SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 8-K/A
---------------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MARCH 23, 1998
FAC REALTY TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
- ----------------------------------- ---------------------------------- -----------------------------------
MARYLAND 001-11998 56-1819372
<S> <C> <C>
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification
Incorporation) No.)
- ----------------------------------- ---------------------------------- -----------------------------------
</TABLE>
11000 REGENCY PARKWAY, SUITE 300
CARY, NORTH CAROLINA 27511
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (919) 462-8787
FAC REALTY, INC.
(Former Name or Former Address if Changed Since Last Report)
<PAGE>
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On March 30, March 31 and May 14, 1998, the Company concluded the
acquisition of eight community shopping centers located in North Carolina and
Virginia from Roy O. Rodwell, Chairman and co-founder of Atlantic Real Estate
Corporation, Mr. John M. Kane, Chairman of Kane Realty Corporation, and their
affiliates. The acquired centers encompass approximately 950,000 square feet and
are, in the aggregate, 96% leased as follows:
<TABLE>
<CAPTION>
Property Location Date Developed Total GLA Occcupancy Key Tenants
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shoreside Kitty Hawk, NC 1993 144,389 100.0% Wal-Mart
Seamark Grocery
Stanton Square Greenville, NC 1985 125,116 76.8% Food Lion
Eckerd
Bolling Creek Roanoke Rapids, NC 1992 29,000 100.0% Food Lion
Celebration at Six Forks Raleigh, NC 1979 125,000 97.0% Revco
University Mall Blacksburg, VA 1973 162,779 98.0% Virginia Tech
Math Emporium
Towne Square Roanoke, VA 1987 301,561 100.0% Office Max
MJ Design
Brookneal Brookneal, VA 1993 25,000 100.0% Food Lion
Keysville Keysville, VA 1993 36,680 100.0% Food Lion
Revco
--------------------------
949,525 96.2%
==========================
</TABLE>
The aggregate purchase price for the acquired shopping centers was
$57,147,437, consisting of the assumption of $44,344,351 of fixed-rate
indebtedness, the payment of $3,499,426 in cash and the issuance of 974,347
limited partnership interests ("Units") of FAC Properties, L.P. Up to 292,447
additional Units and $831,332 in cash will be issued or paid on a delayed or
contingent basis. The contingencies include the attainment of certain property
performance thresholds and the sale, lease or development of certain outparcels.
The purchase price for the acquisition was determined as a result of arms-length
negotiation between the Company and the sellers, with the Units being valued at
$9.50 per share.
The Company acquired the properties by causing the Company's operating
entity, FAC Properties, L.P., to acquire title to six of the properties and the
membership interests of the two limited liability companies that own the other
two properties in exchange for the consideration discussed above.
ITEM 7: FINANCIAL STATEMENTS.
<PAGE>
a) Financial statements of businesses acquired.
Rodwell/Kane Properties
Report of Independent Public Accountants
Combined Statement of Revenue and Certain Expenses
Notes to Combined Statement of Revenue and Certain Expenses
b) Pro forma financial information.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Pro Forma Condensed Consolidated Balance Sheet (unaudited) at
December 31, 1997
Pro Forma Condensed Consolidated Statement of Operations
(unaudited) for the year ending December 31, 1997
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
c) Exhibits.
<TABLE>
<CAPTION>
Number Exhibit
- ------ -------
<S> <C>
10.1* Amended and Restated Stock Purchase Agreement, dated as of March 23, 1998, between the
Company and the Investor.
10.2* Stockholders Agreement, dated February 24, 1998, among the Company and the Investor.
10.3* Registration Rights Agreement, dated February 24, 1998, between the Company and the
Investor.
10.4* Contingent Value Right Agreement, dated February 24, 1998, among the Company and the
Investor.
10.5* First Amendment to the Master and Exchange Option Agreement,
dated as of March 16, 1998, by and among the Company, FAC
Realty, L.P. and the Contributors listed therein.
10.6* Assignment of Interest in Master Agreement and Exchange Option Agreement, and Consent of
Limited Partners dated December 22, 1997.
10.7* Exchange Option Agreement dated as of October 1, 1997, by and among Carolina FAC,
Limited Partnership., FAC Realty, Inc. and the Owners of the Properties and Interests
listed therein.
10.8* Master Agreement, dated as of October 1, 1997, by and among
FAC Realty, Inc., Carolina FAC, Limited Partnership, and the
other signatories listed therein.
10.9 Master Agreement by and among the Company, FAC Properties, L.P. and the other signatories
contained therein, dated as of April __, 1998.
10.10 Exchange Option Agreement by and among FAC Properties, L.P.,
the Company and the owners of the Properties and Interests
listed therein, dated as of April ___, 1998.
23.1 Consent of Arthur Andersen LLP
</TABLE>
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*Previously filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FAC REALTY TRUST, INC.
Date: June 3, 1998 By: /s/ Patrick M. Miniutti
-----------------------------------
Name: Patrick M. Miniutti
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
Rodwell/Kane Properties
Financial Statements as of December 31, 1997
Together with Report of Independent Public Accountants
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
FAC Realty Trust, Inc.:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Rodwell/Kane Properties as described in Notes 1 and 2 for the year
ended December 31, 1997. This combined financial statement is the responsibility
of Rodwell/Kane Properties' management. Our responsibility is to express an
opinion on this combined financial statement based on our audit. We conducted
our audit in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statement. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall combined financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was
prepared using the basis of accounting described in Note 1 for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Form 8-K of FAC Realty Trust, Inc. and is not
intended to be a complete presentation of Rodwell/Kane Properties' revenue and
expenses.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenue and certain expenses described in
Notes 1 and 2 of Rodwell/Kane Properties for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Raleigh, North Carolina,
April 17, 1998
<PAGE>
Rodwell/Kane Properties
Combined Statement of Revenue and Certain Expenses
For the Three Months Ended March 31, 1998, (Unaudited) and the Year
Ended December 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Year Ended December
March 31, 1998 31, 1997
-------------- --------
(Unaudited)
<S> <C> <C>
Rental income $1,804 $6,939
------ ------
Certain expenses:
Repairs and maintenance 144 373
Utilities 50 270
Insurance 28 98
Real estate taxes 128 448
------ ------
Total certain expenses 350 1,189
------ ------
Revenue in excess of certain expenses $1,454 $5,750
====== ======
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE>
Rodwell/Kane Properties
Notes to Combined Statement of Revenue and Certain Expenses
For the Three Months Ended March 31, 1998, (Unaudited) and the Year Ended
December 31, 1997
1. Description of Properties:
The Rodwell/Kane Properties (Rodwell/Kane) consist of eight community
shopping centers located in North Carolina and Virginia and contain
approximately 950,000 square feet. At March 31, 1998, the properties were
approximately 96 % leased.
2. Basis of Presentation:
Rodwell/Kane is not a legal entity but rather a combination of the
operations of certain real estate properties expected to be acquired by FAC
Realty Trust, Inc. The accompanying Combined Statement of Revenue and
Certain Expenses includes the accounts of the community shopping center
properties, each of which is wholly owned by various parties not affiliated
with FAC Realty Trust, Inc.
In accordance with Rule 3-14 of Regulation S-X, the accompanying combined
financial statement is not representative of the actual operations for the
periods presented as certain revenue and expenses, which may not be
comparable to those expected to be incurred by FAC Realty Trust, Inc. in
the proposed future operations of the aforementioned properties, have been
excluded. Interest income has been excluded from revenue. Expenses excluded
consist of depreciation and amortization, management fees, general and
administrative and interest expenses not directly related to future
operations. Management is not aware of any other material factors that
would cause the accompanying Combined Statement of Revenue and Certain
Expenses to not be indicative of the future operations of Rodwell/Kane.
3. Significant Accounting Policies:
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the term
of the lease. Certain lease agreements contain provisions which provide for
rents based on a percentage of sales and certain leases provide for
additional rents based on a percentage of sales volume above a specified
breakpoint and reimbursement of real estate taxes, insurance, advertising,
utilities and certain common area maintenance (CAM) costs. These additional
rents are reflected on the accrual basis.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the combined financial
statement and accompanying notes. Actual results could differ from those
amounts.
Interim Unaudited Financial Information
The accompanying unaudited financial information for the three months ended
March 31, 1998, has been prepared consistent with the rules and regulations
of the Securities and Exchange Commission governing the preparation of the
amounts for the year ended December 31, 1997. Certain information and
disclosures normally included in financial
<PAGE>
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate
to make the information presented not misleading. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
necessary to present fairly the Combined Statement of Revenue and Certain
Expenses for the three months ended March 31, 1998, have been included. The
results of operations for the three-month period ended March 31, 998, are
not necessarily indicative of the results for the full year.
4. Leases:
The Rodwell/Kane properties are being leased to tenants under operating
leases that will expire through 2018.
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 1997, are as
follows (in thousands):
1998 $ 5,443
1999 4,907
2000 4,058
2001 3,712
2002 3,444
Thereafter 27,665
----------
$ 49,229
==========
<PAGE>
Pro Forma Information
The following sets forth unaudited pro forma financial information for FAC
Realty Trust, Inc. (the Company) as of December 31, 1997, and for the year then
ended after giving effect to the acquisition of community shopping centers from
Rodwell/Kane (the Transaction) as described in Note 1 hereto. The unaudited Pro
Forma Condensed Consolidated Balance Sheet is presented as if the Transaction
had occurred on December 31, 1997. The unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended December 31, 1997 is
presented as if the Transaction had occurred as of the beginning of the period
presented.
In management's opinion, all material adjustments necessary to reflect the
transaction described above are presented in the pro forma adjustments columns,
which are further described in the notes to the unaudited pro forma financial
information.
The unaudited Pro Forma Condensed Consolidated Balance Sheet and the
unaudited Pro Forma Condensed Consolidated Statements of Operations should be
read in conjunction with the Consolidated Financial Statements of the Company
and Notes thereto. The unaudited Pro Forma Condensed Consolidated Balance is not
necessarily indicative of what the actual financial position of the Company
would have been at December 31, 1997, nor does it purport to represent the
future financial position of the Company. The unaudited Pro Forma Condensed
Consolidated Statements of Operations are not necessarily indicative of what the
actual results of operations of the Company would have been assuming the
aforementioned transactions had been consummated as of the beginning of the
respective periods, nor does it purport to represent the results of operations
for future periods.
<PAGE>
FAC Realty
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(In Thousands)
<TABLE>
<CAPTION>
At December 31, 1997
-------------------------------------------------
Pro Forma Adjustments
---------------------
Acquired Pro Forma
Historical (A) Properties (B) Consolidated
-------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Income Producing Properties, net $ 345,191 $ 57,147(1) $ 402,338
Properties Under Development 6,456 6,456
Properties Held for Sale 12,490 12,490
Other Assets 39,489 (3,499)(4) 35,990
--------- --------- ---------
$ 403,626 $ 53,648 $ 457,274
========= ========= =========
Debt $ 232,575 $ 44,344(2) $ 276,919
Other Liabilities 8,124 8,124
Minority Interest 9,304(3) 9,304
Convertible Preferred Stock 19,162 19,162
Warrants 9 9
Common Stock 119 119
APIC 145,332 145,332
Deferred Compensation (279) (279)
Retained Deficit (1,416) (1,416)
--------- --------- ---------
$ 403,626 $ 53,648 $ 457,274
========= ========= =========
</TABLE>
Adjustments (dollars in thousands):
(A) Reflects the Company's historical condensed consolidated balance sheet as
of December 31, 1997
(B) Reflects the following pro forma adjustments related to the acquired
properties from Rodwell/Kane:
(1) total acquisition costs of $57,147
(2) the assumption of existing debt of $44,344
(3) the issuance of 974,347 operating partnership units
(4) the use of cash
<PAGE>
FAC Realty
Unaudited Pro Forma Condensed Consolidated Statement of Income
(in thousands)
<TABLE>
<CAPTION>
Year Ending December 31, 1997
-------------------------------------------------
Pro Forma Adjustments
---------------------
Acquired Pro Forma
Historical (A) Properties (B) Consolidated
-------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Rental and Other Revenues $ 53,726 $ 6,939(2) $ 60,665
Property Operating Expenses 15,671 1,189(1) 16,860
General and Administrative 6,397 200(6) 6,597
Depreciation and Amortization 15,652 1,465(3) 17,117
Interest Expense 16,436 3,500(4) 19,936
Extraordinary loss on extinguishment of debt 986 986
Minority interest (63)(5) (63)
--------------------------------------------
Net income(loss) $ (1,416) $ 648 $ (768)
============================================
Loss per common share (0.06)
========
</TABLE>
Adjustments (dollars in thousands):
(A) Reflects the Company's historical condensed consolidated statements of
operations for the year ended December 31, 1997
(B) Reflects the unaudited pro forma adjustments for the purchases of the
acquired properties from Rodwell/Kane:
(1) the historical operating activity of the acquired properties
(2) the historical operating activity of the acquired properties less
management fee income of $286 earned by the Company on the acquired
properties and reflected in the Company's historical revenues
(3) the depreciation expense based on the new accounting basis of the
properties based on a 39 year life
(4) Reflects the additional interest expense on debt of $44,344 at
interest rates ranging between 7.4% and 10.7% and a weighted average
interest rate of 8.2% at December 31, 1997
(5) the minority interests in earnings
(6) incremental general and administrative expenses expected to be
incurred as a result of the acquisition
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying Unaudited Condensed Consolidated Pro Forma Financial
Statements of FAC Realty Trust, Inc. (the Company) have been prepared in
accordance with the instructions to Form 8-K and do not include all of the
information and notes required by generally accepted accounting principals
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included. For further information, refer to the consolidated financial
statements and notes thereto for the year ended December 31, 1997, included
in the Company's form 10-K dated April 15, 1998.
