<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of Earliest Event Reported)
May 8, 1998
-------------
General Growth Properties, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-11656 42-1283895
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
110 N. Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 960-5000
55 West Monroe Street, Chicago, Illinois 60603
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On May 8, 1998, two Delaware limited liability companies, the sole
members of which are GGP Limited Partnership, a Delaware limited partnership
(the "Partnership"), and a wholly-owned subsidiary of the registrant, General
Growth Properties, Inc., a Delaware corporation (the "Company"), which is the
general partner of and owner of an approximately 65.2% interest in the
Partnership, acquired from Grosvenor International (Westcoast Estates) Limited,
a California corporation, and P.I.C. Investments, a Nevada corporation, in a
negotiated arms-length transaction 100% of the partnership interests in the
partnership which owns Northbrook Court, an enclosed mall shopping
center located in Northbrook (Chicago), Illinois. The purchase price for the
partnership interests was paid in cash from borrowings under the Company's line
of credit.
Northbrook Court opened in 1976 and was renovated and expanded in 1995
and 1996. It is a two-level mall of approximately one million square feet. The
center is anchored by Neiman Marcus, Lord & Taylor, Marshall Field's and a 14-
screen, state-of-the-art General Cinema theater. The center has an additional
362,000 square feet of mall shop space, is currently 88% occupied and produces
sales of approximately $333 per square foot.
On April 3, 1998, two Delaware limited liability companies, the sole
members of which are the Partnership and the Company, acquired from Southwest
Properties Venture, a Colorado joint venture, in a negotiated arms-length
transaction 100% of Southwest Plaza, an enclosed mall shopping center located in
Denver, Colorado. The purchase price consisted of cash from borrowings under the
Company's line of credit, redeemable units of limited partnership interest in
the Partnership and the assumption of certain indebtedness.
Southwest Plaza opened in 1983 and was renovated in 1994 and 1995. It
is a two-level mall of approximately 1.3 million square feet located on a 102-
acre tract. The center is anchored by Joslin's, Foley's, Sears, JC Penney and
Montgomery Ward. The mall has an additional 438,000 square feet of mall shop
space, a 100,000 square foot freestanding Target store and two office buildings
totaling approximately 92,000 square feet. The center is currently 83% occupied
and produces sales of approximately $265 per square foot.
The aggregate purchase price paid for Northbrook Court and Southwest
Plaza was approximately $261 million. The acquisition of Northbrook Court, when
taken together with the unrelated acquisition of Southwest Plaza, is deemed to
constitute the acquisition of a significant amount of assets under rules and
regulations promulgated by the Securities and Exchange Commission and therefore
is required to be reported on this Current Report on Form 8-K.
-2-
<PAGE>
Item 5. Other Events.
-------------
On April 17, 1998, the Company entered into a definitive agreement to
acquire the U.S. retail property portfolio of MEPC plc (the "MEPC Portfolio"), a
United Kingdom based real estate company ("MEPC"). Through the purchase of the
stock of the three U.S. subsidiaries of MEPC that directly or indirectly own the
MEPC Portfolio (the "MEPC U.S. Subsidiaries"), the Company will acquire for
approximately $871 million in cash (less certain adjustments) 100% of eight
enclosed mall shopping centers comprising approximately 7.7 million square fee
of GLA and located throughout the United States. The stock of the MEPC U.S.
Subsidiaries will be acquired by a newly formed corporate subsidiary of the
Company that will elect to be taxed as a REIT. This transaction is expected to
close during the second quarter of 1998.
On May 14, 1998, the Company entered into a definitive merger
agreement to acquire U.S. Prime Property, Inc. (""USPPI"), a private REIT, which
owns (or as of closing will own) 100% of six enclosed mall shopping centers (and
office buildings adjacent to one of the malls) (the "USPPI Portfolio"). The
Company has agreed to acquire USPPI through the merger of a subsidiary owned by
the Company with and into USPPI, for an aggregate purchase price of
approximately $625 million (less certain adjustments), which purchase price
includes approximately $65 million of mortgage indebtedness being assumed. The
Company expects to complete the acquisition of the USPPI Portfolio together with
an approximately 50% joint venture partner. This transaction is expected to
close during the second quarter of 1998.
Item 7. Financial Statements and Exhibits.
----------------------------------
(a), (b) The requisite financial information will be filed under
cover of Form 8-K/A as soon as practicable, and in any event not later than 60
days after the date by which this Form 8-K is required to be filed.
(c) See Exhibit Index attached hereto and incorporated herein by
reference.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
By: /s/ Bernard Freibaum
---------------------------------
Bernard Freibaum
Executive Vice President and
Chief Financial Officer
Date: May 26, 1998
-4-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Name* Page
Number ----- Number
- ------- ------
2.1 Purchase and Sale Agreement, dated May 8,
1998, among Grosvenor International
Limited, P.I.C. Investments, Northbrook
Court I L.L.C. and Northbrook Court II
L.L.C.
2.2 Stock Purchase Agreement, dated as of
April 17, 1998, among MEPC plc, MEPC
North American Properties Limited, U.K.-
American Holdings Limited and GGP Limited
Partnership.
2.3 Merger Agreement, dated May 14, 1998,
among GGP Limited Partnership, GGP
Acquisition L.L.C. and U.S. Prime
Property, Inc.
2.4 Sale and Contribution Agreement, dated
April 2, 1998, between Southwest
Properties Venture and GGP Limited
Partnership.**
4 Redemption Rights Agreement, dated
April 2, 1998, among GGP Limited
Partnership, General Growth Properties,
Inc. and Southwest Properties Venture.
- ---------------------
* In accordance with Rule 601(b)(2) of Regulation S-K, the exhibits to these
agreements and the related disclosure schedules have not been filed. The
Company agrees to furnish supplementally a copy of any such omitted exhibit or
disclosure schedule to the Securities and Exchange Commission upon request.
** To be filed by amendment.
-5-
<PAGE>
EXHIBIT 2.1
-----------------------------------
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE OF
GENERAL PARTNERSHIP INTEREST IN
WESTCOAST ESTATES,
A CALIFORNIA GENERAL PARTNERSHIP
-----------------------------------
Partners: Grosvenor International (Westcoast
Estates) Limited, a California corporation
and
P.I.C. Investments, a Nevada corporation
and
Buyer: Northbrook Court I L.L.C., a Delaware
limited liability company
and
Northbrook Court II L.L.C., a Delaware
limited liability company
May 8, 1998
<PAGE>
-----------------------------------
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE OF
GENERAL PARTNERSHIP INTERESTS IN
WESTCOAST ESTATES,
A CALIFORNIA GENERAL PARTNERSHIP
-----------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Recital of Fact......................................................... 1
1. PURCHASE OF THE PARTNERSHIP INTERESTS.............................. 4
2. ESCROW AND CLOSING................................................. 7
3. CONDITIONS AND INSPECTION.......................................... 20
4. CONDITIONS TO CLOSING.............................................. 24
5. ADDITIONAL OBLIGATIONS OF PARTIES.................................. 25
6. OPERATION OF PROPERTY.............................................. 26
7. TITLE AND WARRANTIES............................................... 27
8. ASSIGNMENT......................................................... 34
9. BROKERAGE COMMISSIONS.............................................. 35
10. NOTICES............................................................ 35
11. CONDEMNATION AND DESTRUCTION....................................... 36
12. DEFINED TERMS...................................................... 37
13. MISCELLANEOUS...................................................... 41
</TABLE>
i
<PAGE>
TABLE OF EXHIBITS
-----------------
<TABLE>
<CAPTION>
Page First
Mentioned
---------
<S> <C>
Exhibit A - Partnership Agreement...................... 1
Exhibit B - Real Property.............................. 2
Exhibit C - Reciprocal Operating Agreement and Proposed
Fifth Amendment to REA ("REA")........... 2
Exhibit D - Rent Schedule and Security Deposits........ 3
Exhibit E - Personal Property.......................... 3
Exhibit F - Service Contracts and Third Party Contracts 3
Exhibit G - PIC Partnership Assignment................. 8
Exhibit H - Grosvenor Partnership Assignment........... 8
Exhibit I - Form of Tenant Estoppel Certificate........ 8
Exhibit J - Partners' Estoppel Certificate............. 8
Exhibit K - Form of Anchor Estoppel Certificate........ 8
Exhibit L - FIRPTA CERTIFICATE......................... 9
Exhibit M - Opinion of Partners' Counsel............... 9
Exhibit N - Opinion of Buyer's Counsel................. 10
Exhibit O - Mechanics Lien Claims...................... 11
Exhibit P - Title Commitment........................... 11
Exhibit Q - Pending Leases............................. 19
Exhibit R - Management Agreement....................... 19
Exhibit S - Termination of Management Agreement........ 19
Exhibit T - 1998 Capital Expenditures Statement........ 20
Exhibit U - Schedule of Reports and Studies............ 28
Exhibit V - Schedules of Regulatory Compliance......... 28
Exhibit W - Environmental Disclaimer................... 29
Exhibit X - Asbestos Reports........................... 29
Exhibit Y - Pending Litigation......................... 30
</TABLE>
ii
<PAGE>
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE OF
GENERAL PARTNERSHIP INTERESTS IN
WESTCOAST ESTATES,
A CALIFORNIA GENERAL PARTNERSHIP
--------------------------------
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made by and among
GROSVENOR INTERNATIONAL (WESTCOAST ESTATES) LIMITED, a California corporation
("Grosvenor"), and P.I.C. INVESTMENTS, a Nevada corporation ("PIC"), and
Northbrook Court I L.L.C., a Delaware limited liability company ("NCI"), and
Northbrook Court II L.L.C., a Delaware limited liability company ("NCII") (NCI
and NCII are hereinafter jointly referred to as "Buyer").
Recital of Fact
I. The Partnership
P.I.C. Investments, a Nevada corporation, is the successor in interest to
W.E. Investments Limited, N.V., a Netherlands Antilles corporation, as the owner
of an eighty percent (80%) general partnership interest in Westcoast Estates, a
California general partnership (hereinafter referred to as the "Partnership").
Grosvenor International (Westcoast Estates) Limited, a California corporation,
is the successor-in-interest to Grosvenor International California, Ltd., a
California corporation, as the owner of a twenty percent (20%) general
partnership interest in the Partnership. PIC and Grosvenor are hereinafter
sometimes referred to individually as a "Partner" and, jointly, as "the
Partners". PIC's eighty percent (80%) general partnership interest in the
Partnership and Grosvenor's twenty percent (20%) general partnership interest in
the Partnership are sometimes hereinafter individually referred to as "a
Partnership Interest" and, jointly, as "the Partnership Interest". The
Partnership was formed pursuant to those certain Articles of General Partnership
of Westcoast Estates dated February 15, 1980 among Grosvenor International,
California, Ltd. (predecessor to Grosvenor) and W.E. Investments Limited, N.V.,
a Netherlands Antilles corporation (predecessor to PIC) (the "Partnership
Agreement"). The Partnership Agreement was amended by that certain Amendment
No. 1 to California General Partnership Agreement dated June 26, 1985, by that
certain Amendment No. 2 to California Partnership Agreement dated December 17,
1986, by that certain Amendment No. 3 to California Partnership Agreement dated
June 10, 1987 and by that certain Amendment No. 4 to Agreement and Articles of
General Partnership dated June 1, 1996. A true, complete and correct copy of
the Partnership Agreement, as amended, is attached hereto as Exhibit "A".
<PAGE>
II. The Mall
--------
Northbrook Court Shopping Center (the "Mall") is a fully-enclosed, two-
level regional shopping center and two improved out parcels (the "Out Parcels")
containing a total of approximately 995,500 square feet of improvements. The
Mall has four anchor retail operations (jointly, the "Anchors" and individually,
an "Anchor") who are "Lord & Taylor", "Marshall Fields", "Neiman Marcus", and
"General Cinema". The Mall is located on approximately 103.50 acres of land and
is located in Northbrook, Illinois. A portion of the Mall and the real property
on which it is located are owned by Marshall Field's and Neiman Marcus, who
severally own a total of approximately 410,000 square feet of gross leasable
area of the Mall and various parking lots on approximately 24.58 acres. The
Partnership is the owner of the remaining portion of the Mall commonly known as
the Mall Stores, the Out Parcels, the Lord & Taylor Store and the General Cinema
(as hereinafter defined, the "Improvements") composed of approximately 585,000
square feet of gross leasable area and a parking lot area, which collectively
are located on approximately 78.92 acres of land, which is more particularly
described on Exhibit "B" attached hereto and incorporated herein by reference
(such real property together with all easements, rights, licenses, privileges
rights-of-way, mineral rights and royalties, hereditaments and any other real
property rights and interests appurtenant thereto, are hereinafter collectively
referred to as the "Real Property").
III. Reciprocal Easement Agreement
-----------------------------
The Mall and the parking areas owned by the Anchors and the Partnership are
governed by that certain Construction, Operation and Reciprocal Easement
Agreement for the Mall dated June 17, 1975, amended on February 16, 1976 by that
certain First Amendment to Reciprocal Easement Agreement, on August 30, 1978 by
that certain Second Amendment to Reciprocal Easement Agreement, on November 2,
1983 by that certain Third Amendment to Reciprocal Easement Agreement and on
October 6, 1995 by that certain Fourth Amendment to Operating Agreement (the
Construction, Operation and Reciprocal Easement Agreement, as amended, is
hereinafter referred to as the "REA"). As of the date hereof, a Fifth Amendment
to REA ("Fifth Amendment") has been approved and is being circulated for
execution by the Partnership, Neiman Marcus Group (as successor to Carter Hawley
Hale), Dayton Hudson (successor by merger to Marshall Field, which is the
successor to J.C. Penney) and May Department Stores; the Fifth Amendment to REA
when executed and recorded will be included in the term "REA". A description of
the REA is attached hereto as Exhibit "C".
2
<PAGE>
IV. Property Owned by the Partnership
---------------------------------
The property owned by the Partnership includes all of the Partnership's
right, title and interest in:
A. The Real Property
B. All buildings, structures, fixtures, facilities, installations,
machinery, equipment and other improvements situated on the Real Property (the
"Improvements") and all easements, rights, titles and interests appurtenant
thereto;
C. All retail leases, license agreements and possession agreements
affecting the Real Property and Improvements together with any additions,
modifications or amendments thereof entered into in accordance with the
provisions of this Agreement (the "Leases"), which Leases are more particularly
described on Exhibit "D" attached hereto and incorporated herein by reference
(the "Rent Schedule");
D. The promissory note from Neiman Marcus in the original principal
amount of $3,000,000 and all equipment, furniture and fixtures and other
personal property used in conjunction with the operation of the Real Property
and Improvements (other than equipment, furniture and fixtures owned by Tenants
under the Leases, the Anchors or the property manager,) including the items
described on Exhibit "E" attached hereto and incorporated herein by reference
(the "Personal Property"), subject to depletions, replacements or additions
thereto in the ordinary course of business of the Real Property and Improvements
and any lease interest therein;
E. The third party contracts or agreements pertaining to the Real
Property or Improvements, such as service or utility contracts, which are more
particularly described on Exhibit "F" attached hereto and incorporated herein by
reference (the "Service Contracts").
F. The interest of the Partnership in all intangible personal property
owned by the Partnership and used in the operation of the Real Property and the
Improvements, including (i) warranties, guaranties, indemnities and claims, (ii)
licenses, permits, or similar documents, (iii) telephone exchanges, trade names,
marks and other identifying material, including without limitation all right,
title and interest (if any) of the Partnership in and to the name "Northbrook
Court Shopping Center", (iv) plans, drawings, specifications, surveys,
engineering reports, and other technical descriptions, (v) all records, books of
account and papers of the Partnership relating to the construction, ownership
and operation of the Property, including without limitation, architect's
drawings, blue prints and as-built plans, maintenance logs, copies of warranties
and
3
<PAGE>
guaranties, licenses and permits, instruction books, employee manuals, records
and correspondence relating to insurance claims, financial statements, operating
budgets, paper and electronic media copies of data and other information
relating to the Property available from personal computers, structural,
mechanical, geotechnical or other engineering studies, soil test reports,
environmental reports, underground storage tank reports, feasibility studies,
appraisals, ADA surveys or reports, OSHA asbestos surveys, marketing studies,
mall documents and compilations, lease summaries and originals and/or copies of
Leases, the REA and the Contracts and correspondence related thereto
(collectively the "Books and Records"), all of which together are sometimes
hereinafter referred to as the "Intangible Assets".
G. All right, title and interest of the Partnership under the REA (the
Partnership's "REA Interest").
The Partnership's right, title and interest in the Real Property, the
Improvements, the Leases, the Personal Property, the Service Contracts, the
Intangible Assets and the Partnership's REA Interest are hereinafter
collectively referred to as the "Property". The effective date of this
Agreement (the "Effective Date") shall be the date the second of Buyer or the
Partners executes this Agreement and delivers the fully-executed Agreement to
the other party.
PIC desires to sell and transfer its Partnership Interest to NCI and NCI
desires to purchase and acquire the Partnership Interest of PIC on the terms and
conditions herein set forth. Grosvenor desires to sell and transfer its
Partnership Interest to NCII and NCII desires to purchase and acquire the
Partnership Interest of Grosvenor on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the Partners and Buyer hereby agree as follows:
1. PURCHASE OF THE PARTNERSHIP INTERESTS.
-------------------------------------
1.1 The Partnership Interests. PIC shall sell the PIC Partnership
-------------------------
Interest to NCI and NCI shall acquire and accept the PIC Partnership Interest
from PIC upon the terms and conditions hereinafter set forth. Grosvenor shall
sell the Grosvenor Partnership Interest to NCII and NCII shall acquire and
accept the Grosvenor Partnership Interest from Grosvenor upon the terms and
conditions hereinafter set forth.
1.2 Purchase Price. The total purchase price for the Partnership
--------------
Interests ("Purchase Price") shall be One Hundred Forty-Eight Million Dollars
($148,000,000), as adjusted by the following:
4
<PAGE>
(a) The subtraction of the sum of Three Million Five Hundred Thousand
Dollars ($3,500,000) pursuant to the I. Magnin/GCC Adjustment, as provided in
Section 2.3(h).
(b) The addition of the aggregate amount of the book value of cash and
cash equivalents and prepaid expenses of the Partnership as of the date of
closing. Accounts receivable will be distributed from the Partnership to the
Partners prior to the Close of Escrow.
(c) The subtraction of the aggregate amount of all accounts payable,
accrued employee bonuses, payroll taxes withheld and accrued, deposits by
tenants, of the Partnership as of the date of closing. As of the Close of
Escrow, Notes payable to Partners will be canceled and treated as a contribution
to equity.
(d) The proration (as provided herein) of all real and personal
property taxes, assessments, rents (including percentage rentals) and interest,
and charges for water, electricity, steam, gas and telephone and telegraph
equipment rental, as applicable.
(e) For the purposes of calculations for the Close of Escrow, the
adjustments provided in subparagraphs (a), (b) and (c) above shall be initially
calculated as of the Close of Escrow based on the Partners' good faith estimate
thereof, subject to a final adjustment to be made as of 12:00 midnight, May 8,
1998. The parties shall attempt to fix the day of Close of Escrow to correspond
with the end of an accounting month or other convenient accounting date to
facilitate ease of such accounting adjustments. Such final adjustment shall be
determined from a Closing Balance Sheet prepared as provided below which Closing
Balance Sheet shall be approved by Buyers, which approval shall not be
unreasonably withheld. It is intended that the final adjustments to the
Purchase Price based on the adjustments provided in this subparagraph (d) shall
be made within sixty (60) days after the date of the Close of Escrow or as soon
as such adjustments can reasonably be calculated.
(f) As soon as practicable after the Close of Escrow, the Partners
shall without charge prepare an audited Closing Balance Sheet of the
Partnership. Such Closing Balance Sheet for the Partnership shall be prepared
in accordance with the prior practices and standards utilized by the
Partnership's accountants in the preparation of audited statements for the
Partnership. The final adjustments pursuant to this paragraph will be based on
the Closing Balance Sheets and, when delivered by the Partners, will be true and
correct in all substantial and material respects and will be certified by the
Partners to be true and correct to the best of their knowledge.
5
<PAGE>
(g) Prorations, as provided herein, which are not calculated and paid
until the time periods set forth below, shall be paid in accordance with the
provisions set forth herein.
1.3 Payment of Purchase Price. The Purchase Price as set forth in
-------------------------
Section 1.2 shall be paid as follows:
(a) On the Effective Date, Buyer shall deliver an initial deposit to
Near North National Title Corporation ("Escrow Holder"), 222 N. LaSalle Street,
Chicago, Illinois, 60601, Attn: Cindy O'Donohue in escrow (as hereinafter
defined, the "Escrow") in the sum of Two Million Nine Hundred Sixty Thousand
Dollars ($2,960,000). After satisfaction or waiver of the conditions to Buyer's
obligations listed in Section 3.1, Buyer shall deliver to Escrow Holder an
additional deposit of One Million Four Hundred Eighty Thousand Dollars
($1,480,000). The initial deposit, the additional deposit and all interest
accrued thereon are hereinafter referred to as the "Deposit". The Deposit shall
be paid into an interest-bearing account, which interest shall accrue for the
benefit of Buyer up to and including the close of escrow (as hereinafter
defined, the "Close of Escrow") and on the Close of Escrow, the Deposit plus
interest accrued thereon shall be credited against the Purchase Price. If this
Agreement is terminated by Buyer in accordance with its terms, Buyer shall be
entitled to the return of the Deposit plus interest accrued thereon.
IF BUYER DEFAULTS FOR ANY REASON WHATSOEVER IN THE PERFORMANCE OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND SUCH DEFAULT IS NOT CURED WITHIN TEN (10)
DAYS AFTER WRITTEN NOTICE THEREOF FROM THE PARTNERS TO BUYER, AND THE PARTNERS
ARE NOT IN DEFAULT, THE PARTNERS SHALL HAVE THE RIGHT TO RETAIN THE DEPOSIT PLUS
ANY INTEREST EARNED THEREON AS THE PARTNERS' DAMAGES FOR BUYER'S DEFAULT. BUYER
AND THE PARTNERS AGREE THAT THEY HAVE MADE GOOD FAITH REASONABLE EFFORTS TO
DETERMINE WHAT THE PARTNERS' DAMAGES WOULD BE IN THE EVENT OF A DEFAULT BY
BUYER. THE PARTNERS AND BUYER HAVE BEEN UNABLE TO ARRIVE AT ANY MEANINGFUL
FORMULA OR MEASURE OF DAMAGES FOR BUYER'S DEFAULT AND HAVE THEREFORE AGREED THAT
SUCH DAMAGES WOULD BE EXTREMELY DIFFICULT AND IMPRACTICAL TO DETERMINE IN THE
EVENT OF BUYER'S DEFAULT. THE DEPOSIT SHALL BE LIQUIDATED DAMAGES AND SHALL BE
THE PARTNERS' SOLE RIGHT TO DAMAGES AND THE PARTNERS WAIVE ALL RIGHT TO SPECIFIC
PERFORMANCE, CONSEQUENTIAL DAMAGES, PUNITIVE DAMAGES OR ANY OTHER REMEDY.
BY INITIALING OR SIGNING WHERE INDICATED BELOW, THE PARTIES
SPECIFICALLY APPROVE THIS LIQUIDATED DAMAGES PROVISION.
PARTNERS: _______________ BUYER: _______________
6
<PAGE>
If the Partners default for any reason whatsoever in the performance of
their respective obligations under this Agreement and such default is not cured
within ten (10) days after written notice thereof from Buyer to the Partners,
and Buyer is not in default, then at Buyer's sole and exclusive option either
(i) upon notice to Escrow Holder the Deposit shall be immediately returned to
Buyer and thereupon this Agreement shall terminate and this Agreement shall be
of no further force or effect, or (ii) Buyer shall have the right to pursue an
action for specific performance of the terms of this Agreement.
(b) The balance of the Purchase Price, plus or minus prorations, shall
be deposited together with Buyer's portion of the closing costs and
reimbursements required hereunder, in immediately available funds to a bank
account designated by Escrow Holder on or before the Close of Escrow and shall
be paid toward the Purchase Price at the Close of Escrow.
2. ESCROW AND CLOSING.
------------------
2.1 Escrow. The closing of the purchase and sale of the Property
------
shall take place at the offices of Buyer's counsel, Neal Gerber & Eisenberg, Two
North LaSalle Street, 21st Floor, Chicago, Illinois, 60602, Attn: Reuben C.
Warshawsky.
2.2 Closing. The closing of the Escrow (the "Closing" or the "Close
-------
of Escrow") shall occur on May 8, 1998 (the "Closing Date") or such other date
as the parties shall mutually agree.
2.3 The Close of Escrow shall be in accordance with the following
terms, conditions and restrictions:
(a) Escrow Authorization and Commitment of Parties. A fully-
----------------------------------------------
executed copy of this Agreement shall be deposited with Escrow Holder as escrow
instructions within ten (10) days of the date hereof. Amended and/or additional
instructions ("Additional Escrow Instructions") not inconsistent with the terms
and conditions of this Agreement may be received into Escrow from Buyer and the
Partners. Escrow Holder is hereby authorized and instructed to deliver the
documents and moneys to be deposited into Escrow as hereinafter provided, with
the terms and conditions contained herein to apply to the Escrow. The Partners
and Buyer shall, prior to Close of Escrow, execute any and all documents and
perform any and all acts reasonably necessary or appropriate to close the
transactions pursuant to the terms of this Agreement.
(b) Documents to be Deposited with Escrow Holder by the Partners.
------------------------------------------------------------
On or before the Close of Escrow, the Partners shall deposit into Escrow for
delivery to Buyer upon the close hereof (the "Partners' Closing Documents"):
7
<PAGE>
(i) An instrument of assignment (the "Assignment of PIC's
Partnership Interests") in the form attached hereto as Exhibit "G" assigning to
NCI all of PIC's Partnership interest in the Partnership;
(ii) An instrument of assignment (the "Assignment of Grosvenor's
Partnership Interest") in the form attached hereto as Exhibit "H" assigning to
NCII all of Grosvenor's Partnership interest in the Partnership;
(iii) As a condition to closing an estoppel certificate ("Tenant
Estoppel Certificate"), in the form attached hereto as Exhibit "I", dated on or
after March 1, 1998 executed by each tenant of space within the Property
(excluding Anchors). The form of estoppel certificate shall be modified to
complete the relevant information for the respective lease and may be modified
by or for the respective tenants to delete or modify provisions which such
tenants reasonably assert are not required by the estoppel certificate under
their respective leases (such deletions or modifications to be subject to
Buyer's approval), but such estoppel certificate shall contain no statement or
information which is materially inconsistent with the provisions of such
tenant's lease as delivered to Buyer. If the Partners are unable to obtain such
estoppel certificates from all of the tenants of the Property (excluding
Anchors) but if the Partners obtain a Tenant Estoppel Certificate from tenants
whose total aggregate gross leasable area is not less than seventy percent (70%)
of the total aggregate gross leasable occupied area (excluding, however, Anchors
and short term kiosk license agreements or other short term specialty leases or
licenses with a term of one (1) year or less), then in satisfaction of the
condition of providing Tenant Estoppel Certificates the Partners shall execute
and deliver a Partners' estoppel ("Partners' Estoppel Certificate") as a
condition to closing in the form of Exhibit "J" attached hereto with respect to
space for which Tenant Estoppel Certificates were not received from tenants.
The certifications contained in the Partners' Estoppel Certificate shall survive
the Closing; provided, however, any Tenant Estoppel Certificate received by
Buyer after the Close of Escrow shall enable the Partners to remove their
certification with respect to the Tenant for which the Tenant Estoppel
Certificate is received to the extent that such Tenant Estoppel Certificate
confirms the information set forth in Partners' Estoppel Certificate. Buyer
shall use Buyer's best efforts to assist the Partners in obtaining the Tenant
Estoppel Certificates.
(iv) Estoppel certificates (the "Anchor Estoppel Certificates"), in
the form attached hereto as Exhibit "K", from Lord & Taylor, Marshall Fields
(Dayton Hudson) and Neiman Marcus, and from the ground lessees, General Cinema
and Lord and Taylor in the form attached as Exhibit "I", in each case dated on
or after March 1, 1998. The Partners and Buyer shall
8
<PAGE>
use their best efforts to obtain such estoppel certificates. The delivery of
the Anchor Estoppel Certificates shall be a condition precedent to Closing.
(v) A FIRPTA Certificate, in the form attached hereto as Exhibit
"L", duly executed and acknowledged by each Partner.
(vi) Closing Statements duly executed by the Partners.
(vii) An updated, revised litigation schedule.
(viii) Evidence of authority of each Partner to execute,
and perform under the terms of this Agreement.
(ix) A written certificate executed by the Partners and addressed
to Buyer to the effect that all of the representations and warranties of the
Partners herein contained in Section 7.1 are true and correct in all material
respects as of the Closing Date with the same force and effect as though remade
and repeated in full on and as of the Closing Date or stating the specific
respects, if any, in which any of the representations and warranties is untrue.
(x) Certificate issued by the Secretary of State of the state of
incorporation of each Partner, dated not more than ten (10) days prior to the
Closing Date, certifying the good standing of each Partner.
(xi) Copies of the Articles of Organization of each Partner and any
amendments thereto, certified by the Secretary of State of their respective
states of incorporation, as of a date not more than ten (10) days prior to the
Closing Date, together with a certificate of an officer of such Partner to the
effect that the Articles of Organization thereof, as certified by the Secretary
of State aforesaid, have not been further amended, revised, restated, canceled
or rescinded up to and including the Closing Date.
(xii) An opinion or opinions of counsel for each Partner dated as of
the Closing Date, in the form of Exhibit "M" attached hereto and otherwise in
form and substance reasonably acceptable to Buyer.
(xiii) An updated Rent Schedule showing amounts payable as of the
Closing Date or a date not more than five (5) days prior thereto.
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(xiv) The instruments, documents or certificates as are customarily
required by the Title Company to be executed or provided by the Partners as a
condition to the issuance of the Title Policy at the Closing pursuant to the
Title Commitment, including, without limitation, owner's affidavits, mechanics'
lien affidavits, personal undertakings and ALTA Statements.
(xv) All additional documents, instruments, amendments or
supplements as in the reasonable opinion of Buyer's and the Partners' counsels
and their respective representatives are necessary for the proper consummation
of the transactions contemplated by this Agreement.
The original Leases, or copies, if originals are unavailable, of all Licenses
and Permits, the plans and specifications for the Improvements, to the extent
available, the Books and Records and all keys and entrance cards in the
Partners' possession to all locks on the Property, tagged for identification,
shall remain at the Property in the offices of the Property staff.
(c) Documents to be Deposited with Escrow Holder by Buyer. On
-----------------------------------------------------
or before the Close of Escrow, Buyer shall deposit the following into Escrow.
(i) Evidence of the authority of Buyer to execute and
perform this Agreement.
(ii) A Closing Statement duly executed by Buyer.
(iii) An opinion or opinions of counsel for Buyer dated as
of the Closing Date, in the form of Exhibit "N" attached hereto and otherwise in
form and substance reasonably acceptable to the Partners.
(iv) All additional documents, instruments, amendments or
supplements as in the reasonable opinion of the Partners' and Buyer's counsel
and their respective representatives are necessary for the proper completion of
the transactions contemplated by this Agreement.
(d) Sums to be Deposited with Escrow Holder by Buyer. On or
------------------------------------------------
before the Close of Escrow, Buyer shall deposit with Escrow Holder the sums as
provided in Section 1.3, together with all additional documents, instruments,
amendments or supplements as in the reasonable opinion of Buyer's and the
Partners' counsels and their respective representatives are necessary for the
proper consummation of the transactions contemplated by this Agreement.
10
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(e) Title Insurance. Ticor Title Insurance Company ("Title Company")
---------------
shall furnish to Buyer an American Land Title Association owners policy of title
insurance (together with reinsurance and direct access agreements reasonably
acceptable to Buyer) (the "Title Policy") in the amount of the Purchase Price
from the Title Company, insuring fee title to the Property vested in Buyer as of
the Close of Escrow, subject only to the matters approved by Buyer as provided
herein (the "Permitted Exceptions") with extended coverage endorsement over the
standard printed exceptions and containing the following endorsements: Zoning
3.1 with parking, a location endorsement insuring accuracy of the Survey (as
hereinafter defined), an access endorsement, a contiguity endorsement, a tax
parcel endorsement, a non-imputation endorsement and an endorsement insuring
that there are no violations of covenants or restrictions of record, if
available. The cost of the base Title Commitment, Title Policy and all search
charges shall be borne equally by Buyer and the Partners. The Property is
subject to various mechanics liens relating to tenant improvement work
contracted for by tenants which liens are more specifically listed on Exhibit
"O" attached hereto (the "Mechanics Liens"). The Partners will credit the
Buyers for the sums which the Partnership is obligated to expend for the
mechanics liens listed as items 42, 43, 44, and 55 (the "Credit"). Buyers will
use appropriate and customary measures to compel the tenants responsible for the
mechanics liens to discharge such liens. If Buyers are unsuccessful in
resolving such liens after application of the Credit and other security held by
Buyers for discharge of such liens, if any, then the Partners shall pay Buyers
such unreimbursed lien claims in conjunction with the Final Closing adjustment
(as provided herein). In order to facilitate Buyer's financing at Closing the
Partners will enter into an indemnity agreement with the Title Company with
respect to the Mechanics Liens. The cost of the endorsements shall be borne
solely by Buyer.
Attached hereto as Exhibit "P" is the Title Commitment issued by the
Title Company showing the state of title of the Property. Buyer shall have no
obligation to accept or approve any exceptions on the Title Commitment except to
the extent mentioned above. Buyer will notify the Partners within five (5) days
of Buyer's objections to any of the exceptions to title. Buyer and the Partners
will act in good faith to resolve any unacceptable title exceptions. If the
Partners do not agree to remove any title exceptions which are unacceptable to
Buyer, then Buyer's sole right is to accept such item without discount or credit
and close this transection or terminate this agreement for failure of condition
precedent, in which case Buyer shall be entitled to a full refund of Buyer's
Deposit. If after Buyer's approval of the Title Commitment any additional items
except the Permitted Exceptions are shown in the Title Policy to be provided to
Buyer hereunder and the Partners fail to remove the same or cause the Title
Company to insure over such item by endorsement
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approved by Buyer prior to the Close of Escrow, Buyer shall have the right to
either (x) complete the transactions hereunder and accept the effect of the
additional items; provided, however, that Buyer shall thereupon have the right
to deduct from the Purchase Price the amount of any such additional item which
is a monetary lien of a fixed and ascertainable amount not in excess of Five
Hundred Thousand Dollars ($500,000); or (y) terminate the Escrow as Buyer's sole
and exclusive remedy prior to the Close of Escrow and the Deposit and all
interest earned thereon shall be returned to Buyer in full. The Partners shall
remove or insure over any monetary liens which show as an exception to the Title
Commitment and not approved above. The Partners shall execute and deliver such
affidavits as may reasonably be required by the Title Company, including an
affidavit to enable the Title Company to limit any exception in policies for
"rights of Tenants or rights of parties in possession" to the "occupancy rights
of Tenants as Tenants only under the space leases with no right or option to
purchase the Property or any portion thereof" listed in the current schedule to
be delivered by the Partners to Buyer at the Close of Escrow as provided herein.
At least ten (10) business days prior to the date of the Close of Escrow, the
Title Company shall furnish Buyer with a pro forma of each Title Policy
--- -----
(including all of the co-insurance, reinsurance and direct access agreements
which constitute part thereof) substantially as the Title Company is prepared
(subject to events occurring after the date and time of such pro forma and prior
--- -----
to Close of Escrow) to bind itself to issue as the Title Policy.
(f) Survey. The Partnership has delivered to Buyer an ALTA Survey of
------
the Mall prepared by Gremley & Biedermann dated March 27, 1998 (the "Survey").
(g) Duties of Escrow Holder. On the Close of Escrow, Escrow Holder
-----------------------
shall (1) deliver to Buyer the Assignment of PIC's Partnership Interest, the
Assignment of Grosvenor's Partnership Interest, and the Title Policy, (2)
deliver to the Partners the cash proceeds in accordance with the Closing
Statement, and (3) forward to Buyer and the Partners, in duplicate, an
accounting of all funds received and disbursed and copies of all executed
documents deposited into Escrow.
(h) Prorations - General. All rentals, revenues and other income of
--------------------
the Property, if any, and all utilities, real estate taxes, maintenance charges
and other regular operating expenses of the Property, if any, shall be paid or
shall be prorated between the Partners and Buyer in accordance with the
provisions set forth in Sections 2.3(h) through (q) inclusive. Buyer and
Partners acknowledge that some or all of the tenants under Leases and the
Anchors may claim or be entitled to adjustments of past or future CAM (common
area maintenance) obligations and real property tax and assessment reimbursement
obligations based upon the termination of the I. Magnin lease
12
<PAGE>
(the area currently leased by General Cinema) and the General Cinema lease. The
parties have adjusted the purchase price (the "I. Magnin/GCC Adjustment") due to
current claims and potential future claims for repayment of past CAM charges and
reduction of future CAM obligations and past real property tax and assessment
reimbursement charges and reduction of future real property tax and assessment
reimbursement obligations. In consideration of the I. Magnin/GCC Adjustment,
Buyer releases Partners for any such claims or liabilities relating to CAM and
real property tax reimbursement charges and adjustments for tenants or Anchors
relating to the I. Magnin termination and the General Cinema leasing and no
proration, credit or adjustment shall be made in regard to claims, losses,
costs, damages, refunds or liabilities incurred by Buyer in regard thereto. For
purposes of the prorations and adjustments to be made, Buyer shall be deemed to
own the Property and therefore shall be entitled to any revenues and responsible
for any expenses for the entire day upon which the Closing occurs. Any
apportionments and prorations which are not expressly provided for below shall
be made in accordance with the customary practice in the metropolitan Chicago,
Illinois area. The Partners and Buyer shall cause their accountants to prepare
the schedules of adjustments (the "Closing Statement") prior to the Proration
Date. Any net adjustment in favor of Buyer shall be paid in the form of a
credit to the Purchase Price. Any net adjustment in favor of the Partners shall
be paid in cash or cash equivalent by Buyer to the Partners at Closing. A copy
of the Closing Statement agreed upon by the Partners and Buyer shall be executed
by both the Partners and Buyer and delivered to the Title Company at the
Closing. All Rentals received by the Partners or any of its affiliates or its
general partners related to any period after the Proration Date shall be
immediately paid to Buyer. The parties shall make an interim closing adjustment
(the "Interim Closing Adjustment") on July 31, 1998 and a final closing
adjustment (the "Final Closing Adjustment") on October 1, 1999. The Interim
Closing Adjustment and the Final Closing Adjustment are jointly referred to as
the "Closing Adjustments".
(i) Prorations - Rentals. Rentals shall be prorated upon the
--------------------
Closing in accordance with the following provisions.
(i) Minimum Rent. Subject to Subsection 2.3(g)(iv) below
------------
with respect to Delinquent Rentals, Minimum Rent shall be prorated between the
Partners and Buyer as of the Proration Date on an accrual basis based on the
actual number of days in the month during which the Closing occurs. The Partners
shall be entitled to all Minimum Rent which accrues up to and including the
Proration Date and Buyer shall be entitled to all Minimum Rent which accrues
after the Proration Date.
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(ii) Additional Rental. Subject to Subsection 2.3(i)(iv) below with
-----------------
respect to Delinquent Rentals, and Section 2.3(m) with respect to the Closing
Adjustments, estimated monthly or quarterly payments made by Tenants of the
Property, or parties to the REA, in advance based upon projected Additional
Rentals shall be prorated between the Partners and Buyer as of the Proration
Date on an accrual basis based on the actual number of days in the month during
which the Closing occurs. The Partners shall be entitled to all Additional Rent
which accrues up to and including the Proration Date and Buyer shall be entitled
to all Additional Rent which accrues after the Proration Date.
(iii) Percentage Rent. Percentage Rent (if any) payable by a Tenant
---------------
under each Lease shall be separately prorated as of the Proration Date between
the Partners and Buyer in the manner provided in this Subsection 2.3(g)(iii).
Such proration shall be made on a Lease-by-Lease basis and shall be based upon
the fiscal year set forth in each Lease for the determination of Percentage
Rent. The actual fiscal year for Percentage Rent during which the Closing occurs
is hereinafter referred to as the "Applicable Percentage Rent Fiscal Year". To
the extent a Tenant makes monthly or quarterly interim payments on account of
Percentage Rent, the Partners shall initially retain all such interim payments
of Percentage Rent received by the Partners up to and including the Proration
Date until a Closing Adjustment occurs and Buyer shall initially retain all such
interim payments of Percentage Rent received by Buyer after the Proration Date
until a Closing Adjustment occurs. At each Closing Adjustment, the Partners and
Buyer shall prorate the total annual Percentage Rent due from a Tenant for such
Tenant's Applicable Percentage Rent Fiscal Year as follows: (a) the Partners
shall be entitled to the portion of the Percentage Rent payable by each Tenant
equal to the product obtained by multiplying the total annual Percentage Rent
paid by each such Tenant by a fraction, the numerator of which is the number of
days in the Applicable Percentage Rent Fiscal Year up to and including the
Proration Date and the denominator of which is the number of days in the
Applicable Percentage Rent Fiscal Year; and (b) Buyer shall be entitled to the
portion of the Percentage Rent payable by each Tenant equal to the product
obtained by multiplying the total annual Percentage Rent paid by each such
Tenant by a fraction, the numerator of which is the number of days in the
Applicable Percentage Rent Fiscal Year after the Proration Date and the
denominator of which is the number of days in the Applicable Percentage Rent
Fiscal Year.
(iv) Delinquent Rental. As used herein, "Delinquent Rentals" means
-----------------
Rentals which are due and payable by a Tenant on or prior to the Proration Date
but which have not been paid by the Proration Date. Delinquent Rentals shall be
prorated between the Partners and Buyer as of the Proration Date, but not
14
<PAGE>
until they are actually collected by Buyer. Buyer shall have the right after
the Closing to collect Delinquent Rentals relating to the period prior to the
Proration Date, but shall not be obligated to do so. Upon the Final Closing
Adjustment, any Delinquent Rentals which have not as yet been paid shall be
assigned to the Partners. After the Closing and continuing through and after
the Final Closing Adjustment, without the express written consent of Buyer, the
Partners shall not take, nor cause Buyer to take, any action against a Tenant
owing Delinquent Rentals which would affect such Tenant's right to occupy its
leased premises. Rentals collected by Buyer after the Closing, shall be applied
in the following order of priority: (a) first, to the particular rental
obligation, if any, for which the Tenant designates the payment has been made
(e.g., by a notation on the Tenant's check or in an accompanying cover letter or
- -----
if the payment is made in response to an invoice submitted to the Tenant); and
(b) secondly, against the Tenant's Rental obligations in reverse chronological
order in which they accrue. All Delinquent Rentals received by Buyer or any of
its affiliates after the Proration Date shall be immediately applied in
accordance with the above and any amount owing to the Partners shall be
immediately paid upon application, less the amount of any management fee or
compensation paid or due with respect to such Delinquent Rentals; however, in no
event later than thirty (30) days after collection.
(A) The Partners shall have the right to commence litigation
against the Tenants owing Delinquent Rents (the "Delinquent Tenants") to
collect the Delinquent Rentals, which pursuant to the above, the Partners
are entitled to as and when collected. The Partnership shall assign to the
Partners the necessary rights under the subject leases to commence such
litigation. The Partners may proceed with counsel of their own choosing,
and at its own expense, to collect any such Delinquent Rentals due by the
Delinquent Tenants which are allocable to the Partners, provided that the
Partners shall not seek (i) termination of any Lease; (ii) eviction of any
Delinquent Tenant; nor (iii) to levy against the Delinquent Tenant's
interests in the Lease, all without the prior written consent of Buyer.
(B) If a Delinquent Tenant owes Delinquent Rental which is
properly allocable to both the Partners and Buyer, the Partners and Buyer
shall cooperate in collecting such Delinquent Rental. If the Partners
desire to commence litigation as to Delinquent Rentals properly allocable
to it, but Buyer does not so desire to commence litigation, then the
Partners may commence litigation as set forth in (A) above. If both
parties desire to commence litigation, Buyer shall
15
<PAGE>
institute such litigation on the Partnership's behalf and the Partners'
share of any recovery of the Delinquent Rentals from such litigation, after
the payment of all expenses in connection therewith, shall be apportioned
between Buyer and the Partners in accordance with this Subsection
2.3(i)(iv).
(j) Proration - Taxes and Assessments. All non-delinquent real estate
---------------------------------
and personal property taxes on the Property not otherwise reimbursed by Tenants
under their Leases or by a party to the REA shall be prorated between the
Partners and Buyer on an accrual basis, based upon the actual current tax bill
for the tax year in which the Closing occurs. If the most recent tax bill
received by the Partners as of the Proration Date is not the actual current tax
bill, then the Partners and Buyer shall re-prorate the real estate and personal
property taxes at the Final Closing Adjustment if the actual current tax bill is
then available. All amounts payable for real estate and personal property taxes
accruing up to and including the Proration Date shall be the obligation of the
Partners and all amounts payable for real estate and personal property taxes
accruing after the Proration Date shall be the obligation of Buyer. If, after
the Proration Date, any additional or supplemental real estate and personal
property taxes are assessed against the Property by reason of back assessments,
corrections to previous tax bills or other events occurring up to and including
the Proration Date, the Partners and Buyer shall re-prorate the real estate and
personal property taxes at the Final Closing Adjustment to provide the
appropriate credit. All amounts receivable pursuant to pending appeals for real
estate and personal property tax for the period up to and including the
Proration Date shall be the property of the Partners and all amounts recovered
for tax appeals for real estate and personal property taxes accruing after the
Proration Date shall be property of Buyer. If any of the sums recovered by the
Partners pursuant to the real property tax appeal are payable to or owed as a
credit to tenants of the Property, such sums shall be paid to Buyer who shall
make the appropriate adjustments with the tenants. Any delinquent real estate
and personal property taxes on the Property shall be paid by the Partners at the
Closing.
(k) Proration - Operating Expenses and Insurance Premiums. All costs,
-----------------------------------------------------
expenses, charges and fees for sewer, water, electricity, heat and air-
conditioning service and other utilities, common area maintenance charges,
insurance premiums, rental and privilege taxes, business occupation taxes,
promotional expenses, periodic charges payable under Service Contracts which are
assigned to Buyer, periodic fees payable under transferable Licenses and Permits
for the operation (as opposed to the construction) of the Property, periodic
charges under the REA, any payroll, employee benefits, employee related taxes or
other labor costs paid by the Partners (if assumed by
16
<PAGE>
Buyer directly or indirectly) and any other costs incurred in the ordinary
course of business for the management and operation of the Property, and
insurance premiums shall be prorated between the Partners and Buyer on an
accrual basis, based on the actual number of days in the month during which the
Closing occurs. The Partners shall be responsible for all such expenses that
are attributable to the period up to and including the Proration Date and Buyer
shall be responsible for all such expenses which are attributable to the period
after the Proration Date. To the extent commercially reasonably and
practicable, the Partners shall obtain billings and meter readings as of the day
up to and including the Proration Date to aid in such prorations. If billings
or meter readings as of the day up to and including the Proration Date are
obtained, adjustments of any costs, expenses, charges or fees shown thereon
shall be made in accordance with such billings or meter readings.
(l) Proration - Security Deposits and Other Tenant Credits. At the
------------------------------------------------------
Closing, Buyer shall be credited with and the Partners shall be charged with an
amount equal to the sum of (i) the Security Deposits (and any interest due to
Tenants thereon, if any) being held by the Partners or any other person under
the Leases as designated on the Rent Schedule, plus (ii) the amount of any other
credits due Tenants. Upon the Closing, the Partners shall be entitled to retain
the Security Deposits or other such credits due Tenants, for which Buyer has
been credited and the Partners have been charged pursuant to this Subsection
2.3(l).
(m) Adjustment Dates. On July 31, 1998, the Partners and Buyer shall
----------------
make the Interim Closing Adjustment and no later than October 1, 1999, the
Partners and Buyer shall make the Final Closing Adjustment to the prorations,
each pursuant to this Subsection 2.3(m). The Interim Closing Adjustment and the
Final Closing Adjustment shall be made as set forth below in this Subsection
2.3(m).
(i) General. Payment of Delinquent Rentals collected by Buyer after
-------
the Proration Date which have not been adjusted at the Interim Closing
Adjustment and which are attributable to the period up to and including the
Proration Date, shall be made by Buyer to the Partners when and as collected and
as soon as practicable following receipt. All other adjustments or prorations
which could not be determined at the Closing or the Interim Closing Adjustment
due to the lack of actual statements, bills or invoices for the current period,
the year-end adjustment of Additional Rentals, the unavailability of final sales
figures or amounts for Percentage Rent or for any other reason shall be made at
the Final Closing Adjustment. Any net adjustment determined at each respective
Adjustment Date in favor of Buyer shall be paid in cash or cash equivalent by
the Partners to Buyer no later than twenty (20) days after the
17
<PAGE>
respective Adjustment Date. Any net adjustment in favor of the Partners shall
be paid in cash or cash equivalent by Buyer to the Partners no later than twenty
(20) days after the respective Adjustment Date. Any reduction or credit paid to
or benefiting any tenant or Anchor occasioned by the I. Magnin/GCC Adjustment
shall be treated as if such reduction had not been given or such credit had not
been paid for the purpose of adjustments required by this Agreement.
(ii) Additional Rental Adjustment. The actual amount of Additional
----------------------------
Rentals paid by each Tenant of the Property for the annual period in which the
Proration Date occurs (as distinguished from the estimated amounts prorated as
of the Proration Date pursuant to Subsection 2.3(i)(ii) above) shall be
separately prorated between the Partners and Buyer as of the Proration Date
based on the actual number of days in the annual period during which the
Proration Date occurs. Buyer shall pay to the Partners an amount (if any) equal
to the excess of (1) the product obtained by multiplying (A) the total amount of
Additional Rentals paid by the Tenant to the Partners and Buyer for the annual
period during which the Proration Date occurs, by (B) a fraction, the numerator
of which is the number of days in the annual period up to and including the
Proration Date and the denominator of which is the total number of days in the
annual period over (2) the sum of (X) the total amount of the monthly or
quarterly payments of estimated Additional Rentals actually collected by the
Partners or the Partnership prior to the Close of Escrow from the Tenant for the
months or quarters preceding the month or quarter during which the Proration
Date occurs, (Y) a pro-rated portion of the monthly or quarterly estimated
Additional Rentals paid by the Tenant for the month or quarter during which the
Proration Date occurs (i.e., the amount of the adjustment pursuant to Section
----
2.3(i)(ii) above) and (Z) the entire amount of the monthly or quarterly
estimated Additional Rentals which constitutes Delinquent Rentals and which is
collected by Buyer or the Partnership from the Tenant after the Proration Date
and paid over to the Partners by Buyer pursuant to Subsection 2.3(i)(iv) above.
If, for any Tenant, the Additional Rent received by the Partners, up to and
including the Proration Date, exceeds the product obtained above, the Partners
shall pay the excess to Buyer. If the total sum of all advance payments of
projected Additional Rentals exceeds the Additional Rentals actually due from
the Tenant for the annual period in which the Proration Date occurs, Buyer shall
remit or credit the Tenant with such excess.
(iii) Percentage Rent Adjustment. To the extent the sum of all
interim payments on account of Percentage Rent collected by the Partners
from each Tenant for the Applicable Percentage Rent Fiscal Year exceeds the
amount of Percentage Rent to which the Partners are entitled with respect to
such Tenant pursuant to Subsection 2.3(i)(iii), the Partners
18
<PAGE>
shall pay such excess to Buyer. To the extent the sum of all interim payments
on the account of Percentage Rent collected by Buyer from each Tenant for the
Applicable Percentage Rent Fiscal Year exceeds the amount of Percentage Rent to
which Buyer is entitled with respect to such Tenant, then Buyer shall pay such
excess to the Partners. Any such adjustment of interim payments received and
actual Percentage Rent payable shall be made on a Lease-by-Lease basis (as
opposed to aggregating all interim payments received by the Partners from all
Tenants and offsetting the same against the entire amount of Percentage Rent
payable by all Tenants). If the total sum of the interim payments on account of
Percentage Rent collected by the Partners plus the interim payments on account
of Percentage Rent collected by Buyer exceeds the Percentage Rent actually due
from the Tenant, Buyer shall remit or credit Tenant with such excess and the
Partners and Buyer shall make any necessary adjustment between them in
accordance with the preceding provisions of this Subsection 2.3(m)(iii).
(iv) No Further Adjustments. On the Final Adjustment Date, final
----------------------
prorations shall be made and, to the extent necessary, Buyer and the Partners
shall estimate items for which final sums are not available. Except for: (a)
additional or supplemental real estate taxes, real estate tax credits or
rebates, or other adjustments to real estate taxes due to back assessments,
corrections to previous tax bills or real estate tax appeals or contests, and
(b) any Additional Rentals or any Percentage Rent which may be contested by
Tenants or cannot be computed by the Final Adjustment Date, the Final Closing
Adjustment shall be conclusive and binding upon the Partners and Buyer.
(n) Leasing Commissions and Tenant Improvements. Any and all leasing
-------------------------------------------
commissions due and tenant improvements with respect to Leases in existence on
the date hereof including the Pending Leases (as hereinafter defined in Exhibit
"Q") shall be paid in full and discharged by the Partners or the Partnership or
credited to Buyer at closing prior to the Close of Escrow. The Partners have
entered into that certain Management Agreement with Wilder & Co. a true copy of
which is attached hereto as Exhibit "R" (the "Management Agreement"). The
Partnership will terminate the Management Agreement as of the Close of Escrow.
