obligations of RELP that are outstanding at the Closing
shall survive the Closing and shall not be merged therein. Upon the
consummation of the Merger, such obligations shall be assumed, automatically,
by AIP; provided, however, that such assumption shall not impose upon or expose
AIP to any liability for which RELP was not liable, and provided, further, that
AIP shall be entitled to the same defenses, offsets and counterclaims to which
RELP would have been entitled, but for the Merger.
7.14. Third Party Consents. AIP and RELP each shall take all
necessary corporate and other action and will use its commercially reasonable
efforts to obtain the consents and applicable approvals from third parties that
may be required to enable it to carry out the transactions contemplated by this
Agreement.
7.15. Efforts to Fulfill Conditions. AIP and RELP each shall use
commercially reasonable efforts to insure that all conditions precedent to its
obligations hereunder are fulfilled at or prior to the Closing.
7.16. Representations, Warranties and Conditions Prior to Closing.
AIP and RELP each shall use its commercially reasonable efforts to cause its
representations and warranties contained in this Agreement to be true and
correct on and as of the Closing Date in all material respects. Prior to
Closing, AIP and RELP each shall promptly notify the other in writing (i) if
any representation or warranty contained in this Agreement is discovered to be
or becomes untrue or (ii) if AIP or RELP fails to perform or comply with any of
its covenants or agreements contained in this Agreement or it is reasonably
expected that it will be unable to perform or comply with any of its covenants
or agreements contained in this Agreement.
7.17. Cooperation of the Parties. AIP and RELP each will cooperate
with the other in supplying such information as may be reasonably requested by
the other in connection with obtaining consents or approvals to the
transactions contemplated by this Agreement.
<PAGE> 26
7.18. Lock-Ups. The General Partner shall use its best efforts
prior to the Closing to have each of its directors and officers and Realco
execute a 90-day lock-up agreement in a form (reasonably acceptable to RELP)
supplied to RELP by AIP. The executed agreements will be delivered to AIP at
the Closing. AIP shall use its best efforts prior to the Closing to have each
of its Trust Managers and officers execute a 90-day lock-up agreement, in a
form (reasonably acceptable to AIP) supplied to AIP by RELP. The agreements
will be delivered to RELP at the Closing.
ARTICLE VIII. CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by the Declaration
of Trust and Bylaws and Agreement of Limited Partnership of
AIP and RELP, respectively, and by applicable law or by
applicable regulations of any stock exchange or other
regulatory body by the holders of the AIP Common Shares and
RELP Interests entitled to vote thereon.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which
prohibits the consummation of the transactions contemplated by
this Agreement. In the event any such order or injunction
shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
(c) The Form S-4 shall have become effective and all necessary
state securities law or "Blue Sky" permits or approvals
required to carry out the transactions contemplated by this
Agreement shall have been obtained and no stop order with
respect to any of the foregoing shall be in effect.
(d) AIP shall have obtained the approval for the listing of the
AIP Common Shares issuable in the Merger on the NYSE, subject
to official notice of issuance.
(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission,
board, other regulatory body or third parties required in
connection with the execution, delivery and performance of
this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents
required to be filed after the Effective Time and except where
the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would
not have a material adverse effect on the business, results of
operations or financial condition of AIP and RELP (and their
respective Subsidiaries), taken as a whole, following the
Effective Time.
<PAGE> 27
8.2 Conditions to Obligations of RELP to Effect the Merger. The
obligation of RELP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by
RELP:
(a) AIP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of AIP contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on the Closing
Date, and RELP shall have received a certificate of the
President or an Executive or Senior Vice President of AIP,
dated the Closing Date, certifying to such effect.
(b) RELP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by AIP and approved by
RELP, dated the Closing Date, to the effect that the Merger
will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of
the Code, and that RELP and AIP will each be a party to that
reorganization within the meaning of Section 368(b) of the
Code. In rendering its opinion, said counsel shall be entitled
to rely as to any factual matter upon certificates given by
executive officers of RELP and AIP and shall be entitled to
assume that the covenants of AIP pursuant to Section 7.15
shall be fully complied with.
(c) From the date of the Agreement through the Effective Time,
there shall not have occurred any change in the financial
condition, business or operations of AIP and its Subsidiaries,
taken as a whole, that would have or would be reasonably
likely to have an AIP Material Adverse Effect other than any
such change that affects both RELP and AIP in a substantially
similar manner.