MASTER AGREEMENT
----------
by and among
FAC Realty Trust, Inc.,
FAC Properties, L.P.,
and the other
signatories to this
Master Agreement
hereinafter contained
Dated as of April ___, 1998
----------
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
DOCUMENT USED IN CONNECTION WITH THE OFFERING AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
THE REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................1
ARTICLE II THE TRANSACTIONS...................................................4
2.1 General........................................................4
2.2 Exchange Option Agreement......................................4
2.3 Closing........................................................4
ARTICLE III CONSIDERATION.....................................................5
3.1 Contribution Price.............................................5
3.2 Terms of Payment...............................................5
3.3 Additional Closing Adjustments.................................5
3.4 Fluctuation....................................................6
ARTICLE IV COVENANTS AND AGREEMENTS...........................................7
4.1 Operation of Business..........................................7
4.2 No Brokers.....................................................7
4.3 Section 754 Elections..........................................7
4.4 Termination of Contracts.......................................7
4.5 Contributions of Assets........................................7
4.6 Assignment of Warranties.......................................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS - GENERALLY..........8
5.1 Consents.......................................................8
5.2 Disclosure.....................................................8
5.3 Absence of Conflicts...........................................8
5.4 Certification of Constituent Financial Statements..............8
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS.....................9
6.1 Power and Authority of Contributors and Constituent
Partnerships.................................................9
6.2 Rent Roll and Leases...........................................9
6.3 No Contracts..................................................10
6.4 Liabilities; Indebtedness.....................................10
6.5 Insurance.....................................................10
6.6 Personal Property.............................................10
6.7 Claims or Litigation..........................................10
6.8 Hazardous Substances..........................................10
6.9 Compliance with Laws..........................................11
6.10 Employees.....................................................11
6.11 Condemnation and Moratoria....................................11
6.12 Condition of Improvements.....................................12
6.13 Taxes.........................................................12
6.14 Management Agreements.........................................12
6.15 Operating Agreements..........................................12
6.16 Absence of Certain Changes....................................12
i
<PAGE>
6.17 Tradename.....................................................13
6.18 Title.........................................................13
6.19 Certain Liens.................................................13
ARTICLE VII CONDITIONS TO CLOSING AND DUE DILIGENCE INVESTIGATION............14
7.1 Conditions to Closing of Properties..........................14
7.2 The Operating Partnership Investigation/Due
Diligence Period............................................15
7.3 Closing Documents.............................................16
ARTICLE VIII INDEMNITY.......................................................16
8.1 Representations and Warranties of each of the Contributors....16
8.2 Arbitration...................................................16
ARTICLE IX MISCELLANEOUS.....................................................16
9.1 Notices.......................................................16
9.2 Counterparts..................................................17
9.3 Severability..................................................17
9.4 Assigns.......................................................17
9.5 Public Announcement...........................................17
9.6 Confidentiality...............................................17
9.7 Remedies......................................................17
9.8 Captions......................................................18
9.9 Exhibits and Schedules........................................18
9.10 Merger Clause.................................................18
9.11 Amendments and Waiver.........................................18
9.12 Governing Laws................................................18
LIST OF SCHEDULES AND EXHIBITS...............................................20
ii
<PAGE>
MASTER AGREEMENT
This MASTER AGREEMENT (the "Master Agreement") is made as of the ____ day
of April 1998, by and among FAC REALTY TRUST, INC., a Delaware corporation
("FAC"), a Delaware limited partnership ("Operating Partnership"), and the other
signatories to this Agreement hereinafter contained (each a "Contributor" and
collectively the "Contributors").
WHEREAS, the Operating Partnership is a Delaware limited partnership having
FAC as its sole general partner and FAC has elected to be qualified as a real
estate investment trust under the Code; and
WHEREAS, Contributors own the direct and indirect interests in certain
Properties and other real property, improvements, appurtenances and other
rights, interests and privileges appertaining thereto, set forth with more
particularity on Schedule 1 hereto and, as applicable, in certain partnerships,
limited liability companies or other ownership entities which own interests in
the Properties, as also set forth on Schedule 1;
WHEREAS, the Operating Partnership and the Contributors have entered into
an Exchange Option Agreement (as defined below), pursuant to which such
Contributors have irrevocably agreed to sell, transfer and assign to the
Operating Partnership their interests;
NOW, THEREFORE, in consideration of the premises herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms shall have the following meanings for all
purposes of this Master Agreement and such meanings are equally applicable to
the singular and plural forms of the terms defined. The terms "hereof",
"hereto", "herein", "hereunder" and comparable terms refer to the entire
agreement with respect to which such terms are used and not to any particular
section, subsection, paragraph or other subdivision thereof.
"Adjustment Closing Date" means October 1, 1997.
"Affiliate" means, as to any Person (as defined below), each of the Persons
(i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with such Person;
or (ii) which beneficially owns or holds 10% or more of any class of the
outstanding voting stock (or in the case of a Person which is not a
corporation, 10% or more of the equity interest) of such Person; or (iii)
10% or more of any class of the outstanding voting stock (or in the case of
a Person which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether by
ownership of voting stock, by contract, by close family relationships
(i.e., parent, spouse, child or sibling) or otherwise.
"Bringdown Certificate" means a certificate executed by the Contributors
attesting and certifying as to the continuing truth and accuracy as of the
date of Closing of each and all of
<PAGE>
the representations and warranties of the Contributors and the Constituent
Parties under this Master Agreement and Exchange Option Agreement.
"Closing" means the closing and consummation of the transactions
contemplated by this Master Agreement relating to the Properties.
"Closing Date" means the date upon which all the conditions for closing and
consummation of the transactions contemplated by this Master Agreement
relating to the Properties shall have been satisfied, which date shall be
no later than April 30, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Constituent Financial Statements" means the periodic income statement and
balance sheets provided to the Operating Partnership (including the
schedules attached thereto) for the Contributors or Constituent
Partnerships, and the Properties.
"Constituent Parties" means collectively Contributors and the Constituent
Partnerships, without duplication.
"Constituent Partnerships" means, as to those Properties, if any, which are
owned by partnerships, limited liability companies or other entities which
are in turn owned by certain of the Contributors, such partnerships,
limited liability companies or other entities which may be so owned by
certain of the Contributors.
"Contribution Price" means the consideration to be paid by the Operating
Partnership to the Contributors for their Interests in the Properties as
set forth in Section 3.1.
"Environmental Law" means any and all federal, state and local laws,
regulations, ordinances and other requirements relating to pollution or
protection of the environment, including, without limitation, laws,
regulations and requirements relating to the ownership, possession, storage
and control of the Properties (as defined below) and to emissions,
discharges, releases or threatened releases of storm water, pollutants,
contaminants, toxic or hazardous substances, or solid or hazardous wastes
into the environment (including without limitation ambient air, surface
water, groundwater or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, toxic or hazardous substances, or
solid or hazardous wastes. The Environmental Laws include, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Option Agreement" means the agreement dated as of even date
herewith between the Operating Partnership, FAC and the Contributors
pursuant to which Units are to be exchanged for all of the Interests, as
defined therein.
"Improvements" means all buildings, structures, streets, furnishings,
parking lots, landscaping, walls, ponds, culverts, fixtures, utilities,
fences, driveways, loading docks, security systems and other physical
features constructed or assembled on, at, upon or beneath any of the
Properties (whether finished or unfinished).
2
<PAGE>
"Indebtedness" means, without duplication, any obligations for borrowed
money and all obligations to trade creditors, whether heretofore, now or
hereafter owing, arising, due or payable to any person and howsoever
evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise and whether matured or
unmatured. Without in any way limiting the generality of the foregoing,
Indebtedness specifically includes the following: (a) all obligations or
liabilities of any person that are secured by any lien, claim, encumbrance
or security interest upon property; (b) all obligations or liabilities
created or arising under any capital lease of real or personal property, or
conditional sale or other title retention agreement with respect to
property, even though the rights and remedies of the lessor, seller or
lender thereunder are limited to repossession of such property; (c) all
unfunded pension fund, employee medical or welfare obligations and
liabilities; (d) deferred taxes; and (e) all obligations under any
indemnification agreements, guaranty agreements, letters of credit or other
documents creating such contingent liabilities.
"Independent Director" shall have the meaning set forth in the charter of
FAC, as it may be amended from time to time.
"Interests" shall mean as defined in the Exchange Option Agreement.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a person other than the owner of the property, whether such
interest is based on the common Law, statute or contract, and including but
not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease consignment or bailment for security purposes. The term Lien
shall include reservations, exceptions, defects of any kind or nature,
encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
property.
"NYSE" means the New York Stock Exchange.
"Operating Partnership Agreement" means the Agreement of Limited
Partnership of FAC Properties, L.P., as amended through the date hereof,
including the amendment to admit the Contributors as partners therein.
"Outstanding Debt Financing" means the Indebtedness of the Properties as
described on Schedule 3.2(i) attached hereto including any indemnifications
and guarantees related thereto.
"Permitted Lien" means (i) liens for 1997 ad valorem taxes not yet due and
payable; (ii) restrictions, easements, covenants, reservations and rights
of way of record as do not detract from the value or interfere with the
present use of a parcel of property; (iii) zoning ordinances, restrictions
and other requirements imposed by governmental authority as do not detract
from the value or interfere with the present use of a parcel of property;
and (iv) such imperfections of title, liens and encumbrances, if any, as do
not detract from the value or interfere with the present use of a parcel of
property and which do not secure obligations for borrowed money or the
deferred purchase price of property.
"Person" means any individual, joint venture, corporation, company,
voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of
entity.
"Property" or "Properties" shall mean, individually, the real property
together with any Improvements thereon and all personal property and
rights, privileges and interests appurtenant thereto and all of the
ownership interests therein owned by a Contributor or by a Constituent
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Partnership or, collectively, by all of the Constituent Partnerships,
including but not limited to as more particularly described on Schedule 1.
"Redemption Shares" means the shares of Common Stock of FAC into which
Units received by the Contributors in connection with the transactions
contemplated hereby are convertible into under certain circumstances at the
election of FAC upon their tender for redemption as provided in the
Operating Partnership Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Laws" means the Securities Act, the Exchange Act and the rules
and regulations promulgated thereunder.
"Shares" means the duly authorized common stock of FAC.
"Unit" means an undivided limited partnership interest of the Operating
Partnership, which is exchangeable by the Unit holder for either cash or
Shares, whichever may be elected by FAC, after one year from the Closing
Date in accordance with the Operating Partnership Agreement and the
Exchange Option Agreement.
ARTICLE II
THE TRANSACTIONS
2.1 General. Subject to the terms, conditions, provisions and limitations
in this Master Agreement, on the Closing Date the parties shall cause the
transactions contemplated hereby to be consummated (the "Transactions"),
including, but not limited to:
(a) The closing under the Exchange Option Agreement, as described in
Section 2.2 below;
(b) At the discretion of the Operating Partnership, the dissolution of
the Constituent Partnerships and any other partnerships or other entities
which are wholly-owned by the Contributors and all of the interests in
which shall have been contributed to the Operating Partnership, and, at
FAC's option, the transfer of the Properties to the Operating Partnership
by deed or by operation of Law.
2.2 Exchange Option Agreement. The Operating Partnership shall tender the
consideration to each Contributor as required by the Exchange Option Agreement
such that each "Closing," as defined in the Exchange Option Agreement, occurs
under the terms thereof.
2.3 Closing.
(a) The closing of the transactions contemplated by this Master
Agreement (the "Closing") shall take place at the offices of FAC on or
before the Closing Date, unless otherwise agreed in writing by the
Operating Partnership. The closing under the Exchange Option Agreement
shall take place simultaneously with and only if the Closing hereunder
occurs.
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(b) The Operating Partnership or FAC may terminate this Master
Agreement without liability and without waiving any of its rights at Law or
in equity by giving notice to the Contributors at any time prior to the
Closing:
(i) If any one of the Constituent Parties is in breach of any
representation, warranty, or covenant contained in this Master
Agreement or in the Exchange Option Agreement in any material respect;
(ii) If the Closing shall not have occurred on or before the Closing
Date by reason of any condition precedent in this Master Agreement not
being fulfilled or in the Exchange Option Agreement (unless the
failure results from the Operating Partnership itself breaching any
representation, warranty or covenant contained in this Master
Agreement or in the Exchange Option Agreement); or
(iii) Pursuant to the terms of Section 7.2 hereof.