Buyer shall pay to Wilder & Company a leasing commission earned by Wilder &
Company pursuant to the Termination of Management Agreement attached hereto as
Exhibit "S". Any and all leasing commissions and tenant improvements with
respect to Leases executed after the date of this Agreement in accordance with
the consent provisions described below, except for the Pending Leases shall be
paid in full and discharged by Buyer.
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(o) Reimbursement of 1998 Capital Costs. Buyer shall pay to the
-----------------------------------
Partners at Closing the sums expended by the Partnership during the calendar
year 1998 in connection with the 1998 Capital Expenditures Statement as is more
specifically described on Exhibit "T" (the "1998 Capital Expenditures
Statement"). The 1998 Capital Expenditures Statement shows the sums budgeted
and the sums expended to date. Such statement shall be updated as of the Close
of Escrow based upon actual sums paid by the Partnership. The remaining sums
due under contracts included with the Service Agreements shall be assumed and
paid by Buyer. The Partners will credit Buyer with the unpaid capital
improvement costs which are the Partners' obligation as more specifically set
forth on Exhibit "T".
(p) Payment of Expenses. Except as otherwise specifically provided in
-------------------
this Agreement, the Partners and Buyer shall each pay all of their own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including all related accounting, legal and appraisal fees.
(q) Continuing Effect. Notwithstanding any provisions of this
-----------------
Agreement to the contrary, the agreements made by the Partners and Buyer
pursuant to Subsections 2.3(h) through (p) (inclusive) shall survive the
Closing.
(r) Recordation; Escrow Fees. The cost of the municipal transfer
------------------------
taxes, if any, state and county transfer taxes required to be affixed to the
deeds required herein, recording fees and escrow fees of Escrow Holder shall be
divided and paid equally by Buyer and the Partners.
2.4 Escrow Holder Authorized to Complete. If necessary, Escrow
------------------------------------
Holder is hereby authorized to insert the date of the Close of Escrow as the
execution date of the deeds and is further authorized to insert the date of the
Close of Escrow and to fill in blank spaces in any and all documents and
instructions delivered to it so long as it is done in conformance with this
Agreement.
3. CONDITIONS AND INSPECTION.
-------------------------
3.1 Conditions to Buyer's Obligations. Buyer commenced Buyer's due
---------------------------------
diligence on or about March 1, 1998 and completed Buyer's due diligence on or
about April 15, 1998 (the "Approval Time") to review and approve the "due
diligence" matters set forth in Subsections 3.1(a)-(e) inclusive. Buyer
acknowledges Buyer's approval of the due diligence matters. If any of the
conditions set forth in Subsections 3.1(e), (f), (g) and (h) are not satisfied
by the respective dates set forth therein (each such date being called an "End
Date"), then Buyer may elect to terminate this Agreement and receive the return
of the Deposit and all interest earned thereon. Buyer's election to
20
<PAGE>
terminate this Agreement pursuant to this Section 3.1 shall be effective if, on
or before the End Date, Buyer has delivered to the Partners and Escrow Holder
Buyer's notice of termination. Upon receipt by Escrow Holder of Buyer's notice
of termination pursuant to Section 3.1, Escrow Holder shall immediately return
the Deposit and all interest earned thereon to Buyer and this Agreement shall be
deemed terminated. If Buyer fails to notify the Partners of its election to
terminate this Agreement in accordance with this Section 3.1, then this
Agreement shall remain in full force and effect.
(a) The Partners (i) have made available to Buyer, at the Property or
in the Partners' Washington, D.C. office and at Wilder & Co. offices in Boston,
Massachusetts, all plans and specifications for the Property in the Partners'
possession or under the Partners' control, together with all soils, geological
and environmental reports and governmental reports in the Partners' possession
or under the Partners' control in connection with the construction of
improvements on the Property, and (ii) have permitted Buyer to examine the
conditions of the Property, including but not limited to its soils and any
environmental, structural, electrical, mechanical, roof, HVAC and other elements
relating to the Real Property and the Improvements. Buyer provided the Partners
with copies of all reports prepared by parties other than Buyer in connection
with Buyer's examination of the Property. Buyer shall give the Partners, or the
Partnership's manager or agent, designated by the Partnership for this purpose,
at least twenty-four (24) hours' notice in advance of any intended inspection or
entry. Buyer shall comply with all laws and governmental regulations applicable
to such inspection or entry. Buyer shall indemnify, defend with counsel
reasonably acceptable to the Partnership, and hold Partnership, its directors,
officers, employees, agents, representatives, attorneys and consultants harmless
from and against any and all losses, costs, damages, liabilities and expenses
(including reasonable attorneys' fees and costs of suit), arising out of acts or
activities of Buyer or Buyer's agents or consultants on or about the Property;
provided Buyer shall only be responsible for actual, out-of-pocket losses,
costs, damages, liabilities and expenses. Buyer shall not remove flooring, make
excavations or test borings, disturb any plants, trees or shrubs, or engage in
any other activities destructive of the Property without the Partnership's
consent, which consent shall not be unreasonably withheld or delayed. Any
damage to the Property made by Buyer or any persons acting for or on behalf of
Buyer shall be repaired promptly, replacing or restoring any vegetation that is
damaged and generally putting the Property and all points of entry by the
inspectors in substantially the same condition as before the inspection or
entry.
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<PAGE>
(b) The Partnership has delivered or made available to Buyer copies of
all Leases and all amendments thereto or any subleases in the Partnership's or
the Partners' possession, and any pending leases.
(c) Buyer (or its authorized employees and agents) shall have the
right to examine all of the Partnership's books and records at the Property and
at the Partnership's Washington, D.C. office and at Wilder & Co. offices in
Boston, Massachusetts pertaining to the Property including without limitation
the following documents:
(i) Copies of all certificates of occupancy, licenses, permits,
authorizations, and approvals required by law and issued by all governmental
authorities having jurisdiction and copies of all certificates issued by the
local board of fire underwriters (or other body exercising similar functions);
(ii) Copies of all certificates of existing insurance policies in
force affecting the Property or any portion thereof and a synopsis of the
existing policies (Buyer shall have the right to review the existing policies at
the Partnership's office);
(iii) The original of each bill for current real estate and personal
property taxes and for the two most recent prior years, a current statement of
assessed valuation, water charges and other utilities, together with proof of
payment thereof;
(iv) All records and files relating to the Property including those
records and files relating to the ownership, management, operation and
maintenance of the Property;
(v) The current operating budget for the Property with applicable
documentary support and operating statements for the years 1995, 1996 and 1997;
(vi) The financial records of tenant sales and tenant sales reports for
1995, 1996, 1997 and year to date 1998;
(vii) Tenant expense recapture calculation worksheets and resulting
billing for 1996, 1997 and projected 1998;
(viii) Audited financial statements for the Partnership as of December
31, 1997 and current unaudited financing statements for the period ending March
31, 1998; and
(ix) Pro-forma financial statements for the Partnership as at the Close
of Escrow.
22
<PAGE>
(d) Buyer shall have the right to approve the Survey described in
Section 2.3(f). On or before ten (10) days prior to the Approval Date, Buyer
shall notify the Partners, in writing, of any disapproved survey matters
("Disapproved Matters"). All other matters shown by the Survey shall constitute
additional "Permitted Encumbrances". As a condition to the Closing, the
Partners shall use their best efforts to remove, or cause to be removed, all
Disapproved Matters. No less than five (5) days after receiving notice from
Buyer of the Disapproved Matters, the Partners shall notify Buyer in writing of
any Disapproved Matters which the Partners are unable to cause to be removed or
corrected and Buyer shall then, within five (5) days of receipt of such notice,
elect, by giving written notice to the Partners (i) to terminate this Agreement,
or (ii) to waive its disapproval of such survey matters (such survey matters
shall then be deemed to be "Permitted Encumbrances"). Buyer's failure to give
such written notice shall be deemed an election to terminate this Agreement.
(e) The Partnership has provided to Buyer a Phase I Environmental Site
Assessment regarding the Property prepared by Boelter Engineering dated March
10, 1998. Any further environmental testing or investigation will be at Buyer's
expense.
(f) The Partners shall perform, observe and comply with all the
covenants, agreements, and conditions required by this Agreement to be
performed, and observed, and complied with by, prior to or as of Close of
Escrow.
(g) As of the Close of Escrow, neither the Partners nor the
Partnership shall have made a general assignment for the benefit of creditors,
nor have admitted in writing its inability to pay its debts as they become due,
nor have filed a petition in bankruptcy or been adjudicated a bankrupt or
insolvent or have filed a petition seeking any reorganization, arrangement,
composition, readjustment liquidation, dissolution or similar relief under any
present or future statute, law or regulation, nor have filed any answer
admitting or failing to reasonably contest the material allegations of a
petition filed against it in any such proceeding or seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator.
3.2 Conditions to the Partners' Obligations. The Partners'
---------------------------------------
obligations to close Escrow and complete the transaction contemplated herein is
subject to Buyer's performance, observance and compliance with all the
covenants, agreements, and conditions required by this Agreement to be
performed, and observed, and complied with by, prior to or as of Close of
Escrow.
23
<PAGE>
3.3 Upon termination of this Agreement pursuant to Section 3.1
hereof, Buyer shall return any and all documents, studies and other items
received from the Partnership in Buyer's possession, under control of, or
reasonably available without additional cost to, Buyer and the Partners shall
thereafter maintain the confidentiality of all such information relating to the
Property and the Partners as provided in Section 14.12 hereof.
4. CONDITIONS TO CLOSING.
---------------------
4.1 Conditions to Closing. In addition to the conditions set forth
---------------------
in Section 3.1 above, the Closing and Buyer's obligation to pay the Purchase
Price and complete the transaction contemplated by this Agreement are subject to
satisfaction of the following conditions, no later than the respective dates
specified below in this Section 4.1, and the obligations of the parties with
respect to such conditions are as follows:
(a) Moratorium. At the Closing Date, there shall be no statute, law,
----------
judicial or administrative decision, proceeding, ordinance or regulation
pending, or proposed and known to the Partners, to be imposed by the Authorities
or any public or private utility having jurisdiction over the Property which
would prevent or materially and adversely impair the operation or use of the
Property in the manner it is currently operated or used.
(b) Representations, Warranties and Covenants of the Partners. The
---------------------------------------------------------
Partners shall have materially performed each and every agreement to be
performed by the Partners hereunder and Buyer shall have approved, pursuant to
the Partners' Certificate (hereinafter defined), any material changes in the
truth and accuracy of the Partners' warranties and representations.
(c) No Material Changes. As of the Closing, there shall have been no
-------------------
material adverse changes in the physical or financial condition of the Property
and no material adverse change in the financial condition of the Partnership.
For purposes of this Subsection 4.1(c), a "material adverse change in the
physical or financial condition of the Property" shall mean (i) the closing of
operations by an Anchor of more than twenty-five percent of its store in the
Mall or (ii) a change in the physical condition of the Property other than by
condemnation or casualty which will result in $2,500,000 of loss of value to the
Property or (iii) $250,000 of loss of annualized income of the Property.
(d) The Partners' Deliveries. On or before the Closing Date, the
------------------------
Partners shall have delivered or caused to be delivered the items described
herein to be delivered by the
24
<PAGE>
Partners including, without limitation, the Tenant Estoppel Certificates
required under Section 2.3(b)(iii) and the Anchor Estoppel Certificates required
under Section 2.3(b)(iv).
(e) Title and Title Insurance. At the Closing Date, the
-------------------------
Title Company shall have issued or shall have unconditionally committed to
issue the Title Policy to Buyer as provided herein.
4.2 Conditions Precedent to the Partners' Obligations. The Closing
-------------------------------------------------
and the Partners' obligation to transfer the Property to Buyer and consummate
the transaction contemplated by this Agreement are subject to the satisfaction
of the following conditions, no later than the respective dates specified below
in this Section 4.2, and the obligations of the parties with respect to such
conditions are as follows:
(a) Buyer's Deliveries. On or before the Closing Date,
------------------
Buyer shall have delivered the items described herein to be delivered by Buyer.
(b) Purchase Price. On or before the Closing Date, Buyer
--------------
shall have deposited into Escrow, for disbursement as provided herein, the
Purchase Price in accordance with Section 1.3 of this Agreement.
(c) Representations, Warranties and Covenants of Buyer.
--------------------------------------------------
Buyer shall have materially performed each and every agreement to be performed
by Buyer hereunder and each and every one of Buyer's representations,
warranties and covenants set forth in this Agreement shall be true and correct
in all material respects as of the Closing Date.
5. ADDITIONAL OBLIGATIONS OF PARTIES.
---------------------------------
5.1 Security Deposits. Subject to the provisions of Section 2.3(l),
-----------------
the Partners shall, at the Close of Escrow, prorate and turn over to Buyer a
current list of all tenants and Security Deposits, as well as all security
deposited by any tenant where not prohibited by terms of the tenant's Lease and
all of the original Leases under the Partners' or the Partnership's possession
or control; and in connection with the receipt thereof, Buyer will hold and
apply the Security Deposits for the purposes set out in such tenant's Lease and
indemnify the Partners against any liability in connection therewith.
5.2 Notices to Tenants, Parties to REA and Service Contractors.
----------------------------------------------------------
Immediately after the Close of Escrow, the Partners and Buyer shall give written
notices (i) to the Parties to the REA advising them of the change of ownership
of the Partnership and directing them to pay all charges under the REA as
directed by Buyer; (ii) to the Tenants advising them of the change of
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<PAGE>
ownership of the Partnership and directing them to pay Rent and other charges
under their respective Leases as directed by Buyer.
5.3 Foreign Investors. If the Partners fail to deliver the FIRPTA
-----------------
Certificate (as provided in Section 2.3(b)(ix)), to Buyer prior to or at the
Close of Escrow, then the transaction shall be completed at the Close of Escrow,
but Buyer shall withhold ten percent (10%) of the "amount realized" (as set
forth in the Regulations) by the Partners and transmit to the appropriate
Internal Revenue Service Center, all in accordance with said Section 1445 and
the Regulations pursuant thereto. If the Partners provide Buyer with such
executed certificate or notice prior to or at the Close of Escrow, then no such
withholding shall occur.
6. OPERATION OF PROPERTY.
---------------------
6.1 Access to and Information Concerning the Property and Consulting.
----------------------------------------------------------------
The Partners shall, between the date hereof and the Close of Escrow, allow
Buyer, its agents and attorneys access to the Property for purposes of
inspecting the same or any part thereof at any time as they shall reasonably
request, and furnish to Buyer, its agents and attorneys any and all information
in the Partners' or the Partnership's control regarding the Property and its
operation that Buyer, its agents and attorneys shall reasonably request from
time to time.
6.2 Leasing of the Property. Prior to the Close of Escrow, the
-----------------------
Partnership and the Partners shall not terminate, amend or extend existing
Leases, except with respect to the pending leases (the "Pending Leases") a
schedule of which is attached hereto as Exhibit "Q" or with respect to
agreements approved by Buyer, or enter into new leases or lease extensions
without the approval of Buyer. License and storage agreements which are
terminable by the Landlord do not require prior approval of Buyer. Approval or
disapproval shall be given within five (5) business days of Buyer's receipt of a
proposal from the Partnership. A failure of Buyer to respond within such five
(5) Business Day period shall be deemed approval. To the extent approved by
Buyer, the Partners agree to promptly deliver to Buyer true and complete copies
of any lease amendments, lease extensions, lease termination agreements and new
leases when fully executed. The Partners shall, at the Partners' sole expense,
satisfy in full all lease commissions, tenant allowances or monetary concessions
and complete all alterations or other work required to be performed by the
Partners under the Leases (as shown on the Rent Schedule) or the Pending Leases.
6.3 Possession. Buyer shall have the non-exclusive right to
----------
possession of the Partnership Interest as of the Close of Escrow.
26
<PAGE>
6.4 Conduct of Business Pending Closing. From the date hereof until
-----------------------------------
the Closing, the Partners shall (a) use reasonable best efforts to maintain, for
the benefit of Buyer following the Closing, the goodwill of Tenants, prospective
tenants, vendors and other parties having business relations with the
Partnership; (b) pay their debts and the debts of the Partnership (or in good
faith contest the same) and perform their obligations and the obligations of the
Partnership as they become due; (c) maintain the Property in the same manner and
condition that exists on the date hereof, as such condition shall be altered by
reason of casualty, taking and/or normal wear and tear; (d) without the express
written consent of Buyer, not (i) enter into a new reciprocal easement or
similar agreement or amend or modify, consent to the assignment of or waive any
material right under the REA (except for the execution and recording of the
Fifth Amendment), (ii) make any alterations to the Property or enter into any
new contracts or extend or renew or cancel any Service Contract relating to
capital expenditures, (iii) enter into any other new contracts or extend, renew
or cancel, consent to the assignment of or waive any material right under any
other Service Contract, except for contracts executed in the ordinary and usual
course and business and in accordance with past practices and policies which can
be terminated without penalty or payment upon not more than thirty (30) days
prior notice, (iv) sell, transfer, exchange, further encumber or grant interests
(including easements) in the Property or in the Partnership or any part thereof
or engage in negotiations or discussions with, or otherwise solicit or assist,
any third party relating to the acquisition by such third party of the Property
or the equity interests in the Partnership or the Partners, and (v) otherwise
take any action which could or would render inaccurate any of the
representations or warranties made by the Partners in this Agreement; and (e)
otherwise operate the Property in the ordinary course consistent with current
practice.
6.5 Assistance Following Closing. From and after the Closing, the
----------------------------
Partners shall provide reasonable assistance to Buyer in connection with the
preparation of financial statements and bills and the adjustment of losses and
claims and the enforcement or settlement of any such claims. Without limiting
the foregoing, the Partners shall, upon the request of Buyer from time to time,
provide signed representation letters with respect to revenues and expenses of
the Partnership if required under generally accepted accounting practices to
enable Buyer's accountants to render an opinion on Buyer's financial statements.
7. TITLE AND WARRANTIES.
--------------------
7.1 The Partners' Representations and Warranties. The Partners
--------------------------------------------
hereby represent, warrant and covenant to Buyer as follows:
27
<PAGE>
(a) The Partners have full power and authority to enter into and
perform this Agreement in accordance with its terms; the Partnership is a
general partnership duly organized, validly existing and in good standing under
the laws of the State of California, and to the best of the Partners' knowledge,
it has made all filings and recordings necessary to exist, operate and do
business under all presently applicable Governmental Regulations and has the
full and unrestricted power and authority, to own, operate and lease its
properties, to carry on its business as currently conducted and to execute and
deliver this Agreement and any other instruments to be delivered pursuant
hereto, and to perform all of its obligations under this Agreement and any other
instruments to be delivered pursuant hereto.
(b) Except as otherwise disclosed on the Schedule of Reports and
Studies attached hereto as Exhibit "U", the Partners have no knowledge of any
notice, order or directive of any Authorities that any work of repair,
maintenance, or improvement be performed on the Property.
(c) Except as otherwise disclosed on the Schedules of Regulatory
Compliance attached hereto as Exhibit "V" ("Regulatory Compliance") or on
Exhibit "U", neither the Partners nor the Partnership has received no notice
from any Authorities, any board of fire underwriters, improvement association,
or architectural committee relating to defects in the improvements on the
Property, relating to noncompliance with any applicable building code, laws,
regulations or restrictions applicable to the Property that has not been
corrected, or relating to any threat of impending condemnation.
(d) Neither the Partnership nor the Partners have received any notice
from any Authorities of any pending or contemplated condemnation or change of
zoning affecting the Property.
(e) To the best of the Partners' knowledge, the Rent Schedule provided
is a complete and correct list of all leases, tenancies, and other rights of
occupancy or use for any portion of the Property in effect on the date of this
Agreement and all of the tenant leases are the result of bona fide arm's-length
negotiations between the parties. To the best of the Partners' knowledge, the
Partners have delivered or made available true and complete copies of all Leases
and amendments thereto and Service Contracts affecting the Property that would
be binding on Buyer, the Partnership or the Property following the Closing.
Except for rents not delinquent for more than thirty (30) days and claims
related to the I. Magnin/GCC Adjustment and matters listed on the Partners'
Certificate of Reaffirmation of Representations delivered at the Close of
28
<PAGE>
Escrow, the Partners are not aware of any default by any of the tenants of the
Property.
(f) Except for the completion of tenant improvements under Leases
which the Partnership is obligated to complete and for budgeted repair and
maintenance for the Property, from and after the Effective Date, the Partners
and the Partnership will not authorize Wilder & Co. to, (i) perform any grading
or excavation, construction, or removal of any improvements, or make any other
change or improvement upon or about the Property; (ii) create or incur, or
suffer to exist, any mortgage, lien, pledge, or other encumbrances in any way
affecting the Property without Buyer's written approval; and (iii) commit any
waste or nuisance upon the Property. The Partners and the Partnership will,
maintain and keep the Property in neat condition and will observe all laws,
ordinances, regulations, and restrictions affecting the Property and its use,
until the Close of Escrow.
(g) Except as otherwise disclosed on the Environmental Disclosures
attached hereto as Exhibit "W", the Phase I report referenced in Section 3.1(e)
and the Asbestos Surveys and Reports a listing of which is attached hereto as
Exhibit "X", neither the Partnership nor the Partners have received any written
notice that the Partnership is not in compliance with the Federal Resources
Conservation and Recovery Act ("RCRA"), the Federal Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Insecticide,
Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. (S)136 et. seq.; the
-- ---
Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.); the Toxic
-- ---
Substance Control Act ("TSCA"), 15 U.S.C. (S)2601 et. seq.; the Atomic Energy
-- ---
Act, 42 U.S.C. (S)2011 et. seq.; the Clean Water Act (the "Clean Water Act"), 33
-- ---
U.S.C. (S)1251 et. seq.; and the Clean Air Act (the "Clean Air Act"), 42 U.S.C.
-- ---
(S)7401 et seq. and all comparable federal and/or state laws, implementing
-- ---
federal and/or state regulations and local ordinances (hereafter "Applicable
Environmental Laws"). The Partners hereby disclose and Buyer acknowledges that
some components of the Improvements contain asbestos material and may contain
lead in paint products used prior to 1978. Neither the Partners nor the
Partnership have received any written notice from any governmental unit or other
person that (i) the Partnership or the Property is not in compliance with any
Applicable Environmental Laws, (ii) there are administrative, regulatory or
judicial proceedings pending or alleging any violation of any Applicable
Environmental Laws, or (iii) there is liability or claims under any applicable
Environmental Laws. Except as set forth on Exhibit "W", the Partnership has not
installed any underground or above ground storage tanks on, under or about the
Property and, to the
29
<PAGE>
Partners' knowledge, no such tanks are located on, under or about the Property.
(h) Except as disclosed on the schedule of pending litigation attached
hereto as Exhibit "Y" ("Pending Litigation"), neither the Partners nor the
Partnership have received any written notice of any threatened litigation and to
the best of the Partners' knowledge, there is no litigation pending not covered
by public liability insurance that might adversely affect the Partnership, the
Partnership Interests, the value or the use or operation of the Property for its
intended purpose or the ability of the Partners to perform their obligations
under this Agreement. The Partners shall notify Buyer promptly of any such
litigation of which the Partners become aware.
(i) The Partners are not a "foreign person" within the meaning of
Section 1445(f)(3) of the Code.
(j) Neither the Partners nor the Partnership have filed or been the
subject of any filing of a petition under the Federal Bankruptcy Law or any
federal or state insolvency laws or laws for composition of indebtedness or for
the reorganization of debtors.
(k) The execution, delivery and performance of this Agreement by the
Partners has been duly and validly authorized. This Agreement has been, and the
Partners' Closing Documents will be, duly executed and delivered by the
Partners. This Agreement constitutes, and when so executed and delivered the
Partners' Closing Documents will constitute, the legal, valid and binding
obligations of the Partners, enforceable against the Partners in accordance with
their respective terms.
(l) None of the execution, delivery or performance of this Agreement
by the Partners does or will, with or without the giving of notice, lapse of
time or both, violate, conflict with, constitute a default, result in a loss of
rights, acceleration of payments due or creation of any Lien upon the Property
or require the approval or waiver of or filing with any person or entity
(including without limitation any Authorities) under (i) the organizational
documents of the Partnership or the Partners or, any agreement, instrument or
other document to which the Partnership or the Partners is a party or by which
it is bound or (ii) any judgment, decree, order, statute, injunction, rule,
regulation or the like of any Authorities applicable to the Partnership or the
Partners.
(m) Except for easement agreements listed on the Title Commitment, the
REA constitutes the only reciprocal easement agreements or operating agreements
encumbering the Property. A true and complete copy of the REA has heretofore
30
<PAGE>
been furnished to Buyer, together with each written modification thereof and
supplement thereto. The Partners have not made any oral promises or agreements
amending or modifying the REA with any REA Party.
(i) The REA is valid and in full force and effect. As of the Closing
Date, no interest in the REA will be assigned to any party other than Buyer, or
otherwise pledged or encumbered in any way.
(ii) Except for a $590.30 dispute with Marshall, Fields regarding 1995
REA expenses and the matters relating to the I. Magnin/GCC Adjustment, none of
the parties to the REA has made any written claim which has been received by the
Partners or the Partnership (A) that the Partnership has defaulted in performing
any of its obligations under the REA which has not heretofore been cured, (B)
that any condition exists which with the passage of time or giving of notice, or
both, would constitute any such default, (C) that such REA party is entitled to
any reduction in, refund of, or counterclaim or offset against, or is otherwise
disputing, any Additional Rent or other charges paid, payable or to become
payable by such REA party, (D) that such REA party is entitled to cancel its REA
or to be relieved of its operating covenants thereunder, or (E) that there is a
violation of any of the covenants, conditions or restrictions contained in such
REA. As of the date hereof, Marshall, Fields has reserved the right to audit
REA expenses for 1996 and 1997 and Lord & Taylor will commence its audit of REA
expenses for 1995 and 1996 on April 13, 1998.
(n) To the best of the Partners' knowledge, Exhibit "F" is a true and
complete list of all Service Contracts, including all modifications thereof.
There has been no material default (without giving effect to any notice and cure
rights) by the Partnership under any Service Contract or any written claim
received by the Partners or the Partnership of any such default by any party
thereto, which has not heretofore been cured except as set forth on Exhibit "F".
A true and complete copy of each Service Contract, together with any amendments
or supplements thereto, has been delivered or made available to Buyer by Wilder
& Company.
(o) Neither the Partnership nor the Partners have received any written
notice of violation of any permit or license maintained by the Partnership from
any Authorities that has not been cured or otherwise resolved to the
satisfaction of such Authority.
(p) The Partnership has subsidized the marketing and promotional fund
for the Property; however, the Partnership (as Landlord) is not under any
obligation to make contributions or otherwise provide assistance to any
promotional association or
31
<PAGE>
promotional fund. The promotional and marketing fund established with respect
to the Property (the "Promotional Fund") is collected from the Tenants by the
Partnership and is held by the Partnership.
(q) Copies of current real estate tax bills with respect to the
Property, other than tax bills sent to Tenants who have the obligation to pay
such taxes to the collecting authority, have been delivered or made available to
Buyer. Tax refund proceedings relating to the Property are currently pending
through retainer agreements with Crane & Norcross.
(r) No approval, consent, waiver, filing, registration or
qualification with any third party, including but not limited to, any
governmental bodies, agencies or instrumentalities is required to be made,
obtained or given for the execution, delivery and performance of this Agreement
or any of the Partners' Closing Documents by the Partners.
(s) To the Partners' knowledge, there are no lease brokerage
agreements, leasing commission agreements or other agreements providing for
payments of any amounts for leasing activities or procuring tenants with respect
to the Property other than as disclosed in the Leases, the Contracts or in
Exhibit "W".
(t) The Partners have delivered to Buyer true and complete copies of
the balance sheet and profit and loss statement of the Partnership for the
period ended December 31, 1997, which are true and complete, and were prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods indicated. Except as and to the extent
reflected or reserved against on such balance sheet, the Partnership as of such
date had no liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise, and whether due or to become due.
(u) The Partnership shall pay all federal and state income taxes
payable with respect to their share of the income of the Partnership accrued
through May 8, 1998.
(v) Exhibit "A" is a true, correct and complete copy of the
Partnership Agreement and all amendments thereto.
(w) Title to Partnership Interest; Liens and Encumbrances. The
-----------------------------------------------------
Partners each are the legal and beneficial owner of their respective Partnership
Interest free and clear of all mortgages, liens, options, claims, encumbrances
and other security arrangements and restrictions of any kind. Neither of the
Partners have granted any outstanding rights to purchase its respective
Partnership Interest and neither of the Partners is a party to any agreement,
arrangement or understanding restricting
32
<PAGE>
or otherwise relating to the transfer or voting of its respective Partnership
Interests.
(x) The term "knowledge", when used in this Agreement, shall mean
only such information as has actually been communicated to, or learned by, the
employees or officers of the Partners (without imputing to those employees or
officers, or to that entity, the knowledge of any other person or entity). In
furtherance to the sale of the Property, the Partners obtained and are familiar
with the due diligence materials, including the studies and reports referenced
therein, described in Exhibits "W" and "X".
(y) The representations and warranties set forth in this Article
shall be continuing and shall be true and correct on and as of the date of Close
of Escrow with the same force and effect as if made at that time, and all such
representations and warranties shall survive the Close of Escrow for one (1)
year. If, prior to the Closing, the Partners become aware of any fact or
circumstance that would materially change a representation or warranty of the
Partners in this Agreement, then the Partners shall promptly give written notice
of such changed fact or circumstance to Buyer. If, prior to Closing, upon the
Partners' notice or otherwise, Buyer becomes aware of: any material failure of
any condition to the obligations of Buyer to close the transactions contemplated
in this Agreement; the untruth or inaccuracy of, or facts or circumstances which
would change materially, any representation or warranty of the Partners in this
Agreement; or the failure of the Partners to comply with any provision of this
Agreement; then Buyer shall have the sole option of: (i) waiving such condition,
breach of warranty, or breach, and proceeding to Close the transactions
contemplated in this Agreement; (ii) subject to the Partners' agreement and
concurrence agreeing with the Partners to adjust the terms of this Agreement to
compensate Buyer for such change; or (iii) terminating this Agreement and
receiving the return of the Deposit as Buyer's sole remedy prior to Closing.
7.2 Buyer's Warranties. Buyer hereby represents, warrants and
------------------
covenants as follows:
(a) NCI and NCII are each limited liability companies duly
organized, validly existing and in good standing under the law of the State of
Delaware, and to the best of Buyer's knowledge, have made all filings and
recordings necessary to exist, operate and do business under all presently
applicable Governmental Regulations and have the full and unrestricted power and
authority, corporate or otherwise, to own, operate and lease their respective
properties, to carry on their business as currently conducted and to execute and
deliver this Agreement and any other instruments to be delivered pursuant
hereto, and to
33
<PAGE>
perform all of its obligations under this Agreement and any other instruments to
be delivered pursuant hereto.
(b) The execution, delivery and performance by Buyer of this
Agreement and all other instruments required to be delivered pursuant hereto,
the fulfillment of and compliance with the respective terms and provisions
hereof and thereof, and the due consummation of the transaction contemplated
hereby, have been duly and validly authorized, and do not: (1) require any
consent or approval of any partner, lender, shareholder, creditor, investor,
judicial or administrative body, Authority or other party which has not already
been obtained; or (2) conflict with, or result in any breach of, or constitute a
default under, any presently applicable Governmental Regulation, bond, note, or
other evidence of indebtedness, or under any contract, indenture, mortgage, deed
of trust, loan, lease, partnership agreement, operating agreement, articles of
incorporation, bylaws, shareholder agreement or any other agreement or
instrument to which Buyer is a party or by which Buyer or any of Buyer's
properties may be bound or affected.
(c) Buyer's representations and warranties contained herein
are and will be true and correct as of the Close of Escrow.
(d) Buyer represents that an affiliate of Buyer acquired an
interest in substantially all of the regional mall assets of the original
developer and former manager of the Property, Homart Development Co. ("Homart"),
in 1995. Buyer further acknowledges that some of the Homart employees who were
involved with the management of the Property in 1995 are currently employees of
affiliates of a member of Buyer and, as of the termination date of Homart's
management of the Property, had some knowledge and experience with the Property
and its operation prior to Buyer undertaking its due diligence of the Property.
8. ASSIGNMENT.
----------
8.1 No Other Assignment. Neither Buyer nor the Partners shall assign
-------------------
all or any part of this Agreement or any of their rights or obligations
hereunder, or any interest herein, whether by operation of law or otherwise,
without the prior written consent of the Partners or Buyer, as applicable, and
any such assignment contrary to the terms hereof shall be null and void and of
no force or effect. Except as the other party may otherwise agree in writing,
in no event shall any assignment by Buyer or the Partners of all or any part of
this Agreement or any of their rights or obligations under this Agreement,
whether before or after the Closing, release Buyer or the Partners, as the case
may be, from any of their respective liabilities or obligations hereunder.
34
<PAGE>
9. BROKERAGE COMMISSIONS.
---------------------
9.1 Mutual Representations. Each party represents to the other that
----------------------
no brokers except Morgan Stanley Realty have been involved in this transaction.
The Partners shall pay any commissions owed to Morgan Stanley Realty on or
before the Close of Escrow. It is agreed that if any claims for brokerage
commissions or finder's fees or like payment arise out of or in connection with
the transaction provided herein, and in the event any claim is made, all such
claims shall be handled and paid by the party whose actions or alleged
commitment form the basis of such claim. It is further agreed that each party
whose actions or alleged commitment form the basis of a claim agrees to
indemnify and hold harmless the other party from and against any and all claims
or demands with respect to the brokerage fees or agent's commissions or other
compensation asserted by any person, firm, or corporation in connection with
this Agreement or the transactions contemplated hereby.
10. NOTICES.
-------
Any notices given under this Agreement shall be in writing and shall
be served either personally or delivered by first class or express U.S. mail
with postage prepaid, return receipt requested pursuant to registered or
certified mail, or by nationally recognized overnight commercial courier service
with charges prepaid. Notices may also effectively be given by transmittal over
electronic transmitting devices if the party to whom the notice is being sent
has a receiving device in its office, and provided a complete copy of the notice
shall also be served either personally or in the same manner as required for a
mailed notice. Notices shall be deemed received at the earlier of actual
receipt or one (1) day following deposit in U.S. mail with postage prepaid or
with a nationally recognized overnight commercial courier service with charges
prepaid. Notices shall be directed as follows:
If to the Partners: Grosvenor International
(Westcoast Estates) Limited
1701 Pennsylvania Avenue, N.W.
Suite 1050
Washington, D.C. 20006
Attention: John R. Flavin
Fax No: (202) 785-2632
Telephone No: (202) 293-1235
35
<PAGE>
Copy to P.I.C. Greene Radovsky Maloney & Share LLP
Investments: Four Embarcadero Center, Suite 4000
San Francisco, CA 94111
Attention: Graham Maloney
Fax No: (415) 777-4961
Telephone No: (415) 981-1400
If to Buyer: c/o General Growth Properties, Inc.
55 West Monroe, Suite 3100
Chicago, IL 60603-5060
Attention: Joel Bayer
Fax No: (312) 551-5475
Telephone No.: (312) 551-5015
Copy to: Reuben C. Warshawsky
Neal Gerber & Eisenberg
Two North LaSalle Street
Chicago, IL 60602
Fax No: (312) 269-1747
Telephone No.: (312) 269-8000
If to Escrow Near North National Title Insurance
Holder: Corporation
222 N. LaSalle Street
Chicago, IL 60601
Attention: Cindy O'Donohue
Fax No.: (312) 419-0569
Telephone No: (312) 419-3900
11. CONDEMNATION AND DESTRUCTION.
----------------------------
11.1 Eminent Domain or Taking. If, prior to the Close of Escrow, any
------------------------
material portion of the Property (as defined in Section 11.2 below) is taken or
if the access to the Project is reduced or restricted, by eminent domain or
otherwise (or is the subject of a pending, threatened or contemplated taking
which has not been consummated), Buyer shall have the option, in Buyer's sole
and absolute discretion, to terminate this Agreement upon written notice to the
Partners given not later than ten (10) business days after Buyer is notified of
such taking (and if necessary, the Closing Date shall be extended by the number
of days necessary to provide Buyer such ten (10) Business Day period). If Buyer
elects to terminate this Agreement, neither party shall have any further rights
or obligations hereunder, except the payment of title and escrow cancellation
costs, which shall be borne equally by the Partners and Buyer. If Buyer does
not elect to terminate this Agreement, all awards for the taking by eminent
domain which accrue to the Partners shall be paid to Buyer and the parties shall
proceed to the Closing pursuant to the terms hereof, without modification of the
terms or Purchase Price of this Agreement, provided that Buyer shall accept the
Property "AS IS" and "WITH ALL FAULTS" insofar only as such
36
<PAGE>
condemnation is concerned, and all of the Partners' covenants, representations
and warranties hereunder shall be deemed modified accordingly. Unless or until
this Agreement is terminated, the Partners shall not take any action with
respect to any eminent domain proceeding without the prior written consent of
Buyer which consent shall not be unreasonably withheld or delayed.
11.2 Fire or Casualty. Prior to the Closing, and notwithstanding the
----------------
pendency of this Agreement, the entire risk of loss or damage by fire or other
casualty shall be borne as set forth in this Section 11.2. If, prior to the
Closing, any part of the Property is damaged or destroyed by earthquake, flood,
landslide, fire or other casualty, the Partners shall immediately notify Buyer
of such fact. If such damage or destruction is "material", either Buyer or the
Partners shall have the option to terminate this Agreement upon written notice
to the other party given not later than thirty (30) days after receipt of the
Partners' notice of such damage or destruction (and, if necessary, the Closing
Date shall be extended by the number of days necessary to provide Buyer such
thirty (30) day period). For purposes hereof, "material" shall be deemed to be
any uninsured damage or destruction to the Property in excess of Two Hundred
Fifty Thousand Dollars ($250,000.00), and any insured damage or destruction to
the Property where the cost of repair or replacement is estimated to be Five
Hundred Thousand Dollars ($500,000.00) or more. If either Buyer or the Partners
elects to terminate this Agreement, neither party shall have any further rights
or obligations hereunder except the payment of title and escrow cancellation
charges which shall be borne equally by Buyer and the Partners. If neither
Buyer nor the Partners elects to terminate this Agreement, or if the damage or
destruction is not material, this Agreement shall not terminate but the Partners
shall be entitled to the proceeds of any insurance maintained by or on behalf of
the Partners and the Partners shall repair or restore the damage or destruction
to the same condition as existed prior to the casualty as soon as reasonably
practical but in no event more than 60 days after the casualty, and upon the
completion of such repair or restoration the parties shall proceed to the
Closing pursuant to the terms hereof without any adjustment of the Purchase
Price.
12. DEFINED TERMS.
-------------
12.1 Definitions. The following terms shall have the respective
-----------
meanings assigned to them:
(a) Additional Rental - means such sums and charges payable by the
-----------------
Tenant's pursuant to the Leases (other than Minimum Rent and Percentage Rent)
including without limitation, expense reimbursement; operating cost pass-
throughs; utility charges; common area maintenance charges; charges payable
37
<PAGE>
under the REA; administrative charges, real estate and privilege taxes; Roof
Repair Fund and insurance cost reimbursements.
(b) Affiliate - means with respect to any specific entity or natural
---------
person, any firm, corporation, partnership, association, trust or other entity
which is controlled by, under the common control of or subject to the control of
such specific entity or natural person. For purposes hereof, the term "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of any such entity, or the
power to veto major policy decisions of any such entity, whether through the
ownership of voting securities, by contract or otherwise.
(c) Authorities - means all federal, state, county and local
-----------
governmental and quasi-governmental bodies, boards, commissions, agencies and
courts having jurisdiction over the Property including, without limitation, the
Village of Northbrook, the County of Cook, and the State of Illinois.
(d) Business Day - means the days (other than Saturday or Sunday) on
------------
which federally insured national banking associations are required to be open
for business in Cook County, Illinois.
(e) Improvements - mean, in addition to its definition in the Recital
------------
of Facts, all buildings, fixtures, structures, streets, roadways, sidewalks,
walkways, parking areas, storm drainage facilities, utility systems (including
sanitary sewer, natural gas, domestic and fire protection water, electrical,
telephone and cable television systems) and any other facilities or improvements
situated on the Real Property or constructed as part of the Improvements. The
term "Improvements" also means all rights, titles and interests appurtenant to
the Real Property, including rights and obligations under any REA and rights to
all streets, alleys, easements and rights of way, in, on, across, in front of
and abutting or adjoining the Real Property.
(f) Leases - means all leases, licenses, guaranty agreements, rental
------
agreements or occupancy agreements and all amendments, modifications and
supplements thereto, executed by either (i) unilaterally by the Partners; or
(ii) the Partners and Tenant; or (iii) a third party guarantor of a Lease,
relative to occupying space within the Improvements (together with all rents,
issues and profits thereunder).
(g) Minimum Rent - means all base rent, minimum rent or basic rent
------------
payable in fixed installments for stated periods by Tenants under the Leases.
38
<PAGE>
(h) Official Records - means the Real Property Records of Cook
----------------
County, Illinois.
(i) Percentage Rent - means rentals which are expressed as a fixed
---------------
percentage or percentages of the gross receipts or gross sales in excess of the
stated "break point" of the Tenants under the Leases.
(j) Permitted Encumbrances - means and shall include matters affecting
----------------------
the Property set forth in the Title Commitment and approved, or deemed approved,
by Buyer pursuant to Section 2.3(f).
(k) Personal Property - means, in addition to its definitions in the
-----------------
Recitals of Fact, all fixtures, food court furniture and fixtures, equipment,
appliances, carpet, drapes, maintenance equipment and tools, all other
machinery, landscaping, planting and foliage and furniture and personal property
of every kind or character owned by the Partnership and located in or on or used
in connection with the Real Property or the Improvements or operations thereon,
including the personal property described on the Personal Property Inventory.
The term "Personal Property" shall be deemed to exclude all property owned by
the Tenants and by the Anchors.
(l) Personal Property Inventory - means the list attached as Exhibit
---------------------------
"E".
(m) Proration Date - means 11:59 p.m. on May 8, 1998.
--------------
(n) Real Property - means, in addition to the definition in the
-------------
Recital of Facts, the real property described in Exhibit "B" together with all
and singular the rights pertaining to such real property, including, without
limitation, any right, title and interest of the Partners, if any, in and to all
adjacent streets, roads, alleys, underground tunnels, easements, licenses, and
rights-of-way, whether such property is owned or claimed by deed, limitations,
or otherwise, and whether such real property is located inside or outside the
metes and bounds description contained in Exhibit "B", located within the
Survey.
(o) Rentals - means, collectively, all Minimum Rent, Additional
-------
Rentals, Percentage Rent and other sums and charges payable by the Tenants under
the Lease. Rentals shall not include Security Deposits unless and until such
Security Deposits are forfeited.
(p) Security Deposits - means all security deposits, Rentals prepaid
-----------------
for a period which is more than thirty (30) days in advance, access card or key
deposits, cleaning fees
39
<PAGE>
and other deposits (plus any interest accrued thereon) paid by Tenants to the
Partners pursuant to the Leases.
(q) Title Company:
-------------
Ticor Title Insurance Company
c/o Near North National Title Corporation
222 N. LaSalle Street
Chicago, IL 60601
(r) Title Underwriters - cumulatively the following title insurance
------------------
underwriters with their indicated amounts of title insurance coverages:
<TABLE>
<CAPTION>
UNDERWRITER AMOUNT OF COVERAGE
----------- ------------------
<S> <C>
Ticor Title Insurance Company $60,000,000 (primary
liability)
Chicago Title Insurance $60,000,000 (reinsurance)
Company
Security Union Title Insurance $26,000,000 (reinsurance)
Company
</TABLE>
12.2 Use of Defined Terms. The definitions set forth in Section 12.1
--------------------
are intended to supplement and be consistent with the defined terms set forth in
the Recitals of Fact and in the other Sections hereof, but in the event of any
conflict between defined terms in the Recitals of Fact or the other Sections and
the definitions in Section 12.1, the definitions in Section 12.1 shall prevail.
Any defined terms used in the plural shall refer to all members of the relevant
class and any defined terms used in the singular shall refer to any number of
members of the relevant class. Any reference to this Agreement or any Exhibits
hereto and any other instruments, documents and agreements shall include this
Agreement, Exhibits and other instruments, documents and agreements as
originally executed or existing and as the same may from time to time be
supplemented, modified or amended.
12.3 Accounting Terms. All accounting terms not specifically defined
----------------
in this Agreement shall be construed in conformity with, and all financial data
required by this Agreement to be submitted shall, unless otherwise expressly
stated, be prepared in conformity with generally accepted accounting principles,
applied on a consistent basis.
40
<PAGE>
13. MISCELLANEOUS.
-------------
13.1 Additional Actions and Documents. Each of the parties hereto
--------------------------------
hereby covenants to take or cause to be taken such further actions, to execute,
deliver, and file or cause to be executed, delivered, and filed such further
documents and instruments, and to obtain such consents, as may be necessary or
as may be reasonably required in order to effectuate fully the purposes, terms,
and conditions of this Agreement, whether before, at, or after the Closing.
13.2 Limitations on Benefits. It is the explicit intention of the
-----------------------
parties hereto that no person or entity other than the parties hereto and their
permitted successors and assigns is or shall be entitled to bring any action to
enforce any provision of this Agreement against any of the parties hereto, and
the covenants, undertakings and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns as permitted hereunder.
13.3 Cumulative Remedies. Prior to or following the Closing, each
-------------------
and every one of the rights, benefits and remedies provided to Buyer by this
Agreement, or any instrument or documents executed pursuant to this Agreement,
are cumulative, and shall not be exclusive of any other of said rights, remedies
and benefits allowed by law or equity to Buyer including the right to bring an
action for specific performance. From and after the Closing, each and every of
the rights, benefits and remedies provided to the Partners by this Agreement, or
any other documents or agreements delivered at, or in connection with, the
Closing shall be cumulative and shall not be exclusive of any other of said
rights, remedies and benefits allowed under this Agreement or such other
documents or agreements; provided, however, it being expressly agreed that the
Partners' sole remedy in the event of a breach of this Agreement by Buyer shall
be to receive the Deposit as liquidated damages and not as a penalty.
13.4 Pronouns; Time. All pronouns and any variations thereof shall
--------------
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the person or entity may require. If any period or time set
forth in this Agreement ends or occurs on a day which is not a Business Day,
then such period or time shall instead end on the next immediately following
Business Day.
13.5 Exhibits. The Exhibits and Schedules enumerated herein are
--------
attached hereto. When attached to this Agreement, the Exhibits and Schedules
are hereby made a part of this Agreement as fully as if set forth in the text
hereof.
41
<PAGE>
13.6 Headings. The title and headings of the various Sections hereof
--------
are intended solely for means of reference and are not intended for any purpose
whatsoever to modify, explain or place any construction on any of the provisions
of this Agreement.
13.7 Invalidity. If any of the provisions of this Agreement or the
----------
application thereof to any persons or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement by the application of
such provision or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable shall not be effected thereby,
and every provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
13.8 Attorneys' Fees. In the event of any litigation between the
---------------
parties hereto to enforce any of the provisions of this Agreement or any right
of either party hereto, the unsuccessful party to such litigation agrees to pay
the successful party all costs and expenses, including reasonable attorneys'
fees, incurred hereby by the successful party, all of which may be included in
and as part of the judgment rendered in such litigations.
13.9 Entire Agreement. The terms of this Agreement are intended by
----------------
the parties as a final expression of their agreement with respect to such terms
as are included in this Agreement and may not be contradicted by evidence of any
prior or contemporaneous agreement. The parties further intend that this
Agreement constitutes the complete and exclusive statement of its terms and that
no extrinsic evidence whatsoever may be introduced in any judicial proceedings,
if any, involving this Agreement. No provision of this Agreement may be amended
or added to except by an agreement in writing signed by the parties hereto or
their respective successors in interest. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois.
13.10 Successors. All the terms, covenants and conditions hereof
----------
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors and assigns of the parties hereto.
13.11 Counterparts. This Agreement may be executed in several
------------
counterparts each of which shall be an original, but all of such counterparts
shall constitute one such Agreement.
13.12 Confidentiality. Until Closing, Buyer and its partners,
---------------
attorneys, agents, employees and consultants will treat the information
disclosed to it by the Partners and marked as confidential information, giving
it the same care as Buyer's own
42
<PAGE>
confidential information, and make no use of any such confidential information
not independently known to Buyer except in connection with the transactions
contemplated hereby. In the event of any termination of this Agreement in
accordance with its terms, Buyer shall promptly return copies of all such
confidential information to the Partners. In addition, the parties shall agree
to any press release to be issued regarding this transaction, and except as
required by applicable law, neither party shall issue any such release or make
any statement to the media without the other party's consent, which shall not be
unreasonably withheld.
13.13 Force Majeure. The time for performance of either Buyer's or
-------------
the Partners' obligations hereunder shall be extended for a period equal to any
delays in the performance of that party's obligations caused by acts of God,
labor disputes, strikes, weather conditions, riots, storms, delays or
unavailability of supplies, breach by the Partners' contractor or
subcontractors, or any other causes beyond Buyer's or the Partners' reasonable
control, as the case may be (collectively, "Force Majeure Events"); provided,
however, lack of funds or willful acts of a party shall not constitute a Force
Majeure Event hereunder. Further, it shall be a condition to any extension of
the time for a party's performance hereunder that such party notify the other
party within five (5) Business Days following the occurrence of the Force
Majeure Event. In the event any such delays shall cause or are reasonably
likely to cause the Closing Date to extend six (6) months beyond October 31,
1998, then either party shall have the right to terminate this Agreement.
13.14 Time of the Essence. Time is of the essence in this Agreement.
-------------------
13.15 Indemnification by the Partners. From and after the Closing,
-------------------------------
the Partners shall indemnify, defend and hold harmless Buyer and its respective
Affiliates, members, partners, employees, representatives and agents, and their
respective successors and assigns (collectively, the "Indemnified Buyer
Persons") from and against any and all claims, actions, suits, demands, losses,
damages, liabilities, obligations, judgments, settlements, awards, penalties,
costs or expenses, including, without limitation, reasonable attorneys' fees and
expenses ("Losses") incurred or suffered by any Indemnified Buyer Person that
results from, relates to or arises out of (a) claims (excluding, however, claims
that are actually known to Buyer prior to the Close of Escrow) made by any
Tenant or Anchor under the Leases, any Party to the REA under the REA, or by any
Party under those Service Contracts assigned to Buyer, that relate to any
actions or events first occurring, or obligations first accruing, prior to the
Closing Date, (b) any event, occurrence or accident at any time prior to the
Closing Date relating to the
43
<PAGE>
Property or the Partnership excluding events, occurrences or accidents not
covered by insurance and actually known to Buyer, or (c) the Pending Claims as
are more particularly described on Exhibit "X" attached hereto. This Section
13.15 shall survive the Close of Escrow. Claims against the Partnership or the
Property arising from CAM charges, Rentals, any construction contract or service
agreement or operations expenses shall be borne by the Partners regardless of
any knowledge of Buyer.
13.16 Breach of Contract. Notwithstanding anything to the contrary
------------------
contained in this Agreement, in the event of any breach or inaccuracy of any
representation or warranty made by the Partners in this Agreement or in the
Partners' Closing Documents, or in the event of any breach or non-fulfillment by
the Partners of any of the covenants or agreements of the Partners contained in
this Agreement or the Partners' Closing Documents, Buyer shall have the right,
in addition to any other rights or remedies provided in this Agreement, to bring
an action for breach of contract and for damages against the Partners.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date set forth below and is effective as of the latter.
THE PARTNERS:
------------
GROSVENOR INTERNATIONAL (WESTCOAST ESTATES)
LIMITED, a California corporation
By: ______________________________
Its: ______________________________
By: ______________________________
Its: ______________________________
P.I.C. INVESTMENTS, a Nevada corporation
By: ______________________________
Its: ______________________________
By: ______________________________
Its: ______________________________
44
<PAGE>
BUYER:
-----
NORTHBROOK COURT I L.L.C., a Delaware limited liability
company
By: NORTHBROOK COURT, INC., a Delaware corporation, a
member
By: _____________________________
Joel Bayer, Vice President
By: GGP LIMITED PARTNERSHIP, a Delaware limited
partnership, a member
By: GENERAL GROWTH PROPERTIES, INC., a Delaware
corporation, its general partner
By: ___________________________
Joel Bayer
Vice President-Acquisitions
NORTHBROOK COURT II L.L.C., a Delaware limited liability
company
By: NORTHBROOK COURT, INC., a Delaware corporation, a
member
By: _____________________________
Joel Bayer, Vice President
By: GGP LIMITED PARTNERSHIP, a Delaware limited
partnership, a member
By: GENERAL GROWTH PROPERTIES, INC., a Delaware
corporation, its general partner
By: ___________________________
Joel Bayer
Vice President-Acquisitions
45
<PAGE>
PARTNERSHIP AGREEMENT
---------------------
EXHIBIT "A"
<PAGE>
REAL PROPERTY
-------------
EXHIBIT "B"
<PAGE>
LEGAL DESCRIPTION OF OPERATING AGREEMENT
----------------------------------------
NORTHBROOK COURT
----------------
The Operating Agreement by and among Carter Hawley Hale Stores, Inc. ("Neiman"),
Sears, Roebuck and Co. ("Sears"), Adcor Realty Corporation ("Lord & Taylor") and
Homart, was recorded June 24, 1975 as Document No. 23,126,333, re-recorded
September 12, 1975 as Document No. 23,219,179, re-recorded January 9, 1976 as
Document No. 23,349,231 and filed November 18, 1975 as Document No. LR-2,841,284
and was amended by "First Amendment to Operating Agreement" recorded March 4,
1976 as Document No. 23,406,570 and filed April 2, 1976 as Document No. LR-
2,882,028 which amendment was corrected by an instrument entitled "Correction to
First Amendment to Operating Agreement" recorded May 7, 1976 as Document No.
