U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
August 20, 1997
American Real Estate Investment Corporation
(Name of small business issuer in its charter)
Maryland 1-12514 84-1246585
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification
Number)
1670 Broadway, Suite 3350, Denver, Colorado
80202
(Address of principal executive offices)
(Zip Code)
Registrant's Telephone Number (including Area Code): (303) 869-4700
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Item 5. Other Events.
On August 20, 1997, the Registrant and its operating partnership,
American Real Estate Investment, L.P. (the "Operating Partnership") entered into
agreements with a group of investors (the "Investor Group") whereby the Investor
Group will contribute cash, real estate properties and other assets to the
Registrant and the Operating Partnership and in exchange the Investor Group will
receive shares of common stock, par value $0.001 per share (the "Common Stock"),
of the Registrant and units of interest (the "LP Units") in the Operating
Partnership, each valued at $11.00 per share of Common Stock or LP Unit. The
transactions are subject to the approval of the Registrant's shareholders, among
other closing conditions.
Upon the consummation of such transactions, the Registrant and the
Operating Partnership are expected to issue an aggregate of approximately
6,418,000 shares of Common Stock and LP Units to the Investor Group, subject to
the adjustment set forth in such agreement.
In addition, the Investor Group will receive an aggregate of 675,000
warrants to purchase an aggregate of 675,000 shares of Common Stock and LP Units
at $11.00 per share of Common Stock or LP Unit. Options and warrants held by
members of the Registrant's board of directors, senior management and certain
other parties will be canceled or repurchased at a repurchase price of
approximately $2,090,000, payable wholly in cash or, under certain
circumstances, partly in cash and partly in shares of Common Stock, with up to
129,450 shares issuable at $11.00 per share.
A copy of the Registrant's press release dated August 21, 1997 is
attached hereto and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
10.1 Master Investment Agreement (the "Master Agreement") dated August
20, 1997 by and among the Registrant, American Real Estate Investment, L.P. (the
"Operating Partnership"), and The McBride Entities (as further identified in the
Master Agreement), the FLIP Shareholders (as further identified in the Master
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Agreement), Jeffrey Kelter, Penn Square Properties, Inc. and Hudson Bay
Partners, L.P.;
10.2 Stock Purchase Agreement dated August 20, 1997 between the
Registrant and Hudson Bay Partners, L.P.;
10.3 Management Contribution Agreement dated August 20, 1997
among the Registrant, the Operating Partnership, Jeffrey Kelter and Penn Square
Properties, Inc.;
10.4 McBride Contribution Agreement dated August 20,1997 among the
Registrant, the Operating Partnership and the parties identified on the
signature page of the agreement; and
10.5 Agreement and Plan of Merger dated August 20, 1997 among the
Registrant, Fairlawn Industrial Park, Inc. and the parties identified on the
signature page of the agreement.
99.1 Press release dated August 21, 1997 (previously filed).
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
American Real Estate Investment Corporation
By: /s/ Rick A. Burger
------------------------------
Rick A. Burger, Treasurer
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CONFORMED COPY
MASTER INVESTMENT AGREEMENT
dated as of August 20, 1997
by and between
AMERICAN REAL ESTATE INVESTMENT CORPORATION
and
THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES HERETO
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TABLE OF CONTENTS
Page
No.
ARTICLE I.
THE TRANSACTIONS
1.01 The Transactions................................................... 2
1.02 Closing............................................................ 2
1.03 Further Assurances................................................. 2
ARTICLE II.
PURCHASE PRICE
2.01 Purchase Price..................................................... 3
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE OPERATING PARTNERSHIP
3.01 Authority.......................................................... 3
3.02 Organization of the Company........................................ 4
3.03 Organization of Subsidiaries....................................... 4
3.04 Capital Stock...................................................... 5
3.05 Non-Contravention; Approvals and Consents.......................... 5
3.06 No Violations or Defaults.......................................... 6
3.07 SEC Reports and Financial Statements; Partnership Agreement........ 7
3.08 Absence of Changes................................................. 7
3.09 Absence of Undisclosed Liabilities................................. 8
3.10 Legal Proceedings.................................................. 8
3.11 Compliance with Licenses, Laws and Orders.......................... 8
3.12 Taxes.............................................................. 8
3.13 REIT Qualification................................................. 9
3.14 Employee Benefit Plans; ERISA...................................... 10
3.15 Labor Matters...................................................... 10
3.16 Title to Property.................................................. 11
3.17 Insurance.......................................................... 11
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Page
No.
3.18 Tangible Personal Property......................................... 12
3.19 Intangible Property................................................ 12
3.20 Registration Rights................................................ 12
3.21 Environmental Matters.............................................. 12
3.22 Investment Company Act............................................. 13
3.23 Brokers............................................................ 13
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.01 Conduct of Business by the Company................................. 14
4.02 Conduct of Business by the Contributors............................ 16
ARTICLE V.
ADDITIONAL AGREEMENTS
5.01 Sale of Properties; Section 1031 Exchanges of Original Properties.. 18
5.02 Termination of Certain Employment Agreements....................... 18
5.03 Spin-Off........................................................... 19
5.04 Cancellation of Certain Options and Warrants....................... 21
5.05 No Solicitations................................................... 21
5.06 Investor Inquiries................................................. 22
5.07 Investigation...................................................... 22
5.08 Confidentiality.................................................... 23
5.09 Financial Statements and Reports................................... 24
5.10 Registration Statement............................................. 24
5.11 Approval of Stockholders and Board Recommendation.................. 25
5.12 Regulatory and Other Approvals..................................... 26
5.13 Notice and Cure.................................................... 26
5.14 Fulfillment of Conditions.......................................... 27
5.15 Liability and Indemnification of Officers and Directors of the
Company ........................................................... 27
5.16 Refinancing........................................................ 31
5.17 Blumberg Agreement................................................. 31
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Page
No.
ARTICLE VI.
INDEMNIFICATION
6.01 Indemnification by the Company..................................... 31
6.02 Indemnification by the Investors................................... 31
6.03 Method of Asserting Claims......................................... 33
ARTICLE VII.
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Transactions... 36
7.02 Conditions to Obligations of the Investors......................... 37
7.03 Conditions to Obligations of the Company and the Operating
Partnership 38..................................................... 38
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
8.01 Survival of Representations, Warranties, Covenants and Agreements.. 40
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
9.01 Termination.......................................................... 40
9.02 Effect of Termination and Abandonment; Termination Fee............. 41
ARTICLE X.
DEFINITIONS
10.01 Definitions......................................................... 43
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ARTICLE XI.
MISCELLANEOUS
11.01 Notices............................................................ 49
11.02 Entire Agreement................................................... 50
11.03 Public Announcements............................................... 50
11.04 Waiver............................................................. 50
11.05 Amendment.......................................................... 50
11.06 No Third Party Beneficiary......................................... 50
11.07 No Assignment; Binding Effect...................................... 50
11.08 Headings........................................................... 51
11.10 Invalid Provisions................................................. 51
11.11 Jurisdiction....................................................... 51
11.12 Governing Law...................................................... 51
11.13 Counterparts....................................................... 51
11.14 No Personal Recourse............................................... 51
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This MASTER INVESTMENT AGREEMENT dated as of August 20, 1997
("Agreement") is made and entered into by and among THE MCBRIDE ENTITIES LISTED
ON THE SIGNATURE PAGES HERETO (collectively, "McBride"), THE FLIP SHAREHOLDERS
LISTED ON THE SIGNATURE PAGES HERETO (collective, the "FLIP Shareholders"),
JEFFREY KELTER ("Kelter"), PENN SQUARE PROPERTIES, INC., a Pennsylvania
corporation ("Penn Square," and together with McBride and Kelter, the
"Contributors"), HUDSON BAY PARTNERS, L.P., a Delaware limited partnership
("Hudson Bay," and together with the Contributors, the "Investors"), AMERICAN
REAL ESTATE INVESTMENT, L.P., a Delaware limited partnership (the "Operating
Partnership") and AMERICAN REAL ESTATE INVESTMENT CORPORATION, a Maryland
corporation (the "Company," and together with the Operating Partnership, the
"REIT"). Capitalized terms not otherwise defined herein have the meanings set
forth in Section 10.01.
RECITALS
A. The parties hereto desire to effect the Transactions (as defined
below) pursuant to which, among other things, the Investors and the FLIP
Shareholders will receive shares of common stock, par value $.001 per share, of
the Company ("Common Stock"), partnership interests in the Operating Partnership
("Partnership Units") or a combination of shares of Common Stock and Partnership
Units in exchange for the investment or contribution by such Investors to the
Company or the Operating Partnership of cash and certain assets and properties;
and
B. In order to effect the Transactions, the parties hereto intend to
enter into the Transaction Agreements attached as Exhibits to this Agreement
with respect to the transactions to be entered into by such parties; such
Transaction Agreements will be governed by and subject to the terms and
conditions of this Agreement; and the execution and delivery of each such
Transaction Agreement is a condition to the obligations of the parties to
consummate the Transactions; and
C. The Board of Directors of the Company has approved the execution
and delivery of this Agreement and the Transaction Agreements and have
determined that it is advisable and in the best interests of the stockholders of
the Company to consummate the Transactions to be consummated by the Company or
the Operating Partnership, as the case may be.
AGREEMENT
NOW, THEREFORE, in consideration of the material covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows.
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ARTICLE I.
THE TRANSACTIONS
1.01 The Transactions. At the Closing Date (as defined below),
each of the parties hereby agrees to consummate each of the transactions to be
consummated by it described below (collectively, the "Transactions"):
(i) the issuance and sale to Hudson Bay of shares of Common
Stock and warrants to purchase Common Stock in exchange for the
contribution of cash by Hudson Bay to the Company, pursuant to the terms
of a Stock Purchase Agreement substantially in the form attached hereto as
Exhibit A (the "Stock Purchase Agreement");
(ii) the issuance and transfer to Kelter of Partnership Units and
warrants to purchase Partnership Units in exchange for the contribution by
Kelter to the Operating Partnership of non-voting preferred stock of Penn
Square, pursuant to the terms of a Contribution Agreement substantially in
the form attached hereto as Exhibit B (the "Management Contribution
Agreement");
(iii) the issuance and transfer to McBride of Partnership Units
and warrants to purchase Partnership Units and shares of Common Stock in
exchange for the contribution by McBride to the Operating Partnership
and/or the Company of certain partnership interests and certain
properties, assets (including certain acquisition contracts) and
liabilities, pursuant to the terms of a Contribution Agreement
substantially in the form attached hereto as Exhibit C (the "McBride
Contribution Agreement"); and
(iv) the issuance to the FLIP Shareholders of Common Stock in
connection with the merger of the Company and FLIP, in which the Company
will be the surviving corporation in the Merger (the "Merger"), pursuant
to the terms of a Merger Agreement substantially in the form attached
hereto as Exhibit D (the "Merger Agreement").
1.02 Closing. The closings of the Transactions shall occur
simultaneously (the "Closing") and will take place at the offices of Rogers &
Wells, 200 Park Avenue, New York, New York 10166, or at such other place as the
parties hereto mutually agree, on a date and at a time to be specified by the
parties, which in no event shall be later than 10:00 a.m., local time, on the
third Business Day after the conditions set forth in Article VII and in each of
the Transaction Agreements have been satisfied or, if permissible, waived in
accordance with this Agreement or the Transaction Agreements, or on such other
date as the parties hereto mutually agree (the "Closing Date"). At the Closing
there shall be delivered to the parties hereto and to the Transaction Agreements
the certificates and other documents and instruments required to be delivered
under this Agreement and the Transaction Agreements.
1.03 Further Assurances. Each party hereto will execute such
further documents and instruments (including the Transaction Agreements) and
take such further actions
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as may reasonably be requested by one or more of the others to effect the
Transactions and purposes of this Agreement.
ARTICLE II.
PURCHASE PRICE
2.01 Purchase Price. The purchase price payable for each share of
the Company's Common Stock to be issued and sold pursuant to this Agreement and
the Transaction Agreements (the "Per Share Purchase Price") shall be $11.00 per
share. The purchase price payable for each of the Partnership Units to be issued
and exchanged pursuant to this Agreement and the Transaction Agreements (the
"Per Unit Purchase Price") shall be the same amount as the Per Share Purchase
Price.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE OPERATING PARTNERSHIP
Except as set forth in the Company SEC Reports filed by the Company
with the SEC prior to the execution and delivery of this Agreement or in the
disclosure letter delivered to the Investors by the Company at or prior to the
execution and delivery of this Agreement (the "Company Disclosure Letter"), the
Company and the Operating Partnership hereby represent and warrant to each
Investor as follows:
3.01 Authority. The Company has full corporate power and authority,
and the Operating Partnership has full partnership power and authority, to
execute and deliver this Agreement and the Transaction Agreements to which it is
a party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby including without
limitation the issuance and sale of the Securities, subject only to the
affirmative vote of the holders of shares of the Company's Common Stock entitled
to cast a majority of all the votes entitled to be cast (the "Company
Stockholder Approval"). The execution and delivery by the Company of this
Agreement and the Transaction Agreements to which it is a party, and the
performance by the Company of its obligations hereunder and thereunder, have
been duly and validly approved by the Board of Directors of the Company, the
Board of Directors of the Company has recommended adoption and approval by the
stockholders of the Company of the transactions contemplated by this Agreement
and the Transaction Agreements and the sale of or Section 1031 Exchanges with
respect to the Properties and directed that this Agreement, the Transaction
Agreements (including the Merger Agreement), the sale of or Section 1031
Exchanges with respect to the Properties and the transactions contemplated
hereby and thereby be submitted to the stockholders of the Company for their
consideration, and no other corporate proceedings on the part of the Company or
its stockholders are necessary to authorize the execution, delivery and
performance by the Company of this Agreement and the Transaction Agreements to
which it is a party and the consummation by the Company of the transactions
contemplated hereby or thereby, other than obtaining the Company Stockholder
Approval. The execution and delivery by the Operating Partnership of this
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Agreement and the Transaction Agreements to which it is a party, and the
performance by the Operating Partnership of its obligations hereunder and
thereunder, have been duly and validly approved by all requisite partnership
action, and no other partnership or corporate proceedings, as the case may be,
on the part of the Operating Partnership or its partners are necessary to
authorize the execution, delivery and performance by the Operating Partnership
of this Agreement and the Transaction Agreements to which it is a party and the
consummation by the Operating Partnership of the transactions contemplated
hereby or thereby. The execution and delivery of the Amended and Restated
Partnership Agreement by the parties thereto has been duly and validly approved
by all requisite partnership action, and no other partnership or corporate
proceedings, as the case may be, on the part of the Operating Partnership or its
partners are necessary to authorize the execution, delivery and performance of
the Amended and Restated Partnership Agreement. Upon the execution and delivery
of the Amended and Restated Partnership by the parties thereto, such Amended and
Restated Partnership Agreement will constitute legal, valid and binding
obligations of the Company thereto enforceable against the Company in accordance
with its terms. This Agreement and the Transaction Agreements to which it is a
party have been duly and validly executed and delivered by each of the Company
and the Operating Partnership and constitute, and upon the execution and
delivery by the Company and the Operating Partnership of the other Transaction
Agreements to which it is a party, such Transaction Agreements will constitute,
legal, valid and binding obligations of the Company and the Operating
Partnership enforceable against the Company and the Operating Partnership in
accordance with their terms.
3.02 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, and has full corporate power and authority to conduct its business as
and to the extent now conducted and to own, use and lease and operate its assets
and properties. The Company is duly qualified, licensed or admitted to do
business and is in good standing in those jurisdictions in which the ownership,
use or leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
failures to be so qualified, licensed or admitted and in good standing that
individually or in the aggregate would not result in a Material Adverse Effect.
3.03 Organization of Subsidiaries. Each of the Company's
Subsidiaries has been duly organized and is validly existing as a corporation,
limited partnership, limited liability company or other entity, as the case may
be, in good standing under the laws of the jurisdiction of its incorporation or
organization, as the case may be, has the requisite power and authority to own,
use and lease and operate its assets and properties and to conduct its business
as and to the extent now conducted and is duly qualified as a foreign
corporation, limited partnership or limited liability company or other entity,
as the case may be, to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for failures
to be so qualified or be in good standing that individually or in the aggregate
would not result in a Material Adverse Effect. All of the issued and outstanding
capital stock of each corporate Subsidiary has been duly authorized and is
validly issued, fully paid and non-assessable and is owned by the Company,
directly or through Subsidiaries, free and clear of any Liens. None of the
outstanding shares of capital stock of the corporate Subsidiaries is subject to
any preemptive or other similar
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rights arising by operation of law, under the charter or by-laws of any
corporate Subsidiary or under any agreement to which the Company or any
Subsidiary is a party, or otherwise. All of the partnership or membership
interests, as the case may be, of each partnership or limited liability company
Subsidiary, as the case may be, is owned by the Company, directly or through
Subsidiaries, free and clear of all Liens, except that approximately 41.16% of
the limited partnership interests in the Operating Partnership and 0.1% of the
partnership interests in Virginia Street Associates Limited Partnership,
respectively, are owned by Persons other than the Company.
3.04 Capital Stock. The authorized capital stock of the Company
consists solely of (i) 5,000,000 shares of preferred stock, par value $.01 per
share, none of which are issued and outstanding, (ii) 30,000,000 shares of
Common Stock, 1,128,594 of which are issued and outstanding as of the date
hereof and 1,544,621 of which are reserved for issuance upon exercise of stock
options, warrants or exchange of Partnership Units as of the date hereof, and
(iii) 30,000,000 shares of excess stock, none of which are issued and
outstanding as of the date hereof. Immediately prior to or concurrently with the
Closing, the only outstanding options or warrants to purchase Common Stock will
be 61,500 options in the aggregate granted to certain directors of the Company.
Section 3.04 of the Company Disclosure Letter sets forth a true and correct list
of the number of Partnership Units issued and outstanding and the holders
thereof. All of the outstanding shares of Common Stock and all of the
outstanding Partnership Units have been duly authorized and validly issued and
are fully-paid and nonassessable (except, in the case of Partnership Units, as
contemplated by the Delaware Revised Uniform Limited Partnership Act) and have
been offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued in
violation of any preemptive or other similar right. The Securities, when issued
and sold pursuant to this Agreement and the Transaction Agreements, will be duly
authorized and validly issued, fully-paid and nonassessable and none of them
will be issued in violation of any preemptive or other similar right. There is
no outstanding option, warrant or other right calling for the issuance of, and
there is no commitment, plan or arrangement to issue, any shares of capital
stock of the Company or any security convertible into or exercisable or
exchangeable for, such capital stock. The Common Stock and the Securities
conform in all material respects to all statements relating thereto contained in
the Company SEC Reports.
3.05 Non-Contravention; Approvals and Consents.
(a) The execution and delivery by the Company and the Operating
Partnership of this Agreement and the Transaction Agreements to which it is a
party do not, and the performance by the Company and the Operating Partnership
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, result in
a violation or breach of, constitute (with or without notice or lapse of time or
both) a default under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the assets or
properties of the Company or any of its Subsidiaries under, any of the terms,
conditions or provisions of (i) the certificates or articles of incorporation or
bylaws (or other comparable charter documents) of the Company or any of its
Subsidiaries, or (ii) subject to the taking of the actions and obtaining the
approvals
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described in paragraph (b) of this Section, (x) any statute, law, rule,
regulation or ordinance (together, "Laws"), or any judgment, decree, order,
writ, permit or license (together, "Orders"), of any court, official or other
instrumentality of the United States or any state, county, city or other
political subdivision (a "Governmental or Regulatory Authority"), applicable to
the Company or any of its Subsidiaries or any of their respective assets or
properties, or (y) any agreement or obligation of any kind (together,
"Contracts") to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective assets
or properties is bound, excluding from the foregoing clauses (x) and (y)
conflicts, violations, breaches, defaults, reimbursements, terminations,
cancellations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not be reasonably expected
to have a Material Adverse Effect or adversely affect in any material respect
the ability of the Company or the Operating Partnership to consummate the
transactions contemplated by this Agreement or the Transaction Agreements to
which it is a party.
(b) Except for (i) the filing of the Form S-4 and the Proxy
Statement/Prospectus with the SEC pursuant to the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act") and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), (ii) filings on Forms 3, 4 or 5, Schedules 13G
or 13D by certain affiliates of the Company pursuant to the Exchange Act, and
filings required to be made with the American Stock Exchange and the National
Association of Securities Dealers, Inc., and (iii) the filing of the
certificates of Merger as provided in the Merger Agreement, no consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
is necessary or required for the execution and delivery by each of the Company
and the Operating Partnership of this Agreement or the Transaction Agreements to
which it is a party, the performance by each of the Company and the Operating
Partnership of its obligations hereunder or thereunder or the consummation of
the transactions contemplated hereby or thereby, other than such consents,
approvals, actions, filings and notices which the failure to make or obtain, as
the case may be, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect or adversely affect in any material
respect the ability of the Company or the Operating Partnership to consummate
the transactions contemplated by this Agreement or the Transaction Agreements to
which it is a party.
3.06 No Violations or Defaults.
To the knowledge of the Company, neither the Company nor any of its
Subsidiaries is in violation of its certificate or articles of incorporation,
by-laws, certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may be, and
none of the Company or any of its Subsidiaries is in default in the performance
or observance of any obligation, agreement, covenant or condition contained in
any Contracts to which such entity is a party or by which such entity may be
bound, or to which any of its properties or assets may be bound or subject,
except for such
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violations or defaults that individually or in the aggregate would not have a
Material Adverse Effect.
3.07 SEC Reports and Financial Statements; Partnership Agreement.
(a) The Company has filed all forms, reports, schedules,
registration statements, and other documents required to be filed by it with the
SEC since the date of the Company's formation (as such documents have since the
time of their filing been amended or supplemented, the "Company SEC Reports").
As of their respective dates, the Company SEC Reports (i) complied as to form in
all material respects with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and the interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
Company SEC Reports (the "Company Financial Statements") (A) complied as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, (B) were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to the
Company and its Subsidiaries taken as a whole) the consolidated financial
position of the Company and its consolidated subsidiaries as at the respective
dates thereof and the consolidated results of their operations and cash flows
for the respective periods then ended. Each Subsidiary of the Company is treated
as a consolidated subsidiary of the Company in the Company Financial Statements
for all periods covered thereby, except for American Emerald Partners, L.P.,
which is reflected in the Company Financial Statements and the notes thereto as
an equity investment.
(b) The Operating Partnership has delivered to the Investors a true and
correct copy of the Agreement of Limited Partnership of the Operating
Partnership, dated as of November 10, 1993, (the Partnership Agreement"), as
amended through the date hereof. The Partnership Agreement as so amended is in
full force and effect.
3.08 Absence of Changes. Except for the execution and delivery of
this Agreement and the Transaction Agreements, and the transactions to take
place pursuant hereto and thereto on the Closing Date, since December 31, 1996
there has not been any change, event or development having, or that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Without limiting the foregoing, between December 31, 1996 and
the date hereof (i) the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course consistent with past practice
and (ii) neither the Company nor any of its Subsidiaries has taken any action
which, if taken after the date hereof, would constitute a breach of any
provision of clause (b) of Section 4.01.
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3.09 Absence of Undisclosed Liabilities. Except for matters
reflected in the consolidated balance sheet of the Company as of December 31,
1996 (or the footnotes thereto) included in the Company Financial Statements,
neither the Company nor any of its Subsidiaries had at such date, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of any
nature, except liabilities or obligations (i) which were incurred in the
ordinary course of business consistent with past practice since such date, and
(ii) which have not had, and could not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.
3.10 Legal Proceedings. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Company and its Subsidiaries,
threatened against, relating to or affecting, nor to the knowledge of the
Company and its Subsidiaries are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, relating to or
affecting, the Company or any of its Subsidiaries or any of their respective
assets and properties which, if determined adversely to the Company or any of
its Subsidiaries, individually or in the aggregate, could be reasonably expected
to have a Material Adverse Effect or adversely affect in any material respect
the ability of the Company or the Operating Partnership to consummate the
transactions contemplated by this Agreement or the Transaction Agreements to
which it is a party. Neither the Company nor any of its Subsidiaries is subject
to any Order of any Governmental or Regulatory Authority which, individually or
in the aggregate, is having or could be reasonably expected to have a Material
Adverse Effect or adversely affect in any material respect the ability of the
Company or the Operating Partnership to consummate the transactions contemplated
by this Agreement or the Transaction Agreements to which it is a party.
3.11 Compliance with Licenses, Laws and Orders. The Company and its
Subsidiaries hold all licenses, permits, authorizations and approvals necessary
for the lawful conduct of their respective businesses (the "Licenses"), except
for failures to hold such Licenses which, individually or in the aggregate, are
not having and could not be reasonably expected to have a Material Adverse
Effect. All of the Licenses are valid and in full force and effect, and the
Company and its Subsidiaries are in compliance with the terms of the Licenses,
except for failures to be in full force and effect or to so comply which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Material Adverse Effect. The Company and its Subsidiaries are
not in violation of any Law or Order of any Governmental or Regulatory
Authority, except for violations which, individually or in the aggregate, are
not having and could not be reasonably expected to have a Material Adverse
Effect.
3.12 Taxes.
(a) Each of the Company and its Subsidiaries has timely filed all
tax returns and reports required to be filed by it, or requests for extensions
to file such returns or reports have been timely filed and granted and have not
expired, and all such tax returns and reports are complete and accurate in all
material respects. The Company and each of its Subsidiaries have paid (or the
Company has paid on its behalf) all Taxes shown as due on such tax returns
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and reports. There are no tax liens, other than Permitted Liens, upon the assets
of the Company or any of its Subsidiaries. The most recent financial statements
contained in the Company SEC Reports reflect an adequate reserve for all taxes
payable by the Company and its Subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or assessed against the
Company or any of its Subsidiaries that are not adequately reserved for, except
for inadequately reserved taxes and inadequately reserved deficiencies that
would not, individually or in the aggregate, have a Material Adverse Effect.
Since its formation, the Company has incurred no liability for Taxes under
Sections 857(b), 860(c) or 4981 of the Code, and neither the Company nor any of
its Subsidiaries have incurred any liability for Taxes except in the ordinary
course of business. No requests for waivers of the time to assess any taxes
against the Company or any of its Subsidiaries have been granted or are pending,
except for requests with respect to such taxes that have been adequately
reserved for in the most recent financial statements contained in the Company
SEC Reports, or, to the extent not adequately reserved, the assessment of which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth in Section 3.12 of the Company Disclosure Letter which
provides a description of any tax audit, inquiry or controversy potentially
involving Taxes in excess of $50,000 of the Company or any Subsidiary, to the
knowledge of the Company no event has occurred and no condition or circumstance
exists, which presents a material risk that any Tax will be imposed on the
Company.
(b) As a result of compliance with this Agreement and the matters
referred to herein, neither the Company nor any of its Subsidiaries will be
obligated to make a payment to an individual that would be a "parachute payment"
to a "disqualified individual" as those terms are defined in Section 280G of the
Code.
(c) The Company does not hold any real property primarily for sale
to customers in the ordinary course of business as described in Section 1221(1)
of the Code such that the income derived therefrom would be considered income
from prohibited transactions as defined in Section 857(b)(6) of the Code.
3.13 REIT Qualification. The Company (i) for all of its taxable
years commencing the year ended December 31, 1993 through the year ended
December 31, 1996 has been subject to taxation as a REIT within the meaning of
the Code and has satisfied the requirements to qualify as a REIT for such years,
(ii) has operated and intends to continue to operate, in such a manner as to
qualify as a REIT for its taxable year ending December 31, 1997, and (iii) has
not taken or omitted to take any action which could reasonably be expected to
result in a challenge to its status as a REIT, and to the Company's knowledge,
no such challenge is pending or threatened. The Operating Partnership has at all
times, and each other Subsidiary of the Company which is a partnership or files
Tax returns as a partnership for federal income tax purposes, has since its
acquisition by the Company, been classified for federal income tax purposes as a
partnership and not as a corporation or as an association taxable as a
corporation.
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3.14 Employee Benefit Plans; ERISA.
(a) Section 3.14 of the Company Disclosure Letter sets forth a true
and complete list of all Benefit Plans with respect to which the Company or any
Company ERISA Affiliate has any obligation to contribute, has any liability
under or is otherwise a party to;
(b) No Benefit Plan is or ever has been subject to Part 3 of
Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code,
nor has the Company or any entity which would be a Company ERISA Affiliate at
any relevant time ever maintained, sponsored or had an obligation to contribute
to any plan subject to any such provisions;
(c) To the knowledge of the Company, no prohibited transaction
within the meaning of Section 406 or 407 of ERISA, or Section 4975 of the Code
with respect to any Benefit Plan has occurred which, individually or in the
aggregate, is having or could be reasonably expected to have a Material Adverse
Effect;
(d) Each of the Benefit Plans which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified and such determination has not been modified, revoked or
limited;
(e) Each of the Benefit Plans is, and its administration is and has
been in all material respects in compliance with all applicable laws and orders
and prohibited transaction exemptions, including, without limitation, the
requirements of ERISA, except where failure to comply would not, individually or
in the aggregate, have a Material Adverse Effect;
(f) Except for certain disability and health insurance reimbursement
as set forth in employment agreements, none of the Company or any Company ERISA
Affiliate maintains or is obligated to provide benefits under any life, medical
or health plan which provides benefits to retirees or other terminated employees
other than benefit continuation rights under the Consolidated Omnibus
Reconciliation Act of 1985, as amended; and there has been no violation of
Section 4980B of the Code or Sections 601 through 608 of ERISA with respect to
any Benefit Plan that individually or in the aggregate, is having or could be
reasonably expected to have a Material Adverse Effect; and
(g) Neither the execution and delivery by the Company of this
Agreement or the Transaction Agreements to which it is a party nor the
consummation of the transactions contemplated hereby constitutes or will
constitute an event in respect of which a change in, or acceleration of,
benefits under any Benefit Plan will or may occur.
3.15 Labor Matters. There is no material labor strike, slowdown,
work stoppage, lockout or other labor dispute in effect, or to the knowledge of
the Company, threatened, against or otherwise affecting the Company or any of
its Subsidiaries. To the knowledge of the Company, there are no union
organizational efforts presently being made
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involving any of the unorganized employees of the Company or any of its
Subsidiaries which in any such case or all such cases together would have a
Material Adverse Effect.
3.16 Title to Property. The Company does not own or hold, directly
or indirectly, any real property, other than the Properties. The Company and/or
its Subsidiaries have good and marketable title to the Properties free and clear
of Liens, except for Permitted Liens. All leases and subleases under which the
Company or any Subsidiary has a leasehold interest in the Properties are in full
force and effect, and neither the Company nor any Subsidiary has received any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any Subsidiary under any of the leases
or subleases mentioned above, or affecting or questioning the rights of the
Company or such Subsidiary of the continued possession of the leased or
subleased premises under any such lease or sublease. All liens, charges,
encumbrances, claims or restrictions on or affecting any of the Properties and
the assets of the Company and any Subsidiary which are required to be disclosed
in the Company SEC Reports are disclosed therein. No tenant under any of the
leases, pursuant to which the Company or any Subsidiary, as lessor, leases its
Property, has an option or right of first refusal to purchase the premises
demised under such lease, the exercise of which would have a Material Adverse
Effect. To the best of the Company's knowledge, each of the Properties complies
with all applicable codes, laws and regulations (including, without limitation,
building and zoning codes, laws and regulations and laws relating to access to
the Properties), except for such failures to comply that would not individually
or in the aggregate have a Material Adverse Effect. There are no pending and to
the Company's knowledge, no threatened, condemnation proceeding, zoning change,
or other proceeding or action that will in any manner affect the size of, use
of, improvements on, construction on or access to, the Properties, except such
proceedings or actions that would not individually or in the aggregate have a
Material Adverse Effect.
3.17 Insurance.
(a) Either the Company or a Subsidiary has obtained title insurance
on all of the properties owned by each of them in an amount at least equal to
(i) the cost to acquire land and improvements in the case of an acquisition of
improved property or (ii) the cost to acquire land in the case of an acquisition
of unimproved property, and in each case such title insurance is in full force
and effect.
(b) Each of the Company and each Subsidiary is insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and none of the Company and its Subsidiaries has any reason to believe
that it or any of its Subsidiaries will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its businesses at
a cost that would not have a Material Adverse Effect.
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3.18 Tangible Personal Property. The Company and its Subsidiaries
have good title to all tangible personal property reflected on the balance sheet
included in the Company Financial Statements, owned, used or held for use by
them in the conduct of their respective businesses (except for leasehold and
licensed interests) free and clear of any Liens, except for Permitted Liens. All
material items of equipment, machinery, vehicles, furniture, fixtures and other
tangible personal property of every kind and description included in such assets
and properties are in good operating condition, normal wear and tear excepted.
3.19 Intangible Property. The Company and its Subsidiaries own or
have rights to use all material items of Intangible Property used by the Company
or any such Subsidiary. To the knowledge of the Company, such use does not
conflict with any rights of others with respect thereto, except for such
conflicts that have not had and would not have a Material Adverse Effect.
3.20 Registration Rights. Except pursuant to that Registration
Rights Agreement included as an exhibit to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996, there are no persons with
registration or other similar rights to have any securities registered by the
Company under the Act.
3.21 Environmental Matters. Each of the Company and its Subsidiaries
has obtained all Licenses which are required in respect of its business,
operations or assets and Properties under applicable Environmental Laws, and
each of the Company and its Subsidiaries is in compliance in all material
respects with the terms and conditions of all such Licenses and with any
applicable Environmental Law, except for such instances of non-compliance as
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth in Section 3.21 of the Company Disclosure Letter and except
in such circumstances as would not, individually or in the aggregate, have a
Material Adverse Effect:
(a) No Order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or, to the
knowledge of the Company, threatened by any Governmental or Regulatory Authority
with respect to any alleged failure by the Company or any Subsidiary to have any
License required in connection with the conduct of the business or operations of
the Company or any of its Subsidiaries or with respect to any treatment,
storage, recycling, transportation, disposal or "release" as defined in 42
U.S.C. ss. 9601(22) ("Release"), of any Hazardous Material at any of the
Properties, and neither the Company, nor any Subsidiary is aware of any facts or
circumstances which could reasonably be expected to form the basis for any such
Order, complaint, penalty or investigation.
(b) None of the Company, any Subsidiary or, to the knowledge of the
Company and its Subsidiaries, any prior owner or lessee of any property now or
previously owned or leased by the Company or any Subsidiary, has handled any
Hazardous Material on any property now or previously owned or leased by the
Company or any Subsidiary; and, without limiting the foregoing, (i) no
polychlorinated biphenyl is or has been present, (ii) no asbestos is or has been
present, (iii) there are no underground storage tanks, active or abandoned, and
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(iv) no Hazardous Material has been Released in a quantity reportable under, or
in violation of, any Environmental Law, at, on or under any Property now or
previously owned or leased by the Company or any Subsidiary, during any period
that the Company or a Subsidiary owned or leased such Property or, to the
knowledge of the Company, the Company and its Subsidiaries, prior thereto.
(c) Neither the Company nor any Subsidiary has transported or
arranged for the transportation of any Hazardous Material to any location which
is the subject of any Action or Proceeding that could lead to claims against
Purchaser, the Company or any Subsidiary for clean-up costs, remedial work,
damages to natural resources or personal injury claims, including, but not
limited to, claims under CERCLA.
(d) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any Subsidiary and no
property now or previously owned or leased by the Company or any Subsidiary is
listed or proposed for listing on the National Priorities List promulgated
pursuant to CERCLA or on any similar state list of sites requiring investigation
or clean-up.
(e) There are no Liens (other than Permitted Liens) arising under or
pursuant to any Environmental Law or Order on any real property owned or leased
by the Company or any Subsidiary, and no action of any Governmental or
Regulatory Authority has been taken or, to the knowledge of the Company, is in
process which could subject any of such properties to such Liens, and neither
the Company nor any Subsidiary would be required to place any notice or
restriction relating to the presence of Hazardous Material at any property owned
by it in any deed to such property.
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, the Company or any Subsidiary in relation to any property or
facility now or previously owned or leased by the Company or any Subsidiary
which have not been delivered to Hudson Bay prior to the execution of this
Agreement.
3.22 Investment Company Act. Neither the Company nor the Operating
Partnership is, and upon the issuance and sale of the Securities and the
application of the net proceeds therefrom, neither the Company nor the Operating
Partnership will be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
3.23 Brokers. Except for Donaldson, Lufkin & Jenrette Securities
Corporation, and certain other brokers in connection with the sale of any or all
of the Properties, all of whose fees, commissions and expenses are the sole
responsibility of the Company, all negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the Company
directly with the Investors without the intervention of any Person on behalf of
the Company in such manner as to give rise to any valid claim by any Person
against any Investor, the Company or any Subsidiary for a finder's fee,
brokerage commission or similar payment.
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ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.01 Conduct of Business by the Company. At all times from and
after the date hereof until the Closing Date, the Company and the Operating
Partnership each covenants and agrees as to itself and each of its Subsidiaries
that (except for the sale of or Section 1031 Exchanges with respect to the
Properties or as expressly contemplated or permitted by this Agreement, and
except to the extent that the Investors otherwise shall consent in writing,
which consent shall not be unreasonably withheld):
(a) The Company and its Subsidiaries shall conduct their respective
businesses only in, and the Company and such Subsidiaries shall not take any
action except in, the ordinary course consistent with past practice.
(b) Without limiting the generality of paragraph (a) of this
Section, and except as otherwise provided in Section 5.01, (i) the Company and
its Subsidiaries shall use all commercially reasonable efforts to preserve
intact in all material respects their present business organizations and
reputation, to keep available the services of their key officers and employees,
to maintain their assets and properties in good working order and condition,
ordinary wear and tear excepted, to maintain insurance on their tangible assets
and businesses in such amounts and against such risks and losses as are
currently in effect, to preserve their relationships with customers and
suppliers and others having significant business dealings with them and to
comply in all material respects with any Law or any Order of any Governmental or
Regulatory Authority applicable to the Company or any of its Subsidiaries, and
(ii) neither the Company nor any of its Subsidiaries shall:
(1) amend or propose to amend its certificate or articles of
incorporation, bylaws, certificate of partnership, partnership agreement,
limited liability company agreement, or other comparable governing
documents, except as contemplated by this Agreement;
(2) (w) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, except for the
declaration and payment of dividends by a wholly-owned Subsidiary solely
to its parent corporation and except for the declaration and payment of
regular quarterly cash dividends on the Common Stock consistent with past
practice of the Company and in no event less than the amount necessary to
retain the Company's qualification as a REIT; (x) split, combine,
reclassify or take similar action with respect to any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock;
(y) except as provided in Section 5.01, adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other
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reorganization; or (z) directly or indirectly redeem, repurchase or
otherwise acquire any shares of its capital stock or any option with
respect thereto;
(3) except for issuance of shares pursuant to the redemption of the
Operating Partnership's Units, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any Partnership Units, shares
of capital stock or any option with respect thereto other than the
issuance by a wholly-owned Subsidiary of its capital stock to its parent
corporation, or modify or amend any right of any holder of outstanding
Partnership Units, shares of capital stock or options with respect
thereto;
(4) acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any material amount of assets;
(5) except as provided in Section 5.01 and other than dispositions
in the ordinary course of its business consistent with past practice of
assets which are not, individually or in the aggregate, material to the
Company and its Subsidiaries taken as a whole (and other than the sale of
the Properties), sell, lease, grant any security interest in or otherwise
dispose of or encumber any of its assets or properties;
(6) except to the extent required by applicable law, (x) permit any
material change in (A) any accounting or financial reporting practice or
policy or any material pricing, marketing, purchasing, investment,
inventory, credit, allowance or tax practice or policy or (B) any method
of calculating any bad debt, contingency or other reserve for accounting,
financial reporting or tax purposes, or (y) make any material tax election
or settle or compromise any material income tax liability with any
Governmental or Regulatory Authority;
(7) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
Subsidiaries, or guarantee any debt securities of another person or enter
into any arrangement having the economic effect of any of the foregoing,
or (y) voluntarily purchase, cancel, prepay or otherwise provide for a
complete or partial discharge in advance of a scheduled repayment date
with respect to, or waive any right under, any indebtedness for borrowed
money;
(8) (x) enter into, adopt, amend in any material respect (except as
may be required by applicable law) or terminate any Benefit Plan or other
agreement, arrangement, plan or policy between the Company or one of its
Subsidiaries and one or more of its directors, officers or employees, (y)
except for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a material
increase in benefits or compensation expense to the Company and its
Subsidiaries taken as a whole, increase in any manner the compensation or
fringe benefits
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of any director, officer or employee or pay any benefit not required by
any plan or arrangement in effect as of the date hereof, or (z) establish,
adopt, enter into or amend in any material respect or take action to
accelerate any rights or benefits under any collective bargaining
agreement or any stock option, employee benefit plan, agreement or policy
except as contemplated by this Agreement;
(9) enter into any contract or amend or modify any existing
contract, or engage in any new transaction in each case with any affiliate
of the Company or any of its Subsidiaries;
(10) except for the budgeted capital expenditures set forth on
Schedule 4.01(b)(10) and capital expenditures or commitments which in the
aggregate do not exceed $50,000, make any capital expenditures or
commitments for additions to plant, property or equipment constituting
capital assets;
(11) notwithstanding anything to the contrary contained in this
Agreement (other than as expressly provided in the parenthetical language
contained in the introduction to Section 4.01 above or expressly provided
in Section 5.03), use, or permit or cause to be used, any assets,
properties, resources or services of employees in the formation,
organization, capitalization or operations of the Spin-Off Subsidiary to
an extent that would have a Material Adverse Effect or adversely affect
the ability of the Company and the Operating Partnership to consummate the
transactions contemplated by this Agreement or the Transaction Agreements
to which it is a party; or
(12) enter into any contract, agreement, commitment or arrangement to do or
engage in any of the foregoing.
4.02 Conduct of Business by the Contributors. At all times from and
after the date hereof until the Closing Date, each Contributor covenants and
agrees as to itself and its Subsidiaries that (except for the Refinancing and
except as expressly contemplated or permitted by this Agreement or the McBride
Contribution Agreement or to the extent that the Company shall otherwise consent
in writing, which consent shall not be unreasonably withheld):
(a) Each Contributor and its Subsidiaries shall conduct their
respective Contributed Businesses only in, and shall not take any action with
respect to their respective Contributed Businesses except in, the ordinary
course consistent with past practice.
(b) Without limiting the generality of paragraph (a) of this
Section, (i) each Contributor and its Subsidiaries shall use all commercially
reasonable efforts to preserve intact in all material respects its Contributed
Business' present business organizations and reputation, to keep available the
services of its Contributed Business key officers and employees, to maintain the
assets of its Contributed Business in good working order and condition, ordinary
wear and tear excepted, to maintain insurance on its Contributed Business in
such amounts and against such risks and losses as are currently in effect, to
preserve its Contributed Business'
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relationships with customers and suppliers and others having significant
business dealings with its Contributed Business and to comply in all material
respects with all Laws and Orders of all Governmental or Regulatory Authorities
applicable to its Contributed Business and (ii) each Contributor and its
Subsidiaries (but only insofar as it relates to conduct of its Contributed
Business) shall not:
(1) except as contemplated by the Acquisition Contracts (as defined
in the Management Contribution Agreement), cause its Contributed Business
to acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets other than in the
ordinary course of its Contributed Business consistent with past practice;
(2) except as provided in the McBride Contribution Agreement, other
than dispositions in the ordinary course of its business consistent with
past practice of assets which are not, individually or in the aggregate,
material to its Contributed Business, sell, lease, grant any security
interest in or otherwise dispose of or encumber any of the assets of its
Contributed Business;
(3) with respect to its Contributed Business, except to the extent
required by applicable law, (x) permit any material change in (A) any
accounting or financial reporting practice or policy or any material
pricing, marketing, purchasing, investment, inventory, credit, allowance
or tax practice or policy or (B) any method of calculating any bad debt,
contingency or other reserve for accounting, financial reporting or tax
purposes or (y) make any material tax election or settle or compromise any
material income tax liability with any Governmental or Regulatory
Authority;
(4) with respect to its Contributed Business, enter into any
contract or amend or modify any existing contract, or engage in a new
transaction with any other business unit or division of such Contributor,
any affiliate of such Contributor or any of its Subsidiaries;
(5) make any change in the lines of business in which the Contributed
Business participates or is engaged; or
(6) enter into any contract, agreement, commitment or arrangement to
do or engage in any of the foregoing (except as contemplated herein).
(c) Each Contributor shall use commercially reasonable efforts to
diligently proceed towards consummation of the acquisition of the Acquisition
Properties. Without limiting the generality of the foregoing, the Contributors
(i) shall use commercially reasonable efforts to (x) conduct such due diligence
and other investigations of the Acquisition Properties as they may reasonably
deem necessary in their sole discretion, and (y) maintain the validity, on the
part
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of the Contributors, of the Acquisition Contracts; and (ii) shall not (x) amend,
terminate or waive the terms of any Acquisition Contract except with the prior
written consent of the Company, which consent shall not be unreasonably withheld
or (y) knowingly default, or knowingly cause any other party to default, under
any Acquisition Contract.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.01 Sale of Properties; Section 1031 Exchanges of Original
Properties. (a) The Company shall use all commercially reasonable efforts to
dispose of the Properties in one or more Section 1031 Exchanges prior to the
Closing Date at the highest price reasonably attainable for such Properties and
shall not sell or dispose of any such Properties (other than the Sedona
apartments and the Company's interests in Emerald Pointe apartments provided,
however, that such properties or interests are sold or disposed of on
substantially the same or more favorable terms contained in that certain
contract for the purchase and sale of Sedona Apartments Complex dated March 20,
1997 by and between American Sedona Partners, L.P. and Evans Real Estate Group,
LLC as assigned on July 2, 1997 to Greentree Village Ltd. and that certain
Mutual Release and Settlement Agreement dated as of April 30, 1997 by and among
Emerald Vista, Inc., Schickler Meringoff Properties, Inc., the Company and the
other parties thereto, respectively) without the prior approval of each of the
Investors (with McBride considered a single investor, and Kelter and Penn Square
considered a single investor); provided, however, that such approval will
conclusively be deemed to have been given if such Investor fails to notify the
Company of their disapproval within five Business Days after receipt by the
Investors of the notice described below. The Company shall deliver to the
Investors written notice of any proposed sale or disposition of any Property
between the date of this Agreement until the Closing Date, setting forth in
reasonable detail the material terms of such proposed sale or disposition. Prior
to the Closing Date, the Investors shall use commercially reasonable efforts to
cooperate with the Company and the Operating Partnership in their efforts to
timely identify and enter into an agreement to acquire one or more replacement
properties for the Sedona apartments so as to qualify the disposition of the
Sedona apartments and the acquisition of such replacement properties as a
Section 1031 Exchange.
(b) The Company, as general partner of the Operating Partnership,
shall use all commercially reasonable efforts in disposing of any of the
Original Properties to structure such transaction as one or more Section 1031
Exchanges.
(c) The parties hereto agree that the aggregate gross proceeds
(after deducting expenses) from the sale or Section 1031 Exchange of the
Americana Lakewood apartments phases I and II shall be allocated 62% to
Americana Lakewood apartment, phase I (to the Company) and 38% to Americana
Lakewood apartment phase II (to the owners thereof).
5.02 Termination of Certain Employment Agreements. The Company agrees that
effective upon the Closing, it will terminate the employment agreements set
forth on
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Exhibit 5.02 hereto and pay to the parties thereto the amounts set forth on
Exhibit 5.02 in full satisfaction of the Company's obligations under such
agreements. Notwithstanding the termination of the employment agreement and
payment set forth on Exhibit 5.02 with respect to Rick A. Burger, the Company
agrees to continue to employ Mr. Burger for a period of three months following
the Closing Date on substantially the same terms and conditions (except with
respect to the grant of warrants or stock options) set forth in the employment
agreement for Mr.
Burger described on Exhibit 5.02.
5.03 Spin-Off.
(a) The Company agrees that prior to the Closing, it shall form or
cause to be formed a wholly-owned subsidiary (the "Spin-Off Subsidiary"), with
minimal capitalization, for the purposes of ultimately pursuing real estate
investment opportunities other than in the office or industrial sectors in the
United States. The Spin-Off Subsidiary shall be incorporated under the laws of
the State of Maryland unless otherwise directed by Jim Mulvihill or Evan Zucker.
(b) The Company shall appoint Mulvihill and Zucker or their
designees as directors of the Spin-Off Subsidiary. The Company agrees that it
shall not remove such persons as directors of the Spin-Off Subsidiary without
cause ("cause" being interpreted pursuant to the corporation law of the
jurisdiction of incorporation of the Spin-Off Subsidiary). The Company further
agrees that no removal of Mulvihill or Zucker for cause shall affect the rights
of Mulvihill or Zucker to give the Spin-Off Notice set forth in Section 5.03(c)
below or the obligations of the Company to implement the request set forth in
such Spin-Off Notice.