(d) The opinion of Houlihan addressed to RELP that the Purchase
Price is fair, from a financial point of view, to the partners
of RELP shall not have been withdrawn or materially modified.
(e) RELP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by AIP and approved by
RELP, dated the Closing Date, as to such customary matters as
RELP may reasonably request, such opinion to be reasonably
satisfactory to RELP.
8.3 Conditions to Obligation of AIP to Effect the Merger. The
obligations of AIP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by AIP:
(a) RELP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of RELP contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on the Closing Date
and AIP shall have received
<PAGE> 28
a certificate of the Chief Executive Officer, President or an
Executive Vice President of the General Partner dated the
Closing Date, certifying to such effect.
(b) AIP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by RELP and approved by
AIP, dated the Closing Date, to the effect that the
consummation of the Merger will not result in AIP's failure to
continue to satisfy the requirements for qualification as a
REIT for federal income tax purposes. In rendering its
opinion, said counsel shall be entitled to rely as to any
factual matter upon certificates given by executive officers
of AIP and RELP and shall be entitled to assume that the
covenants of Section 7.15 shall be fully complied with.
(c) From the date of this Agreement through the Effective Time,
there shall not have occurred any change in the financial
condition, business or operations of RELP and its
Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have an RELP Material Adverse Effect,
other than any such change that affects both RELP and AIP in a
substantially similar manner.
(d) Each person listed on Exhibit 8.3(d) attached hereto shall
have delivered to AIP a written agreement to the effect that
such person will not offer to sell, sell or otherwise dispose
of any shares of AIP Common Stock issued in the Merger,
except, in each case, pursuant to an effective registration
statement or in compliance with Rule 145, as amended from time
to time, or in a transaction which, in the opinion of legal
counsel reasonably satisfactory to AIP, is exempt from the
registration requirements of the Securities Act and that the
certificates representing the AIP shares issued to him or her
in the Merger may bear a legend to such effect.
(e) The opinion of Prudential addressed to the Board of Trust
Managers of AIP that the consideration to be paid by AIP
pursuant to the Merger is fair, from a financial point of
view, to AIP shall not have been withdrawn or materially
modified.
(f) AIP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by RELP and approved by
AIP, dated the Closing Date, as to such customary matters as
AIP may reasonably request, such opinion to be reasonably
satisfactory to AIP.
(g) The limited partners of at least two of the Other RELPS shall
have approved the merger of such limited partnership with and
into AIP.
ARTICLE IX. TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the partners of RELP or
the shareholders of AIP or by the mutual written consent of AIP and RELP, with
the prior approval of their respective Board of Trust Managers and General
Partner.
<PAGE> 29
9.2 Termination by Either AIP or RELP. This Agreement may be
terminated and the Merger may be abandoned by action of the General Partner of
RELP or the Board of Trust Managers of AIP if (i) the Merger shall not have
been consummated by March 31, 1998, (ii) a meeting of RELP's partners shall
have been duly convened and held and the approval of RELP's partners required
by Section 8.1(a) shall not have been obtained at such meeting or at any
adjournment thereof, (iii) a meeting of AIP's shareholders shall have been duly
convened and held and the approval of AIP's shareholders required by Section
8.1(a) shall not have been obtained at such meeting or at any adjournment
thereof, (iv) as a result of due diligence investigation by one of the parties
hereto, it is determined in good faith by such party that certain facts or
circumstances not previously known by such party constitute a Material Adverse
Effect on the business, results of operations or financial condition of the
other party, (v) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action 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, provided that the party seeking to terminate this Agreement
pursuant to this clause (v) shall have used all reasonable efforts to remove
such order, decree, ruling or injunction, or (vi) any of the conditions set
forth in Article VIII shall not have been satisfied, and provided, in the case
of a termination pursuant to clause (i) or (vi) above, that the terminating
party shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in said clause. AIP and RELP each shall
(i) deliver its Disclosure Letter to one another not later than 5:00 P.M.,
Central Time, August 11, 1997, and (ii) shall complete its due diligence
investigations not later than 5:00 P.M., Central Time, on July 31, 1997 (the
period from the date of this Agreement through July 31, 1997 being hereinafter
referred to as the "Due Diligence Period"). Until the expiration of the Due
Diligence Period, either party may terminate this Agreement without liability
or penalty due to (i) the discovery of a fact or circumstance that reasonably
could be expected to constitute a Material Adverse Effect on the business,
results of operations or financial condition of the other party, or (ii) the
party's failure to receive a written fairness opinion as described herein
within seven business days from the date of execution of this Agreement.