ARTICLE III
CONSIDERATION
3.1 Contribution Price. As consideration for the contribution of the
Properties, the Operating Partnership shall deliver to the Contributors the
number of limited partnership units ("Units") in the Operating Partnership and
pay to the Contributors the amount of cash provided in the Exchange Option
Agreement.
3.2 Terms of Payment.
(a) Generally. At the Closing, each Contributor shall receive the
number of Units and amount of cash allocated to such Contributor under the
Exchange Option Agreement in respect of the Properties to be acquired,
subject to pro rata adjustment for any changes in the amount of the
Outstanding Debt Financing as of the applicable Closing Date from the
amounts projected to be outstanding as of such dates as reflected on
Schedule 3.2 attached hereto;
(b) Pro Rata Expenses. Each Contributor shall be responsible for
payment of his pro rata portion of legal fees associated with this
transaction, any contract termination fees and any prorations chargeable to
the Contributors under Section 3.3 hereof.
3.3 Additional Closing Adjustments.
(a) Generally. All real estate taxes, charges and assessments
affecting a Property, all charges for water, sewer, electricity, gas and
all other utilities and operating expenses with respect to a Property, to
the extent not paid or payable by tenants under the Leases (as defined in
Section 6.2 below and as described on Schedule 6.2A attached hereto), shall
be apportioned on a per diem basis as of midnight on the date immediately
preceding the Adjustment Closing Date. All such expenses for the period
preceding the Adjustment Closing Date shall be deemed expenses of the
applicable Contributors and all such expenses commencing as of the
Adjustment Closing Date with respect to such Property shall be deemed to be
expenses of the Operating Partnership. Amounts owed under this paragraph
shall be paid to the party to whom they are owed in cash at the Closing or
in the Post-Closing Adjustment Period (as defined below) in the same manner
as if the underlying real property were being sold. If any real estate
taxes, charges or assessments have not been finally assessed as of the
Closing Date for a Property for the then current calendar tax year, they
shall be adjusted at the
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Closing based upon the greater of (i) the most recently issued bills
therefor or (ii) the best reasonable estimate therefor after consultations
with the appropriate taxing officials.
(b) Rent. Except for delinquent rent, all rent under leases and other
income attributable to a Property shall be apportioned on a per diem basis
as of midnight on the date immediately preceding the Adjustment Closing
Date. All such rent and other income, including commissions earned, for the
period preceding the Adjustment Closing Date shall be deemed to be property
of the applicable Contributors, and all rent and other income for any
period commencing as of the Adjustment Closing Date and thereafter shall be
the property of the Operating Partnership for the purpose of making the
adjustments set forth herein. Amounts owed under this paragraph shall be
paid to the party to whom they are owed in cash at the Closing or during
the Post-Closing Adjustment Period. Delinquent rent shall not be prorated,
but shall be deemed the property of the appropriate Contributors. Payments
received by the Operating Partnership from tenants from and after the
Closing with respect to a Property shall be applied first to rents and
other amounts then due the Operating Partnership from such tenant and then
to such tenant's delinquent rent as of the time of apportionment. The
Operating Partnership shall use reasonable efforts to collect delinquent
rents for the benefit of the Contributors but in no event shall be
obligated to evict or sue any tenants in order to collect such rents and
shall cooperate with the Contributors in the collection of any delinquent
amounts; provided, however, that the Contributors shall not have any rights
to evict such tenants for such delinquent amounts. Any amounts received by
Contributors on account of rent or other income for the period after the
Adjustment Closing Date with respect to the Property and the related
personal property shall be turned over to the Operating Partnership for
application in accordance with the terms of this paragraph. All accounts
receivable, notes, cash and bank accounts of the Constituent Parties
existing as of the Adjustment Closing Date and relating to the Properties
shall be transferred at Closing to the Operating Partnership.
(c) Preclosing Expenses and Liabilities. The parties acknowledge that
not all invoices for expenses incurred with respect to the Properties prior
to the Adjustment Closing Date will be received by the Closing and that a
mechanism needs to be in place so that such invoices can be paid as
received. All of the prorations referred to above will be done on an
interim basis at the Closing and will be subject to final adjustment in
accordance with the provisions hereof within 90 days or such other agreed
upon period of time following Adjustment Closing Date (the "Post-Closing
Adjustment Period"). Upon receipt by the Operating Partnership after
Closing of an invoice for a Property's expenses which are attributable in
whole or in part to a period prior to the Adjustment Closing Date and which
were not apportioned at Closing, the Operating Partnership shall submit for
the Contributors a copy of such invoice with such additional supporting
information as Contributors shall reasonably request. Within 10 days of
receipt of such copy, each of the Contributors shall pay to the Operating
Partnership their pro rata share of an amount equal to the portion of such
invoice attributable to the period ending as of midnight on the date
immediately preceding the Adjustment Closing Date apportioned on a per diem
basis.
(d) Security Deposits/Tenant Inducements. With respect to the Property
or Properties to be acquired at any Closing, the Constituent Parties shall
pay to the Operating Partnership in cash at such Closing an amount equal to
the sum of (i) the security deposits, if any, required to be held by the
landlord pursuant to the Leases, and (ii) any other deposits or advances
received by the Constituent Parties relating to services yet to be provided
by the Constituent Parties.
(e) Adjustment Closing Date. The parties acknowledge that,
irrespective of the fact that the Closing may take place substantially
later than the Adjustment Closing Date, the adjustment of all income,
revenues, costs, expenses and expenditures shall be made as of the
Adjustment Closing Date. The Adjustment Closing Date shall be a day of
income and expense for the Operating
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Partnership. The net income between the Adjustment Closing Date and the
Closing shall be treated as fee income to the Operating Partnership in the
nature of asset management fees for the Properties.
3.4 Fluctuation. EACH OF THE CONTRIBUTORS AND THE OPERATING PARTNERSHIP
ACKNOWLEDGES AND AGREES THAT AFTER THE EXECUTION OF THE EXCHANGE OPTION
AGREEMENT, THE MARKET VALUE OF THE FAC COMMON STOCK WHICH IS CURRENTLY
OUTSTANDING MAY INCREASE OR DECREASE IN VALUE AS THE RESULT OF MARKET
FLUCTUATIONS, AND THAT ANY SUCH FLUCTUATIONS MAY AFFECT THE VALUE OF THE UNITS.
NOTWITHSTANDING THESE FLUCTUATIONS, THE OPERATING PARTNERSHIP WILL NOT BE
REQUIRED TO INCREASE THE NUMBER OF UNITS TO BE ISSUED TO ANY CONTRIBUTOR IN THE
EVENT OF A DECREASE IN THE MARKET VALUE OF FAC COMMON STOCK PRIOR TO THIS
AGREEMENT AND THE CLOSING. LIKEWISE, EACH CONTRIBUTOR WHOSE PURCHASE PRICE IS
BEING PAID IN UNITS WILL BE ENTITLED TO THAT NUMBER OF UNITS SET FORTH IN THE
EXCHANGE OPTION AGREEMENT NOTWITHSTANDING ANY INCREASE IN VALUE OF FAC COMMON
STOCK PRIOR TO THE CLOSING.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Operation of Business. Between the date hereof and the Closing Date,
each Contributor shall, and shall cause each Constituent Partnership to,
maintain and operate the Properties in a manner consistent with first-class
retail shopping centers, provided that they shall not enter into, or cause or
permit any Constituent Partnership to enter into, any contracts or other such
arrangements that would be binding upon the Operating Partnership or the
Properties after the Closing Date, unless such contract is terminable without
payment of any termination fee or other penalty on thirty (30) days' notice or
less. Between the date hereof and the Closing Date, neither any Contributor nor
any Constituent Partnership shall consent to any zoning changes or enter into
any covenants or other agreements that would be binding on the Operating
Partnership or the Properties. Between the date hereof and the Closing Date, the
Contributors will advise the Operating Partnership of any written notice from
any governmental authority relating to the violation of any Law or ordinance
regulating the condition or use of the Properties and the Contributors shall
notify the Operating Partnership of any violation of any such Law or ordinance
of which the Contributors become aware.
4.2 No Brokers. Each of the Contributors covenants, represents and warrants
to the Operating Partnership and FAC that no broker or finder or agent has been
involved or engaged by it in connection with the transactions contemplated
hereby and, each hereby agrees to indemnify and hold harmless the Operating
Partnership and FAC from and against any and all broker's or finder's fees,
commissions or similar charges incurred or alleged to have been incurred by the
Contributors in connection with the transactions contemplated hereby and any and
all loss, liability, cost or expense (including without limitation reasonable
fees of counsel satisfactory to the Operating Partnership) arising out of any
claim that the indemnifying party incurred any such fees, commissions or
charges.
4.3 Section 754 Elections. Each of the Contributors agrees with respect to
such Constituent Parties as are being dissolved at the Operating Partnership's
direction and as to which the Operating Partnership has so requested, (i) to
cause an election under Section 754 of the Code to be included in the closing
federal partnership tax returns of each of the Constituent Parties indicating
the Operating Partnership as a partner; (ii) to prepare, at their expense, and
timely file closing partnership tax returns for the period ending on the Closing
Date for each of the Constituent Parties; and (iii) to present such tax returns
to the Operating Partnership for its approval, which shall not be unreasonably
withheld, sufficiently in advance of the filing of such returns.
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4.4 Termination of Contracts. Unless otherwise specified by the Operating
Partnership in writing, all management, development, leasing or other contracts
with respect to any Property, if any, must be terminated as of the date of
Closing with respect to such Property so that the Operating Partnership or its
designee shall have the exclusive right to manage and lease such Property.
4.5 Contributions of Assets. All personal property used in the operation
and management of the Properties including but not limited to that listed on
Schedule 4.6 will be transferred to the Operating Partnership in conjunction
with the Closing and as partial consideration for the transactions otherwise
contemplated by this Agreement.
4.6 Assignment of Warranties. Contributors agree, and shall cause the
Constituent Partnerships, to assign all warranties with respect to the
Properties to the Operating Partnership and will use their best efforts to cause
the maker of such warranties to consent to such assignment if necessary for such
assignment to be valid.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
CONTRIBUTORS - GENERALLY
To induce the Operating Partnership and FAC to enter into this Master
Agreement and the transactions contemplated hereby, unless otherwise indicated,
each of the Contributors represents and warrants that the statements contained
in Article V and Article VI are true, correct and complete on the date hereof
and will be true, correct and complete on the Closing Date. It is the express
intention and agreement of each of the Contributors that the representations and
warranties set forth in Article V and Article VI shall survive the consummation
of the transactions contemplated in this Master Agreement.
5.1 Consents. To the best knowledge of each Contributor, (i) no consents,
approvals, waivers, notifications, acknowledgments or permissions which have not
been obtained are required in order for any of the Constituent Parties to fully
perform its or his respective obligations under this Master Agreement or which,
if left unobtained at Closing and thereafter, would have a material adverse
affect on the value, operation, occupation, use or development of any Property,
and (ii) the execution and delivery of this Master Agreement by the Contributors
and the consummation of the transactions contemplated hereby, including without
limitation the execution of any related agreements, will not require the consent
of, or any prior filing with or notice to or payment to, any governmental
authority or other Person.
5.2 Disclosure. To the best knowledge of each of the Contributors, the
representations and warranties contained in this Master Agreement (including
Schedules and Exhibits and documents or instruments delivered in connection
herewith) or in any information, statement, certificate or agreement furnished
or to be furnished to the Operating Partnership by any of the Constituent
Parties in connection with the Closing pursuant to this Master Agreement or the
Exchange Option Agreement, do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements and
information contained herein or therein, in light of the circumstances in which
they are made, not misleading.
5.3 Absence of Conflicts. To the best knowledge of each Contributor, the
execution, delivery and performance of this Master Agreement by the Contributors
and the consummation of the transactions contemplated hereby, including without
limitation, the execution and delivery by the Contributors or the Constituent
Partnerships, as applicable, of any documents, instruments or agreements
contemplated hereby, will not (after a lapse of time, due notice or otherwise)
(a) conflict with, violate or result in any breach or
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default under (i) any provision of any partnership agreement, operating
agreement or certificate of any of the Constituent Parties; (ii) any Law,
statute, rule or regulation of any administrative agency or governmental body,
or any judgment, order, writ, stipulation, injunction, award or decree of any
court, arbiter, administrative agency or governmental body to which the
Constituent Parties or the Properties are subject; or (iii) any indenture,
agreement, instrument or other contract to which the Constituent Parties may be
bound or relating to or affecting their assets; or (b) result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under or result in the creation or imposition
of any Lien on the Properties or related assets in accordance with the terms of
this Master Agreement under any indenture, mortgage, contract, agreement, lease,
sublease, license, sublicenses, franchise, permit, instrument of indebtedness,
security agreement or other undertaking or instrument to which the Constituent
Parties may be bound or affected.