(c) Subject to the limitations described below, at any time during
the period commencing on the Closing Date and ending on the earlier of (i) the
date that is 12 months after the last of Mulvihill or Zucker ceases to be a
director of the Company or (ii) the third anniversary of the Closing Date,
Mulvihill or Zucker may give written notice (the "Spin-Off Notice") to the
Company to request that the Company, in consideration for such assets as may be
contributed to the Spin-Off Subsidiary by Mulvihill, Zucker or other persons,
transfers to Mulvihill, Zucker or such other persons identified in the Spin-Off
Notice a percentage of the shares of the Spin-Off Subsidiary's common stock to
be specified in such Spin-Off Notice and to distribute the remaining shares of
common stock to the stockholders of the Company (it currently being anticipated
that only a nominal percentage of the Spin-Off Subsidiary's common stock shall
be so distributed to the Company's stockholders) (the "Spin-Off"). The Company
agrees to take all steps as may reasonably be necessary to implement the request
set forth in such notice and to effectuate the Spin-Off as promptly as
practicable, provided, however, that if the Board of Directors of the Company
determines in its reasonable judgment and in good faith that the Spin-Off would
materially impede, delay or interfere with any pending or planned material
financing, acquisition or corporate reorganization or other material corporate
development involving the Company or any of its Subsidiaries or would require
premature disclosure thereof, then the Company shall be entitled to postpone or
delay such Spin-Off for a reasonable period of time, but not in excess of 90
days. Notwithstanding the foregoing, the Company shall not
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be obligated to effect the Spin-Off if (i) at the time of the Spin-Off the net
worth of the Spin-Off Subsidiary is less than $1 million or (ii) independent tax
counsel with a national law firm selected by the Company shall have provided the
Company with a written opinion to the effect that the Spin-Off has a realistic
possibility of terminating the Company's election as a real estate investment
trust under Section 856 of the Code if such matter were litigated (such
determination shall not preclude Mulvihill or Zucker from proposing an alternate
structure).
(d) It is understood and agreed that the Company and its
Subsidiaries (including the Spin-Off Subsidiary prior to the Spin-Off) shall not
incur or bear any costs or expenses associated or in connection with the
Spin-Off, including, without limitation, general, administrative, "start-up," or
operating costs and expenses, attorneys' and accountants' fees and disbursements
or any SEC or other filing fees (collectively, "Spin-Off Costs"), without the
prior written consent of the Investors prior to the Closing or of the Company
after the Closing. Prior to the consummation of the Spin-Off, all Spin-Off Costs
shall be borne and paid directly by Mulvihill and Zucker or such other persons
designated in the Spin-Off Notice and reasonably satisfactory to the Company,
and Mulvihill and Zucker promptly shall reimburse, or cause to be reimbursed,
the Company and the Spin-Off Subsidiary for any Spin-Off Costs that are
otherwise incurred by the Company and the Spin-Off Subsidiary prior to the
consummation of the Spin-Off. After the consummation of the Spin-Off, all
Spin-Off Costs shall be borne and paid directly by the Spin-Off Subsidiary, and
the Spin-Off Subsidiary promptly shall reimburse, or cause to be reimbursed, the
Company for any Spin-Off Costs that are otherwise incurred by the Company or
that otherwise were incurred by the Spin-Off Subsidiary prior to the
commencement of the Spin-Off. It is further understood and agreed that, subject
to paragraph (f) below, the costs or expenses of the Spin-Off Subsidiary arising
in the ordinary course of business which are not Spin-Off Costs (e.g., costs of
incorporation) shall be the responsibility of the Spin-Off Subsidiary.
(e) The parties acknowledge that it is their current understanding
that the approval of the shareholders of the Company is not required for the
formation of the Spin-Off Subsidiary or for the Spin-Off.
(f) The parties agree that the Spin-Off Subsidiary shall not conduct
any business (other than matters incidental to its incorporation, any ongoing
reporting obligations, if any, matters in preparation for the Spin-Off referred
to above, and any other related matters) prior to Spin-Off. The Spin-Off
Subsidiary shall provide an indemnity in form and substance reasonably
satisfactory to the Company and substantially in the form attached hereto as
Exhibit 5.03 in respect of and against any and all (i) Spin-Off Costs incurred
by the Spin-Off Subsidiary prior to the consummation of the Spin-Off and by the
Company, (ii) Losses (as defined in Section 6.01) that the Company may incur in
connection with any conduct of business (other than such business as permitted
in the immediately preceding sentence) prior to the Spin-Off by the Spin-Off
Subsidiary and (iii) liabilities or obligations for Taxes that the Company may
incur as the direct and sole result of the Spin-Off.
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(g) The parties intend the Spin-Off Subsidiary ultimately to be an
entity operated and managed independently of the Company with publicly-traded
securities through the Spin-Off as contemplated in this Section 5.03.
5.04 Cancellation of Certain Options and Warrants. Effective upon
the Closing, the Company shall terminate and cancel the warrants and options set
forth on Exhibit 5.04 hereto in consideration for the payments by the Company as
set forth on Exhibit 5.04, as applicable.
5.05 No Solicitations.
(a) Prior to the Closing Date, the Company agrees that neither it
nor any of its Subsidiaries will, and the Company will use its commercially
reasonable efforts to cause their respective Representatives not to, directly or
indirectly, initiate, solicit, encourage, accept or take any other action
knowingly to facilitate, any inquiries or the making of, or participate in any
discussions or negotiations regarding, any proposal or offer from anyone not a
party hereto (a "Third Party") with respect to, or furnish or disclose any
non-public information regarding the Company or its Subsidiaries to any Third
Party in connection with, any Acquisition Proposal (as defined below).
Notwithstanding the foregoing, (x) in response to an unsolicited Acquisition
Proposal, the Company may take and disclose to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2 under the Exchange Act, and (y) to the
extent the Board of Directors of the Company (the "Board") is advised by its
counsel that it is required by its fiduciary obligations to do so, at any time
prior to approval by the Company's stockholders of the Transactions: (i) the
Company may, in response to an unsolicited request, furnish non-public
information with respect to the Company or its Subsidiaries to any Third Party
that the Board in good faith determines is reasonably capable of consummating
the transactions (a "Qualified Third Party") pursuant to a customary
confidentiality agreement and discuss that information (but not an Acquisition
Proposal) with the Qualified Third Party and (ii) upon receipt by the Company,
any of its Subsidiaries or any of their respective Representatives of an
Acquisition Proposal from a Qualified Third Party, if (A) the Company has
complied fully and in a timely manner with its obligations under Section 5.05(b)
to notify the Investors of the receipt of the Acquisition Proposal and (B) the
Board has determined in good faith that the transaction contemplated by the
Acquisition Proposal, if consummated, would constitute an Overbid Transaction,
and (C) the Company has delivered an Overbid Notice to the Investors advising
them of the determination by the Board that the transaction contemplated by the
Acquisition Proposal would constitute an Overbid Transaction (which notice will
include a statement of the Overbid Amount involved in that transaction and be
accompanied by copies of any form of definitive agreement or other documentation
the Third Party proposes to enter into in connection with the Acquisition
Proposal), then the Company may participate in discussions and negotiations with
the Qualified Third Party regarding the Acquisition Proposal.
(b) If the Company, any of its Subsidiaries or any of their
respective Representatives directly or indirectly receives a request for
information from a Qualified Third Party or an Acquisition Proposal, the Company
(i) will notify the Investors of the existence of such request or the
Acquisition Proposal within two business days after the Company receives
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or otherwise learns of it, will state in the notice the identity of such
Qualified Third Party and describe all material terms regarding the request or
Acquisition Proposal, and thereafter keep the Investors reasonably informed of
all facts and material circumstances relating to such request or Acquisition
Proposal and the Company's actions relating thereto, and (ii) promptly advise
such Qualified Third Party or Person making an Acquisition Proposal of the terms
of this Section 5.05.
(c) If prior to the receipt of Company Stockholder Approval (i) the
Company delivers an Overbid Notice to the Investors, (ii) the Investors do not
notify the Company in writing within five Business Days after receipt of the
Overbid Notice that they are willing to amend the terms of this Agreement and
the Transaction Agreements in order to increase the purchase price for the
Securities by at least the Overbid Amount, (iii) the terms of the Acquisition
Proposal are not modified in a manner adverse to the Company or the Operating
Partnerships and (iv) the Company has paid the Termination Fee to the Investors,
then the Company may terminate this Agreement and enter into an agreement with
the Qualified Third Party with respect to the Overbid Transaction described in
the Overbid Notice that the Company delivered to the Investors.
(d) Nothing contained in this Section 5.05 shall apply to any sale
or proposed sale by the Company of the Properties, individually or in the
aggregate.
5.06 Investor Inquiries. If any of the Investors, any of their
Subsidiaries, or any of their respective Representatives directly or indirectly
receives a request for information from a Third Party or an Investor Acquisition
Proposal, such Investor (i) will notify the Company of the existence of such
request or the Investor Acquisition Proposal within one business day after such
Investor receives or otherwise learns of it, will state in the notice the
identity of the Third Party making the request or the Investor Acquisition
Proposal and describe all material terms regarding the request or Investor
Acquisition Proposal and thereafter keep the Company reasonably informed of all
facts and material circumstances relating to such request or Investor
Acquisition Proposal and such Investor's actions relating thereto, and (ii)
promptly advise such Third Party or Person making an Investor Acquisition
Proposal of the terms of this Section 5.06.
5.07 Investigation.
(a) The Company will, and will cause its Subsidiaries to, (i)
provide each Investor (including any Outside Investor, as the case may be) and
any Person who is considering providing financing to such Investor in connection
with transactions contemplated hereby (a "Financing Party") and their respective
officers, directors, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives (together "Representatives")
with full access, upon reasonable prior notice and during normal business hours,
to all officers, employees, agents and accountants of the Company and the
Subsidiaries and their assets and properties and Books and Records, (ii)
deliver, or cause its agent to deliver, on a weekly basis to each Investor a
status report describing the status of the Company's efforts and activities with
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respect to the marketing or disposition of the Properties, including the
identity of potential buyers contacted and any changes and developments with
respect to any of the foregoing, and (iii) furnish each Investor (including any
Outside Investor, as the case may be) and such other Persons with all such
information and data (including without limitation copies of Contracts, Benefit
Plans and other Books and Records) concerning the business and operations of the
Company and the Subsidiaries as any Investor or any of such other Persons
reasonably may request in connection with such investigation. Notwithstanding
anything to the contrary contained in clause (i) or (iii) above, the Company
shall not be obligated to provide or cause to be provided more than one copy of
materials and documents (including without limitation copies of contracts,
Benefit Plans and other Books and Records) to be furnished to the Investors
hereunder. To the extent any Investor furnishes to any Outside Investor or any
Financing Party any information furnished under Section 5.08, such Investor
shall inform the Company of the identity of the Outside Investor or Financing
Party to whom such information is sent twenty-four hours prior to delivery by
the Investor of such information, and shall inform such recipient that such
information is subject to the confidentiality provisions contained in Section
5.08 below.
(b) Each of the Contributors will, and will cause its Subsidiaries
to, (i) provide the Company and its Representatives with full access, upon
reasonable prior notice and during the normal business hours, to all officers,
employees, agents and accountants of such Contributor and its Subsidiaries and
their assets and properties and books and records, and (ii) furnish the Company
with (x) all such information and data (including without limitation copies of
contracts and benefit plans) concerning the business and operations of such
Contributor and its Subsidiaries as the Company reasonably may request in
connection with such investigation and (y) all information and data that such
Contributor or Subsidiary possesses or obtains with respect to the Acquisition
Contracts or the Acquisition Properties (each as defined in the Management
Contribution Agreement). The Investors shall furnish all such information and
data referred to in clause (ii) above by making such information and data
available in a data room designated by the Investors to which the Company and
its Representatives will be provided with full access, upon reasonable prior
notice and during normal business hours.
5.08 Confidentiality. Each party and its respective Subsidiaries
will hold, and will use its best efforts to cause its and its Subsidiaries'
Representatives, any Outside Investor and persons to whom information is
furnished under Section 5.07, to hold, in strict confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of
applicable Laws of Governmental or Regulatory Authorities (including, without
limitation, in connection with obtaining the necessary approvals of this
Agreement or the transactions contemplated hereby of Governmental or Regulatory
Authorities), all documents and information concerning the other party and its
Subsidiaries furnished to it by such other party or its Representatives in
connection with this Agreement or the transactions contemplated hereby, except
to the extent that such documents or information can be shown to have been (x)
previously known by the Company or the Investors, as the case may be, or its
respective Subsidiaries or its or their Representatives, on a non-confidential
basis, or (y) in the public domain (either prior to or after the furnishing of
such documents or information hereunder) through no fault of the recipient of
the information or its Subsidiaries or its or their
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Representatives. In the event that this Agreement is terminated without the
transactions contemplated hereby having been consummated, upon the request of
the Company or the Investors, as the case may be, the other party will, and will
cause its respective Subsidiaries and will request its or their Representatives
to, promptly (and in no event later than five business days after such request)
redeliver or cause to be redelivered all copies of documents and information
furnished by the Company or the Investors, as the case may be, its respective
Subsidiaries or its or their Representatives to such party and its
Representatives (and, if applicable, other persons to whom information is
furnished pursuant to Section 5.07) in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the Company or the Investors, as the case may be,
its respective Subsidiaries or its or their Representatives.
5.09 Financial Statements and Reports.
(a) As promptly as practicable and in any event no later than two
Business Days after the date of filing with the SEC, the Company will deliver to
Hudson Bay true and complete copies of the audited (in the case of any fiscal
year ending after the date hereof and before the Closing Date) and the unaudited
(in the case of any fiscal quarter ending after the date hereof and before the
Closing Date) consolidated balance sheet, and the related audited or unaudited
consolidated statements of operations, stockholders' equity and cash flows, of
the Company and its consolidated subsidiaries, in each case as of and for the
fiscal year then ended or as of and for each such fiscal quarter and the portion
of the fiscal year then ended, as the case may be, together with the notes, if
any, relating thereto, which financial statements shall be prepared on a basis
consistent with the Company Financial Statements; provided, however, that the
Company's obligations contained in this Section 5.09(a) shall be satisfied by
delivery to Hudson Bay of copies of the Company's Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q, and any amendments thereto, filed with the SEC.
(b) As promptly as practicable, the Company will deliver to Hudson
Bay true and complete copies of such other financial statements, reports and
analyses as may be filed with the SEC by the Company relating to the business or
operations of the Company or any Subsidiary or as any Investor may otherwise
reasonably request.
5.10 Registration Statement. The Company shall prepare (and the
parties hereto shall cooperate in the preparation of) and file with the SEC as
soon as reasonably practicable after the date hereof a Registration Statement on
Form S-4 (the "Form S-4") under the Securities Act, with respect to the Common
Stock to be issued in connection with the Transactions, a portion of which
Registration Statement shall also serve as the proxy statement with respect to
the meeting of the stockholders of the Company in connection with the
Transactions (as amended or supplemented from time to time, the "Proxy
Statement/Prospectus"). The Company will cause the Proxy Statement/Prospectus
and the Form S-4 to comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act. The Company
shall use commercially reasonable efforts, and the parties hereto will cooperate
with
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the Company, to have the Form S-4 declared effective by the SEC as promptly as
practicable and to keep the Form S-4 effective as long as necessary to
consummate the Transactions. The Company shall, as promptly as practicable,
provide copies of any written comments received from the SEC with respect to the
Form S-4 to the parties hereto and advise them of any verbal comments with
respect to the Form S-4 received from the SEC. The Company shall use its best
efforts to obtain, prior to the effective date of the Form S-4, all necessary
state securities law or "blue sky" permits or approvals required to carry out
the transactions contemplated by this Agreement. The Company shall use all
commercially reasonable efforts to obtain "cold comfort" letters from its
independent certified public accountants, dated a date within two business days
before the date on which the Form S-4 shall become effective, in form reasonably
acceptable to the other party and customary in form and substance for letters
delivered by independent certified public accountants in connection with
registration statements similar to the Form S-4. The Company agrees that the
Proxy Statement/Prospectus and each amendment or supplement thereto at the time
of mailing thereof and at the time of the Company Stockholders' Meeting (as
defined below), or, in the case of the Form S-4 and each amendment or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing shall not apply to the extent that any such untrue statement
of a material fact or omission to state a material fact was made by the Company
in reliance upon and in conformity with written information concerning the
Investors hereto furnished to the Company by an Investor specifically for use in
the Proxy Statement/Prospectus. Each Investor agrees that the written
information concerning it provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Company Stockholders' Meeting, or, in the
case of written information concerning it provided by it for inclusion in the
Form S-4 or any amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by the Company without the reasonable approval
of the Investors. The Company will advise the Investors, promptly after receipt
of notice thereof, of the time when the Form S-4 has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Common Stock issuable in connection with
the Transactions for offering or sale in any jurisdiction, or any request by the
SEC for amendment of the Proxy Statement/Prospectus or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for additional information.
5.11 Approval of Stockholders and Board Recommendation. The Company through
the Board, shall duly call, give notice of, convene and hold a meeting of
its voting on the adoption of the Transactions, this Agreement, the Transaction
Agreements (including the Merger Agreement), the sale of the Properties, and the
transactions contemplated hereby and thereby as soon as reasonably
practicable after the date hereof, subject to the requirements of applicable
laws. The
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Company shall use its best efforts to solicit from its stockholders proxies,
and, shall take all other action necessary and advisable, to secure the vote of
stockholders required by applicable law to obtain the approval for the
Transactions. The Board shall recommend to its stockholders the adoption of the
Transactions, this Agreement, the Transaction Agreements (including the Merger
Agreement), the sale of the Properties and the transactions contemplated hereby
and thereby; provided, however, that such recommendation may not be made or may
be withdrawn, modified, or amended after the receipt by the Company of an
Acquisition Proposal to the extent the Board shall determine, in good faith,
upon written advice of outside counsel (who may be the Company's regularly
retained outside counsel), that such action is necessary in order for the Board
to act in a manner which is consistent with its fiduciary obligations to
stockholders under applicable law and the Company has satisfied its obligations
under Section 5.05 (including its obligation to pay the Termination Fee).
5.12 Regulatory and Other Approvals. The Company will, and will
cause the Company and the Subsidiaries to, (i) take all commercially reasonable
steps necessary or desir able, and proceed diligently and in good faith and use
all commercially reasonable efforts, as promptly as practicable to obtain all
consents, approvals or actions of, to make all filings with and to give all
notices to Governmental or Regulatory Authorities or any other Person required
of the Company or any Subsidiary of the Company to consummate the transactions
contemplated hereby and by the Transaction Agreements, (ii) provide such other
information and communications to such Governmental or Regulatory Authorities or
other Persons as such Governmental or Regulatory Authorities or other Persons
may reasonably request and (iii) cooperate with the Investors as promptly as
practicable in obtaining all consents, approvals or actions of, making all
filings with and giving all notices to Governmental or Regulatory Authorities or
other Persons required of the Investors to consummate the transactions
contemplated hereby and by the Transaction Agreements. The Company will provide
prompt notification to the Investors when any such consent, approval, action,
filing or notice referred to in clause (i) above is obtained, taken, made or
given, as applicable, and will advise the Investors of any communications (and,
unless precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority or other Person regarding
any of the transactions contemplated by this Agreement or any of the Transaction
Agreements.
5.13 Notice and Cure.
(a) The Company will notify the Investors promptly in writing of,
and contemporaneously will provide each Investor with true and complete copies
of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance occurring after the date of this Agreement that
causes or will cause any covenant or agreement of the Company under this
Agreement or any of the Transaction Agreements to be breached or that renders or
will render untrue any representation or warranty of the Company contained in
this Agreement or any of the Transaction Agreements as if the same were made on
or as of the date of such event, transaction or circumstance. The Company also
will notify each Investor promptly in writing
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of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant or
agreement made by the Company in this Agreement, whether occurring or arising
before, on or after the date of this Agreement. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement or any other Transaction Agreement for
purposes of determining satisfaction of any condition contained herein or shall
in any way limit each Investor's right to seek indemnity under Article VI.
(b) Each Investor will notify the Company promptly in writing of,
and contemporaneously will provide the Company with true and complete copies of
any and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance occurring after the date of this Agreement that causes or will
cause any covenant or agreement of such Investor under this Agreement or any
Transaction Agreement to which it is a party to be breached or that renders or
will render untrue any representation or warranty of such Investor contained in
this Agreement or any Transaction Agreement to which it is a party as if the
same were made on or as of the date of such event, transaction or circumstance.
Each Investor also will notify the Company promptly in writing of, and will use
all commercially reasonable efforts to cure, before the Closing, any violation
or breach of any representation, warranty, covenant or agreement made by such
Investor in this Agreement or any Transaction Agreement to which it is a party,
whether occurring or arising before, on or after the date of this Agreement. No
notice given pursuant to this Section shall have any effect on the
representations, warranties, covenants or agreements contained in this Agreement
or any other Transaction Agreement for purposes of determining satisfaction of
any condition contained herein or shall in any way limit the Company's right to
seek indemnity under Article VI.
5.14 Fulfillment of Conditions. Subject to the terms and conditions
of this Agreement, each of the parties hereto will use all commercially
reasonable efforts to take or cause to be taken all steps necessary or desirable
and proceed diligently and in good faith to satisfy each condition to the
other's obligations contained in this Agreement and in the Transaction
Agreements and to consummate and make effective the Transactions, and none of
the parties hereto will, nor will they permit any of their Subsidiaries to, take
or fail to take any action that could be reasonably expected to result in the
nonfulfillment of any such condition.
5.15 Liability and Indemnification of Officers and Directors of
the Company.
(a) To the fullest extent permitted by Maryland law, a person who is
now or has been at any time prior to the Closing Date a director or officer of
the Company shall not be personally liable to the Company or the stockholders of
the Company for money damages. Notwithstanding the foregoing, nothing in this
Section 5.15(a) shall restrict or limit the liability of such a director or
officer to the Company or its stockholders: (i) to the extent that it is proved
that such director or officer actually received an improper benefit or profit in
money, property, or services for the amount of the benefit or profit in money,
property, or services actually received; or (ii) to the extent that a judgment
or other final adjudication adverse to such director
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or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The foregoing shall not be construed to affect the liability of
a person in any capacity other than the person's capacity as a director or
officer.
(b) The Company shall indemnify, defend and hold harmless each
person who is now or has been at any time prior to the Closing Date a director
or officer of the Company (an "Indemnitee") against all Losses, claims, damages,
costs, reasonable expenses (including attorneys' fees and expenses),
liabilities, judgments, penalties, fines, or amounts that are paid in settlement
of, or otherwise in connection with any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(collectively, the "Proceedings"), to which an Indemnitee was made a party based
on, arising out of or by reason of the fact that such Indemnitee is or was a
director or officer of the Company, or is or was serving at the request of the
Company, while a director or officer of the Company, as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan at
or prior to the Closing Date, whether such Proceedings were asserted or claimed
prior to, at or after, the Closing Date ("Indemnified Liabilities"), including
all Indemnified Liabilities based on, or arising out of, or pertaining to this
Agreement, any Transaction Agreement, the Spin-Off or the Transactions, unless
it is established that: (i) the act or omission of the Indemnitee was material
to the matter giving rise to the Proceeding and (x) was committed in bad faith
or (y) was the result of active and deliberate dishonesty; (ii) the Indemnitee
actually received an improper personal benefit in money, property, or services;
or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable
cause to believe that the act or omission was unlawful. Notwithstanding the
foregoing, if the Proceeding was one by or in right of the Company, the Company
shall not provide indemnification hereunder in respect of any Proceeding in
which the Indemnitee shall have been adjudged to be liable to the Company, or
any proceeding charging improper personal benefit to the Indemnitee, whether or
not involving action in the Indemnitee's official capacity, in which the
Indemnitee was adjudged to be liable on the basis that personal benefit was
improperly received. In addition to the indemnification provided above, the
Company shall reimburse reasonable expenses (including reasonable attorneys'
fees) incurred by an Indemnitee in connection with an appearance as a witness in
a Proceeding at a time when the Indemnitee has not been made a named defendant
or respondent in the Proceeding.
Notwithstanding the foregoing paragraph, the Company shall not
provide any indemnification under this Section 5.15(b) unless authorized for a
specific proceeding after a determination has been made that indemnification of
the Indemnitee is permissible in the circumstances because the Indemnitee has
met the standard of conduct set forth in the foregoing paragraph. Such
determination shall be made
(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the Proceeding, or,
if such a quorum cannot be obtained, then by a majority vote of a
committee of the board consisting solely of two
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or more directors not, at the time, parties to such Proceeding and who
were duly designated to act in the matter by a majority vote of the full
board in which the designated directors who are parties may participate;
(ii) By special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in clause (i) of this
paragraph, or, if the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be established, by a majority
vote of the full board in which directors who are parties may participate;
or
(iii) By the stockholders; provided, however, that shares held by
directors who are parties to the Proceeding may not be voted on the
subject matter of this paragraph.
Authorization of the indemnification and determination as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified in clause (ii) above for selection of such counsel.
(c) The Company shall indemnify a director or officer of the Company
who has been successful, on the merits or otherwise, in the defense of any
Proceeding against reasonable expenses incurred by such director or officer in
connection with the Proceeding.
(d) The Company shall pay or reimburse the reasonable expenses
expended or incurred by a director or officer of the Company in connection with
any Proceeding in advance of the final disposition of the Proceeding upon
receipt by the Company of (i) a written affirmation of the such director or
officer's good faith belief that the standard of conduct necessary for
indemnification by the Company set forth in the applicable provisions of
Maryland law has been satisfied by such director or officer, and (ii) a written
undertaking by or on behalf of such director or officer to repay the amount
advanced if it shall ultimately be determined that such director or officer has
not satisfied the standard of conduct prescribed by the applicable provisions of
Maryland law, which written undertaking need not be secured and will be accepted
by the Company without reference to the director or officer's ability to make
repayment. The Company shall pay or reimburse such director or officer such
expenses within ten days after receipt by the Company of such affirmation and
undertaking.
(e) Notwithstanding the limitations on indemnification set forth in
Section 5.15(b), an Indemnitee shall be entitled to indemnification if a court
of appropriate jurisdiction, upon application of such Indemnitee and such notice
as the court shall require, shall order indemnification: (i) upon determination
that the Indemnitee is entitled to reimbursement under Section 5.15(c), in which
case the Indemnitee shall be entitled to recover the expenses of securing such
reimbursement; or (ii) upon determination that the Indemnitee is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the Indemnitee has met the standards of conduct
set forth in the first paragraph of Section
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5.15(b) or has been adjudged to be liable under the circumstances described in
the penultimate sentence of the first paragraph of Section 5.15(b); provided
that indemnification with respect to any Proceeding by or in the right of the
Company or in which liability shall have been adjudged on the basis that
personal profit was improperly received shall be limited to expenses.
(f) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition provided
in this Section 5.15 shall be in addition to, and not be exclusive of, any other
right which an officer or director of the Company may have or hereafter acquire
under any statute, provision of the Articles of Incorporation or Bylaws, each as
amended from time to time, of the Company, agreement, insurance policy, vote of
stockholders or directors or otherwise.
(g) All agreements and obligations of the Company contained in this
Section 5.15 shall continue during the period any person is a director or
officer, as the case may be, of the Company and shall continue thereafter so
long as such person shall be subject to any possible Proceeding by reason of the
fact that such person was a director or officer of the Company.
(h) The provisions of this Section 5.15 are intended to provide the
directors and officers of the Company with the maximum protection and for the
maximum period permitted under Maryland law and shall be construed to give
maximum effect to such intention of the parties. If any provision of this
Section 5.15 is or is held to be illegal, invalid or unenforceable under any
present or future Maryland law, it shall be ineffective only to the extent of
such illegality, invalidity or unenforceability without invalidating the
remaining provisions of this Section 5.15.
(i) The parties acknowledge that all directors and officers of the
Company immediately prior to the Closing Date (including without limitation
Messrs. Rick Burger, Jim Mulvihill, Evan Zucker, Hord Hardin, III, J.
Christopher O'Keefe and Michael Rotchford) are third party beneficiaries of this
Section 5.15. This Section 5.15 may not be amended or modified by the parties
hereto without the written consent of each of the directors and officers whose
rights and obligations are or may be adversely affected by such amendment or
modification.
(j) Neither the amendment of this Section 5.15 nor the adoption or
amendment of any provision of the Articles of Incorporation or Bylaws of the
Company inconsistent with this Section 5.15 shall apply to or affect in any
respect the applicability of the provisions of this Section 5.15 with respect to
any act or failure to act of a director or officer of the Company which occurred
prior to such amendment or adoption.
(k) The Company shall obtain and maintain in effect as of the
Closing Date and continuing until the sixth anniversary of the Closing Date
directors and officers liability insurance with a coverage amount and other
terms and conditions comparable to the Company's current directors and officers
liability insurance policy covering the directors and officers of the Company
with respect to their service as such prior to the Closing Date.
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5.16 Refinancing. The Company agrees to use its commercially
reasonable efforts to cooperate with the McBrides in connection with the
Refinancing, including the formation by the Company on or before the Closing
Date of one or more entities that are "qualified REIT subsidiaries" as defined
in Section 856(i)(2) of the Code and that meet any "single purpose entity"
requirements imposed by the lender in the Refinancing, which entities are
anticipated to acquire by merger or otherwise (i) certain Minority Partnership
Interests (as defined in the McBride Contribution Agreement) and (ii) the assets
held by any subsidiary of FLIP formed as a requirement of the Refinancing.
5.17 Blumberg Agreement. On or prior to Closing, the Company
shall enter into the brokerage agreement with John Blumberg, substantially
in the form of Exhibit 5.17 hereto.
ARTICLE VI.
INDEMNIFICATION
6.01 Indemnification by the Company. (a) Subject to the limitations
set forth in paragraph (b) below, the Company and the Operating Partnership
jointly and severally agree to indemnify each of Hudson Bay, Kelter, the MHB LP,
and the FLIP Shareholders, and their respective shareholders, directors,
employees, agents, partners and Affiliates (all such other Persons being
"Related Indemnified Parties") in respect of, and hold each of them harmless
from and against, any and all losses, liabilities (including punitive or
exemplary damages, fines or penalties and interest thereon), expenses (including
fees and disbursements of counsel and expenses of investigation and defense),
claims or other obligations of any value whatsoever (collectively, "Losses")
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to any breach of or
inaccuracy in any representation or warranty, or nonfulfillment of or failure to
perform or breach of any covenant or agreement on the part of the Company or the
Operating Partnership contained in this Agreement in any Transaction Agreement
to which it or the Operating Partnership is a party.
(b) The joint and several obligations of the Company and the
Operating Partnership to indemnify and hold harmless pursuant to Section 6.01(a)
shall be limited to the payment of indemnity amounts that in the aggregate equal
$22,000,000. In addition, no indemnity amounts shall be payable as a result of
any claim arising under Section 6.01(a) unless and until the Indemnified Parties
thereunder have suffered, incurred, sustained or become subject to Losses equal
to (i) in the case of the MHB LP, the FLIP Shareholders and their Related
Indemnified Parties, $250,000 in the aggregate, (ii) in the case of Kelter and
his Related Indemnified Parties, $150,000 in the aggregate, or (iii) in the case
of Hudson Bay and its Related Indemnified Parties, $250,000 in the aggregate; in
which event such Indemnified Parties shall be entitled to seek indemnification
for the full amount of such Losses.
6.02 Indemnification by the Investors. (a) Subject to the
limitations set forth in paragraphs (b) and (c) below, each of (i) Kelter, (ii)
Hudson Bay and (iii) the MHB LP
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(jointly and severally with each of the FLIP Shareholders, but only to the
extent of the number of shares of Common Stock received as Merger Consideration
in connection with the Merger) (each of the foregoing indemnifying parties in
the foregoing clauses being an "Indemnifying Investor" and collectively, the
"Indemnifying Investors") severally agrees to indemnify the Company and its
officers, directors, employees, agents and Affiliates (including the Operating
Partnership) in respect of, and hold each of them harmless from and against, any
and all Losses suffered, incurred or sustained by any of them or to which any of
them becomes subject, resulting from, arising out of or relating to any breach
of or inaccuracy in any representation or warranty, or nonfulfillment of or
failure to perform or breach of any covenant or agreement on the part of such
Indemnifying Investor contained in this Agreement or in any Transaction
Agreement to which it is a party. It is understood and agreed that the
indemnification obligations of the MHB LP (and the FLIP Shareholders, jointly
and severally with the MHB LP, but only to the extent of the number of shares of
Common Stock received as Merger Consideration in connection with the Merger)
hereunder shall extend to any breach of or inaccuracy in any representation or
warranty, or nonfulfillment of or failure to perform or breach of any covenants
or agreement on the part of FLIP or any FLIP Shareholders contained in the
Merger Agreement.
(b) The obligations to indemnify and hold harmless pursuant to
Section 6.02(a) shall be limited to the payment of indemnity amounts that equal
(i) in the case of the MHB LP (and the FLIP Shareholders, jointly and severally
with the MHB LP, but only to the extent of the number of shares of Common Stock
received as Merger Consideration in connection with the Merger), the lesser of
$25,000,000 in the aggregate or the Total Market Value (as defined below), (ii)
in the case of Kelter, the lesser of $4,000,000 in the aggregate or the Total
Market Value, and (iii) in the case of Hudson Bay, the lesser of $10,000,000 in
the aggregate or the Total Market Value. In addition, no indemnity amounts shall
be payable as a result of any claim arising under Section 6.02(a) unless and
until the Indemnified Parties thereunder have suffered, incurred, sustained or
become subject to Losses in excess of $250,000 in the aggregate, in which event
such Indemnified Parties shall be entitled to seek indemnification for the full
amount of such Losses. For the purposes of this Section 6.02(b), "Total Market
Value" means the amount which is equal to the Market Value (as defined below)
calculated as of the date an indemnity payment otherwise would be made
multiplied by all such Indemnifying Investor's Partnership Units or shares of
Common Stock issued to such Indemnifying Investor in connection with the
transactions contemplated hereby; provided that in the case of MHB LP, such
Indemnifying Investor's Partnership Units shall not include 181,818 Partnership
Units to be issued at Closing.
(c) Any Indemnifying Investor who is otherwise obligated to make an
indemnification payment pursuant to Section 6.02(a) may in lieu of such payment
and in satisfaction of such Indemnifying Investor's obligations thereunder
transfer to the Company such number of Partnership Units (in the case of the MHB
LP, Hudson Bay and Kelter) and/or Common Stock (in the case of the FLIP
Shareholders and Hudson Bay) equal to a fraction the numerator of which is the
dollar amount of the indemnification payment and the denominator of which is the
per share Market Value of the Company's Common Stock. Any transfer of
Partnership Units and/or Common Stock pursuant to this Section 6.02(c) shall be
considered an
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adjustment to the consideration received by such Indemnifying Investor for
federal income tax purposes.
For the purpose of any computation under this Section 6.02,
"Market Value" of the Common Stock or Partnership Units on any date will be the
average of the last reported sale prices per share of the Common Stock on each
of the 10 consecutive Trading Days (as defined below) preceding the date of the
computation. The last reported sale price of the Common Stock on each day will
be (A) the last reported sale price of the Common Stock on the principal stock
exchange on which the Common Stock is listed, or (B) if the Common Stock is not
listed on a stock exchange, the last reported sale price of the Common Stock on
the principal automated securities price quotation system on which sale prices
of the Common Stock are reported, or (C) if the Common Stock is not listed on a
stock exchange and sale prices of the Common Stock are not reported on an
automated quotation system, the mean of the high bid and low asked price
quotations for the Common Stock as reported by National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for the Common Stock on at least five of the ten preceding Trading
Days. If the Common Stock is not traded or quoted as described in any of clause
(A), (B) or (C), the Market Value of the Common Stock on a day will be the fair
market value of the Common Stock on that day as determined by a member firm of
the New York Stock Exchange, Inc. selected by the Board of Directors of the
Company. The term "Trading Day" means (x) if the Common Stock is listed on at
least one stock exchange, a day on which there is trading on the principal stock
exchange on which the Common Stock is listed, (y) if the Common Stock is not
listed on a stock exchange, but sale prices of the Common Stock are reported on
an automated quotation system, a day on which trading is reported on the
principal automated quotation system on which sales of the Common Stock are
reported, or (z) if the Common Stock is not listed on a stock exchange and sale
prices of the Common Stock are not reported on an automated quotation system, a
day on which quotations are reported by National Quotation Bureau Incorporated.
6.03 Method of Asserting Claims. All claims for indemnification
by any Indemnified Party under this Article VI will be asserted and resolved as
follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Article VI is asserted against or
sought to be collected from such Indemnified Party by a Person other than the
Company, any Subsidiary, any Investor or any Affiliate of the Company or any
Investor (a "Third Party Claim"), the Indemnified Party shall deliver a Claim
Notice with reasonable promptness to the Indemnifying Party. If the Indemnified
Party fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party will not be obligated to indemnify the Indemnified Party with respect to
such Third Party Claim to the extent that the Indemnifying Party's ability to
defend has been irreparably prejudiced by such failure of the Indemnified Party.
The Indemnifying Party will notify the Indemnified Party as soon as practicable
within the Dispute Period whether the Indemnifying Party disputes its liability
to the Indemnified Party under this Article VI and whether the Indemnifying
Party
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desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to
this Section 6.03(a), then the Indemnifying Party will have the right to
defend, with counsel reasonably satisfactory to the Indemnified Party, at
the sole cost and expense of the Indemnifying Party, such Third Party
Claim by all appropriate proceedings, which proceedings will be vigorously
and diligently prosecuted by the Indemnifying Party to a final conclusion
or will be settled at the discretion of the Indemnifying Party (but only
with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or
that provides for the payment of monetary damages as to which the
Indemnified Party will not be indemnified in full pursuant to this Article
VI). The In demnifying Party will have full control of such defense and
proceedings, including any compromise or settlement thereof (subject to
the consent of the Indemnified Party in the case of any settlement that
provides for any relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the Indemnified
Party will not be indemnified in full pursuant to this Article VI);
provided, however, that the Indemnified Party, at the sole cost and
expense of the Indemnified Party, at any time prior to the Indemnifying
Party's delivery of the notice referred to in the first sentence of this
clause (i), may file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party, at the
sole cost and expense of the Indemnifying Party, will provide reasonable
cooperation to the Indemnifying Party in contesting any Third Party Claim
that the Indemnifying Party elects to contest. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this clause
(i), and except as provided in the preceding sentence, the Indemnified
Party will bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified Party may
take over the control of the defense or settlement of a Third Party Claim
at any time if it irrevocably waives its right to indemnity under this
Article VI with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 6.03(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party will have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party (subject to the
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consent of the Indemnifying Party in the case of any settlement that
provides any relief other than the payment of monetary damages; which
consent will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including any
compromise or settlement thereof (subject to the consent of the
Indemnifying Party in the case of any settlement that provides for any
relief other than the payment of monetary damages; which consent will not
be unreasonably withheld); provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this clause (ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses of
the Indemnified Party's defense pursuant to this clause (ii) or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party will reimburse the Indemnifying Party
in full for all reasonable costs and expenses, if any, of its separate
counsel incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant to
this clause (ii), and the Indemnifying Party will bear its own costs and
expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under this Article VI or fails to notify
the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes its liability to the Indemnified Party with respect to such
Third Party Claim, the Loss in the amount specified in the Claim Notice
will be conclusively deemed a liability of the Indemnifying Party under
this Article VI and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has
timely disputed its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party will proceed in good faith to negotiate a
resolution of such dispute.
(b) In the event any Indemnified Party should have a claim under
this Article VI against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under this Article VI
and the
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Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its liability with respect
to such claim, the Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute.
ARTICLE VII.
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the
Transactions. The respective obligation of each party to effect the transactions
contemplated by this Agreement and the Transaction Agreements is subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Stockholder Approval. The Transactions, this Agreement, the
Transaction Agreements (including the Merger Agreement), the disposition of the
Properties, and the transactions contemplated hereby and thereby shall have been
approved and adopted by the requisite vote of the stockholders of the Company
under applicable law, the Company's Articles of Incorporation and any other
governing instruments.
(b) Form S-4. The Form S-4 shall have become effective and shall be
effective at the Closing Date, and no stop order suspending effectiveness of the
Form S-4 shall have been issued, no action, suit, proceeding or investigation by
the Commission to suspend the effectiveness thereof shall have been initiated
and be continuing, or, to the knowledge of the Company, threatened, and all
necessary approvals under state securities laws relating to the issuance or
trading of the Stock to be issued or reserved in connection with the
Transactions shall have been received.
(c) No Injunctions or Restraints. No court of competent jurisdiction
or other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered into any Law or Order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal or otherwise restricting, preventing or prohibiting
consummation of the transactions contemplated by this Agreement or the
Transaction Agreements.
(d) Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit parties to perform their obligations under this Agreement
and the Transaction Agreements and to consummate the transactions contemplated
hereby and thereby (i) shall have been duly obtained, made or given, (ii) shall
not be subject to the satisfaction of any condition that has not been satisfied
or waived and (iii) shall be in full force and effect, and all terminations or
expirations of waiting periods, if any, imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Transaction Agreements shall have
occurred.
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7.02 Conditions to Obligations of the Investors. The obligations of
each of the Investors to effect the transactions contemplated hereby and by the
Transaction Agreements are subject to the fulfillment, at or before the Closing,
of each of the following conditions (all or any of which may be waived in whole
or in part by the Investors, acting jointly in their sole discretion):
(a) Satisfaction of Conditions to Transaction Agreements. All
conditions precedent to the consummation of the transactions contemplated by the
Transaction Agreements, including the Transactions (other than the condition
that the transactions contemplated by this Agreement shall have been
consummated) shall have been satisfied or, if permissible, waived.
(b) Representations and Warranties. Each of the representations and
warranties made by the Company and the Operating Partnership in this Agreement
(other than those made as of a specified date earlier than the Closing Date)
shall be true and correct in all material respects on and as of the Closing Date
as though such representation or warranty was made on and as of the Closing
Date, and any representation or warranty made as of a specified date earlier
than the Closing Date shall have been true and correct in all material respects
on and as of such earlier date.
(c) Performance. The Company and the Operating Partnership shall
have performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by the Company and the Operating Partnership at or before the
Closing.
(d) Officers' Certificate. The Company shall have delivered to the
Investors a certificate, dated the Closing Date and executed by the Chairman of
the Board, the President or any Executive or Senior Vice President of the
Company, in form and substance satisfactory to the Investors.
(e) American Stock Exchange Listing. The shares of Common Stock
to be issued in connection with the Transactions shall have been approved for
listing on the American Stock Exchange, subject to official notice of issuance.
(f) Third Party Consents. All consents (or in lieu thereof waivers)
to the performance by the Investors and the Company of their respective
obligations under this Agreement and the Transaction Agreements or to the
consummation of the transactions contemplated hereby and thereby as are required
under any Contract to which any Investor, the Company or any Subsidiary of the
Company is a party or by which any of their respective assets and properties are
bound and where the failure to obtain any such consent (or in lieu thereof
waiver) could reasonably be expected, individually or in the aggregate with
other such failures, to have a Material Adverse Effect or adversely affect in
any material respect the ability of any of the Investors to consummate the
transactions contemplated by the Transaction Agreements shall have been
received.
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(g) Opinion of Counsel. The Investors shall have received the
opinions of Paul, Weiss, Rifkind, Wharton & Garrison and Piper and Marbury,
counsel to the Company, dated the Closing Date, substantially in the form and to
the effect of Exhibit 7.02(g) hereto.
(h) Transaction Agreements. The Company and the Investors shall have
executed and delivered the Transaction Agreements to which they are or will be
parties and the transactions contemplated thereby shall close concurrently
herewith.
(i) Lock-Up Agreements. Each of James Mulvihill and Evan Zucker
shall have executed and delivered to the Investors "lock-up" agreements
substantially the in form attached hereto as Exhibit 7.02(i).
(j) Non-Competition Agreements. Each of Evan Zucker and James
Mulvihill shall have executed and delivered a non-competition agreement in
substantially the form attached hereto as Exhibit 7.02(j)-1 and the Spin-Off
Subsidiary shall have executed and delivered a non-competition agreement in
substantially the form attached hereto as Exhibit 7.02(j)-2.
(k) Cancellation of Options and Warrants. The Company shall have
delivered to the Investors evidence satisfactory to the Investors of
cancellation of the warrants and options set forth in Exhibit 5.04.
(l) Amended and Restated Partnership Agreement. The amendment and
restatement of the Partnership Agreement substantially in the form attached
hereto as Exhibit 7.02(l) (the "Amended and Restated Partnership Agreement")
shall have been duly and validly adopted and approved by all requisite
partnership action of the Operating Partnership and by all requisite corporate
action of the Company in its capacity as the general partner thereof, shall have
been executed and delivered by the requisite number of limited partners thereof,
and shall be in full force and effect.
(m) Actions. All actions necessary to be taken by the Company and
the Operating Partnership in connection with the consummation of the
transactions contemplated by this Agreement and the Transaction Agreements and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors, and the Investors shall have received copies of all
such documents and other evidences as they may reasonably request in order to
establish the consummation of such transactions and the taking of all such
actions.
7.03 Conditions to Obligations of the Company and the Operating
Partnership. The obligations of the Company and the Operating Partnership to
effect the transactions contemplated by this Agreement and the Transaction
Agreements are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by the Company in its sole discretion):
(a) Satisfaction of Conditions to Transaction Agreements. All
conditions precedent to the obligations of the Company and the Operating
Partnership to consummate the
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transactions contemplated by the Transaction Agreements, including the
Transactions, shall have been satisfied, or if permissible, waived.
(b) Representations and Warranties. Each of the representations and
warranties made by the Investors in the Transaction Agreements to which they are
parties (other than those made as of a specified date earlier than the Closing
Date) shall be true and correct in all material respects on and as of the
Closing Date as though such representation or warranty was made on and as of the
Closing Date, and any representation or warranty made as of a specified date
earlier than the Closing Date shall have been true and correct in all material
respects on and as of such earlier date.
(c) Performance. The Investors shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Investors at or
before the Closing.
(d) Third Party Consents. All consents (or in lieu thereof waivers)
to the performance by the Company of its obligations hereunder and to the
consummation of the transactions contemplated hereby and the Transaction
Agreements as are required under any Contract to which the Company or any
Subsidiary of the Company is a party or by which any of their respective assets
and properties are bound and where the failure to obtain any such consent (or in
lieu thereof waiver) could reasonably be expected, individually or in the
aggregate with other such failures to have a Material Adverse Effect or
adversely affect in any material respect the ability of the Company and the
Operating Partnership to consummate the transactions contemplated by this
Agreement and the Transaction Agreements shall have been received.
(e) Opinions of Counsel. The Company shall have received the
opinions dated the Closing Date, substantially in the form and to the effect of
Exhibit 7.03(e) hereto, of such counsel to the Investors designated on Exhibit
7.03(e) to furnish such opinions.
(f) Transaction Agreements. The Investors shall have executed
and delivered the Transaction Agreements to which they are or will be parties
and the transactions contemplated thereunder shall close concurrently herewith.
(g) Actions. All actions necessary to be taken by the Investors in
connection with the consummation of the transactions contemplated by this
Agreement and the Transaction Agreements and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company, and the
Company shall have received copies of all such documents and other evidences as
the Company may reasonably request in order to establish the consummation of
such transactions and the taking of all such actions.
ARTICLE VIII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
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8.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of the
Company and the Operating Partnership contained in this Agreement will survive
the Closing until the second anniversary of the Closing Date, or in the case of
any covenant or agreement for which a time period for performance is specified,
for two years following the last date on which such covenant or agreement is to
be performed, except that to the extent any claim for indemnification is made
under this Agreement with respect to any representation, warranty, covenant or
agreement that would otherwise terminate pursuant to this Section 8.01 and a
notice for indemnification shall have been timely given under Article VI on or
prior to such termination date, then such survival period will be extended as it
relates to such related claim until the related claim for indemnification has
been satisfied or otherwise resolved as provided in Article VI. This Section
shall not limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Closing Date, which shall survive for the respective periods set forth
herein.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
9.01 Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual agreement of the parties;
(b) by the Company or by any Investor, in the event any of the
Transaction Agreements is terminated pursuant to its terms;
(c) by any of the Investors or by the Company, in the event the
Operating Partnership exercises its right pursuant to the McBride Contribution
Agreement and/or the Merger Agreement to delete from the contribution
contemplated thereby properties representing 10% or greater of the sum of the
aggregate Allocated Amounts (as defined in the McBride Contribution Agreement)
and the Allocated Amounts (as defined in the Merger Agreement).
(d) by the Company upon any material breach by the Investors of any
of their representations, warranties or covenants contained in this Agreement or
in any of the Transaction Agreements, which breach has not been cured within 10
days following receipt by the Investors of notice of such breach from the
Company;
(e) by the Investors, acting together, upon any material breach by
the Company of any of its representations, warranties or covenants contained in
this Agreement or in any of the Transaction Agreements, which breach has not
been cured within 10 days following receipt by the Company of notice of such
breach from the Investors;
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(f) by any Investor or by the Company if Company Stockholder
Approval shall not have been obtained at a meeting duly convened therefor or any
adjournment thereof;
(g) by the Company or by any Investor at any time after March 31,
1998 upon notification by the terminating party to the others if the Closing
shall not have occurred on or before such date and such failure to consummate is
not caused by a breach of this Agreement or any of the Transaction Agreements by
the terminating party;
(h) by the Company if its obligations under Section 5.05 have
been satisfied and the Termination Fee has been fully paid; or
(i) by the Company if the Acquisition Portfolio (as defined in the
McBride Contribution Agreement) and any Acquisition Property acquired by FLIP
(to be financed with existing cash on hand of approximately $1,700,000) prior to
Closing do not consist of Acquisition Properties or contracts for the
acquisition or purchase of Acquisition Properties (or other comparable
properties in lieu thereof) having an aggregate value of at least $37,000,000.
