<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 7, 1997
Date of Report (Date of earliest event reported)
Commission File Number 1-12452
AVALON PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
--------------------
Maryland 06-1379111
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
15 River Road
Wilton, Connecticut 06897
(Address of principal executive offices) - (Zip Code)
(203) 761-6500
(Registrant's telephone number, including area code)
--------------------
<PAGE> 2
AVALON PROPERTIES, INC.
CURRENT REPORT
ON FORM 8-K
ITEM 5. OTHER EVENTS.
On November 7, 1997, Avalon Properties, Inc. (the "Company"), Avalon
DownREIT V, L.P., a new limited partnership to be formed by the Company (the
"Operating Partnership"), AMLI Residential Properties Trust ("AMLI") and AMLI
Residential Properties, L.P. ("AMLI OP" and, together with AMLI, the "AMLI
Parties") entered into a Contribution and Exchange Agreement (the "Contribution
Agreement") with entities affiliated with Trammell Crow Residential-Midwest
("TCR/MW"). Under the Contribution Agreement, the Company and the Operating
Partnership expect to acquire eight apartment communities containing a total of
2,329 apartment homes, assuming completion of one apartment community currently
under construction (the "New Communities"). The New Communities are located in
the Chicago, Cincinnati, Indianapolis, Minneapolis and St. Louis metropolitan
areas. The Contribution Agreement also provides for the acquisition of certain
third-party management contracts and the acquisition of one undeveloped parcel
of land from TCR/MW.
The consummation of the transactions contemplated by the Contribution Agreement
(the "Transaction") is subject to certain conditions, including certain due
diligence and title requirements. There can be no assurance that the
Transaction will be consummated, that the required conditions to closing will
be met, or that the Contribution Agreement will not be amended or terminated.
While consummation of the Transaction cannot be assured, the Company expects
the seven existing New Communities to be acquired before December 31, 1997 and
the New Community currently under construction to be acquired before December
31, 1999.
Under the terms of the Contribution Agreement, the Company will acquire the New
Communities for an aggregate of $196 million, which includes $149 million of
cash, $20 million of units of limited partnership interest in the Operating
Partnership that are exchangeable for cash or at the Company's option, an equal
number of shares of the Company's Common Stock, and the assumption of
approximately $27 million of debt.
In the event that the AMLI Parties default under the Contribution Agreement
and do not cure such default, the Company and the Operating Partnership, in
order to consummate the Transaction, will be obligated to acquire two
additional apartment communities from TCR/MW for (i) the payment by the Company
of approximately $19.5 million in cash, (ii) the assumption of approximately
$13 million of debt by the Company and/or the Operating Partnership and (iii)
the issuance by the Operating Partnership of Units valued at approximately $4.6
million.
The New Communities are described as follows:
Arbors of Montgomery is a 264 apartment home community located in
Cincinnati, Ohio. This luxury, garden-style community was built in 1989.
Amenities include a clubhouse, racquetball court, two lighted tennis
courts, swimming pool, fitness center, basketball court and whirlpool.
Arbors at Willow Lake is a luxury, garden-style apartment community
located in Indianapolis, Indiana. This community consists of 230
apartment homes located in 15 two-story buildings and was built in 1992.
Amenities include a clubhouse, carports/garages, lighted tennis court,
swimming pool with sun deck, fitness center and picnic areas.
Devonshire Gates is a garden-style and townhome-style apartment
community located in Bloomington, Minnesota. This community consists of
498 apartment homes and was built in 1988. Amenities include a clubhouse,
jogging trails, two lighted tennis courts, swimming pool with sun deck,
fitness center, gazebos with picnic areas and whirlpool spa and sauna. In
connection with this acquisition, the Company expects to assume
tax-exempt floating rate debt with a principal balance of approximately
$27,305,000. These bonds mature December 1, 2025.
Pinnacle at Oxford Hill is a garden-style apartment community located
in St. Louis, Missouri. This community, built in 1970, consists of 480
apartment homes located in 36 buildings and is currently under extensive
renovation. Amenities will include a clubhouse, jacuzzi/sauna, lighted
tennis courts, two outdoor and one indoor swimming pools and fitness
center.
Vinings at Danada is a townhome and carriage apartment community
located in Wheaton, Illinois. This community is currently in lease-up and
consists of 295 apartment homes located in 23 three-story townhome
buildings and 8 two-story carriage home buildings. Amenities include a
clubhouse, business center, concierge services, outdoor swimming pool
with sun deck and fitness center.
Vinings at Geist is a luxury apartment community located in Lawrence,
Indiana. This community, built in 1997 and recently stabilized, consists
of 146 apartment homes located in buildings with architectural features
that resemble traditional single family-style homes. Amenities include a
clubhouse, picnic areas with grills, swimming pool with sun deck and
fitness center.
2
<PAGE> 3
Vinings at Towne Green is a townhome and carriage apartment community
located in Bloomingdale, Illinois. This community is currently in
lease-up and consists of 192 apartment homes located in two and
three-story townhome and carriage home buildings. Amenities include a
clubhouse, business center concierge services, and outdoor swimming pool
with sun deck.
Vinings at Woodbury is a townhome and carriage apartment community
currently under construction in Woodbury, Minnesota. This community will
have 224 apartment homes located in 15 three-story townhome buildings and
8 two-story carriage home buildings. Amenities will include a clubhouse,
business center, concierge services, fitness center and outdoor swimming
pool with sun deck.
In addition to the New Communities acquired in connection with the
Transaction described above, the Company acquired or expects to
acquire three apartment communities before December 31, 1997 from other
Sellers. Descriptions of these communities are as follows.
The Company acquired a fee simple interest in Village Green of Madison
Heights, a garden-style community in Madison Heights, Michigan in
November 1997. This community was purchased for approximately $15,215,000
with cash proceeds drawn under the Company's unsecured credit facilities
(the "Unsecured Facilities"). Village Green of Madison Heights, built in
1990, contains a total of 225 apartment homes in 11 two and three-story
buildings and one townhome building.
The Company acquired a fee simple interest in Village Park of Troy, a
garden-style community in Troy, Michigan in November 1997. This community
was purchased for approximately $31,120,000 with cash proceeds drawn
under the Company's Unsecured Facilities. Village Park of Troy contains a
total of 544 apartment homes located in 42 two and one-half story
buildings and was built in five phases between 1969 and 1975 and was
renovated in 1990.
The Company expects to acquire a fee simple interest in Village Park of
Westmont, a garden-style community in Westmont, Illinois before December
31, 1997. This community is to be purchased for approximately
$25,695,000 with cash proceeds drawn under the Company's Unsecured
Facilities. Village Park of Westmont contains a total of 400 apartment
homes located in 20 two-story buildings and was built in two phases
between 1966 and 1975 and was renovated in 1996.
Certain historical and pro forma financial information concerning these
communities is as set forth in Item 7 of this report.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
<TABLE>
<S> <C>
(a) Financial Statements of Certain Communities Acquired
PAGE
----
Report of Independent Accountants 5
Combined Statement of Revenue and Certain Operating Expenses for
the Year Ended December 31, 1996 6
Notes to Combined Statement of Revenue and Certain Operating
Expenses 7
Estimates of Net Income and Funds from Operations of Certain Acquired
Communities (unaudited) 8
Notes to Estimates of Net Income and Funds from Operations of Certain
Acquired Communities (unaudited) 9
(b) Unaudited Pro Forma Financial Information 10
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997 11
Notes to Pro Forma Condensed Consolidated Balance Sheet 12
Pro Forma Condensed Consolidated Statement of Operations for the Nine
Months Ended September 30, 1997 13
Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1996 14
Notes to Pro Forma Condensed Consolidated Statements of Operations 15
(c) Exhibits
Contribution and Exchange Agreement Dated November 7, 1997 17
</TABLE>
4
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Avalon Properties, Inc.
We have audited the accompanying combined statement of revenue and certain
operating expenses of the Acquisition Communities, as defined in the
accompanying Note 1, for the year ended December 31, 1996. This combined
statement is the responsibility of the management of the Acquisition
Communities. Our responsibility is to express an opinion on the combined
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the combined statement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the combined statement. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenue and certain operating expenses
has been prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the revenue and expenses of the
Acquisition Communities.
In our opinion, the combined statement referred to above presents fairly, in all
material respects, the revenue and certain operating expenses described in Note
2 of the Acquisition Communities for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
November 20, 1997
5
<PAGE> 6
ACQUISTION COMMUNITIES
COMBINED STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
REVENUE:
Rental income $22,156
--------------
CERTAIN OPERATING EXPENSES:
Operating and maintenance 6,984
Real estate taxes 2,359
--------------
Total certain operating expenses 9,343
--------------
Excess of revenue over certain operating expenses $12,813
==============
</TABLE>
See the accompanying notes to the Combined Statement of Revenue
and Certain Operating Expenses.
6
<PAGE> 7
ACQUISITION COMMUNITIES
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES
1. ACQUISITION COMMUNITIES
The combined statement of revenue and certain operating expenses relates
to eight residential apartment communities expected to be acquired
by Avalon Properties, Inc. (the "Company") from the investment
partnerships affiliated with Trammell Crow Residential-Midwest, two other
apartment communities acquired by the Company and one apartment community
that is expected to be acquired (the "Acquisition Communities"). On
November 7, 1997, the Company entered into a Contribution and Exchange
Agreement (the "Contribution Agreement") under which the Company expects
to acquire the eight apartment communities containing a total of 2,329
apartment homes (assuming completion of one apartment community currently
under construction). The Company expects to acquire the seven existing
apartment communities before December 31, 1997 and to acquire the
apartment community currently under construction in 1999. These
residential apartment communities are Arbors of Montgomery located in
Cincinnati, Ohio, Arbors at Willow Lake located in Indianapolis, Indiana,
Devonshire Gates located in Bloomington, Minnesota, Pinnacle at Oxford
Hill located in St. Louis, Missouri, Vinings at Danada located in Wheaton,
Illinois, Vinings at Geist located in Lawrence, Indiana, Vinings at Towne
Green located in Bloomingdale, Illinois and Vinings at Woodbury located in
Woodbury, Minnesota. Four of these communities are currently stabilized,
two are in lease up, one is under construction and one is being renovated.
In unrelated transactions, the Company purchased Village Green of Madison
Heights located in Madison Heights, Michigan and Village Park of Troy
located in Troy, Michigan in November 1997. The Company expects to
purchase Village Park of Westmont before December 31, 1997.
2. BASIS OF PRESENTATION
The combined statement has been prepared on the accrual method of
accounting. Certain operating expenses include operating and maintenance
costs, real estate taxes, and insurance expenses relating to the operation
of the Acquisition Communities. In accordance with the regulations of the
Securities and Exchange Commission, mortgage interest, depreciation and
corporate expenses have been excluded from certain operating expenses, as
they are dependent upon a particular owner, purchase price or other
financial arrangement. Accordingly, the expenses reflected in the
accompanying statement may not be comparable to the expenses to be incurred
in the future operations of the Acquisition Communities.
3. REVENUE RECOGNITION
Apartment homes are leased to individual residents on short-term leases.
Rental income is recognized monthly as earned.
7
<PAGE> 8
ACQUISITION COMMUNITIES
ESTIMATES OF NET INCOME AND
FUNDS FROM OPERATIONS
OF
CERTAIN ACQUIRED COMMUNITIES
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following represents an estimate of the net income and Funds from Operations
expected to be generated from the operation of the subject Acquisition
Communities based upon the Combined Statement of Revenue and Certain Operating
Expenses for the year ended December 31, 1996. These estimated results do not
purport to represent results of operations for these communities in the future
and were prepared on the basis described in the accompanying notes which should
be read in conjunction herewith.
<TABLE>
<S> <C>
ESTIMATED NET INCOME
Excess of revenues over certain operating expenses $12,813
Less: Estimated depreciation (Note 1) (3,921)
---------------
Estimated net income $8,892
===============
ESTIMATED FUNDS FROM OPERATIONS
Estimated net income $8,892
Plus: Estimated depreciation (Note 1) 3,921
---------------
Estimated Funds from Operations $12,813
===============
</TABLE>
See the accompanying notes to unaudited Estimates of Net Income and Funds from
Operations of Certain Acquired Communities.
8
<PAGE> 9
ACQUISITION COMMUNITIES
NOTES TO ESTIMATES OF NET INCOME AND
FUNDS FROM OPERATIONS
OF
CERTAIN ACQUIRED COMMUNITIES
(UNAUDITED)
1. BASIS OF PRESENTATION
Depreciation has been estimated based upon an allocation of the actual or
expected purchase prices for the subject Acquisition Communities to
furniture and fixtures, to land and to building. The allocation of
the purchase price to fixtures is based on an estimated value of $1,500 per
apartment home. The balance of the purchase price is then allocated 20% to
land and 80% to buildings. Furniture and fixtures are depreciated on a
straight line basis over 7 years, and buildings are depreciated on a
straight line basis over 40 years.
No income taxes have been provided because the Company is taxed as a Real
Estate Investment Trust ("REIT") under the provisions of the Internal
Revenue Code. Accordingly, the Company does not pay Federal income tax when
income distributed to its stockholders is equal to at least 95% of REIT
taxable income and when certain other conditions are met.
2. FUNDS FROM OPERATIONS
The Company generally considers Funds from Operations ("FFO") to be an
appropriate measure of the operating performance of the Company because it
provides investors an understanding of the ability of the Company to incur
and service debt and to make capital expenditures. FFO is determined in
accordance with a resolution adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), and
is defined as net income (loss) as computed in accordance with generally
accepted accounting principles ("GAAP"), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation of real estate
and after adjustments for unconsolidated partnerships and joint ventures.
FFO does not represent cash generated from operating activities in
accordance with GAAP and therefore should not be considered an alternative
to net income as an indication of the Company's performance or to net cash
flows from operating activities as determined by GAAP as a measure of
liquidity, and is not necessarily indicative of cash available to fund cash
requirements. FFO as disclosed by other REITs may not be comparable to the
Company's calculation of FFO.
3. ACQUISITION CONSIDERATIONS
In assessing the communities acquired, the Company's management considered
the existing leases, which are the primary source of revenue, the occupancy
rates, the competitive nature of the markets and comparative rental rates.
Furthermore, current and anticipated maintenance and repair costs, real
estate taxes and capital improvement requirements were evaluated.
Management is not aware of any material factors that would cause the
reported financial information in the accompanying Combined Statement of
Revenue and Certain Operating Expenses and Estimates of Net Income and
Funds from Operations of Certain Acquired Communities not to be necessarily
indicative of future operating results, although no assurance can be given
that the historical financial information will be representative of future
results.
9
<PAGE> 10
AVALON PROPERTIES, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Financial Information is based upon
the historical financial statements of Avalon Properties, Inc. (the "Company").
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1997 has been presented as if the acquisition of the Acquisition Communities had
occurred on such date. The Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the nine months ended September 30, 1997 and the year ended
December 31, 1996 have been presented as if the acquisition of the Acquisition
Communities had occurred on January 1, 1996.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1997 is not necessarily indicative of what the actual financial position would
have been assuming the acquisitions had been consummated at September 30, 1997,
nor does it purport to represent the future financial position of the Company.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
nine months ended September 30, 1997 and the year ended December 31, 1996 are
not necessarily indicative of what the actual results of operations of the
Company would have been had the acquisitions been completed as of January 1,
1996, nor does it purport to represent the results of operations for future
periods.
10
<PAGE> 11
AVALON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
The Acquisition
Company Communities Pro Forma
ASSETS (a) (b) Consolidated
----------- ----------- ------------
<S> <C> <C> <C>
Real estate, net $ 1,219,480 $ 269,652 $ 1,489,132
Cash and cash equivalents 3,373 -- 3,373
Cash in escrow 20,509 -- 20,509
Resident security deposits 8,063 -- 8,063
Investments in joint ventures 3,327 -- 3,327
Deferred financing, net 7,421 -- 7,421
Deferred development costs 9,611 -- 9,611
Prepaid expenses and other assets 11,253 -- 11,253
----------- ----------- -----------
TOTAL ASSETS $ 1,283,037 $ 269,652 $ 1,552,689
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and Unsecured Facilities $ 379,783 $ 249,652 $ 629,435
Payables for construction 14,771 -- 14,771
Accrued expenses and other liabilities 13,184 -- 13,184
Accrued interest payable 3,201 -- 3,201
Resident security deposits 9,303 -- 9,303
----------- ----------- -----------
TOTAL LIABILITIES 420,242 249,652 669,894
----------- ----------- -----------
Minority interest in Operating Partnerships 700 20,000 15,099
Stockholders' equity
Preferred Stock, $.01 par value; 20,000,000 shares authorized; 4,455,000
shares of 9% Series A Cumulative Redeemable Preferred Stock
issued and outstanding (Aggregate liquidation preference of $111,375) 45 -- 45
4,300,000 shares of 8.96% Series B Cumulative Redeemable Preferred Stock
issued and outstanding (Aggregate liquidation preference of $107,500) 43 -- 43
Common Stock, $.01 par value; 80,000,000 shares authorized;
38,453,315 and 33,391,992 shares issued and outstanding at September 30, 1997
and December 31, 1996, respectively 384 -- 384
Additional paid-in capital 887,181 -- 892,782
Deferred compensation (3,583) -- (3,583)
Distributions in excess of accumulated earnings (21,975) -- (21,975)
----------- ----------- -----------
STOCKHOLDERS' EQUITY 862,095 5,601 867,696
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,283,037 $ 269,652 $ 1,552,689
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited Pro Forma Condensed
Consolidated Balance Sheet.
11
<PAGE> 12
AVALON PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
a) Reflects the Company's historical consolidated balance sheet as of
September 30, 1997.
b) Reflects the acquisition of the Acquisition Communities in exchange for
cash borrowed under various credit facilities, issuance of operating
partnership units and the assumption of debt.
12
<PAGE> 13
AVALON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREVIOUSLY
THE ACQUISITION ACQUIRED
COMPANY COMMUNITIES PRO FORMA PROFORMA COMMUNITIES
(a) (b) ADJUSTMENTS CONSOLIDATED (h)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue
Rental income $ 121,646 $ 17,752 $ -- $ 139,398 $ 2,236
Management fees 779 -- 786 (c) 1,565 --
Other income 457 -- -- 457 149
------------ ------------ ------------ ------------ ------------
Total revenue 122,882 17,752 786 141,420 2,385
------------ ------------ ------------ ------------ ------------
Expenses
Operating expenses 44,551 7,998 728 (d) 53,277 985
Interest expense 11,850 -- 7,638 (e) 19,488 --
Depreciation and amortization 21,086 -- 3,273 (f) 23,359 --
General and administrative 3,375 -- -- 3,375 --
------------ ------------ ------------ ------------ ------------
Total expenses 80,862 7,998 11,639 100,499 985
------------ ------------ ------------ ------------ ------------
Equity in income of joint ventures 4,145 -- -- 4,145 --
Interest income 926 -- -- 926 --
Other income 247 -- -- 247 --
------------ ------------ ------------ ------------ ------------
Income before gain on sale of community,
extraordinary item and minority interest 47,338 9,754 (10,853) 46,239 1,400
Gain on sale of community 677 -- -- 677 --
------------ ------------ ------------ ------------ ------------
Income before extraordinary item and
minority interest 48,015 9,754 (10,853) 46,916 1,400
Extraordinary item (1,183) -- -- (1,183) --
------------ ------------ ------------ ------------ ------------
Income before minority interest 46,832 9,754 (10,853) 45,733 1,400
Minority interest in operating partnerships (37) -- (777) (g) (814) --
------------ ------------ ------------ ------------ ------------
Net income 46,795 9,754 (11,631) 44,918 1,400
Dividends attributable to preferred stock (14,742) -- -- (14,742) --
------------ ------------ ------------ ------------ ------------
Net income available to common stockholders $ 32,053 $ 9,754 $ (11,631) $ 30,176 $ 1,400
============ ============ ============ ============ ============
Income per share before extraordinary item $ 0.93 $ 0.87
============ ============
Net income per share of common stock $ 0.89 $ 0.84
============ ============
Weighted average number of shares
of Common Stock 35,889,375 35,889,375
============ ============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA REVISED
ADJUSTMENTS PROFORMA
(i) CONSOLIDATED
------------ ------------
<S> <C> <C>
Revenue
Rental income $ -- $ 141,634
Management fees (34) 1,531
Other income -- 606
------------ ------------
Total revenue (34) 143,771
------------ ------------
Expenses
Operating expenses -- 54,262
Interest expense (846) 18,642
Depreciation and amortization 329 24,688
General and administrative -- 3,375
------------ ------------
Total expenses (517) 100,967
------------ ------------
Equity in income of joint ventures -- 4,145
Interest income -- 926
Other Income -- 247
------------ ------------
Income before gain on sale of community,
extraordinary item and minority interest 483 48,122
Gain on sale of community -- 677
------------ ------------
Income before extraordinary item and
minority interest 483 48,799
Extraordinary item -- (1,183)
------------ ------------
Income before minority interest 483 47,616
Minority interest in operating partnerships -- (814)
------------ ------------
Net income 483 46,801
Dividends attributable to preferred stock -- (14,742)
------------ ------------
Net income available to common stockholders $ 483 $ 32,059
============ ============
Income per share before extraordinary item $ 0.90
============
Net income per share of common stock $ 0.87
============
Weighted average number of shares
of Common Stock 36,970,875
============
</TABLE>
See accompanying notes to unaudited Pro Forma Condensed
Consolidated Statement of Operations.
13
<PAGE> 14
AVALON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREVIOUSLY
THE ACQUISITION ACQUIRED
COMPANY COMMUNITIES PRO FORMA PROFORMA COMMUNITIES
(a) (b) ADJUSTMENTS CONSOLIDATED (h)
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental income $ 123,354 $ 22,156 $ -- $ 145,510 $ 10,474
Management fees 1,439 -- 1,048 (c) 2,487 --
Other income 420 -- -- 420 446
----------- ----------- ----------- ----------- -----------
Total revenue 125,213 22,156 1,048 148,417 10,920
----------- ----------- ----------- ----------- -----------
Expenses
Operating expenses 47,155 9,343 967 (d) 57,465 3,991
Interest expense 9,545 -- 10,138 (e) 19,683 --
Depreciation and amortization 20,956 -- 3,921 (f) 24,877 --
General and administrative 3,807 -- -- 3,807 --
----------- ----------- ----------- ----------- -----------
Total expenses 81,463 9,343 15,026 105,832 3,991
----------- ----------- ----------- ----------- -----------
Equity in income of joint ventures 1,025 -- -- 1,025 --
Interest income 887 -- -- 887 --
Other income 495 -- -- 495 --
----------- ----------- ----------- ----------- -----------
Income before gain on sale of community,
extraordinary item and minority interest 46,157 12,813 (13,978) 44,992 6,929
Gain on sale of community 7,850 -- -- 7,850 --
----------- ----------- ----------- ----------- -----------
Income before extraordinary item and
minority interest 54,007 12,813 (13,978) 52,842 6,929
Extraordinary item (2,356) -- -- (2,356) --
----------- ----------- ----------- ----------- -----------
Income before minority interest 51,651 12,813 (13,978) 50,486 6,929
Minority interest in operating partnerships -- -- (933) (g) (933) --
----------- ----------- ----------- ----------- -----------
Net income 51,651 12,813 (14,911) 49,553 6,929
Dividends attributable to preferred stock (10,422) -- -- (10,422) --
----------- ----------- ----------- ----------- -----------
Net income available to common stockholders $ 41,229 $ 12,813 $ (14,911) $ 39,131 $ 6,929
=========== =========== =========== =========== ===========
Income per share before extraordinary item $ 1.42 $ 1.35
=========== ===========
Net income per share of common stock $ 1.34 $ 1.27
=========== ===========
Weighted average number of shares
of Common Stock 30,739,504 30,739,504
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA REVISED
ADJUSTMENTS PROFORMA
(i) CONSOLIDATED
------------ ------------
<S> <C> <C>
Revenue
Rental income $ -- $ 155,984
Management fees (90) 2,397
Other income -- 866
------------ -----------
Total revenue (90) 159,247
------------ -----------
Expenses
Operating expenses -- 61,456
Interest expense 956 20,639
Depreciation and amortization 1,800 26,677
General and administrative -- 3,807
------------ -----------
Total expenses 2,756 112,579
------------ -----------
Equity in income of joint ventures -- 1,025
Interest income -- 887
Other Income -- 495
------------ -----------
Income before gain on sale of community,
extraordinary item and minority interest (2,846) 49,075
Gain on sale of community -- 7,850
------------ -----------
Income before extraordinary item and
minority interest (2,846) 56,925
Extraordinary item -- (2,356)
------------ -----------
Income before minority interest (2,846) 54,569
Minority interest in operating partnerships -- (933)
------------ -----------
Net income (2,846) 53,636
Dividends attributable to preferred stock -- (10,422)
------------ -----------
Net income available to common stockholders $ (2,846) $ 43,214
============ ===========
Income per share before extraordinary item $ 1.39
===========
Net income per share of common stock $ 1.31
===========
Weighted average number of shares
of Common Stock 32,902,504
===========
</TABLE>
See accompanying notes to unaudited Pro Forma Condensed
Consolidated Statement of Operations.