5.4 Certification of Constituent Financial Statements. The Constituent
Financial Statements are true, correct and complete in all material respects,
are prepared in accordance either with generally acceptable accounting
principles or federal income tax principles, consistently applied, and fairly
present the financial condition of each of the applicable Constituent Parties.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF CONTRIBUTORS AS TO THE
CONSTITUENT PARTNERSHIPS
Each of the Contributors jointly and severally represents and warrants to
the Operating Partnership and FAC as follows:
6.1 Power and Authority of Contributors and Constituent Partnerships. Each
of the Contributors and Constituent Partnerships, which is not an individual, is
a limited partnership or limited liability company, as the case may be, duly
formed and validly existing under the laws of the State of North Carolina. To
the best knowledge of each Contributor, each partner or member of the
Contributors and Constituent Partnerships which is not an individual has been
duly formed and is validly existing. All partnership interests in each
Contributor and Constituent Partnership, which is not an individual, have been
validly issued and fully paid. True, correct and complete copies of each of the
partnership agreements, operating agreements and other organizational documents,
as applicable, of the Contributors and Constituent Partnerships and all
amendments thereto, and the minutes of any meetings of the partners of the
Contributors and Constituent Partnerships, have been submitted to the Operating
Partnership prior to the date of this Master Agreement. Each of the documents
and instruments contemplated hereby and other instruments and documents to be
executed and delivered by the Contributors and Constituent Partnerships, as
applicable, hereunder will, when executed, constitute the legal, valid and
binding obligations of the Contributors and Constituent Partnerships,
respectively, enforceable against them in accordance with their respective
terms. To the best knowledge of each of the Contributors, the Closing of the
Exchange Option Agreement, and the Master Agreement will effectuate the transfer
of all of the ownership interests of each of the Constituent Parties in and to
the Properties.
6.2 Rent Roll and Leases. The schedule of leases attached hereto as
Schedule 6.2A (the "Schedule of Leases") is a true, correct and complete
schedule of all leases, subleases and rights of occupancy in effect with respect
to each of the Properties, respectively (the "Leases"), and there have been no
material changes to the Leases. Except as set forth on the Schedule of Leases,
there are no other leases, subleases, tenancies or other rights of occupancy in
effect with respect to the Properties other than the Leases. True, correct and
complete copies of the Leases, together with all amendments and supplements
thereto and all other documents and correspondence relating thereto, have been
delivered or made available to the
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Operating Partnership and its agents. Schedule 6.2A includes the rent roll
information and is, as of the date shown thereon, true and correct in all
material respects. To the best knowledge of each of the Contributors, the
Schedule of Leases sets forth, as of such date, (i) a list of all tenants under
the Leases, (ii) all arrearages owing from such tenants under such Leases
(listed on delinquency and default reports attached to and made a part thereof),
(iii) the expiration date of the term of such Leases, (iv) the rent the tenant
under such Lease is currently obligated to pay, (v) the amount of any concession
given in connection with any such Lease at any time, (vi) the current
outstanding balances of any security deposits held pursuant to any Leases, (vi)
any prepayments of rent by any tenant under any Lease of more than one (1) month
in advance (excluding security deposits which are delineated on the list
attached to the Schedule of Leases and made a part thereof) and (viii) each
Contributor represents that to his best knowledge, there are no rental
concessions or abatements under a Lease applicable to any period subsequent to
the Closing. Except as set forth on the Schedule of Leases, to the best
knowledge of the Contributors, all such Leases are valid and enforceable and
presently in full force and effect, and none of the Leases have been assigned.
Except as set forth on Schedule 6.2B attached hereto, none of the Constituent
Parties, or to the best knowledge of each Contributor, any lessee under any
Lease, is in default under such Lease, and to the best knowledge of each
Contributor, there is no event which, but for the passage of time or the giving
of notice, or both, would constitute a default under such Leases, except such
defaults that would not have a material adverse effect on the condition,
financial or otherwise or on the earnings, business affairs or business
prospects of any of the Constituent Parties or the Properties. Except as
disclosed on Schedule 6.2B attached hereto, to the best knowledge of each of the
Contributors, the consummation of the transactions contemplated by this Master
Agreement will not give rise to any breach, default or event of default under
any of the Leases. Each of the Leases is assignable by the applicable
Constituent Party and, except as disclosed on Schedule 6.2C attached hereto,
none of the Leases requires the consent or approval of any party in connection
with the transactions contemplated by this Master Agreement.
6.3 No Contracts. No agreements, undertakings or contracts (the
"Contracts") affecting the Properties or the Constituent Parties, written or
oral, will be in existence as of the Closing, except as has been disclosed to
the Operating Partnership in writing.
6.4 Liabilities; Indebtedness. Except for the Outstanding Debt Financing
and the Leases, and those liabilities disclosed to the Operating Partnership in
writing on Schedule 6.4 hereto, the Constituent Parties have not incurred any
Indebtedness related to the Properties except in each instance for trade
payables and any other customary and ordinary expenses in the ordinary course of
business that will be paid and discharged in full by the Constituent Parties,
respectively, as of the Closing.
6.5 Insurance. Each of the Constituent Parties currently maintains or
causes to be maintained all of the public liability, casualty and other
insurance coverage with respect to the Properties and their respective
businesses as has been disclosed to the Operating Partnership and FAC, and such
insurance is adequate for the full coverage of the Properties. All such
insurance coverage shall be maintained in full force and effect through the
Closing and all premiums due and payable thereunder have been, and shall be,
fully paid when due.
6.6 Personal Property. All equipment, fixtures and personal property
located at or on any of the Properties, respectively, which is owned or leased
by Contributors or the Constituent Partnerships shall remain at the Properties
and shall not be removed prior to the Closing, except for equipment that becomes
obsolete or unusable, which may be disposed of or replaced in the ordinary
course of business. The personal property of Contributors or the Constituent
Partnerships is not subject to any Liens except for Permitted Liens.
6.7 Claims or Litigation. Except as set forth on Schedule 6.7 attached
hereto, none of the Contributors or Constituent Parties has received notice of
any claim, demand, suit or unfiled lien against
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the Contributors or Constituent Parties or the Properties nor to any of the
Contributors' best knowledge has any proceeding or litigation of any kind,
pending or outstanding, been filed before any court or administrative,
governmental or regulatory authority, agency or body, domestic or foreign, and,
to the best knowledge of any of the Contributors, no order, judgment, injunction
or decree of any court, tribunal or other governmental authority has been filed
against any of the Constituent Parties or any of the Properties or, to the best
knowledge of any of the Contributors, threatened, or likely to be made or
instituted, which would have a materially adverse affect on the business or
financial condition of any of the Constituent Parties or any of the Properties
or in any way be binding upon the Operating Partnership or affect or limit the
Operating Partnership's full use and enjoyment of any of the Properties.
6.8 Hazardous Substances. Each of the Contributors represents, to his best
knowledge, that (x) as of the date hereof and (y) except as set forth in the
environmental audit reports provided to the Operating Partnership by the
Constituent Parties, as of the Closing Date, the Constituent Parties have not
generated, stored, released, discharged or disposed of hazardous substances or
hazardous wastes at, upon or from any of the Properties in violation of any
Environmental Law, order, judgment or decree or permit, or in connection with
which remedial action would be required under any Environmental Law, order,
judgment, decree or permit. To the best knowledge of each of the Contributors,
(x) as of the date hereof and (y) except as set forth in the environmental audit
reports provided to the Operating Partnership by the Constituent Parties, as of
the Closing Date, no hazardous substances or hazardous wastes have otherwise
been generated, stored, released, discharged or disposed of from, at or upon any
of the Properties in violation of any Environmental Law. To the best knowledge
of each of the Contributors, (x) as of the date hereof and (y) except as set
forth in the environmental audit reports provided to the Operating Partnership
by the Constituent Parties, as of the Closing Date, no underground storage tanks
are located on any of the Properties. As used in this Master Agreement, the
terms "hazardous substances" and "hazardous wastes" shall have the meanings set
forth in the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, and the regulations thereunder, the Resource Conservation and
Recovery Act, as amended, and the regulations thereunder, and the Federal Clean
Water Act, as amended, and the regulations thereunder, and such terms shall also
include asbestos, petroleum products, radioactive materials and any regulated
substances under any Environmental Law, regulation or ordinance.
6.9 Compliance with Laws. The Constituent Parties possess such
certificates, authorities or permits issued by the appropriate state or federal
regulatory agencies or bodies necessary to conduct the business to be conducted
by them (other than any environmental certification, authorities or permits
required by state or federal agencies to be obtained by tenants of the
Properties) and none of the Constituent Parties has received any written notice
of proceedings relating to the revocation or modification of any such
certificate, authority or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
business affairs or business prospects of any of the Constituent Parties or any
of the Properties, as applicable. Except as otherwise disclosed to the Operating
Partnership in writing, to the best knowledge of each of the Contributors, there
is no existing violation of any federal, state, county or municipal Law,
ordinance, order, code, regulation or requirement affecting any of the
Constituent Parties or the Properties that would have a material, adverse effect
on the financial condition, business or prospects of any of the Constituent
Parties. Except as otherwise disclosed to the Operating Partnership in writing,
to the best knowledge of each of the Contributors, there has been no material
misstatement of a fact or misrepresentation of a fact herein or in any other
written document submitted by any of the Constituent Parties to the Operating
Partnership. Except as otherwise disclosed to the Operating Partnership in
writing, to the best knowledge of each of the Contributors, there are no zoning,
environmental or other land use regulation proceedings instituted against any of
the Properties. To the best knowledge of each of the Contributors, each of the
Constituent Parties has obtained all material licenses, permits, certificates
and authorization necessary to conduct its business.
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6.10 Employees. None of the Constituent Parties presently has any employees
nor have any of the Constituent Parties ever had any such employees.
6.11 Condemnation and Moratoria. Except as set forth on Schedule 6.11, to
the best knowledge of each of the Contributors, there are (i) no pending or
threatened condemnation or eminent domain proceedings, or negotiations for
purchase in lieu of condemnation, which affect or would affect any portion of
any of the Properties; (ii) no pending or threatened moratoria on utility or
public sewer hook-ups or the issuance of permits, licenses or other inspections
or approvals necessary in connection with the construction or reconstruction of
improvements, including without limitation tenant improvements, which affect or
would affect any portion of any of the Properties; and (iii) no pending or
threatened proceeding to change adversely the existing zoning classification as
to any portion of any of the Properties. No portion of any of the Properties is
a designated historic property or located within a designated historic area or
district, and to the best knowledge of each of the Contributors, there are no
graveyards or burial grounds located within any of the Properties. The Operating
Partnership shall be entitled to all compensation received from any governmental
authority relating to the proceedings or negotiations described on Schedule
6.11.
6.12 Condition of Improvements. To the best knowledge of each of the
Contributors after reasonable inquiry, (x) as of the date hereof and (y) except
as otherwise disclosed to the Operating Partnership during the due diligence
process related to the Properties by its independent engineers or others
conducting such due diligence, as of any Closing Date, there is no material
defect in the condition of (i) any of the Properties, (ii) the improvements
thereon, (iii) the roof, foundation, load-bearing walls or other structural
elements thereof, (iv) any drainage or soil condition of any nature, or (v) the
mechanical, electrical, plumbing and safety systems therein, nor any material
damage from casualty or other cause, nor any soil condition of any nature that
will not support all of the Improvements currently thereon without the need for
unusual or new subsurface excavations, fill, footings, caissons or other
installations.
6.13 Taxes. Except as set forth on Schedule 6.13 attached hereto and the ad
valorem taxes assessed on the Properties, (i) all tax or information returns
required to be filed on or before the date hereof by or on behalf of the
Constituent Parties or the Properties have been filed and all such tax or
information returns required to be filed hereafter will be filed on or before
the date due in accordance with all applicable laws prior to the incurrence of
any penalties or interest thereon and all taxes shown to be due on any returns
have been paid or will be paid when due; and (ii) to the best knowledge of each
of the Contributors, there is no action, suit or proceeding pending against or
threatened with respect to any Constituent Party or any of the Properties in
respect of any tax, nor is any claim for additional tax asserted by any taxing
authority. None of the Constituent Parties nor any of their respective federal,
state and local income or franchise tax returns are the subject of any audit or
examination by any taxing authority. None of the Constituent Parties has
executed or filed with the Internal Revenue Service or any other taxing
authority any agreement now in effect extending the period for assessment or
collection of any income or other taxes.
6.14 Management Agreements. All management, leasing, development or service
and similar agreements in effect relating to the Properties and certain other
properties owned or controlled by Contributors and which have been specified by
FAC or the Operating Partnership (collectively, the "Management and Leasing
Agreements") shall be terminated as of the Closing Date and thereafter shall be
void and of no further force and effect.