23,477,882 and re-recorded May 20, 1976 as Document No. 23,492,076 and filed May
20, 1976 as Document No. LR-2,870,558 and was further amended by "Second
Amendment to Operating Agreement" recorded August 30, 1978 as Document No.
24,607,414 and filed August 30, 1978 as Document No. LR-3,043,161, by and among
Neiman, Sears, Lord & Taylor, Federated Department Stores, Inc. (I. Magnin) and
Developer and was supplemented by the "Supplement to Second Amendment" recorded
August 30, 1978 as Document No. 24,607,415 and filed August 30, 1978 as Document
No. LR-3,043,162 and was further amended by "Third Amendment to Operating
Agreement" recorded January 26, 1984 as Document No. 26,945,586 and filed
January 25, 1984 as Document No. LR-3,352,289, by and among Neiman, J. C. Penney
Properties, Inc. ("Penney"), I. Magnin, Lord & Taylor and Homart and as further
amended by a letter agreement dated June 6, 1988, and by a letter agreement
dated May 2, 1991 regarding Magnin Properties lease termination; and as amended
by "Fourth Amendment to Operating Agreement" dated as of February 1, 1994, and
recorded October 6, 1995 as document 95681401 by and among Neiman, Lord &
Taylor, Field and Developer.
EXHIBIT "C"
<PAGE>
RENT SCHEDULE
-------------
EXHIBIT "D"
<PAGE>
INVENTORY OF PERSONAL PROPERTY
------------------------------
EXHIBIT "E"
<PAGE>
SERVICE CONTRACTS
-----------------
1. Wilder Company Management Agreement
2. Contracts relating to 1998 Capital Expenditures Contracts:
a.
b.
c.
d.
3. Norcress & Crane Retainer Agreements
EXHIBIT "F"
<PAGE>
PIC PARTNERSHIP ASSIGNMENT
--------------------------
EXHIBIT "G"
<PAGE>
GROSVENOR PARTNERSHIP ASSIGNMENT
--------------------------------
EXHIBIT "H"
<PAGE>
FORM OF TENANT ESTOPPEL CERTIFICATE
-----------------------------------
TO: Westcoast Estates ("Landlord")
c/o Grosvenor International (Atlantic) Limited
1701 Pennsylvania Avenue, N.W.
Suite 1050
Washington, D.C. 20006
Attn: John R. Flavin
and
Northbrook Court I L.L.C.
Northbrook Court II L.L.C. (jointly "Purchaser")
c/o General Growth Properties, Inc.
55 West Monroe, Suite 3100
Chicago, IL 60603-5060
Attn: Joel Bayer
Re: ______________________________________ (Tenant) d/b/a
____________________ Northbrook, Illinois ("Real Property")
Gentlemen:
The undersigned tenant ("Tenant") certifies to Landlord and Purchaser that
Tenant and Landlord entered into a written Lease dated ________________ (the
"Lease") in which Landlord leased to Tenant and Tenant leased from Landlord
premises located in the Northbrook Court Shopping center commonly known as
__________________________ (the "Premises"):
1. A true and complete copy of the Lease and all amendments thereto is
attached hereto as Exhibit "A". The Lease has not been supplemented, amended,
modified, extended, renewed, assigned or superseded since its original execution
except as follows:.
___________________________________________________
___________________________________________________
___________________________________________________
2. The Lease is a valid lease, duly authorized and executed by Tenant and
is in full force and effect. Tenant is in full and complete possession of the
Premises and has commenced occupancy and use of the Premises, and Tenant's
obligation to pay rent has commenced and that Tenant is paying monthly
installments of Annual Fixed Minimum Rent of $_____________.
EXHIBIT "I"
<PAGE>
3. To the best of Tenant's knowledge, there are no defaults on the part
of Landlord under the Lease and there are no breaches of the Lease by Landlord
which if not cured by the Landlord in a timely manner will constitute a default
by Landlord.
4. There are no provisions for, and Tenant has no rights with respect to,
renewal or extension of the initial term of the Lease, terminating the term,
leasing additional space, reducing existing space or purchasing any portion of
the Real Property, except as expressly set forth in the Lease attached hereto.
5. No litigation or arbitration or other proceeding presently exists
between Landlord and Tenant, over the Lease or the performance of the terms
thereto, except as follows:
___________________________________________________
___________________________________________________
___________________________________________________
6. Landlord has completed all tenant improvement obligations and
conditions under the Lease to be satisfied and performed to date by Landlord and
Landlord has complied with and completed all construction and provided all
parking required by the Lease. Landlord has no current obligations to pay for
any tenant improvements or to provide any other inducements for the benefit of
Tenant, except as follows:
___________________________________________________
___________________________________________________
___________________________________________________
7. No rental or other payment has been made in connection with the Lease
more than 30 days in advance, except rental for the current month there is no
"free rent" or other concession under the remaining term of the Lease including,
without limitation, payment by Landlord for tenant improvements or moving costs,
and the rent has been paid to and including ________________, 1998.
8. A security deposit is being held by Landlord in the amount of
$___________.
9. Tenant has received no notice of a prior sale, transfer, assignment,
hypothecation or pledge of the Lease.
10. To the best of Tenant's knowledge, Tenant does not use, nor has Tenant
disposed of, hazardous materials in violation of environmental laws on the Real
Property or the Premises.
11. There are no bankruptcy actions pending against Tenant.
2
<PAGE>
12. Landlord has not rebated, reduced or waived any amounts due from
Tenant under the Lease relating to the period from and after the date hereof.
Landlord has not provided financing for or made loans or advances to Tenant
except for ________________.
13. Tenant has not received any notice from any governmental authority of
any present violation of any federal, state, county or municipal laws,
regulations, ordinances, orders or directives relating to the Real Property or
the Premises.
14. This certification is made with the understanding that Purchaser,
Landlord and a lender (the "Lender") making a loan to Purchaser secured by the
Real Property are relying upon the representations herein made in its
determination to purchase the Real Property or make the Loan, as the case may
be, and that the undersigned and the person(s) executing this certification on
behalf of the undersigned have the power and authority to render this
certification.
IN WITNESS WHEREOF, Tenant has duly executed this Estoppel Certificate this
____ day of _______________, 1998.
[TENANT NAME]
By:_____________________________
Name:______________________
Title:_____________________
3
<PAGE>
FORM OF THE PARTNERS' ESTOPPEL CERTIFICATE
------------------------------------------
______________________________ ("Purchaser")
______________________________
______________________________
______________________________
Re: Lease Between ____________________________, as landlord ("Landlord"),
and ____________________________ as tenant ("Tenant") dated
_______________________.
Gentlemen:
Grosvenor International (Westcoast Estates) Limited and P.I.C. Investments
(jointly, the "Partners") hereby certificate as follows to and for the benefit
of the above-named Purchaser, its successors and assigns, and any lender
providing financing to Buyer which is secured by a lien on the Property of which
the Premises are a part.
1. A true and complete copy of the Lease and all amendments thereto is
attached hereto as Exhibit "A". The Lease has not been supplemented, amended,
modified, extended, renewed, assigned or superseded since its original
execution, and there do not exist any other agreements concerning the space
rented under the Lease, whether oral or written, between Landlord and Tenant,
except as follows:
____________________________________________________
____________________________________________________
____________________________________________________
2. The Lease is duly authorized and executed by Landlord and is in full
force and effect. Tenant is in possession of the Premises and has commenced
occupancy and use of the Premises, and Tenant's obligation to pay rent has
commenced and that Tenant is paying monthly installments of Annual Fixed Minimum
Rent of $____________________.
3. Tenant has not notified Landlord that Landlord is in default under the
Lease and to the best of Landlord's knowledge there are no events that have
occurred that, with the giving of notice or passage of time or both, would
result in a default by Landlord thereunder. Tenant has not notified Landlord of
any claim against Landlord under the Lease that could be set off against
accruing rentals or could be a defense against enforcement of the Lease by
Landlord.
EXHIBIT "J"
<PAGE>
4. No litigation or arbitration presently exists between Landlord and
Tenant, over the Lease or the performance of the terms thereto, except as
follows:
____________________________________________________
____________________________________________________
____________________________________________________
5. To the best of the Partners' knowledge, all work required to be
performed by the Landlord under any of the Lease Documents has been completed in
accordance with the terms of the applicable Lease Documents, all allowances and
payments owing by the Landlord to the Tenant for any tenant improvement work or
for any other concessions or inducements payable by Landlord to Tenant in
respect of the Lease have been paid to or as directed by the Tenant, and the
Landlord has no further obligations under the Lease to make any alterations or
improvements to the Premises except ____________________________. (If none,
write "none".) All brokerage and finders fees and leasing commissions payable
by Landlord for or with respect to the Lease have been paid in full.
6. No rental or other payment has been made in connection with the Lease
more than 30 days in advance, except rental for the current month, and there is
no "free rent" except as follows: ____________________
________________________________________________________________.
7. A security deposit is being held by Landlord in the sum of
$______________.
8. Landlord has not sold, transferred, assigned, hypothecated or pledged
the Lease or the rents to be paid under the terms of the Lease.
9. To the best of Landlord's knowledge, Tenant does not use, nor has
Tenant disposed of, hazardous materials in violation of environmental laws on
the Real Property or the Premises.
10. Landlord has received no notice that there are actions, voluntary or
involuntary, pending against Tenant under the bankruptcy laws of the United
States or any state thereof.
11. Landlord has not rebated, reduced or waived any amounts due from
Tenant under the Lease relating to the period from and after the date hereof.
12. Landlord has not received any notice from any governmental authority
of any present violation of any federal, state, county or municipal laws,
regulations, ordinances, orders or directives relating to the Premises.
2
<PAGE>
13. This certification is made with the understanding that both Purchaser
and Lender are relying upon the representations herein made in its determination
to purchase the Real Property or make the Loan, as the case may be, and that the
undersigned and the person(s) executing this certification on behalf of the
undersigned have the power and authority to render this certification.
14. Notwithstanding anything to the contrary set forth in this
Certificate, all obligations and liabilities of the undersigned to any person or
entity arising under or by virtue of this Certificate shall terminate without
further action of the undersigned, Purchaser or any lender, or any successor or
assign of Purchaser or such lender, upon the delivery to Purchaser of an
estoppel certificate duly executed by the Tenant substantially in the form of
Exhibit "I" to that certain Agreement and Contract of Sale and Escrow
Instruction, dated _____________________, 1998 (the "Agreement"), between the
undersigned and Buyer, which meets the requirements of Section 2.3(b)(vii) of
the Agreement with respect to the content of such estoppel certificate; and
following such delivery, no claim shall be made against the
3
<PAGE>
undersigned on account of any certificates or other matters set forth in this
Certificate.
This Certificate is executed on ________________, 1998.
GROSVENOR INTERNATIONAL (WESTCOAST ESTATES)
LIMITED, A CALIFORNIA CORPORATION
By: _____________________________
Its: _____________________________
By: _____________________________
Its: _____________________________
P.I.C. INVESTMENTS, a Nevada corporation
By: _____________________________
Its: _____________________________
By: _____________________________
Its: _____________________________
4
<PAGE>
FORM OF ANCHOR ESTOPPEL CERTIFICATE
(for Marshall Fields (Dayton Hudson), Lord & Taylor
(May Department Stores), and Neiman Marcus),
_______________, 199__
[GGP ENTITY]
c/o GGP Management, Inc.
55 W. Monroe
Suite 3100
Chicago, Illinois 60603
Attn: Joel Bayer
Ladies and Gentlemen:
The undersigned [Insert name of Anchor], a corporation organized and
---------------------
existing under the laws of the State of ____________________, is a party to a
certain Reciprocal Easement Agreement which is more particularly described on
Exhibit "A" (the "REA").
The undersigned has been advised that [GGP ENTITY] or its affiliate
(collectively "Purchaser" may acquire the Westcoast Estates interest in
Northbrook Court Shopping Center (as such term is defined in the REA) located in
Northbrook, Illinois (the "Property"). The undersigned does hereby state and
disclose for the benefit of Purchaser and any prospective lender(s) financing
such acquisition by Purchaser:
1. The REA contains the entire agreement between the parties thereto with
respect to the matters set forth therein and no side or separate
agreements not referred to above exist between such parties with
respect to the Property or the REA.
2. The REA is in full force and effect and has not been modified,
amended, supplemented or changed, except as described on Exhibit "A".
3. To the best knowledge of the undersigned, there are no defaults by any
party in the performance of any covenant, agreement, term or condition
contained in the REA, and no event has occurred which, with the
passage of time or the giving of notice, or both, would constitute a
default under the REA or give rise to a right on the part of the
undersigned to reduce its obligations thereunder. The undersigned has
neither given nor received any notice of any such default or
occurrence.
EXHIBIT "K"
<PAGE>
4. The undersigned has claims no set-off or counterclaim against Westcoast
Estates under the REA.
5. The undersigned's department store on the Property opened for business
on ________________, 19__ and is open for business as of the date of
this Estoppel Certificate.
6. No petition in bankruptcy or petition or answer seeking an assignment
for the benefit of creditors, the appointment of a receiver, trustee,
or liquidator with respect to the undersigned or a substantial portion
of the undersigned's property, or any reorganization, arrangement,
liquidation, dissolution, or similar relief under the Federal
Bankruptcy Code or any state law has been filed by or against the
undersigned.
7. The undersigned has no right to receive and Westcoast Estates under
the REA has no obligation to pay or deliver, which has not yet been
paid or delivered, any inducement to construct, occupy or operate its
building on the Property or to perform its obligations under the REA.
8. The undersigned acknowledges that it has been advised that Purchaser
may acquire Westcoast Estates' interest in the Property and, in such
event, that Purchaser would reasonably rely upon the statements
contained herein in making such acquisition.
9. Consent of the undersigned to the transfer of Westcoast Estates'
interest in the Property and the assignment of the REA to Purchaser
either is not required or has been given and such transactions will
not presently or with the passage of time or giving of notice, or
both, constitute a default under the REA.
IN WITNESS WHEREOF, this Estoppel Certificate has been duly executed as of
the date first above written.
[Insert name of Undersigned Anchor]
By: _____________________________
Name:________________________
Title:_______________________
2
<PAGE>
FIRPTA CERTIFICATE
------------------
EXHIBIT "L"
<PAGE>
OPINION OF PARTNERS' COUNSEL
----------------------------
EXHIBIT "M"
<PAGE>
OPINION OF BUYER'S COUNSEL
--------------------------
EXHIBIT "N"
<PAGE>
MECHANICS LIEN CLAIMS
----------------------
EXHIBIT "O"
<PAGE>
TITLE COMMITMENT
----------------
EXHIBIT "P"
<PAGE>
PENDING LEASES
--------------
EXHIBIT "Q"
<PAGE>
MANAGEMENT AGREEMENT
--------------------
EXHIBIT "R"
<PAGE>
LEASING COMMISSION OBLIGATION
-----------------------------
EXHIBIT "S"
<PAGE>
1998 CAPITAL EXPENDITURES STATEMENT
-----------------------------------
EXHIBIT "T"
<PAGE>
SCHEDULE OF REPORTS AND STUDIES
-------------------------------
EXHIBIT "U"
<PAGE>
SCHEDULE OF REGULATORY COMPLIANCE
---------------------------------
EXHIBIT "V"
<PAGE>
ENVIRONMENTAL DISCLAIMER
------------------------
None
EXHIBIT "W"
<PAGE>
ASBESTOS REPORTS
----------------
EXHIBIT "X"
<PAGE>
PENDING LITIGATION
------------------
EXHIBIT "Y"
<PAGE>
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
dated as of April 17, 1998
among
MEPC PLC,
MEPC NORTH AMERICAN PROPERTIES LIMITED,
U.K.-AMERICAN HOLDINGS LIMITED,
Sellers
and
GGP LIMITED PARTNERSHIP
Buyer
relating to the purchase and sale
of
100% OF THE COMMON STOCK
of
MEPC AMERICAN HOLDINGS INC.,
CALEDONIAN HOLDING COMPANY, INC.,
and
U.K.-AMERICAN PROPERTIES, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS AND INTERPRETATION
----------------------------------------
Section 1.01. Definitions 1
-
Section 1.02. Interpretation 8
-
ARTICLE 2 Purchase and Sale
---------------------------
Section 2.01. Purchase and Sale 9
-
Section 2.02. Base Balance Sheet 9
-
Section 2.03. Closing 9
-
Section 2.04. Closing Balance Sheet 10
--
Section 2.05. Adjustment to Preliminary Purchase Price 12
--
Section 2.06. Deposit 13
--
Section 2.07. Cost to Completion Adjustments 14
--
ARTICLE 3 Representations and Warranties of the Sellers
-------------------------------------------------------
Section 3.01. Corporate Existence and Power 16
--
Section 3.02. Corporate Authorization 17
--
Section 3.03. Governmental Authorization 17
--
Section 3.04. Noncontravention 17
--
Section 3.05. Capitalization 17
--
Section 3.06. Subsidiaries 18
--
Section 3.07. Financial Statements 19
--
Section 3.08. Absence of Certain Changes 20
--
Section 3.09. Intercompany Accounts 21
--
Section 3.10. Properties 21
--
Section 3.11. Other Material Contracts 24
--
Section 3.12. Litigation 27
--
Section 3.13. Insurance Coverage 27
--
Section 3.14. Brokers and Finders 27
--
Section 3.15. Employees 27
--
Section 3.16. Employee Benefit Plans 27
--
Section 3.17. Environmental Matters 29
--
Section 3.18. Compliance with Laws and Court Orders 30
--
Section 3.19. Rent Roll 30
--
Section 3.20. Disclosure Schedules 30
--
<PAGE>
ARTICLE 4 Representations and Warranties of Buyer
-------------------------------------------------
Section 4.01. Existence and Power 31
--
Section 4.02. Authorization 31
--
Section 4.03. Governmental Authorization 31
--
Section 4.04. Noncontravention 31
--
Section 4.05. Financing 31
--
Section 4.06. Purchase for Investment 32
--
Section 4.07. Litigation 32
--
Section 4.08. Brokers and Finders 32
--
Section 4.09. Inspections; No Other Representations 32
--
ARTICLE 5 Covenants of the Sellers
----------------------------------
Section 5.01. Conduct of the Company Group 33
--
Section 5.02. Tenant Leases 35
--
Section 5.03. Access to Properties and Information; Confidentiality 35
--
Section 5.04. Notices of Certain Events 36
--
Section 5.05. Restructuring 37
--
Section 5.06. Resignations 37
--
Section 5.07. Estoppel Certificates 37
--
Section 5.08. Title Insurance and Surveys 37
--
Section 5.09. Certain Accounts and Agreements 38
--
ARTICLE 6 Covenants of Buyer
----------------------------
Section 6.01. Confidentiality 38
--
Section 6.02. Access 39
--
Section 6.03. Trademarks; Tradenames 39
--
ARTICLE 7 Covenants of Buyer and Seller
---------------------------------------
Section 7.01. Commercially Reasonable Efforts; Further Assurances 39
--
Section 7.02. Certain Filings 40
--
Section 7.03. Public Announcements 40
--
Section 7.04. Brokers 40
--
ARTICLE 8 Tax Matters
---------------------
Section 8.01. Tax Definitions 41
--
Section 8.02. Tax Representations 42
--
Section 8.03. Tax Covenants 43
--
Section 8.04. Termination of Existing Tax Sharing Agreements 44
--
Section 8.05. Tax Returns and Cooperation on Tax Matters 44
--
Section 8.06. Indemnification by Seller 45
--
Section 8.07. Survival 48
--
Section 8.08. Withholding 48
--
<PAGE>
ARTICLE 9 Employee Benefits
---------------------------
Section 9.01. Employment of Company Group Employees; Service Recognition 48
--
Section 9.02. Stay Sell Agreement 49
--
Section 9.03. Annual Bonuses 49
--
Section 9.04. No Third-Party Beneficiaries 49
--
ARTICLE 10 Conditions to Closing
--------------------------------
Section 10.01. Conditions to Obligations of Buyer and Sellers 50
--
Section 10.02. Conditions to Obligation of Buyer 50
--
Section 10.03. Conditions to Obligation of the Sellers 52
--
ARTICLE 11 Survival; Indemnification
------------------------------------
Section 11.01. Survival 53
--
Section 11.02. Indemnification 53
--
Section 11.03. Procedures 54
--
Section 11.04. Calculation of Damages 55
--
Section 11.05. Assignment of Claims 56
--
Section 11.06. Exclusivity 56
--
ARTICLE 12 Termination
----------------------
Section 12.01. Grounds for Termination 57
--
Section 12.02. Effect of Termination 57
--
ARTICLE 13 Miscellaneous
------------------------
Section 13.01. Notices 58
--
Section 13.02. Amendments and Waivers 60
--
Section 13.03. Expenses 60
--
Section 13.04. Successors and Assigns 60
--
Section 13.05. Third-Party Beneficiaries 60
--
Section 13.06. Governing Law 60
--
Section 13.07. Jurisdiction 61
--
Section 13.08. WAIVER OF JURY TRIAL 61
--
Section 13.09. Attorneys' Fees 61
--
Section 13.10. No Recording 61
--
Section 13.11. Entire Agreement 61
--
Section 13.12. Invalid Provisions 61
--
Section 13.13. Counterparts 62
--
Section 13.14. Binding Effect 62
--
Section 13.15. Specific Performance 62
--
Section 13.16. Joint and Several Liability 62
--
Exhibit A Restructuring Transactions
Exhibit B Accounting Procedures
Exhibit C Form of Escrow Agreement
Exhibit D Industrial Properties
Exhibit E Office Properties
Exhibit F Retail Properties
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of April 17, 1998 among MEPC PLC, an English
company ("PARENT"), MEPC NORTH AMERICAN PROPERTIES LIMITED, an English
company ("NORTH AMERICAN PROPERTIES"), U.K.-AMERICAN HOLDINGS LIMITED, a
company organized under the laws of Jersey ("UK-AMERICAN" and, together
with Parent and North American Properties, the "SELLERS"), and GGP Limited
Partnership, a Delaware limited partnership ("BUYER").
WITNESSETH:
WHEREAS, MEPC American Holdings Inc., a Delaware corporation ("MEPC
HOLDINGS"), Caledonian Holding Company, Inc., a Delaware corporation
("CALEDONIAN HOLDING") and U.K.-American Properties, Inc., a Delaware
corporation ("UK-AMERICAN PROPERTIES" and, together with MEPC Holdings and
Caledonian Holding, the "COMPANIES"), either directly or through their
direct and indirect Subsidiaries (as defined below), are the owners of the
Properties (as defined below);
WHEREAS, the Sellers are the record and beneficial owners of the
Shares (as defined below) and desire to sell the Shares to Buyer, and Buyer
desires to purchase the Shares from the Sellers, upon the terms and subject
to the conditions and provisions hereinafter set forth;
WHEREAS, certain Restructuring (as defined below) will be consummated
on or prior to the Closing;
The parties hereto agree as follows:
ARTICLE 1
Definitions and Interpretation
Section 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such Person; provided that none of the Companies nor any of their
Subsidiaries (after giving effect to the Restructuring) shall be considered
an Affiliate of the Sellers.
"BALANCE SHEET" means the audited combined balance sheet of the
Companies and their Subsidiaries as of September 30, 1997.
"BALANCE SHEET DATE" means September 30, 1997.
"BENEFIT ARRANGEMENT" means any employment, severance or similar
contract or arrangement (whether or not written) or any plan, policy, fund,
program or contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock options, or other stock related
rights or other forms of incentive or deferred compensation, vacation
benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, workers' compensation,
supplemental unemployment benefits, severance benefits and post-employment
or retirement benefits (including compensation, pension, health, medical or
life insurance or other benefits) that (i) is not an Employee Plan, (ii) is
entered into, maintained, administered or contributed to, as the case may
be, by the Sellers, any of their Affiliates or any member of the
<PAGE>
Company Group and (iii) covers any employee or former employee of any
member of the Company Group employed in the United States.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended on or prior to the date hereof, and
any rules or regulations promulgated thereunder.
"CLOSING DATE" means the date of the Closing.
"COMPANY GROUP" means the Companies and all of their direct or
indirect Subsidiaries, after giving effect to the Restructuring.
"COMPANY SUBSIDIARIES" means the Subsidiaries of each of the
Companies.
"EMPLOYEE PLAN" means any "employee benefit plan", as defined in
Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii)
is maintained, administered or contributed to by any Seller, any of its
Affiliates or any member of the Company Group and (iii) covers any employee
or former employee of any member of the Company Group.
"ENVIRONMENTAL LAWS" means any and all statutes, laws, regulations and
rules, in each case as in effect on the date hereof, that have as their
principal purpose the protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414
of the Code.
"EXCLUDED ASSETS" means assets and properties, including common stock
and other equity interests, that are or have been disposed of or
transferred prior to Closing by any member of the Company Group to the
Sellers or other Persons that are not members of the Company Group.
"EXCLUDED LIABILITIES" means (i) all liabilities or obligations of the
Company Group that are or have been satisfied or assumed prior to Closing
by the Sellers or other Persons that are not members of the Company Group
or that primarily relate to the Excluded Assets and (ii) all liabilities or
obligations of the Company Group relating to employees, Employee Plans or
Benefit Arrangements that accrued or arose, or are based on acts or events
occurring, prior to the Closing or that arise as the result of the
consummation of the transactions contemplated hereby (including, without
limitation, any liabilities with respect to the Worker Adjustment and
Retraining Notification Act), except as otherwise expressly provided in
Article 9.
-
"FINANCE NOTES" means the notes of one or more members of the Company
Group payable to MEPC Finance evidencing the Finance Receivables.
"FINANCE RECEIVABLES" means the combined obligations of the Company
Group owed to MEPC Finance, including principal and accrued interest, as of
the Closing Date after giving effect to the Restructuring.
"GRAYBAR AGREEMENT" means the Sale and Purchase Agreement, dated as of
March 11, 1998 between Caledonian Holding and Graybar Builders LLC.
"GRAYBAR PROPERTY" means the property that is subject to the Graybar
Agreement.
<PAGE>
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant or any toxic,
radioactive or otherwise hazardous substance, as such terms are defined in,
or identified pursuant to, any Environmental Law.
"INDEBTEDNESS" means any indebtedness for borrowed money or any
obligations in connection with any sale-leaseback transaction or similar,
off-balance sheet financing; provided that Indebtedness shall not include
(i) accounts payable (or similar items) arising in the ordinary course of
business consistent with past practices or (ii) the current portion of any
item which constitutes Indebtedness.
"INDUSTRIAL PROPERTIES" means the Properties described in Exhibit D.
"KNOWLEDGE OF THE SELLERS", "SELLERS' KNOWLEDGE" or any other similar
knowledge qualification in this Agreement means to the actual knowledge of
James Tuckey, James Dundas, Stephen East, David Gruber, Donn Fuller, Peter
Johnson, Howard Garfield, Ab Atkins, Jim Fant or Paul Ledbetter.
"LIEN" means, with respect to any property or asset, any mortgage,
deed of trust, deed to secure debt, lien, pledge, charge or encumbrance of
any kind thereon; the interest of a vendor or lessor under conditional sale
agreement, capital lease or other title retention agreement affecting the
title thereto; any covenant, condition, restriction, reservation, easement,
right of way or other right, instrument or document affecting the title
thereto; or any other exception to or defect in the title thereto.
"MEPC FINANCE" means MEPC Finance Inc., a Delaware corporation, and
its Subsidiaries.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets or results of operations of the Company Group, taken as a
whole, except any such effect resulting from or arising in connection with
(i) this Agreement or the transactions contemplated hereby, (ii) changes or
conditions affecting generally the retail real estate markets in the United
States or in any jurisdiction or market where any Property is located, or
(iii) changes in economic, regulatory or political conditions generally.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
3(37) of ERISA.
"NOTES" means the Parent Notes together with the Finance Note.
"OFFICE AND INDUSTRIAL CONTRACT" means the Sale and Purchase Agreement
providing for the sale of the Industrial Properties and the Office
Properties.
"OFFICE PROPERTIES" means the Properties described in Exhibit E.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PARENT NOTES" means the notes of one or more members of the Company
Group payable to Parent, evidencing the Parent Receivables.
"PARENT RECEIVABLES" means the combined obligations of the Company
Group owed to Parent, including principal and accrued interest, as of the
Closing Date after giving effect to the Restructuring.
<PAGE>
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"RELATED AGREEMENTS" means (i) the Graybar Agreement; (ii) any
agreement or agreements relating to the sale (either through the sale of
assets or the sale of stock) of certain land located in Broward County and
Orlando County, Florida; (iii) any agreement relating to the sale of the
Company Group's equity interests in R.A. Greiner Realty and Greiner Pacaud
Management Associates; and (iv) the Office and Industrial Contract.
"RESTRUCTURING" means the transactions set forth in Exhibit A hereto.
"RETAIL PROPERTIES" means the Properties described in Exhibit F.
"SHARES" means all of the issued and outstanding shares of common
stock of MEPC Holdings, Caledonian Holding and UK-American Properties.
"STAY SELL AGREEMENT" means that certain Stay and Sell Pay and
Performance Bonus Agreement dated October 9, 1997, among Parent, MEPC
Holdings, UK-American Properties, Caledonian Holding and their affiliates
(as defined therein), as amended.
"SUBSIDIARY" means, as to any Person, any corporation, partnership or
other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"TENANT ALLOWANCE" means all tenant improvement costs required to be
paid by the Company Group under the terms of leases or other agreements and
all cash allowances for tenant improvements required to be made by the
Company Group under such leases or agreements.
"TITLE IV PLAN" means an employee benefit plan subject to Title IV of
ERISA other than any Multiemployer Plan.
"TRANSACTION EXPENSES" means all costs and expenses incurred by the
parties hereto in connection with this Agreement or the transactions
contemplated hereby.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Arthur Andersen 2.04(c)
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Base Balance Sheet 2.02
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Base Balance Sheet Date 2.02
----
Base Receivables Amount 2.05(a)(iv)
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Base Stockholders' Equity Amount 2.05(a)
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Basket 8.01
----
Brokerage Agreement 3.10(a)(v)
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Buyer Breach Conditions 2.06
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Buyer Designated Person 2.07(c)(iii)
------------
Buyer Recitals
Caledonian Holding Recitals
Claim 11.03(a)
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Closing 2.03
----
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Closing Balance Sheet 2.04(a)
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Closing Permitted Liens 10.02(d)
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Code 8.01
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Companies Recitals
Company Financial Statements 3.07(a)
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Company Group Subsidiary 3.06(a)
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Company Securities 3.05(b)(ii)
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Confidential Information 6.01
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Construction Agreement 3.10(a)(X)
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Construction Completion Amount 2.07(a)(ii)
------------
COREA 3.10(a)(vii)
------------
Damages 11.02(a)
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Deposit 2.06
----
Deposit Amount 2.06
----
Designated Committee 2.07(c)(iii)
------------
Designated Person 2.07(c)
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Development Plans 2.07(a)(ii)
------------
E&P Report 8.06(i)
-------
Effective Date 12.01(b)
--------
Employees 9.01(a)
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Encumbrances 3.05(b)
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Escrow Agent 2.06
----
Escrow Agreement 2.06
----
Estimated Construction Completion Amount 2.07(c)(iii)
------------
Existing Survey 3.10(a)(iv)
------------
Existing Title Report 3.10(a)(iii)
------------
Expiration Date 11.01
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Federal Tax 8.01
----
Final Determination 8.01
----
Final Receivables Amount 2.04(c)(iii)(b)
---------------
Final Stockholders' Equity Amount 2.04(c)(iii)
------------
GGPI 8.06(i)
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Ground Lease 3.10(a)(vi)
------------
Group Subsidiary Securities 3.06(b)(ii)
------------
Indemnified Party 11.03(a)
--------
Indemnifying Party 11.03(a)
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Loss 8.06(a)(ii)
------------
Management Agreement 3.10(a)(viii)
-------------
MEPC Holdings Recitals
MEPC Holdings Class A Common Stock 3.05(a)(i)
----------
MEPC Holdings Common Stock 3.05(a)(i)
----------
Net Partnership Asset Amount Exhibit B
North American Properties Recitals
Note Election 2.01(b)(i)
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Owner 3.10(a)(ii)
------------
Parent Recitals
Parent Designated Person 2.07(c)(iii)
------------
Payment Election 2.01(b)(ii)
------------
Permitted Liens 3.10(b)(vii)
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Post-Closing Tax Period 8.01
----
Potential Contributor 11.05
-----
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Pre-Closing Tax Period 8.01
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Preliminary Purchase Price 2.03(a)
------------
Property 3.10(a)
------------
Purchase Price 2.05(a)(viii)
------------
Rate 2.05(b)
------------
Receivables Amount 2.04(a)
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Retained Employee 9.02(a)
------------
Returns 8.02(a)(i)
------------
Seller Group 8.01
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Sellers Recitals
Service Agreement 3.10(a)(ix)
------------
Stockholders' Equity Amount 2.04(a)
------------
Straddle Period 8.06(b)
------------
Surveyors 5.08
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Tax 8.01
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Tax Asset 8.01
-----
Tax Period 8.01
-----
Tax Sharing Agreement 8.01
-----
Taxing Authority 8.01
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Tenant Lease 3.11(a)(ii)
------------
Third Designated Person 2.07(c)(iii)
------------
Third Party Claim 11.03(b)
------------
Title Companies 5.08
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Title Policy 10.02(d)
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UK-American Recitals
UK-American Properties Recitals
</TABLE>
Section 1.02. Interpretation. In this Agreement, unless otherwise
specified; (i) singular words include the plural and plural words include
the singular; (ii) words importing any gender include the other genders;
(iii) references to any person include its successors and assigns; (iv) the
word "successors", when it refers to an individual, includes the heirs,
devisees, legatees, executors, administrators and personal representatives
of such individual; (v) references to any statute or other law include all
rules, regulations and orders adopted or made thereunder and all statutes
or other laws amending, consolidating or replacing the statute or law
referred to; (vi) references to any agreement or other document include all
subsequent amendments or other modifications thereof entered into in
accordance with the provisions thereof; (vii) the words "approve",
"consent" or "agree", and any derivations thereof or words of similar
import, mean the prior written approval, consent or agreement of the person
holding the right to approve, consent or agree; (viii) the words "include"
and "including", and words of similar import, shall be deemed to be
followed by the words "without limitation"; (ix) the words "hereto",
"herein", "hereof" and "hereunder", and words of similar import, refer to
this Agreement in its entirety; (x) the Schedules and Exhibits hereto are
part of this Agreement and are incorporated herein by reference; (xi) the
words "Section", "Schedule" or "Exhibit" refer to the sections, schedules
and exhibits of and to this Agreement; (xii) headings of Sections,
Schedules and Exhibits are inserted as a matter of convenience and shall
not affect the construction of this Agreement; and (xiii) this Agreement
shall be construed without regard to any presumption or other rule
requiring construction against the party causing this Agreement to be
drafted.
ARTICLE 2
<PAGE>
Purchase and Sale
Section 2.01. Purchase and Sale. (a) Upon the terms and subject to
the conditions of this Agreement, the Sellers agree, jointly and severally,
to sell to Buyer, and Buyer agrees to purchase from the Sellers, the Shares
at the Closing.
(b) Upon the terms and subject to the conditions of this Agreement,
Buyer agrees to either (i) purchase from Parent the Parent Notes and
purchase from MEPC Finance the Finance Notes (a "NOTE ELECTION") or (ii)
provide the Company Group with sufficient cash and cause the Company Group,
at the Closing, to pay to Parent the amount of the Parent Receivables and
to pay to MEPC Finance the amount of the Finance Receivables (a "PAYMENT
ELECTION"). In the event Buyer makes a Note Election, Parent agrees to
sell (or, as appropriate, to cause MEPC Finance to sell) to Buyer the
Notes. Buyer shall give notice to Parent of a Note Election or a Payment
Election no less than five business days prior to the Closing Date.
Section 2.02. Base Balance Sheet. At least five business days prior
to the Closing, Parent shall deliver to Buyer (i) a combined balance sheet
(the "BASE BALANCE SHEET") of the Company Group as of the end of the most
recent month which precedes the Closing Date (the "BASE BALANCE SHEET
DATE"), which Base Balance Sheet will include all adjustments necessary to
give effect to each transaction included in the Restructuring as of the
date of consummation of such transaction, if such transaction is
consummated prior to such month end, or otherwise all pro forma adjustments
necessary to give effect to such transactions as of the Base Balance Sheet
Date; (ii) a statement setting out in reasonable detail the calculation of
the amount of Parent Receivables and the amount of Finance Receivables
based upon the latest available financial information as of the date of the
Base Balance Sheet and, (iii) reasonable supporting documentation for each
pro forma Restructuring adjustment. The Base Balance Sheet shall be
prepared by the Sellers in good faith in accordance with the procedures set
forth in Exhibit B hereto.
Section 2.03. Closing. The closing (the "CLOSING") of the purchase
and sale of the Shares and, in the event of a Note Election, the Notes
hereunder shall take place at the offices of Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York, at 10:00 AM (New York time) on May
31, 1998, or at such other time as Buyer and Parent may agree. At the
Closing:
(a) Buyer shall deliver to Parent (or, as appropriate, MEPC Finance)
an amount (the "PRELIMINARY PURCHASE PRICE") equal to: (i) $871,000,000, as
adjusted pursuant to Section 2.07; plus or minus (ii) stockholders' equity,
----
as set forth on the Base Balance Sheet; plus (iii) in the event of a Note
Election, the sum of the amount of the Parent Receivables and the amount of
the Finance Receivables, in each case as set forth in Parent's statement
delivered pursuant to Section 2.02; minus (iv) the Deposit Amount (as
----
defined below). The Preliminary Purchase Price shall be paid in United
States dollars, in immediately available funds by wire transfer to an
account of Parent with a bank in New York City designated by Parent, by
notice to Buyer, not later than two business days prior to the Closing Date
(or if not so designated, then by certified check of Buyer certified by, or
by an official bank check of a bank which is a member of the New York
Clearing House Association payable in immediately available funds directly
to the order of Parent in such amount). The Preliminary Purchase Price
will be subject to certain adjustments as described below.
(b) Parent shall cause the Sellers (or, as appropriate, MEPC Finance)
to deliver to Buyer (i) certificates for the Shares duly endorsed or
accompanied by stock powers duly endorsed in blank, with any required
<PAGE>
transfer stamps affixed thereto and (ii) in the event of a Note Election,
the Notes, duly endorsed to Buyer.
(c) In the event of a Payment Election, Buyer shall transfer as a
capital contribution or loan to the Company Group at Closing cash, payable
in immediately available funds, in an amount sufficient to enable the
Company Group to pay and Buyer and the Sellers will cause the Company Group
to pay at Closing (i) to Parent the amount of the Parent Receivables and
(ii) to MEPC Finance, the amount of the Finance Receivables, in each case
as set forth in Parent's statement delivered pursuant to Section 2.02.
----
(d) The Preliminary Purchase Price shall be allocated first to the
Notes (in the event of a Note Election), in an amount equal to the amount
thereof, and then to the Shares, as set forth in a Schedule to be agreed
upon by Buyer and Parent and delivered at the Closing. Any difference
between the Preliminary Purchase Price and the Purchase Price shall be
allocated to the Notes (in the event of a Note Election) and to the Shares
as set forth in a schedule to be agreed upon by Buyer and Parent at the
time the Purchase Price is determined.
Section 2.04. Closing Balance Sheet. (a) As promptly as practicable,
but no later than 90 days, after the Closing Date, Buyer will cause to be
prepared and delivered to Parent a combined balance sheet of the Company
Group as of the close of business on the Closing Date (the "CLOSING BALANCE
SHEET"), together with a report of Coopers & Lybrand or Ernst & Young
thereon, and a certificate based on such Closing Balance Sheet setting
forth Buyer's calculation of stockholders' equity (the "STOCKHOLDERS'
EQUITY AMOUNT"), the amount of the Parent Receivables, the amount of the
Finance Receivables (together with the amount of the Parent Receivables,
the "RECEIVABLES AMOUNT"), in each case before giving effect to any payment
thereof pursuant to Section 2.03. The Closing Balance Sheet shall be
----
prepared by Buyer in good faith in accordance with the procedures set forth
in Exhibit B hereto.
(b) If Parent disagrees with Buyer's calculation of the Stockholders'
Equity Amount or Buyer's calculation of the Receivables Amount, in each
case delivered pursuant to Section 2.04(a), Parent may, within 20 days
-------
after delivery of the documents referred to in Section 2.04(a), deliver a
-------
notice to Buyer disagreeing with such calculation and setting forth
Parent's calculation of such amounts. Any such notice of disagreement
shall specify those items or amounts as to which Parent disagrees, and
Parent shall be deemed to have agreed with all other items and amounts
contained in the Closing Balance Sheet and the Buyer's calculation of the
Stockholders' Equity Amount and the Receivables Amount, in each case
delivered pursuant to Section 2.04(a).
-------
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 2.04(b), Buyer and Parent shall, during the 30 days following such
-------
delivery, use their best efforts to reach agreement on the disputed items
or amounts in order to determine, as may be required, the Final
Stockholders' Equity Amount (as defined below) and the Final Receivables
Amount (as defined below) which amounts shall not be less than the amounts
thereof shown in Buyer's calculations delivered pursuant to Section 2.04(a)
-------
nor more than the amounts thereof shown in Parent's calculation delivered
pursuant to Section 2.04(b). If, during such period, Buyer and Parent are
-------
unable to reach such agreement, they shall promptly thereafter cause Arthur
Andersen LLP ("ARTHUR ANDERSEN") to promptly to review this Agreement and
the disputed items or amounts for the purpose of calculating the Final
Stockholders' Equity Amount and the Final Receivables Amount. In making
such calculation, Arthur Andersen shall consider only those items or
amounts in the Closing Balance Sheet or Buyer's calculation of the
Stockholders' Equity Amount and/or Buyer's calculation of the Receivables
Amount as to which Parent has disagreed. Arthur Andersen shall deliver to
Buyer and Parent, as promptly as practicable, a report setting forth such
calculations. Such report shall be final and binding upon Buyer and
Parent. The cost of such review and report shall be borne (i) by Buyer if
the difference between the Final Stockholders' Equity
<PAGE>
Amount plus the Final Receivables Amount and Buyer's calculation of the
Stockholders' Equity Amount plus Buyer's calculation of the Receivables
Amount delivered pursuant to Section 2.04(a) is more than the difference
-------
between the Final Stockholders' Equity Amount plus the Final Receivables
Amount and Parent's calculation of the Stockholders' Equity Amount plus
Parent's calculation of the Receivables Amount delivered pursuant to
Section 2.04(b), (ii) by Parent if the first such difference is less than
-------
the second such difference and (iii) otherwise equally by Buyer and Parent.
"FINAL STOCKHOLDERS' EQUITY AMOUNT" means the Stockholders Equity
Amount as shown in Buyer's calculation delivered pursuant to Section
2.04(a), if no notice of disagreement with respect thereto is duly
-------
delivered pursuant to Section 2.04(b); or if such a notice of disagreement
-------
is delivered, (a) as agreed by Buyer and Parent pursuant to Section 2.04(c)
-------
or (b) in the absence of such agreement, as shown in Arthur Andersen's
calculation delivered pursuant to Section 2.04(c); provided that in no
-------
event shall the Final Stockholders' Equity Amount be less than Buyer's
calculation of the Stockholders' Equity Amount delivered pursuant to
Section 2.04(a) nor more than Parent's calculation of the Stockholders'
-------
Equity Amount delivered pursuant to Section 2.04(b).
-------
"FINAL RECEIVABLES AMOUNT" means the Receivables Amount as shown in Buyer's
calculation delivered pursuant to Section 2.04(a), if no notice of
-------
disagreement with respect thereto is duly delivered pursuant to Section
2.04(b); or if such a notice of disagreement is delivered, as agreed by
-------
Buyer and Parent pursuant to Section 2.04(c) or, in the absence of such
-------
agreement, as shown in Arthur Andersen's calculation delivered pursuant to
Section 2.04(c); provided that in no event shall the Final Receivables
-------
Amount be less than Buyer's calculation of the Receivables Amount delivered
pursuant to Section 2.04(a) nor more than Parent's calculation of the
-------
Receivables Amount delivered pursuant to Section 2.04(b).
-------
(d) Buyer and the Sellers agree that they will, and agree to cause
their respective independent accountants and each member of the Company
Group to, cooperate and assist in the preparation of the Closing Balance
Sheet, the calculation of the Final Stockholders' Equity Amount and the
Final Receivables Amount and in the conduct of the reviews referred to in
this Section, including without limitation, the making available to the
extent necessary of books, records, work papers and personnel.
Section 2.05. Adjustment to Preliminary Purchase Price. (a) The
Preliminary Purchase Price will be adjusted as follows: if the sum of (i)
the Final Stockholders' Equity Amount plus (ii) the Final Receivables
Amount exceeds the sum of (iii) the stockholders equity as set forth on the
Base Balance Sheet (the "BASE STOCKHOLDERS' EQUITY AMOUNT") plus (iv) the
Receivables Amount set forth on the Base Balance Sheet (the "BASE
RECEIVABLES AMOUNT"), Buyer shall pay to Parent, as an adjustment to the
Preliminary Purchase Price, in the manner and with interest as provided in
Section 2.05(b), the amount of such excess. If the sum of (v) the Base
-------
Stockholders' Equity Amount plus (vi) the Base Receivables Amount exceeds
the sum of (vii) the Final Stockholders' Equity Amount plus (viii) the
Final Receivables Amount, Parent shall pay to Buyer, as an adjustment to
the Preliminary Purchase Price, in the manner and with interest as provided
in Section 2.05(b), the amount of such excess. The Preliminary Purchase
-------
Price as so adjusted is referred to herein as the "PURCHASE PRICE".
(b) Any payment pursuant to Section 2.05(a) shall be made at a
-------
mutually convenient time and place within 10 days after the Final
Stockholders' Equity Amount has been determined by delivery by Buyer or
Parent, as the case may be, of a certified or official bank check payable
in immediately available funds to the other party or by causing such
payments to be credited to such account of such other party as may be
designated by such other party. The amount of any payment to be made
pursuant to Section 2.05(a) shall bear interest from and including the
-------
Closing Date to but excluding the date of payment at a rate per annum
<PAGE>
equal to the rate of interest announced by Morgan Guaranty Trust Company of
New York (the "RATE") from time to time as its Base Rate in New York City
in effect from time to time during the period from the Closing Date to the
date of payment. Such interest shall be payable at the same time as the
payment to which it relates and shall be calculated daily on the basis of a
year of 365 days and the actual number of days elapsed.
Section 2.06. Deposit. If this Agreement is not terminated by Buyer
pursuant to Section 12.01(b), on the business day immediately following the
--------
Effective Date, Buyer shall deposit with Chase Manhattan Bank (the "ESCROW
AGENT") $20,000,000 (the "DEPOSIT") by a certified check of Buyer certified
by, or by an official bank check of, a bank which is a member of the New
York Clearing House Association payable in immediately available funds or
by wire transfer of immediately available funds to such account as the
Escrow Agent may specify. The Deposit Amount (as defined below) shall be
held, invested and disbursed by the Escrow Agent in accordance with the
terms set forth in the agreement attached hereto as Exhibit C (the "ESCROW
AGREEMENT"). The Deposit (and any interest earned thereon) (the "DEPOSIT
AMOUNT") shall be credited against the Preliminary Purchase Price at the
Closing as provided in Section 2.03. If this Agreement is terminated by
----
Parent pursuant to Section 12.01(c) and any of the conditions set forth in
--------
Section 12.02 that would, in accordance with Section 12.02, give rise to
----- -----
liability on the part of Buyer (the "BUYER BREACH CONDITIONS") have
occurred, the Sellers shall have the right to retain the Deposit; provided
that, prior to terminating this Agreement, the Sellers will give written
notice to Buyer of such condition and will give Buyer 10 days from the date
of such notice to cure such condition (and if such condition is cured
within such 10-day period, the Sellers may not terminate this Agreement on
account thereof); provided further that retention of the Deposit Amount
shall not affect the availability of any other remedies that may be
available to the Sellers under this Agreement or applicable law. If this
Agreement is terminated pursuant to any other paragraph of Section 12.01 or
-----
pursuant to Section 12.01(c) under circumstances where no Buyer Breach
--------
Condition is satisfied, the Deposit Amount shall be returned to Buyer and,
subject to Section 12.02, the Sellers shall not have any liability to
-----
Buyer.
Section 2.07. Cost to Completion Adjustments. (a) The Preliminary
Purchase Price will be reduced by (i) the amount of all tenant improvement
costs and allowances and brokerage commissions which have been agreed to be
paid by landlord with respect to space leases in effect for the Properties
on the date of this Agreement and which have not been paid by any member of
the Company Group as of the Closing Date and (ii) the amount estimated as
of Closing that will be required, following the Closing Date, to complete
(not including any tenant improvement costs or allowances or any leasing
commissions) the planned development program with respect to Northridge
Fashion Center and Regency Square Mall in accordance with plans and
specifications for each such Property delivered to Buyer not later than 15
days prior to the Closing Date (the "DEVELOPMENT PLANS"), which plans and
specifications shall not be materially different from those made available
to Buyer prior to the date hereof (together, the "CONSTRUCTION COMPLETION
AMOUNT"), the calculation of which shall be without regard to any actions
taken by Buyer or any developments arising after the Closing Date. The
amount calculated pursuant to Section 2.07(a)(ii) shall include the cost of
-----------
paving, grading and other offsite and onsite work; barricades, security,
directional signs and other general conditions; roof, structural and other
shell work; mall and common area finish work; parking, lighting,
landscaping, exterior signage and other developer work; permits and
licenses; architectural, engineering and general contractor's fees and
legal fees, in each case, only to the extent required to complete the
development program set forth under the Development Plans. Notwithstanding
anything to the contrary contained in this Section 2.07(a), for purposes of
-------
this Section 2.07(a), the parties agree that the
-------
<PAGE>
tenant improvement costs and allowances and brokerage commissions for the
theatre lease at Valley Plaza Mall shall be deemed to be $5,200,000. The
Sellers shall cause the site work for the proposed theatre tenant at Valley
Plaza Mall to be completed prior to Closing (or, to the extent not
completed, Buyer shall be entitled to a credit at Closing for the unpaid
cost thereof).
(b) From and after the date hereof and until Closing, the Sellers
shall cause the members of the Company Group to (i) take, at their own
expense, all actions reasonably necessary to continue the construction,
renovation, development or redevelopment of Northridge Fashion Center and
Regency Square Mall, in each case, substantially in accordance with the
plans and specifications therefor made available to Buyer prior to the date
hereof and to keep a designated representative of Buyer informed with
respect to the progress and implementation of such plans, (ii) use all
reasonable efforts to continue negotiating leases in respect of leasable
space in each of such Properties, including the Valley Plaza Mall theatre
lease, (iii) use all reasonable efforts to obtain the consent of the anchor
tenants to the proposed amendments to the Northridge Fashion Center REA (it
being understood that such consents are not required to be obtained prior
to Closing).
(c) Not later than 15 days prior to the Closing Date, Parent shall
deliver to Buyer in writing its good faith calculation of the Construction
Completion Amount. If Buyer agrees with the Construction Completion Amount
as calculated by Parent, such calculation shall be binding upon Parent and
Buyer and will constitute the Construction Completion Amount for purposes
of calculating the Preliminary Purchase Price. If Buyer disagrees with the
calculation made by Parent, Buyer shall deliver to Parent, within 5 days of
receipt of Parent's calculation, a written notice specifying the basis for
its disagreement and setting forth its calculation of the Construction
Completion Amount. Failure to deliver a notice of disagreement within any
such 5-day period shall be deemed to constitute agreement to such
calculation. If a notice of disagreement is delivered within such 5-day
period, Buyer and Parent shall negotiate in good faith to resolve the
disagreements. If no agreement is reached as to the Construction
Completion Amount, Buyer and Parent shall refer the disputed issues for
resolution to an appropriate Person of recognized national standing who has
been agreed upon by Parent and Buyer (a "DESIGNATED PERSON"). The
Designated Person shall resolve such issues and determine the Construction
Completion Amount. The fees and expenses of the Designated Person shall be
borne (i) by Buyer if the difference between Buyer's calculation of the
Construction Completion Amount and the Construction Completion Amount
determined by the Designated Person is greater than the difference between
Parent's calculation of the Construction Completion Amount and the
Construction Completion Amount determined by the Designated Person, (ii) by
Parent if the first such difference is less than the second such difference
and (iii) otherwise equally by Buyer and Parent.
If Parent and Buyer are unable to agree on a Designated Person, each
of Parent and Buyer will select a Designated Person (the "PARENT DESIGNATED
PERSON" and the "BUYER DESIGNATED PERSON", respectively). The Parent
Designated Person and the Buyer Designated Person will select a third,
independent Designated Person (the "THIRD DESIGNATED PERSON"). The Parent
Designated Person, the Buyer Designated Person and the Third Designated
Person (collectively, the "DESIGNATED COMMITTEE") will resolve the issues
and will determine, by a majority vote of the three, the Construction
Completion Amount. The determination of the Construction Completion Amount
shall be binding upon Parent and Buyer; provided that the Construction
Completion Amount so determined shall not exceed the higher of the
Construction Completion Amount or be less than the lower of the
Construction Completion Amount calculated by Parent and Buyer. The Parent
and Buyer will pay the fees and expenses of its own Designated Person, and
if a Third Designated Person is engaged, the fees and expenses of the Third
Designated Person will be paid one-half by Parent and one-half by Buyer.