9.3 Termination by RELP. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the partners of RELP referred to in Section
8.1(a), by action of the General Partner, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its partners imposed by law, as
advised by counsel, the General Partner determines that such termination is
required by reason of a RELP Acquisition Proposal being made, (ii) the Board of
Trust Managers withdraws, materially modifies or changes in a manner materially
adverse to RELP its recommendations to AIP's shareholders of this Agreement or
the Merger, other than as a result of the occurrence of an event that in the
good faith judgment of the Board of Trust Managers has or is reasonably likely
to have a RELP Material Adverse Effect, (iii) the Board of Trust Managers
postpones the date scheduled for the meeting of shareholders of AIP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998
or fails to set a date for such meeting by such date, except with the written
consent of RELP, (iv) there has been a breach by AIP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an AIP Material Adverse Effect,
<PAGE> 30
which breach is not curable by March 31,1998, or (v) there has been material
breach of any of the covenants or agreements set forth in this Agreement on the
part of AIP, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by RELP to AIP, or (vi) the
condition set forth in Section 8.3(g) is not satisfied..
9.4 Termination by AIP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of AIP referred to in Section 8.1(a), by
action of the Board of Trust Managers, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its shareholders imposed by law,
as advised by counsel, the Board of Trust Managers determines that such
termination is required by reason of an AIP Acquisition Proposal being made,
(ii) the General Partner withdraws, materially modifies or changes in a manner
materially adverse to AIP its recommendation to RELP's partners of this
Agreement or the Merger, other than as a result of the occurrence of an event
that in the good faith judgment of the General Partner has or is reasonably
likely to have an AIP Material Adverse Effect, (iii) the General Partner
postpones the date scheduled for the meeting of partners of RELP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998,
or fails to set a date for such meeting by such date, except with the written
consent of AIP, (iv) there has been a breach by RELP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have a RELP Material Adverse Effect, which breach is not curable by
March 31, 1998, or (v) there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of RELP, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by AIP to RELP.
9.5. Effect of Termination and Abandonment. (a) If an election to
terminate this Agreement is made pursuant to (i) Section 9.2(i) (except as a
result of a default or breach hereunder by AIP) or Section 9.2(ii), and a RELP
Acquisition Proposal relating to RELP shall have been made and, within one year
from the date of such termination, RELP consummates a RELP Acquisition Proposal
or enters into an agreement to consummate a RELP Acquisition Proposal which is
subsequently consummated, or (ii) Section 9.3(i), RELP shall pay to AIP,
provided that AIP was not in material breach of its obligations hereunder at
the time of such termination, as liquidated damages and not as a penalty or
forfeiture, an amount equal to the lesser of (m) $352,200 (the "Liquidated
Damages Amount") and (n) the sum of (1) the maximum amount that can be paid to
AIP without causing AIP to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I)
of the Code ("Qualifying Income"), as determined by AIP's certified public
accountants, plus (2) an amount equal to the Liquidated Damages Amount less the
amount payable under clause (1) above in the event AIP receives a letter from
AIP's counsel indicating that AIP has received a ruling from the IRS to the
effect that Liquidated Damages Amount payments constitute Qualifying Income. In
addition to the Liquidated Damages Amount, AIP shall be entitled to receive
from RELP (or its successor in interest) all documented out-of-pocket costs and
expenses, up to a maximum of $176,100 in connection with this Agreement and the
transactions contemplated hereby (the "AIP Expenses") incurred by AIP. The
payments to which AIP is entitled under this Section 9.5(a) shall be its sole
remedy with respect to the termination of the Agreement under the circumstances
contemplated in this Section 9.5(a).
<PAGE> 31
(b) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.3(c) not
being satisfied), RELP shall, provided that AIP was not in material breach of
its obligations hereunder at the time of such termination, pay AIP for the AIP
Expenses, up to a maximum of $176,100, although it shall not be required to pay
the Liquidated Damages Amount, which payment of the AIP Expenses shall be AIP's
sole remedy for termination of the Agreement in such circumstances.