14
<PAGE> 15
AVALON PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
a) Reflects the Company's historical consolidated statements of
operations for the nine months ended September 30, 1997 and the year
ended December 31, 1996.
b) Reflects the combined statement of revenue and certain operating
expenses of the Acquisition Communities for the nine months ended
September 30, 1997 prior to date of acquisition and the historical
combined statement of revenue and certain operating expenses of the
Acquisition Communities for the year ended December 31, 1996.
c) Reflects the historical management fee income earned on the ten
third-party communities purchased by the Company as a result of the
acquisition of certain assets and operations of Trammell Crow
Residential-Midwest.
d) Reflects the incremental overhead cost associated with the management
of the eight communities and the ten third-party communities for the
nine months ended September 30, 1997 and the year ended December 31,
1996.
e) Increase relates to interest on additional borrowings under various
credit facilities to purchase the Acquisition Communities prior to date
of the acquisition for the nine months ended September 30, 1997 and for
the year ended December 31, 1996.
f) Increase in depreciation attributable to the increase in the basis of
real estate resulting from the purchase of the Acquisition Communities
prior to date of acquisition for the nine months ended September 30,
1997 and the year ended December 31, 1996 for assets placed in service
at the dates of acquisition.
g) Reflects the allocation of net income to minority interests in the
Operating Partnerships.
h) Reflects the historical combined statement of revenue and certain
operating expenses of the previously acquired communities included in
the Form 8-K dated October 15, 1997.
i) Reflects the pro forma adjustments relating to the previously acquired
communities included in the Form 8-K dated October 15, 1997. The pro
forma adjustment for interest expense reflected in such Form 8-K has
been reduced ($1,859 for the nine months ended September 30, 1997 and
$4,080 for the year ended December 31, 1996) to reflect the issuance of
2,163,000 shares of common stock of the Company on July 1, 1997 at a
purchase price of $28.0625 per share (net cash proceeds from such
offering of approximately $57,671) with the use of such proceeds to
repay amounts borrowed under the Company's unsecured credit facilities
to acquire the communities, assuming such issuance had occurred as of
January 1, 1996.
15
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AVALON PROPERTIES, INC.
Date: November 21, 1997 By: /s/ THOMAS J. SARGEANT
---------------------------
Thomas J. Sargeant,
Chief Financial Officer, Treasurer and
Secretary (Principal Financial and
Accounting Officer)
16
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Exhibit 1: - Contribution and Exchange Agreement Dated November 7, 1997
17
<PAGE> 1
CONTRIBUTION AND EXCHANGE AGREEMENT
by and among
The Parties Identified on Schedule A
as
the TCR Group
and
Avalon Properties, Inc.
and
AMLI Residential Properties Trust
as
the Company
and
AMLI Residential Properties, L.P.
and
Avalon DownREIT V, L.P.
as
the Operating Partnership
Dated as of November 7, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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INDEX OF DEFINED TERMS ..........................................................................(vi)
SCHEDULES .......................................................................................(ix)
EXHIBITS ........................................................................................(xi)
ARTICLE 1. SUBJECT OF CONVEYANCE ..................................................................2
Section 1.1 Conveyance of the Property ...........................................................2
Section 1.2 Conveyance of Owner Interests ........................................................4
Section 1.3 TCR Group ............................................................................5
Section 1.4 Transferees ..........................................................................5
Section 1.5 Access to Books and Records ..........................................................6
Section 1.6 Excluded Assets ......................................................................6
ARTICLE 2. VALUE AND PAYMENT TERMS ................................................................6
Section 2.1 Issuance of Equity Securities ........................................................6
Section 2.2 Assumption of Indebtedness ...........................................................8
Section 2.3 Development Property .................................................................9
Section 2.4 Cash Consideration ..................................................................13
Section 2.5. Designation of Issuance of Equity Securities .......................................13
Section 2.6 Withdrawn Properties ................................................................14
Section 2.7 Certain Definitions .................................................................15
Section 2.8 Management Contracts ................................................................16
Section 2.9 Acquisition Contracts ...............................................................17
Section 2.10 Delayed Closing Property ..........................................................18
ARTICLE 3. TITLE; MATTERS TO WHICH THIS CONTRIBUTION IS SUBJECT ..................................18
Section 3.1 Permitted Encumbrances ..............................................................18
Section 3.2 Easements, Licenses and Dedications Prior to Closing ................................20
Section 3.3 Title Insurance .....................................................................20
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE TCR GROUP .......................................21
Section 4.1 Operating Representations and Warranties ............................................21
Section 4.2 Legend ..............................................................................25
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP AND THE
COMPANY ..........................................................................................25
Section 5.1 Operating Representations and Warranties ............................................25
ARTICLE 6. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF AVALON AND THE AVALON
OP ...............................................................................................32
Section 6.1 Representations and Warranties ......................................................32
ARTICLE 7. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF AMLI AND THE AMLI OP .....................33
Section 7.1 Representations and Warranties ......................................................33
ARTICLE 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OWNERS ...................................35
Section 8.1 Representations and Warranties ......................................................35
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ARTICLE 9. COVENANTS .............................................................................37
Section 9.1 Conduct of the Business of the TCR Group ............................................37
Section 9.2 Conduct of the Business of the Transferee ...........................................39
Section 9.3 OP Agreements .......................................................................40
Section 9.4 Good Faith Efforts ..................................................................40
Section 9.5 Good Faith Cooperation ..............................................................40
Section 9.6 Public Announcements ................................................................41
Section 9.7 Government Filings ..................................................................41
Section 9.8 Listing of Shares ...................................................................41
Section 9.9 Registration of Shares ..............................................................41
Section 9.10 Investor Representations ...........................................................42
Section 9.11 Time of Closing ....................................................................42
Section 9.12 Guaranty ...........................................................................42
Section 9.13 Pledge of OP Units .................................................................42
ARTICLE 10. CLOSING ..............................................................................43
Section 10.1 The Initial Closing ................................................................43
Section 10.2 Deliveries at the Initial Closing by the TCR Group .................................43
Section 10.3 Deliveries at the Closing by the Transferee ........................................46
Section 10.4 Deliveries at the Delayed Closing Property Closing and Each
Development Property Closing by the TCR Group ...................................................48
Section 10.5 Deliveries at the Delayed Closing Property Closing and Each
Development Property Closing by the Transferee ..................................................50
Section 10.6 Fees and Expenses ..................................................................52
Section 10.7 No Warranties ......................................................................52
ARTICLE 11. INDEMNIFICATION .....................................................................54
Section 11.1 Indemnification by TCRC ............................................................54
Section 11.2 Indemnification by Transferee ......................................................55
Section 11.3 Limitations on Indemnification Obligations .........................................55
Section 11.4 TCRC Security ......................................................................55
ARTICLE 12. ADJUSTMENTS ..........................................................................56
Section 12.1 Adjustments at the Initial Closing Date ............................................56
Section 12.2 Adjustments at the Delayed closing Property Closing Date and Each
Development Property Closing Date ...............................................................58
Section 12.3 Adjustment for Assessments .........................................................59
Section 12.4 Other Adjustments ..................................................................59
Section 12.5 Errors in Calculations .............................................................59
Section 12.6 Survival ...........................................................................59
ARTICLE 13. CONDITIONS PRECEDENT TO CLOSING ......................................................59
Section 13.1 Conditions to Obligations of the TCR Group Relating to the
Initial Closing .................................................................................59
Section 13.2 Conditions to Obligations of the Transferee Relating to the Initial
Closing .........................................................................................60
Section 13.3 Conditions to Obligations of the TCR Group Relating to the
Delayed Closing Property Closing and Each Development Property Closing ..........................62
</TABLE>
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<TABLE>
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Section 13.4 Conditions to Obligations of the Transferee Relating to the
Delayed Closing Property Closing and Each Development Property Closing ..........................63
ARTICLE 14. ASSIGNMENT ...........................................................................64
ARTICLE 15. NO BROKERS ...........................................................................64
ARTICLE 16. CASUALTY LOSS ........................................................................64
Section 16.1 Maintenance of Insurance Coverage ..................................................65
Section 16.2 Casualties .........................................................................65
Section 16.3 Interim Repairs ....................................................................65
Section 16.4 Casualties Other than Major Casualties .............................................65
ARTICLE 17. CONDEMNATION .........................................................................65
ARTICLE 18. TERMINATION ..........................................................................66
Section 18.1 Effect of Termination and Abandonment ..............................................66
Section 18.2 Termination by the TCR Group .......................................................66
Section 18.3 Termination by the Transferee ......................................................68
Section 18.4. Jurisdiction ......................................................................68
ARTICLE 19. TAX MATTERS ..........................................................................68
Section 19.1 Payment of Taxes by the TCR Group ..................................................68
Section 19.2 Payment of 1997 Taxes ..............................................................68
Section 19.3 Definition of Taxes ................................................................69
Section 19.4 Allocation Method ..................................................................69
Section 19.5 Survival ...........................................................................69
Section 19.6 Tax Consequences ...................................................................69
ARTICLE 20. EMPLOYEE MATTERS .....................................................................69
ARTICLE 21. NOTICE ...............................................................................70
ARTICLE 22. MISCELLANEOUS ........................................................................72
Section 22.1 Survival of Representations and Warranties .........................................72
Section 22.2 Entire Agreement; No Third-Party Rights ............................................72
Section 22.3 Amendment ..........................................................................72
Section 22.4 Governing Law ......................................................................72
Section 22.5 Section Headings ...................................................................72
Section 22.6 Severability .......................................................................72
Section 22.7 No Other Rights or Obligations .....................................................73
Section 22.8 Counterparts .......................................................................73
Section 22.9 Construction .......................................................................73
Section 22.10 Representatives ...................................................................73
Section 22.11 Definition of Knowledge ...........................................................73
Section 22.12 Recourse to AMLI ..................................................................74
Section 22.13 Attorneys' Fees ...................................................................74
Section 22.14 Septic Tank Disclosure ............................................................74
Section 22.15 Interpretation ....................................................................74
</TABLE>
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INDEX OF DEFINED TERMS
<TABLE>
Terms Section
- ----- -------
<S> <C>
1933 Act .............................................................2.5
Accepted Acquisition Contract ........................................2.9
Acquisition Contracts ................................................1.1(g)
Additional Management Contracts ......................................2.8(a)
Affected Property ....................................................3.3
Agreement ............................................................Preface
AMLI .................................................................Preface
AMLI Floor ...........................................................2.1(b)
AMLI OP ..............................................................Preface
AMLI OP Agreement ....................................................5.1(d)
AMLI Parties .........................................................1.4
Arbitrator ...........................................................2.6
Assigned Value .......................................................2.6
Assumed Loans ........................................................2.7
Assumed Loan Documents ...............................................4.1(m)
Assumption Documents .................................................2.2
Avalon ...............................................................Preface
Avalon Floor .........................................................2.1(b)
Avalon OP ............................................................Preface
Avalon OP Agreement ..................................................9.3(b)
Avalon Parties .......................................................1.4
Average Closing Price. ...............................................2.7
Benefit Plans ........................................................5.1(o)(i)
Bills of Sale ........................................................10.2(a)
Books and Records ....................................................1.1(f)
Cash Consideration ...................................................2.4
Casualty .............................................................16.2
Casualty Notice ......................................................16.2
Change in Control ....................................................2.7
Claim ................................................................11.3(b)
Closing ..............................................................2.1(a)
Closing Dates ........................................................2.10
Closing Price ........................................................2.7
Code .................................................................5.1(j)
Company ..............................................................Preface
Condemned Property ...................................................17.1
Contributor ..........................................................Preface
Damaged Property .....................................................16.2
Deeds ................................................................10.2(a)
</TABLE>
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<TABLE>
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Defaulting Parties ...................................................1.4
Delayed Closing Property .............................................2.1(a)
Delayed Closing Property Closing .....................................2.10
Delayed Closing Property Closing Date ................................2.10
Designees ............................................................Recital C
Designee Certificate .................................................9.10
Development Property .................................................2.3(a)
Development Property Closing .........................................2.3(a)
Development Property Closing Date ....................................2.3(a)
Development Property Liquidated Damages ..............................18.2(b)
Effective Date .......................................................Preface
Encumbrances .........................................................8.1(a)
ERISA ................................................................5.1(o)(ii)
Equity Securities ....................................................Recital B
Exchange Act .........................................................5.1(e)
Executive Officers ...................................................2.7
Floor ................................................................2.1(b)
GAAP .................................................................5.1(f)
Governmental Authorities .............................................3.1(d)
Guarantee ............................................................9.12
Improvements .........................................................1.1(a)
Indebtedness .........................................................5.1(p)(ii)
Indemnification Notice ...............................................11.4(a)
Indemnitee ...........................................................11.3
Indemnitor ...........................................................11.3
Initial Closing ......................................................10.1
Initial Closing Date .................................................10.1
Insurance Coverage ...................................................16.1
Intangible Property ..................................................1.1(e)
Land .................................................................1.1(a)
Leases ...............................................................1.1(d)
Legal Requirements ...................................................3.1(d)
Liquidated Damages ...................................................18.2
Loss .................................................................11.1(a)
MAE Encumbrance ......................................................3.3
Major Casualty .......................................................16.2
Management Contracts .................................................1.1(h)
Management Fees ......................................................2.8(a)
Material Adverse Effect ..............................................2.7
Material Taking ......................................................17.1
Net Value ............................................................2.1
Non-Defaulting Parties ...............................................1.4
Objection Notice .....................................................3.3
Office Leases ........................................................1.1(e)
</TABLE>
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<TABLE>
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Office Space .........................................................1.1(e)
OP Unit ..............................................................2.7
Operating Partnership ................................................Preface
Other Properties .....................................................2.1(a)
Owner Interests ......................................................1.2(a)
Owners ...............................................................1.2(a)
Partnership ..........................................................8.1(a)
Partnership Agreement ................................................8.1(a)
Permits and Licenses .................................................1.1(e)
Permitted Encumbrances ...............................................3.1
Personal Property ....................................................1.1(c)
Pricing Period .......................................................2.7
Property .............................................................1.1
Property Financials ..................................................4.1(l)
Real Property ........................................................1.1(b)
Registration Rights Agreement ........................................9.9
Rent Rolls ...........................................................4.1(c)
SEC ..................................................................5.1(e)
SEC Documents ........................................................5.1(e)
Security Deposits ....................................................1.1(d)
Service Contracts ....................................................1.1(e)
Share ................................................................2.7
Share Price ..........................................................2.7
Subsidiaries .........................................................5.1(f)
Submission Date ......................................................2.6
Substantial Completion ...............................................2.7
Surveys ..............................................................3.1(e)
Tax Liability ........................................................2.7
Taxes ................................................................19.3
TCRC .................................................................11.1
TCR Cure Period ......................................................3.3
TCR Default ..........................................................18.2(a)
TCR Group ............................................................Preface
TCR Representatives ..................................................22.10
TCR Termination Notice ...............................................18.2
Tenants ..............................................................1.1(d)
Title Objection ......................................................3.3
Title Policies .......................................................3.3
Trademarks ...........................................................1.1(i)
Transferee ...........................................................Preface
Transferee Representatives ...........................................22.10
Transferred Employees ................................................20
Withdrawn Property ...................................................2.6
Work ........................................................... .....2.3(e)
</TABLE>
(vi)
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SCHEDULES
<TABLE>
<S> <C>
Schedule A Contributors
Schedule 1.1(a) Land
Schedule 1.1(c)(i) Excluded Personal Property Located at the Real Property
Schedule 1.1(c)(ii) Excluded Personal Property Located at the Office Space
Schedule 1.1(e)(i) Excluded Permits and Licenses
Schedule 1.1(e)(ii) Service Contracts
Schedule 1.1(e)(iii) Office Leases
Schedule 1.1(e)(iv) Excluded Telephone Numbers
Schedule 1.1(g) Acquisition Contracts
Schedule 1.1(h) Management Contracts
Schedule 1.1(i) Trademarks
Schedule 1.2(c) Owner Interests to Be Conveyed to the Transferee
Schedule 1.4 Designation of Transferee for Specific Items of Property
Schedule 2.1(i) Allocation of Consideration
Schedule 2.1(ii) Assumed Loans
Schedule 2.2 Assumption Fees, Prepayment Premiums and Penalties
Schedule 2.3(a) Development Properties
Schedule 2.3(c) Plans and Specifications for Development Properties
Schedule 2.3(e) The Work and Budget for Oxford Hills
Schedule 2.6 Certain Assigned Values
Schedule 2.7(a) Share Price at Initial Closing Date
Schedule 2.7(b) Allocated Units
Schedule 2.9 Acquisition Contracts Costs
Schedule 3.1(e) Surveys
Schedule 4.1(f) Litigation
Schedule 4.1(g) Proceedings related to the Real Property
Schedule 4.1(h) Violations affecting the Property
Schedule 4.1(j) Conditions affecting the Personal Property
Schedule 4.1(n) Tax Audits
Schedule 5.1(h) Subsidiaries, Partnerships and Trusts
Schedule 5.1(i) Material Liabilities and Obligations
Schedule 5.1(j) Tax Proceedings
Schedule 5.1(l) Ownership of Assets
Schedule 5.1(n) Restrictive Agreements
Schedule 5.1(o)(i) Benefit Plans
Schedule 5.1(o)(ii) Benefit Plan Compliance
Schedule 5.1(p)(i) Transferee Defaults
Schedule 5.1(p)(ii) Transferee Indebtedness
Schedule 5.1(q) Transactions with Affiliates
Schedule 10.6 Allocation of Closing Costs
</TABLE>
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<TABLE>
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Schedule 12.1(c) Letters of Credit and Bonds to be Replaced
Schedule 13.2(a)(vi) Material Defects and Deficiencies
Schedule 13.2(b) Excluded Due Diligence Matters
Schedule 21.10(a) TCR Representatives
Schedule 21.10(b) AMLI Representatives
Schedule 21.10(c) Avalon Representatives
Schedule 22.11(i) TCR Group Knowledge Designees
Schedule 22.11(ii) AMLI Knowledge Designees
Schedule 22.11(iii) Avalon Knowledge Designees
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.3(a)(ii) Form of Certificate of Final Completion
Exhibit 2.3(a)(iii) Form of Land Use Certificate
Exhibit 2.3(b) Terms of Master Lease
Exhibit 9.3 Required Terms in OP Agreement
Exhibit 9.9 Form of Registration Rights Agreement
Exhibit 9.10 Form of Designee Certificate
Exhibit 13.1(h) Required Terms in the Marketing Agreement
</TABLE>
(ix)
<PAGE> 11
CONTRIBUTION AND EXCHANGE AGREEMENT
This CONTRIBUTION AND EXCHANGE AGREEMENT (the "AGREEMENT") dated as of
November 7, 1997 (the "EFFECTIVE DATE") is made and entered by and among each
of the parties identified on Schedule A (individually, a "CONTRIBUTOR" and
collectively the "TCR GROUP"), Avalon Properties, Inc., a Maryland
corporation ("AVALON"), AMLI Residential Properties Trust, a Maryland real
estate investment trust ("AMLI," and together with Avalon, the "COMPANY"),
AMLI Residential Properties, L.P. ("AMLI OP"), a Delaware limited
partnership, and Avalon DownREIT V, L.P., a Delaware limited partnership (the
"AVALON OP" and together with the AMLI OP, the "OPERATING PARTNERSHIP"). The
Company and the Operating Partnership are sometimes hereinafter collectively
referred to as the "TRANSFEREE." Schedule A also identifies the owners of the
Real Property (defined below) and the location thereof, and the type of
Property (defined below) to be contributed by each Contributor that is not
contributing Real Property.
RECITALS
A. The TCR Group owns, develops and manages various multifamily
properties located throughout the Midwest United States. The Transferees and
certain affiliated entities own and manage various multifamily properties
located throughout the United States. AMLI is the sole general partner of the
AMLI OP and Avalon is the sole general partner of the Avalon OP.
B. The TCR Group desires to contribute and/or transfer the assets
described herein to the Operating Partnership or the Company, as the case may
be, in exchange for cash, limited partnership interests therein ("OP UNITS"
as hereinafter further defined) and shares of the Company ("SHARES" as
hereinafter further defined), and Transferee desires to so acquire said
assets. Such Shares and OP Units are collectively referred to herein as
"EQUITY SECURITIES." In general, each Contributor, as a partnership or
limited liability company owning multifamily residential real property, will
contribute such assets to the Operating Partnership.
C. The Company desires to issue or cause to be issued Equity Securities
to the TCR Group or its individual shareholders, partners or members (such
persons, along with any shareholder, partner or member of such person who
receives Equity Securities, "DESIGNEES") as provided herein, and the
Operating Partnership has agreed to take, or refrain from taking, certain
actions with respect
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to the Property and the indebtedness of the Operating Partnership as provided
herein.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound hereby, do hereby agree as follows:
ARTICLE 1. SUBJECT OF CONVEYANCE.
Section 1.1 Conveyance of the Property. In accordance with the
terms and conditions of this Agreement and subject to the Transferee's
performance and satisfaction of the conditions, covenants and
obligations contained herein, each Contributor shall convey to the
Operating Partnership all of its right, title and interest in and to
the following assets:
(a) the real property described on Schedule 1.1(a) (the
"LAND") and all of the improvements located on the Land (the "IMPROVEMENTS");
(b) all rights, privileges, grants and easements
appurtenant to the Contributor's interest in the Land and the Improvements,
if any, including, without limitation, all land lying in the bed of any
public street, road or alley, all mineral and water rights and all easements,
licenses, covenants and rights-of-way or other appurtenances used in
connection with the beneficial use and enjoyment of the Land and the
Improvements (the Land and the Improvements and all such rights, privileges,
easements, grants and appurtenances are sometimes referred to herein as the
"REAL PROPERTY");
(c) (i) except as set forth on Schedule 1.1(c)(i), all
personal property, fixtures, equipment and inventory located on or used in
connection with any of the Real Property and owned by the Contributor, and
(ii) except as set forth on Schedule 1.1(c)(ii), all personal property,
furniture, removable fixtures, equipment and inventory located on or in the
Office Space (as hereinafter defined) (collectively, the "PERSONAL
PROPERTY");
(d) all leases and other agreements with respect to the
use and occupancy of the Real Property, together with all amendments and
modifications thereto and any guaranties provided thereunder (the "LEASES"),
and rents, additional rents, reimbursements, profits, income, receipts and
the amount deposited together with interest thereon to the extent required by
law or the Leases (the "SECURITY DEPOSITS") under the Leases in the nature of
refundable security for the performance of the obligations of those parties
occupying space at the Real Property (the "TENANTS") under each such Lease;
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(e) to the extent assignable or with such consent to
assignment as may be required and obtained (i) except as set forth on
Schedule 1.1(e)(i), all permits, licenses, plans and specifications,
approvals, certificates and third party warranties relating to the Real
Property and the Personal Property, (collectively, the "PERMITS AND
LICENSES"); (ii) those contracts and agreements described in Schedule
1.1(e)(ii) for the servicing, maintenance and operation of the Real Property
and the Office Space, including, without limitation, equipment leases and
other agreements affecting the Real Property and the Office Space (the
"SERVICE CONTRACTS") and excluding the Service Contracts not being assumed by
Transferee as hereinafter provided; (iii) those leases of office and other
space (the "OFFICE SPACE") as described in Schedule 1.1(e)(iii) (the "OFFICE
LEASES") and (iv) except as set forth on Schedule 1.1(e)(iv), all telephone
numbers in use at the Office Space and the Real Property (together with the
Permits and Licenses and the Service Contracts, the "INTANGIBLE PROPERTY");
(f) all books, records, promotional material, tenant
data, leasing material and forms, rent rolls, files, statements, keys,
reports, tests and other materials related to the operation of the Real
Property or the Personal Property (collectively, the "BOOKS AND RECORDS");
(g) the contracts and agreements for the purchase of raw
land intended for development and described in Schedule 1.1(g) except those
which Transferee elects not to assume by written notice to TCR Group not
later than ten (10) business days from the Effective Date (the "ACQUISITION
CONTRACTS");
(h) to the extent assignable or with such consent to
assignment as may be required and obtained, the third party property
management contracts described in Schedule 1.1(h) (collectively, the
"MANAGEMENT CONTRACTS"); and
(i) to the extent assignable, the trademarks, trade
names or symbols set forth in Schedule 1.1(i) (the "TRADEMARKS"); provided,
however, that the right to use the name "Trammell Crow" or "Trammell Crow
Residential" or any derivation of either is not included within the
Trademarks. The Transferee acknowledges and agrees that it is not acquiring,
and shall have no right to the use of, the name "Trammell Crow" or "Trammell
Crow Residential" or any derivation of either in connection with any of the
Property; provided, further, that the Transferee shall be allowed a period of
ninety (90) days after the closing date with respect to a particular property
to change any signage on such Property containing the name "Trammell Crow" or
"Trammell Crow Residential" or any derivation of either.
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The Real Property, the Personal Property, the Leases, the Security
Deposits, the Intangible Property, the Books and Records, the
Acquisition Contracts, the Management Contracts and the other property
interests being transferred hereunder are hereinafter collectively
referred to as the "PROPERTY." The term "Property" may mean all
Property collectively, or when so indicated by the context, may refer
only to that portion of the Property owned by an individual Contributor.
Section 1.2 Conveyance of Owner Interests. (a) The transaction
contemplated hereby is structured as the contribution or transfer of the
Property to the Transferee but in the circumstances described in (b) and
(c) below the transaction shall be consummated as a transfer by an owner
(each an "OWNER" and collectively, "OWNERS") of its interest in a
Contributor (the "OWNER INTERESTS").
(b) Notwithstanding clause (a) above, the Owners of a
Contributor and Transferee may mutually agree that such Owners shall convey,
in lieu of the Property owned by such Contributor, all Owner Interests in
such Contributor to the Operating Partnership. In such instance, the term
"Property" shall include the Owner Interests transferred or to be transferred
to the Transferee and the term "TCR Group" and "Contributor" shall include
severally each Owner of the Contributor, unless the context in which such
terms are used herein requires otherwise. In the event of a transfer of all
Owner Interests of a Contributor contemplated herein, notwithstanding any
contrary provision in this Agreement, such Contributor reserves the right to
distribute all cash on hand which constitutes net operating income or is not
otherwise required to pay the Contributor's then current accrued liabilities
and in accounts of such Contributor to its Owners prior to the Initial
Closing, provided that no Contributor shall have the right to distribute any
Property, including, without limitation, the Security Deposits.
(c) Schedule 1.2(c) identifies (i) the Real Property
with respect to which the parties have agreed that all Trammell Crow
Residential affiliated Owners of a Contributor shall transfer their Owner
Interest in such Contributor to the Transferee in lieu of a transfer of the
Property of such Contributor to the extent such action is authorized by the
relevant organizational documents of such Contributor, and (ii) the name of,
and percentage ownership interest held by, the partners of such Contributor.
The TCR Group hereby represents that the holders of the applicable joint
venture interests not being transferred hereunder have consented to the
transaction contemplated by this Section 1.2(c) and copies of such consents
have been delivered to Transferee. In such event, no assets of the entity
owning the Real Property, including cash on hand, shall be distributed to the
Trammell Crow Residential affiliated Owners.
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Section 1.3 TCR Group. The term "TCR Group" is used herein for
convenience in drafting only to refer to all of the Contributors and all
of the Owners collectively. The TCR Group is not a legal entity.
Except as hereafter provided, neither the Contributors nor the Owners
shall have joint and several liability hereunder. Instead, each
Contributor and each Owner shall have several liability hereunder for
the covenants, agreements, representations, warranties and indemnities
made by it hereunder to the extent and only to the extent that any such
covenant, agreement, representation, warranty or indemnity relates to
such Contributor or Owner or to the Owner Interest or the Property, as
the case may be, owned by it. Notwithstanding the foregoing, each
Contributor conveying Property pursuant to Section 1.1 and each of the
Owners contributing Owner Interests pursuant to Sections 1.2(b) and
1.2(c) shall be jointly and severally liable for liquidated damages, if
applicable under Section 18.3.
Section 1.4 Transferees. Schedule 1.4 sets forth which of the Real
Property, Personal Property, Leases, Permits and Licenses, Service
Contracts, Office Leases, Intangible Property, Books and Records,
Trademarks, Acquisition Contracts and Management Contracts will be
transferred to Avalon or the Avalon OP, on the one hand, and AMLI or the
AMLI OP, on the other hand. For purposes of this Agreement, all
references to "Transferee" and, where the context requires, "Company" or
"Operating Partnership," shall be deemed to refer to the entity
identified on Schedule 1.4 as the transferee of the Property or Owner
Interests to be transferred to such entity. The obligations and
liabilities of AMLI and the AMLI OP (the "AMLI PARTIES") to the TCR
Group hereunder shall be joint and several and the obligations and
liabilities of Avalon and Avalon OP (the "AVALON PARTIES") to the TCR
Group hereunder shall be joint and several. Notwithstanding that the
AMLI Parties and the Avalon Parties are collectively referred to herein
as Transferee, except as provided in the next succeeding sentence, the
obligations and liabilities of the AMLI Parties on the one hand and of
the Avalon Parties on the other hand shall be several, such obligations
and liabilities shall run to the Contributors of the Properties or Owner
Interests allocated to the Avalon Parties and AMLI Parties as identified
on Schedule 1.4, and, under no circumstances, other than as provided in
the next succeeding sentence, shall the AMLI Parties or the Avalon
Parties be liable to the TCR Group with respect to the breach of or
inaccuracy in any representation or warranty or any other obligation
that relates to such other parties. Notwithstanding the foregoing,
while the respective rights and obligations of each entity which is a
Transferee with respect to a transfer of the Property or Owner Interests
allocated to such party on Schedule 1.4 are several, in the event that
Avalon and the Avalon OP, on the one hand, or AMLI and the AMLI OP, on
the other hand (such parties being referred to herein as "DEFAULTING
PARTIES"), default in the performance of their respective obligations to
complete the acquisition of the Property or Owner Interests allocated to
such Defaulting Parties on Schedule 1.4 hereof other than the Delayed
Closing Property (as hereinafter defined) and a Development
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Property (as hereinafter defined), the other parties (hereinafter referred to
as the "NON-DEFAULTING PARTIES") shall, subject to the cure periods specified
in Section 18.2 hereof, be required to cure such default by the Defaulting
Party by assuming the obligations of the Defaulting Party to complete the
acquisition of such Property or Owner Interest(s) allocated to the Defaulting
Party as and to the extent contemplated by this Agreement, failing which the
Avalon Parties and the AMLI Parties shall be jointly and severally liable for
the liquidated damages if applicable under Section 18.2(a) hereof. Upon such
assumption (which will be confirmed in writing to the Contributors), the
Non-Defaulting Parties shall be substituted mutadis-mutandis, for the
Defaulting Party for all purposes of this Agreement.
Section 1.5 Access to Books and Records. The Transferee agrees
that through the eighth (8th) anniversary of the Initial Closing Date
each Contributor shall have access after the Initial Closing to its
respective Books and Records for inspection or duplication at the
offices of the Transferee at reasonable times and upon reasonable
notice. The Transferee shall maintain through such date the computer
equipment or programs transferred under this Agreement which are
necessary to access or retrieve any of the Books and Records.
Section 1.6 Excluded Assets. No property, right or beneficial
interest of the TCR Group or any Contributor or Owner shall be conveyed
by this Agreement, or any right with respect thereto established in
favor of Transferee, unless the conveyance of same is expressly
described in this Agreement or a Schedule attached hereto.
ARTICLE 2. VALUE AND PAYMENT TERMS.
Section 2.1 Issuance of Equity Securities. (a) Subject to Section
2.1(b), at the Initial Closing, the Transferee shall issue or cause to
be issued to the TCR Group or its Designees that number of Equity
Securities (allocated among the parties constituting the Transferee as
set forth in Schedule 2.1(i)) determined by dividing the portion of the
Net Value (as hereinafter defined) attributable to the Property then
being transferred by the Share Price. Subject to Section 2.1(b), at the
Delayed Closing Property Closing and each Development Property Closing
(together with the Initial Closing, the "CLOSINGS" and each, a
"CLOSING") the Transferee shall issue or cause to be issued to the TCR
Group or its Designees the number of OP Units specified in Schedule
2.7(b) (allocated among the parties constituting the Transferee as set
forth in Schedule 2.7(b)). The TCR Group may update Schedule 2.1(i)
prior to the date that is ten (10) days prior to the Initial Closing;
provided, that (i) the Cash Consideration may not exceed the amount set
forth in Section 2.4, (ii) the number of Equity Securities to be issued
by Avalon and AMLI in connection herewith shall not exceed 19% of each
of Avalon's or AMLI's outstanding Shares as of the Initial Closing Date
and (iii) the allocation
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between Avalon and AMLI may not be amended without the consent of each such
party. "NET VALUE" shall be an amount equal to $328,450,000 and which shall
be allocated among the Development Properties, the Property identified on
Schedule A as a "DELAYED CLOSING PROPERTY" and, in the aggregate, all other
Property (the "OTHER PROPERTIES") as set forth on Schedule 2.1(i). The Net
Value allocated to the Other Properties shall be (A) reduced by the sum of
the following: (i) the outstanding principal balance plus all accrued and
unpaid interest thereon due on the applicable Closing Date on the loans
listed on Schedule 2.1(ii), (ii) the Cash Consideration allocated to the
Other Properties on Schedule 2.1(i), (iii) the Assigned Value of all
Withdrawn Property, which are Other Properties, and (iv) the cost to complete
the renovations to the Oxford Hill property as described in Section 2.3(e),
and (B) increased or decreased by the adjustment for Management Contracts
required by Section 2.8. The Net Value allocated to the Delayed Closing
Property and the Development Properties shall be reduced by the Cash
Consideration allocated to the Delayed Closing Property and the Development
Properties, respectively, on Schedule 2.1(i).
(b) Notwithstanding the foregoing, if the Closing Price of AMLI is
less than $22.00 (the "AMLI FLOOR"), or the Closing Price of Avalon is
less than $27.25 (the "AVALON FLOOR" and together with the AMLI Floor, a
"FLOOR"), then this Agreement may be terminated in its entirety at the
election of either the TCR Group or the Transferee made by written
notice to the other two (2) business days prior to the Initial Closing
Date. If the TCR Group delivers such notice, the Transferee by written
notice to the TCR Group given within two (2) business days after receipt
of the TCR Group's termination notice may elect to cause the transaction
to proceed and the Initial Closing shall occur two (2) business days
after the Initial Closing Date by, (X) if the Closing Prices of both of
Avalon and AMLI are below their respective Floors, delivering, in lieu
of Equity Securities, cash in an amount equal to the Net Value plus the
Tax Liability, or (Y) if the Closing Price of either Avalon or AMLI is
below its respective Floor and the Closing Price of the other party is
equal to or greater than its Floor, (i) the party whose Closing Price is
below its Floor delivering, in lieu of its Equity Securities, cash in an
amount equal to the Net Value allocated to such party plus the Tax
Liability associated with such transaction and the party whose Closing
Price is above its Floor delivering its Equity Securities or (ii) the
party whose Closing Price is above its Floor proceeding to close on the
entire transaction contemplated by this Agreement by delivering the
number of Equity Securities determined by dividing the Net Value by its
Share Price (without regard to the allocation set forth in Schedule
2.1(i)), and the transaction terminating only as to the party whose
Closing Price is below its Floor. In the event of any termination of
this Agreement pursuant to this Section 2.1(b), neither party shall have
recourse or remedy hereunder.
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Section 2.2 Assumption of Indebtedness. At the Initial Closing,
Transferee shall assume and agree to pay and perform all indebtedness
and obligations of the TCR Group under all Assumed Loans, and, to the
extent permitted by the respective lenders, the TCR Group and its
affiliates shall be released from any and all liability for such Assumed
Loans. At the Initial Closing, Transferee shall execute and deliver all
such documents and instruments (the "ASSUMPTION DOCUMENTS") reasonably
required by the holders of the Assumed Loans to evidence such assumption
and release in form satisfactory to such holders and the TCR Group,
provided that, except as set forth on Schedule 2.2, Transferee shall not
be required to accept any loan terms (including, with respect to any
bonds, their tax exempt status and low to moderate income tenant
requirements) substantially more onerous than those to which the
applicable Contributor is subject pursuant to the applicable loan
documents. Transferee shall pay fees associated with such assumptions
not in excess of those set forth on Schedule 2.2. Except as provided
below, in the event that the Transferee is unable for any reason to
consummate any such assumption, the Transferee (i) shall cause the
Assumed Loan to be paid in full at the Initial Closing and such payment,
in lieu of assumption, shall not affect the determination of Net Value
under Section 2.1(a) or the Cash Consideration designated under Section
2.4, and (ii) except as provided in the next sentence hereof, Transferee
shall be responsible for the payment at the Initial Closing of all
amounts due in connection with any such prepayment. If, however, a
holder of an Assumed Loan (i) does not allow an assumption of an Assumed
Loan for any reason other than due to a failure of the Transferee to
cooperate with the holder on a basis consistent with that required
pursuant to the second sentence of this Section 2.2, (ii) except as set
forth on Schedule 2.2, requires substantially more onerous terms than
those to which the Contributor is subject, or (iii) charges an
assumption fee in excess of that set forth on Schedule 2.2, then the TCR
Group shall be responsible for (x) any excess assumption fee if (iii)
applies or (y) any prepayment premium or penalty due in connection with
any such prepayment if (i) or (ii) applies. Notwithstanding any other
provision herein, other than the buy-down of the interest rate on the
Assumed Loan on the Vinings Ridge Property as described in Section
9.1(m), the TCR Group shall not be liable for any fee incurred in
connection with the Transferee replacing any credit enhancement,
re-underwriting any bonds or interest rate buy-down. With respect to
any Assumed Loan, Transferee shall indemnify the TCR Group from any
cost, liability or damage for liability under the documents evidencing
the Assumed Loan, including, without limitation, environmental
liabilities, for matters first arising after the Initial Closing.
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Section 2.3 Development Property.
(a) The Real Properties described in Schedule 2.3(a)
(each a "DEVELOPMENT PROPERTY") are presently under construction. The Net
Value allocated to each Development Property, the applicable Transferee and
the means of payment (Cash Consideration or Equity Securities) is set forth
on Schedule 2.1(i).
The closing for each respective Development Property (each a
"DEVELOPMENT PROPERTY CLOSING") shall occur on the earlier of the date
which is one hundred twenty (120) days after issuance of (i) final
unconditional certificates of occupancy (or their functional
equivalents) for all elements of the Development Property or (ii)
temporary certificates of occupancy allowing occupancy (or their
functional equivalents) of all such elements and subject only to a
specific punch list, but in either case no event later than twenty-four
(24) months after the Initial Closing Date (each a "DEVELOPMENT PROPERTY
CLOSING DATE").
In addition to all other applicable provisions of this Agreement,
the consummation of each Development Property Closing shall be
conditioned upon the following:
(i) issuance of the final unconditional certificates of
occupancy (or their functional equivalents) for all
elements of the Development Property;
(ii) a certificate of final completion issued by the
Contributor's architect for the Development Property,
addressed to the TCR Group and Transferee,
substantially in the form of Exhibit 2.3(a)(ii),
subject only to landscaping and other items awaiting
seasonal opportunity;
(iii) a certificate stating that the completed Development
Property complies with applicable land use laws,
substantially in the form of Exhibit 2.3(a)(iii);
(iv) an as-built survey , the cost of which shall be
allocated as set forth on Schedule 10.6, showing no
encroachments or violations of any recorded
instruments;
(v) an environmental report of Dames & Moore, at the
Transferee's cost, reflecting no Material Adverse
Change in the environmental condition of the
Development Property from the date of the reports
furnished by Dames & Moore to Transferee in connection
with this Agreement and
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approved by Transferee five (5) days prior to the Initial
Closing. The Transferee shall notify the Contributors of
its approval of such environmental report five (5) days
prior to the Initial Closing.
Subject to Section 2.3(b), in the event any of the foregoing
conditions are not satisfied, Transferee may (i) terminate this
Agreement with respect to such Development Property, (ii) extend the
Development Property Closing Date for up to an additional one hundred
twenty (120) days or (iii) waive any conditions and proceed to the
Development Property Closing. Such election shall be made by Transferee
by written notice to the Contributor at least two (2) business days
prior to the Development Property Closing Date.
If a Development Property Closing occurs with seasonal work remaining,
at such Development Property Closing an amount equal to 125% of the cost to
complete such work shall be withheld by Transferee until such work is
completed. The cost to complete such work (which cost shall be agreed upon
by the parties, or in the absence of agreement, shall be determined solely
by Eckland Consultants, Inc., which determination shall be binding on each
party) shall be reserved from either the Cash Consideration or the Equity
Securities (at the election of the applicable Contributor) to be delivered
at such Development Property Closing. Such Contributor shall notify the
Transferee upon the completion of such work, accompanied by a certificate of
Eckland Consultants, Inc. that the work has been completed. Within three
(3) business days of such notification, the Transferee shall release to such
Contributor the balance of the amount so withheld. If such seasonal work is
not completed by such Contributor within one hundred and twenty days (120)
days of such Development Property Closing Date, the Transferee may proceed
to complete such work. Within thirty (30) days of the completion by the
Transferee of such work, the Transferee shall release (i) to the Transferee
an amount equal to the actual costs incurred by the Transferee to complete
such work and (ii) to such Contributor the remainder of the amount so
withheld. If such amount is withheld in cash, all interest shall accrue on
the withheld cash amount at the rate of five percent (5%) per annum and all
interest earned shall be credited first, towards the cost to complete
seasonal work, and second, to such Contributor and shall be paid at the time
of a payment of all withheld amounts. If such amount is withheld in Equity
Securities, such Equity Securities shall be issued at the Share Price
applicable to the Development Property Closing together with cash in an
amount equal to the dividends or distributions declared and paid, if any, on
such Equity Securities between the Development Property Closing Date and the
date of payment of all withheld amounts.
(b) Notwithstanding Section 2.3(a), it is anticipated
that the Towne Greene and Danada Properties listed on Schedule 1.1(a) will be
Substantially Completed by the Initial Closing Date. If either of said
properties is
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Substantially Completed and the following conditions are satisfied, the
closing for such Property shall occur on the Initial Closing Date:
(i) A certificate of occupancy (temporary or permanent) (or
its functional equivalent) shall have been issued
allowing the use of all elements of the Property;
(ii) With respect to such Properties, conditions (iii), (iv)
and (v) of Section 2.3(a) above shall have been
satisfied;
(iii) A certificate of Substantial Completion issued by the
Contributor's architect for the particular property
shall have been issued with a punch list which,
including items identified in any temporary certificate
of occupancy, costs less than $200,000 to complete.
If the Closing for either Property so occurs on the Initial Closing
Date, at the Initial Closing:
(x) The Contributor and Transferee shall enter into
a master lease of the rental units of the Property on the
terms set forth as Exhibit 2.3(b).
(y) With respect to such Property, an amount equal
to 125% of the cost to complete the punch list and obtain a
final certificate of occupancy (or its functional equivalent)
shall be withheld by Transferee until such work is completed.
Such costs (which costs shall be agreed upon by the parties,
or, in the absence of agreement, determined solely by Eckland
Consultants, Inc. which determination shall be binding on
each party) shall be reserved from either the Cash
Consideration or the Equity Securities (at the election of
the applicable Contributor) to be delivered at the Initial
Closing. The Contributor hereby agrees to proceed diligently
and at its sole cost and expense to complete the punch list
and obtain the final certificate of occupancy (or its
functional equivalent). Such Contributor shall notify the
Transferee upon the satisfaction of items (i) and (ii) of
Section 2.3(a) above, together with copies of the
certificates required thereby. Within three (3) business
days of such notification, the Transferee shall release to
such Contributor the balance of the amount so withheld. If
such punch list is not completed by such Contributor within
one hundred and twenty days (120) days of the Initial Closing
Date, the Transferee may proceed to complete such punch list.
Within thirty (30) days of the completion by the Transferee
of such punch list, the Transferee
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shall release (i) to the Transferee an amount equal to the
actual costs incurred by the Transferee to complete such punch
list and (ii) to such Contributor the remainder of the amount
so withheld. If such amount is withheld in cash, all interest
shall accrue on the withheld cash amount at the rate of five
percent (5%) per annum and all interest shall be credited
first towards the cost to complete such punch list, if any,
and second to such Contributor and shall be paid at time of
the payment of all withheld amounts. If such amount is
withheld in Equity Securities, such Equity Securities shall be
issued at the Share Price applicable to the Initial Closing
together with cash in an amount equal to the dividends or
distributions declared and paid, if any, on such Equity
Securities between the Initial Closing Date and the date of
payment of all withheld amounts.
(z) In addition to any other provisions of this
Agreement, the Contributor shall warrant for a period of one
year from Substantial Completion that such Property is free
from any and all defects in material and workmanship.
If the Closing of either or both of the Towne Greene and Danada
Properties does not occur on the Initial Closing Date, (i) the parties
shall mutually agree upon the Net Value of such Property and the
allocation of Cash Consideration and Equity Securities thereto, (ii) the
Share Price applicable to the Initial Closing shall govern if the
Closing for such Property occurs within forty-five days of the Initial
Closing Date and (iii) such Property shall be included within the
definition of "Development Properties" for all other purposes hereunder
including without limitation entering into a Management and Leasing
Agreement as provided in Section 2.3(d) below.
(c) The Contributor agrees to proceed diligently to
complete construction of the Development Property in a good and workmanlike
manner, substantially in accordance with the plans and specifications set
forth on Schedule 2.3(c), and in accordance with all applicable laws as
currently enforced by applicable government officials. The Contributor shall
permit a construction representative from Transferee to inspect the work from
time to time during normal business hours and after notice to and
coordination with the site superintendent and attend job meetings. Transferee
shall approve the work on a monthly basis as it proceeds, such approval
limited solely to items readily visible and customarily included in a once a
month job site inspection. In addition to any other provisions of this
Agreement, the Contributor shall warrant for a period of one year from
Substantial Completion that the Development Property is free from any and all
defects in material and workmanship.
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<PAGE> 23
(d) Commencing on the date on which the Initial Closing
shall occur, the Transferee shall assume responsibility for the management
and leasing of each Development Property pursuant to a Management and Leasing
Agreement which provides for (i) a management fee equal to the greater of 3
1/2% of gross receipts or $4,000 per month (prorated for any partial month by
the number of days in such month) and shall commence on the later of the
Initial Closing Date or the date that is thirty (30) days prior to the date
mutually agreed upon for opening the leasing office for the particular
Development Property, (ii) the mutual agreement of an operating and leasing
budget, and (iii) the termination thereof upon termination of this Agreement.
(e) The Oxford Hill Property identified on Schedule
1.1(a) is undergoing substantial renovation and as a consequence a number of
apartment units are unoccupied. A general description of the work is set
forth on Schedule 2.3(e). On the fifth (5th) business day prior to the
Initial Closing Date, the parties, after inspection of the Property by
Transferee's construction representative, in good faith shall agree upon a
detailed scope of work, including with respect to units, the scope on a unit
by unit basis (the "Work") and determine the cost of the Work (including
"hard" and "soft" costs) remaining to be completed as of the Initial Closing
Date and the Net Value shall be reduced accordingly. The Contributor of the
Oxford Hill Property shall enter into a master lease substantially on the
terms set forth in Exhibit 2.3(b). Between the date hereof and the Initial
Closing Date, the Contributor shall proceed diligently with the Work in
compliance with all applicable laws, codes, rules and regulations as
currently enforced by public officials. The remaining cost of Work and
projected date for completion shall be as agreed upon by the TCR Group and
Transferee in good faith. If the parties are unable to agree by the fifth
business day prior to the Initial Closing Date as to the remaining cost of
Work or projected date for Substantial Completion, either party may request
binding arbitration to determine the remaining cost of the Work consistent
with the procedure described in Section 2.6 hereof. In addition, the leasing
of vacant apartment units shall be in accordance with the terms set forth in
Exhibit 13.1(h).
Section 2.4 Cash Consideration. At each Closing, the Transferee shall
pay the TCR Group or its Designees an amount of cash (the "CASH
CONSIDERATION") which amount shall not exceed $226,000,000 in the aggregate
for all Closings, allocated as set forth in Schedule 2.1(i) and adjusted
pursuant to Section 2.1.
Section 2.5 Designation of Issuance of Equity Securities. At each
Closing, the Company and the Operating Partnership shall issue to the
TCR Group or its Designees the number of Shares and OP Units,
respectively, designated in the manner provided in this Section 2.5 in
an amount equal to the Net Value allocated as set forth in Schedule
2.1(i). At least ten (10) business days
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<PAGE> 24
prior to each Closing Date, the TCR Group shall provide notice designating
the name, address and other reasonable information required by the Company or
the Operating Partnership for the Designees. TCR Group recognizes that each
Designee must be an "accredited investor" as defined in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the "1933 ACT"),
and as further provided in Section 9.10.
Section 2.6 Withdrawn Properties. A "WITHDRAWN PROPERTY" shall be
any (i) Affected Property, (ii) Damaged Property, (iii) Condemned Property as
to which this Agreement has been terminated pursuant to Sections 3.3, 16.2,
or Article 17, respectively, or (iv) any other Real Property for which a
condition to Closing has not been satisfied or waived pursuant to Section
13.2, For purposes of the determination of Net Value under Section 2.1, the
"ASSIGNED VALUE" of any Withdrawn Property shall be the amount that the TCR
Group and the Transferee agree upon in good faith, taking into account the
relation of the Withdrawn Property to the value of the entire portfolio of
Real Properties being acquired including appropriate allocation of "going
concern" value among the Real Properties, unless the Assigned Value is
specified on Schedule 2.6, in which event the Assigned Value for the Real
Property shall be the Assigned Value so specified on Schedule 2.6. If the
parties are unable to agree on the Assigned Value by the fifth business day
after the determination that a Property is a Withdrawn Property, then either
party may request binding arbitration of the Assigned Value by the following
method. Ernst & Young/Kenneth Leventhal is hereby appointed by both parties
as the neutral arbitrator (the "ARBITRATOR") of the Assigned Value; provided,
that if for any reason Ernst & Young/Kenneth Leventhal is unable to act as
the Arbitrator, Arthur Andersen, LLP shall be appointed as Arbitrator to
serve in its place. The party electing determination by the Arbitrator shall
give written notice to the Arbitrator and the other party of such election.
On the date (the "SUBMISSION DATE") which is five (5) business days from the
date of such notice, each party shall submit to the Arbitrator its proposed
Assigned Value, together with any materials it wishes to submit in support of
its position. The Arbitrator shall then make its own determination of value
and, within ten (10) business days after the Submission Date, shall select,
in the Arbitrator's sole discretion, the value proposed by one or the other
of the parties (the Arbitrator not being authorized to select any other
value), which selected value shall then be the Assigned Value. In making its
decision, the Arbitrator may make such investigation of the Real Property and
the transactions contemplated by this Agreement, and hold such hearings, as
it deems appropriate. In the event the Withdrawn Property has been withdrawn
because either the holder of an Owner Interest not being transferred no
longer consents to the transaction, or any partner of a Contributor no longer
consents to the transaction, the Assigned Value shall be increased by five
percent (5%) but in no event more than One Million Dollars ($1,000,000.00) in
the aggregate for all Withdrawn Properties. In the event that prior to the
Initial Closing, the number of Withdrawn Properties as to which this
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Agreement has been terminated pursuant to Sections 3.3, 13.2, 16.2 or Article
17 is greater than three (3) Withdrawn Properties, this Agreement may be
terminated in its entirety at the election of the TCR Group or Transferee by
written notice given on or prior to five (5) business days after the fourth
(4th) property becomes a Withdrawn Property.
Section 2.7 Certain Definitions. Where used in this Agreement, the
following terms shall have the following meanings:
"Assumed Loans" mean the obligations listed in Schedule 2.1(ii)
regardless of whether such obligations are assumed or paid at the
Initial Closing as provided in Section 2.2.
"Average Closing Price" means the average of the closing prices of
a share of common stock of Avalon or a share of beneficial interest of
AMLI, as the case may be, on the New York Stock Exchange for all trading
days during the Pricing Period.
"Change in Control" shall mean (i) if the existing board of
directors or trustees of Avalon or AMLI, does not constitute a majority
of such board or (ii) the termination of any of the Executive Officers,
except for termination due to death or Disability. For purposes of this
Agreement "Disability" of an executive officer of Avalon or AMLI, as the
case may be, shall be determined by the Board of Directors or trustees,
respectively.
"Closing Price" means the Average Closing Price determined for the
Pricing Period preceding the Initial Closing Date, weighted by volume.
"Executive Officers" means, in the case of Avalon, Richard L.
Michaux, Charles H. Berman, Bryce Blair, Thomas Sargeant and Robert
Slater and, in the case of AMLI, Allan J. Sweet, Philip Tague, John
Allen and Gregory T. Mutz.
"Material Adverse Effect" shall mean (i) with respect to an entity,
a material adverse effect on the business, results of operations or
financial condition of such entity, or an event which would materially
and adversely effect such entities ability to perform its obligations
hereunder, and (ii) with respect to Property, a material adverse effect
on the marketability of title, use or value of such Property.
"OP Unit" means a unit of limited partner interest in the Operating
Partnership.
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"Pricing Period" means the period of fifteen (15) consecutive
trading days concluding with the last trading day which is three (3)
trading days before the Initial Closing Date.
"Share" means a share of common stock/beneficial interest of the
Company.
"Share Price" means for Avalon and AMLI respectively, the prices
listed on Schedule 2.7(a).
"Substantial Completion" means as to any specific Property, the
time at which a certificate of occupancy (or its functional equivalent)
for the final building constructed on the Property is issued and the
architect engaged by TCR Group issues a certificate of Substantial
Completion identifying a punch list which, other than with respect to
landscaping and other items awaiting seasonal opportunity, costs less
than $200,000 to complete.
"Tax Liability" means the aggregate tax liability mutually agreed
upon by the parties hereto on or prior to the Initial Closing, and which
would be payable by the TCR Group upon an election by the Transferee to
pay cash and the tax liability associated therewith in lieu of Equity
Securities under Section 2.1.
Section 2.8 Management Contracts.
(a) To the extent that (i) any Management Contracts are
not assignable or assignment has not been consented to by the Initial Closing
Date, or (ii) any Management Contracts have been terminated or notice of
termination given on or prior to the Initial Closing Date, then Net Value
shall be decreased by 175% of the projected annual management fees under the
Management Contracts covered by subsection (i) or (ii) above as set forth on
Schedule 1.1(h) (the "MANAGEMENT FEES"). Similarly, in the event that the TCR
Group enters into additional management contracts that are consented to by
Transferee (such consent not to be unreasonably withheld) and assignable to
the Transferee covering Properties not actively for sale on the Initial
Closing Date ("ADDITIONAL MANAGEMENT CONTRACTS"), the Net Value shall be
increased by 175% of the Management Fees under such Additional Management
Contracts; provided, that there shall be no adjustment to the Net Value for
any Additional Management Contract that causes the Management Fees to exceed
$1,700,000.00. To qualify for such increase an Additional Management Contract
must be in the same general rental market areas as Properties under
Management Contracts existing on the Effective Date.
(b) Schedule 1.1(h) indicates all Properties covered by
Management Contracts that are being marketed for sale on the date hereof. The
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parties, at the Initial Closing, shall revise Schedule 1.1(h) to reflect
properties then being marketed for sale. The Net Value payable at the Initial
Closing shall be reduced by one hundred seventy-five percent (175%) of the
Management Fees due under said contracts. Six (6) months following the
Initial Closing Date, Transferee shall pay to the Contributors (i) one
hundred seventy-five percent (175%) of the Management Fees attributable to
the Management Contracts of Properties indicated as being marketed for sale
on the revised Schedule 1.1(h) which management has not been terminated
during such period pursuant to a sale, plus (ii) if such payment is made in
Equity Securities, such Equity Securities issued at the Share Price
applicable to the Initial Closing together with cash in an amount equal to
the dividends or distributions declared and paid, if any, on such Equity
Securities between the Initial Closing Date and date of issuance of such
Equity Securities.
Section 2.9 Acquisition Contracts. Schedule 1.1(g) sets forth all
of the Acquisition Contracts the TCR Group proposes to transfer to
Transferee. Within ten (10) business days from the Effective Date,
Transferee shall identify those Acquisition Contracts it wishes to
accept and shall so notify the TCR Group in writing ("ACCEPTED
ACQUISITION CONTRACT"). If the Initial Closing occurs, the Transferee
shall be responsible for all costs incurred by the TCR Group prior to
the Effective Date related to the Accepted Acquisition Contracts as set
forth in Schedule 2.9, and for those costs incurred after the Effective
Date which are required to maintain said contracts in full force and
effect (provided TCR Group has given Transferee notice of payment of any
such costs at least two (2) business days prior to making such
payments), and such other third party costs ("PREDEVELOPMENT COSTS") as
shall be approved by Transferee in Transferee's sole discretion. If,
however, prior to the Initial Closing the Transferee elects not to
proceed with any Accepted Acquisition Contract, the Transferee shall
give written notice thereof to the Contributor. In such event, or if
the Transferee fails to approve the payment of any Predevelopment Costs,
the Transferee shall have no obligation to reimburse the Contributor for
any costs related to such contract unless the Contributor terminates
such Accepted Acquisition Contract promptly after receipt of
Transferee's notice of termination of its interest therein. If the
Contributor does so terminate the Accepted Acquisition Contract, the
Transferee shall be liable at the Initial Closing for all costs for
which Transferee would otherwise have been liable related to all
Acquisition Contracts incurred by the Contributors on and prior to the
date of the Transferee's election not to proceed.
The TCR Group shall furnish Transferee with copies of all reports
and other written materials which the TCR Group obtains in connection
with the Predevelopment Costs. TCR Group shall permit Transferee to
communicate directly with any consultant or other service provider which
prepared such material and with TCR Group employees who are working on
such transactions in order to address questions which the Transferee may
have. It is understood that
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Transferee will be evaluating on an on-going basis whether it is
satisfied with the information produced by such process and whether
Transferee wishes to continue to commit to accept an assignment of each such
Accepted Acquisition Contract at the Initial Closing.
With respect to each Accepted Acquisition Contract, until such time
(if any) as Transferee terminates its interest in such contract pursuant
to the first grammatical paragraph of this Section 2.9, (i) TCR Group
shall promptly furnish Transferee with a copy of any notices it receives
from the seller under any such contract, (ii) TCR Group shall not amend,
terminate, make any election, or waive any condition or contingency
under any such contract without Transferee's consent, (iii) TCR Group
shall continue to perform all of its obligations under such contract as
needed to keep such contract in full force and effect, and (iv) upon
inquiry by Transferee, TCR Group shall keep Transferee fully informed of
matters affecting the status of such contract.
Section 2.10. Delayed Closing Property. If the Closing of the
Delayed Closing Property takes place on or before February 7, 1998, the
Share Price shall be determined in accordance with Schedule 2.7(a) as if
the Delayed Closing Property Closing Date for such Delayed Closing
Property were the Initial Closing Date. If the Delayed Closing Property
Closing takes place after February 7, 1998, the OP Units to be issued at
the Delayed Property Closing (the date that such Closing actually takes
place, the "DELAYED CLOSING PROPERTY DATE" and, together with the
Initial Closing Date and the Development Property Closing Date, the
"CLOSING DATES") shall be as set forth on Schedule 2.7(b). In all other
respects, the Delayed Closing Property shall be included within the
definition of "Other Property" except (i) the Delayed Closing Property
shall not be considered a Withdrawn Property, and (ii) adjustments
pursuant to Section 12.1 shall be made on the Delayed Closing Property
Date rather than the Initial Closing Date.
ARTICLE 3. TITLE; MATTERS TO WHICH THIS CONTRIBUTION IS SUBJECT.
Section 3.1 Permitted Encumbrances. Whether the Property is
contributed to the Operating Partnership, or in the event of a
contribution described in Section 1.2 above, the Property shall be
subject to the following (collectively, the "PERMITTED ENCUMBRANCES"):
(a) The liens of real estate taxes, personal property
taxes, water charges and sewer charges provided the same are not due and
payable, but subject to adjustment as provided herein;
(b) the rights of the Tenants, as tenants only;
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(c) other than mortgages (except the Assumed Loans),
liens or the like, any and all restrictions, covenants, agreements,
easements, matters and things of record as of the applicable Closing Date,
affecting title to the Real Property as of the Effective Date, and including
such easements, covenants and restrictions granted, created or entered into
after the Effective Date in accordance with Section 3.2 below;
(d) any and all laws, statutes, ordinances, codes,
rules, regulations, requirements, or executive mandates affecting the Real
Property, including, without limitation, those related to zoning and land use
("LEGAL REQUIREMENTS"), of any applicable agency, board, bureau, commission,
department or body of any municipal, county, state or federal governmental
unit, or any subdivision thereof, having, asserting or acquiring jurisdiction
over all or any part of the Real Property or the management, operation, use
or improvement thereof (collectively, "GOVERNMENTAL AUTHORITIES");
(e) the state of facts shown on the surveys described on
Schedule 3.1(e) for each individual Real Property comprising the Real
Property (collectively, the "SURVEYS") and any other state of facts which a
recent and accurate survey of the Real Property would actually show;
(f) the Service Contracts being assumed by Transferee;
(g) any installment of assessments affecting the Real
Property or any portion thereof due and payable after the applicable Closing
Date, subject to Section 12.3;
(h) any utility company rights, easements and franchises
to maintain poles, lines, wires, cables, pipes, boxes and other fixtures and
facilities in, over, under or upon the Real Property that do not encroach
upon or encroach on any Improvements;
(i) any prohibition against the interference with the
natural and unobstructed flow of any applicable brook crossing the Real
Property or other riparian rights, unless presently being violated;
(j) such matters as the Title Company shall be willing,
without special premium, to omit as exceptions to coverage including minor
variations between record lines and tax lot lines; and
(k) the liens of the Assumed Loans on those parcels of
Real Property encumbered by the Assumed Loans including, without limitation,
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any Legal Requirements of Governmental Authorities associated with the
Assumed Loans.
Section 3.2 Easements, Licenses and Dedications Prior to Closing.
From and after the Effective Date, no Contributor will voluntarily
grant, create or enter into any encumbrance, covenant, easement or
restriction on any Real Property without the prior written consent of
the Operating Partnership, which consent will not be unreasonably
withheld, conditioned or delayed. Notwithstanding the foregoing, any
Contributor may enter into agreements or grant easements, licenses and
dedications for usual and customary utilities (other than telephone and
cable television service), water, sewer, ingress and egress granted in
the ordinary course of business without the Operating Partnership's
consent; provided that such Contributor shall give the Operating
Partnership written notice of any such easement, license or dedication,
which shall thereupon become a Permitted Encumbrance.
Section 3.3 Title Insurance. It shall be a condition to the
Transferee's obligations hereunder that the Operating Partnership be
able to obtain owner's policies of title insurance (the "TITLE
POLICIES") insuring good and marketable title to each Real Property in
an amount designated by the Transferee (at a standard rate for such
insurance) in the name of the Operating Partnership or its designees,
upon delivery of the Deeds, or Owner Interest assignments (if
applicable) written on a standard 1970 ALTA Owners Policy with extended
coverage, 3.1 zoning and comprehensive endorsements, free and clear of
all liens, encumbrances and other matters, other than Permitted
Encumbrances that have a Material Adverse Effect on any Real Property (a
"MAE ENCUMBRANCE"). In the event that the Transferee is unable to
obtain a Title Policy in the form described above as to one or more of
the Real Properties (each an "AFFECTED PROPERTY") by reason of a MAE
Encumbrance (a "TITLE OBJECTION"), the Transferee shall give the TCR
Group written notice (the "OBJECTION NOTICE") of such Title Objections
as to each Affected Property not less than thirty (30) days prior to
Closing or ten (10) days after such later date as Transferee becomes
aware of the same. Any such lien, encumbrance or other matter not
raised as a Title Objection in a timely submitted Objection Notice shall
be a Permitted Encumbrance. The TCR Group shall have the option, but
not the obligation, for a period of twenty (20) days following receipt
of the Objection Notice (the "TCR CURE PERIOD") to cure or remedy
(whether by bonding around or otherwise so long as such item is removed
or insured on the Title Policy in a manner satisfactory to the
Transferee) any such Title Objection. If any Title Objection as to an
Affected Property remains uncured at the end of the TCR Cure Period, the
Transferee may, as its sole and exclusive remedy in such event, either
(i) terminate this Agreement as to such Affected Property by written
notice to the TCR Group not less than five (5) days after the expiration
of the TCR Cure Period or (ii) waive any such uncured Title Objection,
which shall thereupon become a Permitted Encumbrance. The
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Transferee's failure to terminate the Agreement as to any such Affected
Property in the manner and within the time provided in the preceding sentence
shall constitute its waiver of any uncured Title Objection relating to or
affecting such Affected Property. In the event of a termination of this
Agreement as to one or more of the Affected Properties under this Section
3.3, such Affected Properties shall be treated as Withdrawn Property under
Section 2.6, and subject to the provisions of Section 2.6 this Agreement
shall continue in full force and effect as to all other Property.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE TCR GROUP.
Section 4.1 Operating Representations and Warranties. In order to
induce the Company and the Operating Partnership to enter into this
Agreement and to perform their respective obligations hereunder, each
Contributor, hereby severally warrants and represents the following:
(a) Organization, Good Standing and Partnership Power.
Each Contributor is a corporation, general or limited partnership or limited
liability company duly organized and validly existing under the laws of the
jurisdiction in which it was organized, is duly authorized to transact
business under the laws of each state in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be
so qualified would not have a Material Adverse Effect, has all requisite
entity power and authority to execute and deliver this Agreement and all
other documents and instruments to be executed and delivered by it hereunder,
and to perform its obligations hereunder and thereunder in accordance with
the terms and conditions hereof and thereof.
(b) Authorization; No Violation. Assuming the due and
valid authorization, execution and delivery of this Agreement by the
Transferee, this Agreement, and the other agreements and documents to be
executed by the TCR Group hereunder, will be the legal, valid and binding
obligation of each Contributor, enforceable against each Contributor in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or similar laws relating to creditors' rights and
general principles of equity. The performance by each Contributor of its
duties and obligations under this Agreement and the documents and instruments
to be executed and delivered by it hereunder will not (i) conflict with, or
result in a breach of, or default under, any provision of any of the
organizational documents of such Contributor or any agreement, instrument,
decree, judgment, injunction, order, writ, law, rule or regulation, or any
determination or award of any court or arbitrator, to which such Contributor
is a party or by which its assets are or may be bound, except for any of the
foregoing matters that, individually or in the aggregate, would not affect
the
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vesting of title or have a Material Adverse Effect on such Contributor, or
(ii) require any consent, approval or authorization of, or declaration,
filing or registration with, any domestic governmental or regulatory
authority, except where the failure to obtain any such consent, approval or
authorization of, or filing or registration with, any governmental or
regulatory authority would not have a Material Adverse Effect on such
Contributor.
(c) Rent Roll. The TCR Group has delivered to the
Operating Partnership a rent roll, in a form mutually agreed to by the
parties (the "RENT ROLLS"), for each Real Property (excluding Development
Properties) current as of September 30, 1997. To the Contributor's knowledge,
the information set forth in each such Rent Roll is true and correct in all
material respects. To the Contributor's knowledge, the Rent Rolls, reflect
all of the Leases, tenancies or occupancies materially affecting the Real
Property as of such date. True and complete copies of the Leases have been
made available to Transferee.
(d) Work on Real Property. To the Contributor's
knowledge, no work has been performed on any Real Property that would require
an amendment to the certificate of occupancy for such Real Property for which
an amendment has not been obtained, and, to the Contributor's knowledge, any
and all work performed at the Real Property has been performed in all
material respects in accordance with all Legal Requirements of all applicable
Governmental Authorities.
(e) Validity of Service Contracts. To the Contributor's
knowledge, there are no service contracts, equipment leases, union contracts,
employment agreements, management agreements or other agreements materially
affecting the Property or the operation thereof other than the Service
Contracts. To the Contributor's knowledge, all of the Service Contracts are
in full force and effect without any material default or claim of material
default by any party thereto. To the Contributor's knowledge, all sums
presently due and payable by the Contributor under the Service Contracts have
been fully paid. Schedule 1.1(e)(ii) identifies all Service Contracts
including those which are not terminable within one (1) year of the Initial
Closing.
(f) No Litigation. Except as set forth on Schedule
4.1(f), to the Contributor's knowledge, there are no actions, suits, labor
disputes, litigation or proceedings currently pending or threatened against
or related to the Contributor or to all or any part of the Property owned by
it, the environmental condition thereof, the operation thereof or the manager
of such Property.
(g) No Actions Relating to Real Property. Except as set
forth on Schedule 4.1(g), to the Contributor's knowledge, the Contributor has
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received no written notice nor does it otherwise have knowledge of (i)
pending or contemplated annexation or condemnation proceedings, or private
purchase in lieu thereof, affecting or which may affect the Real Property, or
any part thereof, (ii) proposed or pending proceedings to change or redefine
the zoning classification of all or any part of the Real Property, (iii)
proposed or pending special assessments affecting the Real Property or any
portion thereof, (iv) penalties or interest due with respect to real estate
taxes assessed against the Real Property and (v) proposed changes in any road
or grades with respect to the roads providing a means of ingress and egress
to the Real Property.
(h) No Violations of Legal Requirements. Except as set
forth on Schedule 4.1(h), to the Contributor's knowledge, the Contributor has
not received written notice from any Governmental Authority of any violations
(including environmental) of any Legal Requirements affecting the Real
Property nor does the Contributor have knowledge that any such Governmental
Authority has issued or contemplates the issuance thereof. To the
Contributor's knowledge, except as disclosed on Schedule 4.1(h), there are no
outstanding orders, judgments, injunctions, decrees or writ of any
Governmental Authority against or involving the Contributor or the Real
Property, except for any matter disclosed on Schedule 4.1(h), which
individually or in the aggregate, would have a Material Adverse Effect on any
individual parcel of Real Property.
(i) Solvency. There does not exist in effect with
respect to such Contributor (i) any general assignment for the benefit of
creditors, (ii) any voluntary petition in bankruptcy, (iii) any involuntary
petition filed by the Contributor's creditors, (iv) any appointment of a
receiver to take possession of all, or substantially all, of such
Contributor's assets, (v) any attachment or other judicial seizure of all, or
substantially all, of such Contributor's assets, (vi) any admission in
writing of its inability to pay its debts as they come due or (vii) any offer
of settlement, extension or composition to its creditors generally.
(j) Title to Personal Property. Except as set forth on
Schedule 4.1(j), the Personal Property will be owned by the Contributor free
and clear of any conditional bills of sale, chattel mortgages, security
agreements or financing statements or other security interests of any kind,
other than liens securing the Assumed Loans.
(k) Insurance. To the Contributor's knowledge, the
Contributor has not received written notice of any outstanding requirements
or recommendations by (i) the insurance company(s) currently insuring the
Property, (ii) any board of fire underwriters or other body exercising
similar functions or (iii) the holder of any Assumed Loan encumbering any of
the Property, which in any case require or recommend any repairs or work to
be done on the Property of a material nature.
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(l) Property Financials. The operating statements of the
Contributor representing the income and expense statements of the Contributor
excluding only those operations not contemplated to be contributed to the
Operating Partnership pursuant to this Agreement relating to the operation of
the Property and the related statement of income and cash flows, including
the footnotes thereto (the "PROPERTY FINANCIALS"), as of and for the years
ending December 31, 1995 and 1996 and for the period of January 1, 1997
through September 30, 1997, fairly present the operating results and cash
flows of such Property for such respective periods, in each case in
accordance with accounting principles applied on a basis consistent with the
Contributor's historical financial statements (except (i) as otherwise
indicated thereon or in the notes thereto and (ii) with regard to the
consistency of the timing and reporting of ad valorem property tax accruals).
The Property Financials from January 1, 1997 through September 30, 1997 are
subject to normal recurring year-end adjustments.
(m) Validity of Assumed Loan Documents. To the
Contributor's knowledge, all documents, instruments and agreements
evidencing, governing, securing and guaranteeing the Assumed Loans (the
"ASSUMED LOAN DOCUMENTS") are in full force and effect, and the Contributor
has not received written notice from the holder of any such Assumed Loan, nor
does it otherwise have knowledge of, any default or event of default
thereunder. True and complete copies of the Assumed Loan Documents have been
made available to Transferee.
(n) Taxes. With respect to ad valorem or property taxes
and assessments relating to the Property which is the subject of the
transfers pursuant to Section 1.2, to the Contributor's knowledge, the
Contributor has paid all material Taxes due and payable prior to the Closing
and timely filed all material returns and reports required to be filed prior
to the Closing with respect to the ownership and operation of such Real
Property (by it or any predecessor entity) for which the Operating
Partnership could be held liable or a claim made against such Real Property.
Except as set forth in Schedule 4.1(n), to the Contributor's knowledge, there
are no audits or other proceedings by any Governmental Authority pending or
threatened with respect to Taxes resulting from the ownership and operation
of such Real Property (by it or any predecessor entities) for which the
Operating Partnership could be held liable or a claim made against such Real
Property, and no agreement extending the period for assessment and collection
has been executed with respect thereto.
(o) Validity of Management Contracts. To the
Contributor's knowledge, all of the Management Contracts are in full force
and effect without any material default or claim of material default by any
party thereto.
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(p) Environmental Matters. To the Contributor's
knowledge, the Contributor has made available to Transferee true and complete
copies of all environmental reports prepared for, or in the possession or
control of Contributor. Except as set forth therein, to the Contributor's
knowledge, the Real Property does not contain any hazardous materials in
violation of applicable law.
Section 4.2 Legend. The Contributor hereby acknowledges that each
certificate or other instrument representing the Equity Securities shall
bear, in addition to such other customary legends as are included
thereon, the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR
INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR (B) IF THE [OPERATING
PARTNERSHIP/COMPANY] HAS BEEN FURNISHED WITH A
REASONABLY SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER AND APPROVED BY THE TRANSFEREE THAT SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE 1933 ACT AND THE RULES AND
REGULATIONS THEREUNDER."
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP
AND THE COMPANY.
Section 5.1 Operating Representations and Warranties. Any
representations and warranties of any Transferee as it may be deemed to
include the Avalon OP or Equity Securities issued by the Avalon OP shall
be deemed to be made as of the formation of the Avalon OP and shall be
true and correct as of the Closing Date. In order to induce the TCR
Group to enter into this Agreement and to perform their respective
obligations hereunder, Avalon and the Avalon OP, jointly and severally,
and AMLI and the AMLI OP, jointly and severally, as applicable,
severally warrant and represent, except as set forth in the SEC
Documents (as hereinafter defined), the following:
(a) Authorization; No Violation. Assuming the due and
valid authorization, execution and delivery of this Agreement by the TCR
Group,
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this Agreement and the other agreements and documents to be executed and
delivered by each of the Operating Partnership and the Company hereunder,
when duly executed and delivered, will be the legal, valid and binding
obligation of each of the Operating Partnership and the Company, enforceable
against the Operating Partnership and the Company in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
similar laws relating to creditors' rights and general principles of equity.
The performance by each of the Operating Partnership and the Company of its
respective duties and obligations under this Agreement and the documents and
instruments to be executed and delivered by each of them hereunder will not
(i) conflict with, or result in a breach of, or default under, any provision
of any of the organizational documents of either of the Operating Partnership
or the Company or any agreements, instruments, decrees, judgments,
injunctions, orders, writs, laws, rules or regulations, or any determination
or award of any court or arbitrator, to which either of the Operating
Partnership or the Company is a party or by which the assets of either are or
may be bound, except for any of the foregoing matters that, individually or
in the aggregate, would not have a Material Adverse Effect on the Operating
Partnership or the Company, or (ii) require any consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, except where the failure to obtain such
consent, approval or authorization of, or filing or registration with, any
governmental or regulatory authority would not have a Material Adverse Effect
on the Operating Partnership or the Company.
(b) Equity Securities. The Equity Securities to be
issued to the TCR Group are duly authorized and, when issued by the
Transferee, will be fully paid and non-assessable, free and clear of any
mortgage, pledge, lien, encumbrance, security interest, claim or rights of
interest of any third party of any nature whatsoever. The Shares to be issued
by the Company, including those issued upon redemption of the OP Units, are,
or prior to the Initial Closing Date, will be, reserved for future listing
with the New York Stock Exchange and, upon issuance, will be fully paid and
non-assessable, free and clear of any mortgage, pledge, lien, encumbrance,
security interest, claim or rights of interest of any third party of any
nature whatsoever.
(c) No Shareholder Approval Required. The approval of
the Company's shareholders of the transactions contemplated by this Agreement
is not a prerequisite to the Company's corporate power to execute and deliver
this Agreement or any other documents and instruments to be executed and
delivered by it hereunder or to perform its obligations hereunder and
thereunder, including, without limitation, the Equity Securities.
(d) OP Agreement. The AMLI OP has furnished to the TCR
Group a true and complete copy of the Agreement of Limited Partnership of
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the AMLI OP, as amended to the Effective Date (the "AMLI OP AGREEMENT"). The
AMLI OP Agreement is in full force and effect and has not been further
amended. No action has been taken or is pending as of the Effective Date,
nor, as of the Initial Closing Date, will have been taken, to amend the AMLI
OP Agreement (except as contemplated hereby) or for the termination or
dissolution of the AMLI Operating Partnership, except to provide for
admission of additional limited partners. Between the Initial Closing Date
and the last Development Property Closing Date, no amendment to the AMLI OP
Agreement shall be taken which will adversely affect the rights of the
holders of OP Units in the AMLI Operating Partnership with respect to the
matters set forth in Exhibit 9.3 hereto or Article 9.13 hereof.
(e) SEC Documents. The Company has caused to be
delivered to the TCR Group copies of its most recent annual report on Form
10-K, proxy statement filed in connection with its most recent shareholders
meeting, any reports under the Securities and Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), filed during fiscal 1997 and its most recent
registration statement and related prospectuses and supplements filed under
the 1933 Act by the Company and declared effective (the "SEC DOCUMENTS") and
will cause to be delivered to the TCR Group copies of such additional
documents as may be filed by the Company pursuant to the 1933 Act or the
Exchange Act, on or prior to the Initial Closing Date. Such SEC Documents
were, and those additional documents filed between the Effective Date and the
applicable Closing Date have been and will be, prepared and filed in material
compliance with the rules and regulations promulgated by the Securities and
Exchange Commission ("SEC"), and, do not and will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein in order to make the statements contained therein, in light
of the circumstances under which they were made or will be made, not
misleading (except to the extent such statements have been amended by
subsequently filed SEC Documents).
(f) Financial Documents. The consolidated financial
statements included in the SEC Documents have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the period involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-Q) and present fairly in all material respects (subject, in the
case of the unaudited statements, to normal, recurring year-end audit
adjustments) the consolidated financial position of the Company and its
consolidated Subsidiaries at the dates thereof and the consolidated results
of operations and cash flows for the periods then ended. For purposes of this
Agreement, the terms "SUBSIDIARY" and "SUBSIDIARIES" shall mean (i) any
entity of which the Company or the Operating Partnership (or other specified
entity) shall own directly or indirectly through a subsidiary, a nominee
arrangement or otherwise (x) at least a majority of the
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outstanding capital stock (or other shares of beneficial interest) or (y) at
least a majority of the partnership, joint venture or similar interests, and
(ii) any entity in which the Company or Operating Partnership (or other
specified entity) is a general partner or joint partner, including, without
limitation, the Operating Partnership.
(g) No Litigation. No action, suit, claim, investigation
or proceeding, whether legal or administrative or in mediation or
arbitration, is pending or, to the best of each of the Operating
Partnership's and the Company's knowledge, threatened, at law or in equity,
against either of the Operating Partnership or the Company before or by any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which would prevent
either of the Operating Partnership or the Company from performing its
respective obligations pursuant to this Agreement or which, if determined
adversely, would have a Material Adverse Effect on either the Operating
Partnership or the Company. There are no judgments, decrees or orders entered
on a suit or proceeding against the Operating Partnership or the Company, an
adverse decision which might, or which judgment, decree or order does,
adversely affect the Operating Partnership's or the Company's ability to
perform its respective obligations pursuant to, or the TCR Group's rights
under, this Agreement, or which seeks to restrain, prohibit, invalidate, set
aside, rescind, prevent or make unlawful this Agreement or the performance of
this Agreement or the transactions contemplated hereby.
(h) Subsidiaries. Except as set forth on Schedule
5.1(h), the Transferee has no Subsidiaries nor any interest or investment in
any partnership, trust or other entity or organization. Each Subsidiary of
the Transferee listed on Schedule 5.1(h) has been duly organized, is validly
existing and in good standing under the laws of the jurisdiction in which it
was organized, has the power and authority to own its properties and to
conduct its business and is duly registered, qualified and authorized to
transact business and is in good standing in each jurisdiction under the laws
of any state in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
Material Adverse Effect on the Operating Partnership, the Company and such
Subsidiaries, taken as a whole; all of the outstanding equity or other
participating interests of each Subsidiary listed on Schedule 5.1(h) have
been duly authorized and validly issued, are fully paid and non-assessable.
(i) No Undisclosed Liabilities. Except as set forth on
Schedule 5.1(i), neither the Company, the Operating Partnership nor any
Subsidiary has any liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise) which could reasonably be
expected to have a Material Adverse Effect except for (i) liabilities or
obligations reflected or
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reserved against in its June 30, 1997 unaudited consolidated balance sheet,
(ii) liabilities and obligations relating to outstanding leases that are not
required to be disclosed under GAAP and (iii) liabilities and obligations
incurred in the ordinary course of business since the date of such balance
sheet.
(j) Taxes. (i) The Company and each of its Subsidiaries
has (A) filed all Tax returns and reports required to be filed by it (after
giving effect to any filing extension properly granted by a Governmental
Authority having authority to do so) and all such returns and reports are
accurate and complete in all material respects; and (B) paid (or the Company
has paid on its behalf) all Taxes shown on such returns and reports as
required to be paid by it, and the most recent financial statements contained
in the SEC Documents reflect an adequate reserve for all material Taxes
payable by the Company (and by those Subsidiaries and whose financial
statements are contained therein) for all taxable periods and portions
thereof through the date of such financial statements. Since December 31,
1996, the Company has incurred no liability for Taxes under Sections 857(b),
860(c) or 4981 of the Internal Revenue Code of 1986, as amended (the "CODE"),
and neither the Company nor any of its Subsidiaries has incurred any material
liability for Taxes other than in the ordinary course of business. No event
has occurred, and no condition or circumstance exists, which presents a
material risk that any Tax described in the preceding sentence will be
imposed upon the Company. Except as set forth on Schedule 5.1(j), no
deficiency for any Taxes has been proposed, asserted or assessed against the
Company or any of its Subsidiaries, and no requests for waivers of the time
to assess any such Taxes are pending.
(ii) The Company (A) for all taxable years commencing
with 1994 through the most recent December 31, has been subject to taxation
as a REIT within the meaning of the Code and has satisfied all requirements
to qualify as a REIT for such years, (B) has operated, and intends to
continue to operate, in such a manner as to qualify as a REIT for the tax
year ending December 31, 1997, and (C) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge to its
status as a REIT, and to the Company's knowledge, no such challenge is
pending or threatened. Each Subsidiary which is a partnership, joint venture
or limited liability company has been treated during and since 1993 (or the
date of its organization, if later) and continues to be treated for federal
income tax purposes as a partnership and not as a corporation or as an
association taxable as a corporation. Each Subsidiary which is a corporation
for federal income tax purposes and with respect to which all of the
outstanding capital stock is owned solely by the Company (or solely by a
Subsidiary that is a corporation wholly owned by the Company) is a "qualified
REIT subsidiary" as defined in Section 856(i) of the Code. Neither the
Company nor any of its Subsidiaries holds any asset (x) the disposition of
which would be subject to rules similar to Section
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1374 of the Code as a result of an election under IRS Notice 88-19 or (y)
that is subject to a consent filed pursuant to Section 341(f) of the Code and
the regulations thereunder.
(k) No Default. Neither the Company nor any of its
Subsidiaries is in default under, or in violation of, any material provision
of its organizational documents.
(l) Ownership of Assets. Except as set forth on Schedule
5.1(l), all of AMLI's real property and other material assets are owned by
AMLI indirectly through its ownership of a partnership interest in the
Operating Partnership and the Operating Partnership's Subsidiaries and
certain other Subsidiaries of the Company.
(m) Solvency. There does not exist in effect with
respect to either the Operating Partnership or the Company (i) any general
assignment for the benefit of creditors, (ii) any voluntary petition in
bankruptcy, (iii) any involuntary petition by either of the Operating
Partnership's or the Company's creditors, suffered the appointment of a
receiver to take possession of all, or substantially all, of the Operating
Partnership's or the Company's assets, (v) any attachment or other judicial
seizure of all, or substantially all, of the Operating Partnership's or the
Company's assets, (vi) any admission in writing of its inability to pay its
debts as they come due or (vii) any offer of settlement, extension or
composition to its creditors generally.
(n) No Restrictions on Equity Securities. Except for the
OP Agreement, this Agreement and as set forth on Schedule 5.1(n), the
Transferee is not in privity to, or otherwise has any knowledge of, any
shareholders' agreement, partners' agreement, voting trust agreement or other
restrictive agreement relating to the sale or voting of the OP Units or the
Shares.
(o) Employee Benefit Plans. (i) Except as disclosed in
Schedule 5.1(o)(i), since the date of the most recent audited financial
statements included in the SEC Documents, there has not been any adoption or
amendment by the Transferee of any or its Subsidiaries of any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other
employee benefit plan, arrangement or understanding (whether or not legally
binding, or oral or in writing) providing benefits to any current or former
employee, officer or director of the Transferee, any of its Subsidiaries, or
any person affiliated with the Transferee under Section 414(b), (c), (m) or
(o) of the Code (collectively, "BENEFIT PLANS").
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(ii) Except as described in Schedule 5.1(o)(ii) or as
would not have a Material Adverse Effect on the Transferee, (A) all Benefit
Plans, including any such plan that is an "employee benefit plan" as defined
in section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), are in compliance with all applicable requirements of law,
including ERISA and the Code, and (B) neither the Transferee nor any of its
Subsidiaries has any liability or obligation with respect to any such Benefit
Plan, whether accrued, contingent or otherwise, or to the knowledge of the
Transferee are any such liabilities or obligations expected to be incurred.
Except as set forth in Schedule 5.1(o)(ii), the execution of, and performance
of the transactions contemplated in, this Agreement will not (either alone or
upon the occurrence of any additional or subsequent event) constitute an
event under any Benefit Plan, policy, arrangement, or agreement or any trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee or director. The only severance agreements or severance policies
applicable to the Transferee or its Subsidiaries are the agreement and
policies specifically referred to in Schedule 5.1(o)(ii).
(p) Debt Instruments. (i) Neither the Transferee nor any
of its Subsidiaries is in violation of or in default under (nor does there
exist any condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under) any material loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other material contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties
or assets is bound, except as set forth in Schedule 5.1(p)(i) and except for
violations or defaults that would not, individually or in the aggregate,
result in a Material Adverse Effect.
(ii) Except for any of the following expressly
identified in the SEC Documents, Schedule 5.1(p)(ii) sets forth (x) a list of
all loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the
Transferee or any of its Subsidiaries in an aggregate principal amount in
excess of $10,000,000 per item is outstanding or may be incurred and (y) the
respective principal amounts outstanding thereunder on October 1, 1997. For
purposes of this Agreement, "INDEBTEDNESS" shall mean, with respect to any
person, without duplication, (A) all indebtedness of such person for borrowed
money, whether secured or unsecured, (B) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person, (C) all capitalized lease obligations of such
person, (D) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof) and (E) all
guarantees of such person of any such indebtedness of any other person.
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(q) Transactions with Affiliates. There are no
arrangements, agreements, and contracts entered into by the Transferee or any
of the Subsidiaries with (i) any person who is an officer, director or
affiliate of the Transferee or any of the Subsidiaries, any relative of any
of the foregoing or any entity of which any of the foregoing is an affiliate
or (ii) any person who acquired securities of the Transferee in a private
placement. Such documents, copies of all of which have previously been
delivered or made available to the TCR Group, are listed in Schedule 5.1(q).
(r) Form S-3. The Company meets all material
requirements and conditions of the SEC for eligibility for registration of
its Common Stock/Common Shares of Beneficial Interest as applicable on Form
S-3.
ARTICLE 6. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF AVALON AND THE
AVALON OP.
Section 6.1 Representations and Warranties. In order to induce the
TCR Group to enter into this Agreement and to perform their respective
obligation hereunder, each of Avalon and the Avalon OP (except with
respect to the Avalon OP, as of the date of the Formation) hereby
jointly and severally warrant and represent, except as set forth in the
SEC Documents, the following:
(a) Organization, Good Standing and Partnership Power of
Avalon. Avalon is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland is duly authorized to
transact business under the laws of any state in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be
so qualified would not have a Material Adverse Effect on Avalon, has all
requisite power and authority to execute and deliver this Agreement and all
other documents and instruments to be executed and delivered by it hereunder,
and to perform its obligations hereunder and thereunder in accordance with
the terms and conditions hereof and thereof. The Board of Directors of Avalon
has approved entering into this Agreement and the transactions contemplated
hereby.
(b) Organization, Good Standing and Partnership Power of
the Avalon OP. The Avalon OP is a Delaware limited partnership duly organized
and validly existing under the laws of the State of Delaware, is duly
authorized to transact business under the laws of any state in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect on
the Avalon OP, has all requisite partnership power and authority to execute
and deliver this Agreement and all
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other documents and instruments to be executed and delivered by it hereunder,
and to perform its obligations hereunder and thereunder in accordance with
the terms and conditions hereof and thereof.
(c) Capital Structure.
(i) As of the second business day immediately
preceding the Effective Date: (A) the authorized capital stock of Avalon
consisted of 80,000,000 shares of common stock, par value $.01 per share, and
20,000,000 shares of preferred stock, par value $.01 per share (B) the issued
and outstanding shares of capital stock of Avalon consisted of [38,471,981
shares of common stock, 4,455,000 shares of Series A preferred stock and
4,300,000 shares of Series B preferred stock, (C) 1,889,502 shares of common
stock were reserved for issuance pursuant to Avalon's current equity
incentive plan; and (D) all the outstanding shares of capital stock of Avalon
have been duly and validly issued and are fully paid and non-assessable.
(ii) As of the second business day immediately
preceding the Effective Date the Avalon OP has partnership interests
outstanding of nominal value.
(iii) Except for the OP Units, as of the Effective
Date, there are no shares of common stock or any other equity security of
Avalon issuable upon conversion or exchange of any security of Avalon or the
Avalon OP or any Subsidiary of either of them. No shareholder of Avalon is
entitled to any preemptive or similar rights to subscribe for shares of
capital stock of Avalon.
ARTICLE 7. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF AMLI AND THE
AMLI OP.
Section 7.1 Representations and Warranties. In order to induce the
TCR Group to enter into this Agreement and to perform their respective
obligations hereunder, each of AMLI and the AMLI OP hereby jointly and
severally warrant and represent, except as set forth in the SEC
Documents, the following:
(a) Organization, Good Standing and Corporate Power of
AMLI. AMLI is a Maryland real estate investment trust, duly organized,
validly existing and in good standing under the laws of the State of
Maryland, is duly authorized to transact business under the laws of any state
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified would not have a Material Adverse
Effect on AMLI, has all requisite power and authority to execute and deliver
this Agreement and all other
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documents and instruments to be executed and delivered by it hereunder, and
to perform its obligations hereunder and thereunder in accordance with the
terms and conditions hereof and thereof. The Board of Trustees of AMLI has
approved entering into this Agreement and the transactions contemplated
hereby.
(b) Organization, Good Standing and Partnership Power of
AMLI OP. AMLI OP is a Delaware limited partnership duly organized and validly
existing under the laws of the State of Delaware, is duly authorized to
transact business under the laws of any state in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be
so qualified would not have a Material Adverse Effect on the AMLI OP, has all
requisite partnership power and authority to execute and deliver this
Agreement and all other documents and instruments to be executed and
delivered by it hereunder, and to perform its obligations hereunder and
thereunder in accordance with the terms and conditions hereof and thereof.
(c) Capital Structure.
(i) As of the second business day immediately
preceding the Effective Date: (A) the authorized capital stock of AMLI
consisted of 150,000,000 shares of beneficial interest, par value $.01 per
share, which may be designated as common or preferred shares of beneficial
interest by AMLI's Board of Trustees; (B) the issued and outstanding shares
of capital stock of AMLI consisted of 16,570,120 common shares of beneficial
interest, 745,290 common shares of beneficial interest reserved for issuance
upon the exercise of options granted pursuant to employee benefit plans of
AMLI and its affiliates and 1,100,000 preferred shares of beneficial
interest; and (C) all the outstanding shares of capital stock of AMLI have
been duly and validly issued and are fully paid and non-assessable.
(ii) As of the second business day immediately
preceding the Effective Date there were 3,005,213 outstanding OP Units and
54,892 OP Units reserved for issuance pursuant to employee benefit plans of
AMLI and its affiliates.
(iii) Except for the outstanding OP Units and the
outstanding preferred shares of beneficial interest of AMLI, as of the
Effective Date, there are no shares of beneficial interest or any other
equity security of AMLI issuable upon conversion or exchange of any security
of AMLI or the AMLI OP or any Subsidiary of either of them. No shareholder of
AMLI is entitled to any preemptive or similar rights to subscribe for shares
of capital stock of AMLI.
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ARTICLE 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
OWNERS
Section 8.1 Representations and Warranties. In order to induce the
Company and the Operating Partnership to enter into this Agreement and
to perform their respective obligations hereunder, each Owner
contributing Owner Interests to the Transferee hereunder severally
warrants and represents as of the applicable Development Property
Closing Date with respect to any transactions contemplated by Section
1.2(b) or 1.2(c) the following:
(a) Title to Owner Interests. Such Owner owns
beneficially and of record, free and clear of any claim, lien, pledge, voting
agreement, option, charge, security interest, mortgage, deed of trust,
encumbrance, rights of assignment, purchase rights or other rights of any
nature whatsoever of any third party (collectively, "ENCUMBRANCES"), and has
full power and authority to convey free and clear of any Encumbrances, its
Owner Interests and, upon delivery of an assignment by such Owner conveying
all or any of its Owner Interests and payment for such Owner Interests as
herein provided, the Transferees will acquire good and valid title thereto,
free and clear of any Encumbrance. Each of such Owner Interests have been
validly issued and Owner has funded (or will fund before the same is past
due) all capital contributions and advances to the partnership in which such
Owner Interest represents an interest that are required to be funded or
advanced prior to the date hereof and the Initial Closing Date or Development
Property Closing Date, as the case may be. There are no agreements,
instruments or understandings with respect to any of such Owner's Interests
except as set forth in the partnership agreement or limited liability company
agreement (each a "PARTNERSHIP AGREEMENT") of the partnership or limited
liability company (each such entity, a "PARTNERSHIP") in which an Owner
Interest represents a limited partner or general partner interest in the case
of a partnership or a member interest, in the case of a limited liability
company, a true and complete copy of which has been provided to the
Transferee. Such Owner has no equity interest, either direct or indirect, in
any of the properties subject to its Partnership Agreement except for the
Owner Interests owned by it that are the subject of this Agreement.
(b) Authority. Such Owner has full right, authority,
power and capacity: (i) to execute and deliver this Agreement and all other
documents and instruments to be executed and delivered by it hereunder, (ii)
to perform its obligations hereunder and thereunder in accordance with the
terms and conditions hereof and thereof, and (iii) to transfer, sell and
deliver any or all of such Owner Interests to the Transferees upon payment
therefor in accordance with this Agreement. Assuming the due and valid
authorization, execution and delivery of this Agreement by the Transferee,
this Agreement and each agreement, document and instrument executed and
delivered by or on behalf of such Owner pursuant to
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this Agreement constitutes, or when executed and delivered will constitute,
the legal, valid and binding obligation of such Owner, each enforceable in
accordance with their respective terms subject to applicable bankruptcy,
insolvency, moratorium or similar laws relating to creditors rights and
general principles of equity. The performance by the Owner of its duties and
obligations under this Agreement and the documents and instruments to be
executed and delivered by it hereunder will not (i) conflict with, or result
in a breach of, or default under, any provision of any of the Partnership
Agreement or any agreement, instrument, decree, judgment, injunction, order,
writ, law, rule or regulation, or any determination or award of any court or
arbitrator, to which such Owner or the Partnership is a party or by which its
or the Partnership's assets are or may be bound, except for any of the
foregoing matters that, individually or in the aggregate, would not have a
Material Adverse Effect on such Owner, or (ii) require any consent, approval
or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority or any other person or entity,
except where the failure to obtain any such consent, approval or
authorization of, or filing or registration with, any governmental or
regulatory authority or other person or entity would not have a Material
Adverse Effect on such Owner or on the Partnership.
(c) No Litigation. To the Owner's knowledge, except as
set forth on Schedule 4.1(f), there are no actions, suits, claims,
investigations, labor disputes, litigation or proceedings currently pending
or threatened against or related to the Partnership or to the Owner or to all
or any part of its Owner Interests before or by any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality.
(d) No Other Agreements to Sell. Such Owner represents
that, other than the Partnership Agreement applicable to it, it has made no
agreement with, and will not enter into any agreement with, and has no
obligation (absolute or contingent) to any other person or firm to sell,
transfer or in any way encumber any of its Owner Interests or to not sell
such Owner Interests, or to enter into any agreement with respect to a sale,
transfer or encumbrance of, or put or call right with respect to such Owner
Interests.
(e) Property Related Representations. Each Owner, with
respect to the Property owned by the entity in which it is a member or
partner, makes, for itself, the representations and warranties set forth in
Section 4.1, substituting the term "Owner" or the entity in which the Owner
has an Owner Interest, as applicable, for the term "Contributor".
(f) Organization, Good Standing and Power. The
Partnership is duly organized and validly existing under the laws of the
jurisdiction in which it was organized, is duly authorized to transact
business
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under the laws of each state in which the character of the properties owned
or leased by it therein or in which the transaction of its business makes
such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect.
(g) No Default. Neither the Owner nor, to the Owner's
knowledge, any other member or partner is in default under the terms of the
Partnership Agreement.
(h) No Undisclosed Liabilities. The Partnership has no
liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise) (i) that could reasonably be expected to have a
Material Adverse Effect, and (ii) except for operating expenses incurred in
the ordinary course of business.
ARTICLE 9. COVENANTS.
Section 9.1 Conduct of the Business of the TCR Group. The TCR
Group covenants and agrees that unless the Transferee has consented
(such consent not to be unreasonably withheld, conditioned or delayed)
in writing to any other act or omission, it shall perform or observe the
following with respect to the Real Property:
(a) Between the Effective Date and the applicable
Closing Date, each Contributor will operate and maintain its Real Property in
the ordinary course of business and use reasonable efforts to reasonably
preserve for the Transferee the relationships of such Contributor's Tenants,
suppliers, managers, employees and others having on-going relationships with
the Real Property. The Contributor will not defer taking any actions or
spending any of its funds, or otherwise manage the Real Property differently,
due to the transaction contemplated by this Agreement.
(b) Between the Effective Date and the applicable
Closing Date, no Contributor will enter into any new Service Contract or
renew, extend or modify any of the Service Contracts except in the ordinary
course of its business and unless any such Service Contract so renewed,
extended or modified grants to the Contributor and its successors and assigns
a right to terminate on thirty (30) days' notice with no material cost to
exercise such right.
Within ten (10) business days after the date hereof, Transferee
shall identify to the Contributor those Service Contracts (other than
cable television and telephone contracts, which Transferee acknowledges
will not be terminated) which Transferee desires to have terminated. To
the extent any liability could arise from such termination, the
Contributor shall commence negotiation of a
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termination settlement with the parties to the Service Contracts that
Transferee identified as desiring to have terminated and report the results
thereof to Transferee no later than seven (7) business days prior to the
Initial Closing. Transferee shall, within three (3) business days of receipt
of the report from the Contributor of the results of such negotiation,
identify those Service Contracts to be terminated by the Contributor prior to
the applicable Closing. Prior to the Initial Closing, the Contributor shall
terminate all such contracts so identified by the Transferee. Any termination
payment shall be shared equally between the TCR Group and Transferee as a
closing proration.
(c) Between the Effective Date and the Initial Closing
Date, each Contributor shall comply with all material terms, covenants and
conditions of each Management Contract, although the termination of any
Management Contract in the ordinary course of business shall not be a
violation of this covenant.
(d) Between the Effective Date and the applicable
Closing Date, no Contributor shall remove any Personal Property located in or
on the Real Property, except as may be required for repair and replacement.
All replacements shall be free and clear of liens and encumbrances except to
the extent the original Personal Property was so encumbered and shall be of
quality at least equal to the replaced items and shall be deemed included in
Personal Property to be contributed pursuant to this Agreement, without cost
or expense to the Operating Partnership, other than expressly provided
herein.
(e) Between the Effective Date and the applicable
Closing Date, the TCR Group shall, upon request of the Transferee at any time
after the Effective Date, assist the Transferee in its preparation of audited
statements of income and expense and such other documentation as the
Transferee may reasonably request, covering the period of the TCR Group's
ownership (and the ownership of any entity related to the TCR Group) of the
Real Property, including the furnishing of any representation letter to the
auditor which the auditor may reasonably request in connection with the
normal course of auditing the Property.
(f) Between the Effective Date and the applicable
Closing Date, each Contributor will make all required payments under any
indebtedness secured by a lien on its Real Property (other than payments due
at stated maturity) within any applicable grace period, including, without
limitation, the Assumed Loans. Each Contributor shall also comply with all
other material terms, covenants and conditions of any such indebtedness,
including, without limitation, the Assumed Loans.
(g) Between the Effective Date and the applicable
Closing Date, except for the Permitted Encumbrances and as permitted by
Section 3.2, no
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Contributor shall cause or permit the Real Property, or any interest therein,
to be alienated, mortgaged, licensed, encumbered or otherwise be transferred.
(h) Between the Effective Date and the applicable
Closing Date, each Contributor will maintain and keep in full force and
effect the hazard, liability and casualty insurance coverage it is currently
maintaining with respect to its Property.
(i) Between the Effective Date and the applicable
Closing Date, each Contributor shall promptly give the Transferee written
notice of, and promptly deliver to the Transferee, a true and complete copy
of any written notice such Contributor may receive, on or before such closing
date, from any Governmental Authority, concerning a violation of any
applicable Legal Requirement pertaining to its Real Property or of any
written notice of default from the holder of any Assumed Loan.
(j) Prior to the applicable Development Property
Closing, each Contributor which is the owner of a Development Property shall
diligently prosecute all work in progress in connection with construction of
such Development Property in a good and workmanlike manner and in accordance
with all applicable Legal Requirements and all documents and instruments
governing or relating to such construction.
(k) From and after the Effective Date, no Contributor
shall enter discussions with, negotiate or contract with any other party for
the sale of any of the Property or any Owner Interest therein.
(l) Between the Effective Date and the Initial Closing
Date, the applicable Contributor shall endeavor to obtain the consent of the
lenders holding the Assumed Loans and the owners of Property subject to the
Management Contracts to the transactions contemplated hereby.
(m) Prior to the Initial Closing Date, the Contributor
of the Vinings Ridge Property at its sole cost and expense shall buy-down the
interest rate on the Assumed Loan to seven and one-half percent (7 1/2%) per
annum.
(n) Between the Effective Date and the Initial Closing
Date, the applicable Contributor shall perform all obligations required of it
under the Acquisition Contracts, including without limitation, making
required deposits necessary to maintain the Acquisition Contracts in full
force and effect.
Section 9.2 Conduct of the Business of the Transferee. The
Operating Partnership and the Company covenant and agree that:
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(a) Between the Effective Date and the Initial Closing
Date, there shall be no Change in Control of the Company or the Operating
Partnership; and
(b) Between the Effective Date and the final Closing
Date, the Company shall continue to qualify as a REIT for federal income tax
purposes.
Section 9.3 OP Agreements. (a) On or prior to the Initial Closing
Date, AMLI and AMLI OP shall cause the AMLI OP Agreement to be amended,
modified or restated if necessary to contain those terms set forth on
Exhibit 9.3 or shall otherwise agree in writing to those matters set
forth in Exhibit 9.3.
(b) On or prior to the Initial Closing Date, Avalon and
each Designee that receives OP Units in connection with the transactions
contemplated by this Agreement shall enter into the Operating Company
Agreement of the Avalon OP, which shall contain such terms and conditions as
are satisfactory to Avalon and the TCR Group, including, without limitation,
those terms set forth on Exhibit 9.3 and in the form of which shall be
determined on or prior to five (5) business days from the Effective Date (the
"AVALON OP AGREEMENT").
Section 9.4 Good Faith Efforts. Each of the TCR Group, on the one
hand, and the Company and the Operating Partnership, on the other hand,
shall act in good faith and shall not take, and shall use commercially
reasonable efforts to cause its respective subsidiaries, if any, to
refrain from taking, any action that would result in (i) any of the
representations and warranties of such party set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue
in any material respect or (iii) any of the conditions precedent to
closing set forth in Article 13 not being satisfied.
Section 9.5 Good Faith Cooperation. Subject to the terms and
conditions herein provided, the parties to this Agreement shall (a) use
their best efforts to cooperate with each other in (i) determining which
filings are required to be made prior to the applicable closing date
with, and which consents, approvals, permits or authorizations are
required to be obtained prior to the applicable closing date from,
Governmental Authorities, third party secured and unsecured lenders and
rating agencies in connection with the execution and delivery of this
Agreement and the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; (b) use their best efforts to obtain in
writing any consents required from third parties necessary to effectuate
the transactions contemplated hereby; and (c) use their best efforts to
take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary, proper or
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appropriate to consummate and make effective the transactions contemplated by
this Agreement. If, at any time after any closing date pursuant hereto, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors and other duly authorized
representatives of the parties shall take all such necessary action.
Section 9.6 Public Announcements. The initial press release
relating to this Agreement shall be separate simultaneous press releases
approved by all parties, and thereafter until the Initial Closing occurs
the parties shall, subject to their respective legal obligations
(including requirements of stock exchanges and similar regulating
bodies), consult with each other, and use reasonable efforts to agree
upon the text of any press release, before issuing any such press
release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filing with any
federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto.
Section 9.7 Government Filings. Each party shall use its best
efforts to make, prior to the applicable closing date, all necessary
filings with all Governmental Authorities required by it to carry out
the transactions contemplated by this Agreement. All expenses (other
than transfer taxes) related to such filing shall be borne by the party
required to make such filings.
Section 9.8 Listing of Shares. Each of AMLI and Avalon shall,
within twenty (20) business days following the Effective Date, prepare
and file with the New York Stock Exchange an additional listing
application covering the Shares to be issued hereunder and upon exchange
of the OP Units and shall use its best efforts to obtain, prior to the
Initial Closing Date, approval of the listing of such Shares, subject to
official notice of issuance, which approval is a condition precedent to
the obligations of the TCR Group to consummate the transactions
contemplated by this Agreement. The obligations of this Section 9.8
shall survive each closing provided for herein.
Section 9.9 Registration of Shares. The Company shall cause to be
filed with the SEC (a) within thirty (30) business days after the
Initial Closing Date, a shelf registration statement and related
prospectus that comply in all material respects with applicable SEC
rules providing for registration under the 1933 Act of the offer and
sale by the Contributors of the total number of Shares be issued
hereunder (if any) and (b) within six (6) months after the Initial
Closing Date, a shelf registration statement and related prospectus that
comply in all material respects with applicable SEC rules providing for
registration under the 1933 Act of the offer and sale by the
Contributors of all Shares that the Contributors would own if they were
to convert all OP Units issued to them hereunder. The Company shall use
its reasonable best efforts to cause such registration statements to be
declared effective by the SEC as soon as practicable
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and to keep such registration effective thereafter as and to the extent
contemplated by the Registration Rights Agreement (defined below). The
Company, the Operating Partnership and the Investors (as defined therein)
shall enter into a registration rights agreement which shall provide, among
other things, for a lock-up restricting any dispositions (to the extent
contemplated by the Registration Rights Agreement) of (x) the Shares issued
to the Investors at the Initial Closing, or the Development Property Closing,
as applicable, for a period of ninety (90) days from the date of issuance and
(y) the OP Units issued at the Initial Closing or the Development Property
Closing, as applicable, for a period of 365 days from the date of issuance
(the "REGISTRATION RIGHTS AGREEMENT"), substantially in the form of Exhibit
9.9, on or prior to the Initial Closing Date.
Section 9.10 Investor Representations. Each of the Contributors
shall use its best efforts to cause each Designee to deliver to the
Transferee prior to or at the applicable closing a certificate in the
form of Exhibit 9.10 (the "DESIGNEE CERTIFICATE") to the effect that
such Designee (a) is acquiring the Shares and/or OP Units being acquired
hereunder for investment (for its own account or for accounts over which
it exercises investment control), and not with a view to, or for offer
or sale in connection with, any distribution thereof that would be in
violation of the 1933 Act, without prejudice, however, to such
Designee's right at all times to sell or otherwise dispose of all or any
part of such Shares and/or OP Units pursuant to an effective
registration statement under the 1933 Act, or under an exemption from
such registration available under the 1933 Act, and (b) is
knowledgeable, sophisticated and experienced in business and financial
matters and fully understands the limitations on transfer described
above and is an "accredited investor" as such term is defined in Rule
501(a) of Regulation D under the 1933 Act. In the event any Designee
does not provide an Designee Certificate and is not an "accredited
investor," such investor will not be eligible to receive Shares or OP
Units or remain a member of an entity receiving Shares or OP Units.
Section 9.11 Time of Closing. Each of the parties hereto shall use
its best efforts to consummate the transactions contemplated hereby on
or prior to the applicable Closing Date. Time is of the essence.
Section 9.12 Guaranty.At the Initial Closing, Avalon shall execute
and deliver to the TCR Group a guarantee (the "GUARANTY") in form and
substance satisfactory to the TCR Group whereby Avalon guarantees the
full and complete performance of the obligations of the general partner
of the Avalon OP under this Agreement.
Section 9.13 Pledge of OP Units. Transferee shall cooperate with
any Contributor or Designee to whom OP Units are issued pursuant to this
Agreement in connection with the pledge of such OP Units to a financial
institution. Such
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cooperation shall include delivery, within ten (10) days of request therefor,
to such financial institution of (i) one or more certificates as to the
organizational documents of the Operating Partnership or the Company, as the
case may be, and as to any changes thereto since the date of delivery of the
most recent certificate, (ii) good standing certificates of the Operating
Partnership and the Company, (iii) an acknowledgment letter confirming the
pledge of any applicable OP Units and the registration thereof in the records
of the Operating Partnership, and (iv) opinions of counsel for the
Partnership which are customary in similar transactions. The Contributors or
Designees shall reimburse the Company or the Operating Partnership for all
out of pocket costs and expenses incurred in connection with the foregoing.
Each Designee receiving OP Units shall be a third party beneficiary of the
provisions of this Section 9.13 which shall survive as to each Designee as
long as such Designee holds OP Units.
ARTICLE 10. CLOSING.
Section 10.1 The Initial Closing. The consummation of the
transactions contemplated hereunder relating to the transfer of the
Other Property (the "INITIAL CLOSING") shall take place at the offices
of Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston, Massachusetts
02110 on the forty-fifth day after the Effective Date or at such other
place as the parties hereto shall mutually agree (the "INITIAL CLOSING
DATE", which Initial Closing Date shall automatically be extended to
permit the completion of the arbitration contemplated by Section 2.3 and
Section 2.6 and the cure period contemplated by Section 3.3); provided
that if the Initial Closing does not occur on or prior to the Initial
Closing Date due to the failure of a closing condition to be satisfied,
the TCR Group or the Transferee shall have the right, but not the
obligation, which it may exercise only once, to extend the Initial
Closing Date for a period not to exceed thirty (30) days by written
notice to the other given at least three (3) business days prior to the
Initial Closing Date. Recognizing that certain Owners (other than
Owners affiliated with Trammell Crow Residential) have consented to the
transactions contemplated herein only if the Initial Closing occurs on
or prior to December 31, 1997, the extension of the Initial Closing Date
for that Property only to any date after December 31, 1997 shall be
subject to the consent of such Owners. The TCR Group agrees to use
reasonable efforts to obtain such consents.
Section 10.2 Deliveries at the Initial Closing by the TCR Group.
At the Initial Closing, the TCR Group will deliver or cause to be
delivered to the Operating Partnership the following with respect to all
Other Property and the Owner Interests and, where appropriate, duly
executed on behalf of all necessary parties thereto other than the
Operating Partnership and the Company:
(a) With respect to all Other Property conveyed to the
Operating Partnership by the TCR Group as contemplated in Section 1.1 hereof,
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(i) a special warranty deed, or the equivalent in the jurisdiction in which
the Real Property is situated (collectively, the "DEEDS"), duly executed by
the appropriate Contributor in proper form for recording so as to convey to
the Operating Partnership good and marketable title to its Real Property,
free and clear of all liens and encumbrances, except the Permitted
Encumbrances and (ii) a bill of sale and assignment (collectively, the "BILLS
OF SALE") duly executed by the appropriate Contributor conveying to the
appropriate Transferee all of such Contributor's assignable right, title and
interest in and to the Personal Property, the Leases, the Security Deposits,
the Acquisition Contracts, the Management Contracts, the Intangible Property,
the Trademarks, and the Books and Records pertaining to such Real Property,
and whereby the Operating Partnership will assume and agree to perform all of
the Contributor's duties and obligations under the foregoing assigned
documents from and after the Initial Closing Date.
(b) With respect to any Owner Interest conveyed to the
Operating Partnership by the TCR Group at the Initial Closing as contemplated
in Section 1.2 hereof, an assignment and assumption agreement providing for
the transfer of any Owner Interest to be transferred at the Initial Closing
in form and substance acceptable to Transferee, including, without
limitation, such indemnification provisions as reasonably required by the
Transferee, duly executed by the Owner of the Owner Interest and duly
acknowledged by any other partner or member of the applicable Contributor
whose consent is required for the valid transfer of the Owner Interest.
(c) All original Leases and all other documents
pertaining thereto or copies of same where the TCR Group, using its best
efforts, is unable to deliver originals.
(d) All other original documents or instruments referred
to herein, including, without limitation, the Service Contracts, Licenses and
Permits, Acquisition Contracts, the Management Contracts and Books and
Records, or copies of same where the TCR Group, using its best efforts, is
unable to deliver originals; and keys to the Improvements.
(e) A letter to Tenants advising the Tenants of the
transaction hereunder and directing that rent and other payments thereafter
be sent to the Operating Partnership or its designee, as the Operating
Partnership shall so direct.
(f) Any affidavits and such other documents or
instruments reasonably required by the Title Company to consummate the
transactions contemplated hereby, including those required to remove
mechanics lien and parties in possession exceptions.
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(g) Affidavits and other instruments, including but not
limited to all organizational documents of the Contributors and their general
partners or managers, as applicable, including partnership agreements,
operating agreements, bylaws, articles of incorporation and certificates of
good standing and/or existence reasonably requested by the Company or the
Title Company evidencing the power and authority of such entities to enter
into and perform this Agreement and any documents to be delivered hereunder.
(h) A list of all Security Deposits, prepaid rents, key
deposits, pet deposits and other such deposits delivered by Tenants under the
Leases.
(i) A certificate executed by a duly authorized
representative of each Contributor stating that the representations and
warranties made by such Contributor in this Agreement are true and correct in
all material respects as of the Initial Closing Date, or if there have been
any changes, a description thereof.
(j) A Rent Roll for each Real Property, current as of a
date not more than ten (10) days prior to the Initial Closing Date, certified
by a duly authorized representative of the appropriate Contributor as being
true and correct in all material respects.
(k) All proper instruments as shall be reasonably
required for the conveyance to the Transferee of all right, title and
interest, if any, of any Contributor in and to any award or payment made, or
to be made, (i) for any taking in condemnation, eminent domain or agreement
in lieu thereof of land adjoining all or any part of the Real Property, (ii)
for damage to the Land or the Improvements or any part thereof by reason of
change of grade or closing of any such street, road, highway or avenue, and
(z) for any taking in condemnation or eminent domain of any part of the Land
or the Improvements.
(l) In order to avoid the imposition of the withholding
tax payment pursuant to Section 1445 of the Code, a certificate signed by a
duly authorized representative of each Contributor to the effect that the
Contributor is not a "foreign person" as that term is defined in Section
1445(f)(3) of the Code.
(m) All such transfer and other tax declarations and
returns and information returns, duly executed and sworn to by each
Contributor to the extent required by law in connection with the conveyance
of the Property or Owner Interest to the Operating Partnership.
(n) Possession of the Property, subject only to the
Leases and the Permitted Encumbrances.
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(o) The Assumed Loan Documents.
(p) The Designees' Certificates of the Designees
receiving Equity Securities at the Initial Closing.
(q) Evidence of all consents required under agreements
to which any Contributor or Owner is a party to the transaction contemplated
hereby.
(r) An estoppel letter from the holders of the Assumed
Loans and from the Owner of any Owner Interest not being transferred
confirming the respective agreements are in full force and effect without
defaults or disputes.
(s) Consent to assignment of the Management Contracts
being assumed.
(t) Evidence of termination of Service Contracts
required to be terminated.
(u) Evidence of termination of all management contracts
at the Real Property.
(v) Evidence of compliance with any applicable Bulk
Sales Act, if any.
(w) The Registration Rights Agreement pursuant to
Section 9.9.
(x) Such other documents as may be reasonably required
or appropriate to effectuate the consummation of the transactions
contemplated by this Agreement.
(y) The Management and Leasing Agreement pursuant to
Section 2.3(d).
(z) The master lease pursuant to Section 2.3(b) with
respect to each of the Town Greene and Danada Properties and pursuant to
Section 2.3(e) with respect to the Oxford Hill Property.
Section 10.3 Deliveries at the Initial Closing by the Transferee.
At the Initial Closing, the Operating Partnership and the Company shall
deliver or cause to be delivered to the TCR Group the following, with
respect to all Other Property and the Owner Interests and, where
appropriate, duly executed by all necessary parties thereto other than
the TCR Group or the Company:
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(a) The Cash Consideration payable at the Initial
Closing.
(b) The certificates representing the OP Units to be
issued at the Initial Closing properly issued to the appropriate party.
(c) The certificates representing Shares to be issued at
the Initial Closing properly issued to the appropriate party.
(d) The Bills of Sale.
(e) The Assumed Loan Documents.
(g) A certificate executed by a duly authorized
representative of the Operating Partnership and the Company stating that the
representations and warranties made by the Operating Partnership and the
Company in this Agreement are true and correct in all material respects as of
the Initial Closing Date, or if there have been any changes, a description
thereof.
(h) Affidavits and other instruments, including but not
limited to all organizational documents of the Operating Partnership and the
Company including limited partnership agreements, filed copies of limited
partnership certificates, articles of organization, and certificates of good
standing and existence, reasonably requested by the TCR Group evidencing the
power and authority of the Operating Partnership and the Company to enter
into and perform this Agreement and any documents to be delivered hereunder.
(i) An amendment to the AMLI OP Agreement pursuant to
Section 9.3 or a separate agreement consistent with Section 9.3.
(j) The Registration Rights Agreement pursuant to
Section 9.9.
(k) The Management and Leasing Agreement pursuant to
Section 2.3(d).
(l) The master lease pursuant to Section 2.3(b) with
respect to each of the Town Greene and Danada Properties and pursuant to
Section 2.3(e) with respect to the Oxford Hill Property.
(m) Evidence satisfactory to the TCR Group of approval
of the listing of the Shares to be issued hereunder and upon exchange of the
Units by the New York Stock Exchange, subject to official notice of issuance.
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(n) With respect to any Owner Interest conveyed to the
Operating Partnership by the TCR Group at the Initial Closing as contemplated
by Section 1.2 hereof, an assignment and assumption agreement providing for
the transfer of any Owner Interest to be transferred at the Initial Closing
in form and substance acceptable to the Owner of such Owner Interest, duly
executed by the applicable Transferee, whereby such Transferee will assume
and agree to perform all of such Owner's duties and obligations with respect
to matters arising after the date of such Closing related to such Owner
Interest and will indemnify such Owner for Transferee's failure to perform
the duties and obligations so assumed.
(o) The Guaranty.
(p) The Avalon OP Agreement
(q) Such other documents as may be reasonably required
or appropriate to effectuate the consummation of the transactions
contemplated by this Agreement.
Section 10.4 Deliveries at the Delayed Closing Property Closing and
Each Development Property Closing by the TCR Group. At the Delayed
Closing Property Closing and each Development Property Closing, the
Contributor of the Delayed Closing Property or the relevant Development
Property, as applicable, will deliver or cause to be delivered to the
Operating Partnership the following with respect to such Property and,
where appropriate, duly executed on behalf of all necessary parties
thereto other than the Company and the Operating Partnership:
(a) (i) A Deed in a form reasonably satisfactory to the
Company, duly executed by the Contributor in proper form for recording so as
to convey to the Operating Partnership good and marketable title to the
applicable Property, free and clear of all liens and encumbrances, except the
Permitted Encumbrances, and (ii) a Bill of Sale in a form reasonably
satisfactory to the Company duly executed by the Contributor conveying to the
Operating Partnership all of such Contributor's right, title and interest in
and to the Personal Property, the Leases, the Security Deposits, the
Intangible Property, and the Books and Records pertaining to the applicable
Property and whereby the Operating Partnership will assume and agree to
perform all of such Contributor's duties and obligations under the foregoing
assigned documents from and after the applicable Closing Date.
(b) All original Leases and all other documents
pertaining thereto or copies of same where the Contributor, using its best
efforts, is unable to deliver originals.
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(c) All other original documents or instruments referred
to herein, including, without limitation, the Service Contracts, the Permits
and Licenses and the Books and Records, or copies of same if the Contributor,
using its best efforts, is unable to deliver originals; and keys to the
Improvements.
(d) A letter to Tenants advising the Tenants of the
transaction hereunder and directing that rent and other payments thereafter
be sent to the Operating Partnership or its designee, as the Operating
Partnership shall so direct.
(e) Any affidavits and such other documents or
instruments reasonably required by the Title Company to consummate the
transactions contemplated hereby, including those required to remove
mechanics lien and parties in possession exception.
(f) Affidavits and other instruments, including but not
limited to all organizational documents of the Contributor and its general
partners, including partnership agreements, operating agreements, bylaws,
articles or incorporation and certificates of good standing and/or existence
reasonably requested by the Company or the Title Company evidencing the power
and authority of such entities to enter into and perform this Agreement and
any documents delivered hereunder.
(g) A list of all Security Deposits, prepaid rents, key
deposits, pet deposits and other such deposits delivered by Tenants under the
Leases.
(h) A certificate executed by a duly authorized
representative of the Contributor, stating that the representations and
warranties made in Sections 4.1(a)-(l), 4.1(n) and 4.1(p) by such Contributor
in this Agreement are true and correct in all material respects as of the
applicable Closing Date, or if there have been any changes, a description
thereof.
(i) A Rent Roll for the applicable Property, current as
of a date not more than ten (10) days prior to the applicable Closing Date,
certified by a duly authorized representative of the appropriate Contributor
as being true and correct in all material respects.
(j) All proper instruments as shall be reasonably
required for the conveyance to the Transferee of all right, title and
interest, if any, of such Contributor in and to any award or payment made, or
to be made, (i) for any taking in condemnation, eminent domain or agreement
in lieu thereof of land adjoining all or any part of the applicable Property,
(ii) for damage to the Land or the Improvements or any part thereof by reason
of change of grade or closing of
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any such street, road, highway or avenue, and (iii) for any taking in
condemnation or eminent domain of any part of the Land or the Improvements.
(k) In order to avoid the imposition of the withholding
tax payment pursuant to Section 1445 of the Code, a certificate signed by a
duly authorized representative of such Contributor to the effect that it is
not a "foreign person" as that term is defined in Section 1445(f)(3) of the
Code.
(l) All such transfer and other tax declarations and
returns and information returns, duly executed and sworn to by such
Contributor to the extent required by law in connection with the conveyance
of the applicable Property to the Operating Partnership.
(m) Possession of the applicable Property, subject only
to the Leases and the Permitted Encumbrances.
(n) The Designees' Certificate of those Designees
receiving Equity Securities at the applicable Closing.
(o) The Registration Rights Agreement executed by those
persons receiving Equity Securities at such Closing.
(p) With respect to any Owner Interest conveyed to the
Operating Partnership by the TCR Group at such Closing as contemplated by
Section 1.2 hereof, an assignment and assumption agreement providing for the
transfer of any Owner Interest to be transferred at any such Closing in form
and substance acceptable to Transferee, including, without limitation, such
indemnification provisions reasonably required by the Transferee, duly
executed by the Owner of the Owner Interest and duly acknowledged by any
other partner or member of the applicable Contributor whose consent is
required for the valid transfer of the Owner Interest.
(q) Such other documents as may be reasonably required
or appropriate to effectuate consummation of the transactions contemplated by
this Agreement.
Section 10.5 Deliveries at the Delayed Closing Property Closing and
Each Development Property Closing by the Transferee. At the Delayed
Closing Property Closing and each Development Property Closing, the
Company and the Operating Partnership shall deliver or cause to be
delivered to the Contributor contributing the Delayed Closing Property
or the relevant Development Property, as applicable, the following with
respect to the applicable Property and, where appropriate, duly executed
by all necessary parties thereto other than such Contributor.
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(a) The Cash Consideration payable at the applicable
Closing.
(b) The certificates representing the Units to be issued
at the applicable Closing properly issued to the appropriate party.
(c) The certificates representing Shares to be issued at
the applicable Closing properly issued to the appropriate party.
(d) The Bill of Sale.
(e) A certificate executed by a duly authorized
representative of the Company and the Operating Partnership stating that the
representations and warranties made by the Company and the Operating
Partnership in this Agreement are true and correct in all material respects
as of the applicable Closing Date, or if there have been any changes, a
description thereof.
(f) Affidavits and other instruments, including but not
limited to all organization documents of the Operating Partnership and the
Company including limited partnership agreements, filed copies of limited
partnership certificates, articles of organization, and certificates of good
standing and existence, reasonably requested by the Contributor evidencing
the power and authority of the Company and the Operating Partnership to enter
into and perform this Agreement and any documents to be delivered hereunder.
(g) The Registration Rights Agreement to be executed by
those persons receiving Equity Securities at such Closing.
(h) An instrument providing for the admission as limited
partners those persons receiving OP Units at such Closing.
(i) An amendment to the AMLI OP Agreement or separate
agreement with respect to the matters set forth in Exhibit 9.3.
(j) The Avalon OP agreement admitting as limited
partners those person receiving OP Units of Avalon at such Closing.
(k) With respect to any Owner Interest conveyed to the
Operating Partnership by the TCR Group at such Closing as contemplated by
Section 1.2 hereof, an assignment and assumption agreement providing for the
transfer of any Owner Interest to be transferred at such Closing in form and
substance acceptable to the Owner of such Owner Interest, duly executed by
the applicable Transferee, whereby such Transferee will assume and agree to
perform
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all of such Owner's duties and obligations with respect to matters arising
after the date of such Closing to such Owner Interest and will indemnify such
Owner for Transferee's failure to perform the duties and obligations so
assumed.
(k) Such other documents as may be reasonably required
or appropriate to effectuate the consummation of the transactions
contemplated by this Agreement, in forms reasonably satisfactory to such
Contributor.
Section 10.6 Fees and Expenses. Recordation and transfer charges
(including transfer taxes), title insurance premiums, title examination
fees and survey costs shall be allocated on a Real Property by Real
Property basis as set forth on Schedule 10.6 hereto. Transfer taxes and
title insurance premiums shall be based upon full value of the
respective Property, including "going concern" value, unless otherwise
elected by Transferee. All other costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such
expenses, including all fees and expenses of agents, representatives,
counsel and accountants. The provisions of this Section 10.6 shall
survive the applicable Closing.
Section 10.7 No Warranties.
(a) THE OPERATING PARTNERSHIP AND THE COMPANY
ACKNOWLEDGE AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
THE OPERATING PARTNERSHIP IS ACQUIRING THE PROPERTY IN ITS "AS IS" CONDITION
"SUBJECT TO ALL FAULTS" AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY
WARRANTIES, REPRESENTATIONS OR GUARANTEES, EITHER EXPRESS OR IMPLIED, OF ANY
KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF THE TCR GROUP. THE
OPERATING PARTNERSHIP AND THE COMPANY ACKNOWLEDGE THAT, EXCEPT AS EXPRESSLY
SET FORTH IN THIS AGREEMENT, NEITHER THE OPERATING PARTNERSHIP NOR THE
COMPANY HAS RELIED AND IS NOT RELYING ON ANY INFORMATION, DOCUMENT, REPORT,
SALES BROCHURE OR OTHER LITERATURE, MAPS OR SKETCHES, FINANCIAL INFORMATION,
PROJECTIONS, PROFORMAS OR STATEMENTS, THAT MAY HAVE BEEN GIVEN BY OR MADE BY
OR ON BEHALF OF THE TCR GROUP. THE OPERATING PARTNERSHIP AND THE COMPANY
FURTHER ACKNOWLEDGE THAT, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, ALL
MATERIALS RELATING TO THE PROPERTY WHICH HAVE BEEN PROVIDED BY THE TCR GROUP
HAVE BEEN PROVIDED WITHOUT ANY WARRANTY OR REPRESENTATION, EXPRESSED OR
IMPLIED, AS TO THEIR CONTENT, SUITABILITY FOR ANY PURPOSE, ACCURACY,
TRUTHFULNESS OR COMPLETENESS AND NEITHER THE OPERATING PARTNERSHIP NOR
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THE COMPANY SHALL HAVE ANY RECOURSE AGAINST THE TCR GROUP OR ITS COUNSEL,
ADVISORS, AGENTS, OFFICERS, DIRECTORS OR EMPLOYEES FOR ANY INFORMATION IN THE
EVENT OF ANY ERRORS THEREIN OR OMISSIONS THEREFROM. THE OPERATING PARTNERSHIP
AND THE COMPANY EACH REPRESENT THAT THEY ARE SOPHISTICATED AND EXPERIENCED IN
ALL MATTERS RELATING TO THE PROPERTY AND EXCEPT AS EXPRESSLY SET FORTH HEREIN
ARE RELYING SOLELY ON SUCH EXPERIENCE AND SOPHISTICATION IN MAKING ALL
DECISIONS WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREIN.
(b) THE OPERATING PARTNERSHIP AND THE COMPANY HEREBY
ACKNOWLEDGE AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE TCR
GROUP HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY, PROMISE, COVENANT, AGREEMENT OR GUARANTEE OF ANY
NATURE, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AS TO OR REGARDING: (i) THE
QUALITY, NATURE, ADEQUACY OR PHYSICAL CONDITION, WHETHER LATENT OR PATENT, OF
THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, THE STRUCTURAL ELEMENTS,
FOUNDATION, ROOF, APPURTENANCES, ACCESS, LANDSCAPING, PARKING FACILITIES OR
THE ELECTRICAL, MECHANICAL, HVAC, PLUMBING, SEWAGE OR UTILITY SYSTEMS,
FACILITIES OR APPLIANCES AT OR IN CONNECTION WITH THE REAL PROPERTY, IF ANY;
(ii) THE EXISTENCE, QUALITY, NATURE, ADEQUACY, PHYSICAL CONDITION, OR
LOCATION OF ANY UTILITIES SERVING THE REAL PROPERTY; (iii) THE DEVELOPMENT
POTENTIAL OF THE REAL PROPERTY, ITS HABITABILITY, MERCHANTABILITY OR FITNESS,
SUITABILITY OR ADEQUACY OF THE PROPERTY FOR ANY PARTICULAR PURPOSE; (iv) THE
ZONING OR OTHER LEGAL STATUS OF THE REAL PROPERTY OR THE POTENTIAL USE OF THE
PROPERTY; (v) THE REAL PROPERTY'S OR ITS OPERATIONS' COMPLIANCE WITH ANY
APPLICABLE LEGAL REQUIREMENTS; (vi) THE QUALITY OF ANY LABOR OR MATERIALS
RELATING IN ANY WAY TO THE REAL PROPERTY; (vii) COMPLIANCE WITH ANY
ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS,
ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN, ON OR UNDER THE REAL
PROPERTY OF ANY HAZARDOUS MATERIALS; OR (viii) THE CONDITION OF TITLE TO THE
REAL PROPERTY OR THE NATURE, STATUS AND EXTENT OF ANY RIGHT, ENCUMBRANCE,
LICENSE, RESERVATION, COVENANT, CONDITION, RESTRICTION OR ANY OTHER MATTER
AFFECTING TITLE TO THE REAL PROPERTY.
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(c) The Operating Partnership and the Company
acknowledge that, to the extent they have deemed necessary or appropriate,
they have conducted appropriate environmental and soil tests and physical
inspections with respect to the Real Property and have relied upon such tests
in electing whether or not to enter into and perform this Agreement. The
Operating Partnership and the Company further acknowledge that the Real
Properties have been available for that purpose. Should the transaction
contemplated by this Agreement fail to close for any reason, whether by
reason of the Transferee's default or otherwise, the Transferee will (i)
indemnify, defend and hold harmless the TCR Group from and against all
claims, damages, losses, costs, liabilities and expenses (including
attorneys' fees and expenses) asserted against or incurred by the TCR Group
and (ii) repair any damage to the Property caused by, resulting from or
arising out of any studies, tests, inspections, surveys or other due
diligence investigation conducted by the Transferee but the indemnity shall
not apply to matters discovered during such investigation. At the TCR Group's
option, the Transferee will reimburse the TCR Group for all reasonable
expenses incurred by the TCR Group in repairing such damages if the
Transferee does not promptly repair such damages after written notice of such
damages has been delivered by the TCR Group to the Transferee.
ARTICLE 11. INDEMNIFICATION.
Section 11.1 Indemnification by TCRC. (a) Subject to the
provisions of this Article 11, the TCR Group shall cause Trammell Crow
Residential Company, a Texas corporation ("TCRC"), to indemnify and hold
harmless the Transferee against and from any and all liability, demands,
claims, actions or causes of action, assessments, losses, fines,
penalties, costs, damages and expenses, including, without limitation,
reasonable attorneys' and accountants' fees and expenses ("LOSSES"),
sustained or incurred by Transferee as a result of or arising out of any
inaccuracy in a representation or warranty made by the TCR Group under
this Agreement or any failure to satisfy the TCR Group's obligations
under Section 2.3(c), Article 12 or Article 19.
In the event that any constituent member of the entity holding the
Owner Interest in any Contributor makes a claim for Losses arising out
of the consummation of the transactions contemplated hereby, TCRC hereby
agrees to indemnify, defend and hold Transferee harmless from any Losses
incurred by Transferee in connection with such claim. This
indemnification shall be unlimited as to amount and shall survive for a
period of eighteen (18) months after each respective Closing, and such
further period necessary to resolve any claim made within the eighteen
(18) month period.
(b) Notwithstanding anything herein to the contrary, any
Loss pursuant to this Section 11.1 arising out of an inaccuracy of the
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representation and warranty made by the TCR Group shall first be satisfied if
applicable by recourse to any applicable title insurance before Transferee
shall be entitled to recovery from TCRC.
Section 11.2 Indemnification by Transferee. Subject to the
provisions of this Article 11 and Section 1.4, the Transferee
indemnifies and holds harmless the TCR Group against and from any and
all Losses sustained or incurred by the TCR Group as a result of or
arising out of any inaccuracy in a representation or warranty made by
the Transferee under this Agreement.
Section 11.3 Limitations on Indemnification Obligations. (a) A
person entitled to indemnification hereunder ("INDEMNITEE") shall not be
entitled to indemnification unless an Indemnification Notice (as
hereinafter defined) has been delivered by Indemnitee to the party that
may be obligated to pay such indemnification ("INDEMNITOR") prior to the
termination of the survival of the indemnification relating to such
Indemnification Notice pursuant to Section 22.1. The indemnification
obligations of an Indemnitor shall survive with respect to claims for
any Losses relating to an inaccuracy in a representation or warranty
made with respect to (x) any Other Property, for the nine (9) month
period following the Initial Closing Date, (y) the Delayed Closing
Property , for the nine (9) month period following the Delayed Closing
Property Closing Date, and (z) a Development Property, for the nine (9)
month period following the applicable Development Property Closing Date
(and, in each case, such additional period as is necessary to resolve a
claim made within such period). Notwithstanding the foregoing, the
Indemnity with respect to Section 2.3(c), Article 12 and Article 19
shall be for the time periods specified therein.
The total liability of an Indemnitor with respect to the
indemnification obligations set forth above shall not exceed $3,000,000
with respect to claims pertaining to the Other Properties and the
Delayed Closing Property and $2,000,000 with respect to claims
pertaining to the Development Properties, but in no event shall the
aggregate of all such claims exceed $3,000,000. In the case of any
Losses by the TCR Group, such obligation shall be several as between the
AMLI Parties and the Avalon Parties as provided in Section 1.4.
(b) If a claim for indemnification is asserted by
Indemnitee against Indemnitor, Indemnitor shall have the right, at its own
expense, to participate in the defense of any claim, action or proceeding
("CLAIM") asserted against Indemnitee which resulted in the Claim, and if
such right is exercised, the parties shall cooperate in the defense of such
Claim.
Section 11.4 TCRC Security. (a) The operating statements of TCRC
representing the income and expense statements of TCRC, and the balance
sheet of TCRC, as of and for the year ending December 31, 1996 and for
the period of
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January 1, 1997 through June 30, 1997, fairly represent the operating results
and cash flows, assets and liabilities of TCRC for such respective periods.
Since the date of such balance sheet, there have been no material liabilities
or obligations incurred.
(b) TCRC hereby covenants that, at any time from and
after the Effective Date and during the period of the survival of any
representations, warranties, covenants or indemnities of the TCRC Group
hereunder and such additional period as is necessary to resolve a Claim made
within such period, TCRC will not permit its (i) net book value (total assets
less total liabilities) to be less than $1,200,000 and (ii) cash or cash
equivalents to be less than $1,000,000.
Section 11.5 Indemnification Procedures. In the event the
Indemnitee asserts within the time period set forth in Section 11.3(a)
hereof that the Indemnitor has an indemnification obligation to
Indemnitee hereunder, Indemnitee shall deliver written notice
("INDEMNIFICATION NOTICE") describing in reasonable detail the
circumstances giving rise to such obligation and the amount thereof.
If, within 30 days after its receipt of an Indemnification Notice, the
Indemnitor delivers written notice to the Indemnitee indicating that the
Indemnitor disputes the circumstances giving rise to or the amount of
such claimed indemnification obligation, the Indemnitee may submit such
matter for binding arbitration. If, after receiving timely notice of a
dispute hereunder from the Indemnitor, the Indemnitee fails to so submit
the matter for arbitration within 20 days after receipt of such notice,
then the Indemnitor shall be relieved of the claimed indemnification
obligation described in the Indemnification Notice.
ARTICLE 12. ADJUSTMENTS.
Section 12.1 Adjustments at the Initial Closing Date. The
following items shall be apportioned as of midnight on the date
preceding the Initial Closing Date with respect to all Other Properties
and shall be made in cash at the Closing, with the Contributors making a
cash payment to the Transferee of the net amount due the Transferee or
vice versa, which payments shall have no effect on the calculation of
Net Value:
(a) Rents payable by Tenants as and when collected. All
moneys received from such Tenants from and after the Initial Closing shall
belong to the Operating Partnership and shall be applied by the Operating
Partnership to current rents and other charges under the Leases. After
application of such moneys to current rents and charges, the Operating
Partnership shall remit to the TCR Group any excess amounts paid by a Tenant
to the extent that such Tenant was in arrears in the payment of rent prior to
the Initial Closing. After the Initial Closing, the TCR Group shall be
entitled to initiate and prosecute proceedings to
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collect rents delinquent as of the Initial Closing Date but such right shall
not include the right to evict or dispossess any Tenant.
(b) At the Initial Closing, the TCR Group shall pay to
or credit the Operating Partnership an amount equal to all Security Deposits
and any prepaid rents relating to all Real Properties other than the
Development Properties.
(c) At the Initial Closing, the Operating Partnership
shall (i) pay to the TCR Group all costs incurred by the TCR Group in
connection with Acquisition Contracts to the extent provided in Section 2.9
and (ii) refund and replace all letters of credit, bond deposits and other
amounts related to the Real Properties and identified in Schedule 12.1(c),
which schedule shall be updated prior to the Initial Closing Date.
(d) Utility charges payable by the TCR Group relating to
all Real Properties other than the Development Properties, including, without
limitation, electricity, water and sewer bills. If there are meters on such
Real Property, the TCR Group will cause readings of all said meters to be
performed not more than ten (10) days prior to the Initial Closing Date. To
the extent said meters are not read prior to the Initial Closing, the
Operating Partnership will cause same to be read promptly thereafter and a
pro-rata adjustment shall be made upon said reading.
(e) Amounts payable under the Service Contracts being
assumed and the Office Leases.
(f) Real estate taxes accrued during the fiscal tax
period in which the Initial Closing occurs relating to all Real Properties
other than the Development Properties. Thus if taxes accrued for 1997 and not
payable until 1998, the adjustment shall nevertheless be with respect to
those accrued in 1997, except with respect to the Devonshire and Woodbury
Properties where the adjustment shall be based upon taxes actually payable in
the calendar year of the Initial Closing. If the real estate taxes for the
fiscal period are not known at the time of Closing, the proration shall be at
one hundred four percent (104%) of the taxes for the most recent tax year and
there shall be no further proration. Notwithstanding the foregoing, with
respect to any Real Property for which the most recent assessment was based
upon a condition of the Real Property substantially different than the
condition on the assessment date for the fiscal period in which the Initial
Closing occurs (for example a land assessment or a partially completed
assessment in one year and on the assessment date the Real Property is
substantially more improved or occupied) there shall be a readjustment when
the actual taxes for such property for such period are known.
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(g) Amounts payable by owners of properties which are
the subject of Management Contracts.
(h) At the Initial Closing, the TCR Group shall credit
to the Transferee receiving the River Glen property an amount equal to
$45,000.
Section 12.2 Adjustments at the Delayed Closing Property Closing
Date and Each Development Property Closing Date. The following items
shall be apportioned as of midnight on the date preceding the Delayed
Closing Property Closing Date and each Development Property Closing Date
with respect to the applicable Property, other than the Spring Mill
Property (to which this Section 12.2 shall not apply), and shall be made
in cash at such Closing, with the Contributor contributing such
Property making a cash payment to the Transferee of the net amount due
the Transferee or vice versa (which payments shall have no effect on the
calculation of Net Value):
(a) Rents payable by Tenants relating to such Property
as and when collected. All moneys received by such Tenants from and after
such Closing Date shall be applied by the Operating Partnership to current
rents and charges, the Operating Partnership shall remit to such Contributor
any excess amounts paid by a Tenant to the extent that such Tenant was in
arrears in the payment of rent prior to such Closing. After such Closing,
such Contributors shall be entitled to initiate and prosecute proceedings to
collect its rents delinquent as of such Closing Date but such right shall not
include the right to evict or dispossess any Tenant.
(b) At such Closing, such Contributor shall pay to or
credit the Operating Partnership an amount equal to all Security Deposits and
any prepaid rents relating to such Property.
(c) Utility charges payable by such Contributor,
including, without limitation, electricity, water and sewer bills. If there
are meters on such Property, such Contributor will cause readings of all said
meters to be performed not more than ten (10) business days prior to such
Closing Date. To the extent said meters are not read prior to a Closing, the
Operating Partnership will cause same to be read promptly thereafter and a
pro-rata adjustment shall be made upon said reading.
(d) Real estate taxes accrued during the fiscal tax
period in which such Closing occurs .
(e) Amounts payable under Service Contracts being
assumed relating to such Property.
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Section 12.3 Adjustment for Assessments. If, on any Closing
Date, the Real Property that is subject to such Closing or any part
thereof shall be or shall have been affected by an assessment or
assessments which are or may become payable in installments, all the
unpaid installments of any such assessment shall be paid and discharged
by the TCR Group on the applicable Closing Date, provided, however, that
with respect to assessments at Devonshire Gates (approximately $275,000)
and the Real Properties in the State of Kansas, (approximately
$75,000.00) the same shall not be paid at Initial Closing, but the
Contributor shall credit Transferee an amount equal to one-half the
outstanding balance of such assessment.
Section 12.4 Other Adjustments. Except as otherwise provided in
this Agreement, all other adjustments and prorations shall be made in
accordance with the customs in respect to title closings in the state in
which the Property is located.
Section 12.5 Errors in Calculations. Any errors in calculations or
adjustments shall be corrected or adjusted within ninety (90) days after
the applicable Closing Date.
Section 12.6 Survival. The provisions of this Article 12 except
with respect to readjustment of real estate taxes shall survive the
applicable Closing Date for ninety (90) days. The provisions of this
Article 12 with respect to readjustment of real estate taxes shall
survive the applicable Closing Date for three (3) months after the
issuance of the applicable tax bill.
ARTICLE 13. CONDITIONS PRECEDENT TO CLOSING.
Section 13.1 Conditions to Obligations of the TCR Group Relating to
the Initial Closing. The obligations of the TCR Group to convey the
Other Property and to perform the other covenants and obligations to be
performed by the TCR Group on the Initial Closing Date shall be subject
to satisfaction of the following conditions (all or any of which may be
waived, in whole or in part, by the TCR Group):
(a) The representations and warranties made by the
Operating Partnership and the Company herein shall be true and correct in all
material respects with the same force and effect as though such
representations and warranties had been made on and as of the Initial Closing
Date; provided, however, that a failure of any representations or warranties
to be true and correct in all material respects shall not give rise to a
claim or right of termination by the TCR Group hereunder so long as such
matters do not have a Material Adverse Effect on the consummation of the
Initial Closing.
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(b) The Operating Partnership and the Company shall have
executed and delivered to the TCR Group all of the items and documents
provided herein for which delivery is requested on or before the Initial
Closing Date.
(c) The Operating Partnership and the Company shall have
performed all covenants and obligations undertaken by the Operating
Partnership and the Company herein in all material respects and materially
complied with all conditions required by this Agreement to be performed or
complied with by them on or before the Initial Closing Date.
(d) The Company shall have been taxed as a real estate
investment trust in its most recent federal income tax return, and shall be
in compliance with all applicable laws, rules and regulations, including the
Code, necessary to permit it to be so taxed. The Company shall not have taken
any action or have failed to take any action which could be expected to,
alone or in conjunction with any other factors, result in the loss of its
status as a real estate investment trust for federal income tax purposes.
(e) The Operating Partnership shall be a partnership for
federal and all state and local income tax purposes.
(f) The Shares to be issued hereunder and upon exchange
of the OP Units shall have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance.
(g) Transferee shall not have terminated this Agreement
pursuant to Section 2.6 as a result of there being more than three (3)
Withdrawn Properties.
(h) The TCR Group and the Transferee shall have agreed
upon a marketing agreement consistent with the terms attached hereto as
Exhibit 13.1(h).
(i) The Transferee shall have notified the TCR Group of
the Transferee's approval of the environmental report of Dames & Moore
relating to the Development Properties.
Section 13.2 Conditions to Obligations of the Transferee Relating
to the Initial Closing. (a) The obligations of the Operating Partnership to
accept title to the Other Property and the Operating Partnership's and the
Company's obligation to perform the other covenants and obligations to be
performed by the Operating Partnership and the Company on the Initial Closing
Date shall be subject to satisfaction of the following conditions (all or any
of which may be waived, in whole or in part, by the Operating Partnership or
the Company):
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(i) The representations and warranties made by the TCR
Group herein shall be true and correct in all material respects with the same
force and effect as though such representations and warranties had been made
on and as of the Initial Closing Date; provided, however, that a failure of a
representation or warranty to be true and correct in all material respects
shall not give rise to a claim or right of termination by the Transferee
hereunder so long as such matters do not have a Material Adverse Effect on
the consummation of the Initial Closing.
(ii) The TCR Group shall have performed all covenants
and obligations undertaken by the TCR Group herein in all material respects
and materially complied with all conditions required by this Agreement to be
performed or complied with by it on or before the Initial Closing Date.
(iii) The TCR Group shall have executed and delivered
to the Operating Partnership and the Company all of the items and documents
provided herein for which delivery is required on or before the Initial
Closing Date.
(iv) The TCR Group shall not have terminated this
Agreement pursuant to Section 2.6 as a result of there being more than three
(3) Withdrawn Properties.
(v) All consents required under agreements to which
any Contributor or Owner is a party to the transaction contemplated hereby
have been obtained.
(vi) Except as set forth on Schedule 13.2(a)(vi), the
Other Property shall be free of material defects (which shall not include
needed exterior painting and ordinary wear and tear), structural deficiencies
or violations of applicable codes which exceed $1,000,000 in the aggregate,
comprised of individual items which in each case costs more than $15,000 to
remedy.
(vii) The Transferee and the TCR Group shall have
agreed upon a marketing agreement consistent with the terms attached hereto
as Exhibit 13.1(h).
(viii) The TCR Group shall have completed necessary
repairs to the retaining wall at the Vinings Ridge Property in a good and
workmanlike manner.
(ix) TCR Group shall have furnished to Transferee an
amendment to the TCI Cable Service contract on the Vinings Ridge Property
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reflecting revenue sharing on the same terms as the TCI cable Service
Contract on the Vinings Trace Property.
(b) The Transferee previously advised the TCR Group that
the Transferee has conducted initial due diligence with respect to the
Property by members of its organization, including a review of financial
information and physical information made available by the TCR Group and
visits to the Property. Commencing on the Effective Date and extending for a
period of forty (40) days thereafter, the Transferee may engage third parties
to confirm or determine certain matters with respect to the Property.
Accordingly, it shall be a condition of Transferee's obligations hereunder
that reports regarding environmental and hazardous materials, oil, asbestos
and like matters are reasonably satisfactory to Transferee in scope and
content from the reports of engineers engaged by Transferee; provided,
however, that the Transferee shall not be relieved of its obligations under
this Section 13.2(b) as a result of any matter set forth in Schedule 13.2(b).
(c) In the event any of the foregoing conditions set
forth in Section 13.2(a) or 13.2(b) are not satisfied with respect to any
Real Property other than a Development Property, and subject to Section 2.6,
the applicable Real Property shall be deemed a Withdrawn Property for
purposes of Section 2.6. Notice of such designation shall be given on or
before the expiration of the fortieth (40th) day after the Effective Date.
Failure to so notify the TCR Group by such time shall be deemed a waiver of
the foregoing conditions.
Section 13.3 Conditions to Obligations of the TCR Group Relating to
the Delayed Closing Property Closing and Each Development Property
Closing. The obligations of the Contributors to convey the Delayed
Closing Property Closing or its Development Property, as applicable, and
to perform the other covenants and obligations to be performed by such
Contributors on the respective Closing Date shall be subject to
satisfaction of the following conditions (all of any of which may be
waived, in whole or in part, by the respective Contributor):
(a) The representations and warranties made by the
Company and the Operating Partnership herein shall be true and correct in all
material respects with the same force and effect as though such
representations and warranties had been made on and as of the applicable
Closing Date; provided, however, that a failure of any representations or
warranties to be true and correct in all material respects shall not give
rise to a claim or right of termination by such Contributor hereunder so long
as such matters do not have Material Adverse Effect on the consummation of
the applicable Closing.
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(b) The Company and the Operating Partnership shall have
executed and delivered to such Contributor all of the items and documents
provided herein for which delivery is required on or before such Closing
Date.
(c) The Operating Partnership and the Company shall have
performed all covenants and obligations undertaken by the Company and the
Operating Partnership herein in all material respects and materially complied
with all conditions required by this Agreement to be performed or complied
with by them on or before such Closing Date.
(d) The Company shall have been treated as a real estate
investment trust for tax purposes in its most recent federal income tax
return, and shall be in compliance with all applicable laws, rules and
regulations, including the Code, necessary to permit it to be so taxed. The
Company shall not have taken any action or failed to take any action which
could be expected to, alone or in conjunction with any other factors, result
in the loss of its status as a real estate investment trust for federal
income tax purposes.
(e) The Operating Partnership shall be a partnership for
federal and all state and local income tax purposes.
Section 13.4 Conditions to Obligations of the Transferee Relating
to the Delayed Closing Property Closing and Each Development Property
Closing. The obligations of the Operating Partnership to accept title
to the Delayed Closing Property and each Development Property, as
applicable, and the Company's obligation to perform the other covenants
and obligations to be performed by the Company and the Operating
Partnership on the respective Closing Date shall be subject to
satisfaction of the following conditions (all or any of which may be
waived, in whole or in part, by the Company or the Operating
Partnership):
(a) The representations and warranties made in Sections 4.1
(a)-(1), 4.1(n) and 4.1(p) by the Contributor contributing such Property
shall be true and correct in all material respects with the same force and
effect as though such representations and warranties had been made on and as
of the applicable Closing Date; provided, however, that a failure of such
representation or warranty to be true and correct in all material respects
shall not give rise to a claim or right of termination by the Company or the
Operating Partnership hereunder so long as such matters do not have a
Material Adverse Effect on the consummation of the applicable Closing.
(b) Such Contributor shall have performed all covenants and
obligations undertaken by it herein in all material respects and materially
complied with all conditions required by this Agreement to be performed or
complied with by it on or before such Closing Date.
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(c) Such Contributor shall have executed and delivered to
the Company and the Operating Partnership all of the items and documents
provided herein for which delivery is required on or before such Closing
Date.
(d) All necessary consents related to such Closing shall have
been obtained.
(e) As a condition to the conveyance identified in Section
1.2(c), Transferee shall have received from TCRC or another credit worthy
party satisfactory to Transferee an indemnity satisfactory to Transferee
respecting liabilities pertaining to the Owner Interest to be transferred
pursuant to Section 1.2(c) and the acts and omissions of the Owner
transferring such interest relating to the period prior to the applicable
Development Property Closing Date. Such indemnity shall survive the
applicable Development Property Closing Date for the eighteen (18) month
period specified in the Partnership Agreement pertaining to such Owner
Interest.
ARTICLE 14. ASSIGNMENT.
No party may assign this Agreement or any interest therein to any
other person without the prior written consent of the other parties
hereto. Notwithstanding the foregoing, with respect to any Property or
Owner Interest to be conveyed hereunder, the Transferee of such Property
or Owner Interest may designate a partnership or limited liability
company having the Transferee as a partner or member as the party to
whom such conveyance will be made, which designation shall in no way
affect the consideration to be received by any Contributor.
ARTICLE 15. NO BROKERS.
The TCR Group and the Transferee covenant and agree one with the
other that no real estate commissions, finders' fees or brokers' fees
have been or will be incurred in connection with this Agreement or the
transaction contemplated hereby. The TCR Group and the Transferee shall
indemnify, defend and hold each other harmless from and against any
claims, liabilities, obligations or damages for commissions, finders' or
brokers' fees resulting from or arising out of the Transferee's
acquisition of the Property hereunder asserted against either party by
any broker or other person claiming by, through or under the
indemnifying party or whose claim is based on the indemnifying party's
acts or omissions. The provisions of this Article 15 shall survive
the Closings provided for herein or other termination of this Agreement.
ARTICLE 16. CASUALTY LOSS.
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Section 16.1 Maintenance of Insurance Coverage. The TCR Group
shall continue to maintain, in all material respects, the fire and
extended coverage insurance coverage with respect to the Property (the
"INSURANCE COVERAGE") which are currently in effect, through the closing
date relating to such Property.
Section 16.2 Casualties. If at any time prior to the Closing Date
for a Property all or any portion of such Property (each, a "DAMAGED
PROPERTY") is destroyed or damaged as a result of fire or any other
casualty (a "CASUALTY"), the TCR Group shall promptly give written
notice ("CASUALTY NOTICE") thereof to the Transferee. If the estimated
cost to repair or restore the Damaged Property following such Casualty
equals or exceeds One Million Dollars and no/100 Dollars
($1,000,000.00), such Casualty is herein called a "MAJOR CASUALTY." In
the event of a Major Casualty, the Transferee shall have the right to
terminate this Agreement as to the Damaged Property only by written
notice to the TCR Group within fifteen (15) days after receipt of the
Casualty Notice. In that event, with respect to all Real Properties
other than the Development Properties, such Damaged Property shall be
treated as a Withdrawn Property under Section 2.6, and this Agreement
shall continue in full force and effect as to all other Property.
Section 16.3 Interim Repairs. If a Property is the subject of a
Major Casualty but the Transferee does not terminate this Agreement as
to such Damaged Property pursuant to the provisions of this Article 16,
then the appropriate Contributor shall prior to the applicable Closing
Date cause all temporary repairs to be made to the Damaged Property as
shall be required to prevent further deterioration and damage to the
Damaged Property and to protect public health and safety, provided that
the cost of any such repairs shall not exceed the amount of proceeds
made available to such Contributor. Such Contributor shall have the
right to be reimbursed from the proceeds of any insurance with respect
to the Damaged Property for the cost of such temporary repairs.
Section 16.4 Casualties Other than Major Casualties. If a Property
is the subject of a Casualty which is not a Major Casualty, this
Agreement shall continue in full force and effect, and (a) subject to
the rights of any holders of existing debt, the proceeds of any
applicable Insurance Coverage, together with a credit equal to the
deductible under such Insurance Coverage, shall be paid to the Operating
Partnership at the applicable Closing, and (b) all unpaid claims and
rights in connection with the Casualty shall be assigned to the
Operating Partnership at the applicable closing without in any manner
affecting the consideration payable to the TCR Group hereunder.
ARTICLE 17. CONDEMNATION.
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In the event of a Material Taking of any Property (the "CONDEMNED
PROPERTY"), the Transferee shall have the right, at its sole option, to
either (a) terminate this Agreement as to the Condemned Property only by
giving the TCR Group written notice to such effect within fifteen (15)
days after its receipt of written notification of any such occurrence or
(b) accept title to the Condemned Property without reduction of any
consideration to be given to the TCR Group hereunder. Should the
Transferee so terminate this Agreement as to Condemned Property in
accordance with this Article 17, with respect to all Real Properties
other than the Development Properties, such Condemned Property shall be
treated as a Withdrawn Property under Section 2.6, and this Agreement
shall continue in full force and effect as to all other Property. In
the event that the Transferee either is not entitled to or elects not to
terminate this Agreement under this Article 17, or in the event of a
taking which is not a Material Taking, the TCR Group shall, subject to
the rights of the holder of any existing mortgage, assign all proceeds
of such taking to the Operating Partnership, and same shall be the
Operating Partnership's sole property, and the Operating Partnership
shall have the sole right to settle any claim in connection with the
Condemned Property. The term "MATERIAL TAKING" as to a Condemned
Property or any portion thereof shall be defined to mean the institution
of any proceedings, judicial, administrative or otherwise which (a)
causes access to the Real Property to be taken or materially diminished
(i.e., following such taking the Real Property no longer has access to a
publicly dedicated street or traffic flow from and to the Real Property
is materially impaired), (b) results in parking no longer being in
compliance with applicable zoning laws; or (c) results in a taking of
any portion of any buildings constituting the Improvements.
ARTICLE 18. TERMINATION.
Section 18.1 Effect of Termination and Abandonment. In the event
of termination of this Agreement and the abandonment of the transaction
contemplated hereby pursuant to this Article 18, all rights and
obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Article 18.
Section 18.2 Termination by the TCR Group. (a) In the event that
the Initial Closing does not occur on or prior to the Initial Closing
Date (as the same may be extended pursuant to Section 10.1) for any
reason other than a TCR Default or failure of any condition to the
Transferee's obligations hereunder, subject to this Section 18.2, the
TCR Group may terminate this Agreement by written notice to the
Transferee ("TCR TERMINATION NOTICE"). In such event, in addition to
and cumulative of the TCR Group's right to terminate this Agreement, as
its sole and exclusive remedy, the TCR Group may recover from the
Transferee the sum of Five Million and 00/100 Dollars ($5,000,000.00) as
liquidated damages ("LIQUIDATED DAMAGES") and not as a penalty. Any
default with respect
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to the Initial Closing shall terminate this Agreement as to all the
Development Properties and the Delayed Closing Property. The TCR Group and
the Transferee have agreed that such amount is a reasonable estimate of the
damages that the TCR Group would be likely to sustain in the event of the
Transferee's default, as the actual amount of such damages would be difficult
or impracticable to determine. Notwithstanding the foregoing, in the event of
the receipt of a TCR Termination Notice prior to the Initial Closing in
respect of an event of termination caused by or attributable to one of the
Avalon Parties, on the one hand, or AMLI Parties, on the other hand, the
Non-Defaulting Party shall have the obligation to consummate each Closing by
written notice to the TCR Group given within five (5) business days of the
TCR Termination Notice, and provided such default is cured prior to the
Initial Closing Date. If the Non-Defaulting Party also fails to close the
transactions contemplated by this Agreement for any reason other than a TCR
Default or failure of any condition to the Transferee's obligations
hereunder, then the Non-Defaulting Party and defaulting party shall be
jointly and severally liable to the TCR Group for payment of the Liquidated
Damages as set forth above as the TCR Group's sole and exclusive remedy. For
purposes of this Section 18.2, the Delayed Closing Property shall not under
any circumstances be included within the definition of "Other Property".
(b) In the event that a Development Property Closing or the
Delayed Closing Property Closing does not close on or prior to the applicable
Closing Date (as the same may be extended pursuant to Section 2.3) for any
reason other than a TCR Default or failure of any condition to the
Transferee's obligations with respect to the applicable Development Property
Closing or Delayed Closing Property Closing hereunder, subject to this
Section 18.2, the TCR Group may terminate this Agreement by delivery of a TCR
Termination Notice. In such event, in addition to and cumulative of the TCR
Group's right to terminate this Agreement, as its sole and exclusive remedy,
the TCR Group may recover from the Transferee the sum of Two Million and
00/100 Dollars ($2,000,000.00) (but Five Hundred Thousand Dollars
($500,000.00) with respect to the Spring Mill Property) as liquidated damages
("DEVELOPMENT PROPERTY LIQUIDATED DAMAGES") and not as a penalty or in lieu
of Development Property Liquidated Damages, the TCR Group may elect to seek
specific performance, such election to be made within thirty (30) business
days after any such default by Transferee. Any default with respect to any
Development Property Closing or Delayed Closing Property Closing shall have
no effect on the obligations of Transferee to consummate any other
Development Property Closing or Delayed Closing Property Closing. The TCR
Group and the Transferee have agreed that such amount is a reasonable
estimate of the damages that the TCR Group would be likely to sustain in the
event of the Transferee's default, as the actual amount of such damages would
be difficult or impracticable to determine.
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Section 18.3 Termination by the Transferee. This Agreement may be
terminated and the transaction contemplated hereby may be abandoned by
the Transferee if the TCR Group fails to satisfy a condition under
Section 13.2 or Section 13.4 to be satisfied by the TCR Group (a "TCR
DEFAULT"). In such event, (i) the Transferee may terminate the
Agreement and recover from the TCR Group the sum of Five Hundred
Thousand and 00/100 Dollars ($500,000.00) as liquidated damages and not
as a penalty, or (ii) the Transferee may, if the TCR Default is a
willful or intentional failure or refusal to perform any covenant or
agreement hereunder, seek specific performance, such election to be made
within thirty (30) business days after any such default by the TCR
Group. Furthermore, should the TCR Default constitute a willful or
intentional failure or refusal by the TCR Group to perform any covenant
or agreement undertaken by it under this Agreement, the TCR Group shall
be precluded for a period of twelve (12) months following the Initial
Closing Date from transferring all or substantially all of the Property
or Owner Interests to any person other than an affiliate of the TCR
Group or entering into any written agreement providing for such
transfer.
Section 18.4. Jurisdiction. In connection with any action to
enforce any provision of this Agreement or arising out of a breach
thereof, the parties agree that proper jurisdiction may be had in the
state or federal courts located in Chicago, Illinois and agree that the
prevailing party shall be paid legal fees incurred in seeking any action
or proceeding relating thereto. The provisions of the preceding
sentence shall survive the closings provided for herein.
ARTICLE 19. TAX MATTERS.
Section 19.1 Payment of Taxes by the TCR Group. The TCR Group will
pay or provide for payment of all Taxes due and payable on or after the
applicable closing and will file all returns and reports required to be
filed on or after the applicable closing with respect to Taxes imposed
in connection with the ownership and operation of the Property for all
taxable periods (or portions thereof) ending on or prior to the
respective closing for which the Operating Partnership could be held
liable on a claim made against the Operating Partnership.
Section 19.2 Payment of 1997 Taxes. The Operating Partnership is
hereby authorized by the TCR Group, in the Operating Partnership's sole
discretion, to file any applicable proceeding for the 1997 tax roll for
a reduction of the assessed valuation of the Property. The refund of
taxes, net of all expenses incurred in connection therewith, if any, for
any tax year for which the TCR Group or the Operating Partnership shall
be entitled to share in the refund shall be divided between the TCR
Group and the Operating Partnership in accordance with the apportionment
of taxes pursuant to the provisions hereof. The TCR
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Group shall not be liable for any such expense that exceeds its apportionment
of any refund of such taxes.
Section 19.3 Definition of Taxes. "TAXES" mean all federal, state,
county, local, foreign and other taxes of any kind whatsoever
(including, without limitation, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, license, stamp,
environmental, withholding, employment, unemployment compensation,
payroll related and property taxes, import duties and other governmental
charges or assessments), whether or not measured in whole or in part by
net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto, and including expenses
associated with contesting any proposed adjustment related to any of the
foregoing.
Section 19.4 Allocation Method. The Company and its affiliates
will use the "traditional method" (as defined in Treas. Reg. Section
1.704-3(b)) of allocating income, gain, loss and deduction to account
for the variation between the fair market value and adjusted basis of
the Property for federal income tax purposes with respect to (i) the
contribution of the Property, and (ii) any revaluation of the Property
in accordance with the provisions of Treas. Reg. Sections
1.704-1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(g) and 1.704-3(a)(6).
Section 19.5 Survival. The provisions of this Article 19 shall
survive the applicable Closing Date until the applicable statute of
limitations shall have expired.
Section 19.6 Tax Consequences. The parties hereto acknowledge that
each party has been represented by sophisticated counsel in connection
with the transactions contemplated by this Agreement and that each party
is aware of the potential tax and other consequences of such
transactions and is not relying upon the representations, knowledge,
advise or counsel of any other party nor any such other party's counsel
or other representative as to the consequences of the transactions
contemplated hereby.
ARTICLE 20. EMPLOYEE MATTERS.
As soon as reasonably practicable, the Transferee shall identify
those employees of the TCR Group that will be employed by the Transferee
after the Initial Closing Date (the "TRANSFERRED EMPLOYEES"). Prior to
the Initial Closing Date, the TCR Group shall cooperate with the
Transferee in the Transferee's efforts to effect the employment of the
Transferred Employees. The Transferee shall not assume any obligations
and liabilities of the TCR Group with respect to the Transferred
Employees and their beneficiaries and dependents under or in connection
with any employee benefit plan or the employment of the Transferred
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Employees and the TCR Group shall be responsible for any and all
severance, accrued benefits, and WARN Act obligations (if applicable).
No provision hereof shall confer upon any Transferred Employee any
right with respect to continued employment by the TCR Group nor shall
anything herein interfere with the right of the TCR Group to terminate
the employment of any Transferred Employee at any time, with or without
cause, or restrict the TCR Group in the exercise of its independent
business judgment in establishing or modifying any of the terms and
conditions of the employment of the Transferred Employees, provided
that, there shall be no increase in compensation other than (i) in the
ordinary course of business during the course of annual or periodic
reviews and (ii) in connection with the transactions contemplated by
this Agreement (including, without limitation, one-time compensation
benefits related hereto).
ARTICLE 21. NOTICE.
All notices, demands, requests, or other writings in this Agreement
provided to be given, made or sent, or which may be given, made or sent,
by either party hereto to the other, shall be in writing and shall be
delivered by depositing the same with any nationally recognized
overnight delivery service, or by telecopy or fax machine, in either
event with all transmittal fees prepaid, properly addressed, and sent to
the following addresses:
If to the Transferee:
Avalon Properties, Inc.
15 River Road, Suite 210
Wilton, Connecticut 06987-4064
Attention: Charles H. Berman, President
Fax: 203-761-6565
Avalon Properties, Inc.
100 Grandview Road, Suite 405
Braintree, Massachusetts 02184
Attention: Bryce Blair, Senior Vice President
Fax: 617-356-1788
and
AMLI Residential Properties Trust
125 South Wacker Drive, Suite 3100
Chicago, IL 60606
Attention: Allan J. Sweet
Fax: (312) 443-0909
with copies to:
Goulston & Storrs
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<PAGE> 81
400 Atlantic Avenue
Boston, MA 02116
Attention: Jordan P. Krasnow
Fax: (617) 574-4112
and
Mayer, Brown & Platt
190 South La Salle Street
Chicago, IL 60603-3441
Attention: Ivan P. Kane
Fax: (312) 701-7711
If to the TCR Group:
Trammell Crow Residential Company
717 North Harwood, Suite 1200
Dallas, Texas 75201
Attention: Randy Pace
Fax: (214) 922-8466
and
Trammell Crow Residential Services
377 East Butterfield Road, Suite 425
Lombard, Illinois 60148
Attention: David J. Hubbard
Fax: (630) 810-1790
with a copy to:
Liddell, Sapp, Zivley,
Hill & LaBoon, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: R. Brent Clifton, Esq.
Fax: (214) 220-4899
or to such other address as either party may from time to time designate
by written notice to the other. Notices given by (i) overnight delivery
service as aforesaid shall be deemed received and effective on the first
business day following such dispatch and (ii) telecopy or fax machine
shall be deemed given at the time and on the date of machine transmittal
provided same is sent prior to 5:00 p.m., Chicago, Illinois time, on a
business day (if sent later, then notice shall be deemed given on the
next business day) and if the sending party receives a written send
confirmation on its machine and forwards a copy thereof by regular mail
accompanied by such notice or communication. Notices may be given by
counsel
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for the parties described above, and such notices shall be deemed given by
said party, for all purposes hereunder.
ARTICLE 22. MISCELLANEOUS.
Section 22.1 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall, to the
extent they relate to the Other Properties or the transactions
contemplated to occur at the Initial Closing, survive the contribution
of the Other Properties and the consummation of the other transactions
contemplated thereby for nine (9) months following the Initial Closing
Date. All representations and warranties to the extent they relate to
the Delayed Closing Property and the Development Properties or the
transactions contemplated to occur at a Delayed Closing Property Closing
and a Development Property Closing, shall survive the applicable Closing
Date for the nine (9) months thereafter.
Section 22.2 Entire Agreement; No Third-Party Rights. This
Agreement constitutes the entire agreement between the parties and
incorporates and supersedes all prior negotiations and discussions
between the parties. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their successors and
assigns, and, except as provided in Section 9.13, nothing in this
Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 22.3 Amendment. This Agreement cannot be amended, waived
or terminated orally, but only by an agreement in writing signed by each
party hereto.
Section 22.4 Governing Law. This Agreement shall be interpreted
and governed by the laws of the State of Illinois, without regard to its
rules of conflicts of laws and shall be binding upon the parties hereto
and their respective successors and assigns.
Section 22.5 Section Headings. The caption headings in this
Agreement are for convenience only and are not intended to be part of
this Agreement and shall not be construed to modify, explain or alter
any of the terms, covenants or conditions herein contained.
Section 22.6 Severability. If any term, covenant or condition of
this Agreement is held to be invalid, illegal or unenforceable in any
respect, this Agreement shall be construed without such provision.
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<PAGE> 83
Section 22.7 No Other Rights or Obligations. Nothing contained in
this Agreement shall be deemed to create any rights or obligations of
partnership, joint venture or similar association between the TCR Group
and the Transferee.
Section 22.8 Counterparts. This Agreement may be executed by the
parties hereto in counterparts, all of which together shall constitute a
single Agreement.
Section 22.9 Construction. All references herein to any Section,
Schedules or Exhibit shall be to the Sections of this Agreement and to
the Schedules and Exhibits annexed hereto unless the context clearly
dictates otherwise. All of the Exhibits and Schedules annexed hereto
are, by this reference, incorporated herein.
Section 22.10 Representatives. Any approval, consent, mutual
satisfaction or similar determination required to be made hereunder by
the TCR Group or any person included within such term shall be granted
exclusively by any one of the "TCR REPRESENTATIVES" who for purposes of
this Agreement, until further notice to the Transferee Representatives
(defined below), shall be those persons designated on Schedule 22.10(a).
Any approval, consent, mutual satisfaction or similar determination
required to be made hereunder by the Transferee or any person included
in such term shall be granted exclusively by both of (x) one of the
"TRANSFEREE REPRESENTATIVES" listed on Schedule 22.10(b) (on behalf of
the AMLI Parties) and (y) one of the "Transferee Representatives" listed
on Schedule 22.10(c) (on behalf of the Avalon Parties).
Section 22.11 Definition of Knowledge. As used in this Agreement,
the term "knowledge" shall mean only the current actual knowledge
without inquiry of (i) in the case of the Contributors, the designees of
the TCR Group set forth on Schedule 22.11(i), and with respect to the
respective properties managed by such regional property managers, the
regional property managers of the TCR Group (limited to representations
and warranties in Sections 4.1(c)-(n) inclusive and 4.1(o)), (ii) in the
case of the AMLI Parties, those persons set forth on Schedule 22.11(ii),
and (iii) in the case of the Avalon Parties, those persons set forth on
Schedule 22.11(iii). As used herein, the term "current actual knowledge
without inquiry" shall mean only the actual, current, conscious (and not
constructive, imputed or implied, knowledge of such designees without
having made a review of the files or other inquiry. "Current actual
knowledge without inquiry" does not include constructive, imputed or
implied knowledge of any partner or agent of the parties hereto.
Anything herein to the contrary notwithstanding, no such designee shall
have any personal liability or obligation whatsoever with respect to any
of the matters set forth in this Agreement or any of the representations
made by the parties hereto being or becoming untrue, inaccurate or
incomplete in any respect.
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<PAGE> 84
Section 22.12 Recourse to AMLI. ANY OBLIGATION OR LIABILITY
WHATSOEVER OF AMLI WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR
ANY OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY
OTHER INSTRUMENT, TRANSACTION OR UNDERTAKING CONTEMPLATED HEREIN SHALL
BE SATISFIED, IF AT ALL, OUT OF THE ASSETS OF AMLI ONLY. NO SUCH
OBLIGATION OR LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR SHALL
RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OR ASSETS OF
ANY OF ITS SHAREHOLDERS, TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS,
REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF
CONTRACT, TORT, OR OTHERWISE. NOTWITHSTANDING THE FOREGOING, NOTHING
CONTAINED IN THIS SECTION 22.12 SHALL LIMIT THE REMEDIES AGAINST ANY
SUCH PERSON OR ENTITY FOR SUCH PERSON'S OR ENTITY'S FRAUD OR INTENTIONAL
MISCONDUCT, IN WHICH EVENT SUCH REMEDIES SHALL BE DETERMINED IN
ACCORDANCE WITH APPLICABLE LAW.
Section 22.13 Attorneys' Fees. In the event of any litigation or
alternative dispute resolution between the Operating Partnership or the
Company, on the one hand, and the TCR Group, on the other hand, in
connection with this Agreement or the transactions contemplated herein,
the non-prevailing party in such litigation or alternative dispute
resolution shall be responsible for payment of all expenses and
reasonable attorneys' fees incurred by the prevailing party. The
provisions of this Section 22.13 shall survive the applicable closing
date provided for herein.
Section 22.14 Septic Tank Disclosure. With respect to each Real
Property located in Minnesota (Vinings at Woodbury and Devonshire
Gates), to the best of each Contributor's knowledge, there is no septic
tank system or well located thereon.
Section 22.15 Interpretation. Whenever used herein, the singular
number shall include the plural, the plural shall include the singular,
and the use of any gender shall be applicable to all genders.
Remainder of this Page
Intentionally Left Blank
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<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
AVALON PROPERTIES, INC.
------------------------------
By: Bryce Blair
Title: Senior Vice President
<PAGE> 86
AVALON DOWNREIT, L.P.,
a Delaware Limited Partnership
By: Avalon Properties, Inc.
Its: General Partner
---------------------
By: Bryce Blair
Its: Senior Vice President
<PAGE> 87
AMLI RESIDENTIAL PROPERTIES TRUST
------------------------------
By: Allan J. Sweet
Its: President
<PAGE> 88
AMLI RESIDENTIAL PROPERTIES, L.P., a Delaware limited partnership
By: Amli Residential Properties Trust
Its: General Partner
------------------------------
By: Allan J. Sweet
Its: President
<PAGE> 89
For purposes of Article 11 only: TRAMMELL CROW RESIDENTIAL
COMPANY,
A Texas corporation
-------------------------
By: Randy J. Pace
Its: Vice President
<PAGE> 90
WILLOW ARBORS LIMITED PARTNERSHIP,
an Indiana limited partnership
By: CT Arbors at Willow Lake Limited Partnership
Its: General Partner
By: TC Residential Indianapolis, Inc.
Its: General Partner
------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 91
VININGS AT GEIST, LLC,
an Indiana limited liability company
By: CT Vinings at Geist
Its: Managing Member
By: TC Residential Indianapolis, Inc.
Its: General Partner
------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 92
CT VININGS AT WOODBURY LIMITED PARTNERSHIP,
a Texas limited partnership
By: TC Residential Indianapolis, Inc.
Its: General Partner
--------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 93
VININGS AT DANADA LIMITED PARTNERSHIP,
an Illinois limited partnership
By: ITCR Danada Limited Partnership
Its: General Partner
By: CT Danada Limited Partnership
Its: General Partner
By: TC Residential Midwest, Inc.
Its: General Partner
----------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 94
TOWNE GREEN LIMITED PARTNERSHIP,
an Illinois limited partnership
By: CT Towne Green Limited Partnership
Its: General Partner
By: TC Residential Midwest, Inc.
Its: General Partner
------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 95
OXFORD HILL LIMITED PARTNERSHIP,
a Missouri limited partnership
By: ITCR Oxford Hill Limited Partnership
Its: General Partner
By: CT Oxford Hill Limited Partnership
Its: General Partner
By: TC Residential Ohio, Inc.
Its: General Partner
--------------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 96
ARBORS OF MONTGOMERY LIMITED PARTNERSHIP,
a Texas limited partnership
By: TC Residential Midwest, Inc.
Its: General Partner
---------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 97
VININGS AT EAGLE CREEK, LLC,
an Indiana limited liability company
By: CT Vinings at Eagle Creek Limited Partnership
Its: Managing Member
By: TC Residential Ohio, Inc.
Its: General Partner
-----------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 98
RIVER GLEN GABLES GENERAL PARTNERSHIP,
an Indiana general partnership
By: CT River Glen Limited Partnership
Its: Managing Partner
By: TC Residential Indianapolis, Inc.
Its: General Partner
---------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 99
CT SPRING MILL LIMITED PARTNERSHIP,
a Texas limited partnership
By: TC Residential Ohio, Inc.
Its: General Partner
---------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 100
CENTENNIAL KANSAS LIMITED PARTNERSHIP,
a Kansas limited partnership
By: CT Centennial Limited Partnership
Its: General Partner
By: TC Residential Midwest, Inc.
Its: General Partner
---------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 101
ITCR VININGS RIDGE LIMITED PARTNERSHIP,
a Texas limited partnership
By: CT Vinings Ridge Limited Partnership
Its: General Partner
By: TC Residential Midwest, Inc.
Its: General Partner
---------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 102
VININGS SQUARE LIMITED PARTNERSHIP,
a Texas limited partnership
By: TC Residential Midwest, Inc.
Its: General Partner
---------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 103
VININGS TRACE, LLC,
an Indiana limited liability company
By: CT Vinings Trace Limited Partnership
Its: Managing Member
By: TC Residential Ohio, Inc.
Its: General Partner
----------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 104
VININGS COURT LIMITED PARTNERSHIP,
a Texas limited partnership
By: TC Residential Indianapolis, Inc.
Its: General Partner
----------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 105
TCR MIDWEST LIMITED PARTNERSHIP,
a Texas limited partnership
By: TC Residential Midwest, Inc.
Its: General Partner
-----------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 106
RS NORTH, INC.,
a Texas corporation
-----------------------------
By: Randy J. Pace
Its: Vice President and Secretary
<PAGE> 107
ARBOR PROPERTIES, INC.,
a Tennessee corporation
-------------------------
By: Brian K. Cranor
Its: Vice President and Secretary
<PAGE> 108
CROW/BLOOMINGTON LIMITED PARTNERSHIP,
a Texas limited partnership
By: Chasewood Bloomington Limited
Its: General Partner
By: TCF Interests Partnership Ltd.
Its: General Partner
By: Mill Spring Holdings, Inc.
Its: General Partner
---------------------------
By: Timothy J. Hogan
Its: Vice President