<PAGE>
If Parent and Buyer are unable to agree on the Construction Completion
Amount or if the Designated Person(s) has (have) not made a determination
as to the Construction Completion Amount, in each case by the Closing Date,
the Construction Completion Amount for purposes of calculating the
Preliminary Purchase Price shall be the calculation originally delivered by
Parent (the "ESTIMATED CONSTRUCTION COMPLETION AMOUNT"). In such event, if
the Estimated Construction Completion Amount is less than the Construction
Completion Amount, determined in accordance with the procedures of this
Section 2.07, Parent shall pay to Buyer the difference between the two
----
amounts. Such payment shall be made within 10 days after the Construction
Completion Amount has been determined pursuant to this Section 2.07 and
----
shall be made in immediately available funds by wire transfer to an account
of Buyer designated by Buyer, by notice to Parent, (or if not so
designated, then by certified check of Parent certified by, or by an
official bank check of a bank which is a member of the New York Clearing
House Association payable in immediately available funds directly to the
order of Buyer in such amount). The amount of any payment to be made
pursuant to Section 2.07(a) shall bear interest from and including the
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Closing Date to but excluding the date of payment at the Rate in effect
from time to time during the period from the Closing Date to the date of
payment. Such interest shall be payable at the same time as the payment to
which it relates and shall be calculated daily on the basis of a year of
365 days and the actual number of days elapsed.
ARTICLE 3
Representations and Warranties of the Sellers
The Sellers represent and warrant to Buyer as of the date hereof and
as of the Closing Date, except as any of the following may be affected by
the Restructuring, that:
Section 3.01. Corporate Existence and Power. Each Seller is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate powers and
all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those
licenses, authorizations, permits, consents and approvals the absence of
which would not have a Material Adverse Effect.
Section 3.02. Corporate Authorization. The execution, delivery and
performance by each Seller of this Agreement and the Escrow Agreement and
the consummation of the transactions contemplated hereby and thereby are
within such Seller's corporate powers and have been duly authorized by all
necessary corporate action on the part of such Seller. This Agreement has
been and the Escrow Agreement, upon the execution thereof, will be, duly
executed and delivered by the Sellers. This Agreement constitutes and the
Escrow Agreement, upon the execution and delivery thereof by the parties
thereto, will constitute, a valid and binding agreement of each Seller,
enforceable against it in accordance with its terms.
Section 3.03. Governmental Authorization. The execution, delivery
and performance by each Seller of this Agreement and the Escrow Agreement
and the consummation of the transactions contemplated hereby and thereby
require no action by or in respect of, or filing with, any governmental
body, agency or official other than any such action or filing where the
failure to make or obtain such action or filing would not have a Material
Adverse Effect.
Section 3.04. Noncontravention. The execution, delivery and
performance by each Seller of this Agreement and the Escrow Agreement and
the consummation of the transactions contemplated hereby and thereby do not
and will not (i) violate the certificate of incorporation, bylaws,
<PAGE>
partnership agreement or other organizational documents of any Seller or
any member of the Company Group, (ii) assuming compliance with the matters
referred to in Section 3.03, violate any applicable law, rule, regulation,
----
judgment, injunction, order or decree, except for any such violations which
would not have a Material Adverse Effect, (iii) except as disclosed in
Schedule 3.04 or as to matters which would not have a Material Adverse
----
Effect, require any consent or other action by any person under, constitute
a default (or would, with the passage of time or giving of notice or both,
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of any Seller or
any member of the Company Group or to a loss of any benefit to which any
Seller or any member of the Company Group is entitled under any provision
of any agreement or other instrument binding upon such Seller or such
member of the Company Group or (iv) result in the creation or imposition of
any Lien on the Shares or any asset of any member of the Company Group,
except for any Permitted Liens.
Section 3.05. Capitalization. (a) (i) The authorized capital stock
of MEPC Holdings consists of 1,000 shares of $1.00 par value common stock
(the "MEPC HOLDINGS COMMON STOCK") and 1,000 shares of $1.00 par value
Class A Common Stock (the "MEPC HOLDINGS CLASS A COMMON STOCK"), of which
only 105 shares of the MEPC Holdings Common Stock and 496 shares of the
MEPC Holdings Class A Common Stock are issued and outstanding and owned
beneficially and of record by Parent; (ii) the authorized capital stock of
Caledonian Holding consists of 1,000 shares of $.10 par value common stock,
of which only 1,000 shares are issued and outstanding and owned
beneficially and of record by North American Properties; and (iii) the
authorized capital stock of UK-American Properties consists of 1,500 shares
of $.10 par value common stock, of which only 1,440.038 shares are issued
and outstanding and owned beneficially and of record by UK-American.
(b) The Shares have been duly authorized and validly issued and are
fully paid and non-assessable and the Shares are owned directly by the
Sellers, free and clear of any lien, encumbrance, security interest, pledge
or option or other right to acquire or vote the same or any interest
therein ("ENCUMBRANCES"). The Sellers will transfer and deliver to Buyer
at the Closing valid title to the Shares free and clear of any Encumbrance
other than any Encumbrance arising as a result of actions of Buyer. There
are no outstanding (i) securities of any Company convertible into or
exchangeable for shares of capital stock, voting securities or other equity
interests of that Company or (ii) options or other rights to acquire from
any Company, or other obligations of any Company to issue, any capital
stock, voting securities or other equity interests in that Company or
securities convertible into or exchangeable for capital stock, voting
securities or other equity interests of that Company (the items in Sections
3.05(b)(i) and 3.05(b)(ii) being referred to collectively as the "COMPANY
---------- -----------
SECURITIES"). There are no outstanding obligations of any member of the
Company Group to repurchase, redeem or otherwise acquire any Company
Securities.
(c) Each of the Parent Notes and the Finance Notes are duly
authorized and validly issued and constitute a valid and binding obligation
of each of the Persons issuing such Note. The Parent Notes are owned by
Parent free and clear of any Encumbrance and, in the event of a Note
Election, Parent will transfer and deliver to Buyer at the Closing valid
title to the Parent Notes free and clear of any Encumbrance other than any
Encumbrance arising as a result of actions of Buyer. The Finance Notes are
owned by MEPC Finance free and clear of any Encumbrance and, in the event
of a Note Election, Parent will cause MEPC Finance to transfer and deliver
to Buyer at the Closing valid title to the Finance Notes free and clear of
any Encumbrance other than any Encumbrance arising as a result of actions
of Buyer.
<PAGE>
Section 3.06. Subsidiaries. (a) Each member of the Company Group is
a corporation or partnership duly organized or formed, validly existing and
(to the extent applicable) in good standing under the laws of its
jurisdiction of incorporation or formation and has all powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those
licenses, authorizations, consents and approvals the absence of which would
not have a Material Adverse Effect. Each corporate member of the Company
Group is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect.
Schedule 3.06(a)(i) sets forth, with respect to each Company, after giving
-------
effect to the Restructuring, a correct and complete list of each material
direct or indirect Subsidiary thereof (each a "COMPANY GROUP SUBSIDIARY"),
and the jurisdiction of organization of such Company Group Subsidiary. The
Companies and the Company Group Subsidiaries, after giving effect to the
Restructuring, own no general partnership interest in any Person other than
the Company Group Subsidiaries and there are no material capital
contribution obligations or other material obligations with respect to any
equity interest that is held by any member of the Company Group and not
disclosed on Schedule 3.06(a)(i).
-------
(b) All of the issued and outstanding shares of capital stock of or
other equity interests in each Company Group Subsidiary have been duly
authorized and validly issued, and are fully paid and non-assessable. All
of the outstanding capital stock or other equity interests in each Company
Group Subsidiary is owned by the respective Company or Company Group
Subsidiary as designated in 3.06(a)(i), directly or indirectly, free and
-------
clear of any Encumbrance. Except as set forth in Schedule 3.06(b)(ii),
-----------
there are no outstanding (i) securities of any Company Group Subsidiary
convertible into or exchangeable for shares of capital stock, voting
securities or other equity interests in that Company Group Subsidiary or
(ii) options or other rights to acquire from any Company Group Subsidiary,
or other obligation of such Company Group Subsidiary to issue, any capital
stock, voting securities or other equity interests in that Company Group
Subsidiary or securities convertible into or exchangeable for capital
stock, voting securities or other equity interests of that Company
Subsidiary (collectively the "GROUP SUBSIDIARY SECURITIES"). There are no
outstanding obligations of any of the Companies or any of the Company Group
Subsidiaries to repurchase, redeem or otherwise acquire any Group
Subsidiary Securities.
Section 3.07. Financial Statements. (a) The audited combined balance
sheet as of September 30, 1997 and the related audited combined statements
of income and cash flows for the year ended September 30, 1997 and the
unaudited interim combined balance sheet as of January 31, 1998 and the
related unaudited interim combined statement of income for the four months
ended January 31, 1998 of the Companies and the Company Group Subsidiaries
(together, the "COMPANY FINANCIAL STATEMENTS") fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
combined financial position of the Company Group as of the dates thereof
and their combined results of operations for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited
interim financial statements).
(b) None of the Companies nor any of the Company Group Subsidiaries
had at January 31, 1998, or has incurred since that date, any liabilities
or obligations (whether absolute, accrued, contingent or otherwise) of any
nature, except liabilities, obligations or contingencies that (i) are
accrued or reserved against in the Company Financial Statements or
reflected in the notes thereto, (ii) are not required under U.S. generally
accepted accounting principles to be shown in the Company Financial
Statements or reflected in the notes thereto, (iii) were
<PAGE>
incurred in the ordinary course of business and consistent with past
practices, (iv) have been discharged or paid in full prior to the Closing
Date or (v) are not, individually or in the aggregate, material to the
Company and the Company Group Subsidiaries, taken as a whole.
Section 3.08. Absence of Certain Changes. Except as set forth in
Schedule 3.08 and except in connection with the Restructuring, since the
----
Balance Sheet Date, the business of the Company Group has been conducted in
the ordinary course consistent with past practices and there has not been:
(a) any event, occurrence or development which has had or would
reasonably be expected to have a Material Adverse Effect;
(b) except for dividends contemplated by the Restructuring, any
dividends paid by any member of the Company Group or any repurchase,
redemption or other acquisition by any member of the Company Group of any
outstanding shares of capital stock of any of the Companies;
(c) any amendment of any material term of any outstanding security
issued by any member of the Company Group;
(d) any incurrence, assumption or guarantee by any member of the
Company Group of any Indebtedness, other than Indebtedness (i) between or
among members of the Company Group or (ii) between or among a member of the
Company Group, on the one hand, and Parent or any of its Affiliates (other
than members of the Company Group), on the other hand.
(e) any making by any member of the Company Group of any loan,
advance or capital contribution to, or investment in, any Person, other
than a Company Group Subsidiary and other than Tenant Allowances and loans,
advances or capital contributions or investments of the type made in the
ordinary course of business consistent with past practices;
(f) any transaction or commitment made, or any contract or agreement
entered into, by any member of the Company Group relating to its assets or
business, in either case, material to the Company Group, taken as a whole,
other than transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this Agreement;
(g) any material change in any method of accounting by any member of
the Company Group except for any such change required by reason of a
concurrent change in generally accepted accounting principles, and except
as set forth in the Company Financial Statements; or
(h) other than in connection with the Stay Sell Agreement and except
as set forth on Schedule 3.08(h), any (i) employment, deferred
-------
compensation, severance, retirement or other similar agreement entered into
with any director, officer or employee of any member of the Company Group
(or any amendment to any such existing agreement), (ii) grant of any
severance or termination pay to any director, officer or employee of any
member of the Company Group, or (iii) change in compensation or other
benefits payable to any director, officer or employee of any member of the
Company Group, in each case other than in the ordinary course of business
consistent with past practices.
Section 3.09. Intercompany Accounts. Schedule 3.09 reflects all
----
intercompany balances (including those evidenced by the Notes) as of the
Balance Sheet Date between Parent and its Affiliates (other than members of
the Company Group), after giving effect to the Restructuring, on the one
hand, and members of the Company Group as of such date, on the other hand.
Since the Balance Sheet Date there has not been any accrual of liability of
the Company Group to Parent or any of its Affiliates (other than members of
the Company Group), or other material transaction between the Company Group
and Parent and any of its Affiliates (other than members of the Company
Group), except (i) in connection with the Restructuring, (ii) changes in
the outstanding principal balance of the Receivables occurring in the
ordinary course of business of the Company Group consistent with past
practices or (iii) as provided in Schedule 3.09.
----
<PAGE>
Section 3.10. Properties. (a) Schedule 3.10(a) lists all the real
-------
properties owned by or held, as lessee, by, any member of the Company Group
(each a "PROPERTY") and, with respect to each Property:
(i) whether the Property is owned or leased;
(ii) the Person that owns the Property (each an "OWNER");
(iii) the most recent title commitment/s, certificate/s or
other report/s held by any member of the Company Group with respect to
such Property (collectively with respect to each Property an "EXISTING
TITLE REPORT");
(iv) the most recent surveys held by any member of the Company
Group with respect to such Property (collectively with respect to each
Property an "EXISTING SURVEY");
(v) any leasing or other real estate brokerage agreements
binding upon any member of the Company Group with respect to such
Property, including any material modifications thereof or supplements
thereto (each a "BROKERAGE AGREEMENT");
(vi) any ground or similar lease under which any member of the
Company Group holds such Property or leases such property to another
Person, including any material modifications thereof or supplements
thereto (each a "GROUND LEASE");
(vii) any construction, operation and reciprocal easement
agreements relating to such Property, including any material
modifications thereof or supplements thereto (each a "COREA");
(viii) any third-party management agreements relating to such
Property, including any material modifications thereof or supplements
thereto (each a "MANAGEMENT AGREEMENT");
(ix) any consulting or other material service agreement binding
upon any member of the Company Group with respect to such Property,
including any material modifications thereof or supplements thereto
(each a "SERVICE AGREEMENT"); and
(x) any material construction, redesign or architectural
agreements binding upon any member of the Company Group with respect
to such Property, including any material modification thereof or
supplements thereto (each a "CONSTRUCTION AGREEMENT").
(b) Each member of the Company Group has good title to each Property
owned by it and a valid leasehold interest in each Property held by it as
lessee, except for any Property sold, leased or otherwise disposed of in
connection with the Restructuring. None of the Properties is subject to
any Lien, except:
(i) any and all Ground Leases, Tenant Leases (as defined
below), COREAs, Management Agreements, Brokerage Agreements,
Construction Agreements and Service Agreements relating to such
Property;
(ii) Liens relating to such Property disclosed or reflected in
or on the relevant Existing Title Reports or the relevant Existing
Surveys (other than Tenant Leases that have expired or been
terminated, Liens for taxes, assessments and similar charges and Liens
that relate to Indebtedness that has been satisfied) and any
additional state of facts which would be disclosed by a survey of such
Property since the date of the relevant Existing Surveys or would be
disclosed by a physical inspection of such Property, so long as such
additional state of facts would not, taken in the aggregate,
reasonably be expected to have a Material Adverse Effect;
(iii) Liens with respect to such Property disclosed or reflected
on the Balance Sheet, the Closing Balance Sheet or notes to either or
securing liabilities reflected on the Balance Sheet or notes to either
and not satisfied, released or otherwise terminated subsequent to the
date of the Balance Sheet;
(iv) Liens with respect to such Property for taxes, assessments
and similar charges that are not yet due or are being contested in
good faith;
<PAGE>
(v) mechanic's, materialman's, carrier's, repairer's and other
similar Liens with respect to such Property arising or incurred in the
ordinary course of business or that are not yet due and payable or are
being contested in good faith or that are the obligation of any party
(other than a member of the Company Group) under any COREA, any tenant
under any Tenant Lease or any manager or other party (other than a
member of the Company Group) under any Management Agreement, Service
Agreement, Construction Contract or other contract or agreement to
pay, bond or remove;
(vi) Liens with respect to such Property incurred since the
Balance Sheet Date and described on Schedule 3.10(b);
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(vii) other Liens with respect to such Property which,
individually or in the aggregate, do not have and would not reasonably
be expected to have a Material Adverse Effect (the Liens with respect
to each Property referred to in Sections 3.10(b)(i) through
----------
3.10(b)(viii) are, collectively, the "PERMITTED LIENS" with respect to
-------------
such Property); or
(viii) Liens with respect to such Property that are between
members of the Company Group.
(c) Each Ground Lease, COREA, Brokerage Agreement, Management
Agreement, Construction Agreement and Service Agreement disclosed pursuant
to this Section is a valid and binding agreement of the relevant member of
the Company Group, constitutes the complete agreement of the parties
thereto with respect to the subject matter thereof and is in full force and
effect, and neither the relevant member of the Company Group nor, to
Sellers' knowledge, the other party thereto is in default or breach in any
material respect thereunder or would, with the passage of time or giving of
notice or both, be in default or breach thereunder; nor, to Sellers'
knowledge, has any member of the Company Group received any written notice
from any other party thereto of any such defaults, breaches or conditions
thereunder; in each case except for any such defaults set forth in Schedule
3.10(c), and except for any such defaults, breaches or conditions which do
-------
not have and would not reasonably be expected to have a Material Adverse
Effect. True, correct and complete copies of the Ground Leases, COREAs,
Brokerage Agreements, Management Agreements and Service Agreements have
been made available to Buyer.
(d) Upon execution and delivery of any COREA, Management Agreement,
Service Agreement or Construction Agreement described in Schedule 3.10(d)
-------
as pending by any member of the Company Group and the other party or
parties thereto upon the terms contained therein, such COREA, Management
Agreement, Service Agreement or Construction Agreement shall constitute a
COREA, Management Agreement, Service Agreement or Construction Agreement,
as the case may be, and shall be deemed to be disclosed and scheduled
pursuant to this Section.
Section 3.11. Other Material Contracts. (a) Except for the contracts
set forth in Schedule 3.10(a), Schedule 3.11 or Schedule 3.19 and except
------- ---- ----
for contracts entered into in connection with the Restructuring, no member
of the Company Group is a party to or bound by:
(i) any lease of personal property providing for annual rentals
of $50,000 or more that cannot be terminated on not more than 60 days'
notice without payment by the relevant member of the Company Group of
any material penalty;
(ii) any lease of real property under which a member of the
Company Group is lessor (or sublessor) that cannot be terminated by
such member of the Company Group on not more than 60 days notice
without payment by such member of the Company Group of any material
penalty (each, a "TENANT LEASE"); provided that, upon execution and
delivery by a member of the Company Group and the other party or
parties thereto of any lease described in Schedule 3.11(a)(ii) as
-----------
pending or anticipated leases upon substantially the terms described
therein and of the standard retail lease form of the Companies (except
with regard to the Borders Books lease at Northridge Fashion
<PAGE>
Center), such lease shall constitute a Tenant Lease and shall be
deemed to be disclosed and scheduled pursuant to this Section.
(iii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets providing for either (A)
annual payments by any member of the Company Group of $50,000 or more
or (B) aggregate payments by any member of the Company Group of
$250,000 or more, in each case that cannot be terminated on not more
than 60 days' notice without payment by that member of the Company
Group of any material penalty;
(iv) any material third-party partnership, joint venture or
other similar agreement or arrangement;
(v) any agreement (including without limitation option
agreements) relating to the acquisition or disposition of any material
asset (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to Indebtedness (other than
leases for personal property) or the deferred purchase price of
property (in either case, whether incurred, assumed, guaranteed or
secured by any asset) or the issuance of performance bonds or letters
of credit and any guarantees or other financial accommodations, except
any such agreement entered into subsequent to the date of this
Agreement as permitted by Section 3.08(d);
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(vii) any agreement between a member of the Company Group and
any of its officers, directors or employees which agreement cannot be
terminated currently by such member of the Company Group without a
material penalty;
(viii) any material agreement that limits the freedom of any
member of the Company Group to compete in any line of business or with
any person or in any area; or
(ix) any collective bargaining agreement.
(x) any lease of real property under which a member of the
Company Group is lessee (or sublessee) that cannot be terminated
currently by such member of the Company Group without a material
penalty;
(xi) any notes, contracts or agreements between any members
of the Company Group, on the one hand, and any of the Sellers or their
Affiliates (other than members of the Company Group), on the other
hand, except as set forth in Schedule 3.09; or
----
(xii) any material undertakings or commitments to any
governmental or regulatory authority; or
(xiii) any other material contract, agreement, arrangement or
commitment not made in the ordinary course of business consistent with
past practice.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed pursuant to Sections 3.11(a)(i) through 3.11(a)(xiii) is a valid
---------- -------------
and binding agreement of the relevant member of the Company Group, and is
in full force and effect, and no member of the Company Group nor, to the
Sellers' knowledge, any other party thereto is in default (or, with the
passage of time or giving of notice or both, would be in default) under the
terms of any such agreement, contract, plan, lease, Tenant Lease,
arrangement or commitment, except as are set forth in Schedule 3.11(b), and
-------
except for any such defaults which do not have or would not reasonably be
expected to have a Material Adverse Effect. To the knowledge of the
Sellers, no member of the Company Group has received any written notice
from any other party to any of the agreements, contracts, plans, leases,
arrangements or commitments disclosed pursuant to Sections 3.11(a)(i)
----------
through 3.11(a)(xiii) asserting that such member of the Company is in
-------------
default or breach thereunder. True, correct and complete copies of the
documents disclosed pursuant to Sections 3.11(a)(i) through 3.11(a)(xiii)
---------- -------------
have been made available to Buyer. Each of the agreements, contracts,
plans, leases, arrangements or commitments set forth in Schedule 3.11
----
constitutes the complete agreement of the parties thereto with respect to
the subject matter thereof.
<PAGE>
Section 3.12. Litigation. Except as set forth in Schedule 3.12,
----
there is no action, suit, investigation or proceeding (including
condemnation proceedings) pending against or, to the knowledge of the
Sellers, threatened against or affecting, the Sellers, any member of the
Company Group or any of the Properties before any court or arbitrator or
any governmental body, agency or official which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect
or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement. None of
the Sellers nor any other member of the Company Group is a party to or is
bound by or in default or, with the passing of time or giving of notice or
both, would be in default with respect to any outstanding order, writ,
injunction, judgment or decree of any court or governmental entity which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
Section 3.13. Insurance Coverage. Schedule 3.13 sets forth a list of
----
all insurance policies and fidelity bonds relating to the assets, business,
operations, employees, officers or directors of the Company Group. Except
as set forth on Schedule 3.13, there are no material claims by any member
----
of the Company Group pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds or in respect of which such underwriters have
reserved their rights. Such policies and bonds are in full force and
effect and all premiums have been paid through the date hereof. To the
knowledge of the Sellers, no Seller or any other member of the Company
Group has received notice or has knowledge of (a) any material violation
with respect to any of such insurance policies or bonds or (b) any material
request or demand by the underwriters of any such insurance policies and
bonds that any work or alteration be performed or made with respect to any
of the Properties.
Section 3.14. Brokers and Finders. Except for Goldman, Sachs & Co.,
whose fees will be paid by the Sellers, there is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Sellers or any member of the Company
Group who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
Section 3.15. Employees. Schedule 3.15 sets forth a true and
----
complete list of the names, titles, annual salaries and other compensation
of all officers of the Company Group and all other employees of the Company
Group whose annual base salary exceeds $75,000.
Section 3.16. Employee Benefit Plans. (a) Schedule 3.16 identifies each
----
Employee Plan. Seller has made available to Buyer copies of the Employee
Plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof together with the most recent
annual report (Form 5500 including, if applicable, Schedule B thereto) and
the most recent actuarial valuation report prepared in connection with any
Employee Plan.
(b) No Company nor any ERISA Affiliate of any Company has (i) engaged
in, or is a successor or parent corporation to an entity that has engaged
in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii)
incurred, or reasonably expects to incur prior to the Closing Date, (A) any
liability under Title IV of ERISA arising in connection with the
termination of, or a complete or partial withdrawal from, any plan covered
or previously covered by Title IV of ERISA or (B) any liability under
Section 4971 of the Code that in either case could become a liability of
that Company or any Company Group Subsidiary or Buyer or any of its ERISA
Affiliates after the Closing Date. No Employee Plan is a Multiemployer
Plan or a Title IV Plan.
<PAGE>
(c) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to
be so qualified and, to the knowledge of the Sellers, there has been no
event since the date of such determination which would adversely affect
such qualification; each trust created under any such Plan has been
determined by the Internal Revenue Service to be exempt from tax under
Section 501(a) of the Code and, to the knowledge of the Sellers, there has
been no event since the date of such exemption which would adversely affect
such exemption. The Sellers have provided Buyer with the most recent
determination letter of the Internal Revenue Service relating to each such
Employee Plan. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and
all applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Code.
(d) Schedule 3.16 identifies each Benefit Arrangement. The Sellers
----
have made available to Buyer copies or descriptions of each Benefit
Arrangement (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof. Each Benefit
Arrangement has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations and has been maintained in good standing with
applicable regulatory authorities.
(e) No member of the Company Group has any current or projected
liability in respect of post-employment or post-retirement health or
medical or life insurance benefits for retired, former or current employees
of the Company Group, except as required to avoid excise tax under Section
4980B of the Code.
(f) Except as would not reasonably be expected to have a Material
Adverse Effect, all contributions, premiums or payments required to be made
with respect to any Employee Plan have been made on or before their due
date or accrued on the unaudited interim combined balance sheet as of
January 31, 1998 of the Companies and the Company Group Subsidiaries and as
a result, there are no underfunded amounts thereunder that have not been
paid or accrued with respect to such Employee Plans. No Employee Plan is
currently subject to an audit or other investigation by the Internal
Revenue Service, the Department of Labor, the PBGC or any other
governmental or regulatory authority. Except as would not reasonably be
expected to have a Material Adverse Effect, no lawsuits, claims (other than
routine claims for benefits) or complaints to, or by, any person or
governmental entity have been filed or are pending and there are no facts
or contemplated events which could be expected to give rise to any such
lawsuit, claim or complaint with respect to any Employee Plan.
Section 3.17. Environmental Matters. Except as disclosed on Schedule
3.17 and except as to matters that would not reasonably be expected to have
----
a Material Adverse Effect:
(a) there has been no written environmental audit of any Property
conducted within the past two years by the Sellers, or any member of the
Company Group, which has not been made available to Buyer prior to the date
hereof;
(b) no written notice, request for information, order, complaint or
penalty has been received, and there are no judicial, administrative or
other actions, suits, investigations or proceedings pending or threatened
which allege a violation of any Environmental Law, in each case relating to
any member of the Company Group arising out of any Environmental Law;
(c) each member of the Company Group has all environmental permits
necessary for the operations of that member of the Company Group to comply
with all applicable Environmental Laws and are in compliance with the terms
of such permits and with all other applicable Environmental Laws; and
(d) no member of the Company Group has discharged, disposed of or
released any Hazardous Substances on or at any of the Properties, other
<PAGE>
than the discharge, disposal or release of Hazardous Substances commonly
present at or used in the operation and maintenance of shopping centers in
quantities commonly present at shopping centers and in compliance with
Environmental Laws; and
(e) no member of the Company Group owns or leases any property in New
Jersey or Connecticut.
Section 3.18. Compliance with Laws and Court Orders. Except as
disclosed in Schedule 3.18, no member of the Company Group is in violation
----
of any applicable law, rule, regulation, judgment, injunction, order or
decree, except for violations that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.
Section 3.19. Rent Roll. The rent roll attached hereto as Schedule
3.19 identifying with respect to each tenant: the lease expiration date,
----
percentage and breakpoint amount, current monthly rent, operating
escalations, current past due amount, amount of security deposits is true,
correct and accurate as of the date of such rent roll, except for any such
inaccuracies which, individually or in the aggregate, would not be material
with respect to the relevant Property.
Section 3.20. Disclosure Schedules. (a) At Closing, the Sellers may
revise the Schedules and Exhibit A to this Agreement by delivering revised
Schedules or a revised Exhibit A to Buyer to reflect any matter hereafter
arising or discovered which, if existing or known at the date hereof, would
have been required to be set forth herein or described thereon (but no such
revision shall relieve the Sellers of liability hereunder for breach of a
representation or warranty except as provided in Section 11.04(c) or modify
--------
the representations and warranties for purposes of determining whether any
condition to closing is satisfied). Buyer shall be reasonably satisfied
with any changes to Exhibit A that are inconsistent with the
representations, warranties and covenants contained herein and that would
materially adversely affect Buyer. Any proposed revision to Exhibit A
shall be provided to Buyer no later than five business days prior to
Closing.
(b) The parties acknowledge and agree that (i) the Schedules to this
Agreement may include certain items and information solely for informational
purposes for the convenience of Buyer; (ii) the disclosure by the Sellers of any
matter in the Schedules shall not be deemed to constitute an acknowledgment by
the Sellers that the matter is required to be disclosed by the terms of this
Agreement or that the matter is material; and (iii) if any Schedule hereto
discloses information that is or may be properly disclosed on another Schedule
or Schedules, the matter shall be deemed to have been disclosed in such other
Schedule or Schedules.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as of the date hereof and
as of the Closing Date that:
Section 4.01. Existence and Power. Buyer is a limited partnership
duly formed, validly existing and in good standing under the laws of the
state of Delaware and has all powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
Section 4.02. Authorization. The execution, delivery and performance
by Buyer of this Agreement and the Escrow Agreement and the consummation of
the transactions contemplated hereby and thereby are within the powers
<PAGE>
of Buyer and have been duly authorized by all necessary action on the part
of Buyer. This Agreement has been and the Escrow Agreement, upon the
execution thereof, will be, duly executed and delivered by the Buyer. This
Agreement constitutes and the Escrow Agreement, upon execution and delivery
thereof by the parties thereto, will constitute, a valid and binding
agreement of Buyer, enforceable against it in accordance with its terms.
Section 4.03. Governmental Authorization. The execution, delivery
and performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby require no material action by or in
respect of, or material filing with, any governmental body, agency or
official.
Section 4.04. Noncontravention. The execution, delivery and
performance by Buyer of this Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate the organizational documents of Buyer, (ii) assuming
compliance with the matters referred to in Section 4.03, violate any
----
applicable law, rule, regulation, judgment, injunction, order or decree,
(iii) require any consent or other action by any person under, constitute
a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Buyer or to a loss of any
benefit to which Buyer is entitled under any provision of any agreement or
other instrument binding upon Buyer or (iv) result in the creation or
imposition of any material Lien on any asset of Buyer.
Section 4.05. Financing. Buyer has, or will have prior to the
Closing, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make timely payment of the
Preliminary Purchase Price and any other amounts to be paid by it
hereunder.
Section 4.06. Purchase for Investment. Buyer is purchasing the
Shares and the Notes, in the event of a Note Election, for investment for
its own account and not with a view to, or for sale in connection with, any
distribution thereof. Buyer (either alone or together with its advisors)
has sufficient knowledge and experience in financial and business matters
so as to be capable of evaluating the merits and risks of its investment in
the Shares and the Notes, in the event of a Note Election, and is capable
of bearing the economic risks of such investment.
Section 4.07. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against
or affecting, Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by
this Agreement.
Section 4.08. Brokers and Finders. There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee or
commission upon consummation of the transactions contemplated by this
Agreement.
Section 4.09. Inspections; No Other Representations. Buyer is an
informed and sophisticated purchaser, and has engaged expert advisors,
experienced in the evaluation and purchase of companies such as the Company
Group as contemplated hereunder. Buyer has undertaken such investigation
and has been provided with and has evaluated such documents and information
as it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement and the Escrow Agreement. Buyer
<PAGE>
acknowledges that the Sellers have given Buyer complete and open access to
the key employees, documents and Properties of the Company Group. Buyer
agrees to accept the Shares and the Properties in the condition they are in
on the Closing Date based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance
upon any express or implied representations or warranties of any nature
made by or on behalf of or imputed to the Sellers, except as expressly set
forth in this Agreement. BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
EXPRESSLY SET FORTH HEREIN, THE SELLERS MAKE NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING ANY WARRANTY
OF CONDITION, HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF ANY OF THE ASSETS OF THE COMPANY GROUP OR OF THE PROPERTIES.
Without limiting the generality of the foregoing, Buyer agrees by acquiring
the Shares, that it is accepting the Properties in their financial,
physical and environmental condition existing on the Closing Date. Further,
without limiting the generality of the foregoing, Buyer acknowledges that
the Sellers are not bound by and have no responsibility for any expressed
or implied warranties, statements or representations made or furnished by
any investment banker, broker, agent, employee or other person representing
or purporting to represent the Sellers, unless such warranties, statements
or representations are expressly set forth herein. Further, without
limiting the generality of the foregoing, Buyer acknowledges that, except
as expressly set forth in this Agreement, the Sellers make no
representation or warranty with respect to (i) any projections, estimates
or budgets delivered to or made available to Buyer of future revenues,
future results of operations (or any component thereof), future cash flows
or future financial condition (or any component thereof) of any member of
the Company Group or the future business and operations of any member of
the Company Group, (ii) any information or documents made available to
Buyer or its advisors concerning the financial, physical or environmental
condition of the Properties, the use to which the Properties may be put,
the expenses of operation or maintenance of the Properties, the rental
income or prospective rental income of the Properties, or anything else
related to the Properties, or (iii) any other information or documents made
available to Buyer or its counsel, accountants or advisors with respect to
any member of the Company Group or their respective businesses or
operations, except as expressly set forth in this Agreement. Nothing
contained in this Section shall be deemed to limit the representations,
warranties and covenants expressly contained in this Agreement.
ARTICLE 5
COVENANTS OF THE SELLERS
The Sellers agree that:
Section 5.01. Conduct of the Company Group. (a) Except in connection
with the Restructuring, from the date hereof until the Closing Date, the
Sellers shall cause each member of the Company Group to conduct its
businesses in the ordinary course consistent with past practices and to use
commercially reasonable efforts to preserve intact its business
organizations and relationships with third parties and to keep available
the services of its present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date,
except as disclosed on Schedule 5.01 and except in connection with the
----
Restructuring, the Sellers will not permit any member of the Company Group
to:
(i) adopt or propose any change in its certificate of
incorporation, bylaws or other organizational documents;
<PAGE>
(ii) merge or consolidate with any other Person or acquire the
business or operations of any other Person;
(iii) sell or otherwise dispose of the Properties or any
material portion thereof;
(iv) sell or otherwise dispose of any material assets or
property (other than the Properties) except (A) pursuant to existing
contracts or commitments that are listed on the Schedules hereto or
(B) otherwise in the ordinary course consistent with past practices;
or
(v) make any material alterations to the Properties other than
in connection with and in accordance with the development or
improvement programs described on Schedule 5.01(a)(v) hereto; or
----------
(vi) agree or commit to do any of the foregoing.
Except for actions taken in connection with the Restructuring and except
for the transactions contemplated hereby, the Sellers will not take, and
will not permit any member of the Company Group to take, any action that
would make any representation or warranty of the Sellers hereunder
inaccurate in any material respect at the Closing Date.
(b) Notwithstanding anything to the contrary contained herein, or in
any budget with respect to any Property, subject to the requirements of
Section 2.07, none of the Sellers nor any member of the Company Group will
----
be required to make any repairs, replacements or improvements for existing
conditions at any Property disclosed in any engineering report or in any of
other written information made available to Buyer on or prior to the date
hereof during the period from the date hereof to the Closing Date. If any
such repairs, replacements or improvements are made by any member of the
Company Group because such repairs, replacements or improvements (i) are
required under legally binding agreements, (ii) are necessary to preserve
the value of, or prevent further deterioration to, the relevant Property
or (iii) have been requested to be made by Buyer, then Buyer shall
reimburse the Sellers at Closing for the actual cost of such repairs,
replacements or improvements.
Section 5.02. Tenant Leases. Notwithstanding anything to the
contrary contained herein and except for actions taken in connection with
the Restructuring and pursuant to Section 2.07, the Sellers agree that from
----
the date hereof until the Closing Date:
(a) Without Buyer's consent, Sellers will not, and will not permit
any member of the Company Group to, terminate any Tenant Lease, except by
reason of a material default by the tenant thereunder or as required
thereunder or by applicable law. Buyer agrees that its consent under this
paragraph shall not be unreasonably withheld, delayed or conditioned, and
shall be deemed given if Buyer does not, within five business days after
Buyer's receipt of a request for such consent, give notice to the Sellers
stating that such consent is denied, the reasons for such denial and the
conditions (if any) that would need to be complied with for such consent to
be given (and if such conditions are complied with such consent shall be
deemed given). Any Tenant Lease terminated by the Sellers or the Company
Group pursuant to this paragraph shall be deemed deleted from the
applicable Schedule 3.10; and
----
(b) Except for entering into the pending Tenant Leases disclosed in
Schedule 3.10 on the terms described therein, without Buyer's consent, the
----
Sellers will not, and will not permit any member of the Company Group to,
enter into any new Tenant Lease, for any Property. Buyer's consent under
this paragraph shall not be unreasonably withheld, delayed or conditioned
and shall be deemed given if Buyer does not, within five business days
after Buyer's receipt of a request for such consent (which request shall
include the identity of the proposed tenant, a summary of the proposed
lease terms, including term, options to renew, options to cancel, rents,
rent concessions, improvement allowances, improvement costs, etc., in
reasonable detail and a statement of the amount of any brokerage commission
payable with respect thereto) give notice to the Sellers stating that such
consent is denied, the reasons for such denial
<PAGE>
and the conditions (if any) that would need to be complied with for such
consent to be given (and if such conditions are complied with, such consent
shall be deemed given). Any new lease made by the Sellers or the Company
Group pursuant to this paragraph and any related real estate brokerage
agreement shall be deemed added to the applicable Schedule 3.10.
----
Section 5.03. Access to Properties and Information; Confidentiality.
(a) From the date hereof until the Closing Date, the Sellers will (i) give,
and will cause each member of the Company Group to give, Buyer, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the Properties, offices, books and records of (and
accounting work papers relating to) the Company Group and to the books and
records of the Sellers relating to the Company Group, (ii) furnish, and
will cause each member of the Company Group to furnish, to Buyer, its
counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information relating to any
member of the Company Group as such persons may reasonably request and
(iii) instruct the employees, counsel and financial advisors of the Sellers
and any member of the Company Group to cooperate with Buyer in its
investigation of any member of the Company Group, except, in each case,
where compliance by the Sellers with these provisions would result in the
violation of a confidentiality restriction with a third-party or would
jeopardize the availability of the attorney-client privilege to any member
of the Company Group. Any investigation pursuant to this Section 5.03
----
shall be conducted in such manner as not to interfere unreasonably with the
conduct of the business of the Sellers or the Company Group and shall be
limited to matters relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the foregoing, Buyer shall not
conduct any invasive tests or inspections or any tests for the presence of
Hazardous Substances without the consent of the Sellers. Also,
notwithstanding the foregoing, Buyer shall not have access to personnel
records of the Company Group relating to individual performance or
evaluation records, medical histories or other information which in the
Sellers' good faith opinion is sensitive or the disclosure of which could
subject the Company Group to risk of liability.
(b) On and after the Closing Date, the Sellers will afford promptly
to Buyer and its agents reasonable access to their books of account,
financial and other records (including, without limitation, accountant's
work papers), information, employees and auditors to the extent necessary
or useful for Buyer in connection with the performance of any of its
obligations hereunder or in connection with any audit, investigation,
dispute or litigation or any other reasonable business purpose relating to
any member of the Company Group; provided that any such access by Buyer
shall not unreasonably interfere with the conduct of the business of the
Sellers. Buyer shall bear all of the out-of-pocket costs and expenses
(including, without limitation, attorneys' fees, but excluding
reimbursement for general overhead, salaries and employee benefits)
reasonably incurred in connection with the foregoing.
Section 5.04. Notices of Certain Events. The Sellers shall promptly
notify Buyer of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced relating to the Seller or any member of the Company Group that,
if pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.12.
----
<PAGE>
Section 5.05. Restructuring. The Sellers shall consummate the
Restructuring at or prior to the Closing Date.
Section 5.06. Resignations. The Sellers will deliver to Buyer at the
Closing the resignations of all officers and directors of the members of
the Company Group.
Section 5.07. Estoppel Certificates. As soon as practicable after
the date of this Agreement, the Sellers shall, or shall cause the members
of the Company Group to, distribute to anchor tenants, any party to a
COREA, any ground lessor, any other major contractors for Northridge
Fashion Center and Regency Square Mall and each other individual tenant
which under its lease occupies 5,000 or more square feet of floor area at
the Properties under Tenant Leases to which any member of the Company Group
is a party estoppel certificates, in Sellers' customary form, which shall
be reasonably satisfactory to Buyer, and shall ask such parties to execute
and return such estoppel certificates to the appropriate member of the
Company Group prior to the Closing. The Sellers shall have no further
obligation to obtain any such estoppel certificates, and the receipt of
such estoppel certificates shall not be considered a condition to the
closing of the transactions contemplated by this Agreement.
If, prior to Closing, the Sellers receive any such estoppel
certificates, the Sellers shall promptly deliver a copy of such estoppel
certificates to Buyer. If the facts set forth in any estoppel certificate
differ from those set forth in the Sellers' representations and warranties
as set forth in this Agreement, then, after the Closing, the Sellers'
representations and warranties shall be deemed amended to conform to the
facts stated in such estoppel certificate.
Section 5.08. Title Insurance and Surveys. Upon the written request
of Buyer, the Sellers shall cooperate (including, without limitation,
through the delivery by Sellers of customary documents to the Title
Companies (as defined below)) with Buyer to cause the title insurance
company that issued the Title Reports: Chicago Title Insurance Company,
National Business Unit, Dollar, TX (or any other nationally recognized
title company selected by Buyer and reasonably acceptable to Sellers) (the
"TITLE COMPANIES") and the surveyors that issued the surveys (or other
surveyors selected by Buyer) (the "SURVEYORS") to issue current title
insurance policies as described in Section 10.02 and/or current surveys
-----
certified to Buyer. All costs for such current surveys, and all premiums
for and costs related to title insurance obtained by Buyer shall be paid by
Buyer.
Section 5.09. Certain Accounts and Agreements. The Sellers shall
cause all intercompany balances (other than the Receivables Amount) between
Parent or its Affiliates (other than members of the Company Group), on the
one hand, and members of the Company Group, on the other hand, to be paid
in full on or prior to the Closing. The Sellers shall cause all contracts
or agreements between any members of the Company Group, on the one hand,
and any of the Sellers or their Affiliates (other than members of the
Company Group), on the other hand, to be terminated on or prior to the
Closing.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
<PAGE>
Section 6.01. Confidentiality. Prior to the Closing Date and after
any termination of this Agreement, Buyer and its Affiliates will hold, and
will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, lenders, consultants, advisors and agents
to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning any of the Sellers, the Companies or
the Company Subsidiaries furnished to Buyer or its Affiliates in connection
with the transactions contemplated by this Agreement (the "CONFIDENTIAL
INFORMATION"), except to the extent that such information can be shown to
have been (i) previously known on a nonconfidential basis by Buyer, (ii) in
the public domain through no fault of Buyer or (iii) later lawfully
acquired by Buyer from sources other than the Sellers, the Companies or the
Company Subsidiaries; provided that Buyer may disclose such Confidential
Information to its officers, directors, employees, accountants, counsel,
lenders, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement so long as such persons are
informed by Buyer of the confidential nature of such information and are
directed by Buyer to treat such information confidentially. Buyer shall be
responsible for any failure to treat the Confidential Information
confidentially by such persons. The obligation of Buyer and its Affiliates
to hold Confidential Information in confidence shall be satisfied if they
exercise the same care with respect to such information as they would take
to preserve the confidentiality of their own similar information. If this
Agreement is terminated, Buyer and its Affiliates will, and will use their
best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or
deliver to the Sellers, upon request, all documents and other materials,
and all copies thereof, obtained by Buyer or its Affiliates or on their
behalf from the Sellers, the Companies or the Company Subsidiaries in
connection with this Agreement that are subject to such confidence.
Section 6.02. Access. Buyer will cause each member of the Company
Group, on and after the Closing Date, to afford promptly to the Sellers and
its agents reasonable access to (a) their properties, books, records (and
accounting work papers relating to), employees and auditors to the extent
necessary to permit the Sellers to determine any matter relating to its
rights and obligations hereunder or to any period ending on or before the
Closing Date or to the obligations of the Sellers pursuant to Section 2.07;
----
provided that any such access by the Sellers shall not unreasonably
interfere with the conduct of the business of Buyer and (b) the Properties
subject to the provisions of Section 2.07 for the purposes of performing
----
the obligations of the Sellers pursuant to Section 2.07. The Sellers will
----
hold, and will direct their officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning
any member of the Company Group provided to it pursuant to this Section.
Sellers shall be responsible for any failure to treat such documents and
information confidentially by such persons. The obligation of Sellers and
their respective Affiliates to hold such documents and information in
confidence shall be satisfied if they exercise the same care with respect
to such information as they would take to preserve the confidentiality of
their own similar information.
Section 6.03. Trademarks; Tradenames. After the Closing, Buyer shall
not permit any member of the Company Group to use any of the marks or names
set forth on Schedule 6.03.
----
ARTICLE 7
<PAGE>
COVENANTS OF BUYER AND SELLER
Buyer and the Sellers agree that:
Section 7.01. Commercially Reasonable Efforts; Further Assurances.
Subject to the terms and conditions of this Agreement, the Sellers and
Buyer will use their commercially reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary
or desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement. The Sellers and Buyer agree,
and the Sellers, prior to the Closing, and Buyer, after the Closing, agree
to cause each member of the Company Group, to execute and deliver such
other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated by this Agreement.
Section 7.02. Certain Filings. The Sellers and Buyer shall cooperate
with one another (i) in determining whether any action by or in respect of,
or filing with, any governmental body, agency, official or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (ii) in
taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such
actions, consents, approvals or waivers. The Sellers and Buyer shall
provide to the other copies of any filings made pursuant to this Section
7.02 with respect to this Agreement or the transactions contemplated
----
hereby.
Section 7.03. Public Announcements. To the extent practicable, the
parties agree to consult with each other, before issuing any press release
or making any public statement with respect to this Agreement or the
transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
Section 7.04. Brokers. The Sellers shall pay the fees of any
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of any of them or any member
of the Company Group who is entitled to any fee or commission in connection
with the transactions contemplated by this Agreement. The Buyer shall pay
the fees of any investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of it or its
Affiliates who is entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
ARTICLE 8
TAX MATTERS
Section 8.01. Tax Definitions. The following terms, as used herein,
have the following meanings:
"BASKET" means the amount at any time equal to (a) $100,000 plus the
liabilities for Taxes, if any, provided for on the Closing Balance Sheet,
minus (b) any reductions (in the aggregate) made pursuant to Section 8.06
----
hereof.
<PAGE>
"CODE" means the United States Internal Revenue Code of 1986, as
amended.
"FEDERAL TAX" means any Tax imposed under Subtitle A of the Code.
"FINAL DETERMINATION" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of
an Internal Revenue Service Form 870AD and, with respect to Taxes other
than Federal Taxes, any final determination of liability in respect of a
Tax that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise (including the expiration of
a statute of limitations or a period for the filing of claims for refunds,
amended returns or appeals from adverse determinations) or (ii) with
respect to any Tax attributable to an item disallowed or adjusted by a
Taxing Authority, the payment of such Tax by the person responsible
therefore under applicable law; provided that such responsible party
determines that no action should be taken to recoup such payment and the
other party agrees.
"POST-CLOSING TAX PERIOD" means any Tax Period beginning after the
close of business on the Closing Date and that portion of any Straddle
Period (as defined below) beginning after the close of business on the
Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax Period ending on or before the
close of business on the Closing Date and that portion of any Straddle
Period ending on or before the close of business on the Closing Date.
"SELLER GROUP" means, with respect to Federal Taxes, the affiliated
groups of corporations (as defined in Section 1504(a) of the Code) of which
any of the Companies or the Company Subsidiaries is a member and, with
respect to state income or franchise Taxes, any of the consolidated,
combined or unitary groups of which the Companies or the Company
Subsidiaries is a member.
"TAX" means any tax or similar charge, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (domestic or foreign) responsible for the imposition of any such
tax (a "TAXING AUTHORITY").
"TAX ASSET" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or
tax attribute which could reduce Taxes (including, without limitation,
deductions and credits related to alternative minimum Taxes).
"TAX PERIOD" means, in respect of a particular Tax, the taxable year
or other period for which Tax is imposed.
"TAX SHARING AGREEMENT" means the tax sharing agreement between the
members of the Company Group currently in effect.
Section 8.02. Tax Representations. The Sellers represent and warrant
to Buyer as of the date hereof and as of the Closing Date that, except as
set forth in the Base Balance Sheet (including the notes thereto) or on
Schedule 8.02, (i) all material Tax returns, statements, reports and forms
----
required to be filed with any Taxing Authority (collectively, the
"RETURNS") on or before the Closing Date (taking into account any extension
of time to file) by, or on behalf of, any Company or any Company Subsidiary
have been filed or will be filed in accordance with all applicable laws;
(ii) all such Returns are true, complete and correct in all material
respects; (iii) all Taxes shown as due and payable on such Returns have
been or will be paid prior to the Closing Date; (iv) there are no
outstanding waivers extending the statutory period of limitations
<PAGE>
applicable to any Return required to be filed by any Company or any Company
Subsidiary; (v) the charges, accruals and liabilities for Taxes with
respect to the Companies and the Company Subsidiaries reflected on the Base
Balance Sheet are adequate to cover the Tax liabilities accruing through
the date thereof; (vi) there is no action, suit, proceeding, audit or claim
by any Taxing Authority now pending (or to the Sellers' knowledge proposed)
against or with respect to the Company or any Company Subsidiary; (vii) no
deficiency for any Taxes has been assessed with respect to any Company or
any Company Subsidiary that has not been abated, paid in full or contested;
(viii) no consent has been filed relating to any member or prior member of
the Seller Group pursuant to Section 341(f) of the Code; (ix) none of the
Companies nor the Company Subsidiaries was a member of an affiliated group
(as defined in Section 1504(a) of the Code) except for the affiliated group
of which it is now a member; (x) with respect to state income or franchise
taxes, no Company or Company Subsidiary has been a member of a
consolidated, combined or unitary group other than the group comprising the
group of which it is now a member (no member of which is not a member of
the Seller Group); (xi) prior to the Closing, the Sellers shall have caused
to be eliminated (a) any excess loss account which a member of the Company
Group has in the stock of a Company Subsidiary and (b) any item of a member
of the Company Group which arose as a result of an intercompany transaction
or deferred intercompany transaction in a Pre-Closing Tax Period; and (xii)
the combined earnings and profits of the Companies accumulated for all Tax
Periods through and including the Tax Period ending at the close of
business on the Closing Date (disregarding any Company having net negative
accumulated earnings and profits) will be not more than $5,000,000 (reduced
by any earnings and profits of a Company Subsidiary attributable to a
Taxable Period in which such Company Subsidiary was not a member of the
Company Group, whether or not such Company Subsidiary is a subsidiary of a
Company having negative earnings and profits).
Section 8.03. Tax Covenants. (a) Buyer covenants that it will not
cause or permit any Company, any Company Subsidiary or any Affiliate of
Buyer (i) to take any action on the Closing Date other than in the ordinary
course of business, including but not limited to the distribution of any
dividend or the effectuation of any redemption that could give rise to any
tax liability of the Seller Group or any loss of the Sellers or the Seller
Group under this Agreement (other than as provided in Section 2.03(c)),
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(ii) to make any election or deemed election under Section 338 of the Code
(or any comparable election under state, local or foreign law), or (iii) to
make or change any tax election, amend any Return or take any position on
any Return, take any action, omit to take any action or enter into any
transaction that results in any increased Tax liability or reduction of any
Tax Asset of the Seller Group in respect of any Pre-Closing Tax Period;
provided that the Sellers acknowledge that Buyer or its assignee's election
to be taxed as a REIT pursuant to Subchapter M of the Code, and the
Companies and the Company Subsidiaries' treatment as Qualified REIT
Subsidiaries, shall not be such an action, or omission to act, which
results in an increased Tax liability or reduction of any Tax Asset of a
Pre-Closing Period. Buyer agrees that the Sellers will have no liability
for any Tax resulting from any action, referred to in the preceding
sentence, of any Company, Company Subsidiary, Buyer or any Affiliate of
Buyer on the Closing Date, and agrees to indemnify and hold harmless the
Sellers and their Affiliates against any such liability or reduction. The
Sellers agree to give prompt notice to Buyer of the assertion of any claim,
or the commencement of any action or proceeding, in respect of which
indemnity may be sought under this Section 8.03(a). Buyer may participate
-------
in and assume the defense of any such suit, action or proceeding at its own
expense. If Buyer assumes such defense, the Sellers shall have the right
(but not the duty) to participate in the defense thereof and to employ
counsel, at their own expense, separate from the counsel employed by Buyer.
Whether or not the Sellers choose to defend
<PAGE>
or prosecute any claim, the parties hereto shall cooperate in the defense
or prosecution thereof.