(c) If an election to terminate this Agreement is made pursuant to
(i) Section 9.2(i) (except as a result of a default or breach hereunder by
RELP) or Section 9.2(iii), and an AIP Acquisition Proposal relating to AIP
shall have been made and, within one year from the date of such termination,
AIP consummates an AIP Acquisition Proposal or enters into an agreement to
consummate an AIP Acquisition Proposal which is subsequently consummated, or
(ii) Section 9.4(i), AIP shall pay to RELP, provided that RELP was not in
material breach of its obligations hereunder at the time of such termination,
as liquidated damages and not as a penalty or forfeiture, an amount equal to
the Liquidated Damages Amount. In addition to the Liquidated Damages Amount,
RELP shall be entitled to receive from AIP (or its successor in interest) all
documented out-of-pocket costs and expenses, up to a maximum of $176,100, in
connection with this Agreement and the transactions contemplated hereby (the
"RELP Expenses" and, together with the AIP Expenses, the "Expenses") incurred
by RELP. The payments to which RELP is entitled under this Section 9.5(c) shall
be its sole remedy with respect to the termination of the Agreement under the
circumstances contemplated in this Section 9.5(c)
(d) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.2(c) not
being satisfied), AIP shall, provided that RELP was not in material breach of
its obligations hereunder at the time of such termination, pay RELP for the
RELP Expenses, up to a maximum of $176,100, although it shall not be required
to pay the Liquidated Damages Amount, which payment of the RELP Expenses shall
be RELP's sole remedy for termination of the Agreement in such circumstances.
(e) If this Agreement is terminated pursuant to Section 9.3(iv),
Section 9.3(v), Section 9.4(iv), or Section 9.4(v), the non-terminating party
shall, provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, pay the terminating
party all Expenses, up to a maximum of $176,100, incurred by it and the
non-terminating party shall remain liable to the terminating party for its
breach.
(f) If either party terminates this Agreement during the Due
Diligence Period described in Section 9.2 above other than for a due diligence
related reason, the non-terminating party shall be entitled to receive the
Liquidated Damages Amount and the Expenses as provided in this Article IX.
(g) RELP agrees to amend this Section 9.5 at the request of AIP in
order to (x) maximize the portion of the Liquidated Damages Amount that may be
distributed to AIP hereunder without causing AIP to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code or (y) improve AIP's
chances of securing a favorable ruling described in this Section 9.5, provided
that no such amendment may result in any additional cost or expense to such
other party.
<PAGE> 32
(h) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article IX, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 9.5 and Section 7.10 and except for the provisions of Section
10.3, 10.4, 10.5, 10.6, 10.7, 10.9, 10.10, 10.13, 10.14 and 10.16. In the event
AIP or RELP has received the Liquidated Damages Amount, such recipient shall
not assert or pursue in any manner, directly or indirectly, any claim or cause
of action against the other party hereto or any of its officers, Trust
Managers, or General Partners, as applicable, based in whole or part upon its
or their receipt, consideration, recommendation or approval of an Acquisition
Proposal or the exercise by AIP of its right to termination under Section
9.4(i) or the exercise by RELP of its right to termination under Section
9.3(i). Notwithstanding the foregoing, in the event AIP or RELP is required to
file suit to seek all or a portion of such Liquidated Damages Amount, and it
ultimately succeeds, it shall be entitled to all expenses, including attorney's
fees and expenses, which it has incurred in enforcing its right hereunder.
(i) If either party willfully fails to perform its duties and
obligations under this Agreement, the non- breaching party is additionally
entitled to all remedies available to it at law or in equity and to recover its
expenses from the breaching party.
9.6 Extension; Waiver. At any time prior to the Effective Time,
any party hereto, by action taken by its Board of Trust Managers or General
Partner, as applicable, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X. GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements.
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Article IV, the last
sentence of Section 7.4 and Sections 7.10, 7.11, 7.12, 7.13, 7.14, 7.15 and
7.16 and this Article X shall survive the Merger.