6.15 Operating Agreements. True, complete and correct copies of all
agreements pertaining to the operation of the Properties as of the date hereof
(collectively, the "Existing Operating Agreements") have been provided or made
available to the Operating Partnership. The Existing Operating Agreements are,
to the best knowledge of each of the Contributors, in full force and effect, no
Constituent Party is in
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default of any of its material obligations under any of such Existing Operating
Agreements, and except for those set forth on Schedule 6.15 attached hereto, all
Existing Operating Agreements are terminable on not more than thirty (30) days
prior written notice and without payment of any penalty. At the Closing with
respect to each of the Properties, true, complete and correct copies of such
Existing Operating Agreements shall have been provided or made available to the
Operating Partnership and, to the best knowledge of each of the Contributors,
the Existing Operating Agreements shall be, unless otherwise described in
writing to the Operating Partnership or except as otherwise provided herein, (i)
in full force and effect and (ii) free from any default by the appropriate
Constituent Party of any of its material obligations under any of them. The
Contributors shall advise the Operating Partnership immediately of any default
by any party to an Existing Operating Agreement. The Operating Partnership does
not assume any obligation under any Existing Operating Agreement for acts or
omissions which occur prior to Closing.
6.16 Absence of Certain Changes. Since December 31, 1996, except as
otherwise set forth in this Master Agreement, to the best knowledge of each of
the Contributors, there has not been with respect to itself or any of the
Constituent Partnerships:
(a) any material adverse change in the financial condition of any of
such Constituent Parties;
(b) any adverse change in the condition of the property, business or
liabilities of any of such Constituent Parties except normal and usual
changes in the ordinary course of business which have not been materially
adverse;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of
any of the Constituent Parties;
(d) any sale, abandonment or other disposition by any of the
Constituent Parties of any interest in the Properties, or of any personal
property owned by a Constituent Party, other than in the ordinary course of
such Constituent Party's business;
(e) any change in the accounting methods or practices by any of the
Constituent Parties or in depreciation or amortization policies theretofore
used or adopted;
(f) any material contractual liability incurred by any of the
Constituent Parties, contingent or otherwise, other than for operating
expenses, obligations under executory contracts incurred for fair
consideration and taxes accrued with respect to operations during such
period, all incurred in the ordinary course of business; or
(g) any other material adverse change in the business, operations or
liabilities of any of the Constituent Parties or any of the Properties.
6.17 Tradename. There have never been any Liens or pending or threatened
third-party claims for infringement or unlawful use of the tradename used by any
Constituent Party, and to the best knowledge of each of the Contributors each of
the Constituent Parties has the right to sell, transfer, assign and convey the
Tradename to the Operating Partnership, provided, however, no party has filed
for any protection under federal or state trademark laws and no Constituent
Party has taken any steps other than use to secure any common Law proprietary
interest in the Tradename.
6.18 Title. The Contributors or Constituent Partnerships, as applicable,
have good and marketable fee simple title to the Properties, and as of Closing
there will be no mechanics' liens, contractors' claims, unpaid bills for
material or labor pertaining to the Properties, nor any other similar
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liens which might adversely affect such Contributors' or Constituent
Partnerships' title to the Properties, except for current ad valorem real estate
taxes.
6.19 Certain Liens. All labor and services performed and materials
furnished to the Properties have been paid for in full and to the best of the
Contributors' knowledge, there exists no basis for which a mechanic's,
materialman's or similar lien can properly be claimed against the Properties or
any part thereof.
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ARTICLE VII
CONDITIONS TO CLOSING AND
DUE DILIGENCE INVESTIGATION
7.1 Conditions to Closing of Properties. In addition to the other
pre-conditions detailed herein, each of the following shall be a condition as
described below to the obligation to close the transactions contemplated hereby
with respect to the Properties:
(a) FAC Shareholder Approval. If it is determined by FAC that the
completion of the transactions contemplated hereby requires the approval of
FAC's shareholders, then (i) such approval shall be a condition to close
the transaction contemplated hereby and (ii) FAC agrees that it shall in
good faith promptly begin the process of preparing and filing with the SEC
any necessary proxy material and will call for and hold a shareholder
meeting as soon as is reasonably practicable to vote on such matter. If
such approval is required and the shareholders of FAC do not approve the
transactions contemplated hereby, this Agreement shall be terminated.
(b) Refinancing of Loans. The Operating Partnership shall have no
obligation to close the transactions contemplated hereby if the Operating
Partnership determines that it is unable to obtain the consent of the
holders of the Outstanding Debt Financing to the assignment of the
Interests or sale of the Properties on terms reasonably acceptable to the
Board of Directors of FAC, including non-recourse provisions satisfactory
to FAC in FAC's sole discretion.
(c) Termination of Management Contracts. The Operating Partnership
shall have no obligation to close the transactions contemplated hereby if
the Operating Partnership does not have the unconditional right, as of the
Closing Date, to manage all of the Properties and such other properties
owned or controlled by Contributors as the Operating Partnership and FAC
shall require. Any costs associated with terminating any existing contracts
shall be at the Contributors' expense.
(d) No Material Adverse Change to Properties. The Operating
Partnership shall have no obligation to close the transactions contemplated
hereby if there has been a material adverse change in the condition,
financial or otherwise, of any of the Properties, or the business prospects
of any of the Properties from the date hereof.
(e) Title and Survey. The Operating Partnership shall have no
obligation to close the transactions contemplated hereby if the
Contributors do not convey good and marketable title to the Properties,
which shall be free and clear of all liens, defects and encumbrances,
except "Permitted Liens." The Operating Partnership shall be responsible
for ordering the ALTA survey at the Operating Partnership's cost.
Additionally, the Operating Partnership and the Contributors are each
responsible for their respective legal fees. Any fees associated with the
assumption, consent or assignment or the prepayment or retirement of debt
encumbering any of the Properties, property transfer and documentary taxes,
all other costs related to the transfer of the Properties and escrow fees
shall be paid by the Contributors.
(f) Opinion to the Operating Partnership. The Operating Partnership
shall have no obligation to close the transactions contemplated hereby if
the Operating Partnership and FAC have not received an opinion of counsel
to the Contributors and Constituent Parties which is satisfactory to the
Operating Partnership and FAC in form and substance.
(o) Zoning. No actual or threatened easement, zoning ordinance or use
regulation, statute, ordinance, Law, juridical decision, official or
unofficial policy, restriction or reservation or proposed
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shall prohibit or impair (and there shall be no pending or threatened
litigation which may prohibit or impair) the Operating Partnership's use
and operation of the Properties.
(p) Representations and Warranties. All of the representations and
warranties of the parties hereto shall be true and correct in all material
respects as of the Closing Date and the Contributors shall have delivered
to the Operating Partnership and FAC the Bringdown Certificate in respect
thereof.
7.2 The Operating Partnership Investigation/Due Diligence Period. For a
period commencing upon the execution date of this Agreement and continuing
through and including the Closing Date ("Investigation/Due Diligence Period"),
the Operating Partnership, at its own expense, shall have the right, but not the
obligation, to perform due diligence on the Properties and the Constituent
Parties, including but not limited to the following procedures:
(a) Physical. Inspect all physical aspects of the Properties,
including inspections of all apartment units at each Property and including
all systems, components and service contracts. Contributor agrees to supply
the Operating Partnership with "as-built" plans, specifications and surveys
with respect to all Properties.
(b) Regulatory. Investigate all zoning, code and governmental
requirements, including the review of certificates of occupancy and
licenses, all which shall be provided by the Constituent Parties.
(c) Environmental. Review and perform Phase I and Phase II audits and
other environmental studies.
(d) Title. Review preliminary title reports and surveys.
(e) Lease and Tenant Information. Review copies of leases, rental
agreements and contracts, together with any modifications or amendments
therein pertaining to the operation of the Properties.
(f) Books and Records. Obtain the Constituent Financial Statements;
verify financial information from all accounting books and records since
the inception of the Contributors' ownership; review any other information
and documents in the Contributors' possession or control and pertaining to
the Contributors' ownership and operation of the Properties including all
tax records (collectively, the "Records").
Each Contributor covenants and agrees that it shall provide the Operating
Partnership with access to all Records in the Constituent Parties' possession
and control. The Operating Partnership shall conduct all of its property
inspections in a manner intended to accommodate the tenants or to the operation
of the Properties.
After its investigation, if the Operating Partnership, in its sole
discretion determines that any Property or Interests are not satisfactory for
purchase or operation, then the Operating Partnership may terminate this Master
Agreement as to such Property or Interests. Such termination shall have no
effect upon the parties' respective obligations with respect to Properties or
Interests as to which this Master Agreement has not been so terminated.
The Constituent Parties and each Contributor will cooperate with the
Operating Partnership before and after Closing in providing such information as
the Operating Partnership may reasonably require to
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prepare its proxy material and Form 8-K filings and such other reports and
filings as may be required by any governmental authority, NYSE or applicable
exchange.
7.3 Closing Documents. At Closing the Contributors and, as applicable, the
Constituent Partnerships shall execute and deliver the following documents to
the Operating Partnership:
(a) Title Insurance Affidavit. Any affidavit required by the title
company to remove the standard printed exceptions from the title policy and
the loan policy. Additionally, Constituent Parties shall discharge in full
any and all indebtedness underlying such exceptions at or before the
Closing.
(b) Letters to Tenants. Letters addressed to the Tenants and signed by
the Contributors or, if applicable, the Constituent Partnerships, advising
the Tenants of the Closing of the Transactions and the Operating
Partnership's right to receive the rents under their respective Leases.
(c) Bringdown Certificate. The Bringdown Certificate.
(d) Other Documents. Such other documents as may be reasonably
required to close the Transactions contemplated by this Master Agreement.
ARTICLE VIII
INDEMNITY
8.1 Representations and Warranties of each of the Contributors. Each of the
Contributors hereby agrees, for himself and his successors and assigns, to
indemnify, defend and hold both the Operating Partnership and FAC harmless from
and against any and all damage, cause of action, action, proceeding, expense,
loss, cost, claim or liability (each a "Claim") suffered or incurred by either
the Operating Partnership or FAC as a result of any of the following: any
untruth, inaccuracy or breach of any of the representations, warranties or
covenants made by himself or any Constituent Party controlled by such
Contributor in this Master Agreement, or in the Exchange Option Agreement, the
Bringdown Certificate or any other document, certificate or exhibit delivered in
connection therewith. It is the express intention and agreement of the parties
that the foregoing indemnity shall survive the consummation of the transactions
contemplated in this Master Agreement.
8.2 Arbitration. Any dispute, claim or controversy between the Operating
Partnership and any Contributor as to liability of any Contributor above shall
be settled by arbitration in accordance with this Section. Each of the Operating
Partnership and the Contributors (by a vote of majority thereof) shall appoint
an arbitrator, and the two arbitrators so appointed shall promptly select a
third arbitrator. Within thirty (30) days of the completion of such
appointments, the parties shall submit to arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The place
of arbitration shall be Cary, North Carolina. Notwithstanding anything to the
contrary herein, the arbitrators are not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives any right to
recover such damages with respect to any dispute or controversy resolved by
arbitration under this Section. Judgment on the award rendered by the
arbitrators may be entered in any court of competent jurisdiction and shall be
binding upon the parties.
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ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and demands which any party is required or desires
to give to the other shall be given in the manner and at the addresses set forth
in the Exchange Option Agreement.
9.2 Counterparts. This Master Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.3 Severability. Any provision of this Master Agreement which is
prohibited or unenforceable in any jurisdiction shall as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision on any other jurisdiction.
9.4 Assigns. This Master Agreement shall be binding upon and inure to the
benefit of any and all successors, assigns, or other successors in interest of
FAC and the Operating Partnership. This Master Agreement shall be binding upon
and inure to the benefit of any and all respective successors, assigns, personal
representatives, executors, or other successors in interest of the Contributors;
provided, however, that none of the Contributors shall assign its rights or
delegate its obligations hereunder without the prior written consent of the
Operating Partnership, which may be withheld for any reason. This Master
Agreement shall not confer any rights or remedies upon any person or entity
other than the Operating Partnership, FAC, the Contributors and their respective
successors and permitted assigns.
9.5 Public Announcement. Except as otherwise required by Law, the
Contributors shall not make public announcements with respect to the
transactions contemplated by this Master Agreement without the approval of the
other parties, which approval may be withheld for any reason.