(b) Buyer shall promptly pay or cause to be paid to the Sellers all
refunds of Taxes and interest thereon (to the extent in excess of the
amount recorded in the Final Stockholders' Equity Amount) received by
Buyer, any Affiliate of Buyer, any Company, or any Company Subsidiary
attributable to Taxes imposed on the Sellers, any Company or any Company
Subsidiary (or any predecessor or Affiliate of the Sellers) with respect to
any Pre-Closing Tax Period. The Sellers shall be subrogated to any rights
of Buyer, any Company or any Company Subsidiary against third parties with
respect to Taxes paid by any Seller or for which the Sellers otherwise are
responsible under this Article 8.
-
(c) All transfer, documentary, sales, use, stamp, registration and
similar taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the transactions contemplated hereby
shall be borne and paid by the Sellers and the Sellers will, at their own
expense, file all necessary Returns and other documentation with respect to
all such taxes and fees, and, if required by applicable law, Buyer will,
and will cause its Affiliates to, join in the execution of any such Returns
and other documentation.
Section 8.04. Termination of Existing Tax Sharing Agreements. Any
and all existing Tax sharing agreements between any Company and any member
of the Seller Group (including, without limitation, the Tax Sharing
Agreement) shall be terminated as of the close of business on the Closing
Date. After such date none of the Companies, the Company Subsidiaries, the
Sellers nor any Affiliate of the Sellers shall have any further rights or
liabilities thereunder. This Agreement shall be the sole Tax sharing
agreement relating to any Company or any Company Subsidiary for all Pre-
Closing Tax Periods.
Section 8.05. Tax Returns and Cooperation on Tax Matters. (a) Buyer
and the Sellers agree to furnish or cause to be furnished to each other,
upon request, as promptly as practicable, such information (including
access to books and records) and assistance (including making its employees
available on a mutually convenient basis) relating to the Companies and the
Company Subsidiaries as is reasonably necessary for any determination with
respect to Taxes, including the filing of any Return, the preparation for
any audit, and the prosecution or defense of any claim, suit or proceeding
relating to Taxes. Buyer and the Sellers agree to retain or cause to be
retained all books and records pertinent to the Companies and the Company
Subsidiaries until the applicable period for assessment under applicable
law (giving effect to any and all extensions or waivers) has expired, and
to abide by or cause the abidance with all record retention agreements
entered into with any Taxing Authority. Buyer agrees to give the Sellers
reasonable notice prior to discarding or destroying any such books and
records relating to Tax matters and, if the Sellers so request, Buyer shall
allow the Sellers to take possession of such books and records. Buyer and
the Sellers shall cooperate with each other in the conduct of any audit or
other proceedings involving the Seller Group for any Tax purposes and each
shall execute and deliver such powers of attorney and other documents as
are necessary to carry out the intent of this subsection. Any information
obtained pursuant to Section 8.05 shall be kept confidential, except as may
----
be otherwise necessary in connection with the filing of Returns or claims
for refund or in conducting an audit or other proceeding.
(b) Buyer shall prepare and timely file or cause the Companies and
the Company Subsidiaries to prepare and timely file all Returns relating to
the Companies and any of the Company Subsidiaries that are due (taking into
account any applicable extension period) after the Closing Date. Returns
required to be filed by Buyer in respect of a Pre-Closing Period shall be
prepared on a basis consistent with those prepared for prior tax
<PAGE>
years unless a different treatment of any item is required by an
intervening change in law. Buyer shall furnish the Sellers (and their
representatives) with a copy of any Return prepared by it for a Pre-Closing
Period at least 20 business days before the anticipated filing date thereof
and, in preparing such Return, shall accept any comments made by the
Sellers with respect to any issue or item which could give rise to a claim
for indemnification; provided that this sentence shall not apply in respect
of any comments for which the Sellers do not provide Buyer, if so requested
in writing to do so, with an opinion of counsel to the effect that there is
a reasonable basis for the Sellers' comments.
Section 8.06. Indemnification by Seller. (a) The Sellers hereby
indemnify Buyer against and agree to hold it harmless from any (i) Tax
imposed on any Company or any Company Subsidiary and (ii) out-of-pocket
costs and expenses (including, without limitation, reasonable expenses of
investigation and attorneys' fees and expenses), arising out of or incident
to the imposition, assessment or assertion of any Tax indemnified under
Section 8.06(a)(i), in each case with respect to any Pre-Closing Tax Period
----------
and in each case incurred or suffered by Buyer, any of its Affiliates or,
effective for any Post-Closing Tax Period, any Company, or any Company
Subsidiary (the sum of 8.06(a)(i) and 8.06(a)(ii) being referred to as a
---------- -----------
"LOSS"); provided that the Sellers shall have no liability for the payment
of any Loss attributable to or resulting from (i) any action described in
Section 8.03(a) hereof relating to any breach by Buyer, or its Affiliates
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of an obligation under this Agreement, (ii) any transaction occurring after
the close of business on the Closing Date or (iii) a reduction in any Tax
Asset of any member of the Seller Group which would otherwise be available
to the Buyer for a Post-Closing Tax Period; provided further, that the
Sellers shall have no obligation to make any payment to Buyer pursuant to
this Section 8.06(a) until the amount of all claims arising pursuant hereto
----
in the aggregate exceeds the Basket, in which case Buyer shall be entitled
to indemnity for the full amount of all claims in excess of the Basket.
(b) Any Taxes for a Tax Period beginning before the Closing Date and
ending after the Closing Date (a "STRADDLE PERIOD") shall be apportioned
between the Pre-Closing Tax Period and the Post-Closing Tax Period on the
basis of the actual operation of the Companies and the Company
Subsidiaries. Each such Pre-Closing Tax Period and Post-Closing Tax Period
shall be deemed to be a Tax Period subject to the provisions of Article 8.
-
(c) If as a result of an adjustment the Sellers make a payment to any
Taxing Authority in respect of a Tax of any member of the Seller Group with
respect to any Pre-Closing Tax Period, then Buyer shall promptly pay to the
Sellers an amount equal to such payment made by the Sellers, provided, that
any such payment by Buyer shall not exceed an amount equal to the positive
balance, if any, in the Basket.
(d) The Basket shall be reduced by (i) the amount of any claim of
Buyer under Section 8.06(a) hereof that is not paid in whole or part by the
-------
Sellers solely by reason of there being a positive balance in the Basket,
and (ii) the amount of any payment of Buyer to the Sellers under Section
8.06(c) hereof.
-------
(e) Any payment by the Sellers pursuant to this Section 8.06 shall be
----
made not later than 30 business days after receipt by the Sellers of
written notice from Buyer stating that any Loss has been paid by Buyer, any
of its Affiliates or, effective upon the Closing, any Company or any
Company Subsidiary and the amount thereof and of the indemnity payment
requested; provided that the Sellers shall not be required to make any
payment hereunder earlier than five days before it is due to the
appropriate Taxing Authority. In the case of a Tax that is contested in
accordance with the provisions of Section 8.06(f), payment of such Tax to
-------
the appropriate Taxing Authority shall not be considered due earlier than
the date of Final Determination with respect to such Tax.
<PAGE>
(f) If any claim or demand for Taxes in respect of which indemnity
may be sought pursuant to this Section 8.06 is asserted in writing against
----
Buyer, any of its Affiliates or, effective upon the Closing, any Company or
Company Subsidiary, Buyer shall notify the Sellers of such claim or demand
within 10 business days of receipt thereof, or such earlier time that would
allow the Sellers to timely respond to such claim or demand (but no failure
to so notify Sellers shall preclude indemnification hereunder except to the
extent Sellers were prejudiced by such failure), and shall give the Sellers
such information with respect thereto as the Sellers may reasonably
request. The Sellers may discharge, at any time, their indemnification
obligation under this Section 8.06 by paying to Buyer the amount of the
----
applicable Loss, calculated on the date of such payment. The Sellers may,
at their own expense, participate in and, upon notice to Buyer, assume and
control the defense of any such claim, suit, action, litigation or other
proceeding (including any Tax audit, other than a claim under Section
8.06(i), in which event Sellers may, at their own expense, participate in
the defense of such claim). Buyer shall empower by appropriate powers of
attorney such persons as may be designated by the Sellers from time to time
as its representatives in any such proceeding. If the Sellers assume such
defense, Buyer shall have the right (but not the duty) to participate in
the defense thereof and to employ counsel, at its own expense, separate
from the counsel employed by the Sellers. Whether or not the Sellers choose
to defend or prosecute any claim, Buyer shall use reasonable efforts to
mitigate any Loss and all of the parties hereto shall cooperate in the
defense or prosecution thereof.
(g) The Sellers shall not be liable under this Section 8.06 for (i)
----
any settlements effected, without the Sellers' prior written consent;
provided that the Sellers have not affirmatively abandoned the contest of
any such Tax or (ii) or resulting from any claim, suit, action, litigation
or proceeding in which the Sellers were not permitted an opportunity to
participate.
(h) Any amount paid to or by the Sellers in respect of warranties or
indemnities under this Agreement or the Related Agreements shall be treated
as an adjustment to the Purchase Price.
(i) Prior to the Closing, the Sellers shall cause KPMG Peat Marwick
to prepare a report (which shall be reasonably acceptable to Buyer) setting
forth the current and accumulated earnings and profits, if any, of the
Company Group (the "E&P REPORT"). The cost of preparing the E&P Report
shall be borne by the Sellers. As part of the Restructuring, the Sellers
shall take such actions as are reasonably necessary to ensure that the
combined earnings and profits of the Companies accumulated for all Tax
Periods through and including the Tax Period ending at the close of
business on the Closing Date (disregarding any Company having net negative
accumulated earnings and profits) will be not more than $5,000,000 (reduced
by any earnings and profits of a Company Subsidiary attributable to a Tax
Period in which such Company Subsidiary was not a member of the Company
Group, whether or not such Company Subsidiary is a subsidiary of a Company
having negative earnings and profits). The Sellers hereby indemnify Buyer
and General Growth Properties, Inc. ("GGPI"), which shall be a third party
hereof notwithstanding Section 13.05, against any Taxes imposed on Buyer,
-----
GGPI, any Affiliates of GGPI or any Company or Company Subsidiary as a
result of the combined earnings and profits of the Companies accumulated
for all Tax Periods through and including the Tax Period ending at the
close of business on the Closing Date (disregarding any Company having net
negative accumulated earnings and profits) exceeding $5,000,000 (reduced by
any earnings and profits of a Company Subsidiary attributable to a Tax
Period in which such Company Subsidiary was not a member of the Company
Group, whether or not such Company Subsidiary is a subsidiary of a Company
having negative earnings and profits). In no event, however, shall the
Sellers' liability under this Section 8.06(i) and Section 8.02(xii) exceed
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$25,000,000.
(j) This Article 8 shall be the sole provision governing Tax matters
-
and indemnities therefor under this Agreement, except as and to the extent
provided in Section 11.06.
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<PAGE>
Section 8.07. Survival. Notwithstanding anything in this Agreement
to the contrary, the provisions of this Article shall survive for thirty
days following the full period of all statutes of limitations (giving
effect to any waiver, mitigation or extension thereof).
Section 8.08. Withholding. On or prior to Closing, the Sellers shall
submit an application for a withholding tax certificate and shall provide
Buyer with notice thereof, as provided for in Treasury regulation
(S)1.1445-1(c)(2)(i)(b). Buyer shall withhold 10% of the Purchase Price
allocated to the Shares hereunder, as paid from time to time, pursuant to
Section 1445 of the Code and deposit such amount in an interest-bearing
escrow account to be established by the Sellers and Buyer with a financial
institution designated by the Sellers. On the 20th day following receipt of
a final determination by the Internal Revenue Service with respect to the
Seller's application for the withholding tax certificate, the amount of
such escrow account shall be distributed as follows: (i) to the Internal
Revenue Service, an amount equal to the amount set forth in such final
determination; and (ii) to the Sellers, an amount equal to the balance of
the escrow account (including any accrued interest) after the distribution
provided for in (i) above.
ARTICLE 9
Employee Benefits
Section 9.01. Employment of Company Group Employees; Service
Recognition. (a) Buyer or its Affiliates may, but shall not be obligated
to, offer to employ any or all employees of the Company Group ("EMPLOYEES")
on such terms as it deems advisable. The Sellers shall cause all Employees
of the Company Group to be terminated immediately prior to the Closing
Date.
(b) Buyer and its Affiliates shall, with respect to Employees who are
employed by Buyer or its Affiliates following Closing, recognize service
with the Sellers, the Company Group and their Affiliates as service for all
purposes under any benefit plan maintained by Buyer or its Affiliates in
which such Employees are otherwise eligible to participate, except for
purposes of benefit accrual under any defined benefit pension plan. Buyer
and its Affiliates shall credit the dollar amount of all expenses incurred
by such Employees and their respective eligible dependents during the
applicable plan year in which occurs the Closing Date, to the extent
relevant, for purposes of satisfying such plan year's deductible and co-
payment limitations under any applicable plan in which such Employees
participate after the Closing Date.
(c) Notwithstanding the foregoing, this Section 9.01 shall not apply
----
to any Employee included in a unit of employees covered by a collective
bargaining agreement.
Section 9.02. Stay Sell Agreement. (a) Notwithstanding any
termination of an Employee pursuant to Section 9.01, Buyer shall assume,
----
and shall hold the Sellers and their Affiliates harmless from, all
liability for "Severance Pay", within the meaning of the Stay Sell
Agreements or any other severance plan or policy of any Company, with
respect to any Employee who is employed by Buyer or its Affiliates in any
capacity at any time during the period commencing on the 30th day after the
Closing Date and ending on the second anniversary of the Closing Date (a
"RETAINED EMPLOYEE"). On or prior to the 30th day after the Closing Date,
Buyer shall provide Parent with a written list of those Employees
<PAGE>
covered by the Stay Sell Agreements who Buyer does not intend to treat as a
Retained Employee.
(b) Except as provided in paragraph 9.02(a) of this Section, Parent
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or its Affiliate shall retain or assume, and shall hold Buyer and its
Affiliates harmless from, all liabilities arising under the Stay Sell
Agreements or any other severance plan or policy of any Company or any
other member of the Company Group.
Section 9.03. Annual Bonuses. The pro rata portion of each Retained
Employee's annual bonus and vacation pay, if any, earned through the
Closing Date for the calendar year in which the Closing Date occurs shall
be calculated by the Sellers as soon as practicable after the Closing Date,
and reflected as a liability on the Closing Balance Sheet.
Section 9.04. No Third-Party Beneficiaries. The provisions of this
Article shall not create any rights in any Employee or any other person who
is not a party to this Agreement, and no such person shall have any rights
as a third party beneficiary hereof.
ARTICLE 10
Conditions to Closing
Section 10.01. Conditions to Obligations of Buyer and Sellers. The
obligations of Buyer and the Sellers to consummate the Closing are subject
to the satisfaction of the following conditions:
(a) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.
(b) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of
the Closing shall have been taken, made or obtained, except for any such
actions or filings the failure to take, make or obtain would not reasonably
be expected to have a Material Adverse Effect.
(c) No termination of this Agreement by the Sellers or Buyer shall
have occurred pursuant to any other provision hereof.
Section 10.02. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) The Sellers shall have performed in all material respects all
of their obligations hereunder required to be performed by them on or prior
to the Closing Date, (ii) the representations and warranties of the Sellers
contained in this Agreement (without regard to any materiality or Material
Adverse Effect qualifications contained therein) shall be true at and as of
the Closing Date, as if made at and as of such date, with only such
exceptions as are related to or contemplated by the Restructuring or would
not in the aggregate have a Material Adverse Effect and (iii) Buyer shall
have received a certificate signed by a senior officer of each of the
Sellers to the foregoing effect.
(b) The Sellers shall have received all consents, authorizations or
approvals from the governmental agencies referred to in Section 3.03, in
----
each case in form and substance reasonably satisfactory to Buyer, and no
such consent, authorization or approval shall have been revoked.
(c) The Restructuring shall have been consummated on or prior to the
Closing.
(d) The Title Companies shall be willing to issue to Buyer (or, at
Buyer's option, the appropriate member of the Company Group), on and
<PAGE>
effective as of the Closing Date, a title insurance policy or policies
(each a "TITLE POLICY") on the 1992 ALTA form owner's policy insuring Buyer
(or, at Buyer's option, the appropriate member of the Company Group) as to
title to each of the Properties as described in the Existing Title Reports
and as to valid easement rights to any property covered by a party to a
COREA (i) subject to no exclusions or exceptions other than Closing
Permitted Liens, (ii) limiting the "rights of parties in possession"
exception to "rights of tenants as tenants only" without options to
purchase, and (iii) including comprehensive, zoning 3.1 (with parking),
non-imputation, tax parcel, survey, contiguity, creditor's rights, access,
fairway (Boulevard Mall only), and utility facility endorsements, to the
extent available and appropriate. The aggregate amount of the Title
Policies shall be equal to the Preliminary Purchase Price. For purposes
hereof, "CLOSING PERMITTED LIENS" means:
(i) any and all Ground Leases, Tenant Leases, COREAs, Management
Agreements, Brokerage Agreements, Construction Agreements and Service
Agreements relating to such Property;
(ii) Liens relating to such Property disclosed or reflected in
or on the relevant Existing Title Reports or the relevant Existing
Surveys (other than Tenant Leases that have expired or been
terminated, Liens for taxes, assessments and similar charges and Liens
that relate to Indebtedness that has been satisfied);
(iii) Liens with respect to such Property disclosed or
reflected on the Balance Sheet, the Closing Balance Sheet or notes to
either or securing liabilities reflected on the Balance Sheet or notes
to either and not satisfied, released or otherwise terminated
subsequent to the date of the Balance Sheet;
(iv) Liens with respect to such Property for taxes, assessments
and similar charges that are not yet due or are being contested in
good faith;
(v) mechanic's, materialman's, carrier's, repairer's and other
similar third-party Liens with respect to such Property arising or
incurred in the ordinary course of business or that are not yet due
and payable or are being contested in good faith or that are the
obligation of any party (other than a member of the Company Group)
under any COREA, any tenant under any Tenant Lease or any manager or
other party (other than a member of the Company Group) under any
Management Agreement, Service Agreement, Construction Contract or
other contract or agreement to pay, bond or remove;
(vi) third party Liens with respect to such Property incurred
since the Balance Sheet Date and described on Schedule 3.10(b); or
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(vii) other Liens with respect to such Property which,
individually or in the aggregate, would not reasonably be expected to
materially restrict the current use of such Property or materially
impair the value of such Property.
(e) Buyer shall have received all documents it may reasonably request
relating to the existence of the Sellers, the members of the Company Group
and the authority of the Sellers for this Agreement, all in form and
substance reasonably satisfactory to Buyer.
(f) Buyer shall have received an opinion of counsel to the Sellers in
form reasonably acceptable to Buyer.
Section 10.03. Conditions to Obligation of the Sellers. The
obligation of the Sellers to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) (i) Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer contained in
this Agreement shall be true in all material respects at and as of the
Closing Date, as if made at and as of such date and (iii) the Sellers shall
have received a certificate signed by a senior officer of Buyer to the
foregoing effect.
<PAGE>
(b) Buyer shall have received all consents, authorizations or
approvals, including those from governmental agencies referred to in
Section 4.03, in each case in form and substance reasonably satisfactory to
----
the Sellers, and no such consent, authorization or approval shall have been
revoked.
(c) The Sellers shall have received all documents it may reasonably
request relating to the existence of Buyer and the authority of Buyer for
this Agreement, all in form and substance reasonably satisfactory to the
Sellers.
(d) The Buyer shall have deposited with the Escrow Agent the Deposit.
(e) The Sellers shall have received an opinion of counsel to the
Buyer in form reasonably acceptable to Sellers.
ARTICLE 11
Survival; Indemnification
Section 11.01. Survival. Unless otherwise provided herein, the
covenants, agreements, representations and warranties of the parties hereto
contained in this Agreement shall survive the Closing until June 1, 1999
(the "EXPIRATION DATE"); provided that the covenants, agreements,
representations and warranties contained in (i) Section 2.07 and Article 8
---- -
shall survive for the periods set forth therein and; (ii) Sections 2.04,
----
2.05, 3.01 - 3.06, 4.01 - 4.04, 4.09, 5.03(b), 5.05, 5.09, 6.02, 6.03,
---- ---- ---- ---- ---- ---- ------- ---- ---- ---- ----
7.01, 7.03, 7.04, 9.02, 9.03, 9.04, and Articles 11 and 13 shall survive
---- ---- ---- ---- ---- ---- -- --
indefinitely. Notwithstanding the preceding sentence, any covenant,
agreement, representation or warranty in respect of which indemnity may be
sought under this Agreement shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if notice of the
inaccuracy or breach thereof giving rise to such right of indemnity shall
have been given to the party against whom such indemnity may be sought
prior to such time.
Section 11.02. Indemnification. (a) From and after Closing, the
Sellers hereby indemnify Buyer and its Affiliates against and agree to hold
each of them harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit
or proceeding) ("DAMAGES") incurred or suffered by Buyer, the members of
the Company Group or any of their Affiliates (i) arising out of any
misrepresentation or breach of representation or warranty, in each case
made by any of the Sellers pursuant to this Agreement (without regard to
any materiality or Material Adverse Effect qualifications contained in any
representation or warranty other than Section 3.07) and which survives the
----
Closing (other than Article 8), (ii) arising out of any breach of any
-
covenant or agreement made or to be performed by any of the Sellers
pursuant to this Agreement and which survives the Closing (other than
Article 8), (iii) arising out of any Excluded Asset or Excluded Liability,
-
(iv) arising out of any mechanic's, materialman's, carrier's, repairer's
and other similar Liens with respect to any Property to the extent such
Liens result from landlord's acts (or the acts of those acting by, through
or under landlord) taken prior to Closing or relating to acts of tenants
(or those acting by, through or under them), which tenants, are not in
possession of the leased premises to which the Lien relates or have filed
for bankruptcy, in each case as of the Closing Date, or (v) arising out of
any obligation of a member of the Company Group under the Related
Agreements; provided that the Sellers shall not be liable under 11.02(a)(i)
-----------
unless the aggregate amount of Damages with respect to all matters referred
to in Section 11.02(a)(i) exceeds $8,000,000 and then only to the extent of
-----------
such excess and the Sellers' maximum aggregate
<PAGE>
liability under Section 11.02(a)(i) shall not exceed $50,000,000. Parent
-----------
shall be entitled to receive and retain any amount, and Buyer shall pay to
Parent any amount it shall receive which is payable to Parent or to any
member of the Company Group under any of the Related Agreements.
(b) From and after Closing, the Sellers hereby indemnify Buyer and
its Affiliates against and agree to hold each of them harmless from any and
all Damages, in excess of the reserve established therefor on the Closing
Balance Sheet, incurred or suffered by Buyer, the members of the Company
Group or any of their Affiliates arising out any of the litigation matters
scheduled on Schedule 11.02(b) hereof. The parties agree that (i) the
--------
reserve to be established on the Closing Balance Sheet in respect of such
litigation matters shall be $40,000 and (ii) Buyer and its Affiliates shall
undertake the defense of the same. Buyer and its Affiliates may not make
any compromise or settlement, or consent to the entry of judgment, in any
such litigation matter without the prior written consent of Parent, which
shall not be unreasonably withheld.
(c) From and after Closing, Buyer hereby indemnifies the Sellers and
their Affiliates against and agrees to hold each of them harmless from any
and all Damages incurred or suffered by the Sellers or any of their
Affiliates arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by Buyer pursuant to this
Agreement and which survives the Closing (other than pursuant to Article
8); provided that (i) Buyer shall not be liable under this Section 11.02(c)
- --------
unless the aggregate amount of Damages with respect to all matters referred
to in this Section 11.02(c) exceeds $8,000,000 and then only to the extent
--------
of such excess and (ii) Buyer's maximum aggregate liability under this
Section 11.02(c) shall not exceed $50,000,000.
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Section 11.03. Procedures. (a) The party seeking indemnification
under Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice
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to the party against whom indemnity is sought (the "INDEMNIFYING PARTY") of
the assertion of any claim, or the commencement of any suit, action or
proceeding ("CLAIM") in respect of which indemnity may be sought under such
Section and will provide the Indemnifying Party such information with
respect thereto that the Indemnifying Party may reasonably request. The
failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder, except to the extent such
failure shall have adversely prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall be entitled to participate in the
defense of any Claim asserted by any third party ("THIRD PARTY CLAIM") and,
subject to the limitations set forth in this Section, shall be entitled to
control and appoint lead counsel (who shall be reasonably acceptable to the
Indemnified Party) for such defense, in each case at its expense.
(c) If the Indemnifying Party shall assume the control of the
defense of any Third Party Claim in accordance with the provisions of this
Section, (i) the Indemnifying Party shall obtain the prior written consent
of the Indemnified Party (which shall not be unreasonably withheld) before
entering into any settlement of such Third Party Claim or consenting to
entry of any judgment and (ii) the Indemnified Party shall be entitled to
participate in the defense of such Third Party Claim and to employ separate
counsel of its choice for such purpose. The fees and expenses of such
separate counsel shall be paid by the Indemnified Party, except that if the
Indemnifying Party has a conflict of interest with respect to any Third
Party Claim, the Indemnifying Party shall pay the fees and expenses of such
separate counsel for the Indemnified Party.
(d) If the Indemnifying Party shall fail to timely undertake the
defense of any Third Party Claim in accordance with the provisions of this
Section and notify the Indemnified Party thereof, the Indemnified Party
may, but shall not be obligated to, undertake the defense of the same and
make any compromise or settlement thereof and recover the entire cost
thereof from the Indemnifying Party, including without limitation
<PAGE>
reasonable attorneys' and expert's fees (but the Indemnified Party shall
not have the right to make any compromise or settlement of, or consent to
the entry of judgment in, any such Third Party Claim without the prior
written consent of the Indemnifying Party, which shall not be unreasonably
withheld).
(e) Each party shall cooperate, and cause their respective Affiliates
to cooperate, in the defense or prosecution of any Third Party Claim and
shall furnish or cause to be furnished such records, information and
testimony, and attend such conferences, discovery proceedings, hearings,
trials or appeals, as may be reasonably requested in connection therewith.
Section 11.04. Calculation of Damages. (a) The amount of any Damages
payable under Section 11.02 by the Indemnifying Party shall be net of any
-----
amounts recovered or recoverable by the Indemnified Party under applicable
insurance policies.
(b) The Indemnifying Party shall not be liable under Section 11.02
-----
for any (i) Damages relating to any matter to the extent that (A) there is
included in the Closing Balance Sheet a specific liability or reserve
relating to such matter or (B) the Indemnified Party had otherwise been
compensated for such matter pursuant to the Purchase Price adjustment under
Section 2.05 or (ii) consequential or punitive Damages. Any calculation of
----
lost profits shall not include a capitalization rate or other earnings
multiplier.
(c) Notwithstanding any other provision of this Agreement to the
contrary, if on the Closing Date the Indemnified Party has actual knowledge
of any information that would cause one or more of the representations and
warranties made by the Indemnifying Party to be inaccurate as of the date
made (other than those contained in Section 8.02(viii) and (xi), the
----
Indemnified Party shall have no right or remedy after the Closing with
respect to such inaccuracy to the extent of the Indemnified Party's actual
knowledge thereof and shall be deemed to have waived its rights to
indemnification in respect thereof.
Section 11.05. Assignment of Claims. If the Indemnified Party
receives any payment from an Indemnifying Party in respect of any Damages
pursuant to Section 11.02 and the Indemnified Party could have recovered
-----
all or a part of such Damages from a third party (a "POTENTIAL
CONTRIBUTOR") based on the underlying Claim asserted against the
Indemnifying Party, the Indemnified Party shall assign such of its rights
to proceed against the Potential Contributor as are necessary to permit the
Indemnifying Party to recover from the Potential Contributor the amount of
such payment; provided that the Indemnified Party shall not be required to
assign any right to proceed against a Potential Contributor if the
Indemnified Party determines in its reasonable discretion that such
assignment would be materially detrimental to its reputation or future
business prospects.
Section 11.06. Exclusivity. Except as specifically set forth in this
Agreement, Buyer waives any rights and claims Buyer may have against the
Sellers, whether in law or in equity, relating to any of the Companies or
the Shares or the transactions contemplated hereby (other than claims for
fraud). The rights and claims waived by Buyer include, without limitation,
claims for contribution or other rights of recovery arising out of or
relating to any Environmental Law, claims for breach of contract, breach of
representation or warranty, negligent misrepresentation and all other
claims for breach of duty (other than claims for breach of this Agreement
or representations or warranties expressly set forth in this Agreement).
After the Closing, Sections 8.06 and 11.02 will provide the exclusive
---- -----
remedy (other than equitable remedies and other than a claim at law for
breach of representation, warranty, or covenant contained in Section
8.02(viii), 8.02(xi), 8.03, 8.04, 8.05 or 8.08) for any misrepresentation,
---- ---- ---- ---- ---- ----
breach of warranty, covenant or other
<PAGE>
agreement (other than those contained in Sections 2.05 and 2.07) or other
---- ----
claim arising out of this Agreement or the transactions contemplated
hereby.
ARTICLE 12
Termination
Section 12.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of the Sellers and Buyer;
(b) by Buyer, if on or before 5:00 p.m. New York City time on
April 20, 1998 (the "EFFECTIVE DATE") Buyer is not reasonably
satisfied with the disclosure schedules and Exhibit A attached hereto.
(c) by either the Sellers or Buyer if the Closing shall not have
been consummated on or before June 30, 1998; or
(d) by either the Sellers or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction.
The party desiring to terminate this Agreement pursuant to Sections
12.01(b), 12.01(c) or 12.01(d) shall give notice of such termination to the
-------- -------- --------
other party.
Section 12.02. Effect of Termination. If this Agreement is
terminated as permitted by Section 12.01; such termination shall be without
-----
liability of either party (or any stockholder, director, officer, employee,
agent, consultant or representative of such party) to the other party to
this Agreement; provided that if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the
performance of the obligations of the other party, (ii) failure to perform
a material covenant of this Agreement or (iii) breach by either party
hereto of any representation or warranty or material agreement contained
herein, such party shall be fully liable for any and all Damages incurred
or suffered by the other party as a result of such failure or breach. The
provisions of Sections 2.06, 6.01, 7.03, 7.04, 9.04, 13.03, 13.06, 13.07,
---- ---- ---- ---- ---- ----- ----- -----
13.08, 13.09, 13.15 and 13.16 shall survive any termination hereof pursuant
----- ----- ----- -----
to Section 12.01.
-----
ARTICLE 13
Miscellaneous
Section 13.01. Notices. All notices, requests, responses and other
communications required or permitted hereunder shall be in writing
(including facsimile transmission), signed by the party giving the same or
by its attorneys, and shall be given:
(a) if to the Sellers:
MEPC plc
Nations House
103 Wigmore Street
London, W1H 9AB
England
Attention: James Dundas
Finance Director
<PAGE>
Fax number: 011-44-171-499-0643
MEPC North American Properties Limited
Nations House
103 Wigmore Street
London, W1H 9AB
England
Attention: James Dundas
Fax number: 011-44-171-499-0643
U.K.American Holdings Limited
c/o MEPC plc
Nations House
103 Wigmore Street
London, W1H 9AB
England
Attention: James Dundas
Fax number: 011-44-171-499-0643
with copies to:
MEPC Management Inc.
15303 Dallas Parkway
Suite 400, LB5
Dallas, TX 75248
Attention: David L. Gruber
President
Fax number: 972-980-5092
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: David J. Strupp, Esq.
Fax number: 212-450-4800
(b) if to Buyer:
General Growth Properties, Inc.
110 North Wacker Drive
Chicago IL 60606
Attention: Matthew Bucksbaum
Fax Number: 312-551-5475
with copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street, Suite 2200
Chicago, IL 60602
Attention: Marshall E. Eisenberg
Fax Number: 312-269-1747
or at such other address or copy address as may be designated by a notice
of change of address given in accordance herewith. Each notice, request,
response or other communication shall be deemed to have been given and to
be effective upon being (i) personally delivered with receipt for delivery,
(ii) deposited with a nationally recognized overnight express delivery
service for next business day delivery with receipt for delivery, (iii)
sent by facsimile transmission with confirmation of delivery, or (iv)
deposited in the United States mail, postage prepaid, registered or
certified with return receipt requested, to the addressee at its address
set forth above or in a change of address notice given in accordance
herewith. The time period in which a response to any such notice, request
or other communication must be given shall commence on the date of receipt
thereof or deemed receipt thereof as provided below. Personal delivery to a
party or any officer, partner or employee of such party at its address
<PAGE>
set forth above or in a change of address notice given in accordance
herewith shall be deemed given and received at the time delivered.
Rejection or other refusal shall also be deemed receipt.
Section 13.02. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each
party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 13.03. Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement or the
transactions contemplated hereby, other than accounting fees and expenses
payable under Section 2.04(c) and costs of obtaining additional title
-------
insurance policies and surveys payable under Section 5.08, shall be paid by
----
the party incurring such cost or expense.
Section 13.04. Successors and Assigns. Subject to Section 2.04 the
----
provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; provided
that no party may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the consent of each other party
hereto, except that Buyer may assign its rights hereunder to any wholly-
owned subsidiary of Buyer without the consent of Sellers, in which case
Buyer will not be relieved of any of its obligations hereunder.
Section 13.05. Third-Party Beneficiaries. The provisions of this
Agreement are for the sole benefit of the parties hereto and their
successors and permitted assigns; and none of the provisions of this
Agreement is intended to or shall be construed as conferring any rights
upon any person other than the parties hereto and their successors and
permitted assigns.
Section 13.06. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New York, without
regard to the conflicts of law rules of such State which might cause the
laws of any other jurisdiction to govern this Agreement.
Section 13.07. Jurisdiction. Except as otherwise expressly provided
in this Agreement, the parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court
for the Southern District of New York or any other New York State court
sitting in New York City, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the jurisdiction of
any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 13.01 shall be
-----
deemed effective service of process on such party.
<PAGE>
Section 13.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 13.09. Attorneys' Fees. In the event of any suit, action or
proceeding relating to this Agreement, the prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and disbursements
as a part of its judgment. Any amounts owing hereunder which are not paid
when due shall bear interest at the Rate.
Section 13.10. No Recording. Neither this Agreement nor any
memorandum or other document referring to this Agreement shall be recorded.
Any such recording shall be void and of no force or effect.
Section 13.11. Entire Agreement. This Agreement and the Closing
Documents constitute the entire agreement between the parties with respect
to the subject matter of this Agreement and supersede all prior agreements,
understandings, representations and statements of any kind whatsoever, both
oral and written, between the parties or their representatives with respect
to the subject matter of this Agreement.
Section 13.12. Invalid Provisions. If any provision of this
Agreement or the application of any provision of this Agreement to any
person or circumstance shall to any extent be held invalid or
unenforceable, the remainder of this Agreement or the application of such
provision to any other persons or circumstances shall not be affected
thereby, and this Agreement and each of the provisions hereof shall be
valid and enforceable to the fullest extent permitted by law.
Section 13.13. Counterparts. This Agreement may be signed in any
number of counterparts; the signatures on each counterpart shall be deemed
to be on the same instrument; each of such counterparts shall be deemed to
be an original; all of such counterparts shall be deemed to be a single
instrument; and signatures on any counterpart delivered by facsimile
transmission shall have the same effect as the original signatures.
Section 13.14. Binding Effect. This Agreement shall not be a binding
obligation of the Sellers until it has been fully executed by Buyer and the
Sellers, the Sellers have delivered a fully executed counterpart hereof to
Buyer, and the Sellers have received the proceeds of the Deposit.
Section 13.15. Specific Performance. The Sellers acknowledge that a
failure by the Sellers to close the transactions contemplated by this
Agreement in violation of this Agreement will irreparably harm Buyer and
that money damages may not be adequate and, accordingly, that Buyer shall,
in addition to other available remedies, be entitled to specific
performance in the event of the failure of the Sellers to close the
transactions contemplated by this Agreement in violation of this Agreement.
Section 13.16. Joint and Several Liability. Each of the Sellers
shall be jointly and severally liable for the obligations, representations,
warranties and covenants of one or more of the Sellers hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
SELLERS:
<PAGE>
MEPC PLC
By: /s/ James Dundas
--------------------------------
Name: James Dundas
Title: Director
By: /s/ David S. Gruber
--------------------------------
Name: David S. Gruber
Title: Director
MEPC NORTH AMERICAN PROPERTIES LIMITED
By: /s/ James Dundas
--------------------------------
Name: James Dundas
Title: Director
By: /s/ David S. Gruber
--------------------------------
Name: David S. Gruber
Title: Director
U.K.-AMERICAN HOLDINGS LIMITED
By: /s/ James Dundas
--------------------------------
Name: James Dundas
Title: Director
By: /s/ David S. Gruber
--------------------------------
Name: David S. Gruber
Title: Director
BUYER:
GGP LIMITED PARTNERSHIP
By: General Growth Properties,
Inc.,
its General Partner
By: /s/ Matthew Bucksbaum
--------------------------------
Name: Matthew Bucksbaum
Title: Chairman of the Board of Directors
<PAGE>
Exhibit 2.3
MERGER AGREEMENT
Among
GGP Limited Partnership, GGP Acquisition L.L.C.
And
U.S. Prime Property Inc.
May 14, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions............................................................................. 1
2. Basic Transaction.......................................................................11
(a) The Merger.........................................................................11
(b) The Closing........................................................................11
(c) Actions at the Closing.............................................................11
(d) Effect of Merger...................................................................12
(e) Procedure for Payment..............................................................14
(f) Closing of Transfer Records........................................................16
(g) Dissenters' Rights.................................................................16
(h) Escrow of Deposit..................................................................16
(i) Escrow For Post-Closing Claims and Adjustments.....................................17
(j) Withholding Matters................................................................17
(k) Net Quick Asset Adjustment.........................................................19
(l) Further Assurances.................................................................22
3. Representations and Warranties of the Company...........................................22
(a) Organization, Qualification and Corporate Power....................................22
(b) Capitalization.....................................................................23
(c) PCI; the Venture; the Trust........................................................23
(d) Subsidiaries; Other Equity Interests...............................................23
(e) Authorization of Transaction.......................................................24
(f) Noncontravention...................................................................24
(g) Financial Statements...............................................................25
(h) Events Subsequent to Most Recent Fiscal Period End.................................26
(i) Tax Returns and Liabilities........................................................27
(j) Litigation.........................................................................29
(k) Real and Personal Property.........................................................29
(l) Shopping Centers - Service Contracts; Leases; REAs; and Brokerage
Commissions; Other Material Contracts..............................................29
(m) Shopping Centers - Representations Pertaining to the Premises and Legal
Matters............................................................................32
(n) Debt Instruments...................................................................34
(o) ERE Yarmouth Agreement.............................................................34
(p) Hart-Scott-Rodino Act..............................................................34
(q) Employees..........................................................................35
(r) Brokers' Fees......................................................................35
(s) Promotional Funds..................................................................35
(t) Violations.........................................................................35
(u) Licenses and Permits...............................................................36
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(v) Tenant Bankruptcy........................................................36
(w) Intellectual Property....................................................36
(x) Tax Assessments..........................................................36
(y) Bank Accounts and Powers of Attorney.....................................37
(z) Records..................................................................37
4. Representations and Warranties of the Buyer and the Transitory Subsidiary.....37
(a) Organization.............................................................37
(b) Financial Ability to Perform.............................................37
(c) Authorization of Transaction.............................................37
(d) Noncontravention.........................................................38
(e) Litigation...............................................................38
(f) The Transitory Subsidiary................................................38
(g) Brokers' Fees............................................................38
5. Survival of Representations and Warranties....................................39
6. Claims Against the Escrow Fund................................................39
7. Covenants.....................................................................39
(a) General..................................................................39
(b) Notices and Consents.....................................................39
(c) Regulatory Matters; Stockholder Approval.................................40
(d) Conduct of Business by the Company.......................................40
(e) Full Access..............................................................42
(f) Notice of Developments...................................................42
(g) Indemnification; Directors' and Officers' Insurance......................43
(h) Contracts, Transfers and Encumbrances....................................46
(i) Tenant Leases and REAs...................................................46
(j) Notice...................................................................47
(k) Estoppel Letters; Rent Roll..............................................47
(l) Taxes; Notices; Lease Negotiations; and Insurance........................48
(m) Other Obligations........................................................48
(n) Contest..................................................................49
(o) Transfer Taxes...........................................................49
(p) Exclusivity..............................................................49
(q) Governmental Entities....................................................50
(r) Employees................................................................50
8. Delivery of Title Commitments and Surveys.....................................50
9. Conditions to Obligation to Close.............................................52
(a) Conditions to Obligations of the Buyer and the Transitory Subsidiary.....52
(b) Conditions to Obligation of the Company..................................55
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
10. Termination..............................................................56
(a) Termination of Agreement and Remedies...............................56
(b) Effect of Termination...............................................57
(c) Remedies............................................................57
11. Miscellaneous............................................................57
(a) Press Releases and Public Announcements.............................57
(b) No Third-Party Beneficiaries........................................58
(c) Entire Agreement....................................................58
(d) Succession and Assignment...........................................58
(e) Counterparts........................................................58
(f) Headings............................................................58
(g) Notices.............................................................58
(h) Governing Law.......................................................60
(i) Amendments and Waivers..............................................60
(j) Severability........................................................60
(k) Construction........................................................60
(l) Consent of the Buyer................................................61
(m) Expenses............................................................61
(n) Enforcement of Agreement............................................61
(o) Waiver of Jury Trial................................................61
(p) Incorporation of Exhibits and Schedules.............................61
</TABLE>
Exhibit A--List of Properties
Exhibit B--Form of Certificate of Merger
Exhibit C--Certificate of Incorporation
Exhibit D--Bylaws
Exhibit E--Form of Letter of Transmittal
Exhibit F--Intentionally Omitted
Exhibit G--Form of Deposit Escrow Agreement
Exhibit H--Form of Post-Closing Escrow Agreement
Exhibit I--Form of Non-Foreign Person Certificate
Exhibit J--Form of Notice of Submission of Application for Withholding
Certificate
Exhibit K--Certain Liabilities on Net Quick Assets Schedules
Exhibit L--Forms of Estoppel
Exhibit M--Intentionally Omitted
Schedule I--Stockholders to be Parties to Post-Closing Escrow Agreement
Schedule II--List of Knowledge Persons
Schedule III--Approved Committed Capital Expenditures and Tenant Improvements
and Certain Due Diligence Items, Commissions and Other Matters
Disclosure Schedule--Exceptions to Representations and Warranties and other
Provisions
iii
<PAGE>
MERGER AGREEMENT
Merger Agreement, entered into on May 14, 1998, by and among GGP Limited
Partnership, a Delaware limited partnership (the "Buyer"), GGP Acquisition,
L.L.C., a Delaware limited liability company wholly-owned by the Buyer (the
"Transitory Subsidiary"), and U.S. Prime Property Inc., a Delaware corporation
(the "Company"). The Buyer, the Transitory Subsidiary and the Company are each
sometimes referred to herein as a "Party" and collectively as the "Parties".
This Agreement contemplates a transaction in which the Buyer will acquire
the Company for cash through a reverse subsidiary merger of the Transitory
Subsidiary with and into the Company. It is intended that, immediately prior to
the Effective Time (as hereinafter defined), P City, Inc. ("PCI"), a Delaware
corporation which is the owner of a fifty percent interest in the partnership
which owns the entire beneficial interest in Park City Center, located in
Lancaster, Pennsylvania, will transfer such interest (the "PCI Venture
Interest") to the Company (or, if requested by the Buyer, to a newly-formed
wholly-owned subsidiary of the Company ("Company Sub")) so that, upon the
Merger, the Buyer will indirectly acquire the entire beneficial interest in Park
City Center. Such transaction will be effected pursuant to the terms of an
agreement, dated as of the date hereof (the "P City Agreement"), among the
Company, the Schedule I Stockholders (as defined below) and PCI. As an
inducement to the Buyer to enter into this Agreement, certain stockholders of
the Company holding a majority of the outstanding Company Shares (as defined
below) are concurrently herewith entering into an agreement with the Buyer and
the Transitory Subsidiary providing that such stockholders shall vote their
Company Shares for approval of the Merger and the transactions contemplated
hereby (the "Stockholder Voting Agreement").
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adjustment" has the meaning set forth in (S)2(k)(iii).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Auditor" has the meaning set forth in (S)2(k)(v).
"Business Day" means any day, other than a Saturday, Sunday, legal holiday
under the Federal laws of the United States of America or a day on which banks
are closed in Chicago, Illinois or New York, New York.
"Buyer" has the meaning set forth in the preface above.
"CBA" has the meaning set forth in (S)7(r)(ii).
<PAGE>
"Certificate" means any certificate which immediately prior to the
Effective Time represented Company Shares.
"Certificate of Merger" has the meaning set forth in (S) 2(c)(iv).
"Chargeable Violation" means any violation of any law, ordinance, order,
requirement or regulation of any governmental authority (i) which is not caused
by the Buyer or the result of any of its decisions under this Agreement, (ii)
which no one other than the Company, any of its Subsidiaries, or the Venture is
solely responsible for complying with, (iii) which the Company, any of its
Subsidiaries, or the Venture has received written notice of from the appropriate
governmental authority on or prior to the Closing Date, (iv) which is not listed
in the Disclosure Schedule or otherwise known to the Buyer on the date hereof,
(v) which will cost at least $5,000 to cure, and (vi) for which the cost of
curing cannot be passed through to tenants or other occupants as common area
maintenance charges pursuant to Leases or REAs.
"Closing" has the meaning set forth in (S) 2(b).
"Closing Date" has the meaning set forth in (S) 2(b).
"Closing Expense Fund" means the amount set forth in a written notice from
the Company to the Buyer at least three (3) Business Days prior to the Closing
Date, to be paid to the Representative, as agent for the Company Stockholders
and PCI, at the Closing pursuant to (S) 2(c), to cover certain transaction
expenses of the Company, the Company Stockholders and PCI, as set forth in such
notice, including, without limitation, all unpaid title and survey costs to be
borne by the Company Stockholders as set forth in (S) 8(a) of this Agreement,
fees, expenses and other amounts payable to ERE Yarmouth Inc. or its Affiliates
(including any disposition fees, termination fees and asset management fees
payable in respect of any period prior to or following the Closing), any unpaid
legal or accounting fees or expenses relating to the transactions contemplated
by this Agreement, the P City Agreement and the other agreements contemplated
hereby, all Transfer Taxes other than Pennsylvania Commonwealth Transfer Taxes
and any fees and expenses of the Representative, which notice shall also
separately identify which expenses are expenses attributable to the Company, the
Company Stockholders and PCI, respectively. The amounts and allocations so set
forth shall be subject to the review and approval of the Buyer, which approval
shall not be unreasonably withheld based on the expenses which can reasonably be
expected to be incurred by the Company, the Company Stockholders and PCI in
connection with the transactions contemplated hereby and which remain unpaid at
Closing. The Representative shall pay all such transaction expenses on behalf
of the Company Stockholders and PCI out of and to the extent of the Closing
Expense Fund, and the Surviving Corporation shall have no liability therefor.
The Buyer and the Surviving Corporation shall be indemnified pursuant to the
Post-Closing Escrow Agreement against any expenses which should have been paid
out of the Closing Expense Fund, but which were not so paid.
"Closing Net Quick Assets Schedules" has the meaning set forth in (S) 2(k)
-2-
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Common Share" means any share of Common Stock, par value $.01 per
share, of the Company.
"Company Share" means any Company Common Share and any share of Class A
Stock, par value $.01 per share, of the Company.
"Company Stockholder" means any Person who or which holds any Company
Shares.
"Company Sub" has the meaning set forth in the preface above.
"Confidential Information" means any information concerning the business or
affairs of the Company, any of its Subsidiaries or the Venture other than
information which (i) at or prior to the time of disclosure by the Company or
any of its Affiliates or representatives, is generally available to and known
by the public other than as a result of a disclosure directly or indirectly by
the Buyer or its partners, directors, officers, employees, agents or advisors,
(ii) was or becomes available to the Buyer on a non-confidential basis from a
source other than the Company, or anyone acting on behalf of the Company,
provided that such source is not and was not known by the Buyer to be bound by a
confidentiality agreement with or other obligation of secrecy to the Company or
(iii) is independently developed by the Buyer or its partners, directors,
officers, employees, agents or advisors without violation of any confidentiality
obligation set forth herein or in the Confidentiality Agreement. To the extent
the foregoing definition conflicts with the definition of Evaluation Material in
the Confidentiality Agreement, the definition of Confidential Information herein
shall control for purposes hereof and of the Confidentiality Agreement.
"Confidentiality Agreement" means the Confidentiality Agreement between
General Growth Properties, Inc. and the Representative (formerly known as The
Yarmouth Group, Inc.), dated December 18, l997, as amended.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended.
"Deposit" has the meaning set forth in (S) 2(h)(i).
"Deposit Escrow Agent" means Commonwealth Land Title Insurance Company.
"Deposit Escrow Agreement" has the meaning set forth in (S) 2(h)(i).
"Disclosure Schedule" has the meaning set forth in (S) 3.
-3-
<PAGE>
"Dissenting Share" means any Company Share which any Company Stockholder
who or which has exercised his or its appraisal rights in accordance with the
Delaware General Corporation Law holds of record and Dissenting Stockholder
means any such Company Stockholder.
"Effective Time" has the meaning set forth in (S) 2(d)(i).
"Employee" has the meaning set forth in (S) 3(q).
"Environmental Laws" means all federal, state and local statutes,
ordinances, codes, rules, regulations, guidelines, orders and decrees
regulating, relating to or imposing liability or standards concerning or in
connection with Hazardous Materials, underground storage tanks or the protection
of human health or the environment, as any of the same may be amended from time
to time, including but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. (S) 9601 et. seq., as
amended by the Superfund Amendments and Reauthorization Act, or any equivalent
state or local laws or ordinances; the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. (S) 6901 et. seq., as amended by the Hazardous and Solid
Waste Amendments of 1984, or any equivalent state or local laws or ordinances;
the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. (S)
136 et. seq. or any equivalent state or local laws or ordinances; the Hazardous
Materials Transportation Act, 49 U.S.C. (S) 1801 et. seq.; the Emergency
Planning and Community Right-to-Know Act ("EPCRA"), 42 U.S.C. (S) 11001 et.
seq., or any equivalent state or local laws or ordinances; the Toxic Substance
Control Act ("TSCA"), 15 U.S.C. (S) 2601 et. seq,. or any equivalent state or
local laws or ordinances; the Atomic Energy Act, 42 U.S.C. (S) 2011 et. seq., or
any equivalent state or local laws or ordinances; the Clean Water Act (the
"Clean Water Act"), 33 U.S.C. (S) 1251 et. seq., or any equivalent state or
local laws or ordinances; the Clean Air Act (the "Clean Air Act") 42 U.S.C. (S)
7401 et. seq., or any equivalent state or local laws or ordinances; and the
Occupational Safety and Health Act, 29 U.S.C. (S) 65101 et. seq., or any
equivalent state or local laws or ordinances.
"ERE-Yarmouth" means ERE-Yarmouth, Inc., a Delaware corporation.
"Escrow Withholding Amount" has the meaning set forth in (S) 2(j)(ii).
"Financial Statements" has the meaning set forth in (S) 3(g).
"GAAP" means United States generally accepted accounting principles, and,
with respect to the Financial Statements and the Venture Financial Statements,
such principles in effect on the date of the relevant Financial Statement or
Venture Financial Statement, as the case may be.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Materials" has the meaning set forth in (S) 3(m)(iv).
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"Indemnified Party" has the meaning set forth in (S) 7(g).
"Indemnifying Party" has the meaning set forth in (S) 7(g).
"Knowledge of the Company" means the actual knowledge, after due inquiry,
of the persons identified on Schedule II to this Agreement.
"Licenses and Permits" has the meaning set forth in (S) 3(u).
"Liens" means liens, charges, claims, pledges, security interests,
mortgages or encumbrances of any nature whatsoever.
"Mandatory Cure Items" has the meaning set forth in (S) 8(b).
"Material Adverse Effect" means a material adverse effect on the business,
properties, liabilities, financial condition or results of operations of the
Company and its Subsidiaries (including, for this purpose the Venture), taken as
a whole, or on the ability of the Parties to consummate the transactions
contemplated by this Agreement or perform their obligations under this
Agreement. Effects attributable to either (i) actions required by the terms of
this Agreement or (ii) changes in general economic conditions, including,
without limitation, changes in prevailing real estate values and interest rates,
shall not be considered to constitute a Material Adverse Effect.
"Mayfair" means Mayfair Property, Inc., a Delaware corporation.
"Meadows Mall Loan" means the loan evidenced by Promissory Note dated
November 30, 1993 of the Company, as Maker, and Connecticut General Life
Insurance Company, as Payee, in the principal amount of $67 million, as modified
by the Modification of Note, Deed of Trust and Other Loan Documents dated August
5, 1994.
"Meadows Mall Mortgage" means the Deed of Trust and Security Agreement with
Assignment of Rents and Fixture Filing, dated November 30, 1993, as modified by
the Modification of Note, Deed of Trust and Other Loan Documents dated August 5,
1994.
"Merger" has the meaning set forth in (S) 2(a).
"Merger Consideration" means $625,000,000 less the sum of (i) the
outstanding unpaid principal balance together with accrued and unpaid interest
thereon in respect of the Meadows Mall Loan, (ii) $15,230,940 in respect of
committed capital expenditures and tenant improvements and certain due diligence
items, commissions and other matters identified in Schedule III, (iii) the Park
City Proceeds, (iv) the Revolving Credit Proceeds and (v) the Closing Expense
Fund, as adjusted in accordance with the terms of this Agreement.