10.2. Notices. Any notice required to be given hereunder shall be
in writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to AIP:
American Industrial Properties REIT
6220 N. Beltline Road, Suite 205
Irving, Texas 75063
Attention: Charles W. Wolcott, President
<PAGE> 33
Telecopy: (972) 550-6037
If to RELP:
USAA Real Estate Company
8000 I-H 10 West, Suite 600
San Antonio, Texas 78230
Attention: Patrick Duncan, Senior Vice-President
Telecopy: (210) 498-6214
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
10.3. Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except as
provided in the following sentence, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. The provisions of Article IV and Sections 7.11, 7.12, 7.13, 7.14 and
7.15 (collectively, the "Third Party Provisions") shall benefit the persons
identified therein, but the aggregate liability of AIP with respect thereto
shall not exceed the amount specified in Article IX.
10.4. Entire Agreement. This Agreement, the Exhibits, the RELP
Disclosure Letter, the AIP Disclosure Letter, the RELP Ancillary Agreements,
the AIP Ancillary Agreements and any documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.5. Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information (written or oral) furnished (whether before or after the date
hereof) by the Providing Party and its directors, officers, employees,
affiliates or representatives of advisors, including counsel, lenders and
financial advisors (collectively, the "Providing Party Representatives") to the
other party hereto (the "Receiving Party") or such Receiving Party's directors,
officers, employees, affiliates or representatives of advisors, including
counsel, lenders and financial advisors or the Receiving Party's potential
sources of financing for the transactions contemplated by this Agreement
(collectively "the Receiving Party Representatives") and all analyses,
compilations, forecasts and other studies or other documents prepared by the
Providing Party or the Providing Party Representatives in connection with its
or their review of the transactions contemplated by this Agreement which
contain or reflect such information. The term "Confidential Material" does not
include, however, information which (i) at the time
<PAGE> 34
of disclosure or thereafter is generally available to and known by the public
other than as a result of a disclosure directly or indirectly by the Receiving
Party or the Receiving Party Representatives in violation of this Agreement,
(ii) at the time of disclosure was available on a nonconfidential basis from a
source other than the Providing Party or the Providing Party Representatives,
providing that such source is not and was not bound by a confidentiality
agreement with the Providing Party, (iii) was known by the Receiving Party
prior to receiving the Confidential Material from the Providing Party or has
been independently acquired or developed by the Receiving Party without
violating any of its obligations under this Agreement, or (iv) is contained in
any RELP Reports or AIP Reports or Proxy Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law,
the Confidential Material will be kept confidential and will not, without the
prior written consent of the Providing Party, be disclosed by the Receiving
Party or its Representatives, in whole or in part and will not be used by the
Receiving Party or its Representatives, directly or indirectly, for any purpose
other than in connection with this Agreement, the Merger or the evaluating,
negotiating or advising with respect to a transaction contemplated herein.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transaction and are
informed by such Receiving Party of the confidential nature of the Confidential
Material and of the terms of this Section.
(c) In the event that either Receiving Party, its Representatives
or anyone to whom such Receiving Party or its Representatives supply the
Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
such Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable
out-of-pocket expenses incurred by the Receiving Party in connection with such
cooperation).
(d) In the event of the termination of this Agreement in
accordance with its terms, promptly upon request from either Providing Party,
the Receiving Party shall, except to the extent prevented by law, redeliver to
the Providing Party or destroy all tangible Confidential Material and will not
retain any copies, extracts or other reproductions thereof in whole or in part.