9.6 Confidentiality Each party hereto shall ensure that all confidential
information which such party or any of its respective officers, directors,
employees, counsel, agents or accountants may now possess or may hereafter
create or obtain relating to the financial condition, results of operations,
business, properties, assets, liabilities or future prospects of the other
party, any Affiliate or subsidiary of the other party or any tenant, customer or
supplier of such other party, or any such Affiliate or subsidiary, shall not be
published, disclosed or made accessible by any of them to any other person or
entity at any time or used by any of them, in each case without the prior
written consent of the other party; provided, however, that the restrictions of
this sentence shall not apply: (i) to the extent that disclosure may otherwise
be required by Law; (ii) to the extent such information shall have otherwise
become publicly available; or (iii) to disclosure by or on its behalf to its
lender(s) for the purpose of obtaining financing in connection with the
acquisition of the Properties. In the event this Master Agreement is terminated,
each party promptly will deliver or certify destruction to the other party all
documents, work papers and other material (and any reproductions thereof)
obtained by each party or on its behalf from such other party or its Affiliates
or subsidiaries in connection with the subject transaction, whether so obtained
before or after the execution hereof, and will itself not use any information so
obtained and will use its good faith and diligent efforts to have any
information so obtained kept confidential and not used in any way detrimental to
such other party, subject to the limitations set forth in this Section above.
9.7 Remedies. In the event that any party defaults or fails to perform any
of the conditions or obligations of such party under this Master Agreement or
any other agreement, document or instrument executed in connection with this
Master Agreement, or in the event that any such party's representations or
warranties contained herein or in any such other agreement, document or
instrument are not true and correct as of the date hereof and as of the Closing
Date, any other party shall be entitled to exercise any
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and all rights and remedies available to it by or pursuant to this Master
Agreement, documents or instruments contemplated hereby or at Law (statutory or
common) or in equity subject to the limitation on liability set forth herein;
provided, however, that in the event of a Closing of the transactions
contemplated by this Master Agreement, the rights and remedies of each party
shall be limited to the rights contained in Article X of this Master Agreement.
9.8 Captions. The captions and headings set forth in this Master Agreement
are for convenience of reference only and shall not be construed as a part of
this Master Agreement.
9.9 Exhibits and Schedules. All exhibits and schedules referred to in this
Master Agreement and attached hereto shall be deemed and construed as part of
this Master Agreement and for all purposes all such exhibits and schedules are
hereby specifically incorporated herein by reference.
9.10 Merger Clause. This Master Agreement and the Exchange Option Agreement
contain the final, complete and exclusive statement of the agreement among the
parties with respect to the transactions contemplated herein and therein, and
all prior or contemporaneous oral and all prior written agreements with respect
to the subject matter hereof are merged herein.
9.11 Amendments and Waiver. No change, amendment, qualification,
cancellation or termination hereof shall be effective unless in writing and duly
executed by each of the parties hereto. No failure of any party to enforce any
provisions hereof or to resort to any remedy or to exercise any one or more of
alternate remedies and no delay in enforcing, resorting to or exercising any
remedy shall constitute a waiver by that party of its right subsequently to
enforce the same or any other provision hereof or to resort to any one or more
of such rights or remedies on account of any such ground then existing or which
may subsequently occur.
9.12 Governing Laws. This Master Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware and of
the United States of America.
IN WITNESS WHEREOF, the parties have duly executed this Agreement by their
hands and under seal affixed hereto as of the date and year first above written.
FAC REALTY TRUST, INC.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
FAC PROPERTIES, L.P.
By: FAC Realty Trust, Inc.,
General Partner
By: _____________________________________
Title: __________________________________
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Separate signature page to Master Agreement.
FESTIVAL ASSOCIATES LIMITED PARTNERSHIP,
a North Carolina limited partnership
By: _____________________________________ [SEAL]
Name:
General Partner
By: _____________________________________ [SEAL]
Name:
General Partner
20
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Properties and Constituent Partnerships
Schedule 3.2 Outstanding Debt Financing
Schedule 4.6 Personal Property of Constituent Parties
Schedule 6.2A Schedule of Leases
Schedule 6.2B Lease Defaults
Schedule 6.2C Lease Consents
Schedule 6.4 Liabilities
Schedule 6.7 Claims or Litigation
Schedule 6.11 Condemnation and Moratoria
Schedule 6.13 Taxes
Schedule 6.15 Operating Agreements - Exceptions to Termination
21
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Schedule 1
Property
Constituent Partnership Name Contributor
- ----------------------- ---- -----------
N/A Celebration at Six Forks Festival Associates
Limited Partnership
22
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Schedule 3.2
Outstanding Debt Financing
Properties Balance
---------- -------
Celebration $_______
23
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Schedule 6.4
Liabilities
NONE, except for (i) mortgages as more particularly set forth in Schedule 3.2
and (ii) tenant security deposits in the amounts and from the tenants as has
been previously provided by the Owners to the REIT.
24
EXCHANGE OPTION AGREEMENT
BY AND AMONG
FAC PROPERTIES, L.P.,
FAC REALTY TRUST, INC.,
AND THE OWNERS OF
THE PROPERTIES AND INTERESTS LISTED HEREIN
DATED AS OF APRIL ____, 1998
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
DOCUMENT USED IN CONNECTION WITH THE OFFERING AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
THE
<PAGE>
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
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TABLE OF CONTENTS
Page
1. Contribution of Interests................................................1
2. Payment of the Consideration.............................................2
A. Units Issued....................................................2
B. The Lock-Up.....................................................2
3. The Closing..............................................................2
A. Conditions to Closing - Generally...............................2
B. Closing; Condition to Obligations...............................3
C. Default.........................................................4
D. Documents to be Delivered at Closing............................4
E. Documents Required to be Delivered by the Operating
Partnership and the REIT at Closing.............................5
4. Holdback of Units........................................................5
Celebration Post Office Space. .........................................6
5. Representations and Warranties of Owners.................................6
A. Existence and Power.............................................6
B. Authorization: No Contravention.................................7
C. Pending Actions.................................................7
D. Investment Representations and Warranties.......................7
E. NASD Affiliation................................................9
F. Foreign Person..................................................9
6. Representations and Warranties of the Operating Partnership
and the REIT.............................................................9
7. Other Provisions........................................................10
A. Counterparts...................................................10
B. Entire Agreement...............................................10
C. Construction...................................................10
D. Applicable Law.................................................10
E. Severability...................................................10
F. Waiver of Covenants, Conditions and Remedies...................10
G. Schedules......................................................11
H. Amendment and Assignment.......................................11
I. Relationship of Parties........................................11
J. Further Acts...................................................11
K. Notice.........................................................11
L. Consent to Transfer of Interests...............................12
SCHEDULES....................................................................15
i
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EXCHANGE OPTION AGREEMENT
THIS EXCHANGE OPTION AGREEMENT (the "Agreement") made and entered into as
of the ___ day of April, 1998, by and among each of the persons whose names are
set forth on Schedule A hereof (each being hereinafter called an "Owner" and
collectively the "Owners"), FAC PROPERTIES, L.P., a Delaware limited partnership
("Operating Partnership") and its general partner, FAC REALTY TRUST, INC., a
Maryland corporation (the "REIT").
W I T N E S S E T H:
WHEREAS, the Operating Partnership is a Delaware limited partnership having
the REIT as its sole general partner and the REIT has elected to be qualified as
a real estate investment trust under the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder (the
"Code"); and
WHEREAS, each Owner owns an interest in one or more of the partnerships,
the limited liability companies and/or the properties listed on Schedule B
attached hereto and incorporated herein by reference (such schedule is herein
referred to as such Owner's "Acquisition Schedule"); and
WHEREAS, the Operating Partnership desires to acquire from each Owner, and
each Owner desires to transfer to the Operating Partnership, on the terms and
conditions set forth herein, all interests owned by such Owner and set forth in
such Owner's Acquisition Schedule and any other direct or indirect equity
interests such Owner may have, whether now owned or hereinafter acquired, in the
partnerships and/or limited liability companies (collectively the "Acquired
Partnerships" or "Partnerships") or the properties (the "Properties") listed on
Schedule B attached hereto, and each such direct or indirect equity interest of
an Owner in such Acquired Partnerships or Properties is referred to individually
as an "Interest" and, collectively, as such Owner's "Interests"; and
WHEREAS, the Owners have agreed to contribute their Interests to the
Operating Partnership in exchange for limited partnership interests in the
Operating Partnership (the "Partnership Units" or "Units") and the Operating
Partnership has agreed to acquire the Interests and to issue to each Owner
Partnership Units in the Operating Partnership in exchange for the contribution
of each Owner's Interest; and
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and conditions herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties do hereby agree as follows:
<PAGE>
1. Contribution of Interests. Subject to the terms and provisions hereof
and of the Master Agreement (as defined below), each Owner does hereby agree to
contribute to the Operating Partnership or its designee its Interests and the
Operating Partnership does hereby agree to accept such Interests (or to cause
its designee to accept such Interests) and the Operating Partnership further
agrees to issue to each Owner, in exchange for such contribution, the
Partnership Units as provided in Paragraph 2 and on Schedule B hereof. Anything
to the contrary in this Agreement or the Master Agreement notwithstanding, the
Operating Partnership shall at all times have the irrevocable right and option
to require the Owners of all of the interests in a Property to either convey to
the Operating Partnership (or its designee) such ownership interests or, in lieu
thereof, fee simple title to the Property. All such contributions and issuances
at a Closing shall otherwise be in accordance with this Agreement.
2. Payment of the Consideration.
A. Units Issued. The consideration for each Owner's Interests shall be
(i) the number of Units as set forth in such Owner's Acquisition Schedule
and (ii) a cash payment in the amount of $2,111,468, less the Withheld Cash
(as hereinafter defined), subject in each case to the provisions of
Paragraph 4 below. The number of such Units and amount of cash are subject
to adjustment at Closing due to principal payments on any mortgage loan,
prorations and post-closing adjustments as provided in the Master Agreement
(as defined below).
For the first fiscal year (or other period over which distributions
are paid) of the Operating Partnership ending after the date of Closing,
partnership distributions, if any, attributable to such year (or other
period) payable by the Operating Partnership to Owner pursuant to Section
5.1 of the Partnership Agreement (as defined at Paragraph 3.E(i) below)
shall be prorated to take into account the period of time during such year
(or other period) that the Owner or its successors in interest to the Units
is a limited partner in the Operating Partnership. The Owner shall receive,
contemporaneously with receipt by the other limited partners in the
Operating Partnership of their respective distributions for such year (or
other period), that portion of a full distribution otherwise attributable
to its Units determined by multiplying the amount of such full distribution
by a fraction the numerator of which is the number of days during such year
(or other period) that the Owner is a limited partner in the Operating
Partnership and the denominator of which is the number of days in such year
(or other period). In the event that the Owner receives a full cash
distribution for such period, it shall reimburse the Operating Partnership
the prorated portion of such distribution within five (5) days of receipt.
B. The Lock-Up. Each Owner hereby agrees that without the prior
written consent of the REIT, he will not, directly or indirectly, sell,
offer or contract to sell, grant any option for the sale of, seek
redemption of or otherwise dispose of or transfer (collectively, "dispose
of"), any Partnership Units received hereby except as set forth at Schedule
E hereof.
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3. The Closing.
A. Conditions to Closing - Generally. The Closing is conditioned upon
satisfaction of the terms and conditions for closing of the Master
Agreement dated as of even date herewith by and among the Operating
Partnership, the REIT and the Owners (the "Master Agreement").
B. Closing; Condition to Obligations. Subject to the foregoing, the
Operating Partnership will specify a closing date, which date shall be no
later than April 30, 1998, for the closing (the "Closing") of the exchange
contemplated hereby which Closing shall take place at the offices of the
REIT. At or before Closing, the Operating Partnership (or its designee) and
Owner will execute all closing documents (the "Closing Documents") required
by the Operating Partnership in accordance with Paragraph 3.D. and deposit
the same in escrow with the REIT or other escrow agent to be selected by
the REIT (the "Closing Agent").
If the Closing occurs:
(i) With respect to each Partnership or Property (or portion
thereof) acquired, the Operating Partnership shall cause to be
delivered to the Closing Agent for the benefit of each Owner the
number of Units set forth on each Owner's Acquisition Schedule, as
adjusted pursuant to the terms hereof and the Master Agreement;
(ii) Upon receipt of the consideration set forth in clause (i)
above, the Closing Agent will release the Closing Documents to the
Operating Partnership; and
(iii) The transactions described or otherwise contemplated herein
or in the Closing Documents will thereupon be deemed to have been
consummated.
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<PAGE>
Notwithstanding the above, the Operating Partnership may, in its sole
discretion, elect not to complete the acquisition of Interests of any
Owner with an identified breach of (and failure to cure within any
relevant grace or cure period) or other exception with respect to
Paragraph 5 hereof or that has otherwise breached (and failed to cure)
this Agreement (any such Owner being hereafter referred to as a
"Non-Complying Owner"), in which case the Operating Partnership shall,
in lieu of the delivery with respect to such Owner pursuant to clause
(i) above, notify the Closing Agent of such election and direct the
Closing Agent to return such Owner's Closing Documents and any other
agreements or instruments executed in connection with the transactions
contemplated thereby (the "Ancillary Agreements") to such Owner. The
election of the Operating Partnership not to acquire the Interests of
a particular Non-Complying Owner shall not affect the obligations of
any other Owner hereunder, including any other Non-Complying Owner. If
because of such an election, the Operating Partnership would not
acquire all of the Interests in any one Partnership or Property, then
the Operating Partnership may elect not to purchase any of the
Interests in such Partnership or Property and none of the Owners in
such Partnership or Property shall contribute its respective Interest
in such Partnership or Property to the Operating Partnership.