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<PAGE>
"Most Recent Fiscal Period End" has the meaning set forth in (S) 3(g).
"Net Quick Assets" has the meaning set forth in (S) 2(k)
"Notice of Denial" has the meaning set forth in (S) 2(j).
"Other Material Contract" means any agreement (including all modifications,
amendments and supplements thereto), other than a Service Contract, Lease or
REA, (i) that limits or purports to limit, directly or indirectly, the ability
of the Company, any of its Subsidiaries or the Venture to compete with any
Person in any geographic area during any period; (ii) relating to the
acquisition or disposition of any real property, whether by merger, sale of
stock, sale of assets or otherwise; (iii) under which the Company, any of its
Subsidiaries or the Venture is obligated to pay in excess of $25,000 over the
remaining term thereof; (iv) constituting an option agreement for real property
or (v) which is between or among any of the Company, any of its Subsidiaries,
PCI, Park City and the Venture, including without limitation, any notes
representing indebtedness among any such entities.
"Ordinary Course of Business" means the ordinary course of business of the
Company, its Subsidiaries, P City and the Venture, consistent with past custom
and practice.
"Park City" means Park City, Inc., a Delaware corporation.
"Park City Proceeds" means the aggregate amount, in U.S. Dollars, required
to be paid by the Company in order to satisfy in full the mortgage indebtedness
of the Company secured by the Park City Center located in Lancaster,
Pennsylvania and to obtain the release of all Liens related thereto on the
Closing Date and all other obligations of the Company and its Affiliates in
respect thereof, including the payment of all fees and expenses related thereto.
"Party" has the meaning set forth in the preface above.
"Paying Agent" has the meaning set forth in (S) 2(e)(i)(A).
"Payment Fund" has the meaning set forth in (S) 2(e)(i)(A).
"PCI" has the meaning set forth in the preface above.
"P City Agreement" has the meaning set forth in the preface above.
"PCI Allocable Portion" means that portion of the Merger Consideration
allocable to PCI in accordance with the P City Agreement in consideration of the
transfer by PCI to the Company (or Company Sub) of the PCI Venture Interest
immediately prior to the Effective Time. The Company shall give written notice
of the PCI Allocable Portion to the Buyer at least three (3) Business Days prior
to the Closing Date, which notice shall specify the amount of the Merger
Consideration which constitutes the PCI Allocable Portion (i) to be delivered to
PCI at
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the Closing and (ii) to be paid to the Escrow Agent in accordance with the terms
of this Agreement and the Post-Closing Escrow Agreement at the Closing as part
of the Escrow Amount.
"PCI Venture Interest" has the meaning set forth in the preface above.
"Permitted Exceptions" means matters identified as Permitted Exceptions in
the Disclosure Schedule. The listing of an item as a Permitted Exception shall
not be deemed to qualify any representation, warranty, covenant, closing
condition (other than the condition relating to the delivery of the Title
Policies), indemnity or other agreement contained herein or in the agreements
contemplated hereby, except as expressly set forth herein or therein.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or any other entity, including a
governmental entity (or any department, agency or political subdivision
thereof).
"Post-Closing Escrow Agent" means Commonwealth Land Title Insurance
Company.
"Post-Closing Escrow Agreement" has the meaning set forth in (S) 2(i).
"Post-Closing Escrow Amount" has the meaning set forth in (S) 2 (i).
"Post-Closing Escrow Fund" has the meaning set forth in (S) 2(i).
"Preliminary Net Quick Assets Schedules" has the meaning set forth in (S)
2(k)(i).
"Quick Assets" has the meaning set forth in (S) 2(k)(i).
"Quick Liabilities" has the meaning set forth in (S) 2(k)(i).
"REA" means the reciprocal easement agreements set forth in the Disclosure
Statement.
"REA Party" means any party to an REA other than the Company, any of its
Subsidiaries, or the Venture.
"Representative" means ERE Yarmouth, Inc., acting solely in its capacity
as representative of the Schedule I Stockholders and PCI.
"Requisite Stockholder Approval" means the affirmative vote of the holders
of a majority of the Company Shares voting as a single class in favor of this
Agreement and the Merger.
"Revolving Credit Agreements" means (i) the Credit Agreements, each dated
as of November 17, 1994, (x) among the Company, the banks parties thereto and
Westpac Banking
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Corporation, as agent and as issuing bank, (y) between the Company and Lend
Lease Corporation Limited ("Lendlease") and (z) between the Company and MLC Life
Limited ("MLC") and (ii) the Commercial Paper Agreement dated as of November 17,
l994 among the Company, Lendlease, MLC, ABN AMRO Australia Limited and ABN AMRO
Bank N.V. and all amendments to the foregoing (in each case, together with all
documents and instruments referred to therein making up the commercial paper
credit facility as referred to in such agreements).
"Revolving Credit Proceeds" means the aggregate amount, in U.S. Dollars,
required to be paid by the Company under the Revolving Credit Agreements in
order to satisfy in full all of the Company's obligations thereunder and obtain
the release all Liens related thereto on the Closing Date, including the payment
of all fees and expenses related thereto.
"Schedule I Stockholders" has the meaning set forth in (S) 2(d)(vi).
"Service Contract" has the meaning set forth in (S)3(l)(i).
"Settlement Date" has the meaning set forth in (S)2(k)(iii).
"Shopping Centers" means the properties listed on Exhibit A hereto.
"Special Meeting" has the meaning set forth in (S) 7(c).
"Stockholder Allocable Portion" means the difference between the Merger
Consideration and the PCI Allocable Portion.
"Stockholder's Portion" means, with respect to any Company Stockholder,
that portion of the Merger Consideration included in the Stockholder Allocable
Portion equal to the product of the Stockholder's Percentage of such Company
Stockholder multiplied by the Stockholder Allocable Portion.
"Stockholder's Percentage" means, with respect to any Company Stockholder,
the percentage (computed to the fourth decimal place) determined by dividing the
number of Company Shares held by such Company Stockholder immediately prior to
the Effective Time by the aggregate number of Company Shares issued and
outstanding immediately prior to the Effective Time.
"Stockholder Voting Agreement" has the meaning set forth in the preamble
above.
"Subsidiary" means any corporation, partnership, limited liability company
or other entity with respect to which the Company (or a Subsidiary thereof),
directly or indirectly, owns a majority of the voting securities or equivalent
interests or has the power to vote or direct the voting of sufficient securities
or equivalent interests to elect a majority of the directors or those Persons
performing similar functions or otherwise to direct the management and policies
thereof.
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"Survey" means:
------
with respect to Landmark Mall, that certain survey dated April 1, 1998,
revised May 6, 1998, prepared by Holland Engineering (the "Landmark
Survey");
with respect to Northgate Mall, that certain survey dated April 10, 1998,
revised May 6, 1998, prepared by David Barnes Realty Development Co. (the
"Northgate Survey");
with respect to Oglethorpe Mall, (a) that certain survey dated September
20, 1982, as updated on April 14, 1998, revised April 25, 1998, prepared by
Hussey, Gay, Bell & DeYoung and (b) with respect to the outparcels, (i)
those certain surveys dated April 26, 1990, as visually reinspected and
updated on April 25, 1998, prepared by Hussey, Gay, Bell & De Young and
(ii) those certain surveys dated March 30, 1990, as visually reinspected
and updated on April 25, 1998, prepared by Hussey, Gay, Bell & De Young
(collectively, the "Oglethorpe Survey");
with respect to Park City Center, that certain survey dated March 30, 1998,
revised May 11, 1998, prepared by Acer Engineers & Consultants, Inc. (the
"Park City Survey");
with respect to Mayfair Mall and the Mayfair office buildings, that certain
survey dated April 10, 1998 prepared by National Survey & Engineering (the
"Mayfair Survey"); and
with respect to Meadows Mall that certain survey dated April 10, 1998,
revised May 6, 1998, prepared by VTN Nevada Consulting Engineers, Planners
& Surveyors (the "Meadows Survey").
"Surveyor" means:
--------
with respect to the Landmark Survey, Holland Engineering;
with respect to the Northgate Survey, David Barnes Realty Development Co.;
with respect to the Oglethorpe Survey, Hussey, Gay, Bell & DeYoung;
with respect to the Park City Survey, Acer Engineers & Consultants, Inc.;
with respect to the Mayfair Survey, National Survey & Engineering; and
with respect to the Meadows Survey, VTN Nevada Consulting Engineers,
Planners & Surveyors.
"Survival Termination Date" has the meaning set forth in (S) 5.
-------------------------
"Surviving Corporation" has the meaning set forth in (S) 2(a).
---------------------
"Tax" means any federal, state, local, foreign or other tax (including
withholding taxes), assessment, deficiency, fee, levy, social security
obligation or other governmental charge, from time to time imposed by or
required to be paid to any governmental authority (including
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penalties and additions to tax thereon, penalties for failure to file a return
or report and interest on any of the foregoing).
"Tax Returns and Reports" means any federal, state, local or foreign Tax
returns, statements, reports, forms and notices required to be filed with any
Taxing authority.
"Title Company" means Commonwealth Land Title Insurance Company.
-------------
"Title Commitments" means:
-----------------
with respect to Landmark Mall, the pro forma Title Insurance Policy No. AX
984054AA dated May 12, 1998 issued by the Title Company;
with respect to Northgate Mall, the pro forma Title Insurance Policy No.
97-027 dated May 12, 1998 issued by the Title Company;
with respect to Oglethorpe Mall, the pro forma Title Insurance Policy No.
98-1022-5 dated May 12, 1998 issued by the Title Company;
with respect to Park City Center, the pro forma Title Insurance Policy No.
D201714LA dated May 12, 1998 issued by the Title Company;
with respect to Mayfair Mall and the Mayfair office buildings, the pro
forma Title Insurance Policies No. 85-00-861416 and No. 85-00-861152 dated
May 12, 1998 issued by Lawyers Title Insurance Corporaton; and
with respect to Meadows Mall, the pro forma Title Insurance Policy No.
9711347 dated May 12, 1998 issued by Lawyers Title of Nevada.
"Title Policy" means an ALTA Form B-1970 Owner's Policy of Title Insurance
issued by the Title Company with respect to each Shopping Center, (other than
with respect to Northgate Mall as to which the policy shall be an ALTA 1975
Leasehold Owner's Policy) in the applicable amount set forth on the
corresponding Title Commitment, and dated the date and time of Closing, insuring
the Company as owner of good, marketable and indefeasible fee title (other than
Northgate Mall as to which the title insured shall be leasehold title) to each
Shopping Center except for Mayfair Mall and the Mayfair office buildings as to
which Mayfair Property Inc. shall be insured as the owner of good, marketable
and indefeasible fee title, and except for Park City Center as to which the
Trust shall be insured as the owner of good, marketable and indefeasible title,
subject in each case only to the Permitted Exceptions, and containing such
affirmative insurance and endorsements as are specified in the respective Title
Commitment.
"Transfer Taxes" has the meaning set forth in (S) 7(o).
--------------
"Transitory Subsidiary" has the meaning set forth in the preface above.
---------------------
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"Trust" means the Lancaster Trust, an Illinois trust established by that
certain Indenture of Trust dated as of July 31, 1979 between the Venture and
Ernest Greenberger and M. James Spitzer, Jr., as trustees, as amended, which is
the legal owner of Park City Center, located in Lancaster, Pennsylvania.
"Venture" means PARCIT-IIP Lancaster Venture, an Illinois partnership
which owns the entire beneficial interest in Park City Center, located in
Lancaster, Pennsylvania.
"Venture Agreement" has the meaning set forth in (S) 3(c).
-----------------
"Venture Financial Statements" has the meaning set forth in (S) 3(g).
----------------------------
"Withholding Amount" has the meaning set forth in (S) 2(j).
------------------
"Withholding Certificate" has the meaning set forth in (S) 2(j).
-----------------------
2. Basic Transaction.
-----------------
(a) The Merger. On and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary will merge with and into the Company (the
"Merger") at the Effective Time in accordance with the Delaware General
Corporation Law. The Company shall be the corporation surviving the Merger (the
"Surviving Corporation").
(b) The Closing. Subject to (S) 10(a) hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Coudert Brothers, 1114 Avenue of the Americas, New York, New York
10036 (or such other location as the Parties may agree upon), commencing at 9:00
a.m. local time on the second Business Day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date").
(c) Actions at the Closing. At the Closing, (i) the Company will deliver
to the Buyer and the Transitory Subsidiary the various certificates, instruments
and documents referred to in (S) 9(a) below; (ii) the Buyer and the Transitory
Subsidiary will deliver to the Company the various certificates, instruments and
documents referred to in (S) 9(b) below; (iii) the Buyer will deliver or cause
to be delivered, in each case in accordance with wire transfer instructions
delivered in writing at least three (3) Business Days prior to the Closing, (A)
the Revolving Credit Proceeds to Citibank N.A. as depository with respect to the
commercial paper program of the Company supported by the Revolving Credit
Agreements in order to discharge all indebtedness represented by the foregoing;
(B) the Park City Proceeds to Union Bank of Switzerland, New York Branch in
order to discharge the Park City Center mortgage indebtedness; (C) the Closing
Expense Fund to the Representative; (D) the Post-Closing Escrow Amount and the
aggregate Escrow Withholding Amounts to the Post-Closing Escrow Agent, (E)
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the PCI Allocable Portion (net of the portion thereof delivered as part of the
Post-Closing Escrow Amount) to PCI in satisfaction of the Company's obligations
in respect of the transfer to the Company (or Company Sub) by PCI of the PCI
Venture Interest and (F) the Payment Fund to the Paying Agent in the manner
provided below in this (S) 2 (and the Company hereby authorizes the Buyer to
make or cause to be made all payments referred to in this clause (iii)); (iv)
the Company and the Transitory Subsidiary will file with the Secretary of State
of the State of Delaware a Certificate of Merger in the form attached hereto as
Exhibit B (the "Certificate of Merger") and (v) the Deposit Escrow Agent will
deliver the Deposit, together with interest earned thereon, to the Paying Agent.
(d) Effect of Merger.
----------------
(i) General. The Merger shall become effective at the time (the
"Effective Time") the Company and the Transitory Subsidiary file the
Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with (S) 264 of the Delaware General Corporation Law. The
Merger shall have the effect set forth in the Delaware General Corporation
Law. The Surviving Corporation may, at any time after the Effective Time,
take any action (including executing and delivering any document) in the
name and on behalf of either the Company or the Transitory Subsidiary in
order to carry out and effectuate the transactions contemplated by this
Agreement.
(ii) Certificate of Incorporation. The Certificate of Incorporation
of the Surviving Corporation shall, by virtue of the Merger and without any
further action on the part of the Surviving Corporation be amended and
restated to read in its entirety as set forth in Exhibit C hereto, and such
Certificate of Incorporation shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter amended as provided by law and
such Certificate of Incorporation.
(iii) Bylaws. The Bylaws of the Surviving Corporation shall, by
virtue of the Merger and without any further action on the part of the
Surviving Corporation be amended and restated to read in their entirety as
set forth in Exhibit D hereto, and such Bylaws shall be the Bylaws of the
Surviving Corporation, until thereafter amended as provided by law, the
Surviving Corporation's Certificate of Incorporation and such Bylaws.
(iv) Directors and Officers. The Board of Directors of the Surviving
Corporation shall be comprised of Matthew Bucksbaum, John Bucksbaum and
Robert A. Michaels and the officers of the Surviving Corporation shall be
Matthew Bucksbaum as President, Joel Bayer, John Bucksbaum, Robert A.
Michaels and Bernard Freibaum, each as a Vice President, Bernard Freibaum
as Treasurer and Marshall Eisenberg as Secretary, in each case to serve
until their successors have been duly elected and qualified or until their
earlier, death, resignation or removal
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<PAGE>
(v) Cancellation of Treasury Stock. As of the Effective Time, any
Company Shares that are owned beneficially or of record by the Company or
any of its Subsidiaries shall automatically be cancelled and retired and
all rights with respect thereto shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(vi) Conversion of Company Shares. At and as of the Effective Time,
(A) all of the Company Shares (other than any Company Shares to be
cancelled in accordance with (S) 2(d)(v) and Dissenting Shares) shall, by
virtue of the Merger and without any action on the part of the holders
thereof, automatically be cancelled, converted and reclassified into and
represent the right, in the case of each Company Stockholder, to receive
such Stockholder's Portion of the Stockholder Allocable Portion of the
Merger Consideration upon surrender of the Certificate or Certificates
representing the Company Shares held by the Company Stockholder and (B)
each Dissenting Share shall be converted into the right to receive payment
from the Surviving Corporation with respect thereto in accordance with the
provisions of the Delaware General Corporation Law; provided, however,
that, notwithstanding the foregoing, the Stockholder's Portion of the
Stockholder Allocable Portion of the Merger Consideration otherwise
receivable by each of the Company Stockholders listed on Schedule I hereto
(the "Schedule I Stockholders") shall be reduced by the amount of such
Schedule I Stockholder's proportionate interest in the Post-Closing Escrow
Fund as set forth on Schedule I and any applicable Escrow Withholding
Amount, which amounts shall be payable to the Post-Closing Escrow Agent as
part of the Post-Closing Escrow Amount and the Tax Escrow Fund (as defined
in the Post-Closing Escrow Agreement), respectively, to be held and
distributed in accordance with (S) 2(j) and the terms of the Post-Closing
Escrow Agreement, and by any amounts required to be withheld and paid to
the Internal Revenue Service pursuant to (S)2(j). The Stockholder's
Portion for all other Company Stockholders shall be reduced by amounts
required to be withheld pursuant to (S) 2(j). No Company Share shall be
deemed to be outstanding or to have any rights other than those set forth
above in this (S) 2(d)(vi) after the Effective Time.
(vii) Conversion of Capital Stock of the Transitory Subsidiary. At
and as of the Effective Time, all of the outstanding membership interests
in the Transitory Subsidiary (all of which are owned by the Buyer) shall,
by virtue of the Merger and without any action on the part of the
Transitory Subsidiary, automatically be converted into 100 validly issued,
fully paid and nonassessable shares of Common Stock, no par value per
share, and 120 validly issued, fully paid and non-assessable shares of non-
voting preferred stock, par value $1.00 per share, of the Surviving
Corporation, and the Surviving Corporation shall issue certificates
representing such shares.
(viii) Company's Obligations, Properties, Assets. At the Effective
Time, the identity, existence, rights, privileges, powers, franchises,
liabilities, obligations, properties and assets of the Company, as the
Surviving Corporation in the Merger, shall continue unaffected and
unimpaired, except as specifically provided herein; and the identity and
separate existence of the Transitory Subsidiary shall cease and all of the
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rights, privileges, powers, franchises, liabilities, obligations,
properties and assets of the Transitory Subsidiary shall be vested in the
Surviving Corporation, all in accordance with the provisions of this
Agreement and the Delaware General Corporation Law.
(ix) No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Company Shares shall cease to have any
rights as stockholders of the Surviving Corporation, except as provided
herein or by law. No dividends or other distributions declared or made
after the Effective Time with respect to Company Shares with a record date
after the Effective Date shall be paid to any holder of Certificates until
the holder of any such Certificate shall properly surrender such
Certificate to the Paying Agent.
(e) Procedure for Payment.
---------------------
(i) At the Effective Time, (A) the Buyer will, or will cause the
Surviving Corporation to, furnish to the paying agent engaged for purposes
of this Agreement (the "Paying Agent") a corpus consisting of cash which,
together with the amount to be delivered by the Deposit Escrow Agent
pursuant to (S) 2(h)(ii)(a), is sufficient in the aggregate for the Paying
Agent to make full payment of the Stockholder Allocable Portion of the
Merger Consideration to the holders of all of the outstanding Company
Shares (other than any Dissenting Shares and less the applicable Post-
Closing Escrow Amount to be paid to the Post-Closing Escrow Agent and less
amounts to be withheld and paid to the Internal Revenue Service pursuant to
(S)2(j), or deposited with the Post-Closing Escrow Agent pursuant to
(S)2(j)) (the "Payment Fund"), and (B) the Buyer will cause the Paying
Agent to mail a letter of transmittal (with instruction for its use), which
shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of such
Certificates to the Paying Agent, in the form attached hereto as Exhibit E
to each record holder of outstanding Company Shares for the holder to use
in surrendering the Certificates which represented such holder's Company
Shares against payment of such holder's Stockholder's Portion of the Merger
Consideration (less, in the case of each Schedule I Stockholder, the
amounts thereof to be paid to the Post-Closing Escrow Agent as part of the
Post-Closing Escrow Amount and any applicable Escrow Withholding Amount,
and less any amounts to be withheld and paid to the Internal Revenue
Service pursuant to (S)2(j) and, in the case of other Company Stockholders,
amounts to be withheld pursuant to (S) 2(j)). Each holder of Certificates
theretofore evidencing Company Shares, upon proper surrender thereof to the
Paying Agent together with and in accordance with such transmittal form and
any other documents required thereby, shall, subject to (S) 2(j), be
entitled to receive in exchange therefore such holder's Stockholder's
Portion of the Merger Consideration deliverable in respect of the Company
Shares theretofore evidenced by the Certificates so surrendered (less, in
the case of each Schedule I Stockholder, the amounts thereof to be paid to
the Escrow Agent as part of the Post-Closing Escrow Amount and any
applicable Escrow Withholding Amount, and less any amounts to be withheld
and paid to the Internal Revenue Service pursuant to (S)2(j) and, in the
case of other Company
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<PAGE>
Stockholders, amounts to be withheld pursuant to (S) 2(j)). Upon such
proper surrender, the Paying Agent shall, subject to (S) 2(j), promptly
deliver such holder's Stockholder's Portion of the Merger Consideration to
the relevant Company Stockholder (less, in the case of each Schedule I
Stockholder, the amounts thereof to be paid to the Post-Closing Escrow
Agent as part of the Post-Closing Escrow Amount and any applicable Escrow
Withholding Amount, and less any amounts to be withheld and paid to the
Internal Revenue Service pursuant to (S)2(j) and, in the case of other
Company Stockholders, amounts to be withheld pursuant to (S) 2(j)). Until
properly surrendered, Certificates formerly evidencing Company Shares shall
be deemed for all purposes to evidence only the right to receive the
applicable portion of the Merger Consideration as herein provided and
subject to (S)(S) 2(i) and (j). No interest shall accrue or be paid on any
cash payment upon surrender of Certificates which immediately prior to the
Effective Time represented Company Shares. In the event of a permitted
transfer of ownership of Company Shares, which is not registered in the
transfer records of the Company, the applicable Stockholder's Portion of
the Merger Consideration or portion thereof (less the applicable portion of
the Post-Closing Escrow Amount and any applicable Escrow Withholding
Amount, and less any amounts to be withheld and paid to the Internal
Revenue Service pursuant to (S)2(j), in the case of Schedule I Stockholders
and, in the case of the other Company Stockholders, amounts to be withheld
pursuant to (S) 2(j)) may be paid to a transferee of a Certificate if such
Certificate is presented to the Paying Agent accompanied by all documents
required to evidence and effect such transfer and any evidence that any
applicable stock transfer Taxes have been paid. Notwithstanding the
foregoing, the Buyer will, if and to the extent requested by the Company or
any Company Stockholder not less than three (3) Business Days prior to the
Closing Date, make appropriate arrangements, subject to (S) 2(j), with the
Paying Agent to enable the Stockholder's Portion of the Merger
Consideration payable to any Company Stockholder (less, in the case of each
Schedule I Stockholder, the amount thereof to be paid to the Post-Closing
Escrow Agent as part of the Post-Closing Escrow Amount and any applicable
Escrow Withholding Amount, and less any amounts to be withheld and paid to
the Internal Revenue Service pursuant to (S) 2(j) and, in the case of the
other Company Stockholders, amounts to be withheld pursuant to (S) 2(j)),
to be paid on the Effective Date (including payment by wire transfer of
immediately available funds), upon surrender of the Certificates evidencing
such Company Stockholder's Company Shares and such other documents as may
be required by the Paying Agent.
(ii) The Buyer may cause the Paying Agent to invest the cash included
in the Payment Fund, to the extent such cash is not disbursed on the
Effective Date, in certificates of deposit or money market funds; provided,
however, that the terms and conditions of the investments shall be such as
to permit the Paying Agent to make, subject to (S)(S) 2(i) and (j), prompt
payment of the applicable portion of the Stockholder Allocable Portion of
the Merger Consideration included in the Payment Fund as necessary. The
Buyer may cause the Paying Agent to pay over to the Surviving Corporation
any net earnings with respect to the investments, and the Buyer will cause
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the Surviving Corporation to replace promptly any portion of the Payment
Fund which the Paying Agent loses through investments.
(iii) The Buyer may cause the Paying Agent to pay over to the
Surviving Corporation any portion of the Payment Fund (including any
earnings thereon) remaining 180 days after the Effective Time, and
thereafter all former Company Stockholders shall only be entitled to look
to the Surviving Corporation (subject to abandoned property, escheat and
other similar laws) as general creditors thereof with respect to the Merger
Consideration payable upon surrender of their Certificates. The Buyer and
the Surviving Corporation shall not be liable to any holder of Certificates
for any cash payable in respect thereof delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(iv) The Buyer shall cause the Surviving Corporation to pay all
charges and expenses of the Paying Agent.
(f) Closing of Transfer Records. From and after the Effective Time, the
stock transfer books of the Company shall be closed and no transfers of
Company Shares outstanding prior to the Effective Time shall be made on the
stock transfer books of the Surviving Corporation.
(g) Dissenters' Rights. No Dissenting Stockholder shall be entitled to
such Dissenting Stockholder's Stockholder's Portion of the Merger
Consideration unless and until such Dissenting Stockholder shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
right to dissent from the Merger under the Delaware General Corporation
Law, and any Dissenting Stockholder shall be entitled to receive only the
payment provided by Section 262 of the Delaware General Corporation Law
with respect to Company Shares owned by such Dissenting Stockholder. If
any Person who otherwise would be deemed a Dissenting Stockholder shall
have failed to properly perfect or shall have effectively withdrawn or lost
the right to dissent with respect to any Company Shares, such Company
Shares shall, subject to (S) 2(j), thereupon be treated as though such
Company Shares had been converted into the applicable portion of the Merger
Consideration pursuant to (S) 2(d)(vi) hereof. The Company shall give the
Buyer (i) prompt notice of any written demands for appraisal, attempted
withdrawals of such demands and any other instruments served pursuant to
applicable law received by the Company relating to stockholders' rights of
appraisal and (ii) the opportunity to direct all negotiations and
proceedings with respect to demand for appraisal under the Delaware General
Corporation Law. The Company shall not, except with the prior written
consent of the Buyer, voluntarily make any payment with respect to any
demands for appraisals of Dissenting Shares, offer to settle or settle any
such demands or approve any withdrawal of any such demands.
(h) Escrow of Deposit.
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(i) On the date hereof, the Buyer has deposited with the Deposit
Escrow Agent the amount of $18,750,000 (the "Deposit") to be held in escrow
pursuant to the provisions of an escrow agreement among the parties hereto
and the Deposit Escrow Agent in the form attached hereto as Exhibit G (the
"Deposit Escrow Agreement"). The Deposit Escrow Agent has separately
acknowledged its receipt of the Deposit and agreed to hold it pursuant to
the provisions of the Deposit Escrow Agreement.
(ii) In accordance with and subject to the terms of the Deposit
Escrow Agreement:
(a) If the Closing occurs, at the Closing, the Deposit Escrow
Agent shall deliver the Deposit, together with all interest earned thereon,
if any, to the Paying Agent.
(b) If this Agreement terminates in accordance with its terms by
reason of the Buyer's or the Transitory Subsidiary's default and a notice
of termination has been delivered to the Buyer, the Deposit Escrow Agent
shall deliver the Deposit, together with all interest earned thereon, if
any, to the Company as liquidated damages as provided in (S) 10(c), subject
to the terms of the Deposit Escrow Agreement.
(c) If this Agreement terminates in accordance with its terms for
any other reason and a notice of termination has been delivered to the
Company, the Deposit, together with all interest earned thereon, if any,
shall forthwith be paid to the Buyer, subject to the terms of the Deposit
Escrow Agreement.
(i) Escrow For Post-Closing Claims and Adjustments. At the Closing, the
Buyer shall deposit with the Post-Closing Escrow Agent, as escrow agent for the
Buyer, the Schedule I Stockholders and PCI pursuant to the terms of the escrow
agreement attached hereto as Exhibit H and incorporated herein by this reference
(the "Post-Closing Escrow Agreement") and (S)2(c)(D), funds in an amount equal
to Twenty Million Dollars ($20,000,000), as increased to the extent required by
(S) 2(k) (the "Post Closing Escrow Amount"), which shall be maintained by the
Post-Closing Escrow Agent pursuant to the Post-Closing Escrow Agreement (such
funds, together with any net earnings from the investment thereof, being
hereinafter referred to as the "Post-Closing Escrow Fund") in connection with
the disposition of Post-Closing Claims and any Adjustments pursuant to the terms
of this Agreement and the Post-Closing Escrow Agreement. The funds in the Post-
Closing Escrow Fund shall be held for disbursement as provided in the Post-
Closing Escrow Agreement.
(j) Withholding Matters.
-------------------
(i) The Buyer will, subject to (S)2(j)(ii) hereof, withhold and
promptly pay over to the Internal Revenue Service an amount equal to ten percent
(10%) of the sum of (x) the aggregate Stockholder's Portions of the Merger
Consideration allocable to the Company Stockholders who or which are foreign
persons for purposes of Section 1445 of the Code, and
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(y) the aggregate portions of the Closing Expense Fund allocable to such Company
Stockholders (such aggregate ten percent (10%) withheld amount being referred to
as the "Withholding Amount"), together with the applicable Internal Revenue
Service forms (as duly prepared and executed by the Buyer), which shall specify
the portion of the Withholding Amount allocable to each Company Stockholder with
respect to whom or which the Buyer has withheld under this (S)2(j). If the
Buyer is required pursuant to (S)2(k) to pay the Adjustment to the
Representative, on behalf of the Company Stockholders, the Buyer will, subject
to (S)2(j)(ii) hereof, at the time when the Buyer is required to so pay the
Adjustment, withhold and promptly pay over to the Internal Revenue Service ten
percent (10%) of the aggregate portions of the Adjustment allocable to the
Company Stockholders who or which are foreign persons for purposes of Section
1445 of the Code (such aggregate ten percent (10%) withheld amount being
referred to as the "Adjustment Withholding Amount"), together with the
applicable Internal Revenue Service forms (as duly prepared and executed by the
Buyer), which shall specify the portion of the Adjustment Withholding Amount
allocable to each such Company Stockholder with respect to whom or which the
Buyer has withheld under this (S)2(j). Promptly after filing with the Internal
Revenue Service, the Buyer will deliver to the Representative a copy of all
Internal Revenue Service forms filed by the Buyer in accordance with this
(S)2(j). The Buyer will not withhold under this (S)2(j) any portion of a
Stockholder's Portion of the Merger Consideration, any portion of the Closing
Expense Fund, or any portion of the Adjustment, allocable to any Company
Stockholder who or which furnishes to the Buyer on or before the Closing a
certificate in the form attached hereto as Exhibit I certifying that such
Company Stockholder is not a "foreign person" within the meaning of Section 1445
of the Code. If a Company Stockholder does not furnish such certificate to the
Buyer, it shall be assumed that such Company Stockholder is a "foreign person".
(ii) If a Schedule I Stockholder who or which is a "foreign person"
for purposes of Section 1445 of the Code applies for a withholding certificate
from the Internal Revenue Service to authorize reduced withholding (including
zero withholding) under Section 1445 of the Code (a "Withholding Certificate")
on or before the Closing, such Schedule I Stockholder shall submit to the Buyer
on or before the Closing a notice under Treasury Regulations Section 1.1445-
1(c)(2) substantially in the form of Exhibit J attached hereto. In this event,
the Buyer shall deposit with the Post-Closing Escrow Agent an amount equal to
ten percent (10%) of the sum of (x) such Schedule I Stockholder's Stockholder's
Portion of the Merger Consideration, and (y) the portion of the Closing Expense
Fund allocable to such Company Stockholder (such ten percent (10%) deposited
amount being referred to as the "Escrow Withholding Amount"), in accordance with
this (S)2(j). The Post-Closing Escrow Agent shall hold the Escrow Withholding
Amount with respect to such Schedule I Stockholder until the earlier to occur of
(x) receipt by the Post-Closing Escrow Agent of a copy of a Withholding
Certificate or notice of denial ("Notice of Denial") from the Internal Revenue
Service with respect to such Schedule I Stockholder (which copy shall be
delivered to the Post-Closing Escrow Agent by the Buyer, promptly upon receipt
of such copy by the Buyer from the Internal Revenue Service, and may be
delivered to the Post-Closing Escrow Agent by such Schedule I Stockholder), or
(y) the date (the "Expiration Date") which is twelve (12) months following the
Closing Date. The Post-Closing Escrow Agent shall pay the Escrow Withholding
Amount with respect to such Schedule
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I Stockholder (or a portion thereof) within twenty (20) days following the
mailing by the Internal Revenue Service of a Withholding Certificate or Notice
of Denial (or copy thereof) with respect to such Schedule I Stockholder (but not
less than five (5) days from receipt of such Withholding Certificate or Notice
of Denial or copy thereof), as follows. In the event the Internal Revenue
Service issues a Withholding Certificate eliminating the withholding tax under
Section 1445 of the Code with respect to such Schedule I Stockholder, the Post-
Closing Escrow Agent (v) shall pay such Escrow Withholding Amount, together with
all interest earned thereon, directly to such Schedule I Stockholder, and (w)
shall send to the Buyer a copy of the check payable to the order of such
Schedule I Stockholder in the amount of such Escrow Withholding Amount. In the
event the Internal Revenue Service denies the Schedule I Stockholder's
application for a Withholding Certificate, or issues a Withholding Certificate
with respect to such Schedule I Stockholder providing for an amount of
withholding that is less than such Escrow Withholding Amount, upon receipt of
any executed applicable Internal Revenue Service forms from the Buyer, the Post-
Closing Escrow Agent promptly (x) shall pay to the Internal Revenue Service such
Escrow Withholding Amount, or portion thereof, plus interest thereon (if any),
as set forth in the Notice of Denial or Withholding Certificate with respect to
such Schedule I Stockholder, together with the applicable Internal Revenue
Service forms received from the Buyer (which Internal Revenue Service forms the
Buyer agrees to promptly prepare, execute and deliver), (y) shall pay to such
Schedule I Stockholder the balance of such Escrow Withholding Amount (if any)
plus interest (if any), and (z) shall send to the Buyer a copy of the check
payable to the order of the Internal Revenue Service in the amount set forth in
the Notice of Denial or Withholding Certificate with respect to such Schedule I
Stockholder. If the Expiration Date occurs prior to the issuance of a
Withholding Certificate or a Notice of Denial with respect to such Schedule I
Stockholder, the Post-Closing Escrow Agent shall pay the Escrow Withholding
Amount to the Internal Revenue Service for the account of such Schedule I
Stockholder, together with the applicable Internal Revenue Service forms
received from the Buyer (which Internal Revenue Service forms the Buyer agrees
to promptly prepare, execute and deliver). If the Buyer is required pursuant to
(S)2(k) hereof to pay the Adjustment to the Representative, on behalf of the
Company Stockholders, the following provisions shall apply with respect to each
Schedule I Stockholder who has submitted to the Buyer on or before the Closing
a notice under Treasury Regulations Section 1.1445-1(c)(2) substantially in the
form of Exhibit J. In this event, at the time when the Buyer is required to pay
the Adjustment to the Representative, on behalf of the Company Stockholders, the
Buyer shall deposit with the Post-Closing Escrow Agent an amount equal to ten
percent (10%) of the Adjustment allocable to each such Schedule I Stockholder
(the "Adjustment Escrow Amount"). Thereafter, the Adjustment Escrow Amount with
respect to each such Schedule I Stockholder shall be subject to the provisions
of this (S)2(j)(ii) applicable to the Escrow Withholding Amount with respect to
such Schedule I Stockholder.
(k) Net Quick Asset Adjustment.
--------------------------
(i) No later than five (5) days prior to the Closing, the Company
shall prepare and deliver to the Buyer a preliminary pro forma consolidated
statement of Net Quick Assets (as defined below) of (a) the Company and its
Subsidiaries (excluding the Venture) and (b) the Venture, in each case, as of
the Closing Date, assuming the consummation of the transactions
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contemplated hereby and by the P City Agreement, prepared in accordance with the
terms of this (S) 2(k) (the "Preliminary Net Quick Asset Schedules"). No later
than ninety (90) days after the Closing Date, the Buyer shall cause to be
prepared and delivered to the Representative an unaudited consolidated statement
of Net Quick Assets of (x) the Company and its Subsidiaries (excluding the
Venture) and (y) the Venture as of the Closing Date and following the
consummation of the transactions contemplated hereby and by the P City
Agreement, prepared in accordance with the terms of this (S) 2(k) (the "Closing
Net Quick Asset Schedules"). The Preliminary Net Quick Asset Schedules and the
Closing Net Quick Asset Schedules shall reflect only the following categories of
assets, which categories are referred to in the Financial Statements for the
year ended December 31, 1997: "Cash and Cash Equivalents", "Accounts
Receivable", and "Prepaid expenses and other assets," in the case of the Company
and its Subsidiaries (excluding the Venture) and "Cash and Cash Equivalents",
"Accounts Receivable" and "Prepaid expenses, in the case of the Venture
(collectively, the "Quick Assets") and shall reflect only the following
categories of liabilities, which categories are referred to in the Financial
Statements for the year ended December 31, 1997, "Accounts payable and accrued
expenses", "Accrued real estate taxes" and "Tenant liabilities", in the case of
the Company and its Subsidiaries (excluding the Venture), and "Accounts payable
and accrued expenses" and "Tenant liabilities", in the case of the Venture
(collectively, the "Quick Liabilities"), provided that, as described above, the
Quick Assets and Quick Liabilities shall be calculated assuming consummation of
the transactions contemplated hereby and by the P City Agreement (except that
the Venture shall not be treated as consolidated with the Company). With
respect to each Preliminary Net Quick Asset Schedule and each Closing Net Quick
Asset Schedule, the amount (positive or negative) equal to Quick Assets less
Quick Liabilities is referred to as "Net Quick Assets." The Preliminary Net
Quick Asset Schedules and the Closing Net Quick Asset Schedules shall be
prepared in accordance with GAAP applied in a manner consistent with that
utilized in the preparation of the Financial Statements, except as provided
above. To the extent that, during the period January 1, 1998 through the Closing
Date, (i) any sale by the Company, any of its Subsidiaries or the Venture of any
real property, or any item of personal property with a sale price exceeding
$25,000, occurs or has occurred or (ii) any proceeds are or have been received
by the Company, any of its Subsidiaries or the Venture as a result of any
condemnation, casualty or any similar event, the proceeds from any such sale or
other event shall, regardless of the form in which received, be deducted in the
determination of Net Quick Assets and not be deemed to be Quick Assets and any
corresponding liability shall not be deemed to constitute Quick Liabilities for
the purposes of such determination. In addition, the matters identified in
Schedule III to this Agreement shall not be deemed to consitute Quick
Liabilities for the purpose of such determination.
(ii) If, as set forth on the Preliminary Net Quick Assets Schedules,
the combined Quick Liabilities exceed the combined Quick Assets by an amount in
excess of $1,000,000, the Post-Closing Escrow Amount shall be increased by the
amount of such shortfall.
(iii) If, based on the Closing Net Quick Assets Schedules, the
combined Net Quick Assets exceed zero, the Buyer will, no later than the later
of (A) thirty (30) days following the delivery of the Closing Net Quick Assets
Schedules or (B) 5 Business Days
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following the resolution of a dispute with respect to any items on the Closing
Net Quick Assets Schedules as set forth in subsection (iv) hereof (the
"Settlement Date"), pay to the Representative, on behalf of the Company
Stockholders and PCI, the amount of such excess, together with interest thereon
calculated as described below, by wire transfer of immediately available funds
to an account designated by the Representative, subject to (S)2(j) hereof. If
the combined Closing Net Quick Assets are less than zero, the Representative
will cause the Post-Closing Escrow Agent to pay to the Buyer, no later than the
Settlement Date, the amount of such shortfall, together with interest thereon
calculated as described below, by wire transfer of immediately available funds
to an account designated by the Buyer. The amount, if any, payable pursuant to
this clause (iii), together with interest thereon at the rate of interest paid
from time to time on the Post-Closing Escrow Fund from the Closing Date up to
and including the date of payment is hereafter referred to as the "Adjustment."
(iv) If the Representative in good faith disagrees with any items on
the Closing Net Quick Assets Schedules, the Representative shall notify the
Buyer and the Post-Closing Escrow Agent in writing of such disagreement within
twenty-nine (29) days after the Representative's receipt of the Closing Net
Quick Assets Schedules. Such notice shall set forth the basis for such
disagreement in reasonable detail. During such twenty-nine (29) day period, the
Buyer shall afford the Representative access to all of the Surviving
Corporation's books and records and cause the Buyer's accountants to afford the
Representative access to all of the work papers of the Buyer's accountants
during regular business hours as required by the Representative to review the
Closing Net Quick Assets Schedules, in each case, solely for the purposes of
resolving such disagreement. The Buyer and the Representative shall thereafter
negotiate in good faith to resolve any such disagreements, provided that the
Representative shall promptly cause the Escrow Agent to pay to the Buyer, or the
Buyer shall promptly pay to the Representative on behalf of the Company
Stockholders and PCI, as the case may be, the portion of the Adjustment that is
not subject to dispute.
(v) If the Buyer and the Representative are unable to resolve any
such disagreements within twenty (20) days after the expiration of the twenty-
nine-day period referred to in clause (iv), the Buyer and the Representative
shall use their reasonable best efforts to cause the Chicago office of Arthur
Andersen LLP, acting as an independent arbitrator, (the "Auditor") to resolve
all disagreements on the disputed items as soon as practicable, provided that
the Auditor shall be bound by the provisions of this (S) 2(k) and may not assign
a value to any item greater than the greatest value for such item claimed by
either the Buyer or the Representative or less than the smallest value for such
item claimed by either the Buyer or the Representative. Each of the Buyer and
the Representative shall permit the Auditor to have full access to its books,
records, key employees and independent accountants, in each case solely in order
to resolve any such disagreements. The resolution of such disagreements by the
Auditor shall be final and binding on the Buyer, the Company Stockholders, PCI
and the Representative. The fees and expenses of the Auditor shall be paid by
the party whose position is most at variance with the decision of the Auditor,
as determined by the Auditor which, if required to be paid by the Representative
on behalf of the Company Stockholders and PCI, shall be paid out of the Escrow
Fund in accordance with the terms of the Post-Closing Escrow Agreement. Any
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payment by the Buyer to the Representative shall be net of amounts to be
withheld pursuant to (S) 2(j).
(l) Further Assurances. Each Party hereto and the Representative, in its
capacity as representative of PCI and the Schedule I Stockholders, will, either
prior to or after the Effective Time, execute such further documents,
instruments, deeds, bills of sale, assignments and assurances and take such
further actions as may reasonably be requested by one or more of the others to
consummate the transactions contemplated hereby, to vest the Surviving
Corporation with full title to all assets, properties, privileges, rights,
approvals, immunities and franchises of the Company and to effect the other
purposes of this Agreement.
(m) Chargeable Violations. Notwithstanding that Chargeable Violations are
Permitted Exceptions, if on the Closing Date Chargeable Violations exist which
have not been cured, then the Buyer shall be entitled as its sole and exclusive
remedy to a credit against the Merger Consideration in an amount equal to the
cost of curing said Chargeable Violations, as reasonably determined by Buyer and
the Company, it being understood and agreed that no credits either individually
or in the aggregate under this (S) 2(m) shall exceed $3,000,000. In furtherance
of the foregoing, and notwithstanding anything in this Agreement to the
contrary, the Buyer acknowledges and agrees that it shall have no right to
terminate this Agreement by reason of the existence of any violations of laws,
ordinances, orders, requirements, or regulations of any governmental authority
relating to the Shopping Centers, including Chargeable Violations and Seller
shall have no obligation to cure or remove any violations of laws, ordinances,
orders, requirements or regulations of any governmental authority including
Chargeable Violations.
3. Representations and Warranties of the Company. The Company represents and
warrants to the Buyer and the Transitory Subsidiary that the statements
contained in this (S) 3 are correct and complete as of the date of this
Agreement, except as set forth in the disclosure schedule accompanying this
Agreement and initialed by the Parties (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this (S) 3 (and the other provisions of
this Agreement to which it relates).
(a) Organization, Qualification and Corporate Power. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, as set
forth in the Disclosure Schedule. Each of the Company and its Subsidiaries is
duly authorized to conduct business and is in good standing under the laws of
those jurisdictions set forth in the Disclosure Schedule, which are the only
jurisdictions where such qualification is required, except where the lack of
such qualification, individually or in the aggregate and together with any other
absent qualifications referred to in (S) 3(c), would not have a Material Adverse
Effect. Each of the Company and its Subsidiaries has full corporate power and
authority to carry on the business in which it is engaged and to own or lease
the properties owned or leased by it. The Company has delivered to the Buyer
complete and correct copies of its Restated Certificate of Incorporation and By-
laws, as amended.
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(b) Capitalization. The entire authorized capital stock of the Company
consists of 940,000 Company Common Shares, of which 798,160.466 shares are
issued and outstanding and 13,712.569 shares are held in treasury, 70,000 Class
A Shares, of which 59,311.758 shares are issued and outstanding and no shares
are held in treasury, and 100,000 Preferred Shares, none of which are issued or
outstanding or held in treasury. All of the issued and outstanding Company
Shares have been duly authorized and are validly issued, fully paid and
nonassessable. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, preemptive rights, conversion rights,
exchange rights or other contracts or commitments that could require the Company
to issue, sell or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom stock,
profit participation or similar rights with respect to the Company, and there
are no agreements or arrangements to which the Company is a party or by which it
is bound for the redemption or repurchase of any Company Shares. There are no
agreements or arrangements governing the rights and/or duties of any Company
Stockholders nor any voting trusts, stockholder or similar agreements, proxies
or other agreements in effect with respect to the voting or transfer of any
equity or other interests in the Company to which the Company is a party or by
which it is bound.
(c) PCI; the Venture; the Trust. PCI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly authorized to conduct business and is in good standing under the
laws of those jurisdictions set forth in the Disclosure Schedule, which are the
only jurisdictions where such qualification is required, except where the lack
of such qualification would not, together with any other such absent
qualifications referred to in (S) 3(a), have a Material Adverse Effect.
Immediately prior to the Effective Time, the Company will own a 50% interest in
the Venture directly (or indirectly through Company Sub) and the remaining 50%
interest in the Venture indirectly through Parcity Inc., in each case, free and
clear of any Liens other than in respect of payment of the PCI Allocable
Portion. The Venture is a partnership duly organized and validly existing under
the laws of the State of Illinois, the sole partners of which are Parcity, Inc.,
a wholly-owned Subsidiary of the Company, and PCI, each of which owns a 50%
interest in the Venture. Each of PCI and the Venture has full power and
authority (corporate or otherwise) to carry on the business in which it is
engaged and to own or lease the properties owned or leased by it. Since its
formation, the Venture has conducted no business other than its ownership of
100% of the beneficial interest in Park City Center and activities related
thereto. The Company has delivered to the Buyer complete and correct copies of
the Certificate of Incorporation and Bylaws of PCI and a complete and correct
copy of the Amended and Restated Partnership Agreement of the Venture (the
"Venture Agreement"), in each case as amended. The Trust is duly established
under the laws of the State of Illinois. The Company has delivered to the Buyer
a complete and correct copy of the Indenture of Trust pursuant to which the
Trust was established, as amended.
(d) Subsidiaries; Other Equity Interests. Each Subsidiary of the Company
and each other Person, including the Venture, in which the Company or any of its
Subsidiaries has an equity or other interest (of record or beneficially) is
listed in the Disclosure Schedule. The authorized, issued and outstanding shares
of the capital stock of each Subsidiary and the record
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and beneficial ownership of the outstanding shares thereof are as set forth in
the Disclosure Schedule; all outstanding shares of each Subsidiary have been
duly and validly issued, are fully paid and nonassessable and are owned free and
clear of all Liens. There are no agreements or arrangements to which any
Subsidiary or the Venture is a party or by which it is bound for the redemption,
repurchase or issuance of such Subsidiary's or the Venture's equity or other
interests. There are no outstanding or authorized options, warrants, puts,
calls, purchase rights, subscription rights, preemptive rights, conversion
rights or exchange rights or other contracts or commitments that could require
any Subsidiary or the Venture to issue, sell or otherwise cause to become
outstanding any equity or other interests, except as contemplated by this
Agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to any Subsidiary or
the Venture. There are no agreements or arrangements governing the rights and/or
duties of any stockholders of any Subsidiary nor any voting trusts, stockholder
or similar agreements, proxies or other agreements or arrangements in effect
with respect to the voting or transfer of any equity or other interests in any
Subsidiary or the Venture. The Company has delivered to the Buyer complete and
correct copies of the Certificate of Incorporation and Bylaws of each of its
Subsidiaries, as amended.
(e) Authorization of Transaction. Each of the Company, PCI and Park City,
to the extent it is a party thereto, has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement, the P
City Agreement, the Post-Closing Escrow Agreement and the Deposit Escrow
Agreement and the other agreements contemplated hereby and to perform its
obligations hereunder and thereunder, and all necessary corporate action has
been taken by the Company, PCI and Park City (except as described below) to
approve the execution, delivery and performance hereof and thereof by the
Company, PCI and Park City, except that the Company cannot consummate the Merger
unless and until it receives the Requisite Stockholder Approval and the
transactions contemplated by the P City Agreement must be approved by the
stockholders of Park City. This Agreement has been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery
hereof by the other Parties and subject to the receipt of the Requisite
Stockholder Approval, which is the only vote required in respect of the Company
(including its stockholders) in order to approve the Merger and the other
transactions contemplated hereby, constitutes the valid and legally binding
obligation of the Company, enforceable in accordance with its terms. The P City
Agreement and the Deposit Escrow Agreement have been, and the other agreements
contemplated hereby will, prior to the Closing be, duly executed and delivered
by the Company, PCI and/or Park City, as the case may be, and constitute, or
will constitute, as the case may be, the valid and legally binding obligations
of the Company, PCI and/or Park City, as the case may be, enforceable in
accordance with their respective terms.
(f) Noncontravention. Neither the execution and the delivery of this
Agreement, the P City Agreement, the Deposit Escrow Agreement, the Post-Closing
Escrow Agreement or any other agreement contemplated hereby nor the consummation
of the transactions contemplated hereby and thereby will (i) violate any
statute, regulation, rule, injunction, judgment, order or decree of any
government, governmental agency or court to which any of the Company, its
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Subsidiaries, PCI or the Venture is subject or by which it or its assets may be
bound, or (ii) result in a breach or default under any provision of the charter,
bylaws or other organizational documents of any of the Company, its Subsidiaries
or PCI or of the Venture Agreement or the Indenture of Trust for the Trust or
(iii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel or require any notice under any agreement, note, bond,
mortgage, contract, lease, license, permit or instrument to which any of the
Company, its Subsidiaries, PCI or the Venture is a party or by which it is bound
or to which any of its assets is subject or any Service Contract (or result in
the imposition of any Lien upon any of its assets), except where, in the cases
of clauses (i) and (iii), any such violations, conflicts, breaches, defaults,
accelerations, terminations, modifications, cancellations, failures to give
notice or Liens would not, individually or in the aggregate, have a Material
Adverse Effect. Other than as required by the Delaware General Corporation Law,
none of the Company and its Subsidiaries, PCI or the Venture needs to give any
notice to, make any filing with or obtain any authorization, consent or approval
of any government or governmental agency or other Person in order for the
Parties to execute and deliver this Agreement, the P City Agreement and the
other agreements contemplated hereby or consummate the transactions contemplated
hereby and thereby, except where the failure to give notice, to file or to
obtain any authorization, consent or approval would not, individually or in the
aggregate, have a Material Adverse Effect. The execution, delivery and
performance of this Agreement, the P City Agreement and the other agreements
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby will not permit any stockholder, partner, joint venturer or other
holder of an interest in the Company, any Subsidiary, PCI or the Venture to
exercise or invoke any buy-sell, right of first refusal or first offer, purchase
option or other purchase or option right.
(g) Financial Statements. The Company has previously provided the Buyer
with an audited consolidated balance sheet and consolidated statement of
operations, and related consolidated statements of shareholders equity and cash
flows, as at and for the fiscal year ended December 31, 1997 (the "Most Recent
Fiscal Period End") and audited consolidated balance sheets and consolidated
statements of operations, and related consolidated statements of shareholders
equity and cash flows, as at and for each of the fiscal years ended December 31,
1994, 1995 and 1996 (collectively, the "Financial Statements"). The Financial
Statements (including the related notes and schedules) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated in the notes thereto) and present
fairly the consolidated financial condition of the Company and its Subsidiaries
as of the indicated dates and the consolidated results of operations of the
Company and its Subsidiaries for the indicated periods. With respect to the
Venture, the Company has also previously provided the Buyer with an audited
balance sheet and statement of operations and related statement of the
venturers' deficit and cash flows as at and for the Most Recent Fiscal Period
End and audited balance sheets and statements of operations and related
statement of venturers' deficit and cash flows as at and for each of the fiscal
years ended December 31, 1994, 1995 and 1996 (collectively, the "Venture
Financial Statements"). The Venture Financial Statements (including, the related
notes and schedules) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
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indicated in the notes thereto) and present fairly the financial condition of
the Venture as of the indicated dates and the results of operations of the
Venture for the indicated periods. Except as set forth in the Financial
Statements or the Venture Financial Statements (including in each case, the
related notes), except for liabilities and obligations incurred since the Most
Recent Fiscal Period End in the Ordinary Course of Business and except for
liabilities under contracts and Leases which are disclosed in the Disclosure
Schedule, neither the Company nor any of its Subsidiaries or the Venture has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which, individually or in the aggregate, are material to the
Company, the Subsidiaries, and the Venture taken as a whole.