Any such destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, each Receiving Party and one Representative designated by each
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
<PAGE> 35
(e) Each party hereto further agrees that if this Agreement is
terminated in accordance with its terms, until one year from the date of
termination, (1) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (2) neither
it nor its affiliates shall directly or indirectly, (a) (w) solicit, seek or
offer to effect or effect, (x) negotiate with or provide any information to the
Board of Trust Managers or General Partner, as applicable, of the other party,
or officer of the other party or any shareholder or partner, as applicable, of
the other party with respect to, (y) make any statement or proposal, whether
written or oral, either alone or in concert with others, to the Board of Trust
Managers or Board of Directors of the General Partner of the other party, any
director, Trust Manager or officer of the other party or any shareholder or
partner of the other party or any other person with respect to, or (z) make any
public announcement (except as required by law in respect of actions permitted
hereby) or proposal or offer whatsoever (including, but not limited to, any
"solicitation"of "proxies"as such terms are defined or used in Regulation 14A
of the Exchange Act) with respect to, (i) any form of business combination or
similar or other extraordinary transaction involving the other party or any
affiliate thereof, including, without limitation, a merger, tender or exchange
offer or liquidation of the other party's assets, (ii) any form of
restructuring, recapitalization or similar transaction with respect to the
other party or any affiliate thereto, (iii) any purchase of any securities or
assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of the other party or any
affiliate thereof, (iv) any proposal to seek representation on the Board of
Trust Managers or the Board of Directors of the General Partner, as
applicable, or otherwise to seek to control or influence the management, Board
of Trust Managers or the Board of Directors of the General Partner, as
applicable, or policies of the other party or any affiliate thereof, (v) any
request or proposal to waive, terminate or amend the provisions of this Section
10.5 or (vi) any proposal or other statement inconsistent with the terms of
this Section 10.5 or (b) instigate, encourage, join, act in concert with or
assist (including, but not limited to, providing or assisting in any way in the
obtaining of financing for, or acting as a joint or co-bidder for the other
party with) any third party to do any of the foregoing, unless and until such
party has received the prior written invitation or approval of a majority of
the Board of Trust Managers or the General Partner, as applicable, to do any of
the foregoing; provided that without such invitation or approval, either party
may at any time, on a confidential non-public basis, submit to the Chief
Executive Officer of AIP or the General Partner, as applicable, a proposal to
(a) amend any of the provisions of this Section 10.5(e) or (b) effect a
business combination or other extraordinary transaction with the other party
providing for the acquisition of all or substantially all of the assets or the
securities of the other party, including, without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 10.5.
10.6. Amendment. This Agreement may be amended by the parties
hereto, by action taken by the Board of Trust Managers or the Board of
Directors of the General Partner, as applicable, at any time before or after
approval of this Agreement or any other matter presented in connection with the
Merger by the shareholders of AIP and partners of RELP, but after any such
approval, no amendment shall be made which by law requires the further approval
of shareholders or partners, as applicable, without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
<PAGE> 36
10.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
its rules of conflict of laws. Each of AIP and RELP hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Texas and of the United States District Court, Northern
District of Texas (the "Texas Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Texas Courts
and agrees not to plead or claim in any Texas Court that such litigation
brought therein has been brought in an inconvenient forum.
10.8. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
10.9. Headings. Heading of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever.
10.10. Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
10.11. Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.12. Incorporation. The RELP Disclosure Letter and the AIP
Disclosure Letter and all Exhibits and Schedules attached hereto and thereto
and referred to herein and therein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
10.13. Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any current or future law, and if
the rights or obligations of the parties under this Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance therefrom. In lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement, a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as
<PAGE> 37
may be possible, and the parties hereto request the court or any arbitrator to
whom disputes relating to this Agreement are submitted to reform the otherwise
illegal, invalid or unenforceable provision in accordance with this Section
10.13.
10.14. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Texas Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.15. Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
10.16. Non-Recourse. Neither the officers, Trust Managers nor
shareholders of AIP shall be personally bound or have any personal liability
hereunder. RELP shall look solely to the assets of AIP for satisfaction of any
liability of AIP with respect to this Agreement and the Ancillary Agreements to
which it is a party. RELP will not seek recourse or commence any action against
any of the shareholders of AIP or any of their personal assets, and will not
commence any action for money judgments against any of the Trust Managers or
officers of AIP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of AIP hereunder or thereunder. The
partners of RELP shall not be personally bound or have any personal liability
hereunder. AIP shall look solely to the assets of RELP for satisfaction of any
liability of RELP with respect to this Agreement and the Ancillary Agreements
to which it is a party. AIP will not seek recourse or commence any action
against any of the partners of RELP or any of their personal assets, and will
not commence any action for money judgments against any of the directors or
officers of RELP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of RELP hereunder or thereunder.
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ CHARLES W. WOLCOTT
------------------------------------------
Charles W. Wolcott, President and
Chief Executive Officer
USAA REAL ESTATE INCOME INVESTMENTS II
LIMITED PARTNERSHIP
By: USAA INVESTORS II, INC.,
Its General Partner
/s/ T. PATRICK DUNCAN
----------------------------------
T. Patrick Duncan
Senior Vice President - Operations