If the Closing of a Partnership or Property does not occur as a result
of a Non-Complying Owner within the time provided by Paragraph 3.B.,
then the Closing Agent will be directed to destroy such Closing
Documents and Ancillary Agreements it holds and return to the
Operating Partnership the consideration delivered by the Operating
Partnership to the Closing Agent with respect to such Partnership or
Property in accordance with the previous paragraph.
C. Default. If any party hereto defaults with respect to its
obligations under this Agreement, the other party shall be entitled to
exercise any and all remedies provided at law or in equity, including but
to limited to, the right to specific performance. Except as otherwise
provided herein, no default by any Owner hereunder shall in any way limit
or affect the obligations of any other Owner hereunder.
D. Documents to be Delivered at Closing. At or prior to the Closing,
each Owner which is a party hereto shall execute, acknowledge where deemed
desirable or necessary by the Operating Partnership, and deliver to the
Closing Agent, in addition to any other documents mentioned elsewhere
herein, the following:
(i) As to Interests for which the Operating Partnership has
elected in its sole discretion to accept (or to cause its designee to
accept) an assignment of partnership interests constituting such
Interests at Closing, three duly executed Assignments of Interest (the
"Assignment"), which assignments shall be in a form as attached at
Schedule D and shall contain a warranty of title that such Owner owns
such Owner's Interests free and clear of all encumbrances.
(ii) As to Interests for which the Operating Partnership has
elected in its sole discretion to accept (or to cause its designee to
accept) a transfer of fee simple
4
<PAGE>
title to the Property in lieu of a transfer of all of the ownership
interests therein, a general warranty deed, bill of sale and
assignments of leases, contracts and intangibles.
(iii) Any other documents reasonably necessary to assign,
transfer and convey such Owner's Interests and effectuate the
transactions contemplated hereby, including any affidavits or
indemnities required by the title insurers insuring the Operating
Partnership's (or its designee's) title to a Property or the
Interests.
(iv) If requested by the Operating Partnership, a certified copy
of all appropriate corporate, limited liability company or partnership
actions authorizing the execution, delivery and performance by Owner
of this Agreement, the Closing Documents and the Ancillary Documents.
(v) Mortgage releases or consents of mortgagees, as applicable,
to the Operating Partnership's acquisition and ownership of its
Interest in such Partnership or Property, without personal liability
of the Operating Partnership or the REIT.
(vi) A settlement statement with respect to the Closing, duly
executed by such Owner.
(vii) If requested by the Operating Partnership in the case of
any Owner which is a corporation, partnership, trust or other entity,
an opinion from counsel for such Owner in form and content reasonably
acceptable to the Operating Partnership substantially to the effect
that such Owner is duly organized, validly existing and in good
standing under the laws of the state of its organization, had and has
all applicable corporate or partnership power and authority to enter
into, deliver and perform this Agreement, the Closing Documents and
the Ancillary Documents, the execution, delivery and performance of
which Agreement, Closing Documents and Ancillary Documents, and the
transactions contemplated hereby and thereby, do not and will not
constitute a breach or a violation of Owner's partnership agreement,
operating agreement, declaration of trusts, charter or bylaws, if
applicable; and that all applicable action necessary for such Owner to
execute and deliver this Agreement, the Closing Documents and the
Ancillary Documents has been taken and that the same have been validly
executed and delivered and are the valid and binding obligations of
such Owner enforceable against it, subject to creditors rights and
other normal and customary exceptions, in accordance with their terms.
E. Documents Required to be Delivered by the Operating Partnership and
the REIT at Closing. the Operating Partnership and the REIT shall deliver
to the Owners at the Closing, the following:
(i) A copy of the Agreement of Limited Partnership of the
Operating Partnership, as amended (the "Partnership Agreement").
5
<PAGE>
(ii) The amendment to the Partnership Agreement (the
"Amendment"), duly executed by the REIT and all other necessary
parties, to evidence admission of the Owners to the Operating
Partnership as limited partners.
(iii) A settlement statement with respect to the Closing, duly
executed by the Operating Partnership.
(iv) Such other documents and instruments as may be reasonably
necessary to consummate the transactions with the Owners under this
Agreement.
4. Holdback of Units. Owners hereby acknowledge and agree that certain
circumstances exist, as described in more detail below, in light of which the
Operating Partnership has (i) withheld issuance of certain Partnership Units
(the "Withheld Units") from the Owners and (ii) withheld the payment of cash in
the amount of $831,332 (the "Withheld Cash") from the Owners, provided that if
the Owners strictly satisfy certain conditions enumerated below, the Operating
Partnership shall issue such Units and pay over such cash as to which said
conditions have been satisfied. However, the Owners hereby expressly acknowledge
that (i) their contribution of their Interests is in consideration of (A) the
issuance of the Units listed in their respective Acquisition Schedules and (B)
their receipt of the amount of cash referenced in Paragraph 2A above, as
adjusted pursuant to this Agreement and the Master Agreement, and such
contribution is not dependent or contingent in any way upon the issuance of any
of the Withheld Units or receipt of any of the Withheld Cash and (ii) the
Withheld Units shall not be issued and the Withheld Cash shall not be paid
unless and until the conditions associated with the issuance of such Units and
the payment of such cash have been strictly satisfied, and unless the conditions
below are strictly satisfied within the time periods set forth below, the
Withheld Units will not be issued and the Withheld Cash will not be paid. Owners
further expressly acknowledge that the Withheld Cash is not to be held in
escrow, shall not accrue interest and the Owners will have no interest therein
or claim therefor unless and until all of the conditions precedent to its
payment shall have been strictly satisfied.
Celebration Post Office Space. Within thirty (30) days after the
earlier to occur of (i) three (3) years after the Closing or (ii) Rent
Commencement (as hereinafter defined) in respect of that certain rentable
area consisting of 13,769 square feet which is "vacant" (i.e., empty,
irrespective of whether the U.S. Post Office has surrendered its lease) on
the date of this Agreement at the Property listed on the Acquisition
Schedule as "Celebration," which vacant space is identified on Schedule C
attached hereto as the "Post Office Vacant Space," the Operating
Partnership shall issue 23,205 Partnership Units to Festival Associates
Limited Partnership. The term "Rent Commencement" shall mean, with respect
to vacant space at a Property, the date upon which the Owner of such
Property has provided to the Operating Partnership and the REIT
satisfactory evidence that such vacant space is under lease to a tenant
(other than the U.S. Post Office under the lease which may currently be in
effect) and on terms acceptable to the Operating Partnership and the REIT
(with such tenant being unaffiliated with the Owner) for an initial term of
not less than three years and at an effective annual base rent, inclusive
of CAM charges and other items commonly considered
6
<PAGE>
"additional rent" of not less than $108,000 over the term of the Lease,
exclusive of renewal options, and such tenant has accepted the demised
premises and is in occupancy and paying rent. Such evidence shall include,
without limitation, the following items which shall be satisfactory to the
REIT and the Operating Partnership in their sole discretion: (i) current
tenant estoppel certifying as to the amount and location of space demised
under the lease, that the tenant has accepted the premises and is in
occupancy and paying rent, detailing the rent payable and any rent
concessions or unfulfilled landlord construction obligations or allowances,
the existence or non-existence of defaults, the term of the lease and any
other matters reasonably required by the REIT or the Operating Partnership,
(ii) a certificate of occupancy covering the entire vacant space, duly
issued by applicable governmental authorities, and authorizing the use and
occupancy by the tenant of the demised premises for the uses contemplated
under the lease, (iii) final lien waivers from all contractors of all
mechanics' or other lien rights associated with tenant improvements
construction and (iv) a current report of title disclosing no mechanics' or
other liens have been filed in connection with the construction of such
tenant improvements.
5. Representations and Warranties of Owners. Each Owner as to his or its
Interests represents and warrants to the Operating Partnership severally as
follows:
A. Existence and Power. Owner or, if Owner is a partnership or a
limited liability company, any of Owner's partners or members which are not
individuals have been duly formed and are validly existing. Each Owner
which is not an individual has all necessary power and authority to enter
into this Agreement and to enter into and deliver the documents required to
be executed by it pursuant to the terms hereof and to perform its
obligations hereunder and thereunder.
B. Authorization: No Contravention. Each Owner represents that the
execution and delivery of this Agreement and the documents required to be
executed by such Owner, and the performance of such Owner's obligations
under this Agreement and the documents required to be executed by each such
Owner, will have been duly authorized by all requisite action, and this
Agreement will have been duly executed and delivered by such Owner. This
Agreement and the documents executed by each such Owner will constitute the
valid and binding obligation of such Owner, subject, however, to bankruptcy
and similar laws affecting the rights and remedies of creditors generally.
Execution of this Agreement and performance of its terms will not violate
any term of any agreement, order or decree to which such Owner is a party
or by which such Owner is bound.
C. Pending Actions. To each Owner's actual knowledge, there is no
existing or threatened legal action or governmental proceedings of any kind
involving such Owner, which, if determined adversely to such Owner, would
interfere with such Owner's ability to execute or deliver, or perform its
obligations under this Agreement or the documents required to be executed
by such Owner.
7
<PAGE>
D. Investment Representations and Warranties.
(i) Such Owner will be acquiring the Units to be received by him
for his own account and not with the view to the sale or distribution
of the same or any part thereof in violation of the Securities Act of
1933, as amended (the "Act");
(ii) Such Owner understands that the Units (or shares of common
stock of the REIT (the "Common Stock") issued upon exchange of the
Units) to be issued to the Owner will not be registered under the Act,
or the securities laws of any state ("Blue Sky Laws") by reason of a
specific exemption or exemptions from registration under the Act and
applicable Blue Sky Laws and that the REIT's and that the Operating
Partnership's reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and warranties of
Owner;
(iii) Such Owner understands that, for the reasons set forth in
subparagraph (ii) above, the Units (or shares of common stock issued
upon exchange of the Units) may not be offered, sold, transferred,
pledged, or otherwise disposed of by Owner except (i) pursuant to an
effective registration statement under the Act and any applicable Blue
Sky Laws, (ii) pursuant to a no-action letter issued by the Securities
and Exchange Commission (the "SEC") to the effect that a proposed
transfer of the Units (or shares of Common Stock issued upon exchange
of the Units) may be made without registration under the Act, together
with either registration or an exemption under applicable Blue Sky
Laws, or (iii) upon the Operating Partnership or the REIT, as the case
may be, receiving an opinion of counsel knowledgeable in securities
law matters and reasonably acceptable to the Operating Partnership or
the REIT, as the case may be, to the effect that the proposed transfer
is exempt from the registration requirements of the Act and any
applicable Blue Sky Laws, and that, accordingly, Owner must bear the
economic risk of an investment in the Units (and the shares of Common
Stock issued upon exchange of the Units) for an indefinite period of
time;
(iv) Such Owner will be at Closing an "accredited investor"
within the meaning of Rule 501(a) promulgated under the Act (the
standards for being "Accredited Investor" will vary depending upon the
legal form of the Owner, but Accredited Investor includes, for
individuals, any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of the purchase
exceeds $1,000,000 or who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in the
current year);
(v) Such Owner understands that an investment in the Operating
Partnership and the REIT involves substantial risks; and such Owner
has had the opportunity to review all documents and information which
it has requested
8
<PAGE>
concerning its investment in the Operating Partnership and the REIT
and has had the opportunity to ask questions of the management of the
Operating Partnership and the REIT, which questions, if any, were
answered to its satisfaction; and
(vi) Such Owner understands that any document that evidences the
Units (and any unregistered shares of Common Stock issued upon
exchange of the Units) will bear a legend substantially to the effect
of the following:
The securities represented by this document have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws, receipt of a
no-action letter issued by the Securities and Exchange Commission
(together with either registration or an exemption under
applicable state securities laws) or an opinion of counsel
acceptable to the Operating Partnership FAC Limited Partnership
that the proposed transaction will be exempt from registration
under the Act and applicable state securities laws.
and that the Operating Partnership or the REIT, as the case may be,
reserves the right to place a stop order against the transfer of the
Units (and any unregistered shares of Common Stock issued upon
exchange of the Units), and to refuse to effect any transfers thereof,
in the absence of satisfying the conditions contained in the foregoing
legend.
(vii) The address set forth under such Owner's name in Schedule A
is the address of the Owner's principal residence or principal place
of business, and such Owner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country
and state in which such principal residence or principal place of
business is situated.
(viii) The Owners acknowledge and agree that they have consulted
their own corporate and tax advisors and have made their investment
decisions based upon the advice of their own consultants and advisors,
and that the number of units to which any Owner is entitled hereunder
shall be determined with reference to Schedule B irrespective of any
tax consequences of the transactions contemplated by this Agreement or
otherwise or the falsity or unreliability of any assumptions made by
such Owner or anyone else, for tax purposes or otherwise, with respect
to the valuation or worth of the Units or the Interests.
9
<PAGE>
E. NASD Affiliation. Each Owner represents severally that (i) neither
he nor any affiliate of such Owner is a member or person affiliated with a
member of the National Association of Securities Dealers, Inc. ("NASD");
and (ii) neither he nor any affiliate of such Owner owns any stock or other
securities of any NASD member not purchased in the open market, or has made
any outstanding subordinated loans to an NASD member. (A company or natural
person is presumed to control a member of the NASD and is therefor presumed
to constitute an affiliate of such a member if the company or person is the
beneficial owner of 10% or more of the outstanding securities of a member
which is a corporation. Additionally, a natural person is presumed to
control a member of the NASD and is therefore presumed to constitute an
affiliate of such a member if such person has the power to direct or cause
the direction of the management or policies of such member.)
F. Foreign Person. Each Owner represents that he is not a "foreign
person" within the meaning of Section 1445 of the Code.
6. Representations and Warranties of the Operating Partnership and the
REIT. The Operating Partnership and the REIT hereby represent and warrant to
each Owner as follows:
A. Each of the Operating Partnership and the REIT has been duly formed
and is validly existing and is duly qualified to do business in all
jurisdictions where such qualification is necessary to carry on its
business as now conducted and is duly qualified or in the process of
becoming duly qualified in all jurisdictions where the ownership of its
property would necessitate such qualification. Each of the Operating
Partnership and the REIT has all power and authority under its enabling
documents to enter into this Agreement and to enter into and deliver all of
the documents and instruments required to be executed and delivered by each
such party and to perform its respective obligations hereunder and
thereunder.
B. The execution and delivery of this Agreement and the documents
required to be executed by the Operating Partnership and the REIT
hereunder, and the performance of their obligations under this Agreement,
have been duly authorized, and this Agreement and such documents will on
the Closing date have been, duly executed and delivered by the Operating
Partnership and the REIT. This Agreement does and will, and the documents
executed by the Operating Partnership and the REIT will, constitute the
valid and binding obligation of each of them enforceable in accordance with
their terms, subject to bankruptcy and similar laws affecting the remedies
or recourse of creditors generally.
10
<PAGE>
C. The Partnership Agreement delivered to the Owner is a true and
correct copy of the agreement of the Operating Partnership. The Partnership
Agreement is in full force and effect.
7. Other Provisions.
A. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which, taken together,
shall constitute one and the same instrument.
B. Entire Agreement. Except as stated herein, this Agreement contains
the entire agreement between the parties and supersedes all prior and
contemporaneous understandings and agreements, whether oral or in writing,
between the parties respecting the subject matter hereof. Except as stated
herein, there are no representations, agreements, arrangements or
understandings, oral or in writing, between or among the parties to this
Agreement relating to the subject matter of this Agreement which are not
fully expressed in this Agreement.
C. Construction. The provisions of this Agreement shall be construed
as to their fair meaning, and not for or against any party based upon any
attribution to such party as the source of the language in question.
Headings used in this Agreement are for convenience of reference only and
shall not be used in construing this Agreement.
D. Applicable Law. This Agreement shall be governed by the laws of the
State of Delaware. Time is of the essence in the Closing of this
transaction.
E. Severability. If any term, covenant, condition or provision of this
Agreement, or the application thereof to any person or circumstance, shall
to any extent be held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, covenants, conditions or
provisions of this Agreement, or the application thereof to any person or
circumstance, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby.
F. Waiver of Covenants, Conditions and Remedies. The waiver by one
party of the performance of any covenant, condition or promise under this
Agreement shall not invalidate this Agreement nor shall it be considered a
waiver by it of any other covenant, condition or promise under this
Agreement. The waiver by either or both parties of the time for performing
any act under this Agreement shall not constitute a waiver of the time for
performing any other act or an identical act required to be performed at a
later time.
G. Schedules. All schedules to which reference is made in this
Agreement are deemed incorporated into this Agreement and made a part
hereof, whether or not actually attached.
11
<PAGE>
H. Amendment and Assignment. This Agreement may be amended at any time
by the Operating Partnership and the REIT, in their sole discretion,
without the consent of any Owners, except that this Agreement shall not be
amended without the consent of the Owners if such amendment would convert
the Owners' Units into general partnership interests or amend this
Paragraph 7.H. All amendments, changes, revisions and discharges of this
Agreement, in whole or in part, and from time to time, shall be binding
upon the parties despite any lack of legal consideration, so long as the
same shall be in writing and executed by the parties hereto. No Owner may
assign this Agreement or any interest herein without the prior written
approval of all other parties.
I. Relationship of Parties. The parties agree nothing contained herein
shall constitute either party the agent or legal representative of the
other for any purpose whatsoever, nor shall this Agreement be deemed to
create any form of business organization between the parties hereto, nor is
either party granted any right or authority to assume or create any
obligations or responsibility on behalf of the other party, nor shall
either party be in any way liable for any debt of the other.
J. Further Acts. Each party agrees to perform any further acts and to
execute, acknowledge and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
K. Notice. All notices and demands which either party is required or
desires to give to the other shall be given in writing by personal
delivery, express courier service, certified mail, return receipt
requested, or by telecopy to the address or telecopy number set forth below
for the respective parties. If notice is by deposit or with an express
courier service, it shall be effective on the next business day following
such deposit or, if notice is sent by certified mail, return receipt
requested, it shall be effective upon receipt.
OWNERS: At the address and telecopy number
set forth under such Owner's name in
Schedule A hereto.
the Operating
Partnership: FAC Properties, L.P.
11000 Regency Parkway
Suite 300
Cary, N.C. 27511
Telecopy No.: (919) 462-8799
With copy to: Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Keith J. Willner
Telecopy No.: (202) 861-0473
12
<PAGE>
REIT: FAC Realty Trust, Inc.
11000 Regency Parkway
Suite 300
Cary, N.C. 27511
Attn: Patrick M. Miniutti
Telecopy No.: (919) 462-8799
L. Consent to Transfer of Interests. Owners agree to and hereby do
amend the partnership agreements or operating agreements for each of the
Acquired Partnerships to allow for the transactions contemplated hereby and
each Owner consents to the transfer by the other Owners of the Interests as
herein contemplated.
13
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement by their
hands and under seal affixed hereto as of the date and year first above written.
FAC PROPERTIES, L.P.
By: FAC Realty Trust, Inc.,
General Partner
By: _________________________________
Name:________________________________
Title: ______________________________
FAC REALTY TRUST, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
14
<PAGE>
OWNER SIGNATURE PAGE
The undersigned, desiring to become one of the within-named Owners to that
certain Exchange Option Agreement by and among the Operating Partnership FAC
Limited Partnership and such Owners, dated as of April ____, 1998, hereby
becomes a party to such Exchange Option Agreement and agrees to the terms and
conditions thereof and makes the representations, warranties and covenants
contained therein. The undersigned agrees that this signature page may be
attached to any counterpart of said Exchange Option Agreement.
FESTIVAL ASSOCIATES LIMITED
PARTNERSHIP, a North Carolina limited
partnership
By: _____________________________ (SEAL)
Name:
General Partner
By: _____________________________ (SEAL)
Name:
General Partner
15
<PAGE>
SCHEDULES
Schedule A List of Owners
Schedule B Acquired Partnerships or Properties
Schedule C Description of Post Office Vacant Space
Schedule D Assignment of Interests
Schedule D-1 Ownership Interests Assigned As Provided By The Assignment To
Which This Schedule D-1 Is Attached
Schedule E Partnership Unit Lock-Up Terms
16
<PAGE>
Schedule A
LIST OF OWNERS
Festival Associates Limited Partnership
7413 Six Forks Road
Raleigh, NC 27615
Attention: John M. Kane
Telephone: (919) 787-3716
Telefax: (919) 787-3716
A-1
<PAGE>
Schedule B
ACQUIRED PARTNERSHIPS OR PROPERTIES
Partnership or Limited Property
Liability Company Name
----------------- ----
Festival Associates Limited Partnership Celebration at Six Forks
Total Units to be
Owners Received at Closing
------ -------------------
Festival Associates Limited Partnership* 35,732
* This Schedule excludes Partnership Units held back and not issued pursuant
to, and subject to future issuance as and to the extent provided under,
Paragraph 4 of the Agreement.
B-1
<PAGE>
Schedule C
[Description of Post Office Vacant Space]
C-1
<PAGE>
Schedule D
ASSIGNMENT OF OWNERSHIP INTERESTS
THIS ASSIGNMENT OF OWNERSHIP INTERESTS (the "Assignment") in the
partnerships and limited liability companies listed on Schedule D-1 attached
hereto (the "Partnerships") is being executed and delivered pursuant to and in
accordance with the terms and provisions of that certain Exchange Option
Agreement dated as of the ____ day of April, 1998, by and among the undersigned
(the "Assignor") herein and FAC Properties, L.P. (the "Purchase Option
Agreement") and specifically in accordance with Paragraph 3.D. thereof.
For good and valuable consideration, the receipt, adequacy and sufficiency
of which are hereby acknowledged, the Assignor does hereby assign, transfer and
convey to FAC Properties, L.P., a Delaware limited partnership ("Assignee"), all
of Assignor's interest(s) (the "Ownership Interest(s)") in the Partnerships,
which Ownership Interest(s) consist(s) of all of the interest in the profits,
losses, distributable cash, and capital together with any and all right, title
and interest in any property, both real and personal, to which the Ownership
Interest relates and any other rights, interests in, privileges and benefits
appertaining thereto, including those provided by the applicable partnership or
operating agreement or state law. From and after the date of the Closing (as
defined in Paragraph 3.B. of the Exchange Option Agreement) the Assignee shall
be entitled to the Assignor's percentage interest in the profits, losses,
capital and distributable cash in each of the Partnerships.
This Assignment is made subject to all of the terms and conditions of the
partnership or operating agreements of each of the Partnerships, as applicable
and as amended (the "Partnership Agreement(s)").
Assignor certifies that he, she or it has full power to make this
Assignment of each of the Ownership Interests, and that this Assignment is being
made in compliance with the applicable Partnership Agreement(s), that the
Ownership Interest(s) now assigned, transferred and conveyed are free and clear
of all encumbrances (including judgments, liens and claims) and that Assignor
owns the listed Ownership Interest(s) and the interest(s) have not otherwise
been conveyed, sold, transferred, encumbered, pledged, hypothecated or assigned.
IN WITNESS WHEREOF, the Assignor has executed this Assignment as of the
_____ day of _________, 1998.
ASSIGNOR:
___________________________ (SEAL)
D-1
<PAGE>
Schedule D
OWNERSHIP INTERESTS ASSIGNED AS
PROVIDED BY THE ASSIGNMENT
TO WHICH THIS SCHEDULE D-1 IS ATTACHED
Name of Partnership or
Limited Liability Company Income Interest %
- ------------------------- -----------------
D-2
<PAGE>
Schedule E
PARTNERSHIP UNIT LOCK-UP TERMS
The Units received hereby may not be disposed of until after one year from
the Closing.
Nonetheless, (i) an Owner may dispose of Units on his or her death to such
Owner's estate, executor, administrator or personal representative or to such
Owner's beneficiaries pursuant to a devise or bequest or by the laws of descent
and distribution and (ii) an Owner may pledge his Units as security for debt
instruments, provided that, in either event, the Units shall thereafter be
subject to the restrictions set forth in the preceding paragraph for the
remainder of the restricted period; provided, however, that in the case of any
transfer of Units, the transferee or transferees shall each be an "accredited
investor" within the meaning of Rule 501(a) of Regulation D under the Securities
Act. In the event any Owner disposes of Units as described in this Paragraph,
such Units shall remain subject to this lock-up provision and, as a condition of
the validity of such disposition, the transferee shall be required to agree in
writing to the lock-up provisions set forth herein.
E-1
Exhibit 23.1
ARTHUR ANDERSEN
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K/A of our report dated April 17, 1998, included in the
Registration Statement (Form S-8 No. 333-3240) pertaining to the 1996 Restricted
Stock Plan, 1995 Outside Directors' Stock Award Plan, and 1993 Employee Stock
Incentive Plan for FAC Realty Trust, Inc. and the Registration Statement (Form
S-8 No. 333-29491) pertaining to the 1996 Restricted Stock Plan, 1995 Outside
Directors' Stock Award Plan, 1993 Employee Stock Incentive Plan, and Qualified
Employee Stock Purchase Plan for FAC Realty Trust, Inc. It should be noted that
we have not audited any financial statements of the Company subsequent to
December 31, 1997, or performed any audit procedures subsequent to the date of
our report.
/s/ Arthur Andersen LLP
Raleigh, North Carolina,
June 2, 1998.