(h) Events Subsequent to Most Recent Fiscal Period End. Since the Most
Recent Fiscal Period End, there has not been any:
(i) Material Adverse Effect;
(ii) change in the accounting methods, principles or practices
(including, without limitation, any change in depreciation or amortization
policies or rates) of the Company or any of its Subsidiaries or of the
Venture, except insofar as required by a change in GAAP (which changes are
described in the Disclosure Schedule);
(iii) sale or transfer of any assets of the Company or any of its
Subsidiaries or the Venture, except in the Ordinary Course of Business and
involving less than $25,000 for each item individually;
(iv) any loan made by the Company or any of its Subsidiaries or the
Venture to any Person or guaranty by the Company or any of its Subsidiaries
or the Venture of any loan, in an amount exceeding $10,000, in each case,
except for inter-company loans (which inter-company loans shall be paid off
or otherwise satisfied prior to the Closing);
(v) cancellation made by the Company or any of its Subsidiaries or
the Venture, without full payment, of any note, loan or other obligation
owing to the Company or any of its Subsidiaries or the Venture in an amount
exceeding $25,000;
(vi) mortgage, pledge or other encumbrance of any assets of the
Company, any of its Subsidiaries or the Venture or the PCI Venture
Interest, except for Liens for Taxes not yet due and payable and for which
appropriate accruals have been reflected in the books and records of the
Company or the Venture;
(vii) waiver or release of any claim of the Company or any of its
Subsidiaries or the Venture with a value in excess of $25,000 for each item
individually, except in the Ordinary Course of Business;
(viii) capital expenditure, including the incurrence of any liability
therefor, by the Company, any of its Subsidiaries or the Venture other than
in accordance with the
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Company's capital expenditures budget, a copy of which has previously been
delivered to the Buyer, and tenant improvements contemplated by Leases
disclosed in (S) 3(l) of the Disclosure Schedule.
(ix) execution of any real estate lease as tenant or personal
property lease as lessee, including the incurrence of any liability
therefor, by the Company, any of its Subsidiaries or the Venture involving
in excess of $25,000 per year, provided that any leases described on the
Disclosure Schedule in relation to this clause (ix) were entered into in
the Ordinary Course of Business and on an arm's length basis;
(x) failure to repay any indebtedness for borrowed money of the
Company, any of its Subsidiaries or the Venture;
(xi) physical damage, destruction or loss (whether or not covered by
insurance) affecting the properties of the Company or any of its
Subsidiaries or of the Venture, which physical damage, destruction or loss,
individually or in the aggregate, had or could reasonably be expected to
have a Material Adverse Effect;
(xii) indebtedness for borrowed money incurred by the Company or any
of its Subsidiaries or by the Venture, or any commitment to incur
indebtedness for borrowed money entered into by the Company or any of its
Subsidiaries or the Venture, other than with respect to the Revolving
Credit Agreements and inter-company loans which shall be paid off or
otherwise satisfied prior to Closing.
(xiii) payment, discharge or satisfaction of any liabilities of the
Company, any of its Subsidiaries or the Venture other than in the Ordinary
Course of Business and consistent with past practice and in respect of
inter-company loans which shall be paid off or otherwise satisfied prior to
Closing;
(xiv) declaration or payment of any dividend or other distribution in
respect of the capital stock or other interests of the Company, any of its
Subsidiaries or the Venture (it being acknowledged that after the date
hereof and prior to the Closing, such entities may pay cash dividends,
subject to the last sentence of (S) 7(d)); or
(xv) agreement, commitment or obligation of the Company or any of
its Subsidiaries or the Venture or PCI to do, or undertaking which may
cause, any of the matters described in the preceding clauses (i) through
(xiv) to occur.
(i) Tax Returns and Liabilities.
(i) (A) Each of the Company, its Subsidiaries and the Venture has
filed all Tax Returns and Reports which it is required to file (taking into
account any applicable filing extensions), (B) all such Tax Returns and
Reports are correct and complete in all material respects, (C) each of the
Company, its Subsidiaries and the Venture has paid (or
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the Company has paid on its behalf) all Taxes shown on such Tax Returns and
Reports as required to be paid by it, and (D) the Financial Statements and
the Venture Financial Statements reflect adequate accruals, for all
material Taxes payable by the Company, its Subsidiaries and the Venture for
all taxable periods and portions thereof through the Most Recent Fiscal
Period End and the general ledgers, which have been prepared in a manner
consistent with prior practices, of the Company, its Subsidiaries and the
Venture reflect adequate accruals for all material Taxes that have accrued
thereafter. True, correct and complete copies of the federal tax returns
for the Company and the Venture for the taxable years 1994, 1995 and 1996
have been delivered or made available to representatives of the Buyer, and
no deficiencies for any Taxes have, to the Knowledge of the Company, been
proposed, asserted or assessed against the Company, any of its Subsidiaries
or the Venture, and no requests for waivers of the time to assess any such
Taxes are pending.
(ii) The Company (A) for all taxable years commencing with the
taxable year ended December 31, 1989 through December 31, 1997 has been
organized in conformity with the requirements for qualification as a real
estate investment trust (a "REIT") (within the meaning of the Code) under
the Code, has been subject to taxation as a REIT and has satisfied all
requirements to qualify as a REIT for such years, (B) has operated, and
intends to continue to operate, in such a manner as to qualify as a REIT
for the taxable period through and including the Closing Date and (C) has
not taken or omitted to take any action which would reasonably be expected
to result in a challenge to its status as a REIT and no such challenge is
pending or, to the Knowledge of the Company, threatened. Each Person which
is a partnership, joint venture or limited liability company and in which
the Company, any of its Subsidiaries or the Venture owns (either directly
or together with any of the Company's Subsidiaries) 5% or more of the
equity interests has been since its formation and continues to be for
federal income tax purposes a partnership and not a corporation or an
association taxable as a corporation. Each Subsidiary with respect to which
all of the outstanding capital stock is owned solely by the Company (or
solely by any of its Subsidiaries that is a corporation wholly owned by the
Company) is a "qualified REIT subsidiary," as defined in Section 856(i) of
the Code. Neither the Company nor any of its Subsidiaries holds any asset
that is subject to a consent filed pursuant to Section 341(f) of the Code
and the regulations thereunder. None of the Company, any of its
Subsidiaries or the Venture owns 5% or more of the stock of any corporation
which is not a "qualified REIT subsidiary" as defined in Section 856(i) of
the Code.
(iii) The Venture has been since its formation and continues to be
for federal income tax purposes a partnership and not a corporation or an
association taxable as a corporation.
(iv) None of the Company or its Subsidiaries has been at any time a
member of a consolidated, combined or unitary group for federal, state,
local or foreign tax purposes.
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(v) None of the Company, its Subsidiaries or the Venture is bound by any
private letter ruling or closing agreement with the Internal Revenue
Service or any other taxing authority, and no applications or requests for
such rulings or closing agreements are outstanding.
(j) Litigation. There is no suit, action, proceeding (including
arbitration), governmental investigation, CAM or environmental audit or labor
dispute pending or, to the Knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or the Venture or any of their
respective properties or assets (including the Shopping Centers), nor is there
any judgment, decree, injunction, writ or order of any court, government,
governmental agency or arbitrator outstanding against the Company or any of its
Subsidiaries or the Venture or any of their respective properties or assets.
(k) Real and Personal Property. The Company has previously delivered to
the Buyer a complete list and brief description of all real and personal
property (or where indicated, the leasehold estate therein) having a value of
over $5,000 per item owned or leased by the Company or by any of its
Subsidiaries or the Venture, in each case indicating the entity or entities
owning or leasing such property. All real property reflected in the most recent
Financial Statements and Venture Financial Statements is listed on the
Disclosure Schedule and is the only real property owned or leased by the
Company, any Subsidiary or the Venture. With respect to all such real property,
the Company, the Subsidiary or the Venture (through the Trust) (as applicable)
owning such property has good title in fee simple (or where indicated, the
leasehold estate) thereto, including all improvements thereon, free and clear of
all Liens, except for the Permitted Exceptions. The Company, each Subsidiary
and the Venture (as applicable) owns its personal property (including capital
stock and other interests in entities) free and clear of any Liens, except for
Permitted Exceptions. All leases referred to in this clause (k) are in full
force and effect and none of the Company, any Subsidiary, the Venture or, to the
Knowledge of the Company, any other party thereto is in default thereunder.
(l) Shopping Centers - Service Contracts; Leases; REAs; and Brokerage
Commissions; Other Material Contracts.
(i) Service Contracts. All service, maintenance, supply and
management contracts affecting each Shopping Center or entered into by the
Company, any of its Subsidiaries or the Venture which are not terminable
without payment of premium or penalty or which cannot be terminated without
more than thirty (30) days notice ("Service Contracts") and any
modifications thereto are set forth in the Disclosure Schedule, and the
information set forth therein is accurate as of the date hereof. Each of
the Service Contracts is valid and subsisting and none of the Company, any
of its Subsidiaries or the Venture or, to the Knowledge of the Company, any
other party thereto is in breach or default thereunder. None of the
Company, its Subsidiaries or the Venture has received or given any written
notice from or to any party to any such Service Contract claiming the
existence of any default or breach thereunder.
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(ii) Leases. (A) A list of all leases, occupancy agreements,
concessions, and licenses (and any modifications, supplements, amendments
and guarantees relating thereto) affecting each Shopping Center on the
date hereof (the "Leases"), showing the name of each tenant, the space
demised (including square footage), the lease commencement and expiration
date, the base monthly rent (including sales break point and percentage
rent rate), any percentage or additional rent, any outstanding rent
abatements, tenant improvement allowances and other tenant concessions and
applicable security deposits (the "Rent Roll"), is accurately set forth in
the Disclosure Schedule. True and complete copies of all Leases (including
all amendments, modifications, supplements and guaranties relating thereto)
have previously been delivered or made available to the Buyer. Except as
otherwise set forth in the Leases, the Disclosure Schedule or Estoppel
Certificates, as applicable, each of the Leases is valid and enforceable
and is in full force and effect and neither the Company, any of its
Subsidiaries or the Venture nor, to the Knowledge of the Company, any of
the tenants thereunder is in default of any of its obligations under any
of the Leases. No tenant has paid any base rent more than 30 days in
advance.
(B) Each Lease, together with any modifications, amendments and
supplements thereto, constitutes the entire agreement between the Company,
any of its Subsidiaries or the Venture and each other party thereto, and
neither the Company, any of its Subsidiaries nor the Venture has made any
oral promises or agreements amending or modifying the same;
(i) There are no leases executed by or on behalf of the
Company, any of its Subsidiaries or the Venture or other rights of
occupancy or use granted by or on behalf of the Company, any of its
Subsidiaries or the Venture for any portion of the Shopping Centers
other than (A) the Leases, (B) subleases or subtenancies granted by
tenants, or (C) occupancy agreements for the operation of any cart or
kiosk. As of the Closing, except for any collateral assignment of
leases and rents pursuant to any financing which will continue after
the Closing, no rents due under, or any other interest of the Company,
any of its Subsidiaries or the Venture in, any of the Leases will be
held by any party other than the Company, any of its Subsidiaries or
the Venture or otherwise pledged or encumbered or subject to any other
Lien in any way.
(ii) (1) No tenant has made any written claim which has been
received by the Company, any of its Subsidiaries or the Venture (A)
that the Company, any of its Subsidiaries or the Venture has defaulted
in performing any of its obligations under any of the Leases which has
not heretofore been cured, (B) that the Company, any of its
Subsidiaries or the Venture is or will be in default under any Lease
as a result of any condition claimed therein to exist which with the
passage of time or notice, or both, would constitute such a default,
(C) that such tenant is entitled to any reduction in, refund of or
counterclaim or offset against, or is otherwise disputing, any rents
or other charges (including CAM) paid, payable
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or to become payable by such tenant or (D) that such tenant is
entitled to cancel its Lease or to be relieved of its operating
covenants, if any, therein; and (2) to the Knowledge of the Company,
(x) no "event of default" or "default" (as defined in the respective
Lease) by a tenant exists under any Lease and (y) no condition exists
that with the passage of time or notice, or both, reasonably forms a
basis for which any Lease may be terminated by the tenant thereunder.
(iii) (1) There are no rent abatements or other tenant
concessions or inducements, including, without limitation, lease
assumptions or buy-outs, applicable to any of the Leases; (2) neither
the Company, any of its Subsidiaries nor the Venture has granted any
rights, options or rights of first refusal of any kind to any tenant,
which are in effect, to purchase or otherwise acquire the Shopping
Centers or any part thereof; and (3) all of the improvements to be
constructed by the landlord under each of the Leases have been fully
completed and paid for.
(C) The REAs constitute the entire agreement between the Company, any
of its Subsidiaries or the Venture and each REA Party thereto, and neither
the Company, any of its Subsidiaries nor the Venture has made any oral or
written promises or agreements amending or modifying the same;
(i) The REAs are valid and in full force and effect. As of the
Closing (except for any collateral assignments of leases and rents
pursuant to any financing which will continue after the Closing), no
amounts due under, or any other interest of the Company, any of its
Subsidiaries or the Venture in, the REAs will be held by any party
other than the Company, any of its Subsidiaries or the Venture or
otherwise pledged or encumbered or subject to any other Lien in any
way.
(ii) (1) None of the REA Parties has made any written claim
which has been received by the Company, any of its Subsidiaries or the
Venture (A) that the Company, any of its Subsidiaries or the Venture
has defaulted in performing any of its obligations under any of the
REAs which has not heretofore been cured, (B) that the Company, any of
its Subsidiaries or the Venture is or will be in default under any REA
as a result of any condition claimed therein to exist which with the
passage of time or notice, or both, would constitute such a default,
(C) that such REA Party is entitled to any reduction in, refund of or
counterclaim or offset against, or is otherwise disputing, any amounts
or other charges paid, payable or to become payable by such REA Party
or (D) that such REA Party is entitled to cancel its REA or to be
relieved of its operating covenants, if any, therein; (2) to the
Knowledge of the Company, (x) no "event of default" or "default" (as
defined in the respective REA) by a party to an REA exists under any
REA and (y) no condition exists that with the passage of time or
notice, or
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both, reasonably forms a basis for which any REA may be terminated by
any party thereto; and (3) each REA is in full force and effect.
(iii) (A) None of the Company, any of its Subsidiaries or the
Venture has granted any rights, options or rights of first refusal of
any kind to any of the REA Parties, which are in effect, to purchase
or to otherwise acquire the Shopping Centers or any part thereof, (B)
all of the improvements to be constructed by the Company, any of its
Subsidiaries or the Venture under any REA have been fully completed
and paid for and (C) there are no abatements or other concessions or
inducements applicable to any REA.
(iv) None of the Company, any of its Subsidiaries or the
Venture has entered into any reciprocal easement agreements other than
the REAs.
(D) Brokerage Commissions. There are no brokerage commissions or
finder's fees payable by the Company, any of its Subsidiaries or the
Venture with respect to the current or any renewal term of any of the
Leases or the negotiation of any new lease, and none of the Company, any of
its Subsidiaries or the Venture has any agreement with any broker with
respect to any renewal term of any Lease.
(E) Other Material Contracts. The Company has made available to
Buyer for review correct and complete copies of all Other Material
Contracts. All Other Material Contracts entered into by or on behalf of the
Company, any of its Subsidiaries or the Venture or by which any of them or
their assets may be bound and any modifications, supplements or amendments
thereto are set forth in the Disclosure Schedule, and the information set
forth therein is accurate. Each of the Other Material Contracts is valid
and subsisting and none of the Company, any of its Subsidiaries or the
Venture or, to the Knowledge of the Company, any other party thereto is in
breach or default thereunder. None of the Company, any of its Subsidiaries
or the Venture has received from, or given any written notice to, any party
to any Other Material Contract claiming the existence of any default or
breach thereunder.
(m) Shopping Centers - Representations Pertaining to the Premises and
Legal Matters.
(i) Insurance. The Disclosure Schedule lists all insurance policies
(the "Insurance Policies") affording coverage with respect to each Shopping
Center, and the information contained therein is accurate. The Company has
delivered or caused to be delivered to the Buyer a certificate or
certificates of insurance with respect to each blanket insurance policy for
the Shopping Centers. Each insurance policy set forth on the Disclosure
Schedule is, and as of the Closing Date will be, in full force and effect,
without any material amendments or modifications having been made thereto
and with all premiums having been paid. None of the Company, any of its
Subsidiaries or the Venture has received any notification of cancellation
or non-renewal or notice of violation in connection with any insurance
policy.
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(ii) Laws and Ordinances. None of the Company, any of its
Subsidiaries or the Venture has received written notice that any of the
Shopping Centers or the present use and condition thereof violate any
applicable deed restrictions, zoning or subdivision regulations or urban
redevelopment plans applicable to such Shopping Center, as modified by any
duly issued variances. No action or proceeding relating to the foregoing is
pending or, to the Knowledge of the Company, threatened with respect to the
Shopping Centers. No written notices of violations of law, ordinances,
regulations or orders relating to the Shopping Centers have been received
by the Company, any of its Subsidiaries or the Venture which have not been
cured or complied with. No written notice from any insurance company,
insurance rating organization or Board of Fire Underwriters requiring any
alterations, improvements or changes at the Shopping Centers, or any
portion thereof, which has not heretofore been complied with has been
received by the Company, any of its Subsidiaries or the Venture.
(iii) Condemnation. There is no pending or, to the Knowledge of the
Company, threatened condemnation, expropriation, eminent domain or similar
proceeding affecting all or any portion of any of the Shopping Centers, and
none of the Company, any of its Subsidiaries or the Venture has received
any written or, to the Knowledge of the Company, oral notice of any of the
same.
(iv) Environmental. To the Knowledge of the Company, none of the
Shopping Centers is in material violation of any Environmental Law. During
the time in which the Company, any of its Subsidiaries or the Venture has
owned the Shopping Centers, neither the Company, any of its Subsidiaries
nor the Venture nor, to the Knowledge of the Company, any third party has
used, generated, manufactured, stored, released or disposed of on, under or
about the Shopping Centers or transported to or from the Shopping Centers
any flammable explosives, radioactive materials, hazardous wastes, toxic
substances or related materials ("Hazardous Materials"), except for the
storage and use of substances commonly present at or used in the operation
and maintenance of shopping centers and in compliance with all applicable
laws. Hazardous Materials shall include, but not be limited to, substances
defined as "hazardous substances", "hazardous materials" or "toxic
substances" in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq; the
Hazardous Materials Transportation Act, 49 U.S.C. Sec. 1801, et seq; the
Resource Conservation and Recovery Act, 42 U.S.C. Sec. 6901, et seq; and
those substances defined as "hazardous wastes" in relevant state laws and
in the regulations adopted and publications promulgated pursuant to said
laws. Neither the Company, any of its Subsidiaries, PCI nor the Venture
has received any written notice from any governmental authority having
jurisdiction or other Person that (i) it, any other occupant of the
Shopping Centers or the Shopping Centers are not in compliance with any
Environmental Law or that it has any liability with respect thereto or (ii)
there are administrative, regulatory or judicial proceedings pending with
respect to the Shopping Centers pursuant to, or alleging any violation of
or liability under, any Environmental Law. Neither the Company, any of its
Subsidiaries, PCI nor the Venture has installed or maintained any
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underground or above ground storage tanks on, under or about the Shopping
Centers. Neither the Company, any of its Subsidiaries, PCI nor the Venture
has received written notice that there is a facility located on or at the
Shopping Centers that is subject to the reporting requirements of Section
312 of the Federal Emergency Planning and Community Right to Know Act of
1986 and the federal regulations promulgated thereunder (42 U.S.C.
(S)11022). None of the Company, any of its Subsidiaries, PCI or the
Venture has received any written notice of pending or threatened claims,
liabilities or proceedings, nor, to the Knowledge of the Company have there
been any violations of or failures to comply with Environmental Laws or any
releases of Hazardous Materials (except for releases of materials commonly
present at or used in the operation and maintenance of shopping centers and
in compliance with all applicable laws), in each case, with respect to any
properties formerly owned or leased (in whole or in part) by any of such
entities or any predecessors of such entities during the period such
properties were so-owned or so-leased by the Company, any of the
Subsidiaries or the Venture (or their predecessors) or prior thereto.
(n) Debt Instruments. Set forth in the Disclosure Schedule is a list of
all loan or credit agreements, notes, bonds, mortgages, indentures or other
agreements or instruments pursuant to which any indebtedness of the Company or
any of its Subsidiaries or the Venture for money borrowed is outstanding or may
be incurred and any agreements relating to the deferred purchase price of
property and the respective principal amounts outstanding thereunder on March
31, 1998. Neither the Company nor any of its Subsidiaries or the Venture is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice, or both, would cause such a
violation of or default under) any such loan or credit agreement, note, bond,
mortgage, indenture or other agreement or instrument, except for violations that
are not, individually or in the aggregate, material to the Company, its
Subsidiaries and the Venture, taken as a whole, and which will not prevent,
materially hinder or delay consummation of the transactions contemplated hereby.
The Disclosure Schedule lists all letters of credit and performance bonds to
which the Company, any of its Subsidiaries or the Venture is a party or under
which any of them is obligated or which otherwise relate to properties or assets
of the Company, any Subsidiary or the Venture.
(o) ERE Yarmouth Agreement. Set forth in the Disclosure Schedule is a
list of all arrangements, agreements or contracts (written or oral) entered into
by the Company or any of its Subsidiaries or by PCI or the Venture with ERE
Yarmouth or any of its Affiliates, complete and correct copies of which have
been previously delivered or made available to the Buyer. All fees (and
expenses) payable to ERE Yarmouth or any of its Affiliates under such agreements
or in connection with the execution, delivery and performance of this Agreement
and the agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby shall be paid by the Company Stockholders and
PCI or from the Closing Expense Fund, in each case prior to or concurrently with
the Closing.
(p) Hart-Scott-Rodino Act. For purposes of determining compliance with
the Hart-Scott-Rodino Act, the Company confirms that the conduct of its business
consists solely of
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investing in, owning and operating shopping centers and office buildings for the
benefit of its stockholders.
(q) Employees. Except as set forth in (S) 3(q) of the Disclosure Schedule,
to the Knowledge of the Company, (a) no employee of ERE Yarmouth or its
Affiliates who is employed at the Shopping Centers (an "Employee") is a member
of a collective bargaining unit, (b) there are no threatened or contemplated
attempts to organize for collective bargaining purposes any of the Employees,
(c) no unfair labor practice charge or complaint or sex, age, disability,
gender, race or religious discrimination claim is pending against the Company,
any Subsidiary or the Venture before the National Labor Relations Board or any
other federal state or local governmental authority, (d) there is no work
stoppage, strike or other concerted action by Employees, (e) the Company, the
Subsidiaries and the Venture and their employee benefit plans are in compliance
in all material respects with all applicable laws, rules, regulations,
ordinances, orders, judgments and decrees relating to the employment of labor
and benefit plans, (f) ERE Yarmouth and its Affiliates have paid in full to all
Employees all wages, salaries, commissions, bonuses, benefits and other
compensation due or to become due on behalf of such Employees, and (g) all
contributions and/or premiums to or on behalf of all benefit plans which are due
and owing have been paid, (h) no notice of intent to terminate any pension plan
has been filed and no amendment to treat such plan as terminated has been
adopted, nor has the Pension Benefit Guaranty Corporation instituted proceedings
to terminate any pension plan, and no other event or condition has occurred
which might constitute grounds under Sections 4041 or 4042 of the Employee
Retirement Income Security Act of 1974, as amended, for the termination of, or
the appointment of a trustee to administer any pension plan, and (i) each
benefit plan which is qualified under Section 401(a) of the Code has received a
determination letter from the IRS that it is so qualified in form, and no fact
or event has occurred since the date of such determination letter that could
adversely affect the qualified status of such benefit plan in operation or form.
(r) Brokers' Fees. Except as described in (S) 3(o), none of the Company,
any of its Subsidiaries or the Venture has any liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement or the P City Agreement.
(s) Promotional Funds. None of the Company, any of its Subsidiaries or the
Venture is under any obligation to make contributions or otherwise provide
assistance to any promotional association or promotional fund.
(t) Violations. None of the Company, any of its Subsidiaries, PCI or the
Venture has received any written notice that there exists any violation of any
restriction, condition or agreement contained in any easement, restrictive
covenant or any similar instrument or agreement recorded against the Shopping
Centers or any portion thereof and, to the Knowledge of the Company, there is no
such violation. To the Knowledge of the Company, without having made any
governmental investigation or inquiry, the Company, its Subsidiaries and the
Venture are in compliance with all applicable laws, statutes, ordinances and
regulations, whether federal, state or local, relating to such entities or their
businesses, properties, assets or operations, other
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than those as to which failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect, or prevent, materially hinder or
delay consummation of the transactions contemplated hereby.
(u) Licenses and Permits. The Disclosure Statement contains a list of all
licenses and permits (collectively, the "Licenses and Permits") currently
maintained with respect to the Shopping Centers. None of the Company, any of its
Subsidiaries, PCI or the Venture has received any written notice of violation of
any such Licenses and Permits from any federal, state or municipal entity that
has not been cured or otherwise resolved to the satisfaction of such
governmental entity, and to the Knowledge of the Company, there is no such
uncured violation. To the Knowledge of the Company, without having done any
governmental investigation or inquiry, the Company has all material Licenses and
Permits necessary for the Company, each of its Subsidiaries and the Venture to
conduct their businesses as presently conducted and to own their properties and
assets.
(v) Tenant Bankruptcy. Neither the Company, any of its Subsidiaries, PCI
nor the Venture has received any written notice that any tenant or REA Party is
the subject of any bankruptcy, reorganization, insolvency or similar proceedings
or has ceased or reduced or intends to cease or reduce operations at the
Shopping Centers (other than temporarily due to casualty, remodeling, renovation
or similar cause) and, to the Knowledge of the Company, no tenant or REA Party
is the subject of any such proceedings or has so ceased or reduced or intends to
so cease or reduce operations at the Shopping Centers.
(w) Intellectual Property. Neither the Company, any of its Subsidiaries,
PCI nor the Venture has received any written notice that the conduct of the
Company's, any of its Subsidiaries' or the Venture's business infringes upon the
patents, trademarks, copyrights or other intellectual property rights of any
third party, and neither the Company, any of its Subsidiaries nor the Venture
has given any written notice to any third party that such third party is
infringing upon the patents, copyrights, trademarks or other intellectual
property rights of the Company, any of its Subsidiaries or the Venture, and, to
the Knowledge of the Company, there is no such infringement. The Company, its
Subsidiaries, and the Venture have all right, title and interest in, or licenses
to use, all intellectual property necessary to conduct their business as
presently conducted.
(x) Tax Assessments. Copies of current real estate tax bills with respect
to each of the Shopping Centers, other than tax bills sent to tenants or REA
Parties who have the obligation to pay such Taxes to the collecting authority,
have been delivered or made available to the Buyer. No application or proceeding
is pending with respect to a reduction of or an increase in any such Taxes. None
of the Company, any of its Subsidiaries, PCI or the Venture has received any
written notice of or, to the Knowledge of the Company, otherwise been made aware
of (i) any special tax or assessment to be levied or proposed to be levied
against any of the Shopping Centers or (ii) any change or proposed change in the
tax assessment of any of the Shopping Centers.
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(y) Bank Accounts and Powers of Attorney. The Disclosure Schedule
identifies all bank accounts (or other accounts with financial institutions)
and safe deposit boxes of the Company, the Subsidiaries and the Venture,
together with account numbers and all current signatories thereon and persons
with access thereto, and the names of all persons holding powers of attorney or
similar grants of authority from the Company, any of its Subsidiaries or the
Venture which are not otherwise disclosed in agreements or other instruments
identified in the Disclosure Schedule. Copies of all said powers of attorney
and similar authorizations have been delivered to the Buyer.
(z) Records. The minute books and records of the Company, each
Subsidiary, and the Venture in the possession of the Representative have been
provided or made available to Buyer. The minute books, stock ledgers and stock
records of the Company, each Subsidiary, and the Venture are or will, as of the
Closing Date, be true, correct and complete. Complete and accurate copies of
the foregoing have been or will, prior to the Closing, be provided or made
available to the Buyer.
4. Representations and Warranties of the Buyer and the Transitory Subsidiary.
The Buyer and the Transitory Subsidiary jointly and severally represent and
warrant to the Company, for the benefit of the Company and the Company
Stockholders, that the statements contained in this (S) 4 are correct and
complete as of the date of this Agreement.
(a) Organization. The Buyer is a limited partnership, and the Transitory
Subsidiary is a limited liability company, in each case, duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
the Buyer and the Transitory Subsidiary has full limited partnership or limited
liability company, as the case may be, power and authority to carry on the
business in which it is engaged and to own or lease the properties owned or
leased by it.
(b) Financial Ability to Perform. The Buyer has or, at the Closing Date,
will have currently available cash funds sufficient to consummate the
transactions contemplated by this Agreement.
(c) Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has full power and authority to execute and deliver this Agreement
and the agreements contemplated hereby to which it is a party and to perform its
obligations hereunder and thereunder, and all necessary corporate or limited
liability company action has been taken by the Buyer and the Transitory
Subsidiary to approve the execution, delivery and performance hereof and thereof
by the Buyer and the Transitory Subsidiary, respectively. This Agreement has
been duly executed and delivered by the Buyer and the Transitory Subsidiary
under applicable Delaware law and in accordance with its partnership agreement
or operating agreement, as the case may be, and, assuming the due authorization,
execution and delivery hereof by the other Parties, constitutes the valid and
legally binding obligation of each of the Buyer and the Transitory Subsidiary,
enforceable in accordance with its terms. The Deposit Escrow Agreement has been,
and the other agreements contemplated hereby to which the Buyer or the
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Transitory Subsidiary will be parties, will prior to the Closing be duly
executed and delivered by the Buyer and/or the Transitory Subsidiary, as the
case may be, and constitute or will constitute, as the case may be, the valid
and legally binding obligations of the Buyer and/or the Transitory Subsidiary,
as the case may be, enforceable in accordance with their respective terms.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement and the agreements contemplated hereby nor the consummation of the
transactions contemplated hereby and thereby will (i) violate any statute,
regulation, rule, injunction, judgment, order or decree of any government,
governmental agency or court to which the Buyer or the Transitory Subsidiary is
subject or by which it or its assets may be bound or any provision of the
limited partnership agreement or operating agreement of the Buyer and the
Transitory Subsidiary, respectively, or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, note, bond, mortgage, contract, lease, license,
permit or instrument to which the Buyer or the Transitory Subsidiary is a party
or by which it is bound or to which any of its assets is subject (or result in
the imposition of any Lien upon any of its assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice or Lien would not have a material adverse
effect on the ability of the Buyer or the Transitory Subsidiary to consummate
the transactions contemplated by or perform its obligations under this
Agreement. Except for the filing of the Certificate of Merger in Delaware,
neither the Buyer nor the Transitory Subsidiary needs to give any notice to,
make any filing with or obtain any authorization, consent or approval of any
government or governmental agency or other Person in order for such Parties to
execute and deliver this Agreement and the other agreements contemplated hereby
to which they are parties or to consummate the transactions contemplated hereby
and thereby.
(e) Litigation. There is no suit, action or proceeding pending or, to the
knowledge of the Buyer or the Transitory Subsidiary, threatened against or
affecting the Buyer or the Transitory Subsidiary that, individually or in the
aggregate, could reasonably be expected to have a material adverse effect on the
ability of the Buyer or the Transitory Subsidiary to consummate the transactions
contemplated by or perform its obligations under this Agreement, nor is there
any judgment, decree, injunction, writ rule or order of any court, government,
governmental agency or arbitrator outstanding against the Buyer or the
Transitory Subsidiary or any of their respective properties or assets having, or
which would reasonably be expected to have, any such effect.
(f) The Transitory Subsidiary. The Transitory Subsidiary was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement
and has not engaged in any business activities or conducted any operations other
than in connection with such transactions.
(g) Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
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5. Survival of Representations and Warranties. No representations and
warranties of the Company or the Buyer and the Transitory Subsidiary set forth
in this Agreement or in any instrument or document delivered or to be delivered
pursuant to this Agreement shall survive the Closing, other than the
representations and warranties of the Company set forth in (S) 3(a), (b), (c),
(d), (e), (f), (g), (h) (only with respect to clauses (ii), (iv), (v), (vii),
(x), (xii), (xiii), (xiv) and clause (xv) but only insofar as clause (xv)
relates to the foregoing clauses of subsection (h)), (i), (o), (p), (q), (r),
(y) and (z), those of the Buyer and the Transitory Subsidiary set forth in (S)
4(a), (c), (d) and (g) and those set forth in any certificate delivered on
behalf of the Company pursuant to (S) 9(a)(v) or on behalf of the Buyer pursuant
to (S) 9(b)(iv), but only to the extent that such representations and warranties
in such certificates relate to the foregoing sections and subsections of this
Agreement, which shall survive the Closing until the first anniversary of the
Closing Date ("Survival Termination Date"). Any representation or warranty
which expires at the Closing shall, notwithstanding anything to the contrary
herein, not be deemed to limit in any respect any representation, warranty or
other provision of this Agreement or the agreements contemplated hereby which
does not so expire. No Party hereto may assert any claim with respect to any
breach of any representation or warranty after the date on which such
representation or warranty ceases to survive pursuant to this Section 5. All
covenants, to the extent relating to periods following the Closing, and
indemnities of the Parties shall survive the Closing.
6. Claims Against the Escrow Fund. (a) The Parties hereby acknowledge and
agree that none of the Buyer, the Transitory Subsidiary or the Surviving
Corporation is permitted to assert against any Schedule I Stockholder or PCI or
Park City any claim with respect to representations, warranties, indemnities or
covenants contained herein or in the P City Agreement or in any instrument or
document delivered or to be delivered pursuant to this Agreement except in
accordance with the Post-Closing Escrow Agreement and their sole remedy with
respect to such matters shall be pursuant to the Post-Closing Escrow Agreement.
7. Covenants. The Parties agree as follows with respect to the period from
and after the execution of this Agreement and to the Effective Time or earlier
termination of this Agreement:
(a) General. Except as otherwise provided herein, each of the Parties will
use its reasonable best efforts to take all actions and to do all things
necessary, proper or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in (S) 9 below).
(b) Notices and Consents. The Company will give any notices (and will
cause each of its Subsidiaries, PCI, the Venture and ERE Yarmouth and its
Affiliates to give any notices) to third parties and will use its reasonable
best efforts to obtain (and will cause each of its Subsidiaries, PCI, the
Venture and ERE Yarmouth and its Affiliates to use its reasonable best efforts
to obtain) any third party consents that are required as disclosed in the
Disclosure Schedule in connection with the matters referred to in (S) 3(f)
above.
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(c) Regulatory Matters; Stockholder Approval. Each of the Parties will
(and will cause each of its Subsidiaries and, in the case of the Company, PCI
and the Venture to) give any notices to, make any filings with and use its
reasonable best efforts to obtain any authorizations, consents and approvals of
governments and governmental agencies in connection with the matters referred to
in (S) 3(f) or (S) 4(d) above, as the case may be. In addition, the Company
will call a special meeting of its stockholders (the "Special Meeting") in
accordance with its Bylaws and the Delaware General Corporation Law as soon as
practicable in order that Company Stockholders may consider and vote upon the
adoption of this Agreement and the approval of the Merger in accordance with the
Delaware General Corporation Law. The notice of such meeting shall contain the
recommendation of the Board of Directors of the Company that the Company
Stockholders adopt this Agreement and approve the transactions contemplated
hereby.
(d) Conduct of Business by the Company. The Company will not (and will
not cause or permit any of its Subsidiaries, PCI or the Venture to) engage in
any practice, take any action or enter into any transaction outside the Ordinary
Course of Business except with the written consent of the Buyer, which consent
shall be given or withheld by the Buyer acting in accordance with its business
judgment, exercised in good faith after giving due consideration to the
Company's recommendations. Without limiting the generality of the foregoing:
(i) none of the Company or its Subsidiaries will authorize or
effect any change in its charter or by-laws and none of the Company,
Parcity, Inc. or PCI will authorize or effect any change in the Venture
Agreement or cause the termination of the Venture;
(ii) none of the Company or its Subsidiaries will grant any options,
warrants or other rights to purchase or obtain any of its capital stock,
securities convertible into or exchangeable therefor or other equity
interests or issue, sell or otherwise dispose of any of its capital stock,
securities convertible into or exchangeable therefor or other equity
interests;
(iii) none of the Company, its Subsidiaries or the Venture will
declare, set aside or pay any non-cash dividend or non-cash distribution
with respect to its capital stock or other equity interests, except to the
extent required in order for the Company or Park City to maintain its
status as a "real estate investment trust" under the Code, or redeem,
repurchase or otherwise acquire any of its capital stock or other equity
interests;
(iv) except as expressly contemplated by this Agreement, none of the
Company, its Subsidiaries or PCI will merge or consolidate with or into any
Person;
(v) none of the Company, its Subsidiaries or the Venture will issue
any note, bond or other debt security, create, incur, assume or guarantee
any indebtedness for borrowed money or capitalized lease obligations or
enter into any sale-leaseback or similar off-balance sheet financing , in
each case which will continue to be outstanding or otherwise remain in
effect following the Closing.
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(vi) none of the Company, its Subsidiaries or the Venture will
impose any Lien or permit to exist any new Lien upon any of its assets
outside the Ordinary Course of Business (other than new Liens which do not
exceed $25,000, individually or $50,000, in the aggregate);
(vii) none of the Company, its Subsidiaries or the Venture will make
any capital investment in, make any loan to or acquire the securities or
assets of any other Person outside the Ordinary Course of Business except
as contemplated by the current capital expenditure budgets of the Company
and its Subsidiaries or of the Venture, as previously approved by the Board
of Directors of the Company or the Venturers, as the case may be, and
provided to the Buyer;
(viii) none of the Company, its Subsidiaries or the Venture will
settle pending or threatened litigation in an amount exceeding $25,000
individually, or $50,000 in the aggregate (excluding amounts covered by
insurance);
(ix) none of the Company, its Subsidiaries or the Venture will
sell, assign or transfer any of its assets that has a fair market value in
excess of $25,000 individually, or $100,000 in the aggregate, whether or
not in the Ordinary Course of Business and;
(x) none of the Company, its Subsidiaries or the Venture will
cancel any indebtedness for borrowed money owed to it, other than in return
for full payment thereof, whether or not in the Ordinary Course of
Business;
(xi) none of the Company, its Subsidiaries or the Venture will
engage in any new transaction outside of the Ordinary Course of Business or
not on an arm's-length basis or enter into any new line of business;
(xii) the Company will not waive any rights under, or enter into any
amendment or modification of, the P City Agreement; and
(xiii) none of the Company, the Subsidiaries or the Venture will hire
any employees; and
(xiv) none of the Company, its Subsidiaries or the Venture will
commit to any of the foregoing.
The Company shall, and shall cause each of its Subsidiaries and the Venture
to, use its reasonable best efforts to preserve its business organization and
reputation intact, to maintain its assets and properties in good working order
and condition, ordinary wear and tear excepted, to preserve its relationships
with tenants and other occupiers of properties, customers, suppliers, lenders,
partners and others having significant business dealings with such entity. The
Company shall prepare and file prior to the Closing Date all federal, state,
local or foreign Tax Returns and Reports relating to the Company, any Subsidiary
or the Venture for the period ending
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December 31, 1997 and pay all Tax due in connection therewith prior to the
Closing Date. Such Tax Returns and Reports shall be prepared on a basis
consistent with those prepared for prior tax years unless a different treatment
of any item is required by an intervening change in law. Notwithstanding the
foregoing, with respect to each year in which Parcity Inc. or PCI owned an
interest in the Venture, the Company shall cause Parcity Inc. and PCI, or, if
applicable, their respective parents, prior to Closing to file corporate Tax
Returns with the Pennsylvania Department of Revenue and to pay the corporate
capital stock/franchise Taxes and corporate net income Taxes shown to be due on
such Tax Returns. The Taxes shown to be due on such corporate Tax Returns (i)
shall be calculated on the basis that the Venture was the legal and beneficial
owner of the Park City Center located in Lancaster, Pennsylvania for each
applicable year, and (ii) shall include interest and all penalties except those
waived in writing by the Pennsylvania Department of Revenue. In addition, prior
to Closing, the Company shall cause the Venture to file a Pennsylvania
partnership information return with the Pennsylvania Department of Revenue for
each year in which the Venture was in existence. The Company shall furnish the
Buyer with a copy of any such Tax Returns and Reports at least 5 Business Days
prior to the Closing. The Company will enforce its rights under the P City
Agreement and will use its reasonable best efforts to cause Net Quick Assets as
of the Closing not to be less than zero.
(e) Full Access. The Company will (and will cause each of its
Subsidiaries and the Venture to) permit representatives and agents of the Buyer
to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company, its Subsidiaries
or the Venture, to all premises, properties, personnel, officers, accountants,
agents, books, records (including tax records), contracts and documents of or
pertaining to the Company, its Subsidiaries and the Venture and to make
photocopies of any such books, records, contracts and documents at no cost to
the Company or the Schedule I Stockholders and PCI. The Buyer will treat and
hold any Confidential Information it receives from the Company or any of its
Subsidiaries or the Venture in the course of the reviews contemplated by this
(S) 7(e), in accordance with the terms of the Confidentiality Agreement. The
Company shall deliver or cause to be delivered promptly to the Buyer each
report, statement, schedule and other document filed with any governmental
agency or authority by the Company, any Subsidiary or the Venture.
(f) Notice of Developments. Each Party will give prompt written notice to
the others of any information which comes to its attention indicating a breach
of any of its own or any other Party's representations and warranties in (S) 3
or (S) 4 above or covenants herein or that is necessary to correct or complete
any information in any representation or warranty contained in (S) 3 or (S) 4.
No disclosure by any Party pursuant to this (S) 7(f), however, shall be deemed
to amend or supplement the Disclosure Schedule or to qualify any representation,
warranty, covenant, indemnity or other agreement contained herein or in the
agreements contemplated hereby or any condition to the obligations of the
Parties hereto. In addition, it is acknowledged and agreed that:
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(i) The Company shall deliver or cause to be delivered to the Buyer,
promptly upon receipt thereof by the Company, any of its Subsidiaries, PCI
or the Venture, copies of any notices received or given by the Company, any
of its Subsidiaries, PCI or the Venture from or to any Person alleging or
relating to any violation of applicable law or any default, or the
occurrence of any event which could result in a default, under any of the
Leases, the REAs or the Service Contracts.
(ii) The Company shall advise the Buyer promptly in writing of the
receipt, by the Company, any of its Subsidiaries, PCI or the Venture, of
notice of the institution of any litigation or judicial, quasi-judicial or
administrative inquiry or proceeding with respect to any of the Shopping
Centers or the Company, any of its Subsidiaries, PCI or the Venture,
including any legal proceedings or condemnation proceedings, any notice of
a violation issued by any governmental authority with respect to any of the
Shopping Centers, any actual or proposed special assessment or change in
the assessed value of any of the Shopping Centers or any portion thereof,
any notice from any insurance company or fire rating bureau of any material
defects or inadequacies in any of the Shopping Centers or any part thereof
or any notice of the unavailability of any licenses or permits hereafter
required in connection with the ownership or operation of any of the
Shopping Centers. Without the written consent of the Buyer, which shall be
given or withheld by the Buyer acting in accordance with its business
judgment, exercised in good faith after giving due consideration to the
Company's recommendations, neither the Company, any of its Subsidiaries,
PCI nor the Venture will withdraw, settle or otherwise compromise any
protest or reduction proceeding affecting real estate taxes or the charges
assessed against any of the Shopping Centers.
(g) Indemnification; Directors' and Officers' Insurance
(i) For a period of six (6) years from and after the Effective Time,
the Buyer and the Surviving Corporation (collectively, the "Indemnifying
Parties") shall indemnify, defend and hold harmless each person who is now
or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, an officer or director of the Company, any of its
Subsidiaries or the Venture or a trustee of the Trust (the "Indemnified
Parties") against all losses, claims, damages, liabilities, judgments,
amounts that are paid or to be paid in settlement with the approval of the
Indemnifying Party (which approval shall not be unreasonably withheld or
delayed), costs or expenses (including reasonable attorneys' fees and
expenses), or assessments that are incurred or otherwise suffered by any
Indemnified Party in connection with any threatened or actual claim,
action, suit, proceeding or investigation based on or arising out of the
fact that such Person is or was an officer or director of the Company or
any of its Subsidiaries at or prior to the Effective Time, whether asserted
or claimed prior to, or at or after, the Effective Time, which arises out
of any action occurring at or prior to the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based on, or arising
out of, or pertaining to this Agreement or the transactions contemplated by
this Agreement, in each case to the full extent a corporation is permitted
under the Delaware General
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Corporation Law to indemnify its own directors or officers. The
Indemnifying Party shall pay expenses in advance of the final disposition
of any such action or proceeding to each Indemnified Party to the full
extent permitted by law, provided that the Person to whom expenses are
advanced provides an undertaking to repay such advance if it is ultimately
determined that such Person is not entitled to indemnification. Any
Indemnified Parties proposing to assert the right to be indemnified under
this (S) 7(g) shall, promptly after receipt of notice of commencement of
any action against such Indemnified Parties in respect of which a claim is
to be made under this (S) 7(g) against the Buyer or the Surviving
Corporation, notify the Indemnifying Parties of the commencement of such
action, enclosing a copy of all papers served. The failure to so notify
the applicable Indemnifying Party shall not relieve such Indemnifying Party
from any liability which it may have under this Section, except to the
extent such failure prejudices such Indemnifying Party. If any such action
is brought against any of the Indemnified Parties and such Indemnified
Parties notify the Indemnifying Parties of its commencement, the
Indemnifying Parties will be entitled to participate in and, to the extent
that they elect, by delivering written notice to such Indemnified Parties
promptly after receiving notice of the commencement of the action from the
Indemnified Parties, to assume the defense of the action, and, after notice
from the Indemnifying Parties to the Indemnified Parties of their election
to assume the defense, the Indemnifying Parties will not be liable to the
Indemnified Parties for any legal expenses with respect to such action
except as provided below. If the Indemnifying Parties assume the defense,
the Indemnifying Parties shall have the right to settle such action without
the consent of the Indemnified Parties; provided, however, that the
Indemnifying Parties shall be required to obtain such consent (which
consent shall not be unreasonably withheld or delayed) if the settlement
includes any admission of wrongdoing on the part of the Indemnified Parties
or any decree or restriction on the Indemnified Parties; provided, further,
that no Indemnifying Parties in the defense of any such action shall,
except with the consent of the Indemnified Parties (which consent shall not
be unreasonably withheld), consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Parties of a
release from all liability with respect to such action. The Indemnified
Parties will have the right to employ their own counsel in any such action,
and the fees, expenses and other charges of such counsel will be at the
expense of the Indemnified Parties unless (i) the employment of counsel by
the Indemnified Parties has been authorized in writing by the Indemnifying
Parties, (ii) the Indemnified Parties have reasonably concluded (based on
advice of counsel) that there may be legal defenses available to them that
are different from or in addition to those available to the Indemnifying
Parties, (iii) a conflict or potential conflict exists (based on advice of
counsel to the Indemnified Parties) between the Indemnified Parties and the
Indemnifying Parties (in which case the Indemnifying Parties will not have
the right to direct the defense of such action on behalf of the Indemnified
Parties) or (iv) the Indemnifying Parties have not in fact employed counsel
to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at
the expense of the Indemnifying Parties. It is understood that the
Indemnifying
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Parties shall not, in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the reasonable fees, disbursements
and other charges of more than one separate firm admitted to practice in
such jurisdiction at any one time from all such Indemnified Parties unless
(a) the employment of more than one counsel has been authorized in writing
by the Indemnifying Parties or (b) there is, under applicable standards of
professional conduct (based on advice of counsel), a conflict on any
significant issue between the positions of any two or more Indemnified
Parties, in each of which cases the Indemnifying Parties shall be obligated
to pay the reasonable and appropriate fees and expenses of one additional
counsel. The Indemnifying Parties will not be liable for any settlement of
any action or claim effected without their written consent (which consent
shall not be unreasonably withheld or delayed).
(ii) The provisions of this (S) 7(g) are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of the Buyer and the Surviving Corporation.
(iii) The Buyer shall either (A) cause the Surviving Corporation to
extend the Company's existing directors and officers liability insurance
policy as of the date hereof (or a policy providing coverage on comparable
terms and conditions) for acts or omissions occurring prior to the
Effective Time by Persons who are covered as of the date of this Agreement
by such insurance policy maintained by the Company for a period of six (6)
years following the Effective Time, or (B) add such Persons to the existing
directors and officers liability insurance policy of the Buyer or an
Affiliate; provided, however, that, for purposes of this clause (B), such
insurance shall provide officers and directors of the Company the same
coverage as similarly situated officers and directors of the Buyer and such
insurance shall be maintained by the Buyer for a period of six years
following the Effective Time. Notwithstanding the preceding sentence, in no
event shall the Buyer or the Surviving Corporation be required to expend on
average over such six year period in excess of 125% of the annual premium
currently paid by the Company for such coverage and, if the premium for
such coverage on average over such six year period exceeds such amount, the
Buyer or the Surviving Company shall purchase a policy with the greatest
coverage available for such 125% of the annual premium.
(iv) In the event that the Buyer or any of its successors or assigns
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or transfers all or substantially all of its properties and assets
to any Person, then, and in each such case, the successors and assigns of
such entity shall, as a condition precedent to such consolidation, merger
or transfer, assume the obligations set forth in this (S) 7(g), which
obligations are expressly intended to be for the irreversible benefit of,
and shall be enforceable by, each officer and director covered hereby.
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(h) Contracts, Transfers and Encumbrances. The Company will not (and will
cause each of its Subsidiaries and the Venture not to), without the prior
written consent of the Buyer, which consent shall be given or withheld by the
Buyer acting in accordance with its business judgment, exercised in good faith
after giving due consideration to the Company's recommendations:
(i) extend, renew, terminate, replace, amend, supplement or modify
any Service Contract (other than as may be required pursuant to its
existing terms), or enter into any new Service Contract with respect to any
of the Shopping Centers which will survive the Closing or otherwise affect
the use, operation or enjoyment of the Shopping Centers after the Closing
or increase the obligations of the Company, any Subsidiary or the Venture
thereunder;
(ii) waive any material rights of the Company, any of its
Subsidiaries or the Venture under any Service Contracts;
(iii) sell, transfer, convey or encumber, or cause or permit to be
sold, transferred, conveyed or encumbered, any of the Shopping Centers, or
any part thereof or interest therein, or agree to or support any adoption
of, amendment to or revocation of any environmental, zoning, subdivision,
land use, building or similar law affecting the Shopping Centers or enter
into any easements or restrictive covenants which burden any of the
Shopping Centers; or
(iv) perform or permit any act which shall diminish, encumber or
adversely affect the Company's, any of its Subsidiaries' or the Venture's
rights in and to the Shopping Centers or prevent the Company from
performing its obligations hereunder.
(i) Tenant Leases and REAs. The Company, each of its Subsidiaries and the
Venture shall fully and faithfully perform all of the landlord's covenants,
agreements and obligations under the Leases and the REAs to which it is a party,
consistent with past practice. Neither the Company or any of its Subsidiaries
nor the Venture will, without the prior written consent of the Buyer, which
consent shall be given or withheld by the Buyer acting in accordance with its
business judgment, exercised in good faith after giving due consideration to the
Company's recommendations:
(i) Enter, or commit to enter, into any new reciprocal easement
agreement or lease or sublease for space in any of the Shopping Centers
which is in excess of 1,000 square feet.
(ii) Agree to any alteration, amendment, supplement, extension,
termination, cancellation or revision of any REA or Lease involving any
space in any of the Shopping Centers which is in excess of 1,000 square
feet and for a term of more than 90 days heretofore entered into or which
may hereafter be entered into as provided in this (S) 7(i).
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(iii) Accept any rent more than one month in advance or any security
deposit not reflected in a Lease.
(iv) Release any of the material obligations of the tenants under
the Leases or the REA Parties under the REAs.
(v) Consent to any assignment or sublease of any Lease except to
the extent required by the terms of the Lease.
(j) Notice. In connection with any action set forth in (S) 7(h) or (i)
above that requires the Buyer's consent, the Company shall deliver to the Buyer
a written notice of each proposed action hereunder stating, if applicable,
whether the Company is willing to consent to such action and setting forth the
relevant information relating thereto and, if applicable, the number of days
within which the Company must respond to the proposed action under the terms of
the applicable Lease, REA or Service Contract, together with any other material
information supplied to the Company as to the proposed action. The Buyer shall,
except as provided in the last sentence of this (S) 7(j), have ten (10) days
after delivery to it of such notice and information to determine whether or not
to approve such action. If the Buyer shall not give notice of its disapproval
within such ten (10) day period, the Buyer shall be deemed to have approved such
action and the Company may proceed to take such action in its discretion. If
any Lease, REA or Service Contract provides the Company, by its express terms,
with fewer than ten (10) days within which to grant any such approval or
disapproval, such ten (10) day period provided for above shall be reduced to one
(1) Business Day less than the number of days provided for in such Lease, REA or
Service Contract and the written notice to the Buyer shall specifically state
the time period for the Buyer's approval.