In the event that this Agreement shall be terminated pursuant to
this Section 9.01, all further obligations of the parties under this Agreement
(other than Sections 5.08, 9.02 and 11.11), shall terminate without further
liability of any party to the others; provided, however, that nothing herein
shall relieve any party from liability for its non-performance or breach of any
provision of this Agreement if performance of or compliance with such provision
was within its reasonable control and nothing herein shall prejudice the ability
of the non-breaching party from seeking damages from any other party for any
willful breach of this Agreement, including without limitation, attorneys' fees
and the right to pursue any remedy at law or in equity (including specific
performance). Notwithstanding the foregoing, (i) the sole remedy of the
Investors for a breach or non-performance by the Company or the Operating
Partnership that is the basis for termination shall be the Termination Fee set
forth in Section 9.02, (ii) to the extent the Company seeks payment of and is
paid the Termination Fee for a breach or non-performance by the Investors that
is the basis for termination, the Company shall be deemed to have waived any and
all rights to seek damages and to pursue any other remedy at law or in equity
(including specific performance) and (iii) to the extent the Company waives its
rights to the Termination Fee for a breach or non-performance by the Investors
that could be a basis for the termination of this Agreement, the Company shall
be entitled to pursue any remedies in equity (including specific performance)
and shall not be entitled to seek money damages. The Investors agree that, if
the Company so waives its right to the Termination Fee, the Company is entitled
to specific performance of the terms hereof to the extent permitted by law.
9.02 Effect of Termination and Abandonment; Termination Fee.
(a) Except as otherwise provided in this Section 9.02, each of the
parties hereto shall bear its own costs and expenses (including, without
limitation, fees and disbursements of its counsel, accountants and other
financial, legal, accounting or other advisors and out-of-pocket expenses)
incurred by it in connection with the preparation, negotiation,
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execution and delivery of this Agreement, each of the other documents and
instruments executed in connection with or contemplated by this Agreement and
the consummation of the transactions hereby and thereby (collectively,
"Transaction Expenses"); provided, however, that the filing fee in connection
with the filing of the Form S-4 or Proxy Statement/Prospectus with the
Commission, and expenses incurred in connection with preparing, printing and
mailing the Form S-4 and the Proxy Statement/Prospectus, shall be paid by the
Company. In the event that the Transactions are consummated, the Operating
Partnership shall bear or reimburse the other parties hereto (other than the
Operating Partnership) for all of their Transaction Expenses, other than McBride
Restructuring Expenses. If any McBride Restructuring Expenses are incurred by
the Company or any of its Subsidiaries, McBride promptly shall reimburse the
Company or its Subsidiaries for such McBride Restructuring Expenses.
(b) If this Agreement is terminated by the Company pursuant to
Section 9.01(h), or if terminated by the Investors pursuant to Section 9.01(e),
then the Company shall pay to the Investors a single termination fee of $1.0
million (the "Termination Fee"). The Termination Fee shall be paid no later than
the third Business Day following the date of termination of this Agreement by
wire transfer of immediately available funds to such single account as Hudson
Bay shall designate in a written notice delivered to the Company. It is
understood and agreed by and amongst the Investors that the Termination Fee
delivered by the Company to such account shall be disbursed therefrom as
follows, but only after payment or reimbursement of such Transaction Expenses
that are jointly expenses of the Investors: (i) 21% to Hudson Bay, (ii) 73% to
McBride, considered a single investor and (iii) 6% to Kelter and Penn Square,
considered a single investor.
(c) If this Agreement is terminated by the Company pursuant to
Section 9.01(d) and the Company elects to receive the Termination Fee, then the
Investor (with McBride considered a single investor, and Kelter and Penn Square
considered a single investor) whose breach is the basis for termination of this
Agreement by the Company pursuant to Section 9.01(d) shall pay to the Company
the Termination Fee. In the event the breach by more than one Investor (with
McBride considered a single investor, and Kelter and Penn Square considered a
single investor) is the basis for termination of this Agreement by the Company
pursuant to Section 9.01(d) and the Company elects to receive the Termination
Fee, then such breaching Investors shall be severally liable to the Company to
pay the Termination Fee; provided, however, that the Company shall not be
entitled to receive any amount in excess of the Termination Fee under this
Section 9.02(c). It is understood and agreed by and amongst the Investors that
although such breaching Investors shall be severally liable to the Company to
pay the Termination Fee pursuant to the immediately preceding sentence, such
breaching Investors as amongst themselves shall be liable for an equal share of
such Termination Fee. Payment of the Termination Fee pursuant to this paragraph
(c) shall be made no later than the third Business Day following the date of
termination of this Agreement by wire transfer of immediately available funds to
such account as the Company shall designate in a written notice delivered to the
Investors.
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ARTICLE X.
DEFINITIONS
10.01 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Acquisition Property" has the meaning ascribed to it in the
McBride Contribution Agreement.
"Acquisition Proposal" means a bona fide proposal or offer from a
Qualified Third Party relating to any direct or indirect (i) acquisition or
purchase of fifteen per cent (15%) or more of any of the Company's Common Stock
outstanding, (ii) acquisition or purchase of any equity securities (including
partnership or membership interests or units) of any Subsidiary of the Company,
or (iii) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Subsidiaries, or a proposal to acquire the Company or an interest in it
which is conditional upon, or otherwise contemplates, the Company not completing
the transactions which are the subject of this Agreement.
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person speci fied. For purposes of this definition, control of
a Person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such Person whether by Contract or otherwise
and, in any event and without limitation of the previous sentence, any Person
owning ten percent (10%) or more of the voting securities of a second Person
shall be deemed to control that second Person.
"Amended and Restated Partnership Agreement" has the meaning
ascribed to it in Section 7.02(l).
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Benefit Plan" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by the Company or any Company
ERISA Affiliate providing benefits to employees, former employees, independent
contractors, former independent contractors of the Company or any Company ERISA
Affiliate, or their dependents or beneficiaries.
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"Books and Records" means all files, documents, instruments, papers,
books and records relating to the business or condition of the Company or the
Operating Partnership, including without limitation financial statements, tax
returns and related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and plans
and environmental studies and plans.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York and are authorized or obligated to
close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"Claim Notice" means written notification of a Third Party Claim,
pursuant to Section 6.03(a), as to which indemnity under Article VI is sought by
an Indemnified Party, enclosing a copy of all papers served, if any; and
specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under Article VI,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company ERISA Affiliate" means an entity required (at any relevant
time) to be aggregated with the Company under Sections 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA.
"Contributed Business" means the business, assets and properties
(including the Acquisition Contracts and Acquisition Properties, as each such
term is defined in the Management Contribution Agreement) to be contributed
pursuant to the McBride Contribution Agreement.
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or Indemnity
Notice.
"Environmental Law" means any applicable Law relating to the use,
ownership, occupancy or operation of the Properties or any portion thereof, or
any user or occupant thereof, human health, safety or protection of the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants or Hazardous Materials in the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), or otherwise relating to the treatment, storage, disposal,
transport or handling
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of any Hazardous Material, including, without limitation, CERCLA, the New Jersey
Spill Compensation and Control Act (N.J.S.A. 58:10-23.11 et seq. and the
Industrial Site Recovery Act (N.J.S.A. 13:1K-6 et seq. and any rules,
regulations, guidelines, directives, orders or the like adopted pursuant to or
implementing any of the above laws.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"FLIP" means Fairlawn Industrial Park, Inc.
"Form S-4" has the meaning ascribed to it in Section 5.10.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"Hazardous Material" means (A) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(B) any chemicals, materials, substances or wastes which are now or hereafter
become defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants" or words
of similar import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now or hereafter prohibited,
limited or regulated by any Governmental or Regulatory Authority.
"Intangible Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Indemnified Party" means any Person claiming indemnification under
any provision of Article VI, including Related Indemnified Parties.
"Indemnifying Party" means any Person providing indemnification
under any provision of Article VI.
"Indemnity Notice" means written notification pursuant to Section
6.03(b) of a claim for indemnity under Article VI by an Indemnified Party,
specifying the nature of and basis
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for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim.
"Investor Acquisition Proposal" means, with respect to any Investor,
a bona fide proposal or offer from a Third Party relating to any direct or
indirect (i) acquisition or purchase of fifteen per cent (15%) or more of any of
such Investor's equity securities (including partnership or membership interests
or units) outstanding, (ii) acquisition or purchase of any equity securities of
any Subsidiary (including Penn Square in the case of Kelter) of such Investor,
(iii) acquisition or purchase of all or any substantial portion of the assets of
such Investor or any Subsidiary, (iv) acquisition or purchase of any McBride
Property or Acquisition Property, or (v) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving such Investor or any of its subsidiaries, or a proposal to acquire
such Investor or an interest in it which is conditional upon, or otherwise
contemplates, such Investor not completing the transactions which are the
subject of this Agreement.
"IRS" means the United States Internal Revenue Service.
"knowledge" of the Company, the Operating Partnership or their
respective Subsidiaries, means, with respect to any representation or warranty,
the current, actual knowledge of James Mulvihill, Evan Zucker or Rick Burger.
"Licenses" means all licenses, permits, variances, exemptions,
certificates of authority, authorizations, orders, approvals, registrations,
franchises and similar consents granted or issued by any Governmental or
Regulatory Authority.
"Liens" means any liens, claims, mortgages, encumbrances, pledges,
security interests, equities and charges of any kind.
"Material Adverse Effect" means an adverse effect on the condition,
financial or otherwise, or on the earnings, assets, business affairs or business
prospects of the Company, the Operating Partnership or any of their Subsidiaries
which would be material to the Company, the Operating Partnership and their
Subsidiaries, taken as a whole.
"McBride Property" means any Property as defined in the McBride
Contribution Agreement and any FLIP Property as defined in the Merger Agreement.
"McBride Restructuring Expenses" means all costs and expenses,
including without limitation, fees and disbursements of counsel, accountants and
other financial, legal, accounting or other advisors and out-of-pocket expenses
incurred by McBride, any Subsidiaries of McBride or any of their respective
Affiliates or Associates in connection with any restructuring, reorganization,
recapitalization, merger or disposition of assets in contemplation of the
Transactions (other than the Transactions themselves) or otherwise; provided,
however, that the following costs incurred by McBride associated with the
Refinancing shall not be
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considered McBride Restructuring Expenses: environmental and engineering
reports, title, survey, and recordation and transfer taxes.
"MHB LP" means McBride Hudson Bay, L.P., a Delaware limited
partnership.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive any benefits or rights similar to any rights enjoyed by or accruing
to the holder of shares of capital stock of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Original Properties" means the Americana Lakewood apartments, the
Emerald Pointe apartments, the Sedona apartments and the Quadrangles Village
apartments (or any property the federal income tax basis of which is determined
in whole or in part by reference to the basis of the foregoing).
"Outside Investor" has the meaning ascribed to it in the Stock
Purchase Agreement.
"Overbid Amount" means the minimum amount determined in good faith
by the Board for the purpose of enabling the Investors to exercise their rights
under Section 5.05(c)(ii), after consultation with a financial advisor, by which
the purchase price for the Securities would have to be increased to make the
transactions which are the subject of this Agreement as favorable to the
stockholders of the Company from a financial point of view as the transaction
which is the subject of a particular Acquisition Proposal.
"Overbid Notice" means a notice of the determination of the Board of
the Company that the transaction contemplated by an Acquisition Proposal would
be an Overbid Transaction, which notice contains the information described in
Section 5.05(a)(y)(ii)(C).
"Overbid Transaction" means a transaction which is the subject of an
Acquisition Proposal which the Board in good faith determines would be
reasonably likely to result in a more favorable transaction from a financial
point of view to the stockholders of the Company than the transactions
contemplated by this Agreement.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to liabilities or obligations not yet due or delinquent, (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the
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use of such property in the conduct of the business of the Company or any
Subsidiary and (iv) any exceptions to title set forth in Section 3.16 of the
Company Disclosure Letter.
"Person" means any natural person, corporation, limited liability
company, general partnership, limited partnership, proprietorship, other
business organization, trust, union, association or Governmental or Regulatory
Authority.
"Plan" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, medical, accident, disability, worker's compensation or other insurance,
severance, separation, termination, change of control or other benefit plan,
agreement, practice, policy or arrangement of any kind, whether written or oral,
including, but not limited to, any "employee benefit plan" within the meaning of
Section 3(3) of ERISA.
"Properties" means the assets held through Virginia Street
Associates Limited Partnership, American Emerald Partners, L.P., American
Quadrangles Partners, L.P. or American Sedona Partners, L.P., including without
limitation the Americana Lakewood apartments, the Sedona apartments, the Emerald
Pointe apartments and the Quadrangles Village apartments.
"Proxy Statement/Prospectus" has the meaning ascribed to it in
Section 5.10.
"Refinancing" means the proposed financing facility of approximately
$45,000,000 aggregate principal amount of indebtedness pursuant to that certain
Commitment Letter by and between Nomura Asset Capital Corporation and McBride
Enterprises, Inc., dated July 21, 1997, or such other similar financing.
"SEC" means the Securities and Exchange Commission.
"Section 1031 Exchange" means, with respect to any property, the
exchange of such property for property of like kind in a transaction qualifying
under Section 1031 of the Code in which not more than 10% of the built-in gain
associated with such property is required to be recognized by the partners of
the Operating Partnership for federal income tax purposes.
"Securities" means the shares of Common Stock, warrants, options and
Partnership Units to be issued and sold to the Investors, including shares of
Common Stock issuable upon conversion of Partnership Units to be issued and
sold, pursuant to this Agreement and the Transaction Agreements.
"Subsidiary" means with respect to any party, a corporation,
partnership or other organization, whether incorporated or unincorporated, of
which more than fifty percent (50%)
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of either the equity interests in, or the voting control of, such corporation,
partnership or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party. Notwithstanding the
foregoing, "Subsidiary," when used with respect to the Company, includes,
without limitation, the Operating Partnership.
"Taxes" means federal, state, local or foreign income, franchise,
excise, stamp, real property, personal property, sales, use, customs, transfer,
gains or value added tax, tariff, import, fee, duty, levy or other governmental
charge.
"Transaction Agreements" means the Stock Purchase Agreement, the
Merger Agreement, the Management Contribution Agreement, the McBride
Contribution Agreement and all agreements and documents to be delivered by the
Company and the Operating Partnership, and by the Investors to the Company, in
connection with the transactions contemplated by this Agreement and the
Transaction Agreements.
"Transfer Taxes" means all sales, use, transfer, real property
transfer, recording, gains and other similar taxes and fees arising out of or in
connection with the transactions effected pursuant to this Agreement.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the relevant party. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
ARTICLE XI.
MISCELLANEOUS
11.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the addresses or facsimile numbers on Annex 1 hereto.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party
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from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
11.02 Entire Agreement. This Agreement and the Transaction
Agreements super sede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
11.03 Public Announcements. Except as otherwise required by law or
the rules of any applicable securities exchange or national market system, so
long as this Agreement is in effect, the Company and the Investors will not, and
will not permit any of their respective Subsidiaries and their Representatives
to, issue or cause the publication of any press release or make any other public
announcement with respect to the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be unreasonably
withheld. The Company and the Investors will cooperate with each other in the
development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.
11.04 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. Except as otherwise provided
in this Agreement, all remedies, either under this Agreement or by Law or
otherwise afforded, will be cumulative and not alternative.
11.05 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.06 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person, except
as provided in Section 5.15 and Article VI (which is intended to be to the
benefit of the persons entitled to therein, and may be enforced by any of such
persons).
11.07 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) except as otherwise provided in the Transaction Agreements. Subject to
the preceding sentence, this Agreement is binding upon,
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inures to the benefit of and is enforceable by the parties hereto and their
respective successors and assigns.
11.08 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.10 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11.11 Jurisdiction. THE PARTIES AGREE THAT ALL DISPUTES BETWEEN ANY
OF THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER TRANSACTION AGREEMENT, AND WHETHER ARISING IN LAW OR IN EQUITY OR
OTHERWISE, SHALL BE RESOLVED BY THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK,
NEW YORK. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE OTHER IN ANY OTHER JURISDICTION. IN ADDITION, EACH OF THE
PARTIES HERETO CONSENTS TO SUBMIT TO THE PERSONAL JURISDICTION OF ANY FEDERAL OR
STATE COURT LOCATED IN THE STATE OF NEW YORK IN THE EVENT THAT ANY DISPUTE
ARISES OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTION AGREEMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to a
Contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof.
11.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11.14 No Personal Recourse. Notwithstanding anything to the
contrary contained in this Agreement or in any of the Transaction Agreements,
except as otherwise specifically set
51
<PAGE>
forth in this Agreement with respect to the Termination Fee, (i) only the MHB LP
and the FLIP Shareholders, jointly and severally with the MHB LP, but only to
the extent of the number of shares of Common Stock received as Merger
Consideration in connection with the Merger, (and not any other McBride or any
partner, shareholder or member of any McBride) shall be liable for any claims
made by non-McBride parties under this Agreement or any of the Transaction
Agreements, (ii) the non-McBride parties to this Agreement and the other
Transaction Agreements shall look only to the Partnership Units held by the MHB
LP (provided that such Partnership Units shall not include 181,818 Partnership
Units to be issued at Closing to MHB LP) and the Common Stock held by the FLIP
Shareholders with respect to any claims that may be made under this Agreement or
any of the Transaction Agreements, and (iii) other than as provided above, no
personal recourse or personal liability for any claims under this Agreement or
any of the Transaction Agreements shall be had against any McBride (other than
the MHB LP) or any partner, shareholder or member of any McBride.
52
<PAGE>
IN WITNESS WHEREOF the parties hereto have executive this Agreement on
this 20th day of August, 1997
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
By:/s/ EVAN ZUCKER
-------------------------------------
Name: Evan Zucker
Title: President
AMERICAN REAL ESTATE INVESTMENT, L.P.
By: American Real Estate Investment Corporation,
its General Partner
By:/s/ EVAN ZUCKER
-------------------------------------
Name: Evan Zucker
Title: President
HUDSON BAY PARTNERS, L.P.
By: Hudson Bay Partners, Incits General Partner
By: /s/ DAVID H. LESSER
-------------------------------------
Name: David H. Lesser
Title: President
JEFFREY KELTER
/s/ JEFFREY KELTER
-------------------------------------
53
<PAGE>
PENN SQUARE PROPERTIES, INC.
By:/s/ JEFFREY KELTER
-------------------------------------
Name: Jeffrey Kelter
Title: Principal
MCBRIDE ENTITIES:
MCBRIDE HUDSON BAY, L.P.
By: Urban Farms Shopping Center, Inc.,
its General Partner
By:/s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Chief Executive Officer
FAIRLAWN INDUSTRIAL PARK, INC.
By:/s/ DAVID F. McBRIDE
Name: David F. McBride
Title: Chief Executive Officer
URBAN FARMS SHOPPING CENTER, INC.
By:/s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Chief Executive Officer
54
<PAGE>
OAKLAND INDUSTRIAL PARK, INC.
By:/s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Chief Executive Officer
MCBRIDE PROPERTIES
By:/s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: General Partner
NEW JERSEY ASSOCIATES
By:/s/ DAVID F. McBRIDE
Name: David F. McBride
Title: General Partner
RAMAPO RIDGE MCBRIDE OFFICE PARK
By:/s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Attorney-in-Fact for General Partner
FAIRLAWN INVESTMENTS, L.L.C.
By:/s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Chief Executive Officer
55
<PAGE>
FLIP SHAREHOLDERS (but only for the purposes of
the agreements contained in Section 6.02):
FRANCIS V. MCBRIDE
REVOCABLE TRUST, UID 4/22/96
By:/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
-------------------------------------
Name: Antoinette R. McBride
Title: Trustee
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
JOAN H. MCBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
MARY V. DEKORTE
/s/ TIMOTHY B. McBRIDE
----------------------------------------
TIMOTHY B. MCBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
KATHRYN M. KRUCKEL
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
MORIA MCBRIDE MURPHY
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
J. NEVINS MCBRIDE, JR.
56
<PAGE>
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
W. PETER MCBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
DAVID F. MCBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
TERENCE A. MCBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
SHEILA JAMES
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
MICHAEL X. MCBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
----------------------------------------
MARK J. MCBRIDE
57
<PAGE>
ANNEX 1 TO
MASTER INVESTOR AGREEMENT
NOTICE PROVISIONS
1. If to McBride, to them at
McBride Enterprises, Inc.
808 High Mountain Road
PO Box 549
Franklin Lakes, New Jersey 07417
Attention: David McBride
Chief Executive Officer
Telephone: (201) 891-6403
Facsimile: (201) 891-3608
2. If to Jeffrey Kelter or Penn Square Properties, Inc., to them at
The Widener Building, Inc.
1 South Penn Square, Suite 200
Philadelphia, Pennsylvania 19107
Attention: Jeffrey Kelter
Telephone: (215) 972-0090
Facsimile: (215) 972-0819
3. If to Hudson Bay Partners, L.P., to it at
237 Park Avenue, Suite 900
New York, New York 10017
Attention: David Lesser
President
Telephone: (212) 692-3622
Facsimile: (212) 692-3623
<PAGE>
If to any of the foregoing Investors, a copy (which shall not constitute
notice) to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Robert E. King, Jr., Esq.
Telephone: (212) 878-8000
Facsimile: (212) 878-8375
4. If to American Real Estate Investment Corporation or American Real Estate
Investment, L.P., to them at
1670 Broadway, Suite 3350
Denver, CO 80202
Attention: Jim Mulvihill, Evan Zucker, Rick Burger
Telephone: (303) 869-4700
Facsimile: (303) 869-4602
with a copy (which shall not constitute notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Edwin S. Maynard, Esq.
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
<PAGE>
EXHIBIT A
STOCK PURCHASE AGREEMENT
See Attached
<PAGE>
EXHIBIT B
MANAGEMENT CONTRIBUTION AGREEMENT
See Attached
<PAGE>
EXHIBIT C
MCBRIDE CONTRIBUTION AGREEMENT
See Attached
<PAGE>
EXHIBIT D
MERGER AGREEMENT
See Attached
CONFORMED COPY
STOCK PURCHASE AGREEMENT
dated as of August 20, 1997
by and between
AMERICAN REAL ESTATE INVESTMENT CORPORATION
and
HUDSON BAY PARTNERS, L.P.
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
Page
ARTICLE I.
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale.............................................. 1
1.02 Purchase Price................................................. 2
1.03 Lock-Up Period................................................. 2
1.04 Closing........................................................ 2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.01 Organization................................................... 3
2.02 Authority...................................................... 3
2.03 No Conflicts................................................... 3
2.04 Governmental Approvals and Filings............................. 4
2.05 Legal Proceedings.............................................. 4
2.06 Purchase for Investment........................................ 4
2.07 Brokers........................................................ 4
ARTICLE III.
COVENANTS OF THE COMPANY
3.01 The Warrant.................................................... 5
3.02 The Option..................................................... 5
ARTICLE IV.
COVENANTS OF PURCHASER
4.01 Regulatory and Other Approvals................................. 5
4.02 Outside Investor............................................... 6
4.03 Purchaser Investment in the McBride Contributor................ 6
4.04 Fulfillment of Conditions...................................... 6
ARTICLE V.
i
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Page
CONDITIONS TO OBLIGATIONS OF PURCHASER
5.01 Satisfaction of Conditions to Transaction Agreements............. 6
5.02 Warrant.......................................................... 6
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE COMPANY
6.01 Representations and Warranties................................... 6
6.02 Officer's Certificate............................................ 7
6.03 Performance...................................................... 7
6.04 Master Investment Agreement...................................... 7
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
7.01 Survival of Representations, Warranties, Covenants and Agreements 7
7.02 Indemnification.................................................. 7
ARTICLE VIII.
TERMINATION
8.01 Termination...................................................... 8
8.02 Effect of Termination............................................ 8
ARTICLE IX.
DEFINITIONS
9.01 Definitions...................................................... 8
ARTICLE X.
MISCELLANEOUS
10.01 Notices.......................................................... 9
10.02 Entire Agreement................................................. 9
10.03 Expenses......................................................... 9
ii
<PAGE>
Page
10.04 Waiver........................................................... 9
10.05 Amendment........................................................ 9
10.06 No Third Party Beneficiary....................................... 9
10.07 No Assignment; Binding Effect.................................... 9
10.08 Headings......................................................... 10
10.09 Invalid Provisions............................................... 10
10.10 Jurisdiction..................................................... 10
10.11 Governing Law.................................................... 10
10.12 Counterparts..................................................... 10
iv
<PAGE>
This STOCK PURCHASE AGREEMENT dated as of August 20, 1997
("Agreement") is made and entered into by and between HUDSON BAY PARTNERS, L.P.,
a Delaware limited partnership ("Purchaser"), and AMERICAN REAL ESTATE
INVESTMENT CORPORATION, a Maryland corporation (the "Company"). Capitalized
terms used in this Agreement and not defined in this Agreement have the meanings
specified in the Master Investment Agreement dated as of the date hereof, by and
among the Company, the Purchaser and the other parties thereto (the "Master
Investment Agreement").
RECITALS
A. Purchaser desires to invest a minimum of $10 million in cash in
the Company in exchange for the issuance to Purchaser of that number of shares
of common stock, par value $.001 per share (the "Common Stock"), as determined
pursuant to the terms and subject to the conditions of this Agreement.
B. Purchaser is a party to the Master Investment Agreement, and
the investment by Purchaser pursuant to this Agreement is among the transactions
contemplated by the Master Investment Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale. (a) The Company agrees to issue and sell to
Purchaser (and to the Outside Investor (as defined in Section 9.01 below), if
applicable), and Purchaser agrees to purchase (and agrees to cause the Outside
Investor to purchase, if applicable) from the Company, at the Closing on the
terms and subject to the conditions set forth in this Agreement, the following:
(i) Purchaser agrees to purchase that number of shares of Common
Stock equal in value (as determined in Section 1.01(b)) to $10,000,000
(the "Guaranteed Shares"); provided that the $10,000,000 amount shall be
reduced by the $2,000,000 Cash Contribution (as defined in the McBride
Contribution Agreement) if contributed pursuant to the McBride
Contribution Agreement;
(ii) Purchaser agrees to purchase, or to provide an Outside Investor
to purchase, that number of shares of Common Stock equal in value to
$5,000,000, subject to a
1
<PAGE>
reduction in an amount equal to the Optional Cash Contribution (as defined
in the McBride Contribution Agreement) (the "Additional Guaranteed
Shares");
(iii) Purchaser agrees to purchase, or to provide an Outside
Investor to purchase, that number of shares of Common Stock equal in value
to $5,000,000; provided, however, that the $5,000,000 amount shall be
reduced by the value ascribed to the following assets if contributed to
the Company or its affiliates pursuant to the Transaction Agreements: (i)
the Partnership Interests (as defined in the McBride Contribution
Agreement) relating to the Acquisition Portfolio (as defined in the
McBride Contribution Agreement), and/or (ii) the FLIP Acquisition
Properties (as defined in the Merger Agreement)(the "McBride Guaranteed
Shares"); and
(iv) If Purchaser notifies the Company on or before the day (the
"Exercise Date") that is 10 days prior to the date on which the Form S-4
is declared effective by the SEC of its decision to purchase additional
shares (the "Option"), that number of shares of Common Stock set forth in
such notice (not to exceed $10,000,000 in value) (the "Option Shares," and
together with the Guaranteed Shares, the Additional Guaranteed Shares and
the McBride Guaranteed Shares, the "Shares"). Purchaser may assign the
Option in its sole discretion to the Outside Investor.
(b) The aggregate number of Shares to be issued and sold to Purchaser (and
the Outside Investor, if applicable) pursuant to this Agreement shall be equal
to the Total Investment (as defined herein) divided by the Per Share Purchase
Price.
1.02 Purchase Price. The aggregate purchase price for the Shares
(the "Purchase Price") shall be an amount equal to the Total Investment.
1.03 Lock-Up Period. Purchaser agrees (and agrees to use reasonable
efforts to cause the Outside Investor to agree, if applicable) that for a period
of two years following the Closing (the "Lock-Up Period") it may not, in any way
or to any extent, sell, transfer, assign, or (with the Company's consent which
shall not be unreasonably withheld) pledge or encumber, or otherwise convey any
or all of the Shares delivered to Purchaser in connection with this transaction;
and that not more than 25% of the Shares owned by Purchaser may be sold in the
three-month period after the end of the initial two year Lock-Up Period, and an
additional 25% of such Shares may be sold in each three-month period thereafter
(so that all such Shares may be sold after the third anniversary of the Closing
Date); provided that transfers may be made, subject to the restrictions hereof
and under the Company's Articles of Incorporation, to an Affiliate which agrees
in writing in an instrument reasonably acceptable to the Company to be bound by
the restriction on transfer of the Shares contained in this Agreement and by the
obligations contained in the indemnification provisions in Section 6.02 of the
Master Investment Agreement, provided that such obligation shall be limited to
the Shares actually received by such Affiliate, and such Affiliate shall not be
liable for money damages or otherwise.
1.04 Closing. The Closing will take place at the place and at the
time on the Closing Date designated in the Master Investment Agreement. At the
Closing, Purchaser (and if applicable the Outside Investor) will pay the
Purchase Price by wire transfer of immediately
2
<PAGE>
available funds to such account as the Company may reasonably direct by written
notice delivered to Purchaser (and if applicable the Outside Investor) by the
Company at least two (2) Business Days before the Closing Date. Simultaneously,
the Company will assign and transfer to Purchaser (and if applicable the Outside
Investor) good and valid title in and to the Shares, free and clear of all
Liens, by delivering to Purchaser (and if applicable the Outside Investor) a
certificate or certificates representing the Shares, in genuine and unaltered
form, duly endorsed in blank or accompanied by duly executed stock powers
endorsed in blank, with requisite stock transfer tax stamps, if any, attached.
At the Closing, there shall also be delivered by the Company to Purchaser the
Warrant (as defined below), the certificates and other documents and instruments
required to be delivered under this Agreement and under the Master Investment
Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
2.01 Organization. Purchaser is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite partnership power and authority to conduct its business as
and to the extent now conducted and to own, use, lease and operate its assets
and properties. Purchaser is duly qualified, licensed or admitted to do business
and is in good standing in those jurisdictions in which the ownership, use, or
leasing of its assets and properties, or the conduct or nature of its business
makes such qualification, licensing or admission necessary, except for failures
to be so qualified, licensed or admitted and in good standing individually or in
the aggregate which would not have a Material Adverse Effect (as defined
herein).
2.02 Authority. Purchaser has full partnership power and authority
to execute and deliver this Agreement and the Transaction Agreements to which it
is a party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Purchaser of this Agreement and the Transaction Agreements to which
it is a party, and the performance by Purchaser of its obligations hereunder and
thereunder have been duly and validly approved by all necessary partnership
action on the part of Purchaser. This Agreement and the Master Investment
Agreement have been duly and validly executed and delivered by Purchaser and
constitute, and upon the execution and delivery by Purchaser of the other
Transaction Agreements to which it is a party, such Transaction Agreements will
constitute, legal, valid and binding obligations of Purchaser enforceable
against Purchaser in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
2.03 No Conflicts. Neither the execution or delivery by Purchaser
of this Agreement or any Transaction Agreement to which it is or will be a
party, nor consummation
3
<PAGE>
of the transactions contemplated hereby or thereby or compliance with or
fulfillment of the terms and provisions hereof or thereof by Purchaser, will (i)
conflict with, result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights, or result in the
creation or imposition of any encumbrance upon any of the assets of Purchaser,
under the organizational documents of Purchaser or any other instrument,
agreement, mortgage, indenture, deed of trust, permit, concession, grant,
franchise, license, judgment, order, award, decree or other restriction to which
Purchaser is a party or any of its properties is subject or by which it is bound
or any statute, other law or regulatory provisions affecting it or (ii) require
the approval, consent or authorization of, or the making of any declaration,
filing or registration with, any third party or any foreign, federal, state or
local court, governmental authority or regulatory body, by or on behalf of
Purchaser, except for such conflicts, breaches, defaults, events, creations,
impositions, approvals, consents, declarations, filings or authorizations which
would not reasonably be expected to either (x) have a Material Adverse Effect or
(y) prevent or hinder the consummation of the transactions contemplated hereby.
2.04 Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Purchaser is required in connection with the execution, delivery and
performance of this Agreement or the Transaction Agreements to which it is a
party, or the consummation of the transactions contemplated hereby or thereby.
2.05 Legal Proceedings. There are no actions, suits, arbitrations
or proceedings pending or, to the knowledge of Purchaser, threatened against,
relating to or affecting, nor to the knowledge of Purchaser are there any
Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, Purchaser or any of its assets and
properties which, if determined adversely to Purchaser, individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect or
adversely affect in any material respect the ability of Purchaser to consummate
the transactions contemplated by this Agreement or the Transaction Agreements to
which it is a party.
2.06 Purchase for Investment. The Shares will be acquired by
Purchaser (or, if applicable, the Outside Investor) pursuant to this Agreement,
for its own account for the purpose of investment, it being understood that the
right to dispose of such Shares shall be entirely within the discretion of
Purchaser (or the Outside Investor, as the case may be). Purchaser (or the
Outside Investor, as the case may be) will refrain from transferring or
otherwise disposing of any of the Shares, or any interest therein, in such
manner as to cause the Company to be in violation of the registration
requirements of the Securities Act of 1933, as amended, or applicable state
securities or blue sky laws.
2.07 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser directly
with the Company without the intervention of any Person on behalf of Purchaser
in such manner as to give rise to any valid claim by any Person against the
Company or any of its Subsidiaries for a finder's fee, brokerage commission or
similar payment.
4
<PAGE>
ARTICLE III.
COVENANTS OF THE COMPANY
The Company covenants and agrees with Purchaser that, at all times
from and after the date hereof until the Closing the Company will comply with
all covenants and provisions of this Article III, except to the extent Purchaser
may otherwise consent in writing.
3.01 The Warrant. The Company will issue to Purchaser at the
Closing a warrant (the "Warrant") (exercisable for a period of seven years from
the Closing Date) to purchase 300,000 shares of Common Stock at a price of
$11.00 per share, in substantially the form attached hereto as Exhibit A.
3.02 The Option. The Company will deliver to Purchaser (or to the
Outside Investor) at the Closing the Option Shares; provided that Purchaser (or
the Outside Investor, as the case may be) gives a written notification to the
Company on or before the Exercise Date of Purchaser's election to exercise the
Option.
ARTICLE IV.
COVENANTS OF PURCHASER
Purchaser covenants and agrees with the Company that, at all times
from and after the date hereof until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in part after the
Closing, for the period specified herein or, if no period is specified herein,
indefinitely, Purchaser will comply with all covenants and provisions of this
Article IV, except to the extent the Company may otherwise consent in writing.
4.01 Regulatory and Other Approvals. Purchaser will (i) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Purchaser to consummate the transactions contemplated
hereby and by the Transaction Agreements to which it is a party, (ii) provide
such other information and communications to such Governmental or Regulatory
Authorities or other Persons as the Company or such Governmental or Regulatory
Authorities or other Persons may reasonably request and (iii) cooperate with the
Company and its Subsidiaries as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required of
the Company or any Subsidiary of the Company to consummate the transactions
contemplated hereby and by the Transaction Agreements to which it is a party.
Purchaser will provide prompt notification to the Company when any such consent,
approval, action, filing or notice referred to in clause (i) above is obtained,
taken, made or given, as applicable, and will advise the Company of any
communications with any Governmental or Regulatory Authority or other Person
regarding any
5
<PAGE>
of the transactions contemplated by this Agreement or any of the Transaction
Agreements to which it is a party.
4.02 Outside Investor. Purchaser will, prior to the Exercise Date,
give notice to the Company stating who is a potential Outside Investor.
4.03 Purchaser Investment in the McBride Contributor. Prior to the
Closing, Purchaser will invest no less than $2,000,000 in the McBride
Contributor and it is intended that the McBride Contributor will, pursuant to
the McBride Contribution Agreement, make the Cash Contribution of such amount.
4.04 Fulfillment of Conditions. Purchaser will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the obligations of the Company
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Purchaser in its sole
discretion):
5.01 Satisfaction of Conditions to Transaction Agreements. All
conditions precedent to the consummation of the transactions contemplated by the
Master Investment Agreement and the other Transaction Agreements (other than the
condition that the transactions contemplated by this Agreement shall have been
consummated) shall have been satisfied or, if permissible, waived.
5.02 Warrant. The Company shall have executed and delivered to
Purchaser the Warrants.
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by the Company in its sole
discretion):
6.01 Representations and Warranties. Each of the representations
and warranties made by Purchaser in this Agreement shall be true and correct in
all material respects
6
<PAGE>
on and as of the Closing Date as though such representation or warranty was
made on and as of the Closing Date.
6.02 Officer's Certificate. Purchaser shall have furnished to the
company a certificate of an officer of its general partner, in form and
substance reasonably satisfactory to the Company.
6.03 Performance. Purchaser shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
6.04 Master Investment Agreement. All of the transactions
contemplated by the Master Investment Agreement (other than those contemplated
by this Agreement) shall have been consummated.
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
7.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of
Purchaser contained in this Agreement will survive the Closing until the second
anniversary of the Closing Date, except that to the extent any claim for
indemnification is made under the Master Investment Agreement with respect to
any representation, warranty, covenant or agreement that would otherwise
terminate and a notice for indemnification shall have been timely given under
Article VI of the Master Investment Agreement on or prior to such termination
date, then such survival period will be extended as it relates to such claim
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article VI of the Master Investment Agreement. This
Section shall not limit in any way the survival and enforceability of any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Closing Date, which shall survive for the respective
periods set forth herein.
7.02 Indemnification. Indemnification with respect to breaches of
or inaccuracies in any representation or warranty of, or nonfulfillment of or
failure to perform or breach of any covenant or agreement on the part of, the
Purchaser contained in this Agreement, or on the part of the Company or the
Operating Partnership in the Master Investment Agreement, shall be as provided
in and pursuant to the Master Investment Agreement.
7
<PAGE>
ARTICLE VIII.
TERMINATION
8.01 Termination. This Agreement shall be terminated in the event
the Master Investment Agreement is terminated pursuant to its terms.
8.02 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 8.01, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of the Company or
Purchaser (or any of their respective officers, directors, employees, agents or
other representatives or Affiliates), except as provided in the Master
Investment Agreement.
ARTICLE IX.
DEFINITIONS
9.01 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Material Adverse Effect" means an adverse effect on the condition,
financial or otherwise, or on the earnings, assets, business affairs or business
prospects of Purchaser or any of its Subsidiaries which would be material to
Purchaser and its Subsidiaries, taken as a whole.
"Option" has the meaning ascribed to it in Section 1.01.
"Outside Investor" means a third party purchaser of the shares of
Common Stock of the Company which purchaser shall not adversely affect the
Company's eligibility or qualification as a "real estate investment trust" under
the Code.
"Total Investment" means the aggregate amount invested by Purchaser
and the Outside Investor pursuant to Section 1.01(a)(i), (ii), (iii) and (iv),
and in any event shall be at least $20,000,000 (subject to reduction as
described in Section 1.01(i), (ii) and (iii)), but no more than $30,000,000.
"Transaction Agreements" means the Master Investment Agreement, the
Merger Agreement, the Management Contribution Agreement, the McBride
Contribution Agreement and all agreements and documents to be delivered by the
Company, the Operating Partnership and the Investors in connection with the
transactions contemplated by this Agreement and the Master Investment Agreement.
"Warrant" has the meaning ascribed to it in Section 3.01.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include
8
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the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; and
(iv) the terms "Article" or "Section" refer to the specified Article or Section
of this Agreement. All accounting terms used herein and not expressly defined
herein or in the Master Investment Agreement shall have the meanings given to
them under GAAP.
ARTICLE X.
MISCELLANEOUS
10.01 Notices. All notices, requests and other communications
hereunder must be given in the manner provided in the Master Investment
Agreement.
10.02 Entire Agreement. This Agreement and the Transaction
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
10.03 Expenses. Except as otherwise expressly provided in this
Agreement or in the Master Investment Agreement, whether or not the transactions
contemplated hereby are consummated, each party will pay its own costs and
expenses, incurred in connection with the negotiation, execution and closing of
this Agreement and the Transaction Agreements and the transactions contemplated
hereby and thereby.
10.04 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
10.05 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
10.06 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
10.07 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of
law; (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder to any Affiliate or Subsidiary of Purchaser, provided
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that any such Affiliate or Subsidiary agrees in writing to be bound by all of
the terms, conditions and provisions contained herein and in the Master
Investment Agreement and provided that such assignment would not adversely
affect the Company's eligibility or qualification as a "real estate investment
trust" under the Code; and (c) except as otherwise provided in this Agreement.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
10.08 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
10.09 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
10.10 Jurisdiction. THE PARTIES AGREE THAT ALL DISPUTES BETWEEN ANY
OF THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND
WHETHER ARISING IN LAW OR EQUITY OR OTHERWISE, SHALL BE RESOLVED BY THE FEDERAL
OR STATE COURTS LOCATED IN NEW YORK, NEW YORK. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER IN ANY OTHER
JURISDICTION.
10.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
AMERICAN REAL ESTATE INVESTMENT CORPORATION
By:/s/ EVAN ZUCKER
---------------------------------------------
Name: Evan Zucker
Title: President
HUDSON BAY PARTNERS, L.P.
By: HUDSON BAY PARTNERS, INC., its general partner
By:/s/ DAVID H. LESSER
---------------------------------------------
Name: David H. Lesser
Title: President
CONFORMED COPY
MANAGEMENT CONTRIBUTION AGREEMENT
dated as of August 20, 1997
among
AMERICAN REAL ESTATE INVESTMENT, L.P.,
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
JEFFREY KELTER
and
PENN SQUARE PROPERTIES, INC.
THE SECURITIES OFFERED HEREBY 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 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
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
Page
ARTICLE I.
CONTRIBUTION AND CLOSING
1.01 Contribution................................................... 1
1.02 Contribution; LP Units......................................... 1
(a) Contribution Consideration............................... 1
(b) Issuance of LP Units..................................... 2
(c) Transfer Restrictions.................................... 2
(d) Lock-Up Period........................................... 2
1.03 Closing........................................................ 3
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF KELTER AND PENN SQUARE
2.01 Organization................................................... 3
2.02 Authority...................................................... 3
2.03 Subsidiaries and Affiliates.................................... 4
2.04 Capitalization................................................. 4
2.05 No Material Adverse Change..................................... 4
2.06 Business Contracts............................................. 4
2.07 Acquisition Contracts.......................................... 5
2.08 Other Contracts................................................ 5
2.09 Acquisition Properties......................................... 5
2.10 No Conflict.................................................... 5
2.11 Books and Records.............................................. 6
2.12 Certificate of Incorporation and By-Laws....................... 6
2.13 Financial Statements........................................... 6
2.14 Undisclosed Liabilities........................................ 6
2.15 Legal Proceedings.............................................. 6
2.16 Property....................................................... 7
2.17 Leases......................................................... 7
2.18 Employee Relations............................................. 7
2.19 Licenses and Permits........................................... 8
2.20 Title; Liens................................................... 8
2.21 Compliance with Laws........................................... 8
2.22 United States Person........................................... 8
2.23 Insurance...................................................... 8
2.24 Remaining Assets and Liabilities............................... 9
(i)
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Page
2.25 Investment Representation...................................... 9
2.26 Brokers........................................................ 9
2.27 Taxes.......................................................... 9
2.28 S Corporation Status........................................... 9
ARTICLE III.
COVENANTS OF KELTER AND PENN SQUARE
3.01 Regulatory and Other Approvals................................. 10
3.02 Notice of Events............................................... 10
3.03 Fulfillment of Conditions...................................... 10
3.04 Change in Conditions........................................... 11
3.05 Issuance of the Preferred Stock................................ 11
3.06 Financial Statements........................................... 11
3.07 Employment Agreement........................................... 11
ARTICLE IV.
CONDITIONS TO OBLIGATIONS OF KELTER AND PENN SQUARE
4.01 Satisfaction of Conditions to Transaction Agreements........... 11
4.02 Warrant........................................................ 12
4.03 Employment Agreement........................................... 12
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF THE OPERATING PARTNERSHIP
5.01 Representations and Warranties................................. 12
5.02 Officer's Certificate.......................................... 12
5.03 Performance.................................................... 12
5.04 Acquisition Contracts.......................................... 12
5.05 Employment Agreement........................................... 12
5.06 Master Investment Agreement.................................... 12
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
6.01 Survival of Representations, Warranties, Covenants and Agreements 13
6.02 Indemnification................................................ 13
(ii)
<PAGE>
Page
ARTICLE VII.
TERMINATION
7.01 Termination.................................................... 13
7.02 Effect of Termination.......................................... 13
ARTICLE VIII.
DEFINITIONS
8.01 Definitions.................................................... 13
ARTICLE IX.
CLOSING DELIVERIES
9.01 Kelter......................................................... 14
(a) Preferred Stock Certificate.............................. 14
(b) Articles of Amendment.................................... 14
9.02 The Operating Partnership...................................... 14
(a) Warrants................................................. 15
(b) Partnership Agreement.................................... 15
ARTICLE X.
MISCELLANEOUS
10.01 Notices........................................................ 15
10.02 Entire Agreement............................................... 15
10.03 Expenses....................................................... 15
10.04 Waiver......................................................... 15
10.05 Amendment...................................................... 15
10.06 No Third Party Beneficiary..................................... 15
10.07 No Assignment; Binding Effect.................................. 16
10.08 Headings....................................................... 16
10.09 Invalid Provisions............................................. 16
10.10 Jurisdiction................................................... 16
10.11 Governing Law.................................................. 16
10.12 Counterparts................................................... 16
10.13 No Personal Recourse........................................... 16
(iii)
<PAGE>
This MANAGEMENT CONTRIBUTION AGREEMENT dated as of August 20, 1997
(this "Agreement") is made and entered into by and among JEFFREY KELTER
("Kelter"), PENN SQUARE PROPERTIES, INC., a Pennsylvania subchapter S
corporation ("Penn Square"), AMERICAN REAL ESTATE INVESTMENT, L.P., a Delaware
limited partnership (the "Operating Partnership") and AMERICAN REAL ESTATE
INVESTMENT CORPORATION, a Maryland corporation (the "Company"). Capitalized
terms used in this Agreement and not defined in this Agreement have the meanings
specified in the Master Investment Agreement dated as of the date hereof, by and
among the Company, the Operating Partnership, Kelter, Penn Square and the other
parties thereto (the "Master Investment Agreement").
RECITALS
A. Kelter desires to contribute the Preferred Stock (as defined
below) to the Operating Partnership in exchange for the Contribution
Consideration (as defined below).
B. Kelter is a party to the Master Investment Agreement and the
contribution by Kelter pursuant to this Agreement is among the transactions
contemplated by the MasterInvestment Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
CONTRIBUTION AND CLOSING
1.01 Contribution. At the Closing, Kelter shall contribute and
convey to the Operating Partnership, and the Operating Partnership shall accept
and assume from Kelter, for the Contribution Consideration, and pursuant to the
terms and subject to the conditions set forth in this Agreement, all of Kelter's
right, title and interest in and to all of the 190,000 shares of Class A
preferred stock, par value $.01 per share (the "Preferred Stock"), of Penn
Square.
1.02 Contribution; LP Units.
(a) Contribution Consideration. In consideration for Kelter's
contribution of all of the Preferred Stock and in exchange therefor, the
following shall be issued to Kelter by the Operating Partnership (the
"Contribution Consideration") (i) that number of LP Units (as defined below)
having an aggregate value, calculated as provided in Section 1.02(b), equal to
<PAGE>
$4,000,000 (the "Total LP Unit Value"); and (ii) warrants (the "Warrants")
(exercisable for a period of seven years from the Closing Date) to purchase
250,000 LP Units at a price of $11.00 per LP Unit, substantially in the form
attached hereto as Exhibit A. If the calculation of the Contribution
Consideration would result in a fraction of an LP Unit being delivered to
Kelter, then such number of LP Units shall be rounded to the nearest whole
number of LP Units.
(b) Issuance of LP Units.
(i) Units of limited partnership interest in the Operating
Partnership (the "LP Units") shall be issued and delivered at the
Closing to Kelter. The LP Units shall be exchangeable at the option
of the holder thereof for shares ("Conversion Shares") of the common
stock, par value $.001 per share, of the Company, as provided in the
Partnership Agreement (as defined below).
(ii) The number of LP Units to be delivered in satisfaction of
payment of the Total LP Unit Value shall be the number of units
equal to the Total LP Unit Value divided by the Per Unit Purchase
Price.
(c) Transfer Restrictions. Kelter agrees that he may only sell,
transfer, assign, pledge or encumber, or otherwise convey any or all of the LP
Units and Warrants delivered to him in connection with this transaction and, if
applicable, any Conversion Shares in strict compliance with this Agreement, the
Partnership Agreement, the terms of the Warrants, the charter documents of the
Company, the registration and other provisions of the Securities Act of 1933, as
amended (and the rules promulgated thereunder)(the "Securities Act"), any state
securities laws, and the rules of the American Stock Exchange, in each case as
may be applicable. With respect to any Conversion Shares, Kelter shall have the
registration rights set forth in the Partnership Agreement.
(d) Lock-Up Period. Kelter agrees that for a period of two years
following the Closing (the "Lock-Up Period") he may not, in any way or to any
extent, redeem (pursuant to the Partnership Agreement or otherwise), sell,
transfer, assign, or (without the Operating Partnership's consent which shall
not be unreasonably withheld) pledge or encumber, or otherwise convey any or all
of the LP Units or Conversion Shares, as the case may be, delivered to Kelter in
connection with this transaction; and that not more than 25% of the LP Units or
Conversion Shares owned by Kelter may be sold in the three-month period
following the initial two year Lock-Up Period, and an additional 25% of such LP
Units and Conversion Shares may be sold in each three-month period thereafter
(so that all LP Units and Conversion Shares may be sold after the third
anniversary of the Closing Date); provided that transfers may be made, subject
to the restrictions hereof and under the Partnership Agreement, to Permitted
Transferees. The term "Permitted Transferee" shall mean Kelter's spouse; a
parent or lineal descendant (including an adopted child) of a parent, or the
spouse of a lineal descendant of a parent; a trustee, guardian or custodian for,
or an executor, administrator or other legal representative of the estate of,
Kelter, or a trustee, guardian or custodian for a Permitted Transferee of
Kelter; the trustee of a trust (including a voting trust) for the benefit of
Kelter; and a corporation, partnership or other entity of which Kelter and
Permitted Transferees of Kelter are the beneficial owners of a majority in
voting power of the equity, and who (i) is an Accredited Investor(as
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defined in Rule 501 under the Securities Act); and (ii) agrees in writing in an
instrument reasonably acceptable to the Operating Partnership to be bound by the
restriction on transfer of the LP Units and Conversion Shares contained in this
Agreement and by the obligations contained in the indemnification provisions in
Section 6.02 of the Master Investment Agreement, provided that such obligation
shall be limited to the LP Units and Conversion Shares actually received by such
Permitted Transferee, and such Permitted Transferee shall not be liable for
money damages or otherwise.
1.03 Closing. The contribution of the Preferred Stock and delivery
of the Contribution Consideration shall be consummated at the Closing, which
will take place at the place and at the time on the Closing Date designated in
the Master Investment Agreement. At the Closing, there shall also be delivered
to the Company, the Operating Partnership, Kelter and Penn Square the
certificates and other documents and instruments required to be delivered under
this Agreement and under the Master Investment Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF KELTER AND PENN SQUARE
Kelter and Penn Square, jointly and severally, represent and warrant
to the Operating Partnership that the following matters are true as of the date
hereof and at Closing:
2.01 Organization. Penn Square is duly organized and validly
existing and in good standing under the laws of the State of Pennsylvania and
has all requisite power and authority to own, lease and operate its properties
and assets as they are now owned, leased and operated and carry on its business
as now conducted and presently proposed to be conducted. Penn Square is duly
qualified, licensed or admitted to do business and is in good standing in those
jurisdictions in which the ownership, use, or leasing of its assets and
properties, or the conduct or nature of its business makes such qualification,
licensing or admission necessary, except for failures to be so qualified,
licensed or admitted and in good standing individually or in the aggregate would
not have a Material Adverse Effect (as defined herein).
2.02 Authority. Each of Kelter and Penn Square has the full legal
right and power and all authority and approval required to enter into, execute
and deliver this Agreement and to perform fully its obligations hereunder. The
execution and delivery of this Agreement and the other documents delivered by
Kelter and Penn Square, and the performance of all obligations of Kelter and
Penn Square under this Agreement and such other documents by Kelter and Penn
Square, have been duly authorized, and this Agreement is binding on Kelter and
Penn Square and enforceable against Kelter and Penn Square in accordance with
its terms. Other than those which have been obtained prior to the date hereof,
no consent of any creditor, investor, partner, shareholder (other than Kelter),
tenant-in-common of Kelter or Penn Square, judicial or administrative body,
Governmental or Regulatory Authority, or other governmental body or agency, or
other party to such execution, delivery and performance by Kelter and Penn
Square is required. Neither the execution of this Agreement nor the consummation
of the transactions contemplated hereby by Kelter and Penn Square will (i)
result in a breach of, default under, or
3
<PAGE>
acceleration of, any agreement to which Kelter or Penn Square is a party or by
which Kelter or Penn Square is bound; or (ii) violate any restriction, court
order, agreement or other legal obligation to which Kelter or Penn Square is
subject.
2.03 Subsidiaries and Affiliates. On the Closing Date, Penn Square
will not own, directly or indirectly, any capital stock of, or any other
interest in, any corporation, limited liability company, general partnership,
limited partnership, proprietorship, trust or other entity.
2.04 Capitalization. On the Closing Date, all of the issued and
outstanding shares of capital stock of Penn Square will be owned directly by
Kelter. At the Closing, the authorized capital stock of Penn Square will consist
of (i) 10,000 shares of common stock; 4,000 shares of which will be owned by
Kelter, 3,000 shares of which will be transferred by Kelter to Hudson Bay and
3,000 shares of which will be transferred by Kelter to McBride; and (ii) 190,000
shares of Preferred Stock, all of which will be transferred by Kelter to the
Operating Partnership hereunder. No options, warrants, calls, commitments or
other rights to acquire, sell or issue shares of capital stock or other equity
interests of Penn Square, whether upon conversion of other securities or
otherwise, are outstanding and there is no agreement or understanding with
respect to the voting of such capital stock or other equity interests.
2.05 No Material Adverse Change. Since December 31, 1996, there has
been no material adverse change in the assets, properties, business, operations,
income or condition (financial or otherwise) of Penn Square, nor is any such
change threatened, nor has there been any damage, destruction or loss which
could have a Material Adverse Effect, whether or not covered by insurance, and
Penn Square has conducted its business only in the ordinary course consistent
with past practice.
2.06 Business Contracts. Schedule 2.06 contains a true, correct and
complete list of all contracts, agreements and arrangements to which Penn Square
is a party and which relate to management, leasing and/or brokerage services
performed by Penn Square (collectively, the "Business Contracts"). True, correct
and complete copies of the Business Contracts have been delivered or made
available to the Operating Partnership. Schedule 2.06 accurately sets forth for
each Business Contract any amendments or modifications with respect thereto.
Each Business Contract is in full force and effect and embodies the entire
agreement between the parties thereto. Penn Square has satisfied in full or
provided for all of its liabilities and obligations thereunder requiring
performance prior to the date hereof in all material respects. Penn Square is
not in default in any material respect under any Business Contract, nor, to the
knowledge of Penn Square, are there any existing conditions which, with the
passage of time or the giving of notice or both, would constitute a default in
any material respect under any Business Contract. To the best knowledge of Penn
Square, no other party to any such Business Contract is in default in any
material respect thereunder, nor does any condition exist which, with the
passage of time or the giving of notice or both, would constitute a default in
any material respect on the part of any other party under any Business Contract.
To the knowledge of Penn Square, no other party to a Business Contract has any
right of offset or other similar rights.
4
<PAGE>
2.07 Acquisition Contracts. Schedule 2.07 contains a true, correct
and complete list of all contracts and agreements to which Penn Square is a
party relating to the acquisition or purchase of real property (the "Acquisition
Contracts"). True, correct and complete copies of the Acquisition Contracts have
been delivered or made available to the Operating Partnership. Schedule 2.07
accurately sets forth for each Acquisition Contract the name of the other
party(ies) thereto and any amendments or modifications with respect thereto.
Each Acquisition Contract is in full force and effect and embodies the entire
agreement between the parties thereto. Penn Square has satisfied in full or
provided for all its liabilities and obligations thereunder requiring
performance prior to the date hereof in all material respects. Penn Square is
not in default in any material respect under any Acquisition Contract, nor, to
the knowledge of Penn Square, are there any existing conditions which, with the
passage of time or the giving of notice or both, would constitute a default in
any material respect under any Acquisition Contract. To the best knowledge of
Penn Square, no other party to any such Acquisition Contract is in default in
any material respect thereunder, nor does any condition exist which, with the
passage of time or the giving of notice or both, would constitute a default in
any material respect on the part of any other party under any Acquisition
Contract.
2.08 Other Contracts. Schedule 2.08 contains a true, correct and
complete list of all contracts and agreements to which Penn Square is a party
other than Business Contracts and the Acquisition Contracts. Each such contract
is in full force and effect and embodies the entire agreement between the
parties thereto. Penn Square has satisfied in full or provided for all its
liabilities and obligations thereunder requiring performance prior to the date
hereof in all material respects. Neither Penn Square nor, to the best knowledge
of Penn Square, any other party thereto is in default in any material respect
under any such contract.
2.09 Acquisition Properties. Penn Square has performed (or will
have performed prior to Closing) a review and investigation with respect to each
of the properties which is the subject of an Acquisition Contract (collectively,
"Acquisition Properties"), in connection with which Penn Square has reviewed and
analyzed at least the following for each Acquisition Property: operating and
financial statements, leases, significant contracts to be assumed, financing to
be assumed, environmental status, physical and engineering status, status of
title, as-built survey and zoning and permitting matters. Such investigation has
not revealed any issues, other than those which have been disclosed to the
Company or the Operating Partnership, which would have a material adverse impact
on the proposed acquisition of any such Acquisition Property or the purchase
price to be paid in connection therewith.
2.10 No Conflict. Neither the execution and delivery of this
Agreement by Kelter and Penn Square nor the performance by Kelter and Penn
Square of the transactions contemplated hereby will: (a) violate or conflict
with any of the provisions of the Certificate of Incorporation or By-Laws (or
similar governing documents) of Penn Square; (b) except as would not have a
Material Adverse Effect, violate, conflict with, result in the acceleration of,
or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or imposition of
any Lien in or upon any of the properties or assets of Kelter or Penn Square or
constitute a default (or an event which might, with the passage of time or the
giving of notice, or both, constitute a default) under any mortgage, indenture,
deed of trust, lease, contract (including any Business Contract and any
Acquisition
5
<PAGE>
Contract), loan or credit agreement, license or other instrument to which Kelter
or Penn Square is a party or by which it or any of their assets may be bound or
affected; or (c) except as would not have a Material Adverse Effect, violate or
conflict with any provision of any Law or Order applicable to Kelter or Penn
Square, require any consent or approval of or filing or notice with any
Governmental or Regulatory Authority.
2.11 Books and Records. Each of the books and records of Penn Square
(as previously supplied or made available to the Operating Partnership) is true,
correct, complete and current in all material respects and all signatures
contained therein are the true signatures of the persons whose signatures they
purport to be.
2.12 Certificate of Incorporation and By-Laws. Penn Square has
heretofore delivered to the Operating Partnership true, correct and complete
copies of the Certificate or Articles of Incorporation (certified by the
Secretary of State of Pennsylvania) and By-Laws (certified by the secretary of
Penn Square) or similar governing documents of Penn Square as in full force and
effect on the date hereof. Such Certificate or Articles of Incorporation and
By-Laws shall remain in full force and effect on the Closing Date, subject only
to the amendments effected by the Articles of Amendment (as defined below).
2.13 Financial Statements. (i) The audited balance sheets of Penn
Square as of December 31, 1996 and the related audited statements of income,
retained earnings and cash flows for the year then ended, including the
footnotes thereto, certified by Arthur Andersen LLP, certified public
accountants, true and complete copies of which have heretofore been delivered to
the Operating Partnership, present fairly, in all material respects, the
financial position of Penn Square as at such date and the results of operations
and cash flows of Penn Square for the year then ended, in each case, in
accordance with GAAP consistently applied for the periods covered thereby (the
"Audited Financial Statements") and (ii) the unaudited balance sheet of Penn
Square as of June 30, 1997 and the related statements of income for the period
then ended, true and complete copies of which have heretofore been delivered to
the Operating Partnership, present fairly, in all material respects, the
financial position of Penn Square as of such date and the results of operations
of Penn Square for the period then ended, in each case in accordance with GAAP
consistently applied for the six-month period covered thereby.
2.14 Undisclosed Liabilities. Except as disclosed on Schedule 2.14,
Penn Square does not have any liabilities, whether or not of a kind required by
GAAP to be set forth on a financial statement, other than (i) liabilities
incurred since December 31, 1996 in the ordinary course of business (none of
which is a liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit), none of which individually or in the aggregate,
is material to the business, operations, income, condition (financial or
otherwise), assets or properties of Penn Square or (ii) liabilities disclosed
and reflected as liabilities on the Audited Financial Statements for Penn Square
delivered to the Operating Partnership.
2.15 Legal Proceedings. There are no outstanding Orders by which
Kelter or Penn Square or any of their securities, assets, properties or
businesses, as applicable, are bound. Except as disclosed on Schedule 2.15,
there are no actions, suits, arbitrations or proceedings pending or, to the
knowledge of Penn Square, threatened (whether or not the defense thereof or
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liabilities in respect thereof are covered by insurance) against or affecting,
nor to the knowledge of Penn Square are there any Governmental or Regulatory
Authority investigations pending or threatened against, Kelter or Penn Square
or any of their assets, properties or businesses, nor are there any facts which
are likely to give rise to any such action or proceeding which if adversely
decided, would have a Material Adverse Effect.
2.16 Property.
(a) Schedule 2.16(a) contains a true and complete list of (i) all
assets owned or leased by Penn Square which constitute real property (the "Real
Property") and (ii) all material assets owned or leased by Penn Square that
constitute tangible personal property (the "Tangible Personal Property" and,
together with the Real Property, the "Penn Square Assets"). The Penn Square
Assets are all the assets owned or leased by Penn Square and used in (or
necessary for) its business. Except as set forth in Schedule 2.16(a), Penn
Square has, and upon consummation of the Closing will continue to have, good and
marketable title to all of the Penn Square Assets that are not licensed or
leased to Penn Square, in each case free and clear of all Liens. The Penn Square
Assets are in good working condition and free of material defects, ordinary wear
and tear excepted. None of the Penn Square Assets, nor the operation or
maintenance thereof, violates in any material respect, any restrictive covenant
or any provision of any federal, state or local law, ordinance, rule or
regulation or encroaches on any property owned by others. No condemnation or
similar proceeding is pending or threatened with respect to any Penn Square
Asset.
(b) Schedule 2.16(b) contains a true and complete list of all
Intangible Property owned by Penn Square and used in (or necessary for) its
business. None of the Intangible Property infringes upon the rights of any other
person or, to the knowledge of Penn Square, is infringed upon by any other
person or its property and Penn Square has not received any notice of any claim
of any other person relating to any of the Intangible Property or any process or
confidential information of Penn Square and Penn Square does not know of any
basis for any such charge or claim. Except for the Intangible Property, no other
intellectual property or intangible property rights are required for Penn Square
to conduct its business in the ordinary course consistent with past practice.
All of the Intangible Property is valid and in good standing.
2.17 Leases. Schedule 2.17 contains a true and complete list of all
real property leases and material equipment leases to which Penn Square is
party, and true and correct copies of all such leases have previously been
furnished or made available to the Operating Partnership. All such leases are in
full force and effect, and there are no existing payment or other defaults with
respect thereto that entitle, or with the passage of time would entitle, the
lessor to terminate any such lease, except where the failure of a lease to be in
full force and effect and for such defaults the existence of which would not
have a Material Adverse Effect.
2.18 Employee Relations. Except as disclosed on Schedule 2.18, Penn
Square is not a party to, and there does not otherwise exist, any agreement with
any labor organization, or any collective bargaining or similar agreement with
respect to employees of Penn Square. There are no complaints, grievances or
arbitrations, employment-related litigation, administrative
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proceedings or controversies either pending or, to the best knowledge of Penn
Square, threatened, involving any employee, applicant for employment, or former
employee of Penn Square against Penn Square. During the past five (5) years,
Penn Square has not suffered or sustained any labor dispute resulting in any
work stoppage and no such work stoppage is, to the best knowledge of Penn
Square, threatened.
2.19 Licenses and Permits. Schedule 2.19 sets forth a list of the
government permits, licenses, registrations and other governmental consents and
authorizations (federal, state, local and foreign) (collectively, "Permits")
which Penn Square has obtained in connection with its assets, properties and
business. Except as set forth on Schedule 2.19, no Permits (including Permits
under Environmental Laws) are required to be obtained by Penn Square in
connection with its properties or business. All such Permits are in full force
and effect and in good standing, and, except as shown on Schedule 2.19, shall
continue to be in full force and effect and in good standing following the
consummation of the transactions contemplated by this Agreement. Penn Square has
not received any notice of any claim of revocation of any such Permits nor has
knowledge of any event which might give rise to such a claim.
2.20 Title; Liens. The Preferred Stock will be duly authorized by
Penn Square for issuance to Kelter and, when issued and delivered by Penn
Square, will be validly issued, fully paid and non-assessable. Upon payment of
the Contribution Consideration and delivery of the Preferred Stock in accordance
herewith, the Operating Partnership will receive good, valid and marketable
title to the Preferred Stock, free and clear of all Liens. The form of stock
certificate to be used to evidence the Preferred Stock will be in due and proper
form and will comply with all applicable legal requirements. The Preferred Stock
and the issuance thereof is not subject to any preemptive or other similar
rights.
2.21 Compliance with Laws. Penn Square (i) is in compliance with
all, and not in violation of any, and has not received any claim or notice that
it is not in compliance in any material respect with, or that it is in violation
in any material respect of, any Law or Order to which Penn Square or any of its
businesses, operations, assets or properties (including the use and occupancy
thereof) are subject and (ii) has not failed to obtain or to adhere to the
requirements of any governmental permit, license, registration and other
governmental consent or authorization necessary in connection with its assets,
properties or business, which non-compliance or violation would have a Material
Adverse Effect.
2.22 United States Person. Kelter is not a "Foreign Person"
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended, and shall execute and deliver an "Individual Transferor"
certification at Closing.
2.23 Insurance. Penn Square is insured by insurers of recognized
financial responsibility as set forth on Schedule 2.23. Penn Square has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its businesses at a cost that
would not have a Material Adverse Effect.
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2.24 Remaining Assets and Liabilities. At the Closing Date, the only
assets of Penn Square will be the Business Contracts and other assets listed on
Schedule 2.24 and the only liabilities of Penn Square will be those listed on
Schedule 2.24.
2.25 Investment Representation. Kelter will acquire the LP Units and
Warrants to be delivered to him at the Closing with the intention of holding
such LP Units and Warrants for purposes of investment and not with a view
towards sale or any other distribution. Kelter has been advised that he may be
required to bear the economic risk of an investment in the LP Units and Warrants
for an indefinite period of time. Kelter is an Accredited Investor. Kelter has
such knowledge and experience in financial and business matters so as to be
fully capable of evaluating the merits and risks of an investment in the LP
Units and Warrants. Kelter has been afforded the opportunity to ask questions of
those persons he considers appropriate and to obtain any additional information
he desires in respect of the LP Units and Warrants and the business, operations,
conditions (financial and otherwise) and current prospects of the Operating
Partnership and the Company. Kelter has consulted his own financial, legal and
tax advisors with respect to the economic, legal and tax consequences of
delivery of the LP Units and Warrants and has not relied on the Operating
Partnership, the Company or any of their officers, directors, affiliates or
professional advisors for such advice as to such consequences.
2.26 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Kelter directly with
the Operating Partnership without the intervention of any Person on behalf of
Kelter in such manner as to give rise to any valid claim by any Person against
the Company or any of its Subsidiaries for a finder's fee, brokerage commission
or similar payment.
2.27 Taxes. All tax returns and reports required to be filed by Penn
Square have been timely filed and all such tax returns are complete and accurate
in all material respects. Penn Square has timely paid all taxes shown as due on
all such tax returns and reports. No requests for waivers of the time to assess
any taxes against Penn Square have been granted or are pending, except for
requests with respect to such taxes that have been adequately reserved for in
the most recent financial statements of Penn Square or, to the extent not
adequately reserved, the assessment of which would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on Schedule 2.27,
to the knowledge of Penn Square, no event has occurred and no condition or
circumstance exists which presents a material risk that any tax will be imposed
on Penn Square. No federal, state or local taxing authority has asserted in
writing any tax deficiency, lien, interest or penalty or other assessment
against Penn Square which has not been paid and there is no pending audit or
inquiry from any federal, state or local tax authority relating to Penn Square
which reasonably may be expected to result in a tax deficiency, lien, interest,
penalty or other assessment against Penn Square which would have, individually
or in the aggregate, a Material Adverse Effect. Since December 31, 1996, Penn
Square has incurred no liability for taxes except in the ordinary course of
business.
2.28 S Corporation Status. Penn Square is an S corporation that
validly elected to be an S corporation for federal and relevant state income tax
purposes as of its first taxable year, and has maintained its status as an S
corporation at all times thereafter. No event exists or has existed, which
presents a material risk that Penn Square's status as an S corporation is
9
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or was subject to termination or revocation. Penn Square has not
had and will not have income which would terminate its S corporation status as
described in Section 1362(d)(3)(A) of the Code.
ARTICLE III.
COVENANTS OF KELTER AND PENN SQUARE
Kelter and Penn Square covenant and agree with the Operating
Partnership that, at all times from and after the date hereof until the Closing,
Kelter and Penn Square will comply with all covenants and provisions of this
Article III, except to the extent the Operating Partnership may otherwise
consent in writing.
3.01 Regulatory and Other Approvals. Kelter and Penn Square will
(i) take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts, as
promptly as practicable to obtain all consents, approvals or actions of, to make
all filings with and to give all notices to Governmental or Regulatory
Authorities or any other Person required of Kelter and Penn Square to consummate
the transactions contemplated hereby and by the Transaction Agreements to which
it is a party, (ii) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as the Company or such
Governmental or Regulatory Authorities or other Persons may reasonably request
and (iii) cooperate with the Company and the Subsidiaries of the Company as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of the Company or any Subsidiary of the
Company to consummate the transactions contemplated hereby and by the
Transaction Agreements to which it is a party. Kelter and Penn Square will
provide prompt notification to the Company when any such consent, approval,
action, filing or notice referred to in clause (i) above is obtained, taken,
made or given, as applicable, and will advise the Company of any communications
with any Governmental or Regulatory Authority or other Person regarding any of
the transactions contemplated by this Agreement or any of the Transaction
Agreements to which it is a party.
3.02 Notice of Events. Kelter shall promptly notify the Operating
Partnership of (i) any event, condition or circumstance occurring from the date
hereof through the Closing Date that would constitute a violation or breach of
this Agreement, and (ii) any event, occurrence, transaction or other item which
would have been required to have been disclosed on any schedule or statement
delivered hereunder had such event, occurrence, transaction or item existed on
the date hereof, other than items arising in the ordinary course of business
which would not render any representation or warranty of Kelter or Penn Square,
as the case may be, materially misleading.
3.03 Fulfillment of Conditions. Kelter will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of the Operating Partnership and
the Company contained in this Agreement
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and will not take or fail to take any action that could reasonably be expected
to result in the nonfulfillment of any such condition.
3.04 Change in Conditions. Kelter shall promptly notify the
Operating Partnership of any change in any condition with respect to Penn
Square, the Acquisition Contracts or the Acquisition Properties, or of the
occurrence of any event or circumstance that makes any representation or
warranty of Kelter or Penn Square, as the case may be, to the Operating
Partnership under this Agreement untrue or misleading, or any covenant of the
Operating Partnership under this Agreement incapable or less likely of being
performed, it being understood that Kelter's obligation to provide notice to the
Operating Partnership under this Section 3.04 shall in no way relieve Kelter or
Penn Square, as the case may be, of any liability for a breach by Kelter or Penn
Square, as the case may be, of any of its representations, warranties or
covenants under this Agreement.
3.05 Issuance of the Preferred Stock. Prior to Closing, Kelter will
cause Penn Square (i) to amend its articles of incorporation to authorize the
Preferred Stock, with such designations, voting powers, preferences and other
rights as set forth in the articles of amendment of the articles of
incorporation, the form of which is attached hereto as Exhibit B (the "Articles
of Amendment"), and (ii) to issue the Preferred Stock.
3.06 Financial Statements. As promptly as practicable, Penn Square
will deliver to the Company the audited (in the case of any fiscal year ending
after the date hereof and before the Closing Date) and the unaudited (in the
case of any fiscal quarter ending after the date hereof and before the Closing
Date) balance sheet of Penn Square, and the related audited or unaudited
statements of income, retained earnings and cash flows, in each case as of and
for the fiscal year then ended or as of and for each such fiscal quarter and the
portion of the fiscal year then ended, as the case may be.
3.07 Employment Agreement. At Closing, Kelter will enter into an
employment agreement (the "Employment Agreement") with the Company substantially
in the form attached hereto as Exhibit C.
ARTICLE IV.
CONDITIONS TO OBLIGATIONS OF KELTER AND PENN SQUARE
The obligations of Kelter and Penn Square hereunder are subject to
the fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Kelter in his sole
discretion):
4.01 Satisfaction of Conditions to Transaction Agreements. All
conditions precedent to the consummation of the transactions contemplated by
the Master Investment Agreement and the other Transaction Agreements (other
than the condition that the transactions contemplated by this Agreement shall
have been consummated) shall have been satisfied or, if permissible, waived.
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4.02 Warrant. The Company shall have executed and delivered to
Kelter the Warrants.
4.03 Employment Agreement. The Company shall have executed and
delivered the Employment Agreement.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF THE OPERATING PARTNERSHIP
The obligations of the Operating Partnership hereunder are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by the
Operating Partnership in its sole discretion):
5.01 Representations and Warranties. Each of the representations
and warranties made by Kelter and Penn Square in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date.
5.02 Officer's Certificate. Penn Square shall have furnished to
the Operating Partnership a certificate of an officer, in form and substance
satisfactory to the Operating Partnership.
5.03 Performance. Kelter and Penn Square shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Kelter or Penn
Square, as the case may be, at or before the Closing.
5.04 Acquisition Contracts. Penn Square shall have assigned to
McBride the Acquisition Contracts.
5.05 Employment Agreement. Kelter shall have executed and
delivered the Employment Agreement.
5.06 Master Investment Agreement. All of the transactions
contemplated in the Master Investment Agreement (other than those contemplated
by this Agreement) shall have been consummated.
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ARTICLE VI.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
6.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of Kelter
and Penn Square contained in this Agreement will survive the Closing until the
second anniversary of the Closing Date, except that to the extent any claim for
indemnification is made under the Master Investment Agreement with respect to
any representation, warranty, covenant or agreement that would otherwise
terminate and a notice for indemnification shall have been timely given under
Article VI of the Master Investment Agreement on or prior to such termination
date, then such survival period will be extended as it relates to such claim
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article VI of the Master Investment Agreement. This
Section shall not limit in any way the survival and enforceability of any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Closing Date, which shall survive for the respective
periods set forth herein.
6.02 Indemnification. Indemnification with respect to breaches of
or inaccuracies in any representation or warranty of, or nonfulfillment of or
failure to perform or breach of any covenant or agreement on the part of, Kelter
or Penn Square contained in this Agreement, or on the part of the Company or the
Operating Partnership in the Master Investment Agreement, shall be as provided
in and pursuant to the Master Investment Agreement.
ARTICLE VII.
TERMINATION
7.01 Termination. This Agreement shall be terminated in the event
the Master Investment Agreement is terminated pursuant to its terms.
7.02 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 7.01, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of the Operating
Partnership, the Company, Penn Square or Kelter (or any of their respective
officers, directors, employees, agents or other representatives or Affiliates),
except as provided in the Master Investment Agreement.
ARTICLE VIII.
DEFINITIONS
8.01 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"knowledge" of Penn Square means, with respect to any representation
and warranty, the current actual knowledge of Jeffrey Kelter.
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"Material Adverse Effect" means an adverse effect on the condition,
financial or otherwise, or on the earnings, assets, business affairs or business
prospects of Penn Square or any of its Subsidiaries which would be material to
Penn Square and its Subsidiaries, taken as a whole.
"Per Unit Purchase Price" has the meaning ascribed to it in the
Master Investment Agreement.
"Transaction Agreements" means the Master Investment Agreement, the
Merger Agreement, the Stock Purchase Agreement, the McBride Contribution
Agreement and all agreements and documents to be delivered by the Operating
Partnership, the Company and the Investors in connection with the transactions
contemplated by this Agreement and the Master Investment Agreement.
"Warrant" has the meaning ascribed to it in Section 1.02.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of Penn Square or a Subsidiary. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
ARTICLE IX.
CLOSING DELIVERIES
9.01 Kelter. It shall be a condition precedent to the Operating
Partnership's obligations under this Agreement that at the Closing (or such
other times as may be specified below), Kelter shall deliver or cause to be
delivered to the Operating Partnership the following, each in form and substance
reasonably acceptable to the Operating Partnership and its counsel and in
addition to the deliveries required under the Master Investment Agreement:
(a) Preferred Stock Certificate. The stock certificate
evidencing the Preferred Stock.
(b) Articles of Amendment. The Articles of Amendment, certified
by the Secretary of State of Pennsylvania.
9.02 The Operating Partnership. It shall be a condition precedent
to Kelter's and Penn Square's obligations under this Agreement that at Closing
(or such other times as may be specified below) the Operating Partnership shall
have delivered or caused to be delivered to
14
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Kelter the following, each in form and substance reasonably acceptable to
Kelter and its counsel and in addition to the deliveries required under the
Master Investment Agreement:
(a) Warrants. The Warrants to be issued to Kelter.
(b) Partnership Agreement. A copy of the Partnership Agreement,
duly certified by the secretary of the Company as true, complete and correct.
After Closing, each of the Operating Partnership and Kelter shall execute and
deliver to the other such further documents and instruments as the other
reasonably requests to effect this transaction and otherwise effect the
agreements of the parties hereto.
ARTICLE X.
MISCELLANEOUS
10.01 Notices. All notices, requests and other communications
hereunder must be given in the manner provided in the Master Investment
Agreement.
10.02 Entire Agreement. This Agreement and the Transaction
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
10.03 Expenses. Except as otherwise expressly provided in this
Agreement or the Master Investment Agreement, whether or not the transactions
contemplated hereby are consummated, each party will pay its own costs and
expenses, incurred in connection with the negotiation, execution and closing of
this Agreement and the Transaction Agreements and the transactions contemplated
hereby and thereby.
10.04 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
10.05 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
10.06 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
15
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10.07 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except for assignments and transfers by operation of law.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
10.08 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
10.09 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
10.10 Jurisdiction. THE PARTIES AGREE THAT ALL DISPUTES BETWEEN ANY
OF THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND
WHETHER ARISING IN LAW OR EQUITY OR OTHERWISE, SHALL BE RESOLVED BY THE FEDERAL
OR STATE COURTS LOCATED IN NEW YORK, NEW YORK. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER IN ANY OTHER
JURISDICTION.
10.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
10.13 No Personal Recourse. Notwithstanding anything to the
contrary contained in this Agreement or in any of the Transaction Agreements,
except as otherwise specifically set forth in the Master Investment Agreement
with respect to the Termination Fee, (i) only Kelter (and not Penn Square)
shall be liable for any claims made by non-Kelter/Penn Square parties to this
Agreement or any of the Transaction Agreements, (ii) the non-Kelter/Penn Square
parties to this Agreement and the other Transaction Agreements shall look only
to the LP Units which Kelter will receive in connection with the transactions
contemplated under this Agreement and the Transaction Agreements with respect
to any claims that may be made under this Agreement
16
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or any of the Transaction Agreements, and (iii) no other personal
recourse or personal liability for any claims under this Agreement or any of the
Transaction Agreements shall be had against Kelter.
17
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each party hereto as of the date first above written.
AMERICAN REAL ESTATE INVESTMENT, L.P.
By: American Real Estate Investment Corporation,
its General Partner
By: /s/ EVAN ZUCKER
---------------------------------------------
Name: Evan Zucker
Title: President
AMERICAN REAL ESTATE INVESTMENT CORPORATION
By: /s/ EVAN ZUCKER
---------------------------------------------
Name: Evan Zucker
Title: President
JEFFREY KELTER
---------------------------------------------
/s/ JEFFREY KELTER
PENN SQUARE PROPERTIES, INC.
By:/s/ JEFFREY KELTER
---------------------------------------------
Name: Jeffrey Kelter
Title: Principal
18
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Exhibit A
WARRANT
<PAGE>
Exhibit B
ARTICLES OF AMENDMENT
<PAGE>
Exhibit C
EMPLOYMENT AGREEMENT
<PAGE>
CONFORMED COPY
MCBRIDE CONTRIBUTION AGREEMENT
Between
AMERICAN REAL ESTATE INVESTMENT CORPORATION,
AMERICAN REAL ESTATE INVESTMENT, L.P.
And
THE OTHER PARTIES LISTED ON
THE SIGNATURE PAGES OF THIS AGREEMENT
Dated as of August 20, 1997
THE SECURITIES OFFERED AND SOLD HEREBY 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 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
1. CONTRIBUTION........................................................... 1
2. CONTRIBUTION; LP UNITS................................................. 4
(a) General..................................................... 4
(b) Contribution Consideration.................................. 4
(c) Issuance of LP Units and Common Stock....................... 5
(d) Transfer Restrictions....................................... 6
(e) Lock-Up Period.............................................. 6
3. CLOSING................................................................ 7
4. PROPERTY INSPECTION.................................................... 7
(a) General..................................................... 7
(b) Condition................................................... 7
(c) Environmental Reports....................................... 8
(d) Refinancing Properties...................................... 10
5. TITLE AND SURVEY MATTERS............................................... 10
(a) Conveyance of Title......................................... 10
(b) Title Commitments........................................... 10
(c) Surveys..................................................... 11
(d) UCC Searches................................................ 12
(e) Defects and Cure............................................ 12
6. REPRESENTATIONS AND WARRANTIES......................................... 12
6.1 McBride Contributor and the Partnerships......................... 12
(a) Organization................................................ 12
(b) Authority................................................... 13
(c) Other Rights................................................ 13
(d) Defaults.................................................... 13
(e) Contracts................................................... 13
(f) Employees................................................... 14
(g) Compliance with Laws and Codes.............................. 14
(h) Litigation.................................................. 14
(i) Insurance................................................... 15
(j) Financial Information....................................... 15
(k) Re-Zoning................................................... 15
(l) Personal Property........................................... 15
(m) Real Estate Taxes........................................... 15
(n) Taxes....................................................... 16
(o) Transfer Taxes.............................................. 16
(p) Easements and Other Agreements.............................. 16
(q) Lease Controversies......................................... 16
i
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Page
(r) United States Person........................................ 17
(s) Bulk Sales.................................................. 17
(t) Existing Mortgage(s)........................................ 17
(u) Condemnation................................................ 17
(v) Disclosure.................................................. 17
(w) Partnership Interests and Minority Partnership Interests.... 18
(x) Remaining Assets and Liabilities............................ 18
(y) Source of Income............................................ 18
(z) Income from Prohibited Transactions......................... 18
(aa) Partnership Status.......................................... 18
6.2 Investment Representation........................................ 18
6.3 Survival......................................................... 19
6.4 Indemnification.................................................. 19
6.5 No Personal Recourse............................................. 19
7. ADDITIONAL COVENANTS................................................... 19
7.1 Additional Covenants of the McBride Contributor and the
Partnerships.................................................. 19
(a) New Leases.................................................. 20
(b) New Contracts............................................... 20
(c) Insurance................................................... 20
(d) Operation of Properties..................................... 20
(e) Pre-Closing Expenses........................................ 20
(f) Good Faith.................................................. 20
(g) No Assignment............................................... 21
(h) Availability of Records..................................... 21
(i) Change in Conditions........................................ 21
(j) Tax Items................................................... 21
(k) Financial Statements........................................ 22
(l) 2 Volvo Drive Remediation................................... 22
7.2 Additional Covenants of the Company.............................. 22
(a) Section 1031 Exchanges of Properties........................ 22
(b) Guarantee of Indebtedness................................... 22
8. ENVIRONMENTAL WARRANTIES AND AGREEMENTS................................ 22
9. LEASES-REPRESENTATIONS WITH RESPECT THERETO............................ 23
(a) Representations as to Leases................................ 23
(b) Estoppel Certificates from Tenants.......................... 25
10. CONDITIONS PRECEDENT TO CLOSING........................................ 26
(a) Pending Actions............................................. 26
(b) Zoning...................................................... 26
(c) Flood Insurance............................................. 26
(d) Utilities................................................... 26
(e) Pay-Off Letters............................................. 26
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Page
(f) Bankruptcy.................................................. 26
(g) Representations and Warranties True......................... 26
(h) Covenants Performed......................................... 27
(i) Material Adverse Effect..................................... 27
(j) Title to the Properties..................................... 27
(k) New Jersey Environmental Clearance.......................... 27
(l) Closing Deliveries.......................................... 27
(m) Acquisition Portfolio....................................... 27
(n) Common Stock Recipient Lock-Up Letters...................... 27
(o) Master Investment Agreement................................. 27
11. CLOSING DELIVERIES..................................................... 27
11.1 McBride Contributor.............................................. 27
(a) Deeds....................................................... 27
(b) Bill of Sale................................................ 28
(c) General Assignment.......................................... 28
(d) Assignment of Contracts..................................... 28
(e) Assignment of Partnership Interests......................... 28
(f) Assignment of Leases and Estoppel Certificates.............. 28
(g) Keys........................................................ 28
(h) Affidavit of Title and ALTA Statement....................... 28
(i) Letters to Tenants.......................................... 29
(j) Title Policies and Surveys.................................. 29
(k) Original Documents.......................................... 29
(l) Plans and Specifications.................................... 29
(m) Tax Bills................................................... 29
(n) Entity Transferor Certificate............................... 29
(o) Rent Roll................................................... 29
(p) Bulk Sales Affidavit........................................ 29
(q) Pay-Off Letters............................................. 29
(r) Certificates of Occupancy................................... 29
(s) ISRA Compliance............................................. 29
(t) Employment Agreement........................................ 30
(u) Other....................................................... 30
11.2 Acquiror......................................................... 30
(a) Warrants.................................................... 30
(b) Assignment of Contracts..................................... 30
(c) Assignment of Leases........................................ 30
(d) Contract Notices............................................ 30
(e) Employment Agreement........................................ 30
(f) Other....................................................... 30
12. PRORATIONS AND ADJUSTMENTS............................................. 30
13. DESTRUCTION, LOSS OR DIMINUTION OF PROPERTIES.......................... 32
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14. SUCCESSORS AND ASSIGNS................................................. 33
15. NOTICES................................................................ 34
16. BENEFIT................................................................ 34
17. TENANTS IN DEFAULT..................................................... 34
(a) Applicability of Provision.................................. 34
(b) Acquiror's Rights........................................... 34
18. TERMINATION............................................................ 35
(a) Termination................................................. 35
(b) Effect of Termination....................................... 35
19. MISCELLANEOUS.......................................................... 35
(a) Entire Agreement............................................ 35
(b) Governing Law............................................... 35
(c) Partial Invalidity.......................................... 35
(d) Expenses.................................................... 35
(e) Counterparts................................................ 35
(f) Jurisdiction................................................ 35
<PAGE>
THIS MCBRIDE CONTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of August 20, 1997, by and between MCBRIDE HUDSON BAY, L.P. (the
"McBride Contributor"), the entities reflected on the signature pages hereto as
"The Partnerships" (the "Partnerships"), AMERICAN REAL ESTATE INVESTMENT
CORPORATION, a Maryland corporation (the "Company"), and AMERICAN REAL ESTATE
INVESTMENT, L.P., a Delaware limited partnership ("Acquiror"). Capitalized terms
used in this Agreement and not otherwise defined have the meanings specified in
the Master Investment Agreement dated as the date hereof, by and among the
Company, Acquiror, the McBride Contributor, the Partnerships and the other
parties thereto (the "Master Investment Agreement").
RECITALS
A. The McBride Contributor desires to contribute or cause to be
contributed the Partnership Interests, the Fee Properties, if any, the Cash
Contribution and the Optional Cash Contribution, if any (all as defined below)
to Acquiror in exchange for the Contribution Consideration (as defined below).
B. The McBride Contributor desires to cause to be contributed the
Minority Partnership Interests (as defined below) to the Company in exchange for
the Common Stock Amount (as defined below).
C. The McBride Contributor is a party to the Master Investment
Agreement and the contribution by the McBride Contributor pursuant to this
Agreement is among the transactions contemplated by the Master Investment
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. CONTRIBUTION At Closing, the McBride Contributor shall contribute and
convey to the Acquiror, and the Acquiror shall accept and assume from the
McBride Contributor, for the Contribution Consideration, and pursuant to the
terms and subject to the conditions set forth in this Agreement, all of the
McBride Contributor's right, title and interest in and to the Partnership
Interests, the Fee Properties, if any, the Cash Contribution and the Optional
Cash Contribution, if any. The contribution and conveyance of the Partnership
Interests, the Fee Properties, if any, the Cash Contribution and the Optional
Cash Contribution, if any, shall be made subject to the Assumed Indebtedness (as
defined below). At Closing, the McBride Contributor shall cause to be
contributed and conveyed to the Company, and the Company shall accept and
assume, for the Common Stock Amount, and pursuant to the terms and subject to
the conditions set forth in this Agreement, all of the right, title and interest
in and to the Minority Partnership Interests.
For purposes of this Agreement:
<PAGE>
(a) "Acquisition Contracts" means the contracts or letters of intent
to acquire the Acquisition Properties, which contracts are listed in Schedule
2.07 to the Management Contribution Agreement.
(b) "Acquisition Portfolio" means the (i) Acquisition Contracts for
those Acquisition Properties which are not acquired prior to Closing, (ii) any
Acquisition Property which is acquired prior to Closing, and (iii) the cash
proceeds from the sale of any Disposition Property (to the extent such proceeds
have not been used to purchase an Acquisition Property) plus additional cash if
necessary, in each case held by the Partnerships. It being understood that, at
any time prior to the date which is 5 business days prior to the Exercise Date
(as defined in the Stock Purchase Agreement), if the McBride Contributor
determines that the closing of the sale of the Disposition Property known as 45
Barbour Pond Road will occur after the Closing Date, then the McBride
Contributor may propose to contribute such Disposition Property hereunder, and
Acquiror may then accept such contribution, subject to its due diligence and in
its sole reasonable discretion, in lieu of cash otherwise included in (iii)
above.
(c) "Acquisition Properties" means the properties that are the
subject of the Acquisition Contracts, which properties are listed in Part A of
Schedule 1(c).
(d) "Assumed Indebtedness" means the indebtedness described in
Schedule 1(d).
(e) "Books and Records" means all files, documents, instruments,
papers, books and records relating to the business or condition of the McBride
Contributor and the Partnerships, including without limitation financial
statements, tax returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts (as
defined herein), Licenses, customer lists, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
(f) "Cash Contribution" means $2.0 million (which will be
contributed by Hudson Bay to the McBride Contributor prior to Closing or, at the
direction of the McBride Contributor, to the Acquiror at Closing) in cash to be
contributed to the Acquiror by or on behalf of the McBride Contributor at the
Closing.
(g) "Disposition Properties" means those Properties listed on
Schedule 1(g) which are currently owned in fee simple by the Partnerships and
which such Partnerships intend to dispose of prior to or after the Closing.
(h) "Fee Properties" means the Properties to be contributed in fee
simple to the Acquiror at Closing by or on behalf of the McBride Contributor and
identified in Schedule 1(h).
(i) "knowledge" of the McBride Contributor and the Partnerships
means, with respect to any representation and warranty, the current actual
knowledge of David McBride, Michael McBride, Peter McBride and Timothy McBride.
(j) "LP Unit Recipients" means those partners of the McBride
Contributor (or beneficial owners of such partners) who will ultimately receive
or beneficially own LP Units or Conversion Shares upon dissolution of the
McBride Contributor.
(k) "Material Adverse Effect" means an adverse effect on the
condition, financial or otherwise, or on the earnings, assets, business affairs
or business prospects of the McBride Contributor,
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the Partnerships or the Properties which would be material to the McBride
Contributor, the Partnerships and the Properties, taken as a whole.
(l) "Minority Partnership Interests" means the up to 1% ownership
interests in the Partnerships listed in Schedule 1(l) to be owned and held
directly or indirectly by one or more owners of such Partnerships prior to
Closing and contributed to the Company at Closing, as described in Schedule
1(l).
(m) "Operating Statements" mean all income and expense statements
and year-end financial operating statements for the Partnerships and the
Properties for calendar years 1994, 1995 and 1996 and for the first and second
quarters of 1997.
(n) "Partnerships" means those certain partnerships, corporations
and limited liability companies listed in Schedule 1(n), which own, or will own
prior to Closing, the Properties and the Acquisition Portfolio.
(o) "Partnership Interests" means the ownership interests in the
Partnerships to be owned and held by or on behalf of the McBride Contributor
prior to Closing and contributed to the Acquiror at Closing, as described in
Part A of Schedule 1(o).
(p) "Partnership Properties" means those Properties owned in fee
simple (or by way of leasehold interest in the case of 88 Mary Street) by the
Partnerships and identified in Part A of Schedule 1(p).
(q) "Properties" means the Fee Properties and the Partnership
Properties, including: (i) the parcels of land described in Part A of Schedule
1(q) (collectively, the "Land"), together with all strips, gores, rights,
easements and interests appurtenant thereto, including, but not limited to, all
right, title and interest of the McBride Contributor, each Partnership or any
other person contributing such Land to the Acquiror on behalf of the McBride
Contributor in and to any islands, alleys, drives, streets or other public ways
adjacent to the Land and any water or mineral rights owned by, or leased to, the
McBride Contributor, each Partnership or such other person; (ii) all
improvements located on, over or below the Land, including, but not limited to,
the buildings thereon (the "Buildings"), and all other structures, systems, and
utilities associated with, and utilized in the ownership and operation of the
Buildings (all such improvements being collectively referred to herein as the
"Improvements"), but excluding improvements and structures, systems and
utilities, if any, owned by Tenants and subtenants of the Buildings; (iii) all
right, title and interest of the McBride Contributor, each Partnership and such
other person in and to all tangible personal property (x) located on or in the
Land or Improvements, or (y) used in connection with the operation and
maintenance of any or all of the Properties, but not including personal property
subject to equipment leases, (collectively, the "Personal Property"); (iv) all
building materials, supplies, hardware, carpeting and other inventory owned by
the McBride Contributor, each Partnership and such other person and maintained
in connection with the McBride Contributor's, each Partnership's and such other
person's ownership and operation of the Land and/or Improvements (collectively,
the "Inventory"); (v) the McBride Contributor's, each Partnership's and such
other person's interest in all goodwill, trademarks, tradenames, property
owners' associations, architectural control boards, development agreements,
development rights and entitlements, claims against third parties and other
intangible property used or useful in connection with the foregoing
(collectively, the "Intangible Personal Property"); and (vi) the McBride
Contributor's, each Partnership's and such other person's
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interest in all leases and other agreements to occupy all or any portion of the
Land and/or Improvements in effect on the date hereof or into which either the
McBride Contributor, any Partnership or any such person enters prior to Closing,
but pursuant to the express terms of this Agreement (collectively, the
"Leases").
(r) "Remedial Action" shall mean any and all corrective or remedial
action, preventative measures, response, removal, transport, disposal, clean-up,
abatement, treatment and monitoring of Hazardous Materials or Environmental
Issues, whether voluntary or mandatory, and includes all studies, assessments,
reports or investigations performed in connection therewith to determine if such
actions are necessary or appropriate (including investigations performed to
determine the progress or status of any such actions), all occurring on or after
the date hereof.
(s) "Remedial Costs" shall include all costs, liabilities, expenses
and fees incurred on or after the date of this Agreement in connection with
Remedial Action, including but not limited to: (i) the fees of environmental
consultants and contractors; (ii) reasonable attorneys' fees (including
compensation for in-house and corporate counsel provided such compensation does
not exceed customary rates for comparable services); (iii) the costs associated
with the preparation of reports, and laboratory analysis (including charges for
expedited results if reasonably necessary); (iv) regulatory, permitting and
review fees; (v) costs of soil and/or water treatment (including groundwater
monitoring) and/or transport and disposal; and (vi) the cost of supplies,
equipment, material and utilities used in connection with Remedial Action.
(t) "Rent Roll" means the rent roll for the Buildings, indicating
all Leases, Tenants and other pertinent information.
(u) "Tenants" mean all of the tenants of the Properties listed
on the Rent Roll.
(v) "Transaction Agreements" means the Master Investment Agreement,
the Merger Agreement, the Stock Purchase Agreement, the Management Contribution
Agreement and all agreements and documents to be delivered by Acquiror, the
Company and the Investors in connection with the transactions contemplated by
this Agreement and the Master Investment Agreement.
2. CONTRIBUTION; LP UNITS
(a) General. Acquiror's sole general partner is the Company. The
Company is a real estate investment trust whose common stock is traded on the
American Stock Exchange (the "AMEX").
(b) Contribution Consideration.
(i) The aggregate consideration to be paid to the McBride
Contributor by Acquiror and the Company for the Partnership
Interests, the Fee Properties, if any, the Cash Contribution and the
Optional Cash Contribution, if any (the "Contribution
Consideration") shall consist of that number of LP Units (as defined
below) (the "Total LP Unit Amount") that equals the aggregate of the
amounts set forth in the next succeeding sentence (the "Total LP
Unit Value") divided by the Per Unit Purchase Price. The Total LP
Unit Value shall equal (A) the sum of the "Allocated Amounts"
assigned
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to all of the Fee Properties, if any, and Partnership Interests, as
provided on Part A of Schedule 2(b)(i)-A, subject to adjustment as
provided below; minus (B) the sum of the Assumed Indebtedness with
respect to all Properties, as reflected in Part A of Schedule
2(b)(i)-B, subject to adjustment as provided below; minus (C) any
prorations described in Paragraph 12 ("Prorations") and credited, as
of the Closing Date (as defined below), to Acquiror; plus (E) any
Prorations credited, as of the Closing Date, to the McBride
Contributor; minus (F) any other adjustments described in this
Agreement ("Adjustments") occurring on or prior to the Closing Date
in favor of Acquiror; plus (G) any Adjustments occurring on or prior
to the Closing Date in favor of the McBride Contributor; and plus
(H) the Cash Contribution and the Optional Cash Contribution, if
any. If any Property is excluded from the transactions provided for
in this Agreement, the Allocated Amounts and the Assumed
Indebtedness shall be adjusted based on the respective amounts
thereof that are allocated on Part A of Schedule 2(b)(i)-A and Part
A of Schedule 2(b)(i)-B to that Property.
(ii) If the calculation of the Total LP Unit Amount in
accordance with the foregoing provisions would result in a fraction
of an LP Unit being delivered to the McBride Contributor, then the
Total LP Unit Amount shall be rounded to the nearest whole number of
LP Units. The Fee Properties are to be contributed to Acquiror
subject to the corresponding items of Assumed Indebtedness. Provided
that all conditions precedent to Acquiror's obligations to close as
set forth in this Agreement (collectively, "Acquiror's Conditions
Precedent") have been satisfied and fulfilled, or waived in writing
by Acquiror, the Contribution Consideration shall be paid to the
McBride Contributor at Closing pursuant to Subparagraph 2(c).
(iii) The McBride Contributor will have the right to elect, at
any time after the date of this Agreement and until Exercise Date,
to make an additional contribution to Acquiror of an aggregate of up
to $2.6 million of cash (which may be contributed through
Partnership Interests and may be in the form of one or more
Acquisition Properties)(the "Optional Cash Contribution"), in
consideration for the issuance to the McBride Contributor of
additional LP Units at the Closing.
(iv) The parties acknowledge that the McBride Contributor (or
any Partnership) may close on one or more of the Acquisition
Properties prior to the Closing Date. If that happens, such
Acquisition Properties shall become part of the Acquisition
Portfolio and the Allocated Amounts and the Assumed Indebtedness
shall be adjusted to reflect the new amounts that are to be
allocated to those Acquisition Properties.
(v) The aggregate consideration to be paid to the holders of
the Minority Partnership Interests by the Company for the Minority
Partnership Interests (the "Common Stock Amount") shall consist of
that number of shares of Common Stock that equals the sum of the
Allocated Amounts assigned to such Minority Partnership Interests,
as provided in Schedule 2(b)(v), divided by the Per Share Purchase
Price.
(c) Issuance of LP Units and Common Stock.
5
<PAGE>
(i) Units of limited partnership interest in Acquiror (the "LP
Units") equalling the Total LP Unit Amount shall be issued and
delivered at Closing to the McBride Contributor. The LP Units shall
be exchangeable at the option of the holders thereof for shares
("Conversion Shares") of the common stock, par value $.001 per share
(the "Common Stock"), of the Company as provided in Acquiror's
Amended and Restated Partnership Agreement (as defined in the Master
Investment Agreement).
(ii) Notwithstanding the foregoing, an amount equal to 5% of
the LP Units otherwise issuable to the McBride Contributor
hereunder, shall be issuable and held in escrow until after the date
on which all post-Closing adjustments and Prorations have been
finalized, which shall occur no later than 90 days after the Closing
Date, and all amounts payable by the McBride Contributor in respect
of those adjustments have been paid in full. Any such amounts
remaining unpaid after 15 days following the date the adjustments
were finalized may at Acquiror's discretion be applied against those
LP Units at the Per Unit Purchase Price. Any distributions made in
respect of such LP Units during the period when such LP Units are
held in escrow will also be held in escrow and will be released to
the McBride Contributor only when the LP Units in respect of which
such distributions were made are so released.
(iii) Shares of Common Stock equalling the Common Stock Amount
shall be issued and delivered at Closing, in the names of and for
distribution to those Common Stock recipients set forth on Schedule
2(c)(iii) (the "Common Stock Recipients"). Such shares of Common
Stock will be registered under the Securities Act.
(d) Transfer Restrictions. The McBride Contributor agrees that it or
any LP Unit Recipient may only sell, transfer, assign, pledge or encumber, or
otherwise convey any or all of the LP Units delivered to it in connection with
this transaction and, if applicable, any Conversion Shares in strict compliance
with this Agreement, the Amended and Restated Partnership Agreement, the charter
documents of the Company, the registration and other provisions of the
Securities Act (and the rules promulgated thereunder), any state securities
laws, and the rules of the AMEX, in each case as may be applicable. Holders of
LP Units (and Conversion Shares issuable in respect of such Units) shall have
the registration rights with respect to those Conversion Shares set forth in the
Amended and Restated Partnership Agreement.
(e) Lock-Up Period. The McBride Contributor agrees that (i) for a
period of two years following the Closing (the "Lock-Up Period") it shall not,
in any way or to any extent, redeem (pursuant to the Amended and Restated
Partnership Agreement or otherwise), sell, transfer, assign, or (without
Acquiror's consent which shall not be unreasonably withheld) pledge or encumber,
or otherwise convey, any or all of the LP Units or Conversion Shares, as the
case may be, delivered to the McBride Contributor in connection with this
transaction; and (ii) not more than 25% of the initial number of LP Units or
Conversion Shares owned by it or an LP Unit Recipient, as the case may be, may
be sold by it or by such LP Unit Recipient in the three-month period immediately
following the Lock-Up Period, and an additional 25% of such LP Units and
Conversion Shares may be sold in each three-month period thereafter (so that all
LP Units and Conversion Shares may be sold after the third anniversary of the
Closing Date); provided that transfers may be made, subject to the restrictions
hereof and under the Amended and Restated Partnership Agreement, to Permitted
Transferees. At Closing, the McBride Contributor will cause each Common Stock
Recipient to agree, in form and substance reasonably
6
<PAGE>
satisfactory to the Company (the "Common Stock Recipient Lock-Up Letters"), that
(i) for the Lock-Up Period it shall not, in any way or to any extent, sell,
transfer, assign, pledge or encumber, or otherwise convey, any or all of the
shares of Common Stock delivered to it in connection with this transaction; and
(ii) not more than 25% of the initial number of shares of Common Stock owned by
it may be sold by it in the three-month period immediately following the Lock-Up
Period, and an additional 25% of such shares may be sold in each three-month
period thereafter (so that all of such shares may be sold after the third
anniversary of the Closing Date); provided that transfers may be made, subject
to the restrictions hereof, to Permitted Transferees. The term "Permitted
Transferee," with respect to the McBride Contributor and any LP Unit Recipient
or Common Stock Recipient, shall mean any other LP Unit Recipient or Common
Stock Recipient, as the case may be, and such recipient's spouse; a parent or
lineal descendant (including an adopted child) of a parent, or the spouse of a
lineal descendant of a parent; a trustee, guardian or custodian for, or an
executor, administrator or other legal representative of the estate of, such
recipient, or a trustee, guardian or custodian for a Permitted Transferee of
such recipient; the trustee of a trust (including a voting trust) for the
benefit of such recipient; and a corporation, partnership or other entity of
which such recipient and Permitted Transferees of such recipient are the
beneficial owners of a majority in voting power of the equity, and, in the case
of an LP Unit Recipient, who (i) is an accredited investor (as defined in Rule
501 under the Securities Act); and (ii) agrees in writing in an instrument
reasonably acceptable to Acquiror to be bound by the restriction on transfer of
the LP Units and Conversion Shares contained in this Agreement and by the
obligations contained in the indemnification provisions in Section 6.02 of the
Master Investment Agreement, provided that such obligation shall be limited to
the LP Units, Conversion Shares or shares of Common Stock actually received by
such Permitted Transferee, and such Permitted Transferee shall not be liable for
money damages or otherwise.
3. CLOSING. The contribution of the Partnership Interests, the Fee
Properties, if any, the Cash Contribution, the Optional Cash Contribution, if
any, and of the Minority Partnership Interests, and delivery of the Contribution
Consideration and Common Stock Amount contemplated herein shall be consummated
at the Closing, which will take place at the place and at the time on the
Closing Date designated in the Master Investment Agreement. At the Closing,
there shall also be delivered to the Company, the Acquiror and the McBride
Contributor the certificates and other documents and instruments required to be
delivered under this Agreement and under the Master Investment Agreement.
4. PROPERTY INSPECTION
(a) General. Acquiror confirms that as of the date hereof, but
without limiting any specific warranty, representation or condition set forth in
this Agreement and except as otherwise set forth below in this Paragraph 4,
there are no further contingencies for Acquiror's studies, investigations,
evaluations and inspections of the Properties.
(b) Condition. As a material inducement to the McBride Contributor
and the Partnerships to execute this Agreement, Acquiror acknowledges and agrees
that, except for the various express warranties, representations and conditions
of the McBride Contributor and the Partnerships set forth in this Agreement and
for the various express warranties, representations and conditions of the
McBride Contributor and the Partnerships in the Master Investment Agreement, or
in any other documents, instruments or agreements now or hereafter to be
executed or delivered by the McBride Contributor or any or all of the
Partnerships and delivered to Acquiror pursuant to the provisions of this
Agreement or the Master Investment Agreement (collectively, the "McBride
Contributor Documents"),
7
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the Partnership Interests, the Properties and the Acquisition Portfolio will be
purchased by Acquiror and the Minority Partnership Interests will be purchased
by the Company "AS IS" and "WHERE IS" and with all faults, on the basis of
Acquiror's own independent investigation. Except as expressly set forth in this
Agreement or the McBride Contributor Documents, the McBride Contributor and the
Partnerships have not made, do not make, and have not authorized anyone else to
make any representation as to the present or future physical condition, value,
presence or absence of Hazardous Materials, financing status, leasing,
operation, use, tax status, income and expenses or any other matter or thing
pertaining to the Properties, and Acquiror acknowledges that no such
representation or warranty has been made and that in entering into this
Agreement it does not rely on any representation or warranty other than those
expressly set forth in this Agreement or in the McBride Contributor Documents.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE MCBRIDE CONTRIBUTOR
DOCUMENTS, THE MCBRIDE CONTRIBUTOR AND THE PARTNERSHIPS MAKE NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTIES OR THE ACQUISITION
PROPERTIES. The McBride Contributor and the Partnerships shall not be liable for
or bound by any verbal or written statements, representations, real estate
broker's "setups" or information pertaining to the Properties or the Acquisition
Properties furnished by any real estate broker, agent, employee, servant or any
other person unless the same are specifically set forth in this Agreement or in
the McBride Contributor Documents. The provisions of this Paragraph 4(b) shall
survive the Closing.
(c) Environmental Reports. Schedule 4(c) contains a list of each
report delivered or made available by the McBride Contributor and the
Partnerships to the Acquiror with regard to so-called "Phase I" or "Phase II"
environmental inspections and assessments performed prior to the date hereof,
and/or a description of any known environmental problem, at the Properties (the
"Delivered Assessments"). The McBride Contributor and the Partnerships represent
and warrant that the Delivered Assessments are the only environmental
assessments in the possession of the Partnerships or the McBride Contributor
with regard to the Properties. The parties acknowledge that EMG has been
retained to perform Phase I environmental inspections or assessments at the
Properties after the date of this Agreement and prior to the fifteenth business
day prior to the Closing Date. The McBride Contributor shall deliver or cause to
be delivered to Acquiror all reports prepared in connection with those
subsequent assessments ("Subsequent Assessments"). If any Subsequent Assessment
indicates that there exists at any Property any presence of or contamination by
Hazardous Materials (i) which have, in the reasonable judgment of Acquiror, a
material adverse effect on the value of such Property, (ii) which were not
disclosed in the Delivered Assessments and (iii) for which Remedial Action (as
defined herein) is necessary in order for such Property to be in the same
condition with regard to environmental matters as was reflected in the Delivered
Assessments (such condition or contamination being referred to as an
"Environmental Issue"), then the following will apply:
(i) Environmental Issue Notice. Acquiror shall give written
notice of the existence of any Environmental Issues (the
"Environmental Issue Notice") to the McBride Contributor not later
than September 10, 1997 (which date shall be extended for any
Property for which a Subsequent Assessment is not delivered at least
5 business days prior to September 10, 1997 to the date which shall
be 5 business days after delivery thereof)(the "Approval Date"). The
Environmental Issue Notice shall specify, in reasonable detail, the
Environmental Issue and the scope of proposed Remedial Action.
Notwithstanding the foregoing, the McBride Contributor shall be and
remain liable
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hereunder, as and to the extent elsewhere provided in this
Agreement, for any breach of warranty or representation relating to
the existence of any Environmental Issue existing as of the date of
this Agreement or the Closing Date, and not detected in the
Delivered Assessments or the Subsequent Assessments.
(ii) McBride Contributor Mitigation Option. After the delivery
of the Environmental Issue Notice, the McBride Contributor may,
within the 10 day period following such delivery, send a written
notice to Acquiror ("McBride Contributor Remediation Notice") of its
election to cause the Acquiror to correct and remediate the noted
Environmental Issues, at the McBride Contributor's sole cost and
expense ("McBride Contributor Mitigation Option"), in which event:
(A) the terms and provisions of this Agreement shall remain in full
force and effect, and (B) Acquiror may deposit into an escrow with
the Title Company (a "Remediation Escrow") a number of LP Units
which would otherwise be delivered to the McBride Contributor at
Closing equal in value to the reasonably anticipated Remedial Costs
(as defined herein). The McBride Contributor will pay all costs and
expenses incurred subsequent to Closing in connection with Remedial
Action at those Properties with respect to which the McBride
Contributor delivered a McBride Contributor Remediation Notice. The
escrowed LP Units in the Remediation Escrow shall be delivered to
the McBride Contributor or its designee upon completion of such
Remedial Action. Any distributions made in respect of such LP Units
during the period when such LP Units are held in escrow will also be
held in escrow and will be released to the McBride Contributor only
when the LP Units in respect of which such distributions were made
are so released. In the event LP Units are escrowed pursuant to this
Subparagraph 4(c), then at Closing, Acquiror and the McBride
Contributor shall enter into a remediation escrow and disbursement
agreement reasonably and mutually satisfactory to Acquiror, the
McBride Contributor and their respective counsel.
(iii) Remediation To Be Performed by Acquiror. If the Closing
occurs hereunder, all Remedial Action at those Properties with
respect to which the McBride Contributor delivered a McBride
Contributor Remediation Notice shall be undertaken by Acquiror or
its agents or contractors, and the McBride Contributor shall not be
responsible for conducting such Remedial Action; provided, however,
that the McBride Contributor liability pursuant to the
indemnification set forth in the Master Investment Agreement is in
addition to, and not replaced or limited by, the terms of this
Subparagraph 4(c). For purposes of this Subparagraph 4(c) the
"reasonably anticipated Remedial Costs" shall be the good faith
estimate of Remedial Costs, as set forth in a detailed bid proposal
by Acquiror's first-class nationally or regionally recognized
environmental engineering and/or consulting firm.
(iv) Acquiror's Right To Delete Properties. If the McBride
Contributor does not elect or fails to timely elect the McBride
Contributor Mitigation Option with respect to any Property subject
to any Environmental Issue Notice, then Acquiror may, at Acquiror's
sole option, elect to delete and eliminate from this Agreement any
such Property (the "Environmental Issue Deletion Option"), by giving
written notice to the McBride Contributor no later than the Closing
Date. Upon delivery of such notice, this Agreement shall, without
further action of the parties, be deemed to have been
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automatically and ipso facto amended so as to eliminate from this
transaction each Property so deleted by Acquiror, subject to a
reduction in the Contribution Consideration equal to the aggregate
amount of the Allocated Amounts and related Assumed Indebtedness,
Prorations and Adjustments of all Properties so deleted. Upon such
amendment of this Agreement, all references to the Properties shall
automatically exclude each Property so deleted and no Closing or
pre-Closing obligations imposed on the McBride Contributor (or
Acquiror's Conditions Precedent) shall apply thereto except that
Acquiror shall promptly return all documents, records and studies
relating to such deleted Properties. Unless the McBride Contributor
or any Partnership breaches a representation or warranty contained
in Paragraph 8 (in which event the remedies applicable thereto shall
apply), Acquiror's exclusive remedy in the event of Environmental
Issues or contamination (assuming that the McBride Contributor does
not elect or fails to timely elect the McBride Contributor
Mitigation Option) at any of the Properties shall be the deletion of
such Properties in the manner provided above.
(d) Refinancing Properties. This Paragraph 4 and the rights
granted to Acquiror hereunder shall not apply to any Properties which are
security for the Refinancing (as defined in the Master Investment Agreement).
5. TITLE AND SURVEY MATTERS
(a) Conveyance of Title. At Closing, the McBride Contributor agrees
to deliver to Acquiror or Acquiror's assignee or designee bargain and sale deeds
with covenants against grantor's acts ("Deeds"), in recordable form, conveying
any Fee Properties to Acquiror or Acquiror's assignee or designee and to deliver
the Partnership Interests, the Cash Contribution and the Optional Cash
Contribution, if any, to the Acquiror or Acquiror's assignee or designee, the
Partnership Interests and the Properties each being free and clear of all liens,
claims and encumbrances except for the following items (the "Permitted
Exceptions"): (i) any real estate taxes not yet due and payable; (ii) those
matters listed on Schedule 5(a) attached hereto; (iii) those additional matters
that may become Permitted Exceptions pursuant to Subparagraph 5(e); (iv) the
rights of Tenants (as tenants only) under the Leases; (v) matters arising as a
direct result of any acts or omissions of Acquiror and its Representatives; (vi)
any matters disclosed on the Title Commitments referenced in paragraph (b)
below, other than matters listed in Schedule 5(a) and liens required to be
removed pursuant to this Agreement; (vii) liens securing the Assumed
Indebtedness; and (viii) any other items acceptable to Acquiror in its
reasonable discretion. At Closing, the McBride Contributor shall also deliver to
Acquiror each of the documents listed in Paragraph 11.1. At Closing, the McBride
Contributor agrees to cause to be delivered to the Company or the Company's
assignee or designee the Minority Partnership Interests, being free and clear of
all liens, claims and encumbrances except for the Permitted Exceptions.
(b) Title Commitments. The McBride Contributor has heretofore caused
(at their sole cost and expense) TitleServNY as agent for Stewart Title Guaranty
Company (the "Title Company") to issue to Acquiror an owner's title insurance
commitment for each of the Properties other than 88 Mary Street (the "Title
Commitments"). The title insurance policy to be issued at Closing by the Title
Company pursuant to the Title Commitment (the "Title Policy") shall be an ALTA
Form B (1987 or later) owner's policy with respect to each Property. Each Title
Commitment shall reflect the full amount of the Allocated Amount for each
Property, show fee simple or leasehold, as applicable, title to the Properties
vested in the McBride Contributor or the Partnerships, together with legible and
complete
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copies of all recorded documents evidencing title exceptions raised in Schedule
B of the Title Commitments. It shall be an Acquiror's Condition Precedent that
the Title Policies (or "marked-up" title commitments) shall have all standard
and general printed exceptions deleted so as to afford full "extended form
coverage," and shall further include an owner's comprehensive endorsement (or
the equivalent by way of affirmative insurance); an endorsement certifying that
the bills for the real estate taxes pertaining to the Land and Improvements do
not include taxes pertaining to any other real estate; an access endorsement; a
contiguity endorsement, if applicable; a subdivision or plat act endorsement; a
survey "land same as" endorsement; a zoning 3.1 endorsement (amended to include
parking); a creditors' rights endorsement; an endorsement indicating that the
Properties are not within any special benefit district for any entity that has
been created and that will assess any one or more of the Properties, but no
assessments from such entity currently appear of record; and any other
endorsements reasonably requested by Acquiror and reasonably approved by the
McBride Contributor, including non-imputation and "Fairway" endorsements. As an
Acquiror's Condition Precedent, each Title Commitment shall be marked for
laterdating to cover the Closing and the recording of the Deeds, and the Title
Company shall deliver the Title Policies (or "marked-up" title commitments) to
Acquiror concurrently with the Closing. Should an update to any Title Commitment
after the date hereof indicate matters that do or would materially adversely
affect the value or marketability of title to any Property, or other matters
which do or would materially adversely affect Acquiror's use, operation or
financing of any Property, such matters shall be considered Defects (as defined
below) and the cure provisions set forth in Subparagraph 5(e) shall apply,
provided that a Defects Notice (as defined below) is timely delivered with
respect to such Defects.
(c) Surveys. The McBride Contributor has heretofore delivered (at
their sole cost and expense) an as-built survey or site plan of each Property
other than the Acquisition Properties (the "Surveys"), prepared by a surveyor(s)
duly registered in the State of New Jersey. The Surveys shall be updated to a
date on or after the date hereof, and certified to the appropriate Partnership,
the Company, any designated lender(s) of Acquiror, and the Title Company, by a
surveyor(s) duly registered in the State of New Jersey as having been prepared
in accordance with the minimum detail and classification requirements of the
land survey standards of the American Land Title Association, and specifically
incorporating all of the standards and protocols contemplated by the minimum
standard detail requirements and classifications for ALTA/ASCM land title
surveys, as adopted in 1992 by ALTA/ASCM, including Table A responsibilities and
specifications 1-5 (excluding for Table A5 any information with respect to
elevations), 6-11, and 13, and shall include the certification attached hereto
as Exhibit A. The Surveys shall show any encroachments of the Improvements onto
adjoining properties, easements, set-back lines or rights-of-way, and any
encroachments of adjacent improvements onto any Property, and shall comply with
any requirements imposed by the Title Company as a condition to the removal of
the survey exception from the standard printed exceptions in Schedule B of the
Title Commitments, and shall comply with any reasonable requirements of
Acquiror's lender(s), if any. Without limitation of the foregoing, the Surveys
shall state the legal description of the Land, the acreage of the Land and the
dimensions, height and square footage of each Building, the number and location
of all legal parking spaces on each parcel of Land, driveways, ingress and
egress, the address of the Improvements, the zoning of the Property and shall
further state whether any parcel of Land is located in a wetlands area or in an
area designated by an agency of the United States as being subject to flood
hazards or flood risks. Should any Survey indicate the presence of any
encroachments by or upon any Property, or other matters that do or would
adversely affect the value or marketability of title to any Property, or other
matters which do or would adversely affect Acquiror's use, operation or
financing of any Property, such matters shall be considered Defects, and the
cure provisions set forth in Subparagraph
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5(e) shall apply, provided that a Defects Notice (as defined below) is timely
delivered with respect to such Defects.
(d) UCC Searches. The McBride Contributor shall deliver to Acquiror,
or cause the Title Company to deliver to Acquiror, within 20 days after the date
hereof, and shall update to the Closing Date, current searches of all Uniform
Commercial Code financing statements naming the record owner of each Property as
debtor and filed with either or both of the Secretaries of State of the States
pursuant to the laws of which such record owner was organized and the
Secretaries of State of the States in which the Properties are located (the "UCC
Searches"). Should the UCC Searches indicate matters that do or would materially
adversely affect the value or marketability of title to any Property, including,
but not limited to, claims or liens against any of such parties encumbering all
or any portion of any Property, or other matters which do or would adversely
affect Acquiror's use, operation or financing of any Property, and such matters
are not Permitted Exceptions, such matters shall be considered Defects, and the
cure provisions set forth in Subparagraph 5(e) shall apply, provided that a
Defects Notice (as defined below) is timely delivered with respect to such
Defects.
(e) Defects and Cure. The items described in this Paragraph 5 are
collectively referred to as "Title Evidence." If any Title Evidence obtained
after the date hereof and prior to the Closing Date discloses claims, liens,
exceptions, or conditions (other than Assumed Indebtedness) that materially
adversely affect the use and/or marketability of title to any Property
("Defects"), Acquiror may, prior to the Closing Date, give written notice (the
"Defects Notice") of such Defects to the McBride Contributor. If and to the
extent that the Title Evidence discloses any claims, liens, exceptions or
conditions to which Acquiror does not object in its Defects Notice, then such
items shall thereafter constitute Permitted Exceptions. If, with respect to any
one or more Properties, the McBride Contributor fails or refuses prior to 15
days prior to Closing ("Response Period"), to either (i) cure all Defects; or
(ii) cause all Defects to be insured over by the Title Company (in form and
substance acceptable to Acquiror), then Acquiror may delete and eliminate from
this Agreement the applicable Property by written notice to the McBride
Contributor delivered on or before the Closing Date, whereupon this Agreement
shall, without further action of the parties, be deemed to have been
automatically and ipso facto amended, as to eliminate such Property or
Properties (the "Title Deleted Properties") herefrom, subject to a reduction in
the Contribution Consideration in an amount equal to the aggregate amount of (x)
the Allocated Amounts minus (y) the Assumed Indebtedness of all Title Deleted
Properties, in each case adjusted by eliminating any and all appropriate
Prorations and Adjustments.
6. REPRESENTATIONS AND WARRANTIES
6.1 McBride Contributor and the Partnerships. The McBride
Contributor and the Partnerships, jointly and severally, represent and warrant
to, and covenant with, Acquiror and the Company as follows:
(a) Organization. The McBride Contributor and each Partnership is
duly organized and validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite power and lawful
authority to (a) own, lease and operate its properties and assets as they are
now owned, leased and operated and (b) carry on its business as now conducted
and presently proposed to be conducted. The McBride Contributor and each
Partnership is duly qualified, licensed or admitted to do business and is in
good standing in those jurisdictions in which the ownership, use or leasing of
its assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or
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admission necessary, except for failures to be so qualified, licensed or
admitted and in good standing that individually or in the aggregate would not
result in a Material Adverse Effect.
(b) Authority. The McBride Contributor and each Partnership has the
full legal right and power and all authority and approval required to enter
into, execute and deliver this Agreement and to perform fully its obligations
hereunder. The execution and delivery of this Agreement and the other documents
delivered by the McBride Contributor and each Partnership pursuant to this
Agreement, and the performance of all of its obligations under this Agreement
and such other documents by it, have been duly authorized by it, and this
Agreement is binding on it and enforceable against it in accordance with its
terms. No consent (other than those which have been obtained or as set forth on
Schedule 6.1(b)) of any creditor, investor, partner, shareholder,
tenant-in-common of the McBride Contributor or any Partnership, judicial or
administrative body, Governmental Authority, or other governmental body or
agency, or other party to such execution, delivery and performance by the
McBride Contributor or any Partnership is required. Neither the execution of
this Agreement nor the consummation of the transactions contemplated hereby by
the McBride Contributor or any Partnership will (i) result in a breach of,
default under, or acceleration of, any agreement to which the McBride
Contributor or any Partnership is a party or by which it or the Partnership or
Properties are bound (other than the Existing Mortgages as set forth on Schedule
6.1(b)); (ii) violate any provision of its partnership agreement, limited
liability company agreement or other organizational documents; or (iii) violate
any restriction, court order, agreement or other legal obligation to which the
McBride Contributor and/or any of the Partnerships or Properties are subject,
except for such breaches, defaults, accelerations or violations which
individually or in the aggregate would not have a Material Adverse Effect.
(c) Other Rights. There are no development or other rights
associated with any Property which are not being transferred to Acquiror under
this Agreement or the other transaction documents.
(d) Defaults. To their knowledge, neither the McBride Contributor
nor any Partnership is in default (which default remains uncured) under any of
the documents, recorded or unrecorded, referred to in the Title Commitments for
the Properties, except for such defaults that individually or in the aggregate
would not have a Material Adverse Effect. To their knowledge, neither the
McBride Contributor nor any Property nor any Partnership is in default under any
certificates of occupancy, licenses, permits, authorizations and approvals
required by law or by any governmental authority having jurisdiction thereof in
respect of the Properties, or any portion thereof, occupancy thereof or any
present use thereof (the "Governmental Approvals"), except for such defaults
which individually or in the aggregate would not have a Material Adverse Effect.
(e) Contracts. There are no existing contracts or equipment leases
of any kind relating to the management, leasing, construction, operation,
maintenance or repair of any Property to which the McBride Contributor or any
Partnership is a party, except those contracts listed on Schedule 6.1(e)
attached hereto (the "Contracts"). The Contracts are in full force and effect
and have not been modified except as set forth in Schedule 6.1(e), and all of
the Contracts will remain in full force and effect through the Closing unless
Acquiror otherwise directs the McBride Contributor pursuant to written notice
provided to the McBride Contributor at least 35 days prior to Closing. To their
knowledge, each party to the Contracts has performed all material obligations
required to be performed by it, and is not in default, under any of such
Contracts, except for such defaults that individually or in the aggregate would
not have a Material Adverse Effect. Except as set forth on Schedule 6.1(e), all
of the Contracts
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may, by the express terms thereof, be terminated without penalty or other
payment by the McBride Contributor or the Partnership party thereto (or their
assignees or successors) upon no more than 30 days' prior notice.
(f) Employees. Neither the McBride Contributor nor any Partnership
has any employees. Neither the McBride Contributor nor any Partnership is a
party to any collective bargaining or other agreement or understanding with any
labor union relating to any one or more of the Properties, and neither the
McBride Contributor nor the Partnerships are privy to or involved in any labor
or union controversy or other union interaction of any kind.
(g) Compliance with Laws and Codes. (i) The Properties, and the use
and operation of any or all of them are (or the use and operation of any
component, portion or area of any Property is) in material compliance with all
applicable municipal and other governmental laws, ordinances, regulations, codes
(as defined below), licenses, permits and authorizations; and (ii) there are
presently and validly in effect all licenses, permits and other authorizations
necessary for the use, occupancy and operation of the Properties as they are
presently being operated, whether required of the McBride Contributor, any
Partnership or any Tenant, except for failures in (i) or (ii) above to comply or
to hold such licenses, permits or other authorizations which, individually or in
the aggregate, are not having and would not be reasonably expected to have a
Material Adverse Effect. The McBride Contributor has not, and no Partnership
has, received any written notice from any Governmental Authority or person
alleging that any or all of the Properties fails to comply with any or all
applicable requirements of the Americans With Disabilities Act of 1990, as
amended (42 U.S.C.A. ss.ss. 12101 et seq.). (i) Each Property is zoned by the
municipality in which it is located so as to permit the existing uses and
structures thereon, in a manner that accommodates and is fully compatible with
the Building and Improvements as they presently exist at each such Property, and
(ii) no Property constitutes a nonconforming use or nonconforming structure
under applicable present zoning laws, except for violations in (i) or (ii) above
which, individually or in the aggregate, are not having and would not be
reasonably expected to have a Material Adverse Effect. To their knowledge, no
zoning, subdivision, Environmental Law, Environmental Permit, building code,
health, fire, safety or other law, order or regulation is, or on the Closing
Date will be, violated by the continued maintenance, operation or use of any
Improvements or parking areas at the Properties, except for violations which,
individually or in the aggregate, are not having and would not be reasonably
expected to have a Material Adverse Effect, and, other than those set forth in
Schedule 6.1(g), neither the McBride Contributor nor any Partnership has
received any written notice of any such violation from any Governmental
Authority having jurisdiction over the Properties. The foregoing representation
in this Subparagraph 6.1(g) shall not apply to any matters specifically
described in Subparagraph 6.1(h) or Paragraph 8 below.
(h) Litigation. Except as shown on Schedule 6.1(h) or those
proceedings as to which liability has been expressly assumed in writing by an
insurer, there are no pending or, to their knowledge, threatened, actions,
suits, arbitrations, or judicial, municipal, or administrative proceedings
("Action or Proceeding") nor to their knowledge are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting any Property or in which the McBride Contributor or any
Partnership is or will be a party by reason of its ownership or operation of, or
right to acquire, any Property or any portion thereof, including, without
limitation, proceedings for or involving collections (other than collection
proceedings in the ordinary course of business), condemnation, eminent domain,
alleged building code or environmental or zoning violations, or personal
injuries or property damage alleged to have occurred on any Property or by
reason of the condition, use of, or
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operations on, such Property. No attachments, execution proceedings, assignments
for the benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings are pending or, to their knowledge threatened, against the McBride
Contributor or any Partnership, nor, to their knowledge, are any of such
proceedings contemplated by them which, individually or in the aggregate, is
having or would be reasonably expected to have a Material Adverse Effect.
Neither the McBride Contributor nor any Partnership is subject to any Order of
any Governmental or Regulatory Authority which, individually or in the
aggregate, is having or would be reasonably expected to have a Material Adverse
Effect or adversely affect in any material respect the ability of the McBride
Contributor and the Partnerships to consummate the transactions contemplated by
this Agreement or the Transaction Agreements to which it is a party.
(i) Insurance. The McBride Contributor and/or the Partnerships now
have in force or are named as an additional insured on casualty, liability and
business interruption insurance relating to the Properties in the minimum
coverages and amounts set forth in Schedule 6.1(i) hereto. Neither the McBride
Contributor nor any Partnership has received any written notice from any
insurance carrier and has no knowledge of any defects or inadequacies in the
Properties that, if not corrected, would result in termination of insurance
coverage or material increase in the present cost thereof.
(j) Financial Information. The Operating Statements (as defined
herein) and all of their Books and Records (as defined herein), are complete,
accurate, true and correct; will be, prior to the Exercise Date, compiled in
accordance with generally accepted accounting principles; and accurately set
forth in all material respects the results of the operation of the Properties
and/or the financial position of the applicable Partnership for the periods
covered. There has been no material adverse change in the financial condition or
operation of the Properties or the Partnerships since the period covered by the
Operating Statements.
(k) Re-Zoning. There is not now pending, and the McBride Contributor
has no knowledge of, any threatened proceeding for the rezoning of any Property
or any portion thereof, or the taking of any other action by governmental
authorities that would have a material adverse impact on the value of any
Property or use thereof.
(l) Personal Property. The Personal Property is all of the personal
property owned by the McBride Contributor, the Partnerships and the other
persons referred to in Section 1(q)(iii) and used in (or necessary for) the
operation of the Properties. The McBride Contributor has good title to the
Personal Property, free and clear of any Liens, except for Permitted Liens. All
such Personal Property is in good working condition, and free of material
defects, normal wear and tear excepted.
(m) Real Estate Taxes. The bill or bills issued for the years 1994,
1995 and 1996, for all real estate taxes and personal property taxes and copies
of any and all notices pertaining to real estate taxes or assessments applicable
to the Properties (the "Tax Bills") (and, to the McBride Contributor's
knowledge, the only real estate tax bills applicable to the Properties) have
been delivered to Acquiror. Except as set forth on Schedule 6.1(m) attached
hereto, neither the McBride Contributor nor any Partnership has received written
notice of any proposed or actual increase in the assessed valuation or rate of
taxation of any or all of the Properties from that reflected in the most recent
Tax Bills. Except as described on Schedule 6.1(m) attached hereto, to its
knowledge, there is not now pending, and the McBride Contributor agrees that
neither it nor any Partnership will, without the prior written consent of
Acquiror (which consent shall not be unreasonably withheld or delayed and shall
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automatically be deemed given in the event that Acquiror fails to respond to a
request for its consent within five business days after the date on which such
request is deemed delivered), institute prior to the Closing Date, any
proceeding or application for a reduction in the real estate tax assessment of
any of the Properties or any other relief for any tax year. In the event that
any of the pending tax proceedings reflected on Schedule 6.1(m) result in any
rebate of taxes paid after the Closing Date in respect of any period ending
prior to the Closing Date, the amount of such rebate, net of the fees and
expenses owing to tax certiorari counsel and all other fees and expenses
(including, without limitation, other attorneys' fees and expenses) payable by
the McBride Contributor in connection with any such tax proceedings shall be the
property of and remitted to the McBride Contributor (except if and to the extent
that all or any portion of such rebated sums are due to Tenants). There are no
outstanding agreements with attorneys or consultants providing for compensation
on a contingency basis with respect to the Tax Bills that will be binding on
Acquiror or any of the Properties after the Closing. Other than the amounts
disclosed by the Tax Bills, no other real estate taxes have been, or to their
knowledge, will be, assessed against the Properties, or any portion thereof or
the Partnerships, in respect of the year 1997 or any prior year, and no special
assessments of any kind (special, bond or otherwise) are or have been levied
against the Properties, or any portion thereof, or the Partnership that are
outstanding or unpaid, and, to their knowledge, none will be levied prior to
Closing.
(n) Taxes. No federal, state or local taxing authority has asserted
in writing any tax deficiency, lien, interest or penalty or other assessment
against the Properties, the Partnerships or the McBride Contributor which has
not been paid and there is no pending audit or inquiry from any federal, state
or local tax authority relating to the Properties, the Partnerships or the
McBride Contributor which reasonably may be expected to result in a tax
deficiency, lien, interest, penalty or other assessment against the Partnerships
or the Properties, and to the McBride Contributor's knowledge, no event has
occurred and no condition or circumstance exists which presents a material risk
that any tax will be imposed on the McBride Contributor or any Partnership, in
each case which would have, individually or in the aggregate, a Material Adverse
Effect. The McBride Contributor and the Partnerships have prepared and timely
filed all tax returns required to be filed by them on or before the date hereof,
which to the extent the taxes are imposed on the Properties or on the McBride
Contributor or any Partnership are true, correct and complete in all material
respects. The McBride Contributor and the Partnerships have paid or made
provision for the payment of all taxes that are due or claimed in writing to be
due from them on or before the date hereof by any governmental taxing authority.
Since December 31, 1996, neither the McBride Contributor nor any Partnership has
incurred any liability for taxes except in the ordinary course of business.
(o) Transfer Taxes. All applicable recording fees, documentary
transfer taxes, and use, personal property and all other transfer taxes imposed
with respect to the contribution of the Properties, shall be paid by the McBride
Contributor.
(p) Easements and Other Agreements. Neither the McBride Contributor
nor any Partnership has received any written notice (that remains outstanding)
alleging that it is in default in complying with the terms and provisions of any
of the covenants, conditions, restrictions, rights-of-way or easements
constituting one or more of the Permitted Exceptions.
(q) Lease Controversies. Except as described in Schedule 6.1(q),
no controversy, complaint, proceeding, suit or litigation relating to all or
any of the Leases, is pending or, to their knowledge, threatened, whether in
any tribunal or informally. The McBride Contributor is and shall
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remain responsible after the Closing Date for defending (or continuing) any such
suit, proceeding or other matter, including any suit, proceeding or other matter
with respect to Leases (as defined in the Merger Agreement), in each case
relating to periods prior to the Closing Date, and all damages, loss, expenses
and costs related thereto.
(r) United States Person. Neither the McBride Contributor nor any
Partnership is a "Foreign Person" within the meaning of Section 1445(f)(3) of
the Internal Revenue Code of 1986, as amended (the "Code") and each of them
shall execute and deliver an "Entity Transferor" certification at Closing.
(s) Bulk Sales. The sale of the Fee Properties to Acquiror hereunder
is not subject to, and does not subject Acquiror to, any liability for income
tax, retail sales tax or bulk sales obligation under applicable law. The McBride
Contributor shall deliver to Acquiror at Closing, its affidavit concerning such
matters.
(t) Existing Mortgage(s). Schedule 6.1(t) attached hereto sets forth
a true, correct and complete schedule of those mortgage(s) or trust deed(s)
("Existing Mortgages") presently encumbering the Properties or any portion
thereof. The McBride Contributor and each Partnership has complied with (and,
prior to Closing, shall continue to comply with) the terms of, and all notices
or correspondence received from the holder of, the promissory notes evidencing
the loans (the "Existing Loans") secured by the Existing Mortgages (the
"Existing Notes"), the Existing Mortgages, and all other documents securing the
Existing Notes (collectively, the "Existing Loan Documents"). The McBride
Contributor and each Partnership has paid (and, at all times prior to Closing,
shall pay), when and as due, all sums due under the Existing Loan Documents. The
Existing Notes and Existing Mortgages are in full force and effect, and neither
the McBride Contributor nor any Partnership has received any notice of a default
thereunder or under the Existing Loan Documents. The McBride Contributor has
delivered to Acquiror true, complete and accurate copies of all of the Existing
Loan Documents. All of the Existing Loans other than the Refinancing and those
set forth on Schedule 6.1(t) may be prepaid, in full, on the Closing Date
without imposition of any penalty or premium.
(u) Condemnation. Neither the McBride Contributor nor any
Partnership has received any written notice of any, and to their knowledge there
are no, pending or contemplated condemnation or other governmental eminent
domain proceedings affecting all or any part of any of the Properties.
(v) Disclosure. Neither the McBride Contributor nor any Partnership
has intentionally withheld from Acquiror any materially adverse information
about any Property of which it has knowledge. All items delivered by the McBride
Contributor pursuant to this Agreement are true, accurate, correct and complete
in all material respects, and fairly present the information set forth in a
manner that is not misleading. The copies of all documents and other agreements
delivered or furnished and made available by the McBride Contributor to Acquiror
pursuant to this Agreement constitute all of and the only Leases and other
agreements to which the McBride Contributor and any Partnership is presently a
party relating to or affecting the ownership, leasing, management and operation
of the Properties, there being no "side" or other agreements, written or oral,
in force or effect, to which the McBride Contributor or any Partnership is a
party or to which any Property is subject. No representation or warranty made by
the McBride Contributor in this Agreement, no exhibit attached hereto with
respect to the Properties and Partnerships, and no schedule contained in this
Agreement contains any untrue
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statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading.
(w) Partnership Interests and Minority Partnership Interests. At
Closing, the Acquiror will receive good and marketable title to the Partnership
Interests, free and clear of all Liens, other than the Assumed Indebtedness. At
Closing, the Company will receive good and marketable title to the Minority
Partnership Interests, free and clear of all Liens, other than the Assumed
Indebtedness. Each of the partnership agreements of the Partnerships has been
duly authorized, executed and delivered by each party thereto and constitutes a
valid and binding obligation of those parties, enforceable in accordance with
its terms. True and complete copies of such partnership agreements have been
made available to the Company. The Partnership Interests and the Minority
Partnership Interests represent all of the equity interests in the Partnerships.
Each Partnership has good and marketable title to its Properties and all
Improvements thereon, and, as applicable, the Partnerships have good and
marketable title to the Acquisition Portfolio, in each case free and clear of
all Liens, except such as are referred to in the Title Policies of such
Properties or those which, individually or in the aggregate, would not have a
Material Adverse Effect.
(x) Remaining Assets and Liabilities. At the Closing Date, the only
assets of the Partnerships will be the Partnership Properties listed on Part A
of Schedule 1(p) and the only liabilities of the Partnerships will be the
Assumed Indebtedness associated with the Partnership Properties and liabilities
incurred in the ordinary course of business with respect to the operation of the
Partnership Properties (and Acquisition Properties) prior to the Closing Date or
those which, individually or in the aggregate, would not have a Material Adverse
Effect.
(y) Source of Income. Except as set forth in Schedule 6.1(y), which
may be delivered or updated through the date that is 30 days before the Closing,
(i) at Closing, all gross income of the Partnerships and all gross income
generated by the Fee Properties, if any, in each case pursuant to the Leases (as
amended through the Closing) or otherwise will be from the sources described in
Section 856(c)(3) of the Code, and (ii) at Closing, all of the assets held by
the Partnerships and all of the Fee Properties, if any, will be assets described
in Section 856(c)(5)(A) of the Code.
(z) Income from Prohibited Transactions. Neither the McBride
Contributor nor the Partnerships are holding any of the Properties primarily for
sale to customers in the ordinary course of business as described in Section
1221(1) of the Code such that the income derived therefrom would be considered
income from prohibited transactions as defined at Section 857(b)(6) of the Code.
(aa) Partnership Status. Each Partnership Interest contributed by
the McBride Contributor that constitutes an ownership interest in a partnership
is an interest in a partnership that has been organized and at all times
classified as a partnership for federal income tax purposes and for the
applicable state income tax purposes and not as a corporation or an association
taxable as a corporation.
6.2 Investment Representation. The McBride Contributor represents
that its LP Units are being acquired by it with the present intention of holding
such LP Units for purposes of investment and not with a view towards sale or any
other distribution. The McBride Contributor recognizes that it may be required
to bear the economic risk of an investment in the LP Units for an indefinite
period of time. The McBride Contributor represents that it is an Accredited
Investor, and has such knowledge and experience in financial and business
matters so as to be fully capable of evaluating the merits and risks
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of an investment in the LP Units. The McBride Contributor represents that it has
(i) been afforded the opportunity to ask questions of those persons they
consider appropriate and to obtain any additional information they desire in
respect of the LP Units and the business, operations, conditions (financial and
otherwise) and current prospects of Acquiror and the Company and (ii) consulted
its own financial, legal and tax advisors with respect to the economic, legal
and tax consequences of delivery of the LP Units and have not relied on the
Informational Materials, Acquiror, the Company or any of their officers,
directors, affiliates or professional advisors for such advice as to such
consequences.
6.3 Survival. The representations, warranties, covenants and
agreements of the McBride Contributor and the Partnerships contained in this
Agreement will survive the Closing until the second anniversary of the Closing
Date, or in the case of any covenant or agreement for which a time period for
performance is specified, for two years following the last date on which such
covenant or agreement is to be performed, except that to the extent any claim
for indemnification is made under the Master Investment Agreement with respect
to any representation, warranty, covenant or agreement that would otherwise
terminate and a notice for indemnification shall have been timely given under
Article VI of the Master Investment Agreement on or prior to such termination
date, then such survival period will be extended as it relates to such claim
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article VI of the Master Investment Agreement. This
Section shall not limit in any way the survival and enforceability of any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Closing Date, which shall survive for the respective
periods set forth herein.
6.4 Indemnification. Indemnification with respect to breaches of or
inaccuracies in any representation or warranty of, or nonfulfillment of, failure
to perform or breach of any covenant or agreement on the part of, the McBride
Contributor or the Partnerships contained in this Agreement, or on the part of
the Company or the Acquiror in the Master Investment Agreement, shall be as
provided in and pursuant to the Master Investment Agreement.
6.5 No Personal Recourse. Notwithstanding anything to the contrary
contained in this Agreement or in any of the Transaction Agreements, except as
otherwise specifically set forth in the Master Investment Agreement with respect
to the Termination Fee, (i) only the McBride Contributor (and not the
Partnerships or any partner, shareholder or member of any of the McBride
Contributor and the Partnerships) shall be liable for any claims made by
non-McBride parties under this Agreement or any of the Transaction Agreements,
(ii) the non-McBride parties to this Agreement and the other Transaction
Agreements shall look only to the assets of the McBride Contributor with respect
to any claims that may be made under this Agreement or any of the Transaction
Agreements, and (iii) no personal recourse or personal liability for any claims
under this Agreement or any of the Transaction Agreements shall be had against
the Partnerships or any partner, shareholder or member of any of the McBride
Contributor and the Partnerships.
7. ADDITIONAL COVENANTS.
7.1 Additional Covenants of the McBride Contributor and the
Partnerships. Effective as of the execution of this Agreement, the McBride
Contributor and the Partnerships hereby jointly and severally covenant with
Acquiror and the Company as follows:
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(a) New Leases. Neither the McBride Contributor nor any Partnership
shall amend any Lease in any material respect or execute any new or renewal
lease, license, or other agreement affecting the ownership or operation of all
or any portion of the Properties or for personal property, equipment, or
vehicles (unless in replacement of any existing personal property lease on
substantially similar or better terms), other than in the ordinary course of
business and on terms comparable to similarly situated properties, except that
any costs associated with Leases not listed on Schedule 9(a)(x) which would
result in an aggregate cost of greater than $100,000 shall require the approval
of Acquiror.
(b) New Contracts. Neither the McBride Contributor nor any
Partnership shall enter into any contract with respect to the ownership,
management or operation of all or any portion of any or all of the Properties
that will survive the Closing (other than those in connection with the
Refinancing), or that would otherwise affect the use, operation or enjoyment of
any or all of the Properties, other than in the ordinary course of business and
on commercially reasonable terms.
(c) Insurance. The insurance coverage described in the policies
listed on Schedule 6.1(i) shall remain continuously in force through and
including the Closing Date.
(d) Operation of Properties. The McBride Contributor shall, and
shall ensure that each Partnership shall, operate and manage the Properties
which they own in the same manner as in effect on the date hereof, maintaining
present services, and shall maintain the Properties in good repair and working
order; keep on hand sufficient materials, supplies, equipment and other Personal
Property for the efficient operation and management of the Properties in the
same manner as in effect on the date hereof; and perform, when due, all of its
obligations under the Leases, Contracts, Existing Mortgages, Governmental
Approvals and other agreements relating to the Properties and otherwise in
accordance with applicable laws, ordinances, rules and regulations affecting the
Properties. Except as otherwise specifically provided herein, the Properties at
Closing shall be in substantially the same condition as each of them is in on
the date hereof (subject to the performance of tenant improvements and
improvements provided for in the McBride Contributor current budget for that
particular Property), reasonable wear and tear excepted, and the Contracts shall
remain in full force and effect through the Closing Date, unless otherwise
advised to the contrary by Acquiror, in writing, no later than thirty days prior
to the Closing Date. None of the Personal Property, fixtures or Inventory
(except such Inventory as may be consumed in the ordinary course of business)
shall be removed from the Properties, unless replaced by personal property,
fixtures or Inventory of equal or greater utility and value.
(e) Pre-Closing Expenses. The McBride Contributor shall, and shall
ensure that each Partnership shall, pay in full, prior to Closing (or after the
Closing if the bill or invoice is not issued by Closing), all bills and invoices
for labor, goods, material and services of any kind relating to the Properties
(or FLIP Properties (as defined in the Merger Agreement) if after the Closing
and not previously paid by FLIP or the FLIP Shareholders) and utility charges,
relating to the period prior to Closing, but excluding therefrom all utility and
other charges billed directly to Tenants or subtenants of the Properties or the
FLIP Properties. Except as the parties may otherwise agree herein, any
alterations, installations, decorations and other work required to be performed
by the McBride Contributor prior to the Closing under any and all agreements
affecting the Properties have been or will, by the Closing, be completed and
paid for in full.
(f) Good Faith. All actions required pursuant to this Agreement
that are necessary or desirable to effectuate the transactions contemplated
herein or to satisfy each Acquiror's Conditions
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Precedent shall be taken promptly and in good faith by the McBride Contributor,
and the McBride Contributor shall furnish Acquiror with such documents or
further assurances as Acquiror may reasonably require, whether prior to or
following the Closing.
(g) No Assignment. Neither the McBride Contributor nor any
Partnership shall assign, alienate, lien, encumber or otherwise transfer all or
any part of any or all of the Properties or Partnership Interests or any
interest in any or all of them except to another Partnership or in connection
with the Refinancing, or as otherwise contemplated by this Agreement.
Notwithstanding the foregoing, (i) Partnership Interests in McBride Properties
and New Jersey Associates may be transferred to one or more newly formed
entities which will be wholly owned by one or more of the current owners of
McBride Properties and New Jersey Associates, and (ii) any Partnership may
transfer some or all of its Properties to a newly formed subsidiary partnership
or limited liability company that is owned at least 99% by such Partnership,
with the remaining 1% or less ownership interest in such subsidiary owned,
directly or indirectly, by one or more owners of such Partnership; it being
understood that up to a 1% interest in McBride Properties and the up to 1%
interests referred to in (ii) above shall constitute the "Minority Partnership
Interests".
(h) Availability of Records. Upon Acquiror's request, for a period
of two years after Closing, the McBride Contributor shall (i) make the Books and
Records available to Acquiror, to the extent not transferred to the Acquiror,
with respect to the Properties and the FLIP Properties, for inspection, copying
and audit by Acquiror's designated accountants; and (ii) cooperate with Acquiror
(without any third party expense to the McBride Contributor) in obtaining any
and all permits, licenses, authorizations, and other Governmental Approvals
necessary for the operation of any or all of the Properties.
(i) Change in Conditions. The McBride Contributor shall promptly
notify Acquiror of any change in any condition with respect to any or all of the
Partnerships or Properties or of the occurrence of any event or circumstance
that makes any representation or warranty of the McBride Contributor to Acquiror
and the Company under this Agreement untrue or misleading, or any covenant of
Acquiror or the Company under this Agreement incapable or less likely of being
performed, it being understood that McBride Contributor's obligation to provide
notice to Acquiror under this Subparagraph 7(i) shall in no way relieve the
McBride Contributor of any liability for a breach by the McBride Contributor of
any of its representations, warranties or covenants under this Agreement.
(j) Tax Items. The McBride Contributor acknowledges that (i) the
computation of taxable income of Acquiror is crucial in the determination of the
taxable income of the Company, (ii) the Company needs to be able to prepare
accurate estimates of its taxable income in order to monitor compliance with the
requirement that it distribute 95% of its taxable income to its shareholders,
and (iii) the depreciation of the Properties and the required depreciation
allocations under Section 704(c) of the Code will materially impact the
computation of Acquiror's and the Company's taxable income. Accordingly, the
McBride Contributor agrees that (i) within 30 days after Closing, the McBride
Contributor shall provide Acquiror with tax basis computations and historical
tax depreciation schedules updated through the Closing Date for each Property;
and (ii) within 30 days after Closing, the McBride Contributor shall provide
Acquiror with all data required to perform depreciation allocations (as
contemplated by Section 704(c) of the Code) with respect to each Property. The
parties acknowledge that the McBride Contributor shall select, and Acquiror
shall employ, the traditional method for calculating Section 704(c) allocations.
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(k) Financial Statements. As promptly as practicable, the McBride
Contributor will deliver or cause to be delivered to the Company the audited (in
the case of any fiscal year ending after the date hereof and before the Closing
Date) and the unaudited (in the case of any fiscal quarter ending after the date
hereof and before the Closing Date) balance sheet of the Partnerships, and the
related audited or unaudited statements of income, retained earnings and cash
flows, in each case as of and for the fiscal year then ended or as of and for
each such fiscal quarter and the portion of the fiscal year then ended, as the
case may be.
(l) 2 Volvo Drive Remediation. Notwithstanding Paragraphs 4 and 8,
for a period of 3 years from the Closing Date, the McBride Contributor agrees to
pay for required Remedial Action, if any, and for all incidental and
administrative costs related thereto, for the Property known as 2 Volvo Drive.
7.2 Additional Covenants of the Company. Effective as of the
execution of this Agreement, the Company, as general partner of the Acquiror,
and the Acquiror, hereby jointly and severally covenant with the McBride
Contributor and the Partnerships (and the LP Unit Recipients) as follows:
(a) Section 1031 Exchanges of Properties. The Company and the
Acquiror shall use all commercially reasonable efforts in disposing of any of
the Properties or the FLIP Properties to structure such transaction as one or
more Section 1031 Exchanges.
(b) Guarantee of Indebtedness. The Company and the Acquiror agree to
use all commercially reasonable efforts (i) to maintain a level of indebtedness
at least equal to the indebtedness of Acquiror immediately following the Closing
and (ii) to cause Acquiror's lenders to permit the McBride Contributor (or any
LP Unit Recipient) to guarantee any indebtedness of the Acquiror in an amount at
least equal to the indebtedness of Acquiror immediately following the Closing
(including additional indebtedness or substitute indebtedness incurred after the
Closing Date).
8. ENVIRONMENTAL WARRANTIES AND AGREEMENTS
The McBride Contributor and the Partnerships have obtained all
Licenses which are required in respect of its business, operations or Properties
under applicable Environmental Laws, and the McBride Contributor, the
Partnerships and the Properties are in compliance in all material respects with
the terms and conditions of all such Licenses and with any applicable
Environmental Law, except for such instances of noncompliance as would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in the Delivered Assessments or on Schedule 8, and except in such
circumstances as would not, individually or in the aggregate, have a Material
Adverse Effect, the McBride Contributor represents and warrants to Acquiror and
the Company that to the McBride Contributor's knowledge:
(a) No Order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any Governmental or Regulatory Authority with respect to any
alleged failure by the McBride Contributor or the Partnerships to have any
License required in connection with the conduct of the business or
operations of the McBride Contributor or the Partnerships with respect to
any treatment, storage, recycling, transportation, disposal or Release, of
any Hazardous Material at any of the Properties.
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(b) Neither the McBride Contributor nor any Partnership nor any
prior owner or lessee of any of the Properties has handled any Hazardous
Material on any Property and, without limiting the foregoing, (i) no
polychlorinated biphenyl is or has been present, (ii) no asbestos is or
has been present, (iii) there are no underground storage tanks, active or
abandoned, and (iv) no Hazardous Material has been Released in a quantity
reportable under, or in violation of, any Environmental Law, at, on or
under any of the Properties, during any period that the McBride
Contributor or any Partnership owned or leased such Property or, to their
knowledge, prior thereto.
(c) Neither the McBride Contributor nor any Partnership has
transported or arranged for the transportation of any Hazardous Material
to any location which is the subject of any Action or Proceeding that
would lead to claims against Acquiror, the Company or any of their
Subsidiaries for clean-up costs, remedial work, damages to natural
resources or personal injury claims, including, but not limited to, claims
under CERCLA.
(d) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the McBride Contributor or any
Partnership and none of the Properties is listed or proposed for listing
on the National Priorities List promulgated pursuant to CERCLA or on any
similar state list of sites requiring investigation or clean-up.
(e) There are no Liens (other than Permitted Liens) arising under or
pursuant to any Environmental Law or Order on any Property, and no action
of any Governmental or Regulatory Authority has been taken or is in
process which could subject any Property to such Liens, and neither the
McBride Contributor nor any Partnership would be required to place any
notice or restriction relating to the presence of Hazardous Material at
any Property owned by it in any deed to such Property.
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, the McBride Contributor or any Partnership in relation to
any Property since 1991 which have not been delivered or made available to
Acquiror or the Company prior to the execution of this Agreement.
9. LEASES-REPRESENTATIONS WITH RESPECT THERETO
(a) Representations as to Leases. With respect to each of the Leases
and Tenants listed on the Rent Roll (as defined herein), the McBride Contributor
and the Partnerships, jointly and severally, represent and warrant to Acquiror
and the Company as follows:
(i) Except as set forth on the Rent Roll, each of the Leases
is in full force and effect according to the terms set forth therein
and in the Rent Roll, and has not been modified, amended, or
altered, in writing or otherwise. Except as otherwise specifically
disclosed on the Rent Roll, each Tenant is legally required to pay
all sums and perform all obligations set forth in the Leases,
without concessions, abatements, offsets or other bases for relief
or adjustment;
(ii) Except as set forth on Schedule 9(a)(ii), all obligations
of the lessor under the Leases that accrue to the date of Closing
have been performed, including, but not
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limited to, all required tenant improvements, cash or other
inducements, rent abatements or moratoria, installations and
construction (for which payment in full has been made or will be
made prior to Closing, or subject to proration hereunder in all
cases), and, to the McBride Contributor's knowledge, each Tenant has
unconditionally accepted lessor's performance of such obligations.
Except as set forth on Schedule 9(a)(ii), no Tenant has asserted any
offsets, defenses or claims available against rent payable by it or
other performance or obligations otherwise due from it under any
Lease, which assertion remains outstanding;
(iii) Except as set forth on the Rent Roll, no Tenant is
currently in default under or is in arrears in the payment of any
sums or in the performance of any monetary obligations required of
it under its Lease, and the McBride Contributor has no knowledge of
any other default under any such Lease;
(iv) Except as set forth in Schedule 9(a)(iv), during the
18-month period immediately preceding the date hereof: (A) no Tenant
has, at any time, been more than 30 days delinquent in its
respective payment of any and all sums due under the terms of its
respective Lease; (B) no Tenant has requested that either the
McBride Contributor or any Partnership provide that Tenant with any
reduction in the Tenant's monetary obligations under its Lease; (C)
no Tenant has expressed to either the McBride Contributor or any
Partnership (whether orally or in writing) any weakness or material
decline in that Tenant's financial condition, nor has any Tenant
requested that the McBride Contributor or any Partnership, in its
capacity as landlord, permit the Tenant to sublease its leased
premises, or assign its Lease, or terminate its Lease on an
accelerated basis; (D) neither the McBride Contributor nor any
Partnership has "written off" any delinquent sums owed by any Tenant
to satisfy its obligation to contribute to the payment of real
estate taxes, common area maintenance charges, and insurance
premiums; and (E) no McBride Contributor has had (nor is it
currently engaged in) any dispute (whether of a formal or an
informal nature) with any Tenant concerning that Tenant's
obligations to make payments under the terms of its Lease toward
real estate taxes, insurance premiums and common area maintenance
charges or other charges imposed under its Lease;
(v) Except as set forth on Schedule 9(a)(v), no McBride
Contributor has received any written notice from any Tenant stating
that a petition in bankruptcy has been filed by or against it;
(vi) Except with respect to security deposits, neither base
rent ("Base Rent"), nor regularly payable estimated Tenant
contributions or operating expenses, insurance premiums, real estate
taxes, common area charges, and similar or other "pass through" or
non-base rent items including, without limitation, cost-of-living or
so-called "C.P.I." or other such adjustments (collectively,
"Additional Rent"), nor any other material item payable by any
Tenant under any Lease has been heretofore prepaid for more than one
month;
(vii) To the McBride Contributor's knowledge, no guarantor(s)
of any Lease has been released or discharged, partially or fully,
voluntarily or involuntarily, or by
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operation of law, from any obligation under or in connection with
any Lease or any transaction related thereto;
(viii)Except as set forth on Schedule 9(a)(viii), there are no
brokers' commissions, finders' fees, or other charges payable or to
become payable to any third party on behalf of the McBride
Contributor or any Partnership in connection with any Lease,
including, but not limited to, any exercised option(s) to expand or
renew;
(ix) Each security deposit set forth on the Rent Roll shall be
assigned to Acquiror at the Closing (or Acquiror shall receive a
credit therefor). Except as set forth on Schedule 9(a)(ix), (i) no
Tenant or any other party has asserted any claim (other than for
customary refund at the expiration of a Lease) to all or any part of
any security deposit and (ii) no McBride Contributor has applied any
portion of any security deposit to the payment of any sums due from
any Tenant under a Lease;
(x) The McBride Contributor shall pay (or Acquiror shall
receive a credit therefor), and retain sole and exclusive
responsibility for, all expenses set forth on Schedule 9(a)(x) due
on or before the Closing Date connected with or arising out of the
negotiation, execution and delivery of the Leases, including,
without limitation, brokers' commissions (including those
applicable, if any, to future expansions or renewals by a Tenant),
leasing fees, recording fees, and the cost of all tenant
improvements not required to be paid for by Tenants;
(xi) Except as set forth on Schedule 9(a)(xi), no Tenant has,
by virtue of its Lease or any other agreement or understanding, any
purchase option with respect to any Property, or any portion
thereof, or any right of first refusal to purchase any Property, or
a portion thereof, whether triggered by the transactions
contemplated by this Agreement or by a subsequent sale of such
Property or a portion thereof. Except as set forth on Schedule
9(a)(xi), no Tenant has, by virtue of its Lease or any other
agreement or understanding any of the following (A) the right or
option to terminate its Lease other than customary termination
rights in the event of a default, casualty or condemnation and (B)
the right or option to reduce the rentable space at any Property
that such Tenant is currently occupying and (C) the right to use or
occupy any property outside the boundaries of the Property in which
the premises demised thereunder are located; and
(xii) Except as set forth on the Rent Roll or on Schedule
9(a)(xii): (A) to the McBride Contributor's knowledge, no Tenant has
sublet its leased premises; (B) no assignment of any interest in a
Lease has been made by any Tenant; and (C) there are no outstanding
requests from any Tenants to the McBride Contributor or any
Partnership, requesting any consent to an assignment of the Tenant's
Lease or to a sublease of all or some portion of a Tenant's leased
premises.
(b) Estoppel Certificates from Tenants. The McBride Contributor
shall use its reasonable, good faith and diligent efforts to obtain and deliver
to Acquiror, on or prior to the Closing Date, a tenant's estoppel certificate
(the "Estoppel Certificate") dated no earlier than 60 days prior to the Closing
Date from each of the Tenants. Each such Estoppel Certificate shall be
substantially in the form attached hereto as Exhibit B. It shall be an
Acquiror's Condition Precedent that the McBride Contributor
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shall obtain and deliver to Acquiror, at Closing, Estoppel Certificates for (i)
75% of the total aggregate gross rental income for all of the Properties (as
shown on the Rent Roll delivered at Closing), (ii) any single-Tenant Property
and (iii) those particular Tenants reflected in Schedule 9(b) ("Required
Estoppel Tenants"). If the McBride Contributor satisfy the above requirement,
but (despite their good faith and diligent efforts) are unable to obtain all of
the remaining Estoppel Certificate(s) from any Tenants, then, at Closing, the
McBride Contributor shall deliver to Acquiror an Estoppel Certificate with
respect to such Tenant(s) in substantially the same form as Exhibit B; provided,
however, that in the event that the McBride Contributor ultimately procure
(within 60 days after Closing) an Estoppel Certificate from any Tenant with
respect to which the McBride Contributor issue their own Estoppel Certificate
and such Tenant's Estoppel Certificate complies with the requirements of this
Paragraph 9(b), then the McBride Contributor shall be released from its own
Estoppel Certificate with respect to that Tenant.
10. CONDITIONS PRECEDENT TO CLOSING. The following shall be Acquiror's
Conditions Precedent to Closing (all of which may be waived in whole or in part
by Acquiror in its sole discretion):
(a) Pending Actions. As of the Closing Date, except as set forth on
Schedule 6.1(h), there shall be no administrative agency, litigation or
governmental proceeding of any kind whatsoever, pending or threatened, that,
after Closing, would materially and adversely affect the value or marketability
of any Property or the Properties as a whole, or the ability of Acquiror to
operate any or all of the Properties in the manner in which such Property is
being operated on the date hereof.
(b) Zoning. As of the Closing Date, no proceedings shall be pending
or threatened in writing that could or would involve the change, redesignation,
redefinition or other modification of the zoning classifications of any or all
of the Properties, or any portion thereof.
(c) Flood Insurance. As of the Closing Date, if any material
improvement at a Property is located in a flood plain, flood plain insurance in
form and substance reasonably acceptable to Acquiror shall be available for
purchase by Acquiror at or prior to the Closing Date.
(d) Utilities. On the Closing Date, no moratorium or legal
proceeding shall be pending or threatened affecting the availability, at regular
rates and connection fees, of sewer, water, electric, gas, telephone or other
services or utilities servicing the Properties.
(e) Pay-Off Letters. The McBride Contributor shall have provided to
Acquiror a payoff letter (the "Pay-off Letter") issued by each mortgagee holding
an Existing Mortgage, setting forth the amount of principal and interest
outstanding on the Closing Date.
(f) Bankruptcy. As of the Closing Date, no McBride Contributor,
Partnership or Property is the subject of any bankruptcy proceeding for which
approval of this transaction has not been given and issued by the applicable
bankruptcy court.
(g) Representations and Warranties True. The respective
representations and warranties of the McBride Contributor severally contained
herein are true and correct in all material respects as of the Closing Date.
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(h) Covenants Performed. All covenants of the McBride Contributor
required to be performed prior to the Closing Date have been performed, in all
material respects.
(i) Material Adverse Effect. As of the Closing Date, there have
been no events which have had or could be expected to have a Material Adverse
Effect.
(j) Title to the Properties. Title to the Properties is in the
condition required under Paragraph 5.
(k) New Jersey Environmental Clearance. Except with respect to the
Partnership Property referred to as 2 Volvo Drive, on or prior to the Closing
Date, the McBride Contributor shall have delivered to Acquiror written proof of
compliance with the Industrial Site Recovery Act (N.J.S.A. 13:1K-6 to et seq.)
("ISRA") or written proof of exemption or exclusion therefrom for each Property
at the McBride Contributor sole cost and expense and shall certify that such
written proof is a true, complete and correct copy thereof. Such written proof
shall be in the form of either (i)(A) a Letter of NonApplicability from the New
Jersey Department of Environmental Protection ("NJDEP"), (B) obtaining an
unconditional Negative Declaration and No Further Action Letter from the NJDEP
or (C) a De Minimis Quantity Exemption; and (ii) true complete and correct
copies of the supporting Applicability/Nonapplicability Affidavits. THE
PARTNERSHIPS AND THE MCBRIDE CONTRIBUTOR HEREBY WAIVE THEIR RIGHT UNDER ISRA TO
VOID THE TRANSACTION CONTEMPLATED HEREIN AND TO TERMINATE THIS AGREEMENT AS A
RESULT OF NONCOMPLIANCE WITH ISRA.
(l) Closing Deliveries. On the Closing Date, all Closing Deliveries
shall have been made by the McBride Contributor pursuant to Subparagraph 11.1
and the McBride Contributor shall have delivered any Estoppel Certificates
required to be executed by the McBride Contributor pursuant to Paragraph 9(b).
(m) Acquisition Portfolio. The aggregate value of (ii) and
(iii) in Section 1((b) above shall be at least $3.7 million as of the Closing
Date.
(n) Common Stock Recipient Lock-Up Letters. The Common Stock
Recipient Lock-Up Letters shall have been executed and delivered.
(o) Master Investment Agreement. All of the transactions
contemplated in the Master Investment Agreement (other than those contemplated
by this Agreement) shall have been consummated.
11. CLOSING DELIVERIES
11.1 McBride Contributor. It shall be an Acquiror's Condition
Precedent that at Closing (or such other times as may be specified below), the
McBride Contributor shall deliver or cause to be delivered to Acquiror the
following, each in form and substance reasonably acceptable to Acquiror and its
counsel:
(a) Deeds. Deeds, duly executed by or on behalf of the McBride
Contributor, in recordable form conveying the Fee Properties to Acquiror free
and clear of all liens, claims and encumbrances except for the Permitted
Exceptions;
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(b) Bill of Sale. A warranty assignment and Bill of Sale, duly
executed by the McBride Contributor or the applicable Partnership, assigning,
conveying and warranting to Acquiror title to the Personal Property and
Inventory, free and clear of all encumbrances, other than the Permitted
Exceptions, and assignments of title to all vehicles, if any, included in the
Personal Property, together with the original certificates of title thereto;
(c) General Assignment. An assignment, duly executed by the
McBride Contributor or the applicable Partnership, to Acquiror of all right,
title, and interest of the McBride Contributor or such Partnership, as the case
may be, and their agents in and to the Intangible Personal Property
(including, but not limited to, the Governmental Approvals);
(d) Assignment of Contracts. An assignment, duly executed by the
McBride Contributor, to Acquiror of the McBride Contributor's right, title and
interest in and to those Contracts that will remain in effect after Closing (the
"Assigned Contracts"), with (i) the agreement of the McBride Contributor to
indemnify, protect, defend and hold Acquiror and the Company harmless from and
against any and all claims, damages, losses, suits, proceedings, costs and
expenses (including, but not limited to, reasonable attorneys' fees) resulting
from a default by it under the Assigned Contracts and relating to the period of
time prior to Closing and (ii) the corresponding agreement of Acquiror and the
Company to indemnify, protect, defend and hold the McBride Contributor and the
Partnerships harmless for claims arising in connection with the Assigned
Contracts and relating to the period of time from and after the Closing. To the
extent assignable, the McBride Contributor shall also assign all existing
guarantees and warranties given to it in connection with the operation,
construction, improvement, alteration or repair of any or all of the Properties;
(e) Assignment of Partnership Interests. An assignment, duly
executed by or on behalf of the McBride Contributor, to Acquiror of all right,
title and interest in and to the Partnership Interests and the Acquisition
Contracts. An assignment, duly executed by the holders of the Minority
Partnership Interests, to the Company (or, pursuant to Section 5.16 of the
Master Investment Agreement, a subsidiary thereof) of all of the right, title
and interest in and to the Minority Partnership Interests. An amended
partnership agreement or limited liability company agreement, as the case may
be, reflecting the transfer of the Partnership Interests and the Minority
Partnership Interests;
(f) Assignment of Leases and Estoppel Certificates. An assignment of
the McBride Contributor right, title and interest in and to the Leases
(including all security deposits and/or other deposits thereunder, except to the
extent an appropriate credit is given to Acquiror at Closing), with the
reciprocal indemnity provisions described in Subparagraph 11.1(d), together with
the Estoppel Certificates of the Tenants in conformity with Subparagraph 9(b);
(g) Keys. Keys to all locks located at each Property to the
extent in the McBride Contributor's or any Partnership's possession;
(h) Affidavit of Title and ALTA Statement. As to each Property, an
Affidavit of Title and an ALTA Statement (or comparable forms required by the
Title Company in New Jersey and required by the Title Company as a condition to
the issuance of the Title Policies), including any affidavit required to obtain
a non-imputation endorsement, each executed by the McBride Contributor and in
form and substance acceptable to the Title Company and to Acquiror;
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(i) Letters to Tenants. Letters executed by the McBride Contributor
and, if applicable, its management agents, addressed to all Tenants, in form
approved by Acquiror (the "Tenant Letters"), notifying all Tenants of the
transfer of ownership and directing payment of all rents accruing after the
Closing Date to be made to Acquiror or at its direction;
(j) Title Policies and Surveys. The Title Policies (or "marked-up"
title commitments) issued by the Title Company, dated as of the Closing Date in
the amount of the Allocated Amounts for each Property, with such endorsements
and otherwise in accordance with the requirements of Paragraph 5 (it being
understood that the McBride Contributor will provide any certificates or
undertakings required in order to induce the Title Company to insure over any
"gap" period resulting from any delay in recording of documents or later-dating
the title insurance file); and the Surveys for each Property in the form
required in Paragraph 5(c) certified by the surveyor to the applicable
Partnership and its assigns, the Company, any designated lender(s) of Acquiror
and the Title Company;
(k) Original Documents. To the extent not previously delivered
to Acquiror, originals or copies of the Leases, Assigned Contracts and
Governmental Approvals;
(l) Plans and Specifications. To the extent not previously
delivered to Acquiror, all plans and specifications in the McBride
Contributor's possession and control or otherwise available to the
McBride Contributor or any Partnership;
(m) Tax Bills. To the extent not previously delivered to
Acquiror, copies of the most currently available Tax Bills;
(n) Entity Transferor Certificate. Entity transferor
certification confirming that neither the McBride Contributor nor any
Partnership is a "Foreign Person" within the meaning of Section 1445 of the
Code;
(o) Rent Roll. A Rent Roll, prepared as of the Closing Date,
certified by theMcBride Contributor to be true, complete and correct through
the Closing Date;
(p) Bulk Sales Affidavit. The McBride Contributor's affidavit
confirming that the sale of the Fee Properties to Acquiror hereunder is not
subject to, and does not subject Acquiror to, liability for income tax, retail
sales tax or bulk sales obligations under applicable law;
(q) Pay-Off Letters. The McBride Contributor shall procure and
deliver the Pay-Off Letters with respect to each and every Existing Mortgage;
(r) Certificates of Occupancy. The McBride Contributor shall procure
and deliver valid and subsisting certificates of occupancy or the equivalent
thereof with respect to each Property issued by each municipality in which such
Property is located;
(s) ISRA Compliance. Documentation evidencing compliance with
ISRA issued by the NJDEP's for each of the Properties;
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(t) Employment Agreement. David McBride shall have executed and
delivered an employment agreement (the "Employment Agreement") with the
Company substantially in the form attached hereto as Exhibit C; and
(u) Other. Such other documents and instruments as may reasonably be
required by Acquiror, its counsel or the Title Company and that may be necessary
to consummate the transaction that is the subject of this Agreement and to
otherwise effect the agreements of the parties hereto.
11.2 Acquiror. It shall be a McBride Contributor Condition Precedent
that at Closing (or such other times as may be specified below) (i) all
conditions precedent to the consummation of the transactions contemplated by the
Master Investment Agreement and the other Transaction Agreements (other than the
condition that the transactions contemplated by this Agreement shall have been
consummated) shall have been satisfied or, if permissible, waived; and (ii)
Acquiror and the Company shall deliver or cause to be delivered to the McBride
Contributor the following, each in form and substance reasonably acceptable to
the McBride Contributor and its counsel:
(a) Warrants. Warrants (exercisable for a period of seven years from
the Closing Date) to purchase 125,000 LP Units at a price of $11.00 per LP Unit,
substantially in the form of Exhibit D, to be issued to David McBride.
(b) Assignment of Contracts. An Assignment of Contracts, duly
executed by Acquiror;
(c) Assignment of Leases. An Assignment of Leases, duly executed
by Acquiror;
(d) Contract Notices. Notices to parties to Contracts which are
being assigned pursuant to the Assignment of Contracts, duly executed by
Acquiror;
(e) Employment Agreement. The Company shall have signed the
employment Agreement; and
(f) Other. Such other documents and instruments as may reasonably be
required by the McBride Contributor or its counsel or the Title Company, and
that are necessary to consummate the transaction which is the subject of this
Agreement and to otherwise effect the agreements of the parties hereto.
After Closing, each of Acquiror and the McBride Contributor shall execute and
deliver to the other such further documents and instruments as the other
reasonably requests to effect this transaction and otherwise effect the
agreements of the parties hereto.
12. PRORATIONS AND ADJUSTMENTS. The following shall be prorated and
adjusted between the McBride Contributor, on the one hand, and Acquiror and the
Company, on the other hand, as of 12:00 a.m. on the Closing Date, except as
otherwise specified:
(a) The amount of all security and other Tenant deposits, and
interest due thereon, if any, shall be credited to Acquiror;
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(b) Acquiror and the McBride Contributor shall divide the cost of
any escrows hereunder equally between them;
(c) To the extent such charges are not billed directly to Tenants,
water, electricity, sewer, gas, telephone and other utility charges shall be
prorated based, to the extent practicable, on final meter readings and final
invoices, or, in the event final readings and invoices are not available, based
on the most currently available billing information, and reprorated upon
issuance of final utility bills;
(d) Amounts paid or payable under any Assigned Contracts shall be
prorated based, to the extent practicable, on final invoices or, in the event
final invoices are not available, based on the most currently available billing
information, and reprorated upon issuance of final invoices;
(e) All real estate, personal property and ad valorem taxes
applicable to the Properties and levied with respect to calendar year 1997 (or
1998, if the Closing occurs in 1998) shall be prorated on an accrual basis, as
of the Closing Date, utilizing the actual final Tax Bills for those Properties
for 1996 (or 1997 if available) adjusted for any announced changes in rates of
taxation. Prior to or at Closing, the McBride Contributor shall pay or have paid
all Tax Bills that are due and payable prior to or on the Closing Date and shall
furnish evidence of such payment to Acquiror and the Title Company. Each party's
respective obligations to reprorate real estate taxes shall survive the Closing
and shall not merge into any instrument of conveyance delivered at Closing. The
McBride Contributor shall also be obligated to reprorate real estate taxes with
respect to the FLIP Properties after the Closing. The taxes to be prorated
(i.e., county, school, city) for each Property and the billing and accrual
schedule for each such tax are set forth in Schedule 12(e);
(f) All assessments, general or special, shall be prorated as of the
Closing Date on a "due date" basis such that the McBride Contributor shall be
responsible for any installments of assessments which are first due or payable
prior to the Closing Date and Acquiror shall be responsible for any installments
of assessments which are first due or payable on or after the Closing Date;
(g) Commissions of leasing and rental agents for any Lease entered
into as of or prior to the Closing Date (which are set forth on Schedule
9(a)(x)) that are due and payable at or prior to the Closing Date, whether with
respect to base lease term, future expansions, renewals, or otherwise, shall be
paid in full at or prior to Closing by the McBride Contributor, without
contribution or proration from Acquiror;
(h) All Base Rents and other charges actually received, including,
without limitation, all Additional Rent, shall be prorated at Closing. At the
time(s) of final calculation and collection from Tenants of Additional Rent for
1997, there shall be a re-proration between Acquiror and the McBride Contributor
as to Additional Rent adjustments, which re-proration shall be paid upon
Acquiror's presentation of its final accounting to the McBride Contributor,
certified as to accuracy by Acquiror. The party's respective obligations to
reprorate Additional Rent shall survive the Closing and shall not merge into any
instrument of conveyance delivered at Closing. The McBride Contributor shall
also be obligated to re-prorate Additional Rents (as defined in the Merger
Agreement) with respect to the FLIP Properties after the Closing. At the
Closing, no "Delinquent Rents" (rents or other charges which are due and owing
as of the Closing) shall be prorated in favor of the McBride Contributor.
Notwithstanding the foregoing, Acquiror shall use reasonable efforts after the
Closing Date to collect any Delinquent Rents due to the McBride Contributor from
Tenants. Further, after the Closing Date, the McBride Contributor
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shall continue to have the right, enforceable at its sole expense, to pursue
legal action against any Tenant (and any guarantors) who have defaulted, prior
to the Closing Date, under a Lease; provided, however, that the McBride
Contributor give Acquiror advance written notice of its intent to pursue such
action and further provided that the McBride Contributor shall have no right to
terminate any Lease (or any right to dispossess any Tenant thereunder). All
rents and other charges received from any Tenant after the Closing by and for
the benefit of Acquiror shall be applied, first, against current and past due
rental obligations owed to, or for the benefit of, Acquiror with respect to
those rental obligations accruing subsequent to the Closing Date (including, but
not limited to, obligations to replenish any security deposit withdrawal by the
McBride Contributor or Acquiror), or any obligations accruing prior to the
Closing Date that the McBride Contributor or any Partnership does not pay or for
which Acquiror does not receive a credit at Closing, and second, any excess
shall be delivered to the McBride Contributor, but only to the extent of
Delinquent Rents owed to, and for the benefit of, the McBride Contributor for
the period prior to the Closing Date (in no event, however, shall any sums be
paid to the McBride Contributor to the extent they have been previously
reimbursed for such default out of any security deposit);
(i) Such other items that are customarily prorated in transactions
of this nature shall be ratably prorated.
For purposes of calculating Prorations, Acquiror shall be deemed to be in title
to the Properties, and therefore entitled to the income therefrom and
responsible for the expenses thereof, for the entire Closing Date. All such
prorations shall be made on the basis of the actual number of days of the year
and month that shall have elapsed as of the Closing Date.
13. DESTRUCTION, LOSS OR DIMINUTION OF PROPERTIES. If prior to Closing,
all or any portion of any Property is damaged by fire or other natural casualty
(collectively "Damage"), or is taken or made subject to condemnation, eminent
domain or other governmental acquisition proceedings (a "Taking"), then the
following procedures shall apply:
(a) As used herein, a "Material Event" shall mean any of the
following:
(i) Damage to all or any portion of a Property, and the cost
of repair or replacement of such Damage exceeds 50% of the Allocated
Amount and the related Assumed Indebtedness, Prorations and
Adjustments of such Property; or
(ii) Taking of all or any portion of a Property, and the value
of such Taking exceeds 50% of the Allocated Amount and the related
Assumed Indebtedness, Prorations and Adjustments of such Property;
or
(iii) any Taking or Damage that results in the cancellation or
termination of any Lease of a Required Estoppel Tenant, or that
provides to a Required Estoppel Tenant the right to cancel or
terminate its Lease upon the giving of subsequent notice (unless
such termination right is waived, in writing, by such Tenant), or
that otherwise results in the permanent loss of a Required Estoppel
Tenant.
(b) In the event of Damage or a Taking that does not constitute a
Material Event, Acquiror shall close and take the Properties as diminished by
such Damage or Taking, subject to (i) a
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reduction in the Contribution Consideration in an amount equal to the
difference, if any, between (x) the cost of repair or replacement of such Damage
(or the value of such Taking) and (y) the casualty insurance proceeds (or
condemnation awards) actually collected by the McBride Contributor prior to
Closing (and paid to Acquiror at Closing) by reason of such Damage or Taking.
(c) If the Damage or Taking is a Material Event, then Acquiror, at
its sole option, shall elect, within 15 days after its acquisition of actual
knowledge that such Damage or Taking is a Material Event, to either: (i) delete
and eliminate from this Agreement any Property that has sustained Damage or is
taken or made subject to a Taking by giving written notice to the McBride
Contributor, in which event (x) this Agreement shall be deemed to have been
automatically and ipso facto amended so as to eliminate the deleted Properties
herefrom, and (y) Acquiror and the McBride Contributor shall proceed to close on
the remaining Properties (i.e., the non-deleted Properties) subject to a
reduction in the Contribution Consideration equal to the aggregate amount of (x)
the Allocated Amounts minus (y) the Assumed Indebtedness of the Property(s) so
deleted, in each case as adjusted by eliminating any and all appropriate
Prorations and Adjustments; or (ii) proceed to close on all of the Properties,
subject to a reduction in the Contribution Consideration in an amount equal to
the aggregate of all deductible(s) imposed under any casualty insurance policies
applicable to the Property(s) that is the subject of Damage, and an assignment
of the McBride Contributor's or the Partnership's interest in any unpaid
insurance proceeds or condemnation awards (as provided in Subparagraph 13(d)).
(d) In the event that Acquiror elects to close on any Property that
is subject to any Damage or Taking, each party shall fully cooperate with the
other party in the adjustment and settlement of the insurance claim (or
governmental acquisition proceeding) and if, as of Closing, all or any portion
of the insurance proceeds assignable, or condemnation awards payable, to
Acquiror shall not have been collected from the insurer or Governmental
Authority, then the McBride Contributor shall irrevocably and unconditionally
assign to Acquiror its entire right, title and interest in and to the
outstanding proceeds or award (except that in the event Subparagraph 13(b)
applies, Acquiror shall not have any rights pursuant to this Subparagraph
13(d)). The proceeds and benefits under any rent loss or business interruption
policies attributable to the period following the Closing shall likewise be
transferred, assigned and paid over to Acquiror.
(e) In the event of a dispute between the McBride Contributor and
Acquiror with respect to the cost of repair, restoration or replacement as to
any Damage or the value of a Taking, an engineer designated by the McBride
Contributor and an engineer designated by Acquiror shall select an independent
third engineer licensed to practice in the jurisdiction where the Property is
located who shall resolve such dispute. The determination of such third engineer
shall be final and binding on the parties and judgment may be rendered thereon
in any appropriate court of record. All fees, costs and expenses of such third
engineer so selected shall be shared equally by Acquiror and the McBride
Contributor.
14. SUCCESSORS AND ASSIGNS. The terms, conditions and covenants of this
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective nominees, successors, beneficiaries and assigns; provided,
however, except as provided in Subparagraph 7(g), no direct or indirect
conveyance, assignment or transfer of any interest whatsoever of, in or to any
or all of the Properties, Partnership Interests or Acquisition Contracts, or of
this Agreement shall be made by the McBride Contributor or Acquiror during the
term of this Agreement.
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15. NOTICES. All notices, requests and other communications hereunder
must be given in the manner provided in the Master Investment Agreement.
16. BENEFIT. This Agreement is for the benefit only of the parties hereto
and their nominees, successors, beneficiaries and assignees as permitted in
Paragraph 14 above and no other person or entity shall be entitled to rely
hereon, receive any benefit herefrom or enforce against any party hereto any
provision hereof.
17. TENANTS IN DEFAULT
(a) Applicability of Provision. If, subsequent to the Approval Date,
and prior to the Closing, any Property shall be leased to (or subject to Leases
with) one or more "Tenants in Default" (as hereinafter defined), and the total
monthly rent payable with respect to such Property by its Tenants in Default
shall, in the aggregate, represent 20% or more of the total rentals then being
realized from that Property (whether one or more, the "Defaulted Building"),
then, at the Closing, the provisions of this Paragraph 17 shall be applicable.
Upon the McBride Contributor's discovery of the existence of a Tenant in Default
in any Property, the McBride Contributor shall promptly notify Acquiror, in
writing, of the specific facts and circumstances giving rise to such conditions
(such written notice being a "TID Notice"). For purposes hereof, a "Tenant in
Default" shall be any Tenant who (i) commits a material default under its Lease,
monetary or otherwise, which default has (without regard to applicable notice
and cure provisions of its Lease) continued more than 45 days; or (ii) vacates
or abandons its respective leased premises without timely paying rent therefor
(i.e., within 45 days of due date); or (iii) files, or has filed against it, any
petition for bankruptcy or reorganization or other debtor or creditor relief
procedure under any state or federal law; or (iv) who repudiates in writing its
obligations under its Lease; or (v) who admits or asserts, in writing, its
inability or unwillingness either to pay its debts as they become due or
otherwise to comply with the terms of its respective Lease.
(b) Acquiror's Rights. For and during a period of 20 days after its
receipt of a TID Notice (the "TID Study Period"), Acquiror shall have the right
to reexamine all of the Books and Records relating to the Tenant In Default and
its respective Lease; to inspect the Defaulted Building and leased premises of
the Tenant(s) In Default; to interview representatives of, and otherwise freely
deal with, the Tenant(s) In Default in order to ascertain the cause and likely
effects and ramifications of the particular default(s) in question; and to
otherwise evaluate the impact of that particular default on Acquiror's
acquisition of the Defaulted Building as a component of the Properties. Within
ten days after the conclusion of the applicable TID Study Period, upon its
reasonable determination that the situation has a material adverse effect on the
value of the building, Acquiror shall have the unilateral right to delete and
eliminate those Properties that include Defaulted Buildings from this Agreement
(the "Deleted Buildings") by giving written notice to the McBride Contributor
("Deletion Notice"). Upon any such identification by Purchaser of Deleted
Buildings and delivery of the Deletion Notice to the McBride Contributor, this
Agreement shall, without further action of the parties, be deemed to have been
amended, ipso facto, so as to eliminate herefrom all such Deleted Buildings,
subject to a reduction in the Contribution Consideration equal to the aggregate
of (x) the Allocated Amounts minus (y) the Assumed Indebtedness of the
Properties so deleted, in each case adjusted by eliminating any and all
appropriate Prorations and Adjustments. Upon such amendment, all references to
the Properties shall automatically exclude the Properties so deleted and no
Closing or pre-Closing obligations of the McBride Contributor (or Acquiror's
Conditions Precedent) shall apply to the Properties so deleted.
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18. TERMINATION
(a) Termination. This Agreement shall be terminated in the event
the Master Investment Agreement is terminated pursuant to its terms.
(b) Effect of Termination. If this Agreement is validly terminated
pursuant to Subparagraph 18(a), this Agreement will forthwith become null and
void, and there will be no liability or obligation on the part of the McBride
Contributor, the Partnerships, the Company or the Acquiror, except as provided
in the Master Investment Agreement.
19. MISCELLANEOUS
(a) Entire Agreement. This Agreement and the other documents
contemplated hereby constitute the entire understanding between the parties with
respect to the transaction contemplated herein, and all prior or contemporaneous
oral agreements, understandings, representations and statements, and all prior
written agreements, understandings, letters of intent and proposals are merged
into this Agreement. Neither this Agreement nor any provisions hereof may be
waived, modified, amended, discharged or terminated except by an instrument in
writing signed by the party against which the enforcement of such waiver,
modification, amendment, discharge or termination is sought, and then only to
the extent set forth in such instrument.
(b) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, except that title and real
estate matters shall be governed by the law of the State in which the affected
Property is located.
(c) Partial Invalidity. The provisions hereof shall be deemed
independent and severable, and the invalidity or partial invalidity or
enforceability of any one provision shall not affect the validity of
enforceability of any other provision hereof.
(d) Expenses. Except as otherwise expressly provided in this
Agreement or the Master Investment Agreement, whether or not the transactions
contemplated hereby are consummated, each party will pay their own costs and
expenses, incurred in connection with the negotiation, execution and closing of
this Agreement and the Transaction Agreements and the transactions contemplated
hereby and thereby.
(e) Counterparts. This Agreement may be executed in any number
of identical counterparts, any of which may contain the signatures of less than
all parties, and all of which together shall constitute a single agreement
(f) Jurisdiction. THE PARTIES AGREE THAT ALL DISPUTES BETWEEN ANY OF
THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND
WHETHER ARISING IN LAW OR EQUITY OR OTHERWISE, SHALL BE RESOLVED BY THE FEDERAL
OR STATE COURTS LOCATED IN NEW YORK, NEW YORK. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER IN ANY OTHER
JURISDICTION.
35
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each party hereto as of the date first above written.
Acquiror:
AMERICAN REAL ESTATE INVESTMENT, L.P.
By: American Real Estate Investment
Corporation, General Partner
By: /s/ EVAN ZUCKER
-------------------------------------
Name: Evan Zucker
Title: President
AMERICAN REAL ESTATE INVESTMENT CORPORATION
By:/s/ EVAN ZUCKER
-------------------------------------
Name: Evan Zucker
Title: President
McBride Contributor and Partnerships:
MCBRIDE HUDSON BAY, L.P.
By: Urban Farms Shopping Center, Inc.,
General Partner
By: /s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Chief Executive Officer
RAMAPO RIDGE-MCBRIDE OFFICE PARK
By: /s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Attorney-in-Fact for General Partner
36
<PAGE>
OAKLAND INDUSTRIAL PARK, INC.
By: /s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Chief Executive Officer
URBAN FARMS SHOPPING CENTER, INC.
By: /s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: Chief Executive Officer
MCBRIDE PROPERTIES
By: /s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: General Partner
NEW JERSEY ASSOCIATES
By: /s/ DAVID F. McBRIDE
-------------------------------------
Name: David F. McBride
Title: General Partner
37
<PAGE>
EXHIBIT A
SURVEY CERTIFICATION
DATE:__________
To: [Contributor] [Acquiror] [Title Company] [Lender]
I, ______________________, a Registered Land Surveyor in the
State of _______________, do hereby certify to the aforesaid parties, their
successors and assigns, as of the date set forth above that I have made a
careful survey of a tract of land known by the street address and more fully
described in the legal description set forth on the Survey.
I further certify that:
1. The Survey was actually made upon the ground, that the Survey is made at
least in accordance with the minimum standards established by the State of New
Jersey for surveyors and with the "Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys" jointly established and adopted by ALTA and ACSM
in 1992 and meets the Accuracy Standards (as adopted by ALTA and ACSM and in
effect on the date of this certification) of any Urban Survey, with accuracy and
precision requirements modified to meet current minimum angular and linear
tolerance requirements of the state in which the subject property is located,
and contains Items 1, 2, 3, 4, 6, 7(a), 7(b)(1), 8, 9, 10, 11, 13 of Table A
thereto.
2. The Survey correctly shows the location of all buildings, structures and
other improvements situated on or at the parcel of land described above (the
parcel, along with such buildings and improvements, the "Property").
3. Except as shown, all utilities serving the Property enter through adjoining
public streets and/or easements of record; that, except as shown, there are no
visible easements or rights of way across the Property; that the Property is the
same as the property described in [Title Company] Commitment No. ________ with
an effective date of _______________ and that all easements, covenants and
restrictions referenced in said title commitment, or easements which the
undersigned has been advised or has knowledge, have been plotted on the Survey
or otherwise noted as to their effect on the Property;
4. Except as shown on the Survey, there are no encroachments across zoning
restriction lines or onto adjoining premises, streets or alleys by any
buildings, structures or other improvements, and no encroachments onto the
Property by buildings, structures or other improvements situated on adjoining
premises;
5. The Property is located within an area having a Zone Designation ____________
by the Secretary of Housing and Urban Development, on Flood Insurance Rate Map
No. ________, with a date of identification of __________, for Community Number
__________, in _______________ County, State of __________, which is the current
Flood Insurance Rate Map for the community in which said Property is situated;
A-1
<PAGE>
6. The Property has direct physical access to _______________, a public street
or highway.
7. The number of striped parking spaces located at the Property is ___ (which
number includes __ handicapped parking spaces), and such parking spaces are
graphically located on the Survey.
______________________________________
Reg. Land Surveyor No.________________
A-2
<PAGE>
EXHIBIT B
TENANT ESTOPPEL CERTIFICATE
Tenant: ___________________________________________________ ("Tenant")
Landlord: ___________________________________________________ ("Landlord")
Acquiror:
Lease: Lease between________________and________________dated
________________ 19__, as amended by amendments dated
(collectively, the "Lease")
Demised Premises:______________________________________________________
(the "Demised Premises")
Property:_______________________________________________(the "Property")
The undersigned has been informed that Acquiror intends to acquire
the Property of which the Demised Premises is a part and that Acquiror desires
assurance that the Lease is in good standing.
The undersigned hereby certifies as follows:
1. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as indicated above and the Lease
represents the entire agreement between the parties as to this leasing and/or
Tenant's rights in and to the Demised Premises.
2. Except as set forth in the Lease, there are no other
representations, warranties, commitments, agreements or understandings between
Landlord (and its predecessors, if applicable) and Tenant with respect to the
Lease or any obligations of any party thereunder.
3. Except as set forth in the Lease, there are no options to
purchase, rights of refusal or rights of first offer in favor of Tenant with
respect to the purchase of the Property or any interest therein.
4. The term of the Lease commenced on_____________________and
expires on________________. A security deposit of $______________ has been
paid to Landlord.
5. Basic Rent under the Lease is currently payable at the rate of
$___________ per month and has been paid through [July 30], 1997. No Basic Rent
has been paid more than thirty (30) days in advance. Tenant has not asserted,
and has no actual knowledge of, any defenses or claims that might be set-off or
credited against any amount due Landlord under the Lease or the enforcement of
the Lease.
B-1
<PAGE>
6. As Additional Rent, Tenant currently pays all real estate taxes
and assessments, interior and exterior building maintenance, utility costs,
insurance and other charges relating to the operation and maintenance of the
Demised Premises, except as follows (insert description of any operating costs
payable by Landlord; if none, write "None"):_________________________________
__________________________________________________________. No Additional Rent
has been paid more than thirty (30) days in advance. All Additional Rent that is
currently due from Tenant pursuant to the Lease has been paid.
[7. Tenant has not executed any sublease with respect to the
Demised Premises and Tenant has not assigned or encumbered its interest in the
Lease. No person or entity other than Tenant is in possession of the Demised
Premises. Tenant is presently conducting business at the Demised
Premises.]
8. Landlord has satisfied all conditions under the Lease in the
nature of inducements to Tenant's occupancy, including without limitation all
co-tenancy requirements thereunder; and all improvements required by the
provisions of the Lease to be made by Landlord have been satisfactorily
completed.
9. Landlord has paid in full all amounts required by the Lease to be
paid by Landlord to Tenant on account of Tenant's improvements or as otherwise
required by the Lease.
10. Tenant is not in default in any of its obligations under the
Lease and, to the best of Tenant's knowledge, Landlord is not in default in any
of its obligations under the Lease. Neither Tenant nor, to the best of Tenant's
knowledge, Landlord has committed any breach under the Lease which, alone or
with the passage of time, the giving of notice, or both, would constitute a
default thereunder. Tenant has not received from or given to Landlord any
written notice of default under the Lease.
11. Except for those services required (under the express terms of
the Lease) to be provided by Landlord to Tenant, Landlord provides no other
services to Tenant in connection with its lease of the Demised Premises.
12. There are no actions, whether voluntary or involuntary, pending
against Tenant under the bankruptcy laws of the United States or any state
thereof.
13. [Tenant agrees that, upon Acquiror's acquisition of the
Property, Tenant will attorn to and recognize Acquiror as the Landlord under the
Lease, with the same force and effect as if there were a direct lease between
Tenant and Acquiror. Tenant further agrees that Acquiror shall not be liable for
any defaults or other acts or omissions of Acquiror's predecessors in interest
in the Property (including, but not limited to, Landlord).]
14. Tenant acknowledges that Acquiror has relied on the information
contained in this Tenant Estoppel Certificate in determining whether to acquire
the land and improvements in or on which the Demised Premises is located. The
statements contained herein may be relied upon by Landlord, Acquiror, Acquiror's
title insurers, and Acquiror's lender, if any, in connection with Acquiror's
acquisition of the Property.
Executed this ___ day of ______________, 1997.
B-2
<PAGE>
TENANT:
By:
Printed:
Title:
[If this certificate is delivered by the McBride Contributors in lieu of a
tenant certificate, then the following shall apply:
(i) all bracketed items shall be deleted;
(ii) Paragraph 10 above shall be replaced with the following paragraph:
There is no continuing default by Landlord in the performance or observance of
any covenant, agreement or condition contained in the Lease to be performed or
observed by Landlord, and there has not occurred any event which, with the
giving of notice or passage of time or both, would become a default under the
Lease. Landlord has not delivered to Tenant any notice of default by Tenant in
the performance or observance of any covenant, agreement or condition contained
in the Lease to be performed or observed by Tenant which has not been cured by
Tenant; and
(iii) The following phrase shall be inserted at the beginning of
Paragraph 12: "To the best of Landlord's knowledge,".]
B-3
<PAGE>
Exhibit C
EMPLOYMENT AGREEMENT
C-1
<PAGE>
Exhibit D
WARRANT
D-1
<PAGE>
CONFORMED COPY
- ------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
AMERICAN REAL ESTATE INVESTMENT CORPORATION
and
FAIRLAWN INDUSTRIAL PARK, INC.
and
THE OTHER PARTIES LISTED ON THE
SIGNATURE PAGES HERETO
Dated August 20, 1997
- ------------------------------------------------------------------------------
<PAGE>
Page
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER................................................2
1.1 Merger....................................................2
1.2 Name......................................................2
1.3 Closing...................................................2
1.4 Effective Time of Merger..................................2
1.5 Other Filings; Further Assurances.........................2
1.6 Articles of Incorporation of the Surviving Corporation....3
1.7 Directors and Officers of the Surviving Corporation.......3
ARTICLE 2 CONVERSION OF SHARES; EFFECTS OF THE MERGER...............3
2.1 Conversion................................................3
(a) Company Common Stock.................................3
(b) FLIP Common Stock....................................4
(c) Cancellation of Treasury Stock.......................4
2.2 Fractional Shares.........................................4
2.3 Exchange of Certificates..................................4
2.4 Effects of the Merger.....................................4
2.5 Lock-Up Period............................................5
2.6 Tax Treatment of Merger...................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES............................6
3.1 FLIP......................................................6
3.2 FLIP Shareholders.........................................6
3.3 Survival..................................................6
3.4 Indemnification...........................................7
3.5 No Personal Recourse......................................7
ARTICLE 4 PROPERTY INSPECTION.......................................7
4.1 General...................................................7
4.2 Condition.................................................8
4.3 Environmental Reports.....................................8
(a) Environmental Issue Notice...........................9
(b) FLIP Mitigation Option...............................9
(c) Remediation To Be Performed by the Company...........9
(d) The Company's Right To Delete Properties............10
4.4 Refinancing Properties...................................10
i
<PAGE>
Page
ARTICLE 5 TITLE AND SURVEY MATTERS.................................10
5.1 Title Commitments........................................10
5.2 Surveys..................................................11
5.3 UCC Searches.............................................12
5.4 Defects and Cure.........................................12
ARTICLE 6 COVENANTS OF FLIP........................................13
(a) New Leases..........................................13
(b) New Contracts.......................................13
(c) Insurance...........................................14
(d) Operation of FLIP Properties........................14
(e) Pre-Closing Expenses................................14
(f) Good Faith..........................................14
(g) No Assignment.......................................14
(h) Change in Conditions................................15
(i) Tax Items...........................................15
(j) Financial Statements................................15
ARTICLE 7 PRORATIONS AND ADJUSTMENTS...............................15
ARTICLE 8 DESTRUCTION, LOSS OR DIMINUTION OF PROPERTIES............17
ARTICLE 9 TENANTS IN DEFAULT.......................................19
9.1 Applicability of Provision...............................19
9.2 The Company's Rights.....................................19
ARTICLE 10 CONDITIONS PRECEDENT TO CLOSING..........................20
10.1 Conditions Precedent to the Company's Obligations........20
(a) Master Investment Agreement.........................20
(b) Merger of FLIP Subsidiary...........................20
(c) Pending Actions.....................................20
(d) Zoning..............................................20
(e) Flood Insurance.....................................21
(f) Utilities...........................................21
(g) Pay-Off Letters.....................................21
(h) Bankruptcy..........................................21
(i) Representations and Warranties True.................21
(j) Covenants Performed.................................21
(k) Material Adverse Effect.............................21
(l) Title to the FLIP Properties........................21
(m) New Jersey Environmental Clearance..................21
(n) Closing Deliveries..................................22
ii
<PAGE>
Page
10.2 Closing Deliveries.......................................22
(a) Keys................................................22
(b) Affidavit of Title and ALTA Statement...............22
(c) Letters to Tenants..................................22
(d) Title Policies and Surveys..........................22
(e) Original Documents..................................22
(f) Plans and Specifications............................23
(g) Tax Bills...........................................23
(h) Entity Transferor Certificate.......................23
(i) Rent Roll...........................................23
(j) Pay-Off Letters.....................................23
(k) Certificates of Occupancy...........................23
(l) ISRA Compliance.....................................23
(m) Other...............................................23
10.3 Conditions Precedent to FLIP and the FLIP
Shareholders' Obligations................................23
(a) Master Investment Agreement.........................23
(b) Promissory Note.....................................24
(c) Merger of FLIP Subsidiary..........................24
10.4 Closing Deliveries by the Company........................24
ARTICLE 11 MISCELLANEOUS............................................24
11.1 Termination..............................................24
11.2 Notices..................................................24
11.3 Waiver...................................................24
11.4 Amendment................................................25
11.5 No Third Party Beneficiary...............................25
11.6 No Assignment; Binding Effect............................25
11.7 Partial Invalidity.......................................25
11.8 Headings.................................................25
11.9 Jurisdiction.............................................25
11.10 Governing Law............................................25
11.11 Counterparts.............................................26
11.12 FLIP Subsidiary..........................................26
11.13 Entire Agreement.........................................26
ARTICLE 12
DEFINED TERMS...................................................26
12.1 Definitions..............................................26
12.2 Glossary.................................................28
iii
<PAGE>
EXHIBIT A AMENDED AND RESTATED ARTICLES
OF INCORPORATION OF THE COMPANY
EXHIBIT B DIRECTORS OF THE SURVIVING CORPORATION
EXHIBIT C OFFICERS OF THE SURVIVING CORPORATION
EXHIBIT D PROMISSORY NOTE
SCHEDULE 3.1 FLIP REPRESENTATIONS AND WARRANTIES
<PAGE>
1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August
20, 1997 among Fairlawn Industrial Park, Inc., a New York corporation ("FLIP"),
its shareholders (the "FLIP Shareholders") listed on the signature pages hereto
and American Real Estate Investment Corporation, a Maryland corporation (the
"Company").
Certain McBride entities (collectively, "McBride"), Jeffrey Kelter,
Penn Square Properties, Inc., Hudson Bay Partners, L.P., American Real Estate
Investment, L.P. (the "Operating Partnership" or "Acquiror"), and the Company
have, concurrently with the execution of this Agreement, entered into a Master
Investment Agreement dated as of the date hereof (the "Master Investment
Agreement" or "MIA"). In connection with the Master Investment Agreement,
certain McBride contributors, the Operating Partnership, and the Company have
entered into a McBride Contribution Agreement dated as of the date hereof (the
"McBride Contribution Agreement" or "MCA"). An index of the defined terms used
herein appears in Section 12.2.
It is contemplated in the Master Investment Agreement that FLIP will
be merged with and into the Company at the Closing Date, with the Company as the
surviving corporation in such merger (the "Merger") (the "Surviving
Corporation").
The Boards of Directors of the Company and FLIP each have approved
the execution and delivery of this Agreement and have determined that it is
advisable and in the best interests of their respective stockholders to effect
the Merger pursuant to the provisions of the laws of the State of Maryland and
the laws of the State of New York upon the terms and conditions hereinafter set
forth.
Section 3-102(2) of the Maryland General Corporation Law (the
"MGCL") permits the merger of a foreign corporation into a domestic corporation
and Section 907 of the New York Business Corporation Law (the "NYBCL") permits
the merger of a domestic corporation into a foreign corporation.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE>
2
ARTICLE 1
THE MERGER
1.1 Merger. At the Effective Time (as defined below), upon the terms
and subject to the conditions of this Agreement, FLIP shall be merged with and
into the Company in accordance with the provisions of the MGCL and the NYBCL,
and the Company shall be the continuing and surviving entity and shall be
governed by the laws of the State of Maryland. The Company and FLIP are
sometimes referred to herein as the "Constituent Corporations."
1.2 Name. The name of the Surviving Corporation shall be
American Real Estate Investment Corporation.
1.3 Closing. The closing of the Merger shall occur concurrently with
the Closing of the Transactions contemplated in the Master Investment Agreement
and shall take place at the time and place set forth in Section 1.02 of the
Master Investment Agreement.
1.4 Effective Time of Merger.
(a) At the Closing: (i) a certificate of merger (the "NY
Certificate of Merger") shall be duly prepared by the Company and executed as
required by the NYBCL, and articles of merger (the "MD Articles of Merger")
shall be duly prepared by the Company and executed as required by the MGCL; and
(ii) the Company shall deliver the NY Certificate of Merger to the Secretary of
State of the State of New York (the "New York Secretary of State") for filing,
as provided in the NYBCL, and the MD Articles of Merger to the Secretary of
State of the State of Maryland (the "Maryland Secretary of State") for filing,
as provided in the MGCL.
(b) The Merger shall become effective at the time (the
"Effective Time") of the later to occur of (i) the filing of the MD Articles of
Merger with the Maryland Secretary of State and (ii) the filing of the NY
Certificate of Merger with the New York Secretary of State.
1.5 Other Filings; Further Assurances. FLIP and the Company agree
that they will cause to be executed and filed or recorded any document or
documents prescribed by the laws of the State of New York and the State of
Maryland, and that they will cause to be performed all necessary acts within the
States of New York, Maryland and elsewhere to effectuate the Merger. FLIP and
the Company agree that they will execute such further documents and instruments
and take such further actions as may reasonably be requested by one or more of
the other parties hereto to consummate the Merger, to vest the Surviving
Corporation with full title to all assets, properties, rights, approvals,
immunities and franchises of FLIP, to
<PAGE>
3
cause the Surviving Corporation to assume all of the liabilities of FLIP or to
effect the other purposes of this Agreement.
1.6 Articles of Incorporation of the Surviving Corporation. At the
Effective Time, the Articles of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be amended and restated in the
form attached hereto as Exhibit A and such Amended and Restated Articles of
Incorporation shall be the Articles of Incorporation of the Surviving
Corporation.
1.7 Directors and Officers of the Surviving Corporation. The
individuals listed on Exhibits B and C attached hereto shall be the directors
and officers, respectively, of the Surviving Corporation from and after the
Effective Time, to serve in accordance with the Articles of Incorporation and
By-laws of the Surviving Corporation.
ARTICLE 2
CONVERSION OF SHARES; EFFECTS OF THE MERGER
2.1 Conversion. By virtue of the Merger and without any action on
the part of any holder of any share of capital stock of the Constituent
Corporations:
(a) Company Common Stock. At and after the Effective Time,
each share of common stock, par value $.001 per share, of the Company (the
"Company Shares") issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding.
(b) FLIP Common Stock. At the Effective Time, each share of
common stock, no par value, of FLIP (the "FLIP Shares") issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive that number of fully-paid and non-assessable Company Shares (the "Merger
Consideration") calculated as follows:
Merger Consideration per FLIP Share = A / B / C
where: A means FLIP asset value ("FAV") which shall be an amount
equal to the aggregate of the following items: (A) the sum of
the "Allocated Amounts" assigned to FLIP, as set forth in Part
B of Schedule 2.1(b)(i)-A to the MCA, subject to adjustment
provided below; minus (B) the sum of the "Assumed
Indebtedness," as set forth in Part B of Schedule 2.1(b)(i)-B
to the MCA, subject to adjustment provided below; minus (C)
any prorations described in Article 7 ("Prorations") and
credited to the Company as of the Closing Date; plus (D) any
Prorations
<PAGE>
4
credited to FLIP as of the Closing Date; minus (E) any other
adjustments described in this Agreement ("Adjustments")
occurring on or prior to the Closing Date in favor of the
Company; and plus (F) any Adjustments occurring on or prior to
the Closing Date in favor of FLIP.
B means the total number of FLIP Shares issued and outstanding
immediately prior to the Effective Time.
C means the Per Share Purchase Price.
From and after the Effective Time, all issued and outstanding FLIP
Shares shall no longer be outstanding and shall automatically be retired and
canceled and shall cease to exist; and each holder of a certificate representing
any FLIP Shares shall cease to have any rights with respect to such shares,
except the right to receive the Merger Consideration provided in Section 2.1.
(c) Cancellation of Treasury Stock. Each FLIP Share that is
owned by FLIP as treasury stock shall be canceled and retired and shall cease to
exist and no stock or other consideration shall be delivered in exchange
therefor.
2.2 Fractional Shares. If the calculation of the Merger
Consideration in accordance with Section 2.1 would result in a fraction of a
Company Share being issued in the Merger, then such fractional number of the
Company Shares shall be rounded to the nearest whole number of the Company
Shares.
2.3 Exchange of Certificates. At the Closing, the Company shall make
available to the FLIP Shareholders certificates representing the number of duly
authorized Company Shares issuable in connection with the Merger as set forth in
this Article 2. Upon surrender by a FLIP Shareholder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding FLIP Shares, the Company shall deliver to such FLIP Shareholder a
certificate or certificates representing the Merger Consideration payable in
respect thereof.
2.4 Effects of the Merger. At the Effective Time, FLIP shall be
deemed merged with and into the Company as provided by the applicable provisions
of the MGCL and the NYBCL and by this Agreement. All rights, privileges, and
powers of FLIP, and all property, real, personal and mixed, and all debts due to
FLIP, as well as all other things and causes of action belonging to FLIP, shall
be vested in the Company, and shall thereafter be the property of the Company as
they were of FLIP. All rights of credits and all liens upon any property of FLIP
shall be preserved and all debts, liabilities and duties of FLIP shall attach to
the Company and may be enforced against the Company to the same extent as if
such debts, liabilities and duties had been incurred and contracted by it. The
Company shall not be
<PAGE>
5
required to wind up its affairs or pay its liabilities and distribute its assets
under the MGCL.
2.5 Lock-Up Period. Each FLIP Shareholder agrees that (i) for a
period of two years following the Closing (the "Lock-Up Period"), it shall not,
in any way or to any extent, redeem, sell, transfer, assign, or (without the
Company's consent which shall not be unreasonably withheld) pledge or encumber,
or otherwise convey, any or all of the Company Shares received as Merger
Consideration, as the case may be, delivered to it in connection with the
Merger; and (ii) not more than 25% of the initial number of such Company Shares
owned by it may be sold by it in the three-month period immediately following
the Lock-Up Period, and an additional 25% of such Company Shares owned by it may
be sold in each three-month period thereafter (so that all such Company Shares
owned by it may be sold after the third the anniversary of the Closing Date);
provided that transfers may be made, subject to the restrictions hereof and
under the charter documents of Incorporation of the Company, to Permitted
Transferees. The term "Permitted Transferee," with respect to each FLIP
Shareholder, shall mean any other FLIP Shareholder, and the spouse of such FLIP
Shareholder; a parent or lineal descendant (including an adopted child) of a
parent, or the spouse of a lineal descendant of a parent; a trustee, guardian or
custodian for, or an executor, administrator or other legal representative of
the estate of, the FLIP Shareholder, or a trustee, guardian or custodian for a
Permitted Transferee of the FLIP Shareholder; the trustee of a trust (including
a voting trust) for the benefit of the FLIP Shareholder; and a corporation,
partnership or other entity of which the FLIP Shareholder and Permitted
Transferees of the FLIP Shareholder are the beneficial owners of a majority in
voting power of the equity, and who agrees in writing in an instrument
reasonably acceptable to the Company to be bound by the (i) transfer
restrictions on the Company Shares issued as Merger Consideration contained in
this Agreement and (ii) obligations contained in the indemnification provisions
in Section 6.02 of the Master Investment Agreement, provided that such
obligation shall be limited to the actual Company Shares received by such
Permitted Transferee, and such Permitted Transferee shall not be liable for
money damages or otherwise.
2.6 Tax Treatment of Merger.
(a) Each of the Company, FLIP and the FLIP Shareholders intend, and
each of the Company, FLIP and the FLIP Shareholders agree to use all
commercially reasonable efforts to ensure, that (i) the Merger will be treated
as a reorganization within the meaning of Section 368(a)(1)(A) of the Code and
(ii) the receipt by the FLIP Shareholders of the Merger Consideration in
exchange for the FLIP Shares will not result in any federal or state income tax
liability.
(b) The Company covenants and agrees that for at least two years
beginning immediately following the Closing date (i) the Company will (a) own
the Continuity Properties directly or through its ownership of one or more
Subsidiaries
<PAGE>
6
each of which is a "qualified REIT subsidiary" as defined in Section 856 of the
Code owned by the Company and (b) use the Continuity Properties in the business
of leasing real properties to tenants, and (ii) the Company will not, and will
not authorize, allow or permit any Subsidiary of the Company to, directly or
indirectly, transfer, assign, sell or otherwise dispose of any of the Continuity
Properties to any Person, including without limitation to the Operating
Partnership or to any other Subsidiary of the Company (other than to a
"qualified REIT subsidiary" as defined in Section 856 of the Code owned by the
Company); provided that notwithstanding the foregoing the Company may transfer
some or all of the Continuity Properties (other than the Property known as 1905
Nevins Road and any other property acquired by FLIP in a transaction intended to
qualify under Section 1031 of the Code) to the Operating Partnership within such
two year period (i) with the prior written consent of the FLIP Shareholders, or
(ii) if the Company has obtained a written opinion of counsel from an
independent tax counsel with a law firm with a national reputation, selected by
the Company (with the approval of the FLIP Shareholders, which shall not be
unreasonably withheld), to the effect that the Company's proposed transfer,
assignment, sale or other disposition of some or all of the Continuity
Properties will not cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code or cause the FLIP
Shareholders' receipt of the Merger Consideration in exchange for the FLIP
Shares to result in any federal or state income tax to the FLIP Shareholders.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 FLIP. The representations and warranties are set forth in
Schedule 3.1 hereto are incorporated by reference herein as if they are set
forth herein in their entirety. FLIP hereby represents and warrants to the
Company that the representations and warranties in such Schedule 3.1 are
complete and accurate, subject only to the qualifications with respect thereto
set forth in such Schedule 3.1.
3.2 FLIP Shareholders. FLIP Shareholders jointly and severally
represent and warrant to and covenant with the Company that: (i) they together
own beneficially and of record all of the issued and outstanding shares of
capital stock of FLIP entitled to vote on the Merger, including the FLIP Shares,
immediately prior to the Effective Time, (ii) they will have voted such shares
in favor of the Merger or consented thereto in writing, and (iii) they have not
and will not exercise their rights to receive payment of the fair value of such
shares and the other rights and benefits provided under Section 910 of the NYBCL
or otherwise.
3.3 Survival. The representations, warranties, covenants and
agreements of FLIP and the FLIP Shareholders contained in this Agreement will
survive the Closing until the second anniversary of the Closing Date, or in the
case of
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7
any covenant or agreement for which a time period is specified, for two years
following the last date on which such covenant or agreement is to be performed,
except that to the extent any claim for indemnification is made under the Master
Investment Agreement or the MCA with respect to any representation, warranty,
covenant or agreement that would otherwise terminate and a notice for
indemnification shall have been timely given under Article VI of the Master
Investment Agreement on or prior to such termination date, then such survival
period will be extended as it relates to such claim until the related claim for
indemnification has been satisfied or otherwise resolved as provided in Article
VI of the Master Investment Agreement. This Section shall not limit in any way
the survival and enforceability of any covenant or agreement of the parties
hereto which by its terms contemplates performance after the Closing Date, which
shall survive for the respective periods set forth herein.
3.4 Indemnification. Indemnification with respect to breaches of or
inaccuracies in any representation or warranty of, or nonfulfillment of, failure
to perform or breach of any covenant or agreement on the part of FLIP or the
FLIP Shareholders contained in this Agreement, or on the part of the Company in
the Master Investment Agreement, shall be as provided in and pursuant to the
Master Investment Agreement.
3.5 No Personal Recourse. Notwithstanding anything to the contrary
contained in this Agreement or in any of the Transaction Agreements, except as
otherwise specifically set forth in the Master Investment Agreement with respect
to the Termination Fee, (i) only the McBride Contributor and the FLIP
Shareholders (but only to the extent of the Company Shares received as Merger
Consideration and held by the FLIP Shareholders), and not the Partnerships or
any partner, shareholder or member of any of the McBride Contributor and the
Partnerships, shall be liable for any claims made by non-McBride parties under
this Agreement or any of the Transaction Agreements, (ii) the non-McBride
parties to this Agreement and the other Transaction Agreements shall look only
to the LP Units held by the McBride Contributor, and the Company Shares received
as Merger Consideration and held by the FLIP Shareholders, with respect to any
claims that may be made under this Agreement or any of the Transaction
Agreements, and (iii) no personal recourse or personal liability for any claims
under this Agreement or any of the Transaction Agreements shall be had against
FLIP Shareholders or any partner, shareholder or member of any of the McBride
Contributor and the Partnerships.
ARTICLE 4
PROPERTY INSPECTION
4.1 General. The Company confirms that as of the date hereof, but
without limiting any specific warranty, representation or condition set forth in
this
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8
Agreement or the MCA and except as otherwise set forth below in this Article 4,
there are no further contingencies for the Company's studies, investigations,
evaluations and inspections of the FLIP Properties.
4.2 Condition. As a material inducement to FLIP and the FLIP
Shareholders to execute this Agreement, the Company acknowledges and agrees
that, except for the various express warranties, representations and conditions
of FLIP set forth in this Agreement and for the various express warranties,
representations and conditions of FLIP and the FLIP Shareholders in the Master
Investment Agreement, the MCA or in any other documents, instruments or
agreements now or hereafter to be executed or delivered by FLIP and the FLIP
Shareholders and delivered to the Company pursuant to the provisions of this
Agreement, the MCA or the Master Investment Agreement (collectively, the "FLIP
Documents"), the FLIP Properties will be purchased by the Company "AS IS" and
"WHERE IS" and with all faults, on the basis of the Company's own independent
investigation. Except as expressly set forth in this Agreement or the FLIP
Documents, FLIP and the FLIP Shareholders have not made, do not make, and have
not authorized anyone else to make any representation as to the present or
future physical condition, value, presence or absence of Hazardous Materials,
financing status, leasing, operation, use, tax status, income and expenses or
any other matter or thing pertaining to the FLIP Properties, and the Company
acknowledges that no such representation or warranty has been made and that in
entering into this Agreement it does not rely on any representation or warranty
other than those expressly set forth in this Agreement or in FLIP Documents.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN FLIP DOCUMENTS, FLIP AND
THE FLIP SHAREHOLDERS MAKE NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED OR
ARISING BY OPERATION OF LAW, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
CONDITION, HABITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF
THE FLIP PROPERTIES. FLIP and the FLIP Shareholders shall not be liable for or
bound by any verbal or written statements, representations, real estate broker's
"setups" or information pertaining to the FLIP Properties furnished by any real
estate broker, agent, employee, servant or any other person unless the same are
specifically set forth in this Agreement or in FLIP Documents.
4.3 Environmental Reports. Schedule 4(c) to the MCA contains a list
of each report delivered or made available by FLIP to the Company with regard to
so-called "Phase I" or "Phase II" environmental inspections and assessments
performed prior to the date hereof, and/or a description of any known
environmental problem, at the FLIP Properties (the "Delivered Assessments").
FLIP represents and warrants that the Delivered Assessments are the only
environmental assessments in the possession of FLIP with regard to the FLIP
Properties. The parties acknowledge that EMG has been retained to perform Phase
I environmental inspections or assessments at the FLIP Properties after the date
of this Agreement and prior to the fifteenth business day prior to the Closing
Date. FLIP shall deliver or cause to be delivered to
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9
the Company all reports prepared in connection with those subsequent assessments
("Subsequent Assessments"). If any Subsequent Assessment indicates that there
exists at any FLIP Property any presence of or contamination by Hazardous
Materials (i) which have, in the reasonable judgment of the Company, a material
adverse effect on the value of such FLIP Property, (ii) which were not disclosed
in the Delivered Assessments and (iii) for which Remedial Action is necessary in
order for such FLIP Property to be in the same condition with regard to
environmental matters as was reflected in the Delivered Assessments (such
condition or contamination being referred to as an "Environmental Issue"), then
the following will apply:
(a) Environmental Issue Notice. The Company shall give written
notice of the existence of any Environmental Issues (the "Environmental Issue
Notice") to FLIP not later than September 10, 1997 (which date shall be extended
for any FLIP Property for which a Subsequent Assessment is not delivered at
least five business days prior to September 10, 1997 to the date which shall be
five business days after the delivery thereof) (the "Approval Date"). The
Environmental Issue Notice shall specify, in reasonable detail, the
Environmental Issue and the scope of proposed Remedial Action. Notwithstanding
the foregoing, FLIP shall be and remain liable hereunder, as and to the extent
elsewhere provided in this Agreement, for any breach of warranty or
representation relating to the existence of any Environmental Issue existing as
of the date of this Agreement or the Closing Date, and not detected in the
Delivered Assessments or the Subsequent Assessments.
(b) FLIP Mitigation Option. After the delivery of the
Environmental Issue Notice, FLIP may, within the 10 day period following such
delivery, send a written notice to the Company ("FLIP Remediation Notice") of
its election to cause the Company to correct and remediate the noted
Environmental Issues, at FLIP's sole cost and expense ("FLIP Mitigation
Option"), in which event: (A) the terms and provisions of this Agreement shall
remain in full force and effect, and (B) the Company may deposit part of the
Merger Consideration into an escrow with the Title Company (a "Remediation
Escrow") in an amount equal to the reasonably anticipated Remedial Costs. The
FLIP Shareholders will pay all costs and expenses incurred subsequent to Closing
in connection with Remedial Action at those FLIP Properties with respect to
which FLIP delivered a FLIP Remediation Notice. The escrowed amount in the
Remediation Escrow shall be delivered to the FLIP Shareholders upon completion
of such Remedial Action and the payment of such costs and expenses by the FLIP
Shareholders. Any distributions made in respect of such escrowed amount during
the period when such escrowed amount is held will also be held in escrow and
released to the FLIP Shareholders only when the escrowed amount in respect of
which such distributions were made are so released. In the event any amount is
escrowed pursuant to this Section 4.3(b), then at Closing, the Company and FLIP
Shareholders shall enter into a remediation escrow and disbursement agreement
reasonably and mutually satisfactory to the Company, FLIP Shareholders and their
respective counsel.
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10
(c) Remediation To Be Performed by the Company. If the Closing
occurs hereunder, all Remedial Action at those FLIP Properties with respect to
which FLIP delivered a FLIP Remediation Notice shall be undertaken by the
Company or its agents or contractors, and FLIP shall not be responsible for
conducting such Remedial Action; provided that liability of FLIP and the McBride
Contributor pursuant to the indemnification set forth in the Master Investment
Agreement is in addition to, and not replaced or limited by, the terms of this
Section 4.3(c). For purposes of this Section 4.3(c), the "reasonably anticipated
Remedial Costs" shall be the good faith estimate of Remedial Costs, as set forth
in a detailed bid proposal by the Company's first-class nationally or regionally
recognized environmental engineering and/or consulting firm.
(d) The Company's Right To Delete Properties. If FLIP does not
elect or fails to timely elect FLIP Mitigation Option with respect to any FLIP
Property subject to any Environmental Issue Notice, then the Company may, at the
Company's sole option, elect to delete and eliminate from this Agreement any
such FLIP Property (the "Environmental Issue Deletion Option"), by giving
written notice to FLIP no later than the Closing Date. Upon delivery of such
notice, this Agreement shall, without further action of the parties, be deemed
to have been automatically and ipso facto amended so as to eliminate from this
transaction each FLIP Property so deleted by the Company, and FLIP shall take
all actions necessary or desirable to divest itself of its record and beneficial
ownership of such FLIP Property, and the liabilities incidental or related
thereto, subject to a reduction in the FAV in an amount equal to the aggregate
amount of the Allocated Amounts and related Assumed Indebtedness, Prorations and
Adjustments, of all FLIP Properties so deleted. Upon such amendment of this
Agreement, all references to the FLIP Properties shall automatically exclude
each FLIP Property so deleted and no Closing or pre-Closing obligations imposed
on FLIP (or the conditions precedent to the obligations of the Company to effect
the Merger) shall apply thereto except that the Company shall promptly return
all documents, records and studies relating to such deleted FLIP Properties.
Unless FLIP breaches a representation or warranty contained in this Agreement
(in which event the remedies applicable thereto shall apply), the Company's
exclusive remedy in the event of Environmental Issues or contamination (assuming
that FLIP does not elect or fails to timely elect FLIP Mitigation Option) at any
of the FLIP Properties shall be the deletion of such FLIP Properties in the
manner provided above.
4.4 Refinancing Properties. This Article 4 and the rights granted
to the Company hereunder shall not apply to any FLIP Properties which are
security for the Refinancing.
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11
ARTICLE 5
TITLE AND SURVEY MATTERS
5.1 Title Commitments. FLIP has heretofore caused (at its sole cost
and expense) TitleServNY as agent for Stewart Title Guaranty Company (the "Title
Company") to issue to the Company an owner's title insurance commitment for each
of the FLIP Properties (the "Title Commitments"). The title insurance policy to
be issued at Closing by the Title Company pursuant to the Title Commitment (the
"Title Policy") shall be an ALTA Form B (1987 or later) owner's policy with
respect to each FLIP Property. Each Title Commitment shall reflect the full
amount of the Allocated Amount for each FLIP Property, show fee simple title or
leasehold, as applicable, to the FLIP Properties vested in FLIP or a subsidiary
of FLIP (the "FLIP Subsidiary"), together with legible and complete copies of
all recorded documents evidencing title exceptions raised in Schedule B of the
Title Commitments. It shall be a condition precedent to the obligations of the
Company to effect the Merger that the Title Policies (or "marked-up" title
commitments) shall have all standard and general printed exceptions deleted so
as to afford full "extended form coverage," and shall further include an owner's
comprehensive endorsement (or the equivalent by way of affirmative insurance);
an endorsement certifying that the bills for the real estate taxes pertaining to
the Land and Improvements do not include taxes pertaining to any other real
estate; an access endorsement; a contiguity endorsement, if applicable; a
subdivision or plat act endorsement; a survey "land same as" endorsement; a
zoning 3.1 endorsement (amended to include parking); a creditors' rights
endorsement; an endorsement indicating that the FLIP Properties are not within
any special benefit district for any entity that has been created and that will
assess any one or more of the FLIP Properties, but no assessments from such
entity currently appear of record; and any other endorsements reasonably
requested by the Company and reasonably approved by FLIP including
non-imputation and "Fairway" endorsements. As a condition precedent to the
obligations of the Company to effect the Merger, each Title Commitment shall be
marked for later-dating to cover the Closing, and the Title Company shall
deliver the Title Policies (or "marked-up" title commitments) to the Company
concurrently with the Closing. Should an update to any Title Commitment after
the date hereof indicate matters that do or would materially adversely affect
the value or marketability of title to any FLIP Property, or other matters which
do or would materially adversely affect the Company's use, operation or
financing of any FLIP Property, such matters shall be considered Defects and the
cure provisions set forth in Section 5.4 shall apply; provided that a Defects
Notice is timely delivered with respect to such Defects.
5.2 Surveys. FLIP has heretofore delivered (at its sole cost and
expense) an as-built survey or site plan of each FLIP Property (the "Surveys"),
prepared by a surveyor(s) duly registered in the State of New Jersey. The
Surveys shall be updated to a date on or after the date hereof, and certified to
the Company, any designated lender(s) of the Company and the Title Company by
surveyor(s) duly
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12
registered in the State of New Jersey as having been prepared in accordance with
the minimum detail and classification requirements of the land survey standards
of the American Land Title Association, and specifically incorporating all of
the standards and protocols contemplated by the minimum standard detail
requirements and classifications for ALTA/ASCM land title surveys, as adopted in
1992 by ALTA/ASCM, including Table A responsibilities and specifications 1-5
(excluding for Table A5 any information with respect to elevations), 6-11, and
13, and shall include the certification attached to the MCA as Exhibit A. The
Surveys shall show any encroachments of the Improvements onto adjoining
properties, easements, set-back lines or rights-of-way, and any encroachments of
adjacent improvements onto any FLIP Property, and shall comply with any
requirements imposed by the Title Company as a condition to the removal of the
survey exception from the standard printed exceptions in Schedule B of the Title
Commitments, and shall comply with any reasonable requirements of relevant
lenders, if any. Without limitation of the foregoing, the Surveys shall state
the legal description of the Land, the acreage of the Land and the dimensions,
height and square footage of each Building, the number and location of all legal
parking spaces on each parcel of Land, driveways, ingress and egress, the
address of the Improvements, the zoning of the FLIP Property and shall further
state whether any parcel of Land is located in a wetlands area or in an area
designated by an agency of the United States as being subject to flood hazards
or flood risks. Should any Survey indicate the presence of any encroachments by
or upon any FLIP Property, or other matters that do or would adversely affect
the value or marketability of title to any FLIP Property, or other matters which
do or would adversely affect the Company's use, operation or financing of any
FLIP Property, such matters shall be considered Defects, and the cure provisions
set forth in Section 5.4 shall apply; provided that a Defects Notice is timely
delivered with respect to such Defects.
5.3 UCC Searches. FLIP shall deliver to the Company, or cause the
Title Company to deliver to the Company, within 20 days after the date hereof,
and shall update to the Closing Date, current searches of all Uniform Commercial
Code financing statements naming FLIP or the FLIP Subsidiary, as the case may
be, as debtor and filed with (i) the Secretary of State of the state of
incorporation of FLIP or the FLIP Subsidiary, as the case may be, or (ii) the
Secretary of State of the state in which a FLIP Property is located (the "UCC
Searches"). Should the UCC Searches indicate matters that do or would materially
adversely affect the value or marketability of title to any FLIP Property,
including, but not limited to, claims or liens against any of such parties
encumbering all or any portion of any FLIP Property, or other matters which do
or would adversely affect FLIP's use, operation or financing of any FLIP
Property, and such matters are not Permitted Exceptions, such matters shall be
considered Defects, and the cure provisions set forth in Section 5.4 shall
apply; provided that a Defects Notice is timely delivered with respect to such
Defects.
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13
5.4 Defects and Cure. The items described in this Article 5 are
collectively referred to as "Title Evidence." If any Title Evidence obtained
after the date hereof and prior to the Closing Date discloses claims, liens,
exceptions, or conditions (other than Assumed Indebtedness with respect to FLIP
Properties) that materially adversely affect the use and/or marketability of
title to any FLIP Property ("Defects"), the Company may, prior to the Closing
Date, give written notice (the "Defects Notice") of such Defects to FLIP. If and
to the extent that the Title Evidence discloses any claims, liens, exceptions or
conditions to which the Company does not object in its Defects Notice, then such
items shall thereafter constitute Permitted Exceptions. If, with respect to any
one or more FLIP Properties, FLIP fails or refuses prior to 15 days prior to
Closing ("Response Period"), to either (i) cure all Defects or (ii) cause all
Defects to be insured over by the Title Company (in form and substance
acceptable to the Company), then the Company may delete and eliminate from this
Agreement the applicable FLIP Property by written notice to FLIP delivered on or
before the Closing Date, whereupon this Agreement shall, without further action
of the parties, be deemed to have been automatically and ipso facto amended, as
to eliminate such FLIP Property or FLIP Properties (the "Title Deleted
Properties") herefrom, and FLIP shall take all actions necessary or desirable to
divest itself of its record and beneficial ownership of such FLIP Property, and
the liabilities incidental or related thereto, subject to a reduction in the FAV
in an amount equal to the aggregate amount of (x) the Allocated Amounts minus
(y) the Assumed Indebtedness of all Title Deleted Properties, in each case
adjusted by eliminating any and all appropriate Prorations and Adjustments with
respect to such FLIP Properties.
ARTICLE 6
COVENANTS OF FLIP
Effective as of the execution of this Agreement, FLIP hereby
covenants with the Company as follows:
(a) New Leases. FLIP shall not amend any Lease in any material
respect or execute any new or renewal lease, license, or other agreement
affecting the ownership or operation of all or any portion of the FLIP
Properties or for personal property, equipment, or vehicles (unless in
replacement of any existing personal property lease on substantially similar or
better terms), other than in the ordinary course of business and on terms
comparable to similarly situated properties except that any costs associated
with Leases not listed on Schedule 9(a)(x) to the MCA which would result in an
aggregate cost of greater than $100,000 shall require the approval of the
Company.
(b) New Contracts. FLIP shall not enter into any contract
with respect to the ownership, management or operation of all or any portion of
any or all of the FLIP Properties that will survive the Closing (other than
those in
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14
connection with the Refinancing) or that would otherwise affect the use,
operation or enjoyment of any or all of the FLIP Properties, other than in the
ordinary course of business and on commercially reasonable terms.
(c) Insurance. The insurance coverage described in the
policies listed on Schedule 6.1(i) to the MCA with respect to the FLIP
Properties shall remain continuously in force through and including the Closing
Date.
(d) Operation of FLIP Properties. FLIP shall operate and
manage the FLIP Properties which it owns in the same manner as in effect on the
date hereof, maintaining present services, and shall maintain the FLIP
Properties in good repair and working order; keep on hand sufficient materials,
supplies, equipment and other Personal Property for the efficient operation and
management of the FLIP Properties in the same manner as in effect on the date
hereof; and perform, when due, all of its obligations under the Leases,
Contracts, Existing Mortgages, Governmental Approvals and other agreements
relating to the FLIP Properties and otherwise in accordance with applicable
laws, ordinances, rules and regulations affecting the FLIP Properties. Except as
otherwise specifically provided herein, the FLIP Properties at Closing shall be
in substantially the same condition as each of them is in on the date hereof
(subject to the performance of tenant improvements and improvements provided for
in FLIP's current budget for that particular FLIP Property), reasonable wear and
tear excepted, and the Contracts shall remain in full force and effect through
the Closing Date, unless otherwise advised to the contrary by the Company, in
writing, no later than thirty days prior to the Closing Date. None of the
Personal Property, fixtures or Inventory (except such Inventory as may be
consumed in the ordinary course of business) shall be removed from the FLIP
Properties, unless replaced by personal property, fixtures or Inventory of equal
or greater utility and value.
(e) Pre-Closing Expenses. FLIP shall pay in full, prior to
Closing, all bills and invoices for labor, goods, material and services of any
kind relating to the FLIP Properties and utility charges, relating to the period
prior to Closing, but excluding therefrom all utility and other charges billed
directly to Tenants or subtenants of the FLIP Properties. Except as the parties
may otherwise agree herein, any alterations, installations, decorations and
other work required to be performed by FLIP prior to the Closing under any and
all agreements affecting the FLIP Properties have been or will, by the Closing,
be completed and paid for in full.
(f) Good Faith. All actions required pursuant to this
Agreement that are necessary or desirable to effectuate the transactions
contemplated herein or to satisfy each of the conditions precedent to the
obligations of the Company to effect the Merger shall be taken promptly and in
good faith by FLIP, and FLIP shall furnish the Company with such documents or
further assurances as the Company may reasonably require, whether prior to or
following the Closing.
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15
(g) No Assignment. FLIP shall not assign, alienate, lien,
encumber or otherwise transfer all or any part of any or all of the FLIP
Properties or any interest in any or all of them except as contemplated by this
Agreement or in connection with the Refinancing.
(h) Change in Conditions. FLIP shall promptly notify the
Company of any change in any condition with respect to any or all of the FLIP
Properties or of the occurrence of any event or circumstance that makes any
representation or warranty of FLIP to the Company under this Agreement untrue or
misleading, or any covenant of the Company under this Agreement incapable or
less likely of being performed, it being understood that FLIP's obligation to
provide notice to the Company under this Section 6(h) shall in no way relieve
FLIP of any liability for a breach by FLIP of any of its representations,
warranties or covenants under this Agreement.
(i) Tax Items. FLIP acknowledges that (i) the Company needs to
be able to prepare accurate estimates of its taxable income in order to monitor
compliance with the requirement that it distribute 95% of its taxable income to
its shareholders, and (ii) the depreciation of the FLIP assets will materially
impact the computation of the Company's taxable income. Accordingly, FLIP agrees
that (i) within 30 days after Closing, FLIP shall provide the Company with tax
basis computations and historical tax depreciation schedules updated through the
Closing Date for each FLIP Property and for any properties held by a
wholly-owned subsidiary of FLIP, and (ii) within 30 days after Closing, FLIP
shall provide the Company with all data required to perform depreciation
allocations with respect to each property held by a partnership or limited
liability company in which FLIP owns an interest.
(j) Financial Statements. As promptly as practicable, FLIP
will deliver or cause to be delivered to the Company the audited (in the case of
any fiscal year ending after the date hereof and before the Closing Date) and
the unaudited (in case of any fiscal quarter ending after the date hereof and
before the Closing Date) balance sheet of FLIP, and the related audited or
unaudited statements of income, retained earnings and cash flows, in each case
as of and for the fiscal year then ended or as of and for each such fiscal
quarter and the portion of the fiscal year then ended, as the case may be.
ARTICLE 7
PRORATIONS AND ADJUSTMENTS
For the purposes of determining FAV in accordance with Section 2.1
of this Agreement, the following shall be prorated and adjusted between FLIP, on
the
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16
one hand, and the Company, on the other hand, as of 12:00 a.m. on the Closing
Date, except as otherwise specified:
(a) The amount of all security and other Tenant deposits,
and interest due thereon, if any, shall be credited to the Company;
(b) The Company and FLIP shall divide the cost of any
escrows hereunder equally between them;
(c) To the extent such charges are not billed directly to
Tenants, water, electricity, sewer, gas, telephone and other utility charges
shall be prorated based, to the extent practicable, on final meter readings and
final invoices, or, in the event final readings and invoices are not available,
based on the most currently available billing information, and reprorated upon
issuance of final utility bills;
(d) Amounts paid or payable under any contracts assumed by the
Company in the Merger (the "Contracts") shall be prorated based, to the extent
practicable, on final invoices or, in the event final invoices are not
available, based on the most currently available billing information, and
reprorated upon issuance of final invoices;
(e) All real estate, personal property and ad valorem taxes
applicable to the FLIP Properties and levied with respect to calendar year 1997
(or 1998, if the Closing occurs in 1998) shall be prorated on an accrual basis,
as of the Closing Date, utilizing the actual final Tax Bills for those FLIP
Properties for 1996 (or 1997 if available) adjusted for any announced changes in
rates of taxation. Prior to or at Closing, FLIP shall pay or have paid all Tax
Bills that are due and payable prior to or on the Closing Date and shall furnish
evidence of such payment to the Company and the Title Company. The taxes to be
prorated (i.e., county, school, city) for each FLIP Property and the billing and
accrual schedule for each such tax are set forth in Schedule 12(e) to the MCA;
(f) All assessments, general or special, shall be prorated as
of the Closing Date on a "due date" basis such that FLIP shall be responsible
for any installments of assessments which are first due or payable prior to the
Closing Date and the Company shall be responsible for any installments of
assessments which are first due or payable on or after the Closing Date;
(g) Commissions of leasing and rental agents for any Lease
entered into as of or prior to the Closing Date (which are set forth on Schedule
9(a)(x) to the MCA with respect to the FLIP Properties) that are due and payable
at or prior to the Closing Date, whether with respect to base lease term, future
expansions, renewals, or otherwise, shall be paid in full at or prior to Closing
by FLIP, without contribution or proration from the Company;
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17
(h) All Base Rents and other charges actually received,
including, without limitation, all Additional Rent, shall be prorated at
Closing. At the time(s) of final calculation and collection from Tenants of
Additional Rent for 1997, there shall be a re-proration between the Company and
FLIP as to Additional Rent adjustments, which re-proration shall be paid upon
the Company's presentation of its final accounting to FLIP, certified as to
accuracy by the Company. At the Closing, no "Delinquent Rents" (rents or other
charges which are due and owing as of the Closing) shall be prorated in favor of
FLIP; and
(i) Such other items that are customarily prorated in
transactions of this nature shall be ratably prorated.
For purposes of calculating Prorations, the Company shall be deemed to be in
title to the FLIP Properties, and therefore entitled to the income therefrom and
responsible for the expenses thereof, for the entire Closing Date. All such
prorations shall be made on the basis of the actual number of days of the year
and month that shall have elapsed as of the Closing Date.
ARTICLE 8
DESTRUCTION, LOSS OR DIMINUTION OF PROPERTIES
If prior to Closing, all or any portion of any FLIP Property is
damaged by fire or other natural casualty (collectively "Damage"), or is taken
or made subject to condemnation, eminent domain or other governmental
acquisition proceedings (a "Taking"), then the following procedures shall apply:
(a) As used herein, a "Material Event" shall mean any of
the following:
(i) Damage to all or any portion of a FLIP Property,
and the cost of repair or replacement of such Damage exceeds 50% of the
Allocated Amount and the related Assumed Indebtedness, Prorations and
Adjustments of such FLIP Property; or
(ii) Taking of all or any portion of a FLIP Property,
and the value of such Taking exceeds 50% of the Allocated Amount and the related
Assumed Indebtedness, Prorations and Adjustments of such FLIP Property; or
(iii) Any Taking or Damage that results in the
cancellation or termination of any Lease of a Required Estoppel Tenant, or that
provides to a Required Estoppel Tenant the right to cancel or terminate its
Lease upon the giving of subsequent notice (unless such termination right is
waived, in writing,
<PAGE>
18
by such Tenant), or that otherwise results in the permanent loss of a Required
Estoppel Tenant.
(b) In the event of Damage or a Taking that does not
constitute a Material Event, the Company shall close and take the FLIP
Properties as diminished by such Damage or Taking, subject to (i) a reduction in
the FAV in an amount equal to the difference, if any, between (x) the cost of
repair or replacement of such Damage (or the value of such Taking) and (y) the
casualty insurance proceeds (or condemnation awards) actually collected by FLIP
prior to Closing (and paid to the Company at Closing) by reason of such Damage
or Taking.
(c) If the Damage or Taking is a Material Event, then the
Company, at its sole option, shall elect, within 15 days after its acquisition
of actual knowledge that such Damage or Taking is a Material Event, to either:
(i) delete and eliminate from this Agreement any FLIP Property that has
sustained Damage or is taken or made subject to a Taking by giving written
notice to FLIP, in which event (x) this Agreement shall be deemed to have been
automatically and ipso facto amended so as to eliminate the deleted FLIP
Properties herefrom, and FLIP shall take all actions necessary or desirable to
divest itself of its record and beneficial ownership of such FLIP Property, and
the liabilities incidental or related thereto, and (y) the Company and FLIP
shall proceed to close on the remaining FLIP Properties (i.e., the non-deleted
FLIP Properties) subject to a reduction in the FAV in an amount equal to the
aggregate amount of (x) the Allocated Amounts minus (y) the Assumed Indebtedness
of the FLIP Property(s) so deleted, in each case as adjusted by eliminating any
and all appropriate Prorations and Adjustments with respect to such FLIP
Properties; or (ii) proceed to close on all of the FLIP Properties, subject to a
reduction in the FAV in an amount equal to the aggregate of all deductible(s)
imposed under any casualty insurance policies applicable to the FLIP Property(s)
that is the subject of Damage, and an assignment of FLIP's interest in any
unpaid insurance proceeds or condemnation awards.
(d) In the event that the Company elects to close on any FLIP
Property that is subject to any Damage or Taking, each party shall fully
cooperate with the other party in the adjustment and settlement of the insurance
claim (or governmental acquisition proceeding).
(e) In the event of a dispute between FLIP and the Company
with respect to the cost of repair, restoration or replacement as to any Damage
or the value of a Taking, an engineer designated by FLIP and an engineer
designated by the Company shall select an independent third engineer licensed to
practice in the jurisdiction where the FLIP Property is located who shall
resolve such dispute. The determination of such third engineer shall be final
and binding on the parties and judgment may be rendered thereon in any
appropriate court of record. All fees, costs and expenses of such third engineer
so selected shall be shared equally by the Company and FLIP.
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19
ARTICLE 9
TENANTS IN DEFAULT
9.1 Applicability of Provision. If, subsequent to the Approval Date,
and prior to the Closing, any FLIP Property shall be leased to (or subject to
Leases with) one or more "Tenants in Default," and the total monthly rent
payable with respect to such FLIP Property by its Tenants in Default shall, in
the aggregate, represent 20% or more of the total rentals then being realized
from that FLIP Property (whether one or more, the "Defaulted Building"), then,
at the Closing, the provisions of this Article 9 shall be applicable. Upon
FLIP's discovery of the existence of a Tenant in Default in any FLIP Property,
FLIP shall promptly notify the Company, in writing, of the specific facts and
circumstances giving rise to such conditions (such written notice being a "TID
Notice"). For purposes hereof, a "Tenant in Default" shall be any Tenant who (i)
commits a material default under its Lease, monetary or otherwise, which default
has (without regard to applicable notice and cure provisions of its Lease)
continued more than 45 days; or (ii) vacates or abandons its respective leased
premises without timely paying rent therefor (i.e., within 45 days of due date);
or (iii) files, or has filed against it, any petition for bankruptcy or
reorganization or other debtor or creditor relief procedure under any state or
federal law; or (iv) who repudiates in writing its obligations under its Lease;
or (v) who admits or asserts, in writing, its inability or unwillingness either
to pay its debts as they become due or otherwise to comply with the terms of its
respective Lease.
9.2 The Company's Rights. For and during a period of 20 days after
its receipt of a TID Notice (the "TID Study Period"), the Company shall have the
right to reexamine all of the Books and Records relating to the Tenant In
Default and its respective Lease; to inspect the Defaulted Building and leased
premises of the Tenant(s) In Default; to interview representatives of, and
otherwise freely deal with, the Tenant(s) In Default in order to ascertain the
cause and likely effects and ramifications of the particular default(s) in
question; and to otherwise evaluate the impact of that particular default on the
Company's acquisition of the Defaulted Building as a component of the FLIP
Properties. Within ten days after the conclusion of the applicable TID Study
Period, upon its reasonable determination that the situation has a Material
Adverse Effect on the value of the building, the Company shall have the
unilateral right to delete and eliminate those FLIP Properties that include
Defaulted Buildings from this Agreement (the "Deleted Buildings") by giving
written notice to FLIP ("Deletion Notice"). Upon any such identification by the
Company of Deleted Buildings and delivery of the Deletion Notice to FLIP, this
Agreement shall, without further action of the parties, be deemed to have been
amended, ipso facto, so as to eliminate herefrom such Deleted Buildings, and
FLIP shall take all actions necessary or desirable to divest itself of its
record and beneficial ownership of such FLIP Property, and the liabilities
incidental or related thereto,
<PAGE>
20
subject to a reduction in the FAV in an amount equal to the aggregate of (x) the
Allocated Amounts minus (y) the Assumed Indebtedness of the FLIP Properties so
deleted, in each case adjusted by eliminating any and all appropriate Prorations
and Adjustments assigned to such FLIP Properties. Upon such amendment, all
references to the FLIP Properties shall automatically exclude the Properties so
deleted and no Closing or pre-Closing obligations of FLIP (or the conditions
precedent to the obligations of the Company to effect the Merger) shall apply to
the FLIP Properties so deleted.
ARTICLE 10
CONDITIONS PRECEDENT TO CLOSING
10.1 Conditions Precedent to the Company's Obligations. The
obligation of the Company to effect the Merger is subject to the fulfillment, at
or prior to the Closing, of each of the following conditions (all of which may
be waived in whole or in part by the Company in its sole discretion):
(a) Master Investment Agreement. The fulfillment (or
waiver, if permissible), at or prior to the Closing, of each of the conditions
set forth in Article VII of the Master Investment Agreement and the consummation
of all of the transactions contemplated in the Master Investment Agreement
(other than those contemplated by this Agreement);
(b) Merger of FLIP Subsidiary. At the Effective Time, the FLIP
Subsidiary will have merged with and into a wholly-owned subsidiary of the
Company, which wholly-owned subsidiary shall qualify as a "qualified REIT
subsidiary" within the meaning of the Code;
(c) Pending Actions. As of the Closing Date, except as set
forth on Schedule 6.1(h) to the MCA with respect to the FLIP Properties, there
shall be no administrative agency, litigation or governmental proceeding of any
kind whatsoever, pending or threatened, that, after Closing, would materially
and adversely affect the value or marketability of any FLIP Property or the FLIP
Properties as a whole, or the ability of the Company to operate any or all of
the FLIP Properties in the manner in which such FLIP Property is being operated
on the date hereof;
(d) Zoning. As of the Closing Date, no proceedings shall be
pending or threatened in writing that could or would involve the change,
redesignation, redefinition or other modification of the zoning classifications
of any or all of the FLIP Properties, or any portion thereof;
<PAGE>
21
(e) Flood Insurance. As of the Closing Date, if any
material improvement at a FLIP Property is located in a flood plain, flood plain
insurance in form and substance reasonably acceptable to the Company shall be
available for purchase by the Company at or prior to the Closing Date;
(f) Utilities. On the Closing Date, no moratorium or legal
proceeding shall be pending or threatened affecting the availability, at regular
rates and connection fees, of sewer, water, electric, gas, telephone or other
services or utilities servicing the FLIP Properties;
(g) Pay-Off Letters. FLIP shall have provided to the
Company a pay-off letter (the "Pay-Off Letter") issued by each mortgagee holding
an Existing Mortgage, setting forth the amount of principal and interest
outstanding on the Closing Date;
(h) Bankruptcy. As of the Closing Date, neither FLIP nor
any FLIP Property is the subject of any bankruptcy proceeding for which approval
of this transaction has not been given and issued by the applicable bankruptcy
court;
(i) Representations and Warranties True. The
representations and warranties of FLIP and the FLIP Shareholders contained
herein are true and correct in all material respects as of the Closing Date;
(j) Covenants Performed. All covenants of FLIP and the
FLIP Shareholders required to be performed prior to the Closing Date have been
performed, in all material respects;
(k) Material Adverse Effect. As of the Closing Date, there
have been no events which have had or could be expected to have a Material
Adverse Effect;
(l) Title to the FLIP Properties. Title to the FLIP
Properties is in the condition required under Article 5;
(m) New Jersey Environmental Clearance. On or prior to the
Closing Date, FLIP shall have delivered to the Company written proof of
compliance with the Industrial Site Recovery Act (N.J.S.A. 13:1K-6 to et seq.)
("ISRA") or written proof of exemption or exclusion therefrom for each FLIP
Property at FLIP's sole cost and expense and shall certify that such written
proof is a true, complete and correct copy thereof. Such written proof shall be
in the form of (i) either (A) a Letter of Non-Applicability from the New Jersey
Department of Environmental Protection ("NJDEP"), (B) an unconditional Negative
Declaration and No Further Action Letter from the NJDEP or (C) a De Minimis
Quantity Exemption and (ii) true complete and correct copies of the supporting
Applicability/Nonapplicability Affidavits. FLIP HEREBY WAIVES ITS RIGHT UNDER
ISRA TO VOID THE TRANSACTION
<PAGE>
22
CONTEMPLATED HEREIN AND TO TERMINATE THIS AGREEMENT AS A
RESULT OF NON-COMPLIANCE WITH ISRA; and
(n) Closing Deliveries. On the Closing Date, all required
closing deliveries shall have been made by FLIP pursuant to Section 10.2, and
FLIP shall have delivered any Estoppel Certificates required to be executed by
FLIP pursuant to Section 3(a)(xiii) of Schedule 3.1.
10.2 Closing Deliveries. It shall be a condition precedent to the
obligations of the Company to effect the Merger that, at Closing (or such other
times as may be specified below), FLIP shall deliver or cause to be delivered to
the Company the following, each in form and substance reasonably acceptable to
the Company and its counsel:
(a) Keys. Keys to all locks located at each FLIP Property
to the extent in FLIP's possession;
(b) Affidavit of Title and ALTA Statement. As to each FLIP
Property, an Affidavit of Title and an ALTA Statement (or comparable forms
required by the Title Company in New Jersey and required by the Title Company as
a condition to the issuance of the Title Policies), including any affidavit
required to obtain a non-imputation endorsement, each executed by FLIP and in
form and substance acceptable to the Title Company and to the Company;
(c) Letters to Tenants. Letters executed by FLIP and, if
applicable, its management agents, addressed to all Tenants, in form approved by
the Company (the "Tenant Letters"), notifying all Tenants of the Merger and
directing payment of all rents accruing after the Closing Date to be made to the
Company or at its direction;
(d) Title Policies and Surveys. The Title Policies (or
"marked-up" title commitments) issued by the Title Company, dated as of the
Closing Date in the amount of the Allocated Amounts for each FLIP Property, with
such endorsements and otherwise in accordance with the requirements of Article 5
(it being understood that FLIP will provide any certificates or undertakings
required in order to induce the Title Company to insure over any "gap" period
resulting from any delay in recording of documents or later-dating the title
insurance file); and the Surveys for each FLIP Property in the form required in
Section 5.2 certified by the surveyor to the Company, any designated lender(s)
of the Company and the Title Company;
(e) Original Documents. To the extent not previously
delivered to the Company, originals or copies of the Leases, contracts to be
assumed by the Company and Governmental Approvals;
<PAGE>
23
(f) Plans and Specifications. To the extent not previously
delivered to the Company, all plans and specifications in FLIP's possession and
control or otherwise available to FLIP;
(g) Tax Bills. To the extent not previously delivered to
the Company, copies of the most currently available Tax Bills;
(h) Entity Transferor Certificate. Entity transferor
certifications confirming that neither FLIP nor any FLIP Shareholder is a
"Foreign Person" within the meaning of Section 1445 of the Code;
(i) Rent Roll. A Rent Roll, prepared as of the Closing
Date, certified by FLIP to be true, complete and correct through the Closing
Date;
(j) Pay-Off Letters. FLIP shall procure and deliver the
Pay-Off Letters with respect to every Existing Mortgage;
(k) Certificates of Occupancy. FLIP shall procure and deliver
valid and subsisting certificates of occupancy or the equivalent thereof with
respect to each FLIP Property issued by each municipality in which such FLIP
Property is located;
(l) ISRA Compliance. Documentation evidencing
compliance with ISRA issued by the NJDEP's for each of the FLIP Properties; and
(m) Other. Such other documents and instruments as may
reasonably be required by the Company, its counsel or the Title Company and that
may be necessary to consummate the transaction that is the subject of this
Agreement and to otherwise effect the agreements of the parties hereto.
10.3 Conditions Precedent to FLIP and the FLIP Shareholders'
Obligations. The obligations of FLIP and the FLIP Shareholders to effect the
Merger are subject to the fulfillment, at or prior to the Closing, of the
following conditions (all of which may be waived in whole or in part by FLIP and
the FLIP Shareholders in their respective sole discretion):
(a) Master Investment Agreement. The fulfillment (or
waiver, if permissible), at or prior to the Closing, of each of the conditions
set forth in Article VII of the Master Investment Agreement and the consummation
of all of the transactions contemplated in the Master Investment Agreement
(other than those contemplated by this Agreement);
<PAGE>
24
(b) Promissory Note. The Company shall have executed and
delivered to the Partnership a promissory note substantially in the form
attached hereto as Exhibit D, and the Operating Partnership shall have issued to
the Company in consideration therefor such number of Partnership Units equal to
the aggregate principal amount of indebtedness evidenced by such promissory note
divided by the Per Unit Purchase Price; and
(c) Merger of FLIP Subsidiary. At the Effective Time, the FLIP
Subsidiary will have merged with and into a wholly-owned subsidiary of the
Company, which wholly-owned subsidiary shall qualify as a "qualified REIT
subsidiary" within the meaning of the Code.
10.4 Closing Deliveries by the Company. It shall be a condition
precedent to the obligations of FLIP and the FLIP Shareholders to effect the
Merger that, at Closing, the Company shall, upon surrender by a FLIP Shareholder
of certificates representing FLIP Shares, deliver or cause to be delivered to
such FLIP Shareholder certificates representing the number of Company Shares
such FLIP Shareholder is entitled to receive pursuant to Section 2.1.
ARTICLE 11
MISCELLANEOUS
11.1 Termination.
(a) This Agreement shall be terminated in the event the Master
Investment Agreement is terminated pursuant to its terms.
(b) If this Agreement is validly terminated pursuant to
Section 11.1(a), this Agreement will forthwith become null and void, and there
will be no liability or obligation on the part of the parties hereto, except as
provided in the Master Investment Agreement.
11.2 Notices. All notices and other communications hereunder must be
given in the manner provided in the Master Investment Agreement.
11.3 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
<PAGE>
25
11.4 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.5 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third party beneficiary rights upon any other Person.
11.6 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void. Subject to the preceding sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.
11.7 Partial Invalidity. The provisions hereof shall be deemed
independent and severable, and the invalidity or partial invalidity or
enforceability of any one provision shall not affect the validity of
enforceability of any other provision hereof.
11.8 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.9 Jurisdiction. THE PARTIES AGREE THAT ALL DISPUTES BETWEEN ANY
OF THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND
WHETHER ARISING AT LAW OR IN EQUITY OR OTHERWISE, SHALL BE RESOLVED BY THE
FEDERAL OR STATE COURTS LOCATED IN NEW YORK, NEW YORK. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER IN
ANY OTHER JURISDICTION.
11.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO A
CONTRACT EXECUTED AND PERFORMED IN SUCH STATE WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT THE MERGER IS
REQUIRED TO BE GOVERNED BY THE LAWS OF THE STATE OF MARYLAND.
<PAGE>
26
11.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
11.12 FLIP Subsidiary. It is currently expected by the parties
hereto that prior to the Effective Time certain of the FLIP Properties will be
held by the FLIP Subsidiary. At the Effective Time, the FLIP Subsidiary will
merge with and into a wholly-owned subsidiary of the Company, which wholly-owned
subsidiary shall qualify as a "qualified REIT subsidiary" under the Code, and
all of the issued and outstanding shares of capital stock of the FLIP Subsidiary
shall be extinguished and canceled. The parties hereto agree that they will
execute such further documents and instruments and take such further actions as
may be reasonably requested by one or more of the other parties hereto to effect
such merger.
11.13 Entire Agreement. This Agreement and the other documents
contemplated hereby constitute the entire understanding between the parties with
respect to the subject matter hereof, and all prior or contemporaneous oral
agreements, understandings, representations and statements, and all prior
written agreements, understandings, letters of intent and proposals are merged
into this Agreement.
ARTICLE 12
DEFINED TERMS
12.1 Definitions. As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the business or condition of FLIP,
including without limitation financial statements, tax returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, contracts, licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Continuity Properties" means all of the FLIP Properties and
the FLIP Acquisition Property set forth in Schedule 1(c) to the MCA other than
the FLIP Partnership Interests set forth in Schedule 1(o)B to the MCA.
"FLIP Properties" means the properties of FLIP including: (i)
the parcels of land described and attributed to FLIP in Schedule 1(p)B to the
MCA (collectively, the "Land"), together with all strips, gores, rights
easements and interests appurtenant thereto, including, but not limited to, all
right, title and interest
<PAGE>
27
of FLIP in and to any islands, alleys, drives, streets or other public ways
adjacent to the Land and any water or mineral rights owned by, or leased to,
FLIP; (ii) all improvements located on, over or below the Land, including, but
not limited to, the buildings thereon (the "Buildings"), and all other
structures, systems, and utilities associated with, and utilized in the
ownership and operation of the Buildings (all such improvement being
collectively referred to herein as the "Improvements"), but excluding
improvements and structures, systems and utilities, if any, owned by Tenants and
subtenants of the Buildings: (iii) all right, title and interest of FLIP in and
to all tangible personal property (x) located on or in the Land or Improvements,
or (y) used in connection with the operation and maintenance of any or all of
the FLIP Properties, but not including personal property subject to equipment
leases, (collectively, the "Personal Property"); (iv) all building materials,
supplies, hardware, carpeting and other inventory owned by FLIP and maintained
in connection with FLIP's ownership and operation of the Land and/or
Improvements (collectively, the "Inventory"); (v) FLIP's interest in all
goodwill, trademarks, trade names, property owners' associations, architectural
control boards, development agreements, development rights and entitlements,
claims against third parties and other intangible property used or useful in
connection with the foregoing (collectively, the "Intangible Personal
Property"); (vi) FLIP's interest in all leases and other agreements to occupy
all or any portion of the Land and/or Improvements in effect on the date hereof
or into which FLIP enters prior to the Closing, but pursuant to the express
terms of this Agreement (collectively, the "Leases"); and (vii) FLIP's
proportionate ownership interests in partnerships described on Schedule 1(o)B to
the MCA (collectively, the "Partnership Interests").
"Material Adverse Effect" means an adverse effect on the
condition, financial or otherwise, or on the earnings, assets, business affairs
or business prospects of FLIP or the FLIP Properties which would be material to
FLIP and the FLIP Properties, taken as a whole.
"Operating Statements" mean all income and expense statements
and year-end financial operating statements for the FLIP Properties for calendar
years 1994, 1995 and 1996 and for the first and second quarters of 1997.
"Permitted Lien" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with generally accepted
accounting principles, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to liabilities or obligations not yet
due or delinquent and (iii) any minor imperfection of title or similar Lien
which individually or in the aggregate with other such Liens does not materially
impair the value of the FLIP Property subject to such Lien or the use of such
FLIP Property in the conduct of the business of FLIP.
<PAGE>
28
"Remedial Action" shall mean any and all corrective or
remedial action, preventative measures, response, removal, transport, disposal,
clean-up, abatement, treatment and monitoring of Hazardous Materials or
Environmental Issues, whether voluntary or mandatory, and includes all studies,
assessments, reports or investigations performed in connection therewith to
determine if such actions are necessary or appropriate (including investigations
performed to determine the progress or status of any such actions), all
occurring on or after the date hereof.
"Remedial Costs" shall mean all costs, liabilities, expenses
and fees incurred on or after the date of this Agreement in connection with
Remedial Action, including but not limited to: (i) the fees and environmental
consultants and contractors: (ii) reasonable attorneys' fees (including
compensation for in-house and corporate counsel provided such compensation does
not exceed customary rates for comparable services); (iii) the costs associated
with the preparation of reports, and laboratory analysis (including charges for
expedited results if reasonably necessary); (iv) regulatory, permitting and
review fees; (v) costs of soil and/or water treatment (including groundwater
monitoring) and/or transport and disposal; and (vi) the cost of supplies,
equipment, material and utilities used in connection with Remedial Action.
"Rent Roll" means the rent roll for the Buildings, indicating
all Leases, Tenants and other pertinent information.
"Tenants" means all of the tenants of the FLIP Properties
listed on the Rent Roll.
12.2 Glossary. The following capitalized terms are, unless otherwise
indicated below, defined in the following sections of this Agreement, unless
otherwise indicated below:
Defined Terms Section
Acquiror Recital
Action or Proceeding 1(h) of Schedule 3.1
Additional Rent 3(a)(vi) of Schedule 3.1
Adjustments 2.1(b)
Agreement Preamble
Allocated Amounts 2.1(b)
Approval Date 4.3(a)
Assumed Indebtedness 2.1(b)
Base Rent 3(a)(vi) of Schedule 3.1
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29
Defined Terms Section
Books and Records 12.1
Buildings 12.1
CERCLA 10.01 of MIA
Closing 1.02 of MIA
Closing Date 1.02 of MIA
Contracts 7(d)
Code 10.01 of MIA
Company Preamble
Company Shares 2.1(a)
Constituent Corporations 1.1
Continuity Properties 12.1
Damage 8
Defaulted Building 9.1
Defects 5.4
Defects Notice 5.4
Deleted Buildings 9.2
Deletion Notice 9.2
Delinquent Rents 7(h)
Delivered Assessments 4.3
Disclosed Contracts 1(e) of Schedule 3.1
Effective Time 1.4(b)
Environmental Issue Deletion Option 4.3(d)
Environmental Issue 4.3
Environmental Issue Notice 4.3(a)
Environmental Law 10.01 of MIA
Estoppel Certificate 3(a)(xiii) of Schedule 3.1
<PAGE>
30
Defined Terms Section
Exercise Date 1.01(a)(iv) of Stock Purchase
Agreement
Existing Loan Documents 1(s) of Schedule 3.1
Existing Loans 1(s) of Schedule 3.1
Existing Mortgages 1(s) of Schedule 3.1
Existing Notes 1(s) of Schedule 3.1
FAV 2.1(b)
FLIP Preamble
FLIP Subsidiary 5.1
FLIP Documents 4.2
FLIP Mitigation Option 4.3(b)
FLIP Properties 12.1
FLIP Remediation Notice 4.3(b)
FLIP Shares 2.1(b)
FLIP Shareholders Preamble
GAAP 10.01 of MIA
Governmental Approvals 1(d) of Schedule 3.1
Governmental or Regulatory Authority 3.05(a) of MIA
Hazardous Materials 10.01 of MIA
Improvements 12.1
Intangible Personal Property 12.1
Inventory 12.1
ISRA 10.1(m)
Land 12.1
Leases 12.1
Liens 10.01 of MIA
LP Units 2(c) of MCA
<PAGE>
31
Defined Terms Section
Lock-Up Period 2.5
Maryland Secretary of State 1.4(a)(i)
Master Investment Agreement or MIA Recital
Material Adverse Effect 12.1
Material Event 8(a)
McBride Recital
McBride Contribution Agreement or MCA Recital
McBride Contributor Preamble of MCA
MD Articles of Merger 1.4(a)(i)
Merger Recital
Merger Consideration 2.1(b)
MGCL Recital
New York Secretary of State 1.4(a)(ii)
NJDEP 10.1(m)
NYBCL Recital
NY Certificate of Merger 1.4(a)(ii)
Operating Partnership Recital
Operating Statements 12.1
Partnerships 1(n) of MCA
Partnership Interests 12.1
Partnership Units Recital of MIA
Pay-off Letter 10.1(g)
Per Share Purchase Price 2.01 of MIA
Per Unit Purchase Price 2.01 of MIA
Permitted Exceptions 5(a) of MCA
Permitted Lien 12.1
<PAGE>
32
Defined Terms Section
Permitted Transferee 2.5
Personal Property 12.1
Prorations 2.1(b)
Refinancing 10.01 of MIA
Remedial Action 12.1
Remedial Costs 12.1
Remediation Escrow 4.3(b)
Rent Roll 12.1
Required Estoppel Tenants 3(a)(xiii) of Schedule 3.1
Response Period 5.4
Securities Act 3.05(b) of MIA
Stock Purchase Agreement 1.01(i) of MIA
Subsequent Assessments 4.3
Subsidiary 10.01 of MIA
Surveys 5.2
Surviving Corporation Recital
Taking 8
Tax Bills 1(m) of Schedule 3.1
Tenants 12.1
Tenants in Default 9.1
Tenant Letters 10.2(c)
Termination Fee 9.02(b) of MIA
TID Notice 9.1
TID Study Period 9.2
Title Commitments 5.1
Title Company 5.1
<PAGE>
33
Defined Terms Section
Title Deleted Properties 5.4
Title Evidence 5.4
Title Policy 5.1
Transaction Agreements 10.01 of MIA
Transactions 1.01 of MIA
Transfer Taxes 10.01 of MIA
UCC Searches 5.3
<PAGE>
34
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each party hereto as of the date first above written.
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
By: /s/ EVAN ZUCKER
Name: Evan Zucker
Title: President
FAIRLAWN INDUSTRIAL PARK, INC.
By:/s/ TIMOTHY B. McBRIDE
Name: Timothy B. McBride
Title: Treasurer and Attorney-in-Fact
FRANCIS V. McBRIDE
REVOCABLE TRUST, UID 4/22/96
By: /s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
ANTOINETTE R. McBRIDE, TRUSTEE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
JOAN H. McBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
MARY V. DEKORTE
/s/ TIMOTHY B. McBRIDE
TIMOTHY B. McBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
KATHRYN M. KRUCKEL
<PAGE>
35
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
MORIA McBRIDE MURPHY
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
J. NEVINS McBRIDE, JR.
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
W. PETER McBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
DAVID F. McBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
TERENCE A. McBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
SHEILA JAMES
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
MICHAEL X. McBRIDE
/s/ TIMOTHY B. McBRIDE, Attorney-in-Fact
MARK J. McBRIDE
<PAGE>
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF THE COMPANY
<PAGE>
EXHIBIT B
DIRECTORS OF THE SURVIVING CORPORATION
1. *Jim Mulvihill
2. *David Lesser
3. *David McBride
4. +Jeffrey Kelter
5. +Robert A. Branson
6. oEvan Zucker
7. oTimothy McBride
* To serve from and after the Effective Time until their respective
successors are duly elected at the third succeeding annual
stockholders meeting after the Effective Time.
+ To serve from and after the Effective Time until their respective
successors are duly elected at the second succeeding annual
stockholders meeting after the Effective Time.
o To serve from and after the Effective Time until their respective
successors are duly elected at the first succeeding annual
stockholders meeting after the Effective Time.
<PAGE>
EXHIBIT C
OFFICERS OF THE SURVIVING CORPORATION
Name Title
David F. McBride Chairman of the Board
Jeffrey Kelter President
<PAGE>
EXHIBIT D
PROMISSORY NOTE
<PAGE>
SCHEDULE 3.1
FLIP REPRESENTATIONS AND WARRANTIES
Except as otherwise disclosed in the schedules to the MCA with
respect to a FLIP Property, FLIP represents and warrants to, and covenants with,
the Company as follows:
1. General.
(a) Organization. FLIP is duly organized and validly existing and in
good standing under the laws of the jurisdiction of its organization and has all
requisite power and lawful authority to (i) own, lease and operate its
properties and assets as they are now owned, leased and operated and (ii) carry
on its business as now conducted and presently proposed to be conducted. FLIP is
duly qualified, licensed or admitted to do business and is in good standing in
those jurisdictions in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for failures to be so qualified,
licensed or admitted and in good standing that individually or in the aggregate
would not result in a Material Adverse Effect.
(b) Authority. FLIP has the full legal right and power and all
authority and approval required to enter into, execute and deliver this
Agreement and to perform fully its obligations hereunder. The execution and
delivery of this Agreement and the other documents delivered by FLIP pursuant to
this Agreement, and the performance of all of its obligations under this
Agreement and such other documents by it, have been duly authorized by it, and
this Agreement is binding on it and enforceable against it in accordance with
its terms. No consent (other than those which have been obtained or as set forth
on Schedule 6.1(b) to the MCA with respect to the FLIP Properties) of any
creditor, investor, partner, shareholder, tenant-in-common of FLIP, judicial or
administrative body, Governmental Authority, or other governmental body or
agency, or other party to such execution, delivery and performance by FLIP is
required. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby by FLIP will (i) result in a breach of, default
under, or acceleration of, any agreement to which FLIP is a party or by which it
or any of the FLIP Properties are bound, other than the Existing Mortgages as
set forth in Schedule 6.1(b) to the MCA with respect to the FLIP Properties,
(ii) violate any provision of its limited liability company agreement or other
organizational documents or (iii) violate any restriction, court order,
agreement or other legal obligation to which FLIP and/or any of the FLIP
Properties are subject, except for such breaches, defaults, acceleration, or
violations which individually or in the aggregate would not have a Material
Adverse Effect.
(c) Other Rights. There are no development or other rights
associated with any FLIP Property which are not being transferred to the Company
under this Agreement or the other transaction documents.
(d) Defaults. To its knowledge, FLIP is not in default (which
default remains uncured) under any of the documents, recorded or unrecorded,
referred to in the Title Commitments for the FLIP Properties, except for such
defaults that individually or in the
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aggregate would not have a Material Adverse Effect. To its knowledge, neither
FLIP nor any FLIP Property is in default under any certificates of occupancy,
licenses, permits, authorizations and approvals required by law or by any
governmental authority having jurisdiction thereof in respect of the FLIP
Properties, or any portion thereof, occupancy thereof or any present use thereof
(the "Governmental Approvals"), except for such defaults which individually or
in the aggregate would not have a Material Adverse Effect.
(e) Contracts. There are no existing contracts or equipment leases
of any kind relating to the management, leasing, construction, operation,
maintenance or repair of any FLIP Property to which FLIP is a party, except
those contracts listed on Schedule 6.1(e) to the MCA with respect to the FLIP
Properties (the "Disclosed Contracts"). The Disclosed Contracts are in full
force and effect and have not been modified except as set forth in such Schedule
6.1(e) with respect to the FLIP Properties, and all of the Disclosed Contracts
will remain in full force and effect through the Closing unless the Company
otherwise directs FLIP pursuant to written notice provided to FLIP at least 35
days prior to Closing. To its knowledge, each party to the Disclosed Contracts
has performed all material obligations required to be performed by it, and is
not in default under any of such Disclosed Contracts, except for such defaults
that individually or in the aggregate would not have a Material Adverse Effect.
Except as set forth on Schedule 6.1(e) to the MCA with respect to the FLIP
Properties, all of the Disclosed Contracts may, by the express terms thereof, be
terminated without penalty or other payment by FLIP (or its assignees or
successors) upon no more than 30 days' prior notice.
(f) Employees. FLIP does not have any employees. FLIP is not a party
to any collective bargaining or other agreement or understanding with any labor
union relating to any one or more of the FLIP Properties, and is not privy to or
involved in any labor or union controversy or other union interaction of any
kind.
(g) Compliance with Laws and Codes. (i) The FLIP Properties, and the
use and operation of any or all of them are (or the use and operation of any
component, portion or area of any FLIP Property is) in material compliance with
all applicable municipal and other governmental laws, ordinances, regulations,
codes, licenses, permits and authorizations; and (ii) there are presently and
validly in effect all licenses, permits and other authorizations necessary for
the use, occupancy and operation of the FLIP Properties as they are presently
being operated, whether required of FLIP or any Tenant, except for failures in
(i) or (ii) above to comply or to hold such licenses, permits or other
authorizations which, individually or in the aggregate, are not having and would
not be reasonably expected to have a Material Adverse Effect. FLIP has not
received any written notice from any Governmental Authority or person alleging
that any or all of the FLIP Properties fails to comply with any or all
applicable requirements of the Americans With Disabilities Act of 1990, as
amended (42 U.S.C.A. ss.ss. 12101 et seq.) (i) Each FLIP Property is zoned by
the municipality in which it is located so as to permit the existing uses and
structures thereon, in a manner that accommodates and is fully compatible with
the Building and Improvements as they presently exist at each such FLIP
Property, and (ii) no FLIP Property constitutes a nonconforming use or
nonconforming structure under applicable present zoning laws, except for
violations in (i) or (ii) above which, individually or in the aggregate, are not
having and would not be reasonably expected to have a Material Adverse Effect.
To its knowledge, no zoning,
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<PAGE>
subdivision, Environmental Law, Environmental Permit, building code, health,
fire, safety or other law, order or regulation is, or on the Closing Date will
be, violated by the continued maintenance, operation or use of any Improvements
or parking areas at the FLIP Properties, except for violations which,
individually or in the aggregate, are not having and would not be reasonably
expected to have a Material Adverse Effect, and, other than those set forth in
Schedule 6.1(g) with respect to the FLIP Properties, FLIP has not received any
written notice of any such violation from any Governmental Authority having
jurisdiction over the FLIP Properties. The foregoing representation in this
clause shall not apply to any matters specifically described in Section 1(h) or
Section 2 in this Schedule 3.1.
(h) Litigation. Except as shown on Schedule 6.1(h) to the MCA with
respect to the FLIP Properties or those proceedings as to which liability has
been expressly assumed in writing by an insurer, there are no pending or, to its
knowledge, threatened, actions, suits, arbitrations, or judicial, municipal, or
administrative proceedings ("Action or Proceeding") nor to its knowledge are
there any Governmental or Regulatory Authority investigations or audits pending
or threatened against, relating to or affecting any FLIP Property or in which
FLIP is or will be a party by reason of its ownership or operation of, or right
to acquire, any FLIP Property or any portion thereof, including, without
limitation, proceedings for or involving collections (other than collection
proceedings in the ordinary course of business), condemnation, eminent domain,
alleged building code or environmental or zoning violations, or personal
injuries or property damage alleged to have occurred on any FLIP Property or by
reason of the condition, use of, or operations on, such FLIP Property. No
attachments, execution proceedings, assignments for the benefit of creditors,
insolvency, bankruptcy, reorganization or other proceedings are pending or, to
its knowledge threatened, against FLIP, nor, to its knowledge, are any of such
proceedings contemplated by it which, individually or in the aggregate, is
having or would be reasonably expected to have a Material Adverse Effect. FLIP
is not subject to any Order of any Governmental or Regulatory Authority which,
individually or in the aggregate, is having or would be reasonably expected to
have a Material Adverse Effect or adversely affect in any material respect the
ability of FLIP to consummate the transactions contemplated by this Agreement or
the Transaction Agreements to which it is a party.
(i) Insurance. FLIP now has in force or is named as an additional
insured on casualty, liability and business interruption insurance relating to
the FLIP Properties in the minimum coverages and amounts set forth in Schedule
6.1(i) to the MCA with respect to the FLIP Properties. FLIP has not received any
written notice from any insurance carrier and has no knowledge of any defects or
inadequacies in the FLIP Properties that, if not corrected, would result in
termination of insurance coverage or material increase in the present cost
thereof.
(j) Financial Information. The Operating Statements and all of their
Books and Records: are complete, accurate, true and correct; will be, prior to
the Exercise Date, compiled in accordance with generally accepted accounting
principles; and accurately set forth in all material respects the results of the
operation of the FLIP Properties and/or the financial position of FLIP for the
periods covered. There has been no material adverse change in the financial
condition or operation of the FLIP Properties since the period covered by the
Operating Statements.
3
<PAGE>
(k) Re-Zoning. There is not now pending, and FLIP has no knowledge
of, any threatened proceeding for the rezoning of any FLIP Property or any
portion thereof, or the taking of any other action by governmental authorities
that would have a material adverse impact on the value of any FLIP Property or
use thereof.
(l) Personal Property. The Personal Property is all of the personal
property owned by FLIP and used in (or necessary for) the operation of the FLIP
Properties. FLIP has good title to the Personal Property, free and clear of any
Liens, except for Permitted Liens. All such Personal Property is in good working
condition, and free of material defects, normal wear and tear excepted.
(m) Real Estate Taxes. The bill or bills issued for the years 1994,
1995 and 1996, for all real estate taxes and personal property taxes and copies
of any and all notices pertaining to real estate taxes or assessments applicable
to the FLIP Properties (the "Tax Bills") (and, to FLIP's knowledge, the only
real estate tax bills applicable to the FLIP Properties) have been delivered to
the Company. Except as set forth on Schedule 6.1(m) to the MCA with respect to
the FLIP Properties, FLIP has not received written notice of any proposed or
actual increase in the assessed valuation or rate of taxation of any or all of
the FLIP Properties from that reflected in the most recent Tax Bills. Except as
described on Schedule 6.1(m) to the MCA with respect to the FLIP Properties, to
its knowledge, there is not now pending, and FLIP agrees that it will not,
without the prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed and shall automatically be deemed given in the
event that the Company fails to respond to a request for its consent within five
business days after the date on which such request is deemed delivered),
institute prior to the Closing Date, any proceeding or application for a
reduction in the real estate tax assessment of any of the FLIP Properties or any
other relief for any tax year. In the event that any of the pending tax
proceedings reflected on Schedule 6.1(m) to the MCA with respect to the FLIP
Properties result in any rebate of taxes paid after the Closing Date in respect
of any period ending prior to the Closing Date, the amount of such rebate, net
of the fees and expenses owing to tax certiorari counsel and all other fees and
expenses (including, without limitation, other attorneys' fees and expenses)
payable by FLIP in connection with any such tax proceedings shall be the
property of and remitted to FLIP (except if and to the extent that all or any
portion of such rebated sums are due to Tenants). There are no outstanding
agreements with attorneys or consultants providing for compensation on a
contingency basis with respect to the Tax Bills that will be binding on the
Company or any of the FLIP Properties after the Closing. Other than the amounts
disclosed by the Tax Bills, no other real estate taxes have been, or to its
knowledge, will be, assessed against the FLIP Properties, or any portion thereof
in respect of the year 1997 or any prior year, and no special assessments of any
kind (special, bond or otherwise) are or have been levied against the FLIP
Properties, or any portion thereof, that are outstanding or unpaid, and, to its
knowledge, none will be levied prior to Closing.
(n) Taxes. No federal, state or local taxing authority has asserted
in writing any tax deficiency, lien, interest or penalty or other assessment
against the FLIP Properties or FLIP which has not been paid and there is no
pending audit or inquiry from any federal, state or local tax authority relating
to the FLIP Properties or FLIP which reasonably may be expected to result in a
tax deficiency, lien, interest, penalty or other assessment against the
4
<PAGE>
FLIP Properties, and to its knowledge, no event has occurred and no condition or
circumstance exists which presents a material risk that any tax will be imposed
on FLIP or any FLIP Property, in each case which would have, individually or in
the aggregate, a Material Adverse Effect. FLIP has prepared and timely filed all
tax returns required to be filed by it on or before the date hereof, which to
the extent the taxes are imposed on the FLIP Properties or on FLIP are true,
correct and complete in all material respects. FLIP has paid or made provision
for the payment of all taxes that are due or claimed in writing to be due from
it on or before the date hereof by any governmental taxing authority. Since
December 31, 1996, FLIP has not incurred any liability for taxes except in the
ordinary course of business. FLIP is an S corporation that validly elected to be
an S corporation for federal and relevant state and local income tax purposes
beginning with its first taxable year beginning January 1, 1987 and has
maintained its status as an S corporation at all times thereafter. No event
exists or has existed which presents any risk that FLIP's status as an S
corporation is or was subject to termination or revocation. At Closing, FLIP
will not have any earnings and profits for federal income tax purposes.
(o) Transfer Taxes. All applicable recording fees, documentary
transfer taxes, and use, personal property and all other Transfer Taxes imposed
with respect to the FLIP Properties shall be paid by FLIP.
(p) Easements and Other Agreements. FLIP has not received any
written notice (that remains outstanding) alleging that it is in default in
complying with the terms and provisions of any of the covenants, conditions,
restrictions, rights-of-way or easements constituting one or more of the
Permitted Exceptions.
(q) Lease Controversies. Except as described on Schedule 6.1(q) to
the MCA with respect to the FLIP Properties, no controversy, complaint,
proceeding, suit or litigation relating to all or any of the Leases, is pending
or, to its knowledge, threatened, whether in any tribunal or informally.
(r) United States Person. Neither FLIP nor any FLIP Shareholder is a
"Foreign Person" within the meaning of Section 1445(f)(3) of the Code and each
of them shall execute and deliver an "Entity Transferor" or "Individual
Transferor" certification at Closing.
(s) Existing Mortgage(s). Schedule 6.1(t) to the MCA sets forth a
true, correct and complete schedule of those mortgage(s) or trust deed(s)
("Existing Mortgages") presently encumbering the FLIP Properties or any portion
thereof. FLIP has complied with (and, prior to Closing, shall continue to comply
with) the terms of, and all notices or correspondence received from the holder
of, the promissory notes evidencing the loans (the "Existing Loans") secured by
the Existing Mortgages (the "Existing Notes"), the Existing Mortgages, and all
other documents securing the Existing Notes (collectively, the "Existing Loan
Documents"). FLIP has paid (and, at all times prior to Closing, shall pay), when
and as due, all sums due under the Existing Loan Documents. The Existing Notes
and Existing Mortgages are in full force and effect, and FLIP has not received
any notice of a default thereunder or under the Existing Loan Documents. FLIP
has delivered to the Company true, complete and accurate copies of all of the
Existing Loan Documents. All of the Existing
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<PAGE>
Loans other than the Refinancing and those set forth on Schedule 6.1(t) may be
prepaid, in full, on the Closing Date without imposition of any penalty or
premium.
(t) Condemnation. FLIP has not received any written notice of any,
and to its knowledge there are no, pending or contemplated condemnation or other
governmental eminent domain proceedings affecting all or any part of any of the
FLIP Properties.
(u) Disclosure. FLIP has not intentionally withheld from the Company
any materially adverse information about any FLIP Property of which it has
knowledge. All items delivered by FLIP pursuant to this Agreement are true,
accurate, correct and complete in all material respects, and fairly present the
information set forth in a manner that is not misleading. The copies of all
documents and other agreements delivered or furnished and made available by FLIP
to the Company pursuant to this Agreement constitute all of and the only Leases
and other agreements to which FLIP is presently a party relating to or affecting
the ownership, leasing, management and operation of the FLIP Properties, there
being no "side" or other agreements, written or oral, in force or effect, to
which FLIP is a party or to which any FLIP Property is subject. No
representation or warranty made by FLIP in this Agreement, no exhibit attached
hereto with respect to the FLIP Properties, and no schedule contained in this
Agreement contains any untrue statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein not
misleading.
(v) Title to Properties. At Closing, the Company will receive good
and marketable title to the FLIP Properties, free and clear of all Liens, other
than the Assumed Indebtedness with respect to the FLIP Properties.
(w) Assets and Liabilities. At the Closing Date, the only assets of
FLIP will be those listed on Part B of Schedule 2(b)(i)-A to the MCA and the
only liabilities of FLIP will be those set forth on Part B of Schedule 2(b)(i)-B
and liabilities incurred in the ordinary course of business with respect to the
operation of the FLIP Properties prior to the Closing Date or those which,
individually or in the aggregate, would not have a Material Adverse Effect.
(x) Source of Income. Except as set forth in Schedule 6.1(y) to the
MCA with respect to the FLIP Properties, which schedule may be delivered or
updated through the date that is 30 days before the Closing, (i) at Closing, all
gross income generated by the FLIP Properties pursuant to the Leases (as amended
through Closing) or otherwise will be from the sources described in Section
856(c)(3) of the Code and (ii) at Closing, all of the assets held by FLIP (and
assets owned by partnerships in which FLIP has an ownership interest or by the
FLIP Subsidiary) will be assets described in Section 856(c)(5)(A) of the Code.
(y) Income from Prohibited Transactions. FLIP is not holding any of
the FLIP Properties primarily for sale to customers in the ordinary course of
business as described in Section 1221(1) of the Code such that the income
derived therefrom would be considered income from prohibited transactions as
defined at Section 857(b)(6) of the Code.
(z) Partnership Status. Each Partnership Interest held by FLIP
that constitutes an ownership interest in a partnership is an interest in a
partnership that has been
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<PAGE>
organized and at all times classified as a partnership for federal income tax
purposes and for the applicable state income tax purposes and not as a
corporation or an association taxable as a corporation.
2. Environmental.
FLIP has obtained all Licenses which are required in respect of its
business, operations or FLIP Properties under applicable Environmental Laws, and
FLIP and the FLIP Properties are in compliance in all material respects with the
terms and conditions of all such Licenses and with any applicable Environmental
Law, except for such instances of noncompliance as would not, individually or in
the aggregate, have a Material Adverse Effect. Except as disclosed in the
Delivered Assessments or on Schedule 8 to the MCA with respect to the FLIP
Properties, and except in such circumstances as would not, individually or in
the aggregate, have a Material Adverse Effect, FLIP represents and warrants to
the Company that to its knowledge:
(a) No Order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any Governmental or Regulatory Authority with respect to any
alleged failure by FLIP to have any License required in connection with the
conduct of the business or operations of FLIP with respect to any treatment,
storage, recycling, transportation, disposal or Release, of any Hazardous
Material at any of the FLIP Properties.
(b) Neither FLIP nor any prior owner or lessee of any of the FLIP
Properties has handled any Hazardous Material on any FLIP Property and, without
limiting the foregoing, (i) no polychlorinated biphenyl is or has been present,
(ii) no asbestos is or has been present, (iii) there are no underground storage
tanks, active or abandoned, and (iv) no Hazardous Material has been Released in
a quantity reportable under, or in violation of, any Environmental Law, at, on
or under any of the FLIP Properties, during any period that FLIP owned or leased
such FLIP Property or prior thereto.
(c) FLIP has not transported or arranged for the transportation of
any Hazardous Material to any location which is the subject of any Action or
Proceeding that would lead to claims against the Company or any of its
Subsidiaries for clean-up costs, remedial work, damages to natural resources or
personal injury claims, including, but not limited to, claims under CERCLA.
(d) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of FLIP and none of the FLIP Properties
is listed or proposed for listing on the National Priorities List promulgated
pursuant to CERCLA or on any similar state list of sites requiring investigation
or clean-up.
(e) There are no Liens (other than Permitted Liens) arising under or
pursuant to any Environmental Law or Order on any FLIP Property, and no action
of any Governmental or Regulatory Authority has been taken or is in process
which could subject any FLIP Property to such Liens, and FLIP would not be
required to place any notice or
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<PAGE>
restriction relating to the presence of Hazardous Material at any FLIP Property
owned by it in any deed to such FLIP Property.
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, FLIP in relation to any FLIP Property since 1991 which have not
been delivered or made available to the Company prior to the execution of this
Agreement.
3. Leases.
(a) With respect to each of the Leases and Tenants listed on the
Rent Roll, FLIP represents and warrants to the Company as follows:
(i) Except as set forth on the Rent Roll, each of the Leases
is in full force and effect according to the terms set forth therein and in the
Rent Roll, and has not been modified, amended, or altered, in writing or
otherwise. Except as otherwise specifically disclosed on the Rent Roll, each
Tenant is legally required to pay all sums and perform all obligations set forth
in the Leases, without concessions, abatements, offsets or other bases for
relief or adjustment;
(ii) Except as set forth on Schedule 9(a)(ii) to the MCA with
respect to the FLIP Properties, all obligations of the lessor under the Leases
that accrue to the date of Closing have been performed, including, but not
limited to, all required tenant improvements, cash or other inducements, rent
abatements or moratoria, installations and construction (for which payment in
full has been made or will be made prior to Closing, or subject to proration
hereunder in all cases), and, to its knowledge, each Tenant has unconditionally
accepted lessor's performance of such obligations. Except as set forth on
Schedule 9(a)(ii) with respect to the FLIP Properties, no Tenant has asserted
any offsets, defenses or claims available against rent payable by it or other
performance or obligations otherwise due from it under any Lease, which
assertion remains outstanding;
(iii) Except as set forth on the Rent Roll, no Tenant is
currently in default under or is in arrears in the payment of any sums or in the
performance of any monetary obligations required of it under its Lease, and FLIP
has no knowledge of any other default under any such Lease;
(iv) Except as set forth in Schedule 9(a)(iv) to the MCA with
respect to the FLIP Properties, during the 18-month period immediately preceding
the date hereof: (A) no Tenant has, at any time, been more than 30 days
delinquent in its respective payment of any and all sums due under the terms of
its respective Lease; (B) no Tenant has requested that FLIP provide that Tenant
with any reduction in the Tenant's monetary obligations under its Lease; (C) no
Tenant has expressed to FLIP (whether orally or in writing) any weakness or
material decline in that Tenant's financial condition, nor has any Tenant
requested that FLIP, in its capacity as landlord, permit the Tenant to sublease
its leased premises, or assign its Lease, or terminate its Lease on an
accelerated basis; (D) FLIP has not "written off" any delinquent sums owed by
any Tenant to satisfy its obligation to contribute to the payment of real estate
taxes, common area maintenance charges, and insurance premiums; and (E) FLIP
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has not had (nor is it currently engaged in) any dispute (whether of a formal or
an informal nature) with any Tenant concerning that Tenant's obligations to make
payments under the terms of its Lease toward real estate taxes, insurance
premiums and common area maintenance charges or other charges imposed under its
Lease;
(v) Except as set forth on Schedule 9(a)(v) to the MCA with
respect to the FLIP Properties, FLIP has not received any written notice from
any Tenant stating that a petition in bankruptcy has been filed by or against
it;
(vi) Except with respect to security deposits, neither base
rent ("Base Rent"), nor regularly payable estimated Tenant contributions or
operating expenses, insurance premiums, real estate taxes, common area charges,
and similar or other "pass through" or non-base rent items including, without
limitation, cost-of-living or so-called "C.P.I." or other such adjustments
(collectively, "Additional Rent"), nor any other material item payable by any
Tenant under any Lease has been heretofore prepaid for more than one month;
(vii) To its knowledge, no guarantor(s) of any Lease has been
released or discharged, partially or fully, voluntarily or involuntarily, or by
operation of law, from any obligation under or in connection with any Lease or
any transaction related thereto;
(viii)Except as set forth on Schedule 9(a)(viii) to the MCA
with respect to the FLIP Properties, there are no brokers' commissions, finders'
fees, or other charges payable or to become payable to any third party on behalf
of FLIP in connection with any Lease, including, but not limited to, any
exercised option(s) to expand or renew;
(ix) Each security deposit set forth on the Rent Roll shall be
assigned to the Company at the Closing (or the Company shall receive a credit
therefor). Except as set forth on Schedule 9(a)(ix) to the MCA with respect to
the FLIP Properties, (i) no Tenant or any other party has asserted any claim
(other than for customary refund at the expiration of a Lease) to all or any
part of any security deposit and (ii) FLIP has not applied any portion of any
security deposit to the payment of any sums due from any Tenant under a Lease;
(x) FLIP shall pay (or the Company shall receive a credit
therefor), and retain sole and exclusive responsibility for, all expenses set
forth on Schedule 9(a)(x) to the MCA with respect to the FLIP Properties due on
or before the Closing Date connected with or arising out of the negotiation,
execution and delivery of the Leases, including, without limitation, brokers'
commissions (including those applicable, if any, to future expansions or
renewals by a Tenant), leasing fees, recording fees, and the cost of all tenant
improvements not required to be paid for by Tenants;
(xi) Except as set forth on Schedule 9(a)(xi) to the MCA with
respect to the FLIP Properties, no Tenant has, by virtue of its Lease or any
other agreement or understanding, any purchase option with respect to any FLIP
Property, or any portion thereof, or any right of first refusal to purchase any
FLIP Property, or a portion thereof, whether triggered by the transactions
contemplated by this Agreement or by a subsequent sale of such FLIP Property or
a portion thereof. Except as set forth on Schedule 9(a)(xi) to the MCA with
respect to the FLIP Properties, no Tenant has, by virtue of its Lease or any
other agreement
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or understanding any of the following (A) the right or option to terminate its
Lease other than customary termination rights in the event of a default,
casualty or condemnation and (B) the right or option to reduce the rentable
space at any FLIP Property that such Tenant is currently occupying and (C) the
right to use or occupy any property outside the boundaries of the FLIP Property
in which the premises demised thereunder are located; and
(xii) Except as set forth on Schedule 9(a)(xii) to the MCA
with respect to the FLIP Properties or on the Rent Roll: (A) to its knowledge,
no Tenant has sublet its leased premises; (B) no assignment of any interest in a
Lease has been made by any Tenant; and (C) there are no outstanding requests
from any Tenants to FLIP requesting any consent to an assignment of the Tenant's
Lease or to a sublease of all or some portion of a Tenant's leased premises.
(xiii)Estoppel Certificates from Tenants. FLIP shall use its
reasonable, good faith and diligent efforts to obtain and deliver to the
Company, on or prior to the Closing Date, a tenant's estoppel certificate (the
"Estoppel Certificate") dated no earlier than 60 days prior to the Closing Date
from each of the Tenants. Each such Estoppel Certificate shall be substantially
in the form attached to the MCA as Exhibit B thereto. It shall be a condition
precedent to the obligations of the Company that FLIP shall obtain and deliver
to the Company, at Closing, Estoppel Certificates for (i) 75% of the total
aggregate gross rental income for all of the FLIP Properties (as shown on the
Rent Roll delivered at Closing), (ii) any single-Tenant FLIP Property and (iii)
those particular Tenants reflected in Schedule 9(b) to the MCA with respect to
the FLIP Properties ("Required Estoppel Tenants"). If FLIP satisfies the above
requirement, but (despite its good faith and diligent efforts) is unable to
obtain all of the remaining Estoppel Certificate(s) from any Tenants, then, at
Closing, FLIP shall deliver to the Company an Estoppel Certificate with respect
to such Tenant(s) in substantially the same form as such Exhibit B; provided,
however, that in the event that FLIP ultimately procures (within 60 days after
Closing) an Estoppel Certificate from any Tenant with respect to which FLIP
issues its own Estoppel Certificate and such Tenant's Estoppel Certificate
complies with the requirements of this paragraph, then FLIP shall be released
from its own Estoppel Certificate with respect to that Tenant.
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