(k) Estoppel Letters; Rent Roll. (i) The Company agrees to request
estoppel certificates from all tenants, REA parties, the ground lessor at
Northgate Mall and from Connecticut General Life Insurance Company as lender at
Meadows Mall.
(ii) On or before the date that is five (5) Business Days prior to the
Closing Date, the Company shall furnish to the Buyer, an estoppel certificate
completed by each anchor tenant (as identified on Exhibit L-1 hereto) who is
required to deliver an estoppel certificate pursuant to its Lease, each REA
Party who is required to deliver an estoppel certificate pursuant to its REA,
not less than seventy five percent (75%) of the tenants, other than the anchors,
who are required to deliver an estoppel certificate pursuant to their Lease, the
ground lessor at the Northgate Mall and Connecticut General, as lender with
respect to Meadows Mall. The estoppels shall be either (x) on the form
specified in the Lease, REA, or mortgage, as the case may be, or (y) on the form
attached hereto and incorporated herein as Exhibit L-2 for tenants (a "Tenant
Estoppel"), or the form attached hereto and incorporated herein as Exhibit L-3
for each REA Party (an "REA Estoppel"), or the form attached hereto and
incorporated herein as Exhibit L-4 for the ground lessor (the foregoing are
hereinafter collectively referred to as the "Estoppels"). The Company shall use
its reasonable best efforts to obtain and deliver the Estoppels specified in
this clause (ii) it being understood and agreed, however, that if an estoppel
certificate is received
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which is in a form different from the form specified in the Lease, REA or
mortgage, as the case may be, or different from the form specified herein, said
estoppel certificate shall nevertheless be deemed duly received for purposes of
this Agreement and the Company's obligations hereunder provided the Estoppel
does not contain information which is materially different from that previously
disclosed in writing to the Buyer.
(iii) Prior to the Closing an updated version of the Rent Roll shall be
delivered by the Company to the Buyer which shall be dated as of a date no more
than five (5) Business Days prior to the Closing.
(l) Taxes; Notices; Lease Negotiations; and Insurance. The Company shall,
at all times:
(i) pay or cause to be paid when due all real estate taxes, special
assessments, sales taxes and other Taxes, brokerage commissions and other
charges required to be paid by the Company, any of its Subsidiaries or the
Venture, except for any real estate taxes, special assessments, sales taxes
or other Taxes, brokerage commissions or other charges that are being
contested in good faith, and for which appropriate accruals on the
Company's financial statements and general ledgers have been established
and which are disclosed in writing to the Buyer;
(ii) advise the Buyer from time to time, at the request of the
Buyer, of the status of any negotiations with prospective tenants of the
Shopping Centers or with other parties with whom contracts or agreements
are being negotiated; and
(iii) file all returns and reports required by any governmental
authority with respect to the Shopping Centers or the ownership, use or
occupancy thereof and provide copies thereof to the Buyer.
(m) Other Obligations. The Company shall, and shall cause its
Subsidiaries, PCI and the Venture to, perform all obligations required by the
terms of this Agreement, the P City Agreement and the other agreements
contemplated hereby to be performed by them, shall perform or cause to be
performed when due all of the Company's, its Subsidiaries' and the Venture's
obligations under, and shall comply and cause its Subsidiaries and the Venture
to comply with all applicable provisions of, the Service Contracts, the
insurance policies, governmental approvals and all Licenses and Permits and
other agreements, encumbrances and restrictions relating to the Shopping Centers
and shall comply with all applicable laws, including, without limitation, the
requirements of any governmental authority with respect to any tax abatement or
exemption benefitting the Shopping Centers. The Company shall not cause or
permit any Hazardous Materials to be stored, released or disposed of on, under
or at the Shopping Centers or any part thereof and shall promptly notify the
Buyer in writing if any Hazardous Materials are discovered at the Shopping
Centers.
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(n) Contest. If any proceedings are filed seeking to enjoin or otherwise
prevent or declare unlawful the occupancy, maintenance or operation of any of
the Shopping Centers or any portion thereof, the Company shall (i) notify the
Buyer of such proceedings, (ii) cause such proceedings to be vigorously
contested in good faith and (iii) in the event of an adverse ruling or decision,
prosecute all allowable appeals therefrom.
(o) Transfer Taxes. The Buyer and the Company shall cooperate in the
preparation, execution and filing of all returns, reports or other documents
regarding any real property transfer or gains, sales, use, transfer, value
added, stock transfer and stamp Taxes, any transfer, recording, registration
and other fees, and any similar Taxes which become payable in connection with
the transactions contemplated by this Agreement and the P City Agreement
("Transfer Taxes") and the Schedule I Stockholders and PCI shall be responsible
for the payment thereof, other than any Pennsylvania Commonwealth Transfer Tax,
which shall be the responsibility of the Buyer. In particular, the Company
shall use its reasonable best efforts to obtain prior to Closing a final
settlement regarding any applicable Pennsylvania local real estate Transfer
Taxes on the transactions contemplated by this Agreement and the P City
Agreement. Such settlement shall document the names of the relevant Affiliates
and shall be binding on the City of Lancaster, the School District of Lancaster,
and any other subdivision of the Commonwealth of Pennsylvania in which the Park
City Center is located. The Company shall keep the Buyer informed of its
discussions and written filings with the local taxing authorities and shall
reasonably consult in good faith with the Buyer before making or accepting any
settlement offer or submitting any written filings. The Closing Expense Fund
shall reflect the amount of any local real estate Transfer Tax which is agreed
to be due with the local taxing authorities or, in the absence of such an
agreement, such amount as the Company shall in good faith estimate to be due
upon a determination or settlement plus actual and estimated legal and
accounting fees and expenses relating thereto; provided that the Buyer
Indemnified Parties (as defined in the Post-Closing Escrow Agreement) shall be
indemnified pursuant to Section 4.1(c) of the Post-Closing Escrow Agreement in
respect of any amount which becomes due in excess of such estimates.
(p) Exclusivity. The Company shall notify the Buyer promptly if any
proposal or offer, or any inquiry or other contact with any Person with respect
to the acquisition of any of the capital stock (or other interests) or any
material assets of any of the Company, any Subsidiary, PCI or the Venture
(including any acquisition structured as a merger, consolidation or share
exchange), is made and shall, in any such notice to the Buyer, indicate in
reasonable detail the identity of the Person making such proposal, offer,
inquiry or contact and the terms and conditions of such proposal, offer, inquiry
or other contact. The Company shall immediately cease and cause to be
terminated all existing discussions, conversations, negotiations and other
communications with any Persons other than with the Buyer and its Affiliates and
representatives with respect to the foregoing. The Company will not (and will
not cause or permit any of its Subsidiaries or the Venture or any of their
officers, directors, employees, financial advisors or other representatives) to
provide Confidential Information to any third party (other than representatives
of Buyer and its Affiliates). The Company agrees not to, and to cause each
Subsidiary, PCI and the Venture not to, without the prior written consent of the
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Buyer, release any Person from, or waive any provision of, any confidentiality
or standstill agreement to which the Company, any Subsidiary or the Venture is a
party.
(q) Governmental Entities. Without the prior written consent of the
Company, such consent not to be unreasonably withheld or delayed, prior to the
Closing, the Buyer shall not contact any governmental entity having jurisdiction
over the Shopping Centers or any part thereof with respect to any matter
relating to the condition or operation of the Shopping Centers; provided, that,
in the event the Company so consents to such contact, the Buyer shall indemnify
and hold harmless the Company, its Subsidiaries, PCI and the Venture from any
costs, losses and claims arising from any note or notice of violation from such
governmental authority related to such contact. The foregoing indemnity shall
not cover any such contact made by the Title Company that is not directed by the
Buyer.
(r) Employees. (i) As of the Closing Date, the Representative shall
terminate or cause the termination of the employment of all of its and its
Affiliates' employees who are employed in the conduct of the business of the
Company, its Subsidiaries and the Venture, except for the employees of the
General Maintenance Group at the Mayfair Shopping Center (the "Represented
Employees"), and any and all obligations of the Representative with respect to
such terminated employees shall end as of the date on which the employment of
such employees is terminated by the Representative or its Affiliates. The Buyer
may offer employment thereafter to such terminated employees as it shall
determine in its sole discretion and shall be solely responsible for any and all
obligations arising out its employment of any such terminated employees.
(ii) As of the Closing Date, the Buyer or an Affiliate thereof shall (a)
assume the obligations of Mayfair and ERE Yarmouth under the Agreement between
Mayfair and the Local 150, Service Employees International Union AFL-CIO, CLC
(the "CBA"), (b) adopt the Froedtert-Mayfair, Inc. Retirement Income Plan for
Employees Represented by Local #125 for the benefit of the Represented Employees
and (c) continue the employment of the Represented Employees pursuant to the
CBA.
8. Delivery of Title Commitments and Surveys.
(a) Prior to the date hereof, the Company has caused the Title Company to
deliver the Title Commitments and the Surveyors to deliver the Surveys to the
Buyer. The cost of the title examinations related to the Title Commitments and
the Surveys and the premiums for basic coverage in respect of the Title Policies
shall be borne by the Schedule I Stockholders. The cost of coverage in excess
of basic coverage under the Title Policies shall be borne by the Buyer.
(b) If any update of the Title Commitments or the Surveys delivered to the
Buyer after the date hereof disclose any matters other than the Permitted
Exceptions, the Buyer shall notify the Company in writing (a "Disapproval
Notice") within fifteen (15) days after the Buyer's receipt of such update. The
Disapproval Notice shall specify the title objections. The Buyer's failure to
give such notice shall be deemed an election by the Buyer to waive such title
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objections without compensation or offset or abatement to or of the Merger
Consideration and without warranty by or recourse against the Company, any of
its Subsidiaries or the Venture of any nature whatsoever with respect thereto,
and the Buyer shall thereupon take and accept title to the Shopping Centers "as
is".
The Company (A) shall cause all Mandatory Cure Items (as hereinafter
defined) to be removed or, in the case of clause (2)(I)(y) or (z) of the
definition of Mandatory Cure Item, bonded or insured over by the Title Company,
at or prior to the Closing and the Company shall deposit with the Buyer or the
Title Company releases, bonds or other appropriate instruments, in recordable
form (where appropriate), sufficient to cause the removal of such Liens from the
respective Shopping Center or to cause the Title Company to insure over said
Liens or omit them as exceptions to coverage under the Title Policy and (B)
shall notify the Buyer in writing within fifteen (15)Business Days after receipt
of the Disapproval Notice whether the Company will cause all or any of the
matters other than Mandatory Cure Items to be removed, bonded insured over or
cured at or prior to Closing. The term "Mandatory Cure Items" shall mean (1)
mortgages or deeds of trust granted by the Company, any of its Subsidiaries or
the Venture, or (2) monetary liens that (I) are (x) affirmatively placed on the
Shopping Centers by the Company, any of its Subsidiaries or the Venture, (y)
judgment liens against the Company, any of its Subsidiaries or the Venture that
would require the expenditure by the Company any of its Subsidiaries or the
Venture of an aggregate amount of not more than $1,000,000 for each Shopping
Center to remove such judgment liens from title, or (z) mechanics' liens that
result from labor or materials contracted for or required to be paid (whether by
allowances, credit reimbursement, payment or otherwise) by the Company, any of
its Subsidiaries or the Venture, (II) are of a fixed and ascertainable amount
and (III) may be removed solely by the payment of money (other than any such
matters that are the responsibility of any tenant under a Lease, any REA Party
under an REA or any other Person other than the Company, any of its Subsidiaries
or the Venture). The Company shall be deemed to have elected to remove, bond or
cure any matters other than Mandatory Cure Items if the Company does not
affirmatively notify the Buyer to the contrary as aforesaid. If the Company
elects not to remove, bond or cure all such matters which are not Mandatory Cure
Items, the Buyer may elect, in its sole discretion, (m) subject to satisfaction
of the other conditions to Closing, to close the transactions contemplated by
this Agreement without adjustment of the Merger Consideration and take title
subject to any such matters which are not Mandatory Cure Items that the Company
elects not to remove, bond or cure, or (n) to terminate this Agreement. The
Company shall have until the Closing or such later date as may be needed to
remove, bond or cure any matter that it has elected or is required to remove,
bond or cure. The Closing Date may be extended by the Company as necessary to
permit the Company to fulfill its obligations pursuant to this (S) 8(b) but not
beyond ninety (90) days. With respect to title objections which are not
Mandatory Cure Items, the Company agrees to cooperate in good faith with the
Buyer in order to cure said title objections. Except with respect to Mandatory
Cure Items, nothing contained in this Agreement shall require the Company to
bring or defend any action or proceeding, or to incur any expense, or to make
any payment or to do any acts or things of any nature whatsoever in order to
cure any alleged title objection, regardless of the manner in which the same
arose. Notwithstanding anything in this Agreement to the contrary, any action by
the Company resulting in the issuance of
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affirmative coverage or the omission of any alleged title objection from the
Title Policy, whether or not the same are removed of record, shall be deemed a
"cure" for purposes of this Agreement.
(c) If any matter that is not a Mandatory Cure Item that the Company has
elected, or is required, to remove or cure has not been removed or cured on or
prior to Closing (as the same may be extended pursuant to clause (b) above), or
provision for their removal or cure to the Buyer's reasonable satisfaction has
not been made at or prior to Closing, the Buyer may elect (no later than the
Closing Date as the same may be adjourned pursuant to clause (b) above), in its
sole discretion and as its exclusive remedy: (x) subject to satisfaction of the
other conditions to Closing, to close the transactions contemplated hereby
without adjustment to the Merger Consideration and take title subject to any
matters that have not been cured or removed at or before Closing other than in
respect of Mandatory Cure Items as to which the Buyer shall be allowed a credit
against the Merger Consideration for all costs incurred or reasonably estimated
to cure such Mandatory Cure Item or (y) to terminate this Agreement.
9. Conditions to Obligation to Close.
(a) Conditions to Obligations of the Buyer and the Transitory Subsidiary.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction, at or prior to the Closing, of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(ii) the representations and warranties set forth in (S) 3 above
(except for (S) 3(h)(xiv) insofar as it relates to cash dividends or cash
distributions made after the date hereof) which are not qualified by
materiality shall be true and correct in all material respects and the
representations and warranties set forth in (S) 3 above which are so
qualified shall be true and correct, in each case, at and as of the date
hereof and the Closing Date;
(iii) the Company shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iv) there shall not be any judgment, order, decree, legislation,
stipulation or injunction pending, threatened or in effect which would
prevent or hinder consummation of any of the transactions contemplated by
this Agreement, the P City Agreement and the other agreements contemplated
hereby;
(v) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate to the effect that each of the
conditions specified above in
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(S) 9(a)(i)-(iii) is satisfied, signed by the President or a Vice President
and the chief financial officer of the Company;
(vi) the Parties shall have received all authorizations, consents
and approvals of governments and governmental agencies referred to in
(S)3(f) and (S) 4(d) above and those non-governmental authorizations,
consents or approvals, including those consents to transfers of Service
Contracts in the name of the Representative relating to or used primarily
in the operation or maintenance of the Shopping Centers, identified on the
Disclosure Schedule under (S) 9(a)(vi);
(vii) the Buyer and the Transitory Subsidiary shall have received
from counsel to the Company, PCI and the Schedule I Stockholders opinions
in form and substance reasonably acceptable to them relating to the
transactions described herein, in the P City Agreement, and in the
agreements contemplated hereby and thereby, and the status of the Company
as a REIT under the Code, addressed to the Buyer and the Transitory
Subsidiary and dated as of the Closing Date;
(viii) Estoppels shall have been obtained in accordance with (S)
7(k)(ii);
(ix) (a) all management and advisory or other agreements between
ERE Yarmouth, and/or its Affiliates, on the one hand, and the Company, any
Subsidiary and/or the Venture, on the other hand, shall have been
terminated, with the Company, the Subsidiaries and the Venture having no
further obligations thereunder and the managers and advisors thereunder
shall have returned all books and records to General Growth Management,
Inc. and (b) ERE Yarmouth and its Affiliates shall have duly assigned,
transferred and conveyed to General Growth Management, Inc. all service
contracts and personal property relating to or used primarily in the
operation or maintenance of the Shopping Centers which are assignable
without consent of a third party or for which consent to assignment has
been obtained.
(x) all intercompany agreements and arrangements between or among
any of the Company, the Subsidiaries, and/or the Venture, or between or
among any of such entities on the one hand, and PCI, Park City or any
Affiliates of any of the entities described in this clause (x), on the
other hand, shall have been terminated;
(xi) the PCI Venture Interest shall have been transferred to the
Company (or Company Sub) in accordance with the P City Agreement, free and
clear of any Liens other than the right of PCI to receive the PCI Allocable
Portion from the Company pursuant to the terms of the P City Agreement;
(xii) the Revolving Credit Proceeds and the Park City Proceeds shall
have been applied to discharge the Company's obligations under the
Revolving Credit Agreements and the Park City Center mortgage indebtedness
and to release all Liens created thereby, and all other indebtedness
(including intercompany indebtedness, interest rate swap and
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cap agreements and other hedging agreements, but excluding the Meadows Mall
Loan and the Meadows Mall Mortgage) shall have been discharged or
terminated and all Liens created thereby shall have been released;
(xiii) the parties to the Post-Closing Escrow Agreement, other than
the Company, shall have delivered duly executed counterparts thereof;
(xiv) the aggregate amount of Dissenting Shares shall represent less
than 10% of the Company Stock outstanding at the Effective Time;
(xv) all persons who are directors or officers of any of the
Subsidiaries or trustees of the Trust shall have resigned such
directorships, trusteeships or such offices and new trustees of the Trust
designated by the Buyer shall have been appointed as of the Effective Time;
(xvi) all agreements between the Company and any of the Company
Stockholders shall have been terminated to Buyer's reasonable satisfaction,
and the Company shall have been released from all obligations thereunder;
(xvii) PCI and each Company Stockholder who or which is not a
"foreign person" for purposes of Section 1445 of the Code shall have
delivered to the Buyer a certificate in the form attached hereto as Exhibit
I certifying that PCI or such Company Stockholder, as the case may be, is
not a "foreign person" within the meaning of Section 1445 of the Code.
(xviii) the Title Company shall have issued, or be irrevocably
committed to issue a Title Policy with respect to each Shopping Center;
(xix) since the date hereof no event or events shall have occurred,
other than any event or events directly resulting from actions or omissions
of the Buyer in the exercise of its rights to give or withhold consents
pursuant to Article 7, which individually or in the aggregate has had a
Material Adverse Effect;
(xx) ERE Yarmouth and its Affiliates shall have assigned all
confidentiality agreements and standstill agreements relating to the
Company, any Subsidiaries or the Venture to the Buyer;
(xxi) the Company shall have prepared and delivered to the Buyer, at
the Company's cost and expense, a report (which shall be reasonably
acceptable to the Buyer) which demonstrates that Froedtert-Mayfair Inc. did
not have any current or accumulated earnings and profits as of September
30, 1991 (provided that, if the cost and expense of such report exceeds
$25,000, the Buyer shall bear the cost and expense of such report in excess
of $25,000), or such other supporting material reasonably satisfactory to
the Buyer demonstrating that, as of the end of the Company's taxable year
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ended December 31, 1991, the Company had no earnings and profits
accumulated in any non-REIT year, within the meaning of Section 857(a)(3)
of the Internal Revenue Code of 1986, as amended and as in effect for the
Company's taxable year ended December 31, 1991;
(xxii) the Company shall have satisfied, or made arrangements to
satisfy, any realty Transfer Tax obligations in Pennsylvania (other than
Pennsylvania Commonwealth Transfer Taxes) and any capital stock/franchise
Tax and corporate net income Tax obligations in Pennsylvania (as described
in the last paragraph of (S) 7(d)); and
(xxiii) all actions to be taken by the Company, its Subsidiaries, PCI
and the Venture in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required or deemed reasonably required by the Buyer or its
counsel to effect the transactions contemplated hereby shall, in all
reasonable respects, be satisfactory in form and substance to the Buyer.
The Buyer and the Transitory Subsidiary may waive, in their sole and absolute
discretion, any condition specified in this (S) 9(a) if they execute a writing
so stating at or prior to the Closing.
(b) Conditions to Obligation of the Company. The obligation of the Company
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in (S)4 above which
are not qualified by materiality shall be true and correct in all material
respects and the representations and warranties set forth in (S) 4 above
which are so qualified shall be true and correct, in each case, at and as
of the date hereof and the Closing Date;
(ii) each of the Buyer and the Transitory Subsidiary shall have
performed and complied with all of its covenants hereunder in all material
respects through the Closing;
(iii) there shall not be any judgment, order, decree, legislation,
stipulation or injunction pending, threatened or in effect which would
prevent or materially hinder consummation of any of the transactions
contemplated by this Agreement, the P City Agreement and the other
agreements contemplated hereby;
(iv) the Buyer and the Transitory Subsidiary shall have delivered to
the Company a certificate to the effect that each of the conditions
specified above in (S) 9(b)(i)-(iii) is satisfied, signed by the President
or a Vice President and the chief financial officer of the general partner
of the Buyer on behalf of the Buyer and the Transitory Subsidiary;
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<PAGE>
(v) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(vi) the Parties shall have received all authorizations, consents,
and approvals of governments and governmental agencies referred to in (S)
3(f) and (S) 4(d) above;
(vii) the Company, PCI and the Schedule I Stockholders shall have
received from counsel to the Buyer and the Transitory Subsidiary an opinion
in form and substance reasonably acceptable to them relating to the
transactions described herein and in the agreements contemplated hereby,
addressed to the Company, PCI and the Schedule I Stockholders, and dated as
of the Closing Date;
(viii) the Revolving Credit Proceeds and the Park City Proceeds shall
have been applied to discharge the Company's obligations under the
Revolving Credit Agreements and the Park City Center mortgage indebtedness;
(ix) new trustees of the Trust designated by the Buyer shall have
been appointed as of the Effective Time; and
(x) all actions to be taken by the Buyer and the Transitory
Subsidiary in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby will, in
all reasonable respects, be satisfactory in form and substance to the
Company.
The Company may waive, in its sole and absolute discretion, any condition
specified in this (S) 9(b) if it executes a writing so stating at or prior to
the Closing.
10. Termination.
(a) Termination of Agreement and Remedies. Any of the Parties may
terminate this Agreement (whether before or after stockholder approval) as
provided below:
(i) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
(ii) the Buyer and the Transitory Subsidiary may terminate this
Agreement by giving written notice to the Company at any time prior to the
Effective Time (A) in the event the Company has breached any
representation, warranty or covenant contained in this Agreement, the P
City Agreement or the other agreements contemplated hereby in any material
respect, the Buyer or the Transitory Subsidiary has notified the Company of
the breach and the breach has continued without cure for a period of 20
days after the notice of breach, or as otherwise provided herein, (B) if
the Closing shall not have occurred on or before August 31, 1998 by reason
of the failure of any condition
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<PAGE>
precedent under (S) 9(a) hereof (unless the failure results primarily from
the Buyer or the Transitory Subsidiary breaching any representation,
warranty or covenant contained in this Agreement) or (C) if the P City
Agreement has terminated;
(iii) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary at any time prior to the
Effective Time (A) in the event the Buyer or the Transitory Subsidiary has
breached any representation, warranty or covenant contained in this
Agreement in any material respect, the Company has notified the Buyer and
the Transitory Subsidiary of the breach and the breach has continued
without cure for a period of 20 days after the notice of breach or (B) if
the Closing shall not have occurred on or before August 31, 1998, by reason
of the failure of any condition precedent under (S) 9(b) hereof (unless the
failure results primarily from the Company breaching any representation,
warranty, or covenant contained in this Agreement); or
(iv) any Party may terminate this Agreement by giving written notice
to the other Parties at any time after the Special Meeting in the event
this Agreement and the Merger fail to receive the Requisite Stockholder
Approval.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to (S) 10(a) above, all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (subject to (S)
2(h) and 10(c) hereof and except for any liability of any Party then in breach
for actual but not consequential damages); provided, however, that the
confidentiality provisions contained in (S) 7(e) above and the provisions of
(S)(S) 3(r), 4(g), 11(a) and this (S) 10(b) shall survive any such termination.
(c) Remedies. Notwithstanding anything to the contrary set forth herein,
the Company shall be entitled to retain the Deposit as the Company's liquidated
damages (and not as a penalty) and as the Company's exclusive remedy for the
Buyer's default in the event of termination of this Agreement pursuant to
Section 10(a)(iii)(A), it being agreed by the parties that it would be
impracticable and extremely difficult to ascertain the actual damages suffered
by the Company as a result of the Buyer's failure to complete the transactions
contemplated by this Agreement and that, under the circumstances existing as of
the date hereof, the liquidated damages provided for herein represent a
reasonable estimate of the damages which the Company would incur as a result of
such failure.
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement nor permit any of its Affiliates, representatives or agents to do
the same without the prior written approval of the other Parties which shall not
be unreasonably withheld; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
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<PAGE>
listing agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided, however, that (i) the provisions in
(S)(S) 2, 4, 5 and 6 above are intended for the benefit of the Company
Stockholders and PCI and (ii) the provisions in (S) 7(g) above concerning
insurance and indemnification are intended for the benefit of the individuals
specified therein and their respective legal representatives.
(c) Entire Agreement. This Agreement (including the documents referred to
herein) and the Confidentiality Agreement constitute the entire agreement among
the Parties concerning the subject matter hereof and supersede any prior
understandings, agreements, or representations by or among the Parties, written
or oral, to the extent they related in any way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided, however, that the Buyer or the Transitory
Subsidiary may assign its respective rights and obligations to any wholly-owned
direct or indirect subsidiary of the Buyer, but no such assignment shall relieve
the Buyer of its obligations hereunder.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices and other communications hereunder shall be
deemed to have been duly given and made if in writing and (i) served by personal
delivery upon the party for whom it was intended or (ii) delivered by courier
service or telecopier, return receipt received, to the relevant party at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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<PAGE>
If to the Company:
-----------------
U.S. Prime Property Inc.
c/o ERE Yarmouth, Inc.
787 Seventh Avenue
46th Floor
New York, New York 10019
Attn.: Ms. Susan Lloyd-Hurwitz
Fax No.: (212) 554-1667
Copy to:
-------
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn: Andrew S. Hedden, Esq.
Fax No.: (212) 626-4120
If to the Buyer:
---------------
GGP Limited Partnership
110 North Wacker Drive
Chicago, Illinois 60606
Attn: Mr. Matthew Bucksbaum
Fax No.: (312) 960-5475
Copy to:
-------
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Attn.: Marshall E. Eisenberg, Esq.
Fax No.: (312) 269-1747
If to the Transitory Subsidiary:
-------------------------------
GGP Acquisition, L.L.C.
110 North Wacker Drive
Chicago, Illinois 60606
Attn: Mr. Matthew Bucksbaum
Fax No.: (312) 960-5475
Copy to:
-------
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<PAGE>
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Attn.: Marshall E. Eisenberg, Esq.
Fax No.: (312) 269-1747
Any Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(i) Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the prior
authorization of the Board of Directors, in the case of the Company and the
general partner of the Buyer in the case of the Buyer and the Transitory
Subsidiary; provided, however, that any amendment effected subsequent to
stockholder approval will be subject to the restrictions contained in the
Delaware General Corporation Law. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence. The Closing shall not be
deemed to constitute a waiver by the Buyer of any of its rights hereunder except
as otherwise expressly provided in this Agreement. Whenever this Agreement
requires or permits consent by or on behalf of any Party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance set forth in this (S)11(i). The Transitory Subsidiary
hereby agrees that any consent or waiver of compliance given by the Buyer
hereunder shall be conclusively binding upon it, whether given expressly on its
behalf or not.
(j) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed to refer to such statute or law as
amended and also to refer to all rules and regulations promulgated thereunder,
unless the context otherwise requires. The word "including" shall mean including
without limitation.
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(l) Consent of the Buyer. The Buyer, as the sole member of the Transitory
Subsidiary, by executing this Agreement, consents to the execution, delivery and
performance of this Agreement by the Transitory Subsidiary, and such consent
shall be treated for all purposes as a vote duly adopted at a meeting of the
members of the Transitory Subsidiary held for such purpose.
(m) Expenses. Except as otherwise provided herein, each Party shall be
liable for its own costs and expenses incurred in connection with the
negotiation, preparation, execution and performance of this Agreement and the
agreements contemplated hereby, whether or not the transactions contemplated
hereby are consummated.
(n) Enforcement of Agreement. The Company agrees that irreparable damage
would occur in the event that any of the provisions of this Agreement binding
upon it were not performed in accordance with their specified terms or were
otherwise breached. It is accordingly agreed that the Buyer and the Transitory
Subsidiary 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 court of competent jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
(o) Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, FOR ITSELF AND FOR THE THIRD
PARTY BENEFICIARIES HEREUNDER, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(p) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
*****
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
GGP LIMITED PARTNERSHIP
By: GENERAL GROWTH PROPERTIES, INC.,
General Partner
By:
-------------------------------
Name:
Title:
GGP ACQUISITION, L.L.C.
By: GGP LIMITED PARTNERSHIP,
Member
By: GENERAL GROWTH PROPERTIES, INC.,
General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
U.S. PRIME PROPERTY INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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<PAGE>
EXHIBIT A
---------
1. That certain property known as the Landmark Mall located in
Alexandria, Virginia, together with the buildings and improvements thereon.
2. Those certain properties known as Mayfair Mall, North Tower Office
Building, Bank Tower Office Building, Atrium Building and the Professional
Building Garden Suites East located in Wauwatosa, Wisconsin, together with the
buildings and improvements thereon.
3. That certain property known as Meadows Mall located in Las Vegas,
Nevada, together with the buildings and improvements thereon.
4. That certain property known as the Northgate Mall located in
Chattanooga, Tennessee, together with buildings and improvements thereon.
5. That certain property known as Oglethorpe Mall located in Savannah,
Georgia, together with the buildings and improvements thereon.
6. That certain property known as the Park City Center located in
Lancaster, Pennsylvania, together with the buildings and improvements thereon.
<PAGE>
Exhibit 4
REDEMPTION RIGHTS AGREEMENT
Redemption Rights Agreement, dated April 2, 1998, among GGP Limited
Partnership, a Delaware limited partnership (the "Partnership"), General Growth
Properties, Inc., a Delaware corporation (the "General Partner"), and Southwest
Properties Venture, a Colorado general partnership ("Contributing Partner").
R E C I T A L S
---------------
WHEREAS, concurrently herewith, Contributing Partner is being admitted as a
limited partner of the Partnership, the general partner of which is the General
Partner;
WHEREAS, shares of common stock, $.10 par value per share, of the General
Partner (the "Common Stock") are listed on the New York Stock Exchange; and
WHEREAS, the parties desire to set forth herein the terms and conditions
upon which the Contributing Partner may cause the Partnership to redeem its
limited partnership units in the Partnership.
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Acts" shall mean the Securities Act and the Exchange Act, collectively.
"Affiliates" shall mean "affiliates" as defined pursuant to the Securities
Act and the regulations promulgated thereunder.
"Business Day" shall mean any day upon which commercial banks are open for
business in Chicago, Illinois.
"Cash Purchase Price" shall mean, with respect to any redeemed or purchased
Units, an amount of cash equal to the value of the Share Purchase Price
(computed as of the Computation Date and equal to the Current Per Share Market
Price on such Computation Date multiplied by the number of Shares) that would be
payable with respect to such Units assuming the Share Purchase Price were paid
in full satisfaction of the Purchase Price of such Units. In the event that the
Share Purchase Price includes securities other than Shares, then the value of
such other securities shall be determined by the
<PAGE>
General Partner acting in good faith on the basis of the closing prices of
securities if listed on a nationally recognized exchange and otherwise on the
basis of such quotations and other information as the General Partner considers,
in its reasonable judgment, appropriate.
"Certificate of Incorporation" shall mean the Certificate of Incorporation
of the General Partner, as the same may be amended from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor code.
"Common Stock" shall have the meaning set forth in the recitals.
"Computation Date" shall mean the date on which the applicable Notice is
received by the Partnership or, if such date is not a Business Day, the first
Business Day thereafter.
"Conversion Factor" shall mean 100%, provided that such factor shall be
adjusted in accordance with Section 6(a).
"Contribution Agreement" shall mean that certain Sale and Contribution
Agreement dated January ___, 1998, among the Partnership, the General Partner
and Contributing Partner, as the same has been and may hereafter be amended from
time to time, pursuant to which this Agreement is being executed.
"Current Per Share Market Price" shall have the meaning set forth in the
Partnership Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor statute.
"Exchange Act Reporting Company" shall mean any corporation or other entity
which is subject to the reporting requirements of the Exchange Act.
"Expiration Date" shall mean the earlier of (a) April 16, 2023 and (b) the
date upon which all Units have been redeemed or purchased in accordance with the
terms hereof.
"Liens" shall have the meaning set forth in the Contribution Agreement.
2
<PAGE>
"Major Transaction Event" shall mean, with respect to the General Partner,
(a) a reclassification, capital reorganization or other similar change regarding
or affecting outstanding Shares (other than a change addressed in Section 6(a));
(b) a merger or consolidation of the General Partner with one or more other
corporations or entities, other than a merger pursuant to which the General
Partner is the surviving corporation and the outstanding Shares are not
affected, (c) a sale, lease or exchange of all or substantially all of the
General Partner's assets or (d) the liquidation, dissolution or winding up of
the General Partner.
"Notice" shall have the meaning set forth in Section 3.2.
"Partnership Agreement" shall mean that certain Amended and Restated
Agreement of Limited Partnership of the Partnership, dated July 27, 1993, as
amended by that certain First Amendment thereto dated May 23, 1995, that certain
Second Amendment thereto dated June 13, 1995, that certain Third Amendment
thereto dated May 21, 1996, that certain Fourth Amendment thereto dated August
30, 1996, that certain Fifth Amendment thereto dated as of October 4, 1996, that
certain Sixth Amendment thereto dated as of November 27, 1996, that certain
Seventh Amendment thereto dated December 6, 1996, that certain Eighth Amendment
thereto dated June 19, 1997, that certain Ninth Amendment thereto dated as of
August 8, 1997, that certain Tenth Amendment thereto dated as of September 8,
1997, that certain Eleventh Amendment thereto dated as of September 11, 1997,
that certain Twelfth Amendment thereto dated October 15, 1997, that certain
Thirteenth Amendment thereto dated October 24, 1997 and that certain Fourteenth
Amendment thereto dated October 29, 1997 and as the same may be further amended.
"Person" shall mean any natural person, corporation, partnership,
association, limited liability company, trust or other entity.
"Purchase Price" shall mean the Cash Purchase Price or the Share Purchase
Price, or a combination thereof.
"Redemption Rights" shall have the meaning set forth in Section 2.
"REIT" shall mean real estate investment trust as such term is defined
under the Code.
3
<PAGE>
"REIT Requirements" shall have the meaning set forth in the Partnership
Agreement, as the same may change from time to time.
"Registration Expenses" shall mean all expenses incident to the General
Partner's performance of or compliance with the registration requirements set
forth in this Agreement, including without limitation (a) the fees,
disbursements and expenses of the General Partner's counsel and accountants in
connection with the registration of Shares issuable upon the exercise of the
Redemption Rights; (b) all expenses in connection with the preparation and
printing of the registration statement or statements, any preliminary prospectus
or final prospectus, any other offering document and amendments and supplements
thereto; (c) the cost of printing or producing any blue sky or legal investment
memoranda or other documents in connection with the offering, sale or delivery
of such Shares; (d) all expenses in connection with the qualification of such
Shares under state securities laws; (e) the fees and expenses incurred in
connection with the listing of such Shares on each securities exchange on which
securities of the same class are then listed and (f) all SEC, stock exchange and
National Association of Securities Dealers, Inc. registration and filing fees.
Notwithstanding the foregoing, Registration Expenses shall not include (and the
General Partner will pay) any costs incurred by the Partnership or the General
Partner in preparing any document that is incorporated by reference in a
registration statement, or any professional fee or other expenses, that would
have been incurred apart from the obligation of the General Partner hereunder to
file a Registration Statement.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor statute.
"Share Purchase Price" shall mean, with respect to the exercise of any
Redemption Rights and subject to the provisions of Section 6(c), a number of
Shares equal to the product of (a) the number of Units being redeemed or
purchased multiplied by (b) the Conversion Factor; provided, however, that, in
the event the General Partner, after the date of this Agreement, issues to all
holders of Shares rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase Shares (other
than rights referred to in Section 6(b)) or any other securities or property,
then the Share Purchase Price also shall include such rights, options,
4
<PAGE>
warrants or convertible or exchangeable securities that a holder of that number
of Shares would have been entitled to receive.
"Shares" shall mean shares of the Common Stock.
"Units" shall mean the limited partnership units in the Partnership issued
to Contributing Partner pursuant to the Contribution Agreement.
"Unitholder" shall mean the Person who at the time in question holds one or
more Units in accordance with the Partnership Agreement, as the same may be
amended from time to time.
2. Grant of Redemption Rights.
(a) Upon the terms and subject to the conditions contained herein, the
Partnership does hereby grant to Contributing Partner, and Contributing Partner
does hereby accept, the right, but without obligation on the part of
Contributing Partner, to require the Partnership to redeem from time to time
part or all of the Units of Contributing Partner for the Cash Purchase Price
("Redemption Rights").
(b) Notwithstanding the provisions of Section 2(a), the General Partner
may, in its sole and absolute discretion, assume the obligation of the
Partnership with respect to and satisfy Contributing Partner's exercise of a
Redemption Right by paying to Contributing Partner, at the General Partner's
election (which may be exercised in the General Partner's sole discretion),
either the Cash Purchase Price or the Share Purchase Price (or a combination
thereof) with respect to the Units for which Contributing Partner exercised its
Redemption Rights. If the General Partner assumes such obligations with respect
to the exercise by Contributing Partner of a Redemption Right as to certain
Units and makes the required payment, then the Partnership shall have no
obligation to pay any amount to Contributing Partner with respect to the
exercise of a Redemption Right for such Units, and any Units purchased shall be
owned by the General Partner for all purposes.
(c) If the General Partner shall assume the obligations of the Partnership
with respect to and satisfy a Redemption Right, the Partnership, the
Contributing Partner and the General Partner each shall treat the transaction
between the General Partner and Contributing Partner as a sale of Contributing
5
<PAGE>
Partner's Units (or a portion thereof) to the General Partner for federal income
tax purposes.
(d) Upon the redemption or purchase of part or all of Contributing
Partner's Units and the payment of the Purchase Price with respect thereto, such
Person shall be deemed withdrawn as a Partner in the Partnership to the extent
of the Units redeemed or purchased and shall have no further rights or
obligations under this Agreement with respect to such redeemed or purchased
Units; provided, however, that Contributing Partner's rights under this
Agreement with regard to any other Units will continue in full force and effect.
(e) No fractional Shares shall be issued hereunder. In lieu of fractional
Shares, the General Partner shall pay cash based on the Current Per Share Market
Price on the relevant Computation Date.
3. Exercise of Redemption Rights.
3.1 Time for Exercise of Redemption Rights. Contributing Partner may
exercise its Redemption Rights in whole or in part and at any time and from time
to time on or after the first anniversary of the date hereof but prior to the
Expiration Date; provided, however, that the Redemption Rights may not be
exercised at any one time by Contributing Partner with respect to less than
1,000 Units (or all the Units then owned by Contributing Partner if Contributing
Partner owns less than 1,000 Units) or in the event that such exercise of
Redemption Rights (or the assignment of Units or delivery of either the Cash
Purchase Price or the Share Purchase Price with respect thereto) violates the
terms of the Partnership Agreement or applicable law. Once given, a Notice shall
be irrevocable subject to the payment of the Purchase Price for the Units
specified therein in accordance with the terms hereof.
3.2 Method of Exercise. The Redemption Rights shall be exercised by
written notice (the "Notice") to the Partnership in the form of Exhibit A
specifying the number of Units to be redeemed and the name or names (with
address) in which any Shares issuable upon such exercise shall be registered if
different than the Contributing Partner.
3.3 Closing. The closing of the redemption or purchase and sale pursuant
to an exercise of the Redemption Rights shall occur within 30 days following the
giving of the Notice. Contributing Partner shall execute such documents as the
General
6
<PAGE>
Partner may reasonably require in connection with the closing of such redemption
or purchase and sale.
3.4 Payment of Cash or Issuance of Shares. At the closing of the
redemption or purchase and sale of Units pursuant to an exercise of Redemption
Rights, the Partnership shall deliver to Contributing Partner the Cash Purchase
Price by check or, in the event that the General Partner has assumed the
obligations of the Partnership with respect to such exercise of Redemption
Rights, the General Partner shall deliver to the Partnership, at the election of
the General Partner, which may be exercised in the General Partner's sole
discretion, either (a) the Cash Purchase Price by check or (b) certificates
representing the Shares and any other securities constituting the Share Purchase
Price, together with cash in lieu of the issuance of any fraction of a Share as
provided in Section 2(e), or a combination thereof.
4. Matters Relating to Shares.
4.1 Registration.
(a) The General Partner shall (i) prepare, file and use reasonable efforts
to cause to become effective on or before the ninetieth day following the first
anniversary of the date hereof a registration statement, which may be on Form S-
3, under the Securities Act relating to the Shares to be issued upon exercise of
the Redemption Rights assuming full satisfaction of the Redemption Rights by
delivery of Shares and (ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act.
(b) The General Partner shall pay all Registration Expenses incurred prior
to the sixth anniversary of the date hereof with respect to filing and keeping
effective the registration statement through such date, and the Unitholders
shall reimburse the General Partner for Registration Expenses (or a pro rata
portion of the Registration Expenses based on the number of Shares issuable to
such Unitholders upon full exercise of the Redemption Rights of such Unitholders
relative to the total number of Shares issuable pursuant to such registration
statement) which are incurred after the sixth anniversary of the date hereof in
respect of maintaining effective (but not the initial filing and causing to
become effective of) such
7
<PAGE>
registration statement; provided, however, that Contributing Partner shall not
be required to reimburse any costs (i) of preparing any documents filed with the
SEC that are incorporated by reference in the Registration Statement or (ii)
that become necessary because the General Partner is unable to use Form S-3 (or
any equivalent short form that relies on incorporation by reference) for the
reason that the General Partner has failed to comply on a timely basis with any
requirement of the Acts or Form S-3. The reimbursement of such expenses by the
Unitholders shall be paid upon demand.
(c) Notwithstanding anything to the contrary contained herein, the General
Partner shall have no obligation to keep any registration statement filed
pursuant to this Section 4.1 effective after the Expiration Date or if the
status of the General Partner (or its successor) as an Exchange Act Reporting
Company is terminated or all of the Unitholders notify the General Partner in
writing that the General Partner no longer need keep such registration statement
effective.
4.2 Reservation of Shares. At all times while the Redemption Rights are
outstanding, the General Partner shall reserve for issuance such number of
Shares as may be necessary to enable the General Partner to issue Shares in full
satisfaction of all Redemption Rights which are from time to time outstanding
(assuming no limitations as to the ownership of such Shares under the
Certificate of Incorporation which relate to compliance with the REIT
Requirements and that the General Partner elected to pay the Share Purchase
Price with respect to all such Redemption Rights).
4.3 Fully Paid and Non-Assessable. All Shares which may be issued upon
exercise of the Redemption Rights shall be duly and validly issued and fully
paid and non-assessable.
5. Transfer and Other Taxes. In the event that any state or local
property transfer or other tax is payable as the result of or in connection with
any exercise of the Redemption Rights by Contributing Partner, Contributor
Partner shall pay such tax, and no Shares shall be issued pursuant hereto until
such Contributor Partner has paid to the General Partner or the Partnership, as
the case may be, the amount of such tax or has provided evidence, in form
reasonably satisfactory to the General Partner or the Partnership, as the case
may be, as to the payment thereof.
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6. Anti-Dilution and Adjustment Provisions.
(a) The Conversion Factor shall be adjusted in the event that the General
Partner (i) declares or pays a dividend on its outstanding Shares in Shares or
makes a distribution to all holders of its outstanding Shares in Shares, (ii)
subdivides its outstanding Shares, or (iii) combines its outstanding Shares into
a smaller number of Shares. The Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator of which shall be
the number of Shares issued and outstanding on the record date for such
dividend, distribution, subdivision or combination (assuming for such purposes
that such dividend, distribution, subdivision or combination has occurred as of
such time) and the denominator of which shall be the actual number of Shares
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Conversion Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
(b) If at any time the General Partner grants to its stockholders any
right to subscribe pro rata for additional securities of the General Partner,
whether Common Stock or other classifications, or for any other securities or
interests that Contributing Partner would have been entitled to subscribe for
if, immediately prior to such grant, Contributing Partner had exercised its
Redemption Rights and received the Share Purchase Price in payment thereof, in
lieu of any adjustment under any other subsection of this Section 6 or other
provision of this Agreement, then the General Partner also shall grant to
Contributing Partner the same subscription rights that Contributing Partner
would be entitled to if Contributing Partner had exercised its Redemption Rights
in full and received the Share Purchase Price in satisfaction thereof prior to
such grant.
(c) Upon the occurrence of a Major Transaction Event where at least one-
half of the value (as determined in good faith by the General Partner) of the
consideration received by the stockholders of the General Partner in connection
with such Major Transaction Event is in the form of securities in a successor
entity, the General Partner shall cause effective provision to be made so that,
upon exercise of the Redemption Rights and payment of the Purchase Price at any
time following such Major Transaction Event by means of the Share Purchase
Price, Unitholders shall have the right to acquire, in lieu of
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<PAGE>
the Shares which otherwise would have been issued to Contributing Partner, the
kind and amount of shares of stock and other securities and property (and the
provisions contained in Section 4.1 shall apply anew to the extent that such
securities are of a class of securities of the General Partner or its successor
that are registered under the Exchange Act) and interests as would be issued or
payable with respect to or in exchange for the number of Shares constituting the
Share Purchase Price as if such Redemption Rights had been exercised and the
General Partner had satisfied the Redemption Rights by delivery of the Share
Purchase Price immediately before such Major Transaction Event.
(d) In the event of any other Major Transaction Event, each Unitholder
shall be entitled to exercise the Redemption Rights in full prior to the
consummation of such Major Transaction Event, and, with respect to any Shares
acquired upon exercise thereof, shall be entitled to all of the rights of the
other holders of Shares with respect to any distribution by the General Partner
(or the other party to such Major Transaction Event) in connection with such
Major Transaction Event. If not exercised within forty-five days after written
notice from the General Partner of such Major Transaction Event or such shorter
period between the date of such notice and the effective date of such Major
Transaction Event, the Redemption Rights shall terminate at the expiration of
such period, but the Redemption Rights shall be revived if such Major
Transaction Event is not consummated.
(e) The Partnership shall give written notice of any Major Transaction
Event promptly after such Major Transaction is announced to the public.
(f) The provisions of this Section 6 shall apply to successive events that
may occur from time to time but only shall apply to a particular event if it
occurs prior to the exercise in full of the Redemption Rights or the liquidation
of the Partnership. Nothing contained herein shall prevent or otherwise limit
the liquidation of the Partnership pursuant to the Partnership Agreement, as
amended from time to time.
(g) Whenever the Conversion Factor is adjusted as herein provided, the
General Partner shall compute the adjusted Conversion Factor in accordance with
this Section 6 and shall prepare a certificate signed by the chief financial
officer of the General Partner setting forth the adjusted Conversion Factor and
showing in reasonable detail the facts upon which such
10
<PAGE>
adjustment is based, and such certificate shall forthwith be filed at the
offices of the General Partner.
7. Miscellaneous Provisions.
7.1 Notices. All notices or other communications given pursuant to this
Agreement, including without limitation any Notice, shall be sent to the party
to whom or to which such notice is being sent, by certified or registered mail,
return receipt requested, commercial overnight delivery service, facsimile or
delivered by hand with receipt acknowledged in writing and otherwise as set
forth in this Section 8.1. All notices (a) shall be deemed given when received
or, if mailed as described above, after 5 Business Days or, if sent by
facsimile, upon receipt of confirmed answerback and (b) may be given either by a
party or by such party's attorneys. For purposes of this Section 8.1, the
addresses of the parties shall be, in the case of the Partnership and the
General Partner, 55 West Monroe Street, Suite 3100, Chicago, Illinois 60603,
facsimile number (312) 551-5475, Attention: Matthew Bucksbaum and Bernard
Freibaum (with a copy to Neal, Gerber & Eisenberg, Two North LaSalle Street,
Suite 2200, Chicago, Illinois 60602, Attn: Marshall E. Eisenberg), and, in the
case of Contributing Partner, as set forth on the records of the Partnership.
The address of any party may be changed by a notice in writing given in
accordance with the provisions hereof.
7.2 Assignment. The rights of Contributing Partner hereunder (including
the Redemption Rights) shall automatically devolve upon any Person to the extent
that such Person holds Units, and becomes a substituted partner with respect to
such Units, in accordance with the Partnership Agreement, as amended from time
to time, and delivers to the Partnership a written instrument, in form
reasonably satisfactory to the Partnership, pursuant to which such Person agrees
to be bound by the terms hereof (but the rights of Contributing Partner
hereunder are not otherwise assignable). Subject to the provisions of Section 6,
the General Partner may assign this Agreement without the consent of
Contributing Partner, provided that no such assignment shall relieve the General
Partner of its obligations under this Agreement.
7.3 Binding Effect. Except as otherwise set forth herein, this Agreement
shall be binding upon, and inure to the benefit of, the parties and their
successors and permitted assigns.
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7.4 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware (without regard to its conflicts of law principles).
7.5 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which shall constitute one document.
7.6 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes any
prior written or oral understandings and/or agreements among them with respect
thereto.
7.7 Pronouns; Headings; Etc. As used herein, all pronouns shall include
the masculine, feminine and neuter, and all terms shall include the singular and
plural thereof wherever the context and facts require such construction. The
headings herein are inserted for convenience of reference only and are to be
ignored in any construction of the provisions hereof. Any references in this
Agreement to a "Section" or "Exhibit" shall refer to a Section or Exhibit of
this Agreement unless otherwise specified.
7.8 Survival. The representations, warranties and covenants contained
herein or made pursuant hereto shall survive the execution and delivery of this
Agreement and the issuance of Shares pursuant hereto.
7.9 Further Assurances. Each of the parties shall hereafter execute and
deliver such other instruments and documents and do such further acts and things
as may be required or useful to carry out the purposes of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
CONTRIBUTING PARTNER:
SOUTHWEST PROPERTIES VENTURE,
a Colorado joint venture
By: P&P SOUTHWEST PARTNERSHIP, a
Colorado general partnership,
which is a joint venturer of Southwest
Properties Venture
By: /s/ Jordon Perlmutter
------------------------------------
Jordon Perlmutter
Managing General Partner
By: /s/ Samuel Primack
------------------------------------
Samuel Primack
Managing General Partner
By: WADSWORTH PARTNERSHIP, a Colorado
limited partnership, which is a joint
venturer of Southwest Properties Venture
By: The Wadsworth Holding Partnership,
a Colorado general partnership,
which is the sole general partner
of The Wadsworth Partnership
By: Cooper Investments, a Colorado
general partnership, which is a
general partner of The Wadsworth
Holding Partnership
By: /s/ Michael Cooper
------------------------------------
Michael Cooper
General Partner
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<PAGE>
PARTNERSHIP:
GGP LIMITED PARTNERSHIP,
a Delaware limited partnership
By: General Growth Properties, Inc.
a Delaware corporation
By: /s/ Joel Bayer
------------------------------------
Its Senior Vice President
---------------------------------
GENERAL PARTNER:
General Growth Properties, Inc.
a Delaware corporation
By: /s/ Joel Bayer
------------------------------------
Its: Senior Vice President
-------------------------------
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EXHIBIT A
Notice of Redemption
The undersigned hereby irrevocably (i) exercises its Redemption Rights as
to ___________ units of limited partnership interest (the "Units") in GGP
Limited Partnership (the "Partnership") in accordance with the terms of that
certain Redemption Rights Agreement, dated _______________, 1998 (the
"Agreement"), among the Partnership, General Growth Properties, Inc. (the
"General Partner"), and the other parties thereto, (ii) transfers and surrenders
such Units and all right, title and interest of the undersigned therein to the
party, which shall be either the Partnership or the General Partner, that shall
purchase or redeem such Units pursuant to the Agreement, and (iii) directs that
the Cash Purchase Price or Share Purchase Price payable upon exercise of the
Redemption Right be delivered to the address specified below and, if the Share
Purchase Price is to be delivered, the Shares shall be registered or placed in
the name(s) and at the address(es) specified below.
The undersigned hereby represents, warrants, certifies and agrees (i) that
the undersigned has unencumbered title to the Units, free and clear of all
Liens, (ii) that the undersigned has the full right, power and authority to
transfer and surrender the Units as provided herein and such transfer and
surrender has been authorized by all necessary action, and (iii) that the
undersigned has obtained the consent or approval of all persons or entities, if
any, having the right to consent to or approve such transfer and surrender.
<PAGE>
Capitalized terms used but not defined herein shall have the meanings set
forth in the Agreement.
Dated: ____________________
Name: ________________________
_____________________________
(Signature of Limited Partner)
_____________________________
(Street Address)
_____________________________
City (State) (Zip Code)
Signature Guaranteed by
______________________________
If Shares are to be issued, issue to:
Please insert social security or identifying number:
