<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
Date of Report: February 19, 1998
---------------------------------
Date of earliest event reported)
Commission File Number 1-12486
-------
ASSOCIATED ESTATES REALTY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-1747603
- ------------------------------------------- ----------
(State or other Jurisdiction of (IRS Employer
Incorporation or organization) Identification
Number)
5025 Swetland Court, Richmond Heights, Ohio 44143-1467
- ------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(216) 261-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
1
<PAGE> 2
ITEM 5: OTHER EVENTS
On February 19, 1998, Associated Estates Realty Corporation (the
"Company") acquired certain assets, consisting principally of a 316 suite
multifamily property known as Country Club Apartments (the "Acquired Property")
from Teachers Insurance and Annuity Association of America, a New York
Corporation.
With respect to the Acquired Property, the Company purchased all of
the above named sellers' right, title and interest in the apartment complex
and land together with all rights of way, easements, licenses, permits,
fixtures, furnishings, equipment, the right to manage, other intangible assets,
leases and tenancies, and all guaranties, warranties and other intangible rights
pertaining to the Acquired Property.
Neither the Company nor any of its shareholders owned any interests
in the seller prior to the acquisition of the Acquired Property by the Company.
The purchase price of the Acquired Properties was approximately $14.9 million,
of which approximately $300,000 represented liabilities assumed.
In determining the price paid for the Acquired Property, the Company
considered the historical and expected cash flow from the Acquired Property, the
nature of the occupancy trends and terms of the leases in place, current
operating costs and taxes, the physical condition of the Acquired Property, the
potential to increase their cash flow and other factors. The Company also
considered the capitalization rates at which it believes apartment properties
have recently sold, but determined the prices it was willing to pay for the
Acquired Property primarily based on the factors discussed above. No independent
appraisals were performed in connection with the acquisitions. The Company,
after investigation of the property, is not aware of any material factors, other
than those enumerated above, that would cause the financial information reported
to not be necessarily indicative of future expected operating results.
Country Club Apartments, built in 1989, is a multifamily apartment
property containing 316 suites located in Toledo, Ohio. The cash purchase price
of the Acquired Property has been financed primarily with cash on hand made
available through the Company's revolving credit facility (the "Line of
Credit"). The Acquired Property has been operated, since construction, as rental
property. The Company will manage the Acquired Property.
THE PROPOSED MERGER WITH MIG REALTY ADVISERS, INC. AND THE PROPOSED ACQUISITION
OF MULTIFAMILY PROPERTIES
The Company has entered into a definitive merger agreement with MIG
Realty Advisors, Inc. ("MIGRA") and agreements to acquire certain assets,
consisting principally of eight multifamily properties, from MIG Residential
REIT, Inc. (collectively the "Proposed Acquisitions"). The Proposed Acquisitions
are subject to customary conditions to closing, the receipt of a favorable
opinion from Morgan Stanley Dean Witter Discover Co. as to the fairness of the
Proposed Acquisitions and the approval of the Company's shareholders.
THE PROPOSED MERGER WITH MIG REALTY ADVISORS, INC.
2
<PAGE> 3
Pursuant to the terms of the merger agreement with MIGRA, the Company
will also acquire the property management business of several of MIGRA's
affiliates and the right to receive certain asset management fees. Founded in
1982, MIGRA currently manages, through its affiliated management companies,
36 Multifamily Apartment Properties containing 11,059 suites. MIGRA's asset
management, property management, investment advisory and mortgage servicing
operations are collectively referred to herein as the "MIGRA Operations".
In exchange for their interest in MIGRA and the affiliated property
management businesses, the shareholders of MIGRA will receive approximately
408,318 (based on the average closing prices of the Company's common shares for
the 20 trading days preceding the date of the merger agreement price, which
average price is $23.63) of the Company's common shares at the closing of the
merger. Subject to the achievement of certain performance criteria, the
shareholders of MIGRA have the opportunity to receive additional contingent
consideration to be paid in the form of the Company's common shares. Such
contingent consideration may have a value of up to $3.1 million and $6.4 million
on the first and second anniversary of the merger, respectively. A portion of
the shares to be issued will be based on the average closing price of the
Company's common shares for the 20 days immediately preceding the contingent
payment date. Assuming all contingent consideration is paid, the total purchase
price for MIGRA, the property management business, will be approximately
$19.1 million.
The Company may reduce the purchase price for the MIGRA Operations to
the extent that any of MIGRA's or a MIGRA affiliate's advisory clients have not
consented to the assignment of or have terminated any advisory, asset, property
management or mortgage servicing agreement to the Company. Conversely, the
purchase price may be increased to the extent that MIGRA enters into any new
asset or property management or mortgage servicing agreement on or before the 90
days preceding the closing of the merger. In no event, however, will the amount
of any price increase exceed the amount of any price decrease.
THE PROPOSED ACQUISITION OF MULTIFAMILY REAL ESTATE PROPERTIES.
On January 28, 1998 (the "Contract Date"), the Company
3
<PAGE> 4
entered into agreements to acquire the Proposed Acquisition Properties,
consisting principally of the multifamily properties further described
as follows:
Number of
Name of Property Location Suites
---------------- -------- ------
20th and Campbell Apartments Phoenix, Arizona 204
Annen Woods Apartments Pikesville, Maryland 132
Desert Oasis Apartments Palm Desert, California 320
Fleetwood Apartments Houston, Texas 104
Hampton Point Apartments Silver Springs, Maryland 352
Morgan Place Apartments Atlanta, Georgia 186
Peachtree Apartments St. Louis, Missouri 156
Windsor Falls Apartments Raleigh, North Carolina 276
Prior to the closing of the MIGRA transaction as discussed above,
neither the Company nor any of its shareholders own any interests in the seller.
The purchase price of the Proposed Acquisition Properties is approximately
$108.5 million. As there is commonality of ownership, the purchase of the eight
properties disclosed above is considered to be a single transaction.
In determining the price to be paid for the Proposed Acquisition
Properties, the Company considered the historical and expected cash flow from
the Proposed Acquisition Properties, the nature of the occupancy trends and
terms of the leases in place, current operating costs and taxes, the physical
condition of the Proposed Acquisition Properties, the potential to increase
their cash flow and other factors. The Company also considered the
capitalization rates at which it believes apartment properties have recently
sold, but determined the prices it was willing to pay for the Proposed
Acquisition Properties primarily based on the factors discussed above. No
independent appraisals were performed in connection with the acquisitions. The
Company, after investigation of the properties, is not aware of any material
factors, other than those enumerated above, that would cause the financial
information reported to not be necessarily indicative of future expected
operating results.
The seller of the Proposed Acquisition Properties has agreed to
exchange its assets for a combination of cash and an equity interest (the
"Equity Consideration") in the Company totaling $108.5 million. The seller may
elect to receive a portion of the total consideration in cash, up to a maximum
of $11.1 million. The number of common shares issued will be determined based on
the amount of Equity Consideration divided by the average closing price of the
Company's common shares over the
4
<PAGE> 5
20 day period preceding the purchase of the Proposed Acquisition Properties.
For purposes of determining the number of shares issued as Equity
Consideration, however, to the extent that the 20 day average price does not
exceed the average closing price of the Company's common shares over the 20 day
period preceding the Contract Date times 106%, no adjustment in the number of
shares determined at the Contract Date will be made. The Company intends to
finance any cash portion of the purchase price with borrowings made available
through the Company's Line of Credit.
There can be no assurances, however, that the Company will be
successful in its attempts to acquire the Proposed Acquisition Properties
currently under contract.
The Proposed Acquisition Properties have been operated, since
construction, as rental properties. The Company will manage all of the Proposed
Acquisition Properties upon the consummation of the transaction.
PURCHASE OF THE MRT PROPERTIES
On February 3, 1998, (as previously reported on the
Company's Form 8-K dated February 3, 1998) in anticipation of the
proposed merger with MIGRA and the purchase of the Proposed
Acquisition Properties, the Company consummated the acquisition of
three properties, two of which were indirectly owned by MIG
Residential Trust ("MRT") and one of which was owned by MRT and
Stonemark Equity Trust, each a client of MIGRA (collectively the
"MRT Properties"). The aggregate purchase price of the MRT
Properties was approximately $59.5 million, of which approximately
$15.9 million represented assumed liabilities. The cash portion of
the purchase price has been financed primarily through an unsecured
90-day term loan.
The MRT Properties are further described as follows:
<TABLE>
<CAPTION>
Property Location Year Built Number of Suites
-------- -------- ---------- ----------------
<S> <C> <C> <C>
The Falls Apartments Duluth, Georgia 1986 520
Reflections Apartments Columbia, Maryland 1985 184
Cypress Shores Apartments Coconut Creek, Florida 1991 300
-----
1,004
</TABLE>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements
This report includes (i) audited combined statement of revenue and
certain expenses for the MRT Properties for the year ended December 31, 1997,
(ii) audited statement of revenue and certain expenses for the year ended
December 31, 1997 for the Acquired Property, (iii) audited consolidated
financial statements for the years ended December 31, 1997, 1996 and 1995 for
the MIG Residential REIT, Inc. ("MIG REIT") and (iv) audited combined financial
statements for the year ended December 31, 1997 for MIG Companies, presented
herein as the financial statements of the MIGRA Operations, along with unaudited
combined financial statements for the years ended December 31, 1996 and 1995.
The MRT Properties were acquired by the Company as previously
reported on the Company's Form 8-K dated February 3, 1998.
The financials of MIG REIT are presented herein as the financial
statements of the Proposed Acquisition Properties. As discussed in Item 5 above,
MIG REIT owns the eight operating properties being acquired by the Company. The
related proforma financial information presented herein adjusts the MIG REIT
historical financial statements for the operations not being acquired,
principally those operations equivalent to a holding company.
5
<PAGE> 6
Pro Forma Financial Information (Unaudited)
Unaudited pro forma financial information of the Company and the
Acquired Property, the MRT Properties, the Proposed Acquisition Properties and
the MIGRA Operations is presented as follows:
. Condensed balance sheet as of December 31, 1997;
. Condensed statement of operations for the year ended
December 31, 1997;
. Estimated twelve-month pro forma statement of taxable net
operating income and operating funds available.
6
<PAGE> 7
Exhibits
2.01 Second Amendment and Restated Agreement and Plan of Merger by and
among Associated Estates Realty Corporation (the "Company"),
MIG Realty Advisors, Inc. ("MIGRA") and the MIGRA Stockholders dated
as of March __, 1998
2.02 Purchase Agreement by and between MIG REIT/Morgan Place, Inc. and
the Company dated as of January 28, 1998
2.03 Purchase Agreement by and between MIG REIT/Annen Woods, Inc. and
the Company dated as of January 28, 1998
2.04 Purchase Agreement by and between MIG Peachtree Corporation and
the Company dated as of January 28, 1998
2.05 Purchase Agreement by and between MIG Fleetwood, Ltd. and the
Company dated as of January 28, 1998
2.06 Purchase Agreement by and between MIG REIT Falls, L.L.C. and
the Company dated as of January 28, 1998
2.07 Purchase Agreement by and between MIG Zoth & Campbell Corporation
and the Company dated as of January 28, 1998
2.08 Purchase Agreement by and between Desert Oasis Corporation and
the Company dated as of January 28, 1998
2.09 Purchase Agreement by and between MIG Hampton Corporation and
the Company dated as of January 28, 1998
23.01 Consent of Price Waterhouse LLP
23.02 Consent of Ernst & Young LLP
7
<PAGE> 8
ASSOCIATED ESTATES REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
ACQUIRED PROPERTIES
MRT PROPERTIES
Report of Independent Certified Public Accountants F-2
Combined Statement of Revenue and Certain Expenses
for the year ended December 31, 1997 F-3
Notes to Combined Statement of Revenue and Certain Expenses F-4
COUNTY CLUB APARTMENTS
Report of Independent Accountants F-6
Statement of Revenue and Certain Expenses for the year
ended December 31, 1997 F-7
Notes to Statement of Revenue and Certain Expenses F-8
PROPOSED ACQUISITIONS
MIG RESIDENTIAL REIT, INC.
Consolidated Financial Statements for the years ended
December 31, 1997, 1996 and 1995:
Report of Independent Certified Public Accountants F-9
Audited Consolidated Financial Statements
Consolidated Balance Sheets F-10
Consolidated Statements of Income F-11
Consolidated Statements of Shareholders' Equity F-12
Consolidated Statements of Cash Flows F-13
Notes to Consolidated Financial Statements F-14
MIG COMPANIES
Combined Financial Statements
Report of Independent Certified Public Accountants F-23
Combined Balance Sheets as of December 31, 1997
and 1996 (unaudited) F-24
Combined Statements of Operations for the years
ended December 31, 1997, 1996 (unaudited) and
1995 (unaudited) F-25
Combined Statements of Shareholders' Equity for
the years ended December 31, 1997, 1996
(unaudited) and 1995 (unaudited) F-26
Combined Statements of Cash Flows for the years
ended December 31, 1997, 1996 (unaudited) and
1995 (unaudited) F-27
Notes to Combined Financial Statements F-29
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Condensed Balance Sheet as of December 31, 1997 F-39
Condensed Statement of Operations for the year
ended December 31, 1997 F-43
Estimated Twelve-Month Pro Forma Statement of Taxable
Net Operating Income and Operating Funds Available F-48
</TABLE>
F-1
<PAGE> 9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Associated Estates Realty Corporation
We have audited the accompanying combined statement of revenue and
certain expenses for certain multifamily properties (the Statement)for the year
ended December 31, 1997. The Statement is the responsibility of management. Our
responsibility is to express an opinion on the 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 Statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statement. An audit also includes assessing
the accounting principles used and the significant estimates made by management,
as well as evaluating the overall Statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Current Report on Form 8-K of Associated Estates Realty
Corporation) as described in Note 2 to the Statement and is not intended to be a
complete presentation of the combined revenue and expenses of the certain
multifamily properties described in Note 1 to the Statement (the Acquired
Properties).
In our opinion, the Statement referred to above presents fairly, in all
material respects, the combined revenue and certain expenses for the Acquired
Properties for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
West Palm Beach, Florida
February 2, 1998
F-2
<PAGE> 10
ASSOCIATED ESTATES REALTY CORPORATION
MRT PROPERTIES
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR CERTAIN MULTIFAMILY PROPERTIES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Rental $8,085,927
Other 309,452
----------
8,395,379
Certain expenses
Personnel 878,468
Advertising 139,802
Utilities 619,541
Building and grounds repair and maintenance 689,041
Real estate taxes and insurance 931,824
Other operating 259,037
----------
3,517,713
----------
Revenue in excess of certain expenses $4,877,666
==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 11
ASSOCIATED ESTATES REALTY CORPORATION
MRT PROPERTIES
NOTES TO THE COMBINED STATEMENT
OF REVENUE AND CERTAIN EXPENSES
FOR CERTAIN MULTIFAMILY PROPERTIES
1. OPERATING PROPERTIES
The properties presented herein, referred to as the "MRT Properties,"
are summarized as follows:
Year
Property Location Suites Built
-------- -------- ------ -----
The Falls Apartments Duluth, Georgia 520 1986
Reflections Apartments Columbia, Maryland 184 1985
Cypress Shores Apartments Coconut Creek, Florida 300 1991
The combined statement of revenue and certain expenses include the
operating results of each of the MRT Properties detailed above for the year
ended December 31, 1997. The MRT Properties were purchased by Associated Estates
Realty Corporation (the "Company") on February 2, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined statement of revenue and certain expenses
(the "Statement") has been prepared on the accrual basis of accounting.
The accompanying Statement is not representative of the actual
operations for the period presented because certain expenses which may not be
comparable to the expenses to be incurred by the Company in the future
operations of the properties have been excluded. Expenses excluded consist of
depreciation on the building and improvements and amortization of organization
costs and other intangible assets, interest on debt and other general and
administrative expenses not directly related to the future operations of the MRT
Properties.
F-4
<PAGE> 12
ASSOCIATED ESTATES REALTY CORPORATION
MRT PROPERTIES
NOTES TO THE COMBINED STATEMENT
OF REVENUE AND CERTAIN EXPENSES
FOR CERTAIN MULTIFAMILY PROPERTIES - CONTINUED
INCOME RECOGNITION
Rental income attributable to residential operating leases is recorded
when due from tenants.
REPAIR AND MAINTENANCE
Expenditures for maintenance and repairs are charged to operations as
incurred. Betterments that improve or extend the life of the asset beyond its
original condition are capitalized.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred.
USE OF ESTIMATES
The preparation of the Statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the Statement and accompanying notes. Actual results
could differ from those estimates.
F-5
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Associated Estates Realty Corporation
We have audited the accompanying statement of revenue and certain
expenses of Country Club Apartments for the year ended December 31, 1997. This
historical statement is the responsibility of management. Our responsibility is
to express an opinion on this historical statement based upon 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 historical statement is free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the historical statement, assessing the
accounting principles used and the significant estimates made by management, as
well as evaluating the overall presentation of the historical statement. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying historical statement is prepared on the basis
described in Note 2, for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission (for inclusion in the Current Report
on Form 8-K of Associated Estates Realty Corporation) and is not intended to be
a complete presentation of the revenues and expenses of Country Club Apartments.
In our opinion, the historical statement referred to above presents
fairly, in all material respects, the revenue and certain expenses of Country
Club Apartments on the basis described in Note 2 for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
January 29, 1998
F-6
<PAGE> 14
ASSOCIATED ESTATES REALTY CORPORATION
COUNTRY CLUB APARTMENTS
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Rental income $2,162,691
Other income 45,184
----------
2,207,875
Certain expenses
Personnel 214,503
Advertising 54,431
Utilities 79,809
Building and grounds repair and maintenance 214,676
Real estate taxes and insurance 286,887
Other operating expenses 51,002
----------
901,308
----------
Revenue in excess of certain expenses $1,306,567
==========
The accompanying notes are an integral part of this financial statement.
F-7
<PAGE> 15
ASSOCIATED ESTATES REALTY CORPORATION
COUNTRY CLUB APARTMENTS
NOTES TO THE STATEMENT OF REVENUE AND CERTAIN EXPENSES
1. OPERATING PROPERTY
Country Club Apartments (the "Property") is a multifamily apartment
property containing 316 suites located in Toledo, Ohio. The Property was built
in 1989 and was acquired by Associated Estates Realty Corporation (the
"Company") on February 19, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statement of revenue and certain expenses have been
prepared on the accrual basis of accounting.
The accompanying financial statement is not representative of the
actual operations for the periods presented, because certain expenses which may
not be comparable to the expenses to be incurred by the Company in the future
operations of the properties have been excluded. Expenses excluded consist of
depreciation on the building and improvements and amortization of organization
costs and other intangible assets, interest expense and other general and
administrative expenses not directly related to the future operations of Country
Club Apartments.
INCOME RECOGNITION
Rental income attributable to residential operating leases is recorded
when due from tenants.
REPAIR AND MAINTENANCE
Expenditures for maintenance and repairs are charged to operations as
incurred. Betterments that improve or extend the life of the asset beyond its
original condition are capitalized. Costs incurred in connection with resident
turnover are charged to operations.
USE OF ESTIMATES
The preparation of the statement of revenue and certain expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect amounts reported in the Statement and
accompanying notes. Actual results could differ from those estimates.
F-8
<PAGE> 16
Report of Independent Certified Public Accountants
The Board of Directors and Shareholders
MIG Residential REIT, Inc.
We have audited the accompanying consolidated balance sheets of MIG
Residential REIT, Inc. (the Company) as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of MIG
Residential REIT, Inc. at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
West Palm Beach, Florida
January 28, 1998
F-9
<PAGE> 17
MIG RESIDENTIAL REIT, INC.
CONSOLIDATED BALANCE SHEETS
December 31
1997 1996
------------ ------------
ASSETS
Real estate, net $ 95,442,840 $ 75,829,988
Cash and cash equivalents 3,820,352 3,056,332
Restricted cash 373,863 345,452
Other assets 541,694 191,997
------------ ------------
Total assets $100,178,749 $ 79,423,769
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 704,791 $ 417,687
Security deposits payable and
other liabilities 482,313 459,357
Dividends payable 1,600,000 300,000
Note payable under line of credit 10,000,000 --
------------ ------------
12,787,104 1,177,044
Shareholders' equity:
Common stock:
Class A, par value $.001 per share-950,000
shares authorized, 89,467 and 85,260
subscribed, 89,467 and 78,974 issued and
outstanding at December 31, 1997 and 1996,
respectively 89 85
Class B, par value $.001 per
share-50,000 shares authorized,
25,000 shares issued and
outstanding at December 31, 1997
and 1996 25 25
Additional paid-in capital 87,391,531 84,564,615
------------ ------------
87,391,645 84,564,725
Subscriptions receivable, 6,286
shares subscribed, not issued at
December 31, 1996 -- (6,318,000)
------------ ------------
87,391,645 78,246,725
------------ ------------
Total liabilities and shareholders'
equity $100,178,749 $ 79,423,769
============ ============
See accompanying notes.
F-10
<PAGE> 18
MIG RESIDENTIAL REIT, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31
1997 1996 1995
----------- ---------- ----------
Revenue:
Rental $13,583,335 $7,573,032 $2,730,693
Interest 134,388 73,696 164,430
Other 412,058 193,896 53,422
----------- ---------- ----------
14,129,781 7,840,624 2,948,545
Expenses:
Depreciation 2,244,944 1,169,248 390,378
Real estate taxes and insurance 1,474,995 793,965 318,626
Salaries and employee benefits 1,488,730 727,493 261,135
Management fees, related parties 959,293 602,733 212,863
Repairs and maintenance 1,095,876 599,986 175,396
Utilities 722,229 311,708 99,321
Professional fees 273,196 146,837 49,808
Interest 712,238 -- --
Other 1,013,476 471,827 179,884
----------- ---------- ----------
9,984,977 4,823,797 1,687,411
----------- ---------- ----------
Net income $ 4,144,804 $3,016,827 $1,261,134
=========== ========== ==========
See accompanying notes.
F-11
<PAGE> 19
MIG RESIDENTIAL REIT, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------
CLASS A CLASS B ADDITIONAL
-------------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------------ ------------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 32,500 $33 -- $-- $ 32,499,967
Common stock subscribed 47,100 47 -- -- 47,099,953
Contributions from
subscribing shareholders -- -- -- -- --
Net income -- -- -- -- --
Proceeds from issuance of
common stock 196 -- 25,000 25 220,798
Distributions to
shareholders -- -- -- -- --
------ --- ------ --- ------------
Balance at December 31, 1995 79,796 80 25,000 25 79,820,718
Common stock subscribed 4,922 5 -- -- 4,999,995
Contributions from
subscribing shareholders -- -- -- -- --
Net income -- -- -- -- --
Proceeds from issuance of
common stock 542 -- -- -- 552,876
Dividends declared -- -- -- -- (808,974)
--- ------ --- ------------
Balance at December 31, 1996 85,260 85 25,000 25 84,564,615
Common stock subscribed 3,060 3 -- -- 3,114,997
Contributions from
subscribing shareholders -- -- -- -- --
Net income -- -- -- -- --
Proceeds from issuance of
common stock 1,147 1 -- -- 1,187,115
Dividends declared -- -- -- -- (1,475,196)
------ --- ------ --- ------------
Balance at December 31, 1997 89,467 $89 25,000 $25 $ 87,391,531
====== === ====== === ============
</TABLE>
<TABLE>
<CAPTION>
RETAINED SUBSCRIPTIONS
EARNINGS RECEIVABLE TOTAL
------------ ------------- ------------
<S> <C> <C> <C>
Balance at January 1, 1995 $ (21,376) $(32,500,000) $ (21,376)
Common stock subscribed -- (47,100,000) --
Contributions from
subscribing shareholders -- 34,154,000 34,154,000
Net income 1,261,134 -- 1,261,134
Proceeds from issuance of
common stock -- -- 220,823
Distributions to
shareholders (1,231,624) -- (1,231,624)
----------- ------------ ------------
Balance at December 31, 1995 8,134 (45,446,000) 34,382,957
Common stock subscribed -- (5,000,000) --
Contributions from
subscribing shareholders -- 44,128,000 44,128,000
Net income 3,016,827 -- 3,016,827
Proceeds from issuance of
common stock -- -- 552,876
Dividends declared (3,024,961) -- (3,833,935)
----------- ------------ ------------
Balance at December 31, 1996 -- (6,318,000) 78,246,725
Common stock subscribed -- (3,115,000) --
Contributions from
subscribing shareholders -- 9,433,000 9,433,000
Net income 4,144,804 -- 4,144,804
Proceeds from issuance of
common stock -- -- 1,187,116
Dividends declared (4,144,804) -- (5,620,000)
----------- ------------ ------------
Balance at December 31, 1997 $ -- $ -- $ 87,391,645
=========== ============ ============
</TABLE>
See accompanying notes.
F-12
<PAGE> 20
MIG RESIDENTIAL REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,144,804 $ 3,016,827 $ 1,261,134
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,244,944 1,169,248 390,378
Changes in operating assets and
liabilities:
Restricted cash (28,411) (175,326) (170,126)
Other assets (349,697) (78,662) (102,280)
Accounts payable and accrued expenses 287,104 64,083 353,604
Security deposits payable and other
liabilities 22,956 143,868 166,058
------------ ------------ ------------
Net cash provided by operating activities 6,321,700 4,140,038 1,898,768
INVESTING ACTIVITIES
Acquisition of operating real estate (20,386,593) (42,752,360) (33,381,756)
Payments for land and building improvements
and furniture and equipment (1,471,203) (783,928) (354,570)
------------ ------------ ------------
Net cash used in investing activities (21,857,796) (43,536,288) (33,736,326)
FINANCING ACTIVITIES
Contributions from subscribing shareholders 9,433,000 44,128,000 34,154,000
Proceeds from issuance of common stock 1,187,116 552,876 220,823
Dividends paid to shareholders (4,320,000) (3,533,935) (1,231,524)
Proceeds from line of credit 16,850,000 -- --
Repayments on line of credit (6,850,000) -- --
------------ ------------ ------------
Net cash provided by financing activities 16,300,116 41,146,941 33,143,199
------------ ------------ ------------
Increase in cash and cash equivalents 764,020 1,750,691 1,305,641
Cash and cash equivalents at beginning of
year 3,056,332 1,305,641 --
------------ ------------ ------------
Cash and cash equivalents at end of year $ 3,820,352 $ 3,056,332 $ 1,305,641
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 680,808 $ -- $ --
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Accrued but unpaid dividends $ 1,600,000 $ 300,000 $ --
============ ============ ============
</TABLE>
The consolidated statement of cash flows for the year ended December
31, 1995 excludes the effects of certain noncash investing activities relating
to work holdbacks pursuant to certain purchase agreements, totaling $117,000,
which are included in the cost of real estate acquired and security deposits
payable and other liabilities in the consolidated balance sheet at December 31,
1995.
F-13
<PAGE> 21
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
MIG Residential REIT, Inc. (the Company) is a corporation organized in
May 1993 under the laws of the State of Maryland for the purpose of acquiring
and managing a real estate portfolio consisting principally of operating
residential apartment complexes throughout the United States. The Company has
entered into an agreement with MIG Realty Advisors, Inc. (MIGRA), an entity
affiliated with the Company by means of common management, which functions as
its investment advisor.
CONSOLIDATION POLICY
The consolidated financial statements include the accounts of the
Company and eight entities which own operating residential apartment complexes,
as discussed in Note 2. The Company has a 100% ownership interest in each of
these entities. All significant transactions and accounts between the Company
and the investee entities have been eliminated in consolidation.
REAL ESTATE
Real estate is carried at cost.
Costs directly related to the acquisition, renovation or improvement of
real estate are capitalized. Costs incurred in connection with the pursuit of
unsuccessful acquisitions are expensed at the time the acquisition is abandoned.
Repairs and maintenance are expensed as incurred.
The Company provides for depreciation using the straight-line method.
Buildings and improvements are being depreciated over their estimated useful
lives of 40 years. Land improvements, and furniture and equipment are
depreciated over their estimated useful lives which range from five to seven
years.
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents and restricted cash include demand deposit
accounts and other highly liquid investments with original maturity dates at
date of purchase of three months or less. The Company minimizes its credit risk
associated with cash and cash equivalents and restricted cash by utilizing high
credit quality financial institutions.
F-14
<PAGE> 22
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Restricted cash consists principally of cash restricted for the
repayment of tenant security deposits.
LEASING ACTIVITIES
Rental income consists of lease payments earned from tenants under
lease agreements with terms of one year or less. Rental income is recorded on
the accrual method of accounting for financial reporting and tax purposes.
Costs directly related to the leasing of rental units, including
commissions, are expensed as incurred.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising costs
included in other expenses in the consolidated statements of income for the year
ended December 31, 1997, 1996 and 1995 total approximately $408,000, $127,000
and $40,000, respectively.
INCOME TAXES
The Company has elected to be taxed as a real estate investment trust
(REIT) under the Internal Revenue Code (the IRC) of 1986, as amended. As a REIT,
the Company generally is taxed as a C corporation, the primary differences being
that the Company will be allowed a deduction from taxable income for dividends
paid to shareholders, and an excise tax may be imposed in the event dividend
distributions are insufficient in any fiscal year. Accordingly, no provision has
been made for federal or state income taxes in the accompanying consolidated
financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents and
F-15
<PAGE> 23
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
restricted cash approximates fair value. The carrying amount of note payable
under the line of credit, which bears interest at a variable rate (see Note 3),
also approximates fair value.
2. REAL ESTATE
The Company's investments as of December 31, 1997 consist of the
following:
<TABLE>
<CAPTION>
Date Property
Entity Name Nature (Location) of Property Acquired
----------- ----------------------------- --------
<S> <C> <C>
MIG REIT/ Morgan Place Apartments, 186-unit March 1995
Morgan Place, Inc. residential apartment complex
constructed in 1989
(Atlanta, Georgia)
MIG REIT/Annen Annen Woods Apartments, 132- unit April 1995
Woods, Inc. residential apartment complex
constructed in 1987
(Pikesville, Maryland)
MIG Peachtree Peachtree Apartments, 156-unit August 1995
Corporation residential apartment complex
constructed in 1989
(Chesterfield, Missouri)
MIG Fleetwood, Ltd. The Fleetwood Apartments, 104-unit September 1995
residential apartment complex
constructed in 1993
(Houston, Texas)
MIG REIT Falls, Windsor Falls Apartments, 276-unit March, 1996
L.L.C. residential apartment complex
constructed in 1994
(Raleigh, North Carolina)
MIG 20th & Campbell 20th & Campbell Apartments, 204-unit July 1996
Corporation residential apartment complex
constructed in 1989
(Phoenix, Arizona)
MIG Desert Oasis Desert Oasis Apartments, 320-unit December 1996
Corporation residential apartment complex
constructed in 1990
(Palm Desert, California)
MIG Hampton Hampton Point Apartments, 352-unit February, 1997
Corporation residential apartment complex
constructed in 1986
(Silver Spring, Maryland)
</TABLE>
The following summarizes the net capitalized cost of the
Company's investments in operating real estate through the
F-16
<PAGE> 24
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
entities listed above at December 31:
1997 1996
-------------- --------------
Morgan Place Apartments $ 9,590,710 $ 9,760,659
Annen Woods Apartments 8,235,534 8,288,591
Peachtree Apartments 8,618,887 8,725,625
The Fleetwood Apartments 6,352,652 6,486,269
Windsor Falls Apartments 16,292,184 16,622,844
20th & Campbell Apartments 12,393,041 12,463,876
Desert Oasis Apartments 13,282,864 13,482,124
Hampton Point Apartments 20,676,968 -
-------------- --------------
$ 95,442,840 $ 75,829,988
============== ==============
Operating real estate held for income production and long-term
appreciation at December 31 consists of the following:
1997 1996
-------------- --------------
Land $ 15,758,229 $ 13,409,065
Land improvements 245,645 153,190
Buildings and improvements 81,495,608 63,085,222
Furniture and equipment 1,747,928 742,137
-------------- --------------
99,247,410 77,389,614
Accumulated depreciation (3,804,570) (1,559,626)
-------------- --------------
$ 95,442,840 $ 75,829,988
============== ==============
3. NOTE PAYABLE UNDER LINE OF CREDIT
During 1997, the Company entered into a revolving line-of-credit
agreement (the "LOC") with a bank which provides unsecured maximum aggregate
borrowings equal to the lesser of $20,000,000 or 25% of the aggregate value of
the Properties, as defined. Under the terms of the LOC, the Company is required
to maintain a compensating balance of not less than an annual average of
$3,000,000 in depository accounts with the bank during the term of the LOC in
support of both outstanding borrowings and the assurance of future credit
availability.
Advances under the LOC bear interest at the prime rate minus 1.00% or
LIBOR plus 1.25%, as elected by the Company for each Interest Period, as
defined. Interest is payable monthly. The effective rate at December 31, 1997 is
7.21%. The Company is also charged a standby fee of .05% of the average of the
maximum loan amount not drawn in each quarter during the term. Interest and
standby fees paid on the above debt totaled approximately
F-17
<PAGE> 25
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
$693,000 for the year ended December 31, 1997.
Outstanding principal amounts under the LOC are payable in three equal
semiannual payments beginning on the first day of the 16th month following the
advance date. The minimum annual maturity of advances under the LOC as of
December 31, 1997 are: 1998-$1,233,000; 1999-$6,666,666; 2000-$2,100,334.
Generally, advances under the LOC may be prepaid at any time prior to maturity
without penalty. On February 19, 2000, all outstanding advances become due and
payable, including interest accrued thereon.
4. DIVIDENDS
The Company's current policy is to declare and pay dividends to
shareholders based upon funds from operations and aggregating annually at least
95% of its taxable income.
For federal income tax purposes, dividends declared and paid totaled
approximately 133%, 127% and 100% of taxable income for the years ended December
31, 1997, 1996 and 1995, respectively.
In determining taxable income, costs incurred are capitalized or
expensed in accordance with the treatment appropriate for federal income tax
purposes rather than in accordance with generally accepted accounting principles
(GAAP). The principal differences between taxable income and net income relate
to methods used to calculate and capitalize acquisition and start-up costs, the
useful lives used to depreciate such costs and the recognition of revenue and
expense for certain items which are temporarily deferred under GAAP.
The reconciliation of net income to taxable income for the year ended
December 31 is as follows:
F-18
<PAGE> 26
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1997 1996 1995
------------ ----------- -----------
Net income $ 4,144,804 $ 3,016,827 $ 1,261,134
Book over (under) tax
depreciation 104,640 (25,186) (5,138)
Prepaid expenses (36,118) 12,869 (22,213)
Amortization of capitalized
start-up costs (8,574) (6,486) (6,486)
Deferred rental income and
other, net 23,374 22,142 4,327
----------- ----------- -----------
Taxable income $ 4,228,126 $ 3,020,166 $ 1,231,624
=========== =========== ===========
The Company's federal income tax returns are subject to examination by
taxing authorities. Because the application of tax laws and regulations to many
types of transactions is susceptible to varying interpretations, amounts
reported in the income tax returns could be changed at a later date upon final
determinations by taxing authorities.
5. SHAREHOLDERS' EQUITY
OWNERSHIP RESTRICTIONS
For the Company to continue to qualify as a REIT under the IRC, as
amended, not more than 50% in value of its outstanding capital shares may be
owned by five or fewer individuals at any time during the last half of the
Company's taxable year. For this purpose, pursuant to the Omnibus Budget
Reconciliation Act of 1993, a pension plan qualifying under IRC Section 401(a)
is not considered an individual shareholder, rather each beneficiary of the
pension plan is considered to own a proportionate amount of the Company's shares
held by the pension plan. The Company's Articles of Incorporation restrict the
beneficial ownership of the Company's outstanding shares by an individual, or
individuals acting as a group, to 9.9% in value of the Company's outstanding
shares. The purpose of this provision is to assist in protecting and preserving
the Company's REIT status.
Common shares owned by an individual or group of individuals in excess
of these limits are subject to redemption by the Company. The provision does not
apply where a majority of the Board of Directors, in its sole discretion, waives
such restriction after determining that the eligibility of the Company to
continue qualifying as a REIT for federal income tax purposes
F-19
<PAGE> 27
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
will not be jeopardized or the disqualification of the Company as
a REIT is advantageous to the shareholders.
CAPITAL CALLS
During 1997, 1996 and 1995, capital calls aggregating $9,433,000,
$44,128,000 and $34,154,000, respectively, were made to the subscribing
shareholders of the Company, the proceeds of which have been received.
REDEMPTION
At the discretion of the Board of Directors of the Company, the Class B
common stock may be redeemed in whole by the Company, at any time, upon at least
15 days prior written notice to the holders of record and upon paying to the
holders of record cash equal to the net asset value of the shares, as defined,
plus all declared and unpaid dividends.
6. MANAGEMENT FEES
In September 1994, the Company entered into an agreement with MIGRA, an
entity affiliated with the Company by means of common management, to provide
investment advisory services (the Advisor Agreement), including both strategic
and day-to-day management of the Company.
The Advisor Agreement requires the Company to pay MIGRA a quarterly
asset management fee equal to 7% of cash available for distribution, as defined.
During 1997, 1996 and 1995, the Company incurred asset management fee expense of
approximately $419,000, $297,000 and $102,000, respectively, and paid asset
management fees of approximately $417,000, $242,000 and $58,000, respectively,
pursuant to the Advisor Agreement. Included in accounts payable and accrued
expenses at December 31, 1997 and 1996 are accrued but unpaid asset management
fees of approximately $101,000 and $99,000, respectively.
The Advisor Agreement also stipulates that MIGRA is entitled to receive
an acquisition fee equal to .75% of the cost of real estate acquired, as
defined, upon the closing of each property acquired by the Company or its
subsidiaries. Acquisition fees paid to MIGRA and capitalized in the basis of the
real estate of the properties acquired during 1997 and 1996, totaled
F-20
<PAGE> 28
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
approximately $152,000 and $319,000, respectively.
In addition to the asset management fee and acquisition fees, the
Advisor Agreement also entitles MIGRA to receive an incentive management fee
equal to 10% of the difference between the net sales proceeds resulting from the
disposition of an investment and the amount necessary at the time of disposition
to provide the Company with an annual 4% real rate of return over the holding
period of the investment, as defined.
The Advisor Agreement shall continue to be effective through the
liquidation and termination of the Company unless earlier terminated upon the
vote of 66-2/3% of the aggregate voting power of the then outstanding shares of
common stock of the Company.
Each of the Company's consolidated entities had property management
agreements with MIG Management Services (MMS), an entity affiliated by means of
common ownership. The agreements entitle MMS to a monthly fee equal to the
lesser of (a) prevailing market rates, or (b) 4% of gross receipts, as defined,
for performance of property management services. During 1997, 1996 and 1995, the
Company incurred property management fee expense of approximately $540,000,
$306,000 and $111,000, respectively, and paid property management fees of
approximately $569,000, $293,000 and $95,000, respectively.
7. CONTINGENCIES
The Company is subject to environmental regulations related to the
ownership, operation and acquisition of real estate. As part of its due
diligence procedures, the Company has conducted environmental assessments on
each property prior to acquisition. The Company is not aware of any
environmental condition on any of its properties which is likely to have a
material adverse effect on the Company's consolidated financial position or
results of operations.
8. SUBSEQUENT EVENT
On January 28, 1998, the Company entered into agreements to sell all of
its real estate assets to Associated Estates Realty Corporation (AERC). The
aggregate sale price is $108,500,000, consisting of a combination of cash and
AERC common shares. Among other things, the sale agreements provide for an
increase
F-21
<PAGE> 29
MIG RESIDENTIAL REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
of the aggregate sale price up to approximately 6% contingent upon the trading
prices of AERC's common shares, as defined. Upon consummation of the sale,
management of the Company anticipate that the proceeds will be used to settle
any remaining liabilities of the Company, including its obligation under the
LOC, and the balance will be distributed to its shareholders. Thereafter, it is
anticipated that management will commence the liquidation and dissolution of the
Company.
F-22
<PAGE> 30
Report of Independent Certified Public Accountants
Shareholders
MIG Companies
We have audited the accompanying combined balance sheet of MIG
Companies (the Company) as described in Note 1 as of December 31, 1997, and the
related combined statements of operations, shareholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present
fairly, in all material respects, the combined financial position of MIG
Companies at December 31, 1997, and the combined results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
West Palm Beach, Florida
February 20, 1998
F-23
<PAGE> 31
MIG COMPANIES
COMBINED BALANCE SHEETS
DECEMBER 31,
1997 1996
------------ -------------
ASSETS (UNAUDITED)
Cash and cash equivalents $ 237,433 $ 401,830
Construction loans receivable, net of
allowance for loan losses and
unamortized loan fees of $28,951 -- 2,251,099
Funds held in escrow 4,359,947 6,394,102
Due from affiliates 2,888,469 1,063,842
Other receivables 1,317,256 1,515,588
Other receivables - affiliates 103,443 --
Investment in unconsolidated entities -- 134,836
Property and equipment:
Furniture and equipment 1,871,321 1,790,459
Leasehold improvements 27,926 27,926
------------ ------------
1,899,247 1,818,385
Less accumulated depreciation and
amortization (1,482,979) (1,318,217)
------------ ------------
416,268 500,168
Prepaid expenses and other assets 437,730 456,271
------------ ------------
Total assets $ 9,760,546 $ 12,717,736
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Construction loans payable $ -- $ 1,207,390
Construction loans payable to affiliates -- 1,072,661
Escrow funds payable 4,359,646 6,396,919
Lines of credit 610,000 1,000
Accounts payable and accrued expenses 2,167,348 1,883,896
Accrued interest payable -- 17,148
Due to affiliates 263,185 11,665
Deficit capital balances of unconsoli-
dated general partnership interests 82,515 55,738
------------ ------------
7,482,694 10,646,417
Minority interests 168,970 386,634
Shareholders' equity:
Common stock 19,085 19,085
Additional paid-in capital 656,094 656,094
Notes and other amounts due from
shareholders -- (2,561,417)
Retained earnings 1,433,703 3,570,923
------------ ------------
2,108,882 1,684,685
------------ ------------
Total liabilities and shareholders' equity $ 9,760,546 $ 12,717,736
============ ============
See accompanying notes.
F-24
<PAGE> 32
MIG COMPANIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
1997 1996 1995
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue:
Acquisition, management and
disposition fees from affiliates $ 2,640,721 $ 3,514,614 $ 3,508,085
Acquisition, management and
disposition fees 6,461,682 5,827,709 3,446,588
Servicing and administrative fees 1,098,043 1,592,130 2,025,363
Interest 42,982 442,708 859,836
Origination fees -- 142,085 574,398
Other 380,245 458,923 619,358
------------ ------------ ------------
10,623,673 11,978,169 11,033,628
Expenses:
Salaries, wages and employee benefits 6,775,119 7,352,906 6,793,253
Interest 244,901 274,329 655,654
Travel, meetings and seminars 612,045 905,402 849,453
Occupancy 744,163 766,953 708,502
Professional fees 691,517 513,176 546,162
Stationery, postage and office supplies 229,599 338,640 335,282
Depreciation and amortization 166,382 185,175 341,454
Utilities 177,466 219,678 183,722
Insurance 231,257 213,563 173,592
Costs associated with reorganization
plan 1,290,777 -- --
Other 687,485 574,257 459,303
------------ ------------ ------------
11,850,711 11,344,079 11,046,377
------------ ------------ ------------
(Loss) income before equity in net
income of unconsolidated entities and
minority interests in net loss
(income) of consolidated subsidiaries (1,227,038) 634,090 (12,749)
Equity in net income of unconsolidated
entities 73,235 49,212 319,732
Minority interests in net loss (income)
of consolidated subsidiaries 206,145 (102,133) 9,465
------------ ------------ ------------
Net (loss) income $ (947,658) $ 581,169 $ 316,448
============ ============ ============
</TABLE>
See accompanying notes.
F-25
<PAGE> 33
MIG COMPANIES
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES AND
OTHER
ADDITIONAL AMOUNTS TOTAL
COMMON PAID-IN RETAINED DUE FROM SHAREHOLDERS'
STOCK CAPITAL EARNINGS DISTRIBUTIONS SHAREHOLDERS EQUITY
----- ------- -------- ------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995
(unaudited) $ 85 $648,889 $ 2,673,306 $ -- $(1,444,005) $ 2,178,275
Net income (unaudited) -- -- 316,448 -- -- 316,448
Issuance of common stock (unaudited) 17,000 -- -- -- -- 17,000
Accrued preferential returns
(unaudited) -- 2,891 -- -- -- 2,891
Additions to notes and other amounts
due from shareholders (unaudited) -- -- -- -- (806,104) (806,104)
------- -------- ----------- ----------- ----------- -----------
Balance at December 31, 1995
(unaudited) 17,085 651,780 2,989,754 -- (1,950,109) 1,708,510
Net income (unaudited) -- -- 581,169 -- -- 581,169
Issuance of common stock (unaudited) 2,000 -- -- -- -- 2,000
Accrued preferential returns
(unaudited) -- 4,314 -- -- -- 4,314
Additions to notes and other amounts
due from shareholders (unaudited) -- -- -- -- (611,308) (611,308)
------- -------- ----------- ----------- ----------- -----------
Balance at December 31, 1996
(unaudited) 19,085 656,094 3,570,923 -- (2,561,417) 1,684,685
Net loss -- -- (947,658) -- -- (947,658)
Distributions -- -- -- (1,189,562) 1,189,562 --
Repayments to notes and
other amounts due from
shareholders -- -- -- -- 1,371,855 1,371,855
------- -------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 $19,085 $656,094 $ 2,623,265 $(1,189,562) $ -- $ 2,108,882
======= ======== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-26
<PAGE> 34
MIG COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
1997 1996 1995
------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) or income $ (947,658) $ 581,169 $ 316,448
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization 166,382 185,175 341,454
Net deferred loan fees capitalized -- (23,663) (53,842)
Provision for bad debts - affiliate 170,280 -- --
Equity in net income of unconsolidated
entities (73,235) (49,212) (319,732)
Minority interests in net (loss) income
of consolidated subsidiaries (206,145) 102,133 (9,465)
Other (24,075) 29,617 (67,769)
Changes in operating assets and
liabilities:
Funds held in escrow 2,034,155 (2,252,437) (2,896,440)
Due from affiliates (1,994,907) (433,152) (59,751)
Notes and other amounts due from
shareholders -- (59,000) 38,000
Other receivables 80,462 (633,742) (921,935)
Accrued interest receivable 14,425 12,030 52,574
Prepaid expenses and other assets 18,541 (39,379) 149,158
Escrow funds payable (2,037,273) 2,253,970 2,895,787
Due to affiliates 251,520 -- --
Accounts payable and accrued expenses 283,452 624,530 316,113
Accrued interest payable (17,148) (14,097) (64,398)
----------- ------------ ------------
Net cash (used in) provided by operating
activities (2,281,222) 283,942 (283,798)
INVESTING ACTIVITIES
Purchase of property and equipment (87,358) (188,475) (211,781)
Construction loan commitments funds -- (9,838,236) (19,420,262)
Principal collected on construction loans
receivable -- 11,974,430 26,984,006
Loans to shareholders -- (618,142) (978,670)
Distributions from unconsolidated entities 234,848 24,272 592,793
Contribution to unconsolidated entities -- -- (5,199)
Principal collected due from shareholders 1,371,855 -- --
----------- ------------ ------------
Net cash provided by investing activities 1,519,345 1,353,849 6,960,887
FINANCING ACTIVITIES
Proceeds from construction loan borrowings -- 9,919,616 18,757,226
Payments on construction loan payable -- (11,974,430) (26,352,276)
Proceeds from lines of credit 2,911,972 6,783,611 5,608,410
Repayments on lines of credit (2,302,972) (6,786,161) (5,771,527)
Distributions to minority interests (11,520) (17,520) (68,400)
----------- ------------ ------------
Net cash provided by (used in) financing
activities 597,480 (2,074,884) (7,826,567)
----------- ------------ ------------
Decrease in cash and cash equivalents (164,397) (437,093) (1,149,478)
Cash and cash equivalents at beginning
of year 401,830 838,923 1,988,401
----------- ------------ ------------
Cash and cash equivalents at end of year $ 237,433 $ 401,830 $ 838,923
=========== ============ ============
</TABLE>
F-27
<PAGE> 35
MIG COMPANIES
COMBINED STATEMENT OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid for the year ended December 31, 1997 was $4,300,
$288,426 (unaudited) in 1996 and $720,052 (unaudited) in 1995. Income taxes paid
for the year ended 1995 were $11,013 (unaudited).
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
During 1997, the Company recorded a noncash distribution of
approximately $1,190,000 with a corresponding reduction in due from affiliates.
During 1997, the Company transferred the construction loans receivable
and payable to an affiliate totaling approximately $2,300,000.
In 1995, the Company exchanged a receivable for management fees of
$352,540 (unaudited) for an investment in an unconsolidated entity of the same
amount.
During 1996, the Company recorded a non cash contribution from a
minority interest of approximately $238,000 (unaudited). In connection
therewith, the Company recorded an increase in minority interest and a
corresponding reduction in due to affiliates.
See accompanying notes.
F-28
<PAGE> 36
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND COMBINATION POLICY
The combined financial statements include the accounts of MIG Realty
Advisors, Inc. ("MIGRA") and its consolidated investee partnerships and the
accounts of MIG Management Services ("MMS"), a group of 19 corporations, which
are affiliated with MIGRA through common ownership.
The combined financial statements have been prepared as a result of the
pending acquisition of MIGRA and MMS by Associated Estates Realty Corporation
("AERC").
The financial information for the years ended December 31, 1996 and
1995 is unaudited; however, in the opinion of the Company, the financial
information includes all adjustments necessary for a fair presentation of the
combined financial position at December 31, 1996 and the combined results of
operations and cash flows for the years ended December 31, 1996 and 1995.
MIGRA is registered with the U.S. Securities and Exchange Commission as
an investment advisor to corporate and municipal pension systems. The Company
has a 75% interest in the limited partnership known as Mortgage Investors Group,
Ltd. ("MIG Ltd."), a Florida limited partnership, and acts as its managing
general partner. MIG Ltd. is a registered investment advisor and also functions
as a mortgage banker and as a real estate advisor to municipal pension systems.
MIG Ltd. recognizes revenue primarily from real estate acquisition and
disposition, loan origination and consultation, debt servicing, asset management
and construction lending activities. MIG Ltd. earns the majority of its debt
servicing fee revenue from two of its pension fund clients.
MIGRA also has a 40% interest as a general partner in and effectively
controls Stonemark Investor Services ("Stonemark"), a general partnership. The
other general partner of Stonemark is an unrelated entity. Stonemark functions
as the investment manager for Stonemark Equity Trust, an entity that holds a
real estate investment and is related to the Company by means of common
management.
MIG Realty, Inc., an entity related to MIGRA by means of
F-29
<PAGE> 37
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
common ownership, is a 10% general partner in MIG Ltd. The
limited partner is an unrelated corporation.
The corporations which comprise MMS corporations are as follows: MIG
Management Services of Florida Inc., MIG Management of Georgia Inc., MIG
Management Services of Pennsylvania Inc., MIG Management Services of Maryland
Inc., MIG Management Services of Virginia Inc., MIG Management Services of North
Carolina Inc., MIG Management Services of Michigan Inc., MIG Management Services
of Texas Inc., MIG Management Services of Illinois Inc., MIG Management Services
of Ohio Inc., MIG Management Services of Minnesota Inc., MIG Management Services
of Oklahoma, Inc., MIG Management Services of Missouri Inc., MIG Management
Services of California Inc., MIG Management Services of Washington Inc., MIG
Management Services of Arizona Inc., MIG Management Services of Colorado Inc.,
MIG Management Services of New Mexico Inc., and MIG Management Services of Utah
Inc. These corporations primarily provide property management services to owners
of multifamily properties.
MIGRA and its consolidated partnerships and MMS are collectively
referred to hereinafter in these combined financial statements as MIG Companies
or the Company. All significant intercompany transactions and balances have been
eliminated upon combination.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation of furniture and
equipment is provided using the straight-line method over the estimated useful
lives of the assets. Asset lives range from three to five years. Leasehold
improvements are being amortized over the shorter of the estimated useful lives
of the assets or the life of the related leases using the straight-line method.
INCOME TAXES
MIGRA and MMS operate as subchapter S corporations under the Internal
Revenue Code. MIG Ltd. and Stonemark are each partnerships. The shareholders of
MIGRA and MMS and the partners of MIG Ltd. and Stonemark include in their own
income tax returns the income or loss of MIGRA, MIG Ltd., Stonemark and MMS,
respectively. Accordingly, none of these entities in the combined financial
statements are subject to income taxes and no income tax provision has been
provided in the accompanying
F-30
<PAGE> 38
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
combined financial statements.
REVENUE RECOGNITION
Acquisition, management and disposition fees from affiliates, interest
income and other fees are recognized when the related services are performed and
the earnings process is complete. Servicing fee income, related to loans
serviced on behalf of the municipal pension systems, is recognized when earned.
CASH AND CASH EQUIVALENTS
For purposes of the combined statement of cash flows, cash and cash
equivalents include demand deposit accounts and securities purchased from
financial institutions under agreements to resell with original maturity dates
of three months or less when purchased. The Company minimizes the credit risk
associated with cash and cash equivalents by placing its temporary cash
investments with high credit quality financial institutions and by investing in
temporary cash investments which mature in 90 days.
INCOME AND EXPENSE ALLOCATIONS
The Company's shareholders, through common ownership and/or management,
control several affiliated companies. At the discretion of management and the
shareholders of the Company and its affiliated companies, certain items of
income have been allocated to affiliates based on their estimates of the value
of the services rendered by the affiliates. In addition, certain items of
expense have been allocated to affiliates based on their estimates of the
expenses incurred by the affiliates. Accordingly, the accompanying combined
financial statements do not necessarily represent the financial position or
results of operations that would result if the Company operated on an autonomous
basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
F-31
<PAGE> 39
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
2. FUNDS HELD IN ESCROW
The majority of escrow funds shown on the combined balance sheet as
funds held in escrow and as escrow funds payable represent funds held by the
Company primarily for the payment of operating expenses associated with
properties managed by the Company on behalf of its pension fund clients.
3. PENSION AND PROFIT SHARING PLAN AND OTHER
The Company has a 401(k) plan which allows participants to make
tax-deferred contributions to several alternative investment funds. The Company
is also permitted to contribute an amount determined at the discretion of the
Board of Directors to the 401(k) plan. The Company made contributions of $17,000
to this plan during 1997.
Effective January 1, 1995, the Company terminated its defined
contribution pension plan (the Plan) for eligible employees. In connection
therewith, the Company paid its liability to the Plan of approximately $108,000
(unaudited) in September 1995.
F-32
<PAGE> 40
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
4. LINES OF CREDIT
Available lines of credit and amounts outstanding at December 31, 1997
are as follows:
Unsecured line of credit ($500,000 maximum) payable
to a bank, interest accrues at prime (8.5% at
December 31, 1997), expires on June 30, 1998 $219,000
Unsecured line of credit ($500,000 maximum) payable
to a bank, interest accrues at prime (8.5% at
December 31, 1997), expires on June 30, 1998 391,000
Line of credit ($500,000 maximum) payable to a bank,
interest accrues at prime plus 1% (9.5% at December
31, 1997), expires on October 31, 1998, secured by
life insurance policies on certain shareholders of
MIG Ltd.'s general partners and all furniture and
equipment of MIG Ltd. -
Line of credit ($500,000 maximum) payable to a bank,
interest accrues at prime plus 2%(10.50% at December
31, 1997), expires on May 31, 2000, secured by life
insurance policies on certain shareholders of MIG
Ltd.'s general partners. -
--------
$610,000
========
5. LEASES
The Company occupies certain facilities under long-term leases. These
leases generally are renewable and provide for the payment of real estate taxes
and certain other occupancy expenses. The lease for one facility provides for
escalations based on changes in the Consumer Price Index. In addition, the
Company leases office equipment from an entity owned by an existing and a former
shareholder of the Company and leases office space from an entity affiliated
with the Company by means of common management.
F-33
<PAGE> 41
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
Minimum rental commitments under these noncancelable operating leases
at December 31, 1997 are as follows:
FACILITIES EQUIPMENT TOTAL
---------- --------- -----
Year ending December 31, 1998 $358,657 $ 50,726 $409,383
1999 252,546 30,958 283,504
2000 27,008 25,883 52,891
-------- -------- --------
$638,211 $107,567 $745,778
======== ======== ========
Rent expense for the year ended December 31, 1997 was approximately
$575,000 including approximately $27,000 incurred on the related party leases.
6. OTHER RELATED PARTY TRANSACTIONS
The Company had approximately $425,000, $2,429,000 (unaudited) and
$1,873,000 (unaudited) in unsecured notes receivable from shareholders at
December 31, 1997, December 31, 1996 and December 31, 1995, respectively. The
notes bear interest at the prime rate (8.5% at December 31, 1997) and are
payable on demand. There was approximately $10,000, $136,000 (unaudited) and
$77,000 (unaudited) in accrued interest related to these notes at December 31,
1997, December 31, 1996 and December 31, 1995, respectively. Interest of
$60,000, $126,000 (unaudited) and $103,000 (unaudited) related to these notes
was included in income during 1997, 1996 and 1995, respectively. Based on
historical practices, some or all of the notes receivable and accrued interest
due from shareholders could be distributed to the shareholders at a future date.
Accordingly, these notes and other amounts due from shareholders are included in
shareholder' equity on the combined statements of shareholders' equity for the
year ended December 31, 1996 and 1995.
The Company had approximately $274,000 in notes payable to a
shareholder at December 31, 1997. The notes bear interest at 10% and are payable
on demand. There was approximately $23,000 in accrued interest related to these
notes at December 31, 1997. Interest of $23,000 related to these notes was
included in expense during 1997. Amounts are shown net in 1997 and are included
in due from affiliates on the accompanying balance sheet.
The Company had approximately $2,900,000 and $1,064,000
F-34
<PAGE> 42
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(unaudited) of advances due from entities affiliated by means of common
ownership or management at December 31, 1997 and 1996, respectively. These
amounts are included in due from affiliates and officer on the combined balance
sheets. The amounts due from entities affiliated by means of common ownership or
management bear no interest and have no stated repayment terms. The amount due
from an officer of the Company (approximately $324,000 (unaudited) at December
31, 1996 bears interest at the prime rate (8.25% at December 31, 1996) and is
payable on demand. Netted against due from affiliates and other is approximately
$671,000 (unaudited) of amounts due to certain affiliates under common control
at December 31, 1996. These amounts are non-interest bearing and have no stated
repayment terms.
The Company had approximately $260,000 and $12,000 (unaudited) of
amounts due to certain affiliates under common control at December 31, 1997 and
1996, respectively . These amounts are non-interest bearing and have no stated
repayment terms. In addition, the Company paid expenses of approximately
$170,000 on behalf of an affiliate for which it received no reimbursement. The
Company received expense reimbursements of $104,000 (unaudited) during 1996 and
1995 from affiliates for expenses incurred by the Company on behalf of the
affiliates. These reimbursements are included in other revenue on the
accompanying combined statements of operations.
During 1997, a majority shareholder sold his stock in MIGRA, MMS and
other affiliates to an existing shareholder. As part of the separation, the
Company entered into a severance agreement whereby the former shareholder would
receive certain benefits over a three year period. The total costs of this
severance package is approximately $1,200,000 and is included in salaries, wages
and employee benefits on the accompanying combined statement of operations. In
addition, the Company incurred approximately $400,000 related to severance
agreements associated with other employees which is included in salaries, wages
and employee benefits on the accompanying combined statement of operations.
The Company had construction loans payable to the shareholder of a
minority interest limited partner in MIG Ltd. of approximately $1,073,000
(unaudited) and $3,314,000, (unaudited) and approximately $7,000 (unaudited) in
related accrued interest at December 31, 1996. Interest related to these loans
of approximately $117,000 (unaudited) and $328,000 (unaudited) was incurred
during 1996 and 1995, respectively. These amounts are
F-35
<PAGE> 43
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
included in construction loans payable to affiliates on the
combined balance sheet.
The Company earned approximately $700,000 $881,000 (unaudited) and
$1,197,000 (unaudited) in servicing fee revenue from affiliates during 1997,
1996 and 1995, respectively.
F-36
<PAGE> 44
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
7. YEAR 2000 (UNAUDITED)
The Company has assessed its computer system's ability to function
properly with respect to the dates in the year 2000 and thereafter. The Company
does not believe that the cost of ensuring its systems are year 2000 compliant
will be significant or that the year 2000 issue will pose significant
operational problems.
8. COSTS ASSOCIATED WITH REORGANIZATION PLAN
During 1997, the Company initiated a reorganization plan. The costs
associated with these activities totaling approximately $1,291,000 have been
charged to expense in the accompanying combined statement of operations.
9. SHAREHOLDERS' EQUITY
The combined shareholders' equity at December 31, 1997 consists of the
following:
MIGRA MMS TOTAL
----- --- -----
Common stock $ 85 $ 19,000 $ 19,085
Additional paid-in capital 656,094 -- 656,094
Retained earnings 1,323,016 110,687 1,433,703
---------- ---------- ----------
$1,979,195 $ 129,687 $2,108,882
========== ========== ==========
The combined shareholders' equity at December 31, 1996 consists of the
following:
MIGRA MMS TOTAL
----- --- -----
(unaudited) (unaudited) (unaudited)
Common stock $ 85 $ 19,000 $ 19,085
Additional paid-in capital 656,094 -- 656,094
Notes and other amounts
due from shareholders (2,561,417) -- (2,561,417)
Retained earnings 3,460,235 110,688 3,570,923
----------- ---------- -----------
$ 1,554,997 $ 129,688 $ 1,684,685
=========== ========== ===========
F-37
<PAGE> 45
MIG COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
The common stock of MIGRA and each of the 19 MMS corporations has a par
value of $1 per share. MIGRA has authorized the issuance of 7,500 shares of its
common stock and 85 shares are issued and outstanding at December 31, 1997. Each
of the 19 MMS corporations have authorized the issuance of 1,000 shares of their
common stock, all of which have been issued and are outstanding at December 31,
1997 and 1996.
10. SUBSEQUENT EVENT
On January 28, 1998, the shareholders entered into agreements to sell
all the Company to AERC, an unrelated third party in exchange for cash and
common shares.
F-38
<PAGE> 46
\
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma condensed balance sheet is presented
as if the following transactions had occurred on December 31, 1997 : (i) the
acquisition of Country Club Apartments which occurred on February 19, 1998, (ii)
the acquisition of The Falls Apartments, Reflections Apartments and Cypress
Shores Apartments (collectively referred to as the "MRT Properties") which
occurred on February 3, 1998, (iii) the proposed acquisition of 20th and
Campbell Apartments, Annen Woods Apartments, Desert Oasis Apartments, Fleetwood
Apartments, Hampton Point Apartments, Morgan Place Apartments, Peachtree
Apartments and Windsor Falls Apartments (collectively referred to as the "MIG
Residential REIT Properties") and (iv) the proposed merger with MIG Realty
Advisors, Inc. ("MIGRA"). Such pro forma information is based upon the
historical consolidated balance sheet of the Company as of that date, giving
effect to the transactions described above. This pro forma condensed balance
sheet should be read in conjunction with the pro forma condensed statement of
operations of the Company and the historical financial statements and notes
thereto of the Company included in the Associated Estates Realty Corporation
Form 10-K for the year ended December 31, 1997 and the MIG Residential REIT,
Inc. and the MIG Companies financial statements included elsewhere in this
report.
This unaudited pro forma condensed balance sheet is not necessarily
indicative of what the actual financial position of the Company would have been
at December 31, 1997 nor does it purport to represent the future financial
position of the Company.
<TABLE>
<CAPTION>
Pro Forma
----------------------------------------------------------
Merger and
Company MIG Acquisition Company
Historical Companies Adjustments(a) Pro Forma
---------- --------- -------------- ---------
<S> <C> <C> <C> <C>
Assets
Real estate and other fixed
assets (net) $ 515,830 $ 416 $194,154 (b) $ 710,400
Cash and cash equivalents 2,252 237 -- 2,489
Receivables and other assets 25,702 4,747 90 (c) 27,651
(2,888)(d)
Restricted cash 10,126 4,360 -- 14,486
Goodwill -- -- 6,750 (e) 6,750
--------- ----- -------- ---------
$ 553,910 $ 9,760 $198,106 $ 761,776
========= ======== ======== =========
Liabilities
Secured debt $ 57,818 $ -- $ 15,014 (f) $ 72,832
Unsecured debt 260,352 610 76,403 (g) 337,365
Other liabilities 42,244 6,790 1,618 (c) 50,389
(263)(d)
Accumulated losses of equity
investees in excess of
investment and advances 12,338 82 -- 12,420
-------- -------- -------- ---------
372,752 7,482 92,772 473,006
Minority interests -- 169 (169)(h) --
Shareholders' equity
Class A cumulative preferred shares 56,250 -- -- 56,250
Common shares 1,707 19 507 (i) 2,214
(19)(j)
Paid in capital 171,753 656 107,105 (i) 278,858
(656)(j)
Retained earnings -- 1,434 (1,434)(j) --
Accumulated dividends in excess
of net income (48,552) -- -- (48,552)
-------- -------- --------- ---------
181,158 2,109 105,503 288,770
-------- -------- --------- ---------
$553,910 $9,760 $ 198,106 $ 761,776
======== ======== ========= =========
</TABLE>
F-39
<PAGE> 47
ASSOCIATED ESTATES REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Represents the adjustments to (i) reflect the acquisitions of Country
Club Apartments, the MRT Properties, the MIG Residential REIT
Properties and (ii) record the effects of the merger with MIGRA. The
Historical Balance Sheet of MIGRA is presented separately as the "MIG
Companies". The historical amounts are presented in a separate column
since the operations of the MIG Companies are being merged into the
Company, where the entities reflected in (i) effectively represent the
purchase of real estate assets.
(b) Represents the purchase price, including transaction costs, for Country
Club Apartments, the MRT Properties, MIG Residential REIT Properties
and MIGRA. Country Club Apartments and the MRT Properties were acquired
subsequent to December 31, 1997 for $14.9 million and $59.5 million,
respectively, paid in cash and the assumption of liabilities. Assumed
liabilities principally include the assumption of secured debt. [See
note (f).]
The Company has entered into a contract to acquire the MIG Residential
REIT Properties for an aggregate purchase price of $108.5 million with
up to approximately $11.1 million payable in cash and the balance due
in common shares of the Company. For purposes of this pro forma
presentation, it is assumed $11.1 million is paid in cash [see note
(i)], and the balance paid in common shares.
The Company has entered into a merger agreement with MIGRA for total
consideration, including estimated transaction costs, of $16.6 million,
of which $9.9 million has been allocated to real estate assets and the
remainder to goodwill. A portion of the consideration was allocated to
the real estate assets of the MRT and MIG Residential REIT Properties,
as the purchase negotiations of the MRT and MIG Residential REIT
Properties occurred simultaneously with the negotiations of MIGRA. The
amount ultimately allocated to real estate assets is subject to further
review and the consummation of the transaction. The merger agreement
provides for contingent consideration of up to $14.5 million, none of
which has been reflected in this pro forma presentation.
The cash requirements as reflected above, have been provided through
available financings. [See note (g).]
F-40
<PAGE> 48
The adjustment is summarized as follows:
Purchase price of consummated acquisitions $ 74,400
Assumed purchase price of proposed
acquisitions 126,078
----------
200,478
Historical net assets of MIG Companies
[note (j)] (2,109)
Adjustment to eliminate affiliate
balances, net [note (d)] 2,625
Allocation to goodwill [note (e)] (6,750)
Other (90)
----------
$ 194,154
==========
(c) Represents receivables and other assets acquired and the assumption of
other liabilities in connection with Country Club Apartments, the MRT
Properties and the MIG Residential REIT Properties as follows:
Receivables
and Other Other
Assets Liabilities
------ -----------
Country Club Apartments $ - $ 310
The MRT Properties 90 877
The MIG Residential REIT
Properties - 431
----- --------
$ 90 $ 1,618
===== ========
(d) Represents the elimination of the MIG Companies' affiliate receivables
and payables as such amounts will be settled immediately prior to the
merger with the net cash receipt distributed to shareholders of the MIG
Companies prior to the consummation of the merger.
(e) Represents the excess of the purchase price over the identifiable
net assets acquired from the MIG Companies. The amounts allocated to
goodwill have been based upon a preliminary purchase price allocation
and include certain estimates. A final allocation will be made pending
consummation of the transaction and determination of the final purchase
price. [See note (b).]
(f) Reflects the assumption of mortgage indebtedness with respect to the
acquisition of the MRT Properties.
(g) Represents the utilization of the line of credit and an unsecured 90
day term loan to finance the acquisition of Country Club Apartments,
the MRT Properties and the MIG Residential REIT Properties.
(h) Represents the elimination of the minority interests in the
F-41
<PAGE> 49
consolidated subsidiaries of the MIG Companies, which interests are
being acquired by the Company.
(i) Represents the issuance of approximately 5,073,267 million of the
Company's no par value common shares (stated value of $.10 per share)
comprised of (i) 4,664,949 shares for the acquisition of the MIG
Residential REIT Properties, and (ii) 408,318 shares in exchange for
the shareholders' interests in MIGRA and an affiliated property
management business.
The MIG Residential REIT Properties' purchase agreement provides that
the number of common shares issued will be subject to adjustment to the
extent the share price as of the date of closing, as defined, is less
than or greater than the defined share price at the contract date.
However, if the Closing Date Price, as defined, is greater than 106% of
the Execution Date Price, as defined, the adjustment to decrease the
number of shares otherwise required to be issued must be reduced by up
to a maximum of approximately 270,000 shares. The number of common
shares assumed to be issued has been determined by reference to an
amount of $20.79 per share, which is the average closing price for the
20 days immediately preceding March 19, 1998. The final number of
common shares to be issued will not be known until the date the
transaction is consummated.
Common shares assumed to be issued exclude any common shares which are
contingently issuable upon the satisfaction of certain conditions.
(j) Represents the elimination of the historical equity accounts of the MIG
Companies, consistent with the utilization of the purchase method of
accounting.
F-42
<PAGE> 50
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The unaudited pro forma condensed statement of operations for the year
ended December 31, 1997 is presented as if the following transactions had
occurred on January 1, 1997, (i) the acquisition of the Gables at White River,
Remington Place, Saw Mill Village and Hawthorne Hills Apartments as previously
reported on the Company's Form 8-K/A-1 dated February 6, 1997, (ii) the offering
of 1,750,000 common shares completed on July 2, 1997, (iii) the acquisition of
Clinton Place Apartments and Spring Valley Apartments as previously reported on
the Company's Form 8-K dated August 25, 1997 (together with the four
acquisitions reported on the Company's Form 8-K/A-1 dated February 6, 1997, the
"Previously Reported Acquisitions") and (iv) the acquisition by the Company of
Country Club Apartments, the MRT Properties, the MIG Residential REIT Properties
and the merger with MIG Realty Advisors, Inc. as reported herein.
This pro forma condensed statement of operations is based upon the
historical results of operations of the Company for the year ended December 31,
1997 and should be read in conjunction with the proforma condensed balance sheet
of the Company set forth elsewhere herein and the historical financial
statements and notes thereto of the Company included in the Associated Estates
Realty Corporation Form 10-K for the year ended December 31, 1997 and the
Country Club Apartments Statement of Revenue and Certain Expenses, the MRT
Properties Combined Statement of Revenue and Certain Expenses, the MIG
Residential REIT, Inc. and the MIG Companies financial statements for the
year ending December 31, 1997 as presented elsewhere in this report.
The unaudited pro forma condensed statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the transactions had been completed as set forth above,
nor does it purport to represent the results of operations of future periods of
the Company.
F-43
<PAGE> 51
ASSOCIATED ESTATES REALTY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
(unaudited)
---------------------------------------------------------
Previously Country
Reported Follow-on MRT Club
Company Acquisitions Offering Properties Apartments
Historical (a) (b) (c) (d)
---------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Rental $101,640 $ 4,525 $ -- $ 8,086 $ 2,163
Painting services 1,664 -- -- -- --
Acquisition, management and disposition fees 3,752 -- -- -- --
Interest 926 -- -- -- --
Other 828 61 -- 309 45
-------- -------- ------- ------- --------
108,810 4,586 -- 8,395 2,208
Expenses
Property operating and maintenance expenses
exclusive of depreciation and
amortization 43,230 1,694 -- 3,518 901
Management fees, related parties -- -- -- 334 --
Depreciation - real estate assets 17,926 945 -- 2,033 482
- other 640 -- -- -- --
Amortization of deferred financing fees 700 -- -- -- --
Amortization of goodwill -- -- -- -- --
Painting services 1,491 -- -- -- --
Cost associated with abandoned projects 310 -- -- -- --
General and administrative 6,085 -- -- -- --
Charge for unrecoverable funds advanced to
non-owned properties and other 1,764 -- -- -- --
Costs associated with reorganization plan -- -- -- -- --
Interest expense 19,144 1,355 (1,897) 4,118 1,024
-------- -------- ------- ------- --------
91,290 3,994 (1,897) 10,003 2,407
-------- -------- ------- ------- --------
Income from operations 17,520 592 1,897 (1,608) (199)
Minority interests in net loss of consolidated
subsidiaries -- -- -- -- --
Gain on sale of land 1,608 -- -- -- --
Equity in net income of joint ventures 561 -- -- -- --
-------- -------- ------- ------- --------
Net income (loss) before extraordinary items $ 19,689 $ 592 $ 1,897 $(1,608) $ (199)
======== ======== ======= ======= ========
Net income before extraordinary items
applicable to common shares $ 14,205
========
Per share data:
Net income before extraordinary items per
share - basic and diluted $ .88
========
Weighted average number of shares - basic 16,200
========
- diluted 16,222
========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Adjustments
(unaudited)
---------------------------------------
MIG
Residential Merger
REIT MIG and Company
Properties Companies Acquisition Pro Forma
(e) (e) Adjustments (unaudited)
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Rental $13,584 $ -- $ -- $129,998
Painting services -- -- -- 1,664
Acquisition, management and disposition fees -- 9,103 (1,293)(f) 11,562
Interest 134 43 -- 1,103
Other 412 1,478 -- 3,133
------- -------- --------- --------
14,130 10,624 (1,293) 147,460
Expenses
Property operating and maintenance expenses
exclusive of depreciation and
amortization 5,796 -- 372 (g) 55,511
Management fees, related parties 959 -- (1,293)(f) --
Depreciation - real estate assets 2,245 -- 1,515 (h) 25,146
- other -- 166 -- 806
Amortization of deferred financing fees -- -- -- 700
Amortization of goodwill -- -- 338 (i) 338
Painting services -- -- -- 1,491
Cost associated with abandoned projects -- -- -- 310
General and administrative 273 10,149 (175)(j) 16,332
Charge for unrecoverable funds advanced to
non-owned properties and other -- -- -- 1,764
Costs associated with reorganization plan -- 1,291 - (k) 1,291
Interest expense 712 245 259 (l) 24,960
------- -------- --------- --------
9,985 11,851 1,016 128,649
------- -------- --------- --------
Income from operations 4,145 (1,227) (2,309) 18,811
Minority interests in net loss of consolidated
subsidiaries -- 206 (206)(m) --
Gain on sale of land -- -- -- 1,608
Equity in net income of joint ventures -- 73 -- 634
------- -------- --------- --------
Net income (loss) before extraordinary items $ 4,145 $ (948) $ (2,515) $ 21,053
======= ======== ========= ========
Net income before extraordinary items applicable $ 15,569
to common shares ========
Per share data:
Net income before extraordinary items per
share - basic and diluted $ .70
========
Weighted average number of shares - basic 22,150(n)
========
- diluted 22,172(n)
========
</TABLE>
F-44
<PAGE> 52
ASSOCIATED ESTATES REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(a) Reflects the revenues and expenses of the Previously Reported
Acquisitions for the period January 1, 1997 through the date of
acquisition.
Interest expense assumes interest at market rates with respect to
mortgages assumed or at the rate of the Company's line of credit or
Medium Term Notes, as applicable.
Depreciation expense reflects the pro forma depreciation charge
utilizing the properties' respective purchase price and an estimated
useful life of 30 years for buildings.
(b) Reflects the reduction of interest expense associated with the
repayment of debt utilizing the proceeds of the 1.75 million Common
Share offering completed on July 2, 1997.
(c) Represents the revenues and expenses of the MRT Properties for the year
ended December 31, 1997. The MRT Property's were acquired by the
Company on February 3, 1998.
Interest expense assumes interest at market rates with respect to
mortgages assumed or at the rate of the Company's line of credit or
unsecured term loan, as applicable.
Depreciation expense reflects the pro forma depreciation charge
utilizing the property's purchase price and an estimated
useful life of 30 years for buildings.
(d) Reflects the revenues and expenses of Country Club Apartments for the
year ended December 31, 1997. Country Club Apartments was acquired by
the Company on February 19, 1998.
Interest expense assumes interest at the weighted average rate of the
Company's line of credit.
Depreciation expense reflects the pro forma depreciation charge
utilizing the property's purchase price and an estimated
useful life of 30 years for buildings.
(e) Represents the respective historical statement of operations of MIG
Residential REIT Properties and the MIG Companies (proposed purchase
transactions)for the year ended December 31, 1997.
(f) Decrease results from the elimination of management and
F-45
<PAGE> 53
ASSOCIATED ESTATES REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS-CONTINUED
advisory fees earned by the MIG Companies from the MRT and MIG REIT
Properties as follows:
MRT Properties $ 334
MIG REIT Properties 959
---------
$ 1,293
=========
(g) Charge for maintenance and repairs to conform the accounting policies
of the Acquired and Proposed Acquisition Properties to those of the
Company.
(h) Represents the net increase in depreciation for real estate to be
acquired as a result of recording the MIG Residential REIT Properties
at their respective purchase prices (which exceeds historical costs).
Depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets of approximately 30 years.
Calculation of the pro forma adjustment of depreciation of real estate
property for the year ended December 31, 1997:
Depreciation expense based
upon an estimated useful life
of approximately 30 years $ 3,760
Less: Historical MIG Residential
REIT Properties depreciation of
real estate property 2,245
---------
$ 1,515
=========
Notes (a), (c) and (d) describe depreciation of other real estate
acquisitions reflected in this pro forma presentation.
(i) Reflects the amortization of the goodwill recognized as a result of the
Merger. Goodwill is being amortized over a 20 year period.
(j) Decrease results from the duplication of directors' fees, directors
and officers insurance costs and certain audit fees which will be
eliminated or reduced upon the purchase of the MIG Residential
REIT Properties.
(k) Represents costs incurred by the MIG Companies associated
with an abandoned financing and reorganization plan. Such
costs are non-recurring.
F-46
<PAGE> 54
ASSOCIATED ESTATES REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS-CONTINUED
(l) Interest expense assumes interest at the weighted average rate of the
Company's line of credit.
(m) To eliminate the minority interests in the net loss of consolidated
subsidiaries, which interests are being acquired by the Company.
(n) Assumes 1.75 million shares issued in connection with the common share
offering on July 2, 1997 and shares issued in connection with the MIGRA
Merger and the acquisition of MIG Residential REIT Properties had
occurred as of January 1, 1997. Common shares assumed to be issued
in connection with the MIGRA Merger exclude the common shares whose
issuance is contingent upon the satisfaction of certain conditions.
In addition, the 4.665 million common shares assumed to be issued for
the acquisition of the MIG Residential REIT Properties is subject to
potential adjustment. See note (i) of the pro forma balance sheet.
F-47
<PAGE> 55
ASSOCIATED ESTATES REALTY CORPORATION
ESTIMATED TWELVE-MONTH PRO FORMA STATEMENT OF
TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
(UNAUDITED)
The following unaudited statement is a pro forma estimate for a
twelve-month period of taxable income and funds available from operations of the
Company. The unaudited pro forma statement is based on the Company's historical
operating results for the year ended December 31, 1997 adjusted as if the
following transactions had occurred on January 1, 1997: (i) the acquisition of
the Gables at White River, Remington Place, Saw Mill Village and Hawthorne Hills
Apartments as previously reported on the Company's Form 8- K/A-1 dated February
6, 1997, (ii) the offering of 1,750,000 common shares completed on July 2, 1997,
(iii) the acquisition of Clinton Place Apartments and Spring Valley Apartments
as previously reported on the Company's Form 8-K dated August 25, 1997 (together
with the four acquisitions reported on the Company's Form 8-K/A-1 dated February
6, 1997, the "Previously Reported Acquisitions") and (iv) the acquisition by the
Company of Country Club Apartments, the MRT Properties, the MIG Residential REIT
Properties and the merger with MIG Realty Advisors, Inc. as reported herein.
This estimated twelve-month pro forma statement of taxable net
operating income and operating funds available is based upon the historical
results of operations of the Company for the year ended December 31, 1997 and
should be read in conjunction with the proforma condensed balance sheet and the
pro forma condensed statement of operations of the Company set forth elsewhere
herein and the historical financial statements and notes thereto of the Company
included in the Associated Estates Realty Corporation Form 10-K for the year
ended December 31, 1997 and the Country Club Apartments Statement of Revenue
and Certain Expenses, the MRT Properties Combined Statement of Revenue and
Certain Expenses, the MIG Residential REIT, Inc. and the MIG Companies
financial statements for the year ending December 31, 1997 as presented
elsewhere in this report.
ESTIMATE OF TAXABLE NET OPERATING INCOME (IN THOUSANDS):
Historical earnings from operations, exclusive of
depreciation and amortization (Note 1) $ 34,494
Historical earnings (loss) from operations, exclusive of
depreciation and amortization (Note 2)
Previously reported acquisitions 750
MRT Properties 475
Country Club Apartments 283
MIG Residential REIT Properties 6,390
MIG Companies (782)
--------
41,610
Estimated tax basis depreciation and amortization (Note 3)
AERC (12,492)
Previously Reported Acquisitions (1,660)
MRT Properties (1,276)
Country Club Apartments (320)
MIG Residential REIT Properties (2,818)
MIG Companies (166)
--------
Pro Forma taxable operating income before dividends deduction 22,878
Estimated dividends deduction (Note 4) 41,199
--------
$(18,321)
========
Pro Forma taxable operating income $ --
========
ESTIMATE OF PRO FORMA OPERATING FUNDS AVAILABLE (NOTE 5)
IN THOUSANDS):
Pro Forma taxable operating income before dividends deduction $ 22,878
Add pro forma tax basis depreciation and amortization 18,732
--------
Estimate of pro forma operating funds available $ 41,610
========
F-48
<PAGE> 56
Note 1 - The historical earnings from operations represents the Company's net
income applicable to common shares as adjusted for depreciation and amortization
for the year ended December 31, 1997 as reflected in the historical financial
statements.
Note 2 - The historical earnings from operations represents the pro forma
results of the Previously Reported Acquisitions, MRT Properties, Country Club
Apartments, the MIG Residential REIT Properties and MIG Companies as referred to
in the pro forma condensed consolidated statement of operations for the year
ended December 31, 1997 included elsewhere in this report.
Note 3 - The tax basis depreciation of the Company is based upon the original
purchase price allocated to the buildings, equipment and personal property,
depreciated on a straight-line basis over a 40-, 12-, and 10-year life,
respectively.
Note 4 - Estimated dividends deduction is based on the estimated dividend rate
of $1.86 per share. Shares outstanding, on a pro forma basis are 22,150.
Note 5 - Operating funds available does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs.
F-49
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Associated Estates Realty
Corporation
Date: March 30, 1998 /s/ DENNIS W. BIKUN
- ----------------------- -------------------
Dennis W. Bikun
Chief Financial Officer & Treasurer
Chief Accounting Officer
F-50
<PAGE> 58
Exhibits
2.01 Second Amendment and Restated Agreement and Plan of Merger by and
among Associated Estates Realty Corporation (the "Company"),
MIG Realty Advisors, Inc. ("MIGRA") and the MIGRA Stockholders dated
as of March __, 1998
2.02 Purchase Agreement by and between MIG REIT/Morgan Place, Inc. and
the Company dated as of January 28, 1998
2.03 Purchase Agreement by and between MIG REIT/Annen Woods, Inc. and
the Company dated as of January 28, 1998
2.04 Purchase Agreement by and between MIG Peachtree Corporation and
the Company dated as of January 28, 1998
2.05 Purchase Agreement by and between MIG Fleetwood, Ltd. and the
Company dated as of January 28, 1998
2.06 Purchase Agreement by and between MIG REIT Falls, L.L.C. and
the Company dated as of January 28, 1998
2.07 Purchase Agreement by and between MIG Zoth & Campbell Corporation
and the Company dated as of January 28, 1998
2.08 Purchase Agreement by and between Desert Oasis Corporation and
the Company dated as of January 28, 1998
2.09 Purchase Agreement by and between MIG Hampton Corporation and
the Company dated as of January 28, 1998
23.01 Consent of Price Waterhouse LLP
23.02 Consent of Ernst & Young LLP
<PAGE> 1
Exhibit 2.01
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ASSOCIATED ESTATES REALTY CORPORATION
("AERC"),
MIG REALTY ADVISORS, INC.
("MIGRA")
and the
MIGRA STOCKHOLDERS
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER........................ 1
PRELIMINARY STATEMENTS.......................................................... 1
ARTICLE I THE MERGER........................................... 2
<S> <C> <C>
1.1 The Merger.................................................... 2
1.2 Effective Time................................................ 2
1.3 Effects of the Merger......................................... 2
1.4 Articles of Incorporation and Bylaws.......................... 2
1.5 Directors and Officers........................................ 2
1.6 Additional Actions............................................ 3
ARTICLE II CONVERSION OF SECURITIES............................. 3
2.1 Conversion of Capital Stock................................... 3
2.2 Shares; Share Prices; Fractional Shares....................... 5
2.3 Exchange of Certificates...................................... 5
2.4 Purchase Price Adjustment..................................... 6
2.5 Disposition Fees.............................................. 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AERC............... 9
3.1 Organization and Standing..................................... 9
3.2 Corporate Power and Authority................................. 9
3.3 Capitalization of AERC........................................10
3.4 Conflicts; Consents and Approvals.............................10
3.5 SEC Documents.................................................11
3.6 Absence of Certain Changes....................................12
3.7 Brokerage and Finder's Fees...................................12
3.8 State Takeover Laws...........................................12
3.9 REIT Status...................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MIGRA..............12
4.1 Organization and Standing.....................................12
4.2 Subsidiaries..................................................13
4.3 Corporate Power and Authority.................................15
4.4 Capitalization................................................15
4.5 Conflicts; Consents and Approvals.............................16
4.6 Absence of Certain Changes....................................16
4.7 Officers, Employees and Compensation..........................18
4.8 Financial Statements..........................................18
4.9 Taxes.........................................................19
4.10 Compliance with Law...........................................20
4.11 Intellectual Property.........................................21
4.12 Title to and Condition of Properties..........................21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.13 Investment Advisor............................................24
4.14 Litigation....................................................28
4.15 Brokerage and Finder's Fees; Expenses.........................28
4.16 Employee Benefit Plans........................................29
4.17 Contracts.....................................................32
4.18 [INTENTIONALLY OMITTED.]......................................32
4.19 Labor Matters.................................................32
4.20 Undisclosed Liabilities.......................................32
4.21 Operation of MIGRA's Business; Relationships..................33
4.22 Environmental Matters.........................................33
4.23 FBCA and State Takeover Laws..................................34
4.24 Insurance.....................................................34
4.25 Books of Account; Records.....................................34
4.26 Rights to Disposition Fees....................................34
ARTICLE V COVENANTS OF THE PARTIES.............................34
5.1 Mutual Covenants..............................................34
5.2 Covenants of AERC.............................................36
5.3 Covenants of MIGRA............................................38
5.4 Covenants of MIGRA Stockholders...............................42
5.5 Covenants of Mr. Wright.......................................44
ARTICLE VI CONDITIONS...........................................44
6.1 Mutual Conditions.............................................44
6.2 Conditions to Obligations of MIGRA............................44
6.3 Conditions to Obligations of AERC.............................45
ARTICLE VII TERMINATION AND AMENDMENT............................47
7.1 Termination...................................................47
7.2 Effect of Termination.........................................48
7.3 Amendment.....................................................49
7.4 Extension; Waiver.............................................49
ARTICLE VIII INDEMNIFICATION......................................49
8.1 Survival of Representations, Warranties and Agreements........49
8.2 Indemnification...............................................50
8.3 Limitations on Indemnification................................51
8.4 Procedure for Indemnification with Respect to Third Party ....53
8.5 Procedure For Indemnification with Respect to Non-Third Party
Claims......................................................54
8.6 Termination of MIGRA's Warranties.............................55
8.7 Sole Remedies.................................................55
ARTICLE IX MISCELLANEOUS........................................55
9.1 Notices.......................................................55
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.2 Interpretation................................................56
9.3 Counterparts..................................................56
9.4 Entire Agreement..............................................57
9.5 Third Party Beneficiaries.....................................56
9.6 Governing Law.................................................57
9.7 Consent to Jurisdiction; Venue................................57
9.8 Specific Performance..........................................57
9.9 Assignment....................................................58
9.10 Expenses......................................................58
Exhibit A - Properties
Exhibit A-1- Development Properties
Exhibit B - Form of Opinion of AERC Counsel
Exhibit C - Form of Opinion of MIGRA's Counsel
Exhibit D - Form of Non-Competition Agreement
Exhibit E - Form of Employment Agreement
Exhibit F - Description of E Units
</TABLE>
-iii-
<PAGE> 5
SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Second Amended and Restated Agreement and Plan of Merger
(this "Agreement") is made and entered into as of the _____ day of March, 1998,
by and among Associated Estates Realty Corporation, an Ohio corporation
("AERC"), MIG Realty Advisors, Inc., a Florida corporation ("MIGRA"), and
certain of the holders of the issued and outstanding shares of MIGRA's capital
stock (such holders herein referred to as the "MIGRA Stockholders"), to amend
and restate the Agreement and Plan of Merger, dated as of November 5, 1997, as
amended and restated as of January 24, 1998 among AERC, MIGRA and the MIGRA
Stockholders.
PRELIMINARY STATEMENTS
A. AERC desires to acquire the real estate acquisition,
development and management business and other businesses operated by MIGRA and
the interests owned by MIGRA, the MIGRA Stockholders in other MIGRA Companies
(as defined in Section 4.5) and/or the real property owned thereby through the
merger of MIGRA with and into AERC, with AERC as the surviving corporation (the
"Merger"), pursuant to which each share of MIGRA Common Stock (as defined in
Section 4.4) outstanding at the Effective Time (as defined in Section 1.2)
("MIGRA Conversion Stock") will be converted into the right to receive AERC
Common Shares (as defined in Section 2.1), as more fully provided herein.
B. Immediately after the Effective Time, the MIGRA
Stockholders shall agree to pay when due all obligations, contingent or
otherwise, of MIGRA or any affiliate arising from or in connection with (i) the
purchase of the interest in MIGRA of Edwin B. Wayman ("Wayman"), (ii) any
deferred compensation arrangements for the benefit of Wayman, (iii) the purchase
of the interest of PF Funds, Inc. in MIG Ltd. (as hereinafter defined); (iv)
the liabilities identified on Schedule A attached hereto, and (v) the purchase
price adjustments more fully described in Section 5.4 (collectively, the "MIGRA
Stockholders Fixed Liabilities").
C. Immediately after the consummation of the Merger, AERC will
convey to (i) Associated Estates Management Company, an Ohio corporation and
affiliate of AERC ("AEMC"), and (ii) MIG Realty, Inc., a newly formed affiliate
of AERC ("MRI"), certain of the assets, contract rights and other rights and
properties theretofore owned by MIGRA (the "Spinoff Transfer").
D. MIGRA desires to combine its real estate acquisition,
development and management business and other businesses with the real estate
businesses operated by AERC and for the holders of shares of MIGRA Conversion
Stock to have a continuing equity interest in the combined AERC/MIGRA
businesses.
E. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
<PAGE> 6
NOW, THEREFORE, in consideration of these premises and the
mutual and dependent promises hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of the Florida Business
Corporation Act (the "FBCA") and Chapter 1701 of the Ohio Revised Code (the
"ORC"), MIGRA shall be merged with and into AERC following the satisfaction or
waiver of the conditions set forth in Article VI, and the separate corporate
existence of MIGRA shall thereupon cease. AERC shall continue its existence
under the laws of the State of Ohio. In its capacity as the corporation
surviving the Merger, AERC is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 Effective Time and Closing. The Merger shall be
consummated by (i) filing with the Secretary of State of the State of Ohio (the
"Ohio Secretary of State") a certificate of merger (the "Certificate of Merger")
in such form as is required by and executed in accordance with Section 1701.81
of the ORC and (ii) filing with the Department of State of the State of Florida
(the "Florida Department of State") articles of merger (the "Articles of
Merger") in such form as is required by and executed in accordance with Section
607.1105 of the FBCA. The Merger shall become effective on the date and at the
time when the Certificate of Merger and the Articles of Merger have been filed
with, and accepted by, the Ohio Secretary of State and the Florida Department of
State, respectively, or at such later time as shall be specified in the
Certificate of Merger (the "Effective Time"). Prior to the filing referred to in
this Section 1.2, a closing (the "Closing") shall be held at the offices of
Baker & Hostetler LLP, 3200 National City Center, 1900 East Ninth Street,
Cleveland 44114, or such other place as the parties may agree, on the fifth
business day immediately following the day on which the last of the conditions
set forth in Article VI shall be fulfilled or waived in accordance with this
Agreement or at such other time, date or place as the parties hereto may agree.
The date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
1.3 Effects of the Merger. The Merger shall have the effects
of the applicable provisions of the FBCA and the ORC.
1.4 Articles of Incorporation and Bylaws. The Certificate of
Merger and the Articles of Merger shall provide that at the Effective Time (i)
the Articles of Incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of AERC, and (ii) the Code of Regulations of AERC in effect immediately prior to
the Effective Time shall be the Code of Regulations of the Surviving
Corporation; in each case until amended in accordance with applicable law.
1.5 Directors and Officers. Immediately after the Effective
Time, the officers and directors of the Surviving Corporation shall be the
officers and directors identified on Schedule 1.5, until their respective
successors are duly elected and qualified. On the Closing
-2-
<PAGE> 7
Date, MIGRA shall deliver to AERC evidence satisfactory to AERC of the
resignations of the officers and directors of MIGRA, such resignations to be
effective as of the Effective Time.
1.6 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are reasonably
necessary or desirable to (a) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of MIGRA, or (b) otherwise carry out the
provisions of this Agreement, MIGRA shall execute and deliver all such deeds,
assignments or assurances in law and shall take all acts necessary, proper or
desirable to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
provisions of this Agreement, and the officers and directors of the Surviving
Corporation are authorized in the name of MIGRA or otherwise to take any and all
such action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. By virtue of the Merger and
without any action on the part of AERC or MIGRA, the following securities will
be converted in the manner set forth below:
(a) At the Effective Time, each share of capital stock,
without par value, of AERC issued and outstanding immediately prior to
the Effective Time, but after the conversion described in Section
2.1(b), shall be converted into one share of common stock, without par
value ("AERC Common Shares"), of the Surviving Corporation.
(b) Subject to the provisions of Section 2.4, at the Effective
Time, the MIGRA Conversion Stock shall be converted into and represent
(i) a number of AERC Common Shares equal to the quotient obtained by
dividing (A) $9,648,573 by (B) the Average Share Price (as hereinafter
defined) and (ii) the right to receive the AERC Common Shares
hereinafter described in this Section 2.1 (the "Conversion Rights"),
all as allocated to the MIGRA Stockholders on Schedule 2.1.
(c) Subject to the provisions of Sections 2.1(h), 2.4 and 5.4,
on the later of the first anniversary date of the Effective Time or the
date on which the conditions set forth in Section 2.1(h) are satisfied
(the "Second Issuance Date"), the holders of the Conversion Rights
shall receive a number of AERC Common Shares equal to the quotient
obtained by dividing (A) $689,037 by (B) the Average Share Price, all
as allocated to the MIGRA Stockholders on Schedule 2.1.
(d) Subject to the provisions of Sections 2.1(i), 2.4 and 5.4,
on the later of the second anniversary date of the Effective Time or
the date on which the conditions set forth in Section 2.1(i) are
satisfied (the "Third Issuance Date"), the holders of the Conversion
Rights shall receive a number of AERC Common Shares equal to the
quotient obtained by dividing (A) $3,959,537 by (B) the Average Share
Price.
-3-
<PAGE> 8
(e) Subject to the provisions of Sections 2.1(h), 2.4, 2.5 and
5.4, on the Second Issuance Date, the holders of the Conversion Rights
shall receive a number of AERC Common Shares equal to the quotient
obtained by dividing (A) $2,408,000 by (B) the average closing prices
of the AERC Common Shares for the twenty (20) Trading Days (as defined
in Section 2.2) immediately preceding the Second Issuance Date, all as
allocated to the MIGRA Stockholders on Schedule 2.1.
(f) Subject to the provisions of Sections 2.1(i), 2.4, 2.5 and
5.4, on the Third Issuance Date, the holders of the Conversion Rights
shall receive a number of AERC Common Shares equal to the quotient
obtained by dividing (A) $2,408,000 by (B) the average closing prices
of the AERC Common Shares for the twenty (20) Trading Days immediately
preceding the Third Issuance Date, all as allocated to the MIGRA
Stockholders on Schedule 2.1.
(g) At the Effective Time, each share of capital stock of
MIGRA held in treasury shall be cancelled and retired and no payment
shall be made in respect thereof.
(h) The obligation of AERC to issue AERC Common Shares
pursuant to Sections 2.1(c) and (e) shall be conditioned on the
occurrence of both of the following: (i) the issuance of a final
certificate of occupancy for the so-called Windsor Pines property and
(ii) the MIGRA Stockholders' submission to AERC of multifamily property
acquisition opportunities with an aggregate gross asset value of at
least $50,000,000 and an average yield of at least 85% of the average
pro forma yield of the properties to be acquired by AERC
contemporaneously with the Closing to satisfy the condition set forth
in Section 6.3(e)(ii) (the "Initial Properties"). For purposes of this
Agreement "gross asset value" means the most recent appraisal value, as
determined by "CB Commercial Properties," with respect to the Initial
Properties, and with respect to subsequent properties presented for
acquisition, the fair market value thereof as determined by the agreed
upon purchase price or appraised value, as the case may be; and "yield"
means the ratio of (A) the sum of net operating income, amortization
and depreciation to (B) the gross asset value.
(i) The obligation of AERC to issue AERC Common Shares
pursuant to Sections 2.1(d) and (f) shall be conditioned on the
occurrence of both of the following: (i) the issuance of a final
certificate of occupancy for the so-called Kirkman property; and (ii)
the MIGRA Stockholders' submission to AERC of multifamily property
acquisition opportunities in addition to those described in Section
2.1(h)(ii) with an aggregate gross asset value of at least $50,000,000
and an average yield of at least 85% of the average pro forma yield of
the Initial Properties.
For purposes of Sections 2.1(h) and (i), the average pro forma
yield of the Initial Properties will be agreed upon by and between AERC and the
MIGRA Stockholders and set forth in writing on or before the Closing.
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2.2 Shares; Share Prices; Fractional Shares.
(a) For purposes hereof, "Average Share Price" shall mean
$23.63 (the average closing prices of the AERC Common Shares for the
twenty (20) Trading Days immediately preceding November 5, 1997. For
purposes of this Agreement, "Trading Days" shall mean each day that
AERC Common Shares have been traded on the New York Stock Exchange. For
purposes of this Agreement, the "Purchase Price" shall mean
$19,113,147, as the same may be adjusted pursuant to Sections 2.4, 2.5
and 5.4.
(b) No certificates for fractional AERC Common Shares shall be
issued as a result of the conversion provided for in Section 2.1. To
the extent that an outstanding share (or fraction thereof) of MIGRA
Conversion Stock would otherwise have become a fractional AERC Common
Share, the holder thereof, upon delivery of such fractional interest
represented by an appropriate certificate, shall be entitled to receive
a cash payment therefor in an amount equal to (i) with respect to the
Closing, the Average Share Price of such fractional interest, and (ii)
with respect to the Second Issuance Date and the Third Issuance Date,
the relevant closing price of the AERC Common Shares on the applicable
Trading Day relating thereto. Such payment with respect to fractional
shares is merely intended to provide a mechanical rounding off of, and
is not a separately bargained for, consideration. If more than one
certificate representing shares of MIGRA Conversion Stock shall be
surrendered for the account of the same holder, the number of AERC
Common Shares for which certificates have been surrendered shall be
computed on the basis of the aggregate number of shares represented by
the certificates so surrendered. In the event that prior to the
Effective Time, the Second Issuance Date or the Third Issuance Date, as
the case may be, AERC shall declare a stock dividend or other
distribution payable in AERC Common Shares or securities convertible
into, or exchangeable for, AERC Common Shares, or effect a stock split,
reclassification, combination or other change with respect to AERC
Common Shares, the calculations set forth in this Section 2.2 shall be
correspondingly adjusted to reflect such dividend, distribution, stock
split, reclassification, combination or other change.
(c) In the event any certificate representing shares of MIGRA
Common Stock shall have been lost, stolen or destroyed, upon receipt of
appropriate evidence (which may consist of an affidavit) as to such
loss, theft or destruction and to the ownership of any such certificate
by the person claiming any such certificate to be lost, stolen or
destroyed, and the receipt by AERC of reasonably appropriate and
customary indemnification (which may include the posting of a bond or
similar security), AERC shall cause to be issued in exchange for any
such lost, stolen or destroyed certificate, the applicable number of
AERC Common Shares and the fractional share payment, if any,
deliverable in respect thereof as determined in accordance with Section
2.1 and this Section 2.2.
2.3 Exchange of Certificates. At the Closing, AERC shall
deliver to the MIGRA Stockholders certificates representing AERC Common Shares
issuable pursuant to Section 2.1(b)(i) plus payment for any fractional shares as
provided in Section 2.2(b), and the MIGRA Stockholders shall deliver to AERC
certificates representing all shares of MIGRA Conversion Stock. On the Second
Issuance Date, AERC shall deliver to the MIGRA
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Stockholders certificates representing AERC Common Shares issuable pursuant to
Sections 2.1(c) and 2.1(e) plus payment for any fractional shares as provided in
Section 2.2(b). On the Third Issuance Date, AERC shall deliver to the MIGRA
Stockholders certificates representing AERC Common Shares issuable pursuant to
Sections 2.1(d) and 2.1(f) plus payment for any fractional shares as provided in
Section 2.2(b).
2.4 Purchase Price Adjustment
(a) Management and Other Contract Purchase Price Adjustment.
If on or before the 90th day after the Closing Date (the "Adjustment Period")
(a) all of the entities which are parties with a MIGRA Company and/or any
affiliate thereof under a mortgage servicing, advisory and/or asset and property
management agreement ("Relevant Contracts") and scheduled to pay the $8,301,077
of fees on Schedule 2.4(a) under the Relevant Contracts have not (i) consented
in writing to the assignment to the Surviving Corporation, MRI or AEMC, as the
case may be, of the obligations of the applicable MIGRA Company and/or
affiliates thereof under all Relevant Contracts, as the case may be, on terms no
less favorable than presently existing or (ii) entered into a new contract with
the Surviving Corporation, MRI or AEMC, as the case may be, with respect to the
obligations of the applicable MIGRA Company and/or affiliates thereof, which new
contract is on terms no less favorable than presently existing ("New Relevant
Contracts"), or (b) AERC does not actually acquire all of the properties listed
on Exhibit A (the "Relevant Properties") (as to which (i) no such consent to
assignment of the associated Relevant Contract is obtained or (ii) no New
Relevant Contract is entered into) pursuant to the terms of the applicable
purchase agreements entered into between AERC and/or one of its affiliates and
the applicable seller (the "Applicable Purchase Agreement") prior to the end of
the Adjustment Period, then the Purchase Price will be adjusted as follows:
(i) The Purchase Price will be increased by:
(x) One percent of the aggregate purchase price, as
reflected in the Applicable Purchase Agreement and
treating any assumed mortgage indebtedness as part of
the purchase price, for other properties identified
by MIGRA which are not listed on Schedule 2.4(c)
hereto (including the properties currently owned by
the Pennsylvania Public School Employees Retirement
System listed on Schedule 2.4(b) hereto (the "PPSERS
Properties")) which are actually acquired by AERC
pursuant to the terms of an Applicable Purchase
Agreement entered into during the Adjustment Period;
plus,
(y) One times the annualized fees of any new asset or
property management contracts or mortgage servicing
contracts related to properties identified by MIGRA
(but which are not listed on Schedule 2.4(a) hereto)
which are entered into during the Adjustment Period;
plus,
(z) The lesser of (i) one half of one percent of the
aggregate purchase price, as reflected in the
Applicable Purchase Agreements and treating any
assumed mortgage indebtedness as part of the purchase
price, for any of the PPSERS Properties which are
actually acquired by AERC pursuant to the terms of an
Applicable Purchase Agreement entered into during the
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<PAGE> 11
Adjustment Period, or (ii) 2.18 times the excess of
the Fee Shortfall (as hereinafter defined) over
$1,245,162,(which amount is 15% of the total fees
scheduled to be paid on Schedule 2.4(a)).
(ii) The Purchase Price will be decreased:
(x) By an amount equal to the aggregate amount of the
annualized asset and property management fees,
advisory fees and mortgage servicing fees payable
with respect to each Relevant Contract for which
neither such consent to the assignment nor New
Relevant Contract has been obtained prior to the end
of the Adjustment Period or for those Relevant
Contracts for which a consent to assignment has not
been obtained or a New Relevant Contract has not been
obtained and which relate to a Relevant Property,
which Relevant Property is not actually acquired by
AERC pursuant to the terms of an Applicable Purchase
Contract entered into prior to the end of the
Adjustment Period (the "Fee Shortfall"); plus,
(y) An amount equal to the product of (A) 2.18 times (B)
the excess of the Fee Shortfall over $1,245,162.
(iii) However, in no event shall the amount of the increase described in
clause (i) exceed the amount of the decrease described in clause (ii).
Any decrease in the Purchase Price as a result of any such adjustment will be
reflected as a reduction in the payment to be made pursuant to Section 2.1(c)
and, if necessary, Section 2.1(d) and if further necessary, Section 2.1(b)(i);
provided that if at the Closing Date, there is a potential reduction in the
payment to be made pursuant to Section 2.1(b)(i) by reason of the foregoing, the
amount of such potential reduction shall be held back by AERC until the last day
of the Adjustment Period at which time the amount, if any, of the actual
reduction required under this Section 2.4 shall be determined. If the amount of
the hold back is greater than such actual reduction amount, then the balance of
the amount held back, together with any dividends accrued and paid on the
released AERC Shares from the Closing Date, will be released by AERC. In
addition, in the event that the Purchase Price decrease exceeds the aggregate of
the amounts in Sections 2.1(b), (c) and (d) as adjusted by Section 2.4(b)
hereof, such excess shall be paid in immediately available funds by the MIGRA
Stockholders to AERC contemporaneously with the closing of AERC's direct or
indirect acquisition of the so-called Windsor Pines property; provided however,
that the MIGRA Stockholders, as a group and not on an individual basis, may
elect to reduce the amount of E Units (as defined in Exhibit F) to be received
pursuant to the Windsor Pines closing in lieu of making a cash payment to AERC
with respect to the excess Purchase Price decrease. For the purposes of this
Agreement, the value of an E Unit shall be deemed equal to the Average Share
Price of an AERC Common Share.
(b) Property Purchase Price Adjustment.
For purposes of this Section 2.4(b), the "Value" of a property shall mean the
appraised value of such property as set forth on Exhibit A.
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<PAGE> 12
(i) If on or before July 27, 1998, AERC closes on the acquisition of
properties indicated on Exhibit A (other than the properties previously owned by
subsidiaries of MIG Residential Trust (the "MRT Properties," which include
Cypress Shores, The Falls and Reflections) and the properties owned by
subsidiaries of MIG Residential Trust, Inc. (the "MIG REIT Properties," which
include 20th and Campbell, Annen Woods, Desert Oasis, Hampton Point, Fleetwood,
Morgan Place, Peachtree and Windsor Falls)), the Purchase Price shall be
increased by an amount determined by the following formula, but not to exceed
the sum of (i) $4,777,853 plus (ii) the amount of the decrease, if any, as a
result of Section 2,4(b)(ii):
($32,500,000) multiplied by (1-(the Value of properties acquired divided by
184,000,000))
Any adjustments pursuant to this subparagraph (i) will be
applied as follows:
(A) 50% of such adjustments will be applied to increase the amount
referred to in Section 2.1(b)(i);
(B) 25% of such increase (x) will be first applied to offset the
decrease, if any, resulting from Section 2.4(b)(ii)(B), and
(y) will then be applied to increase the amounts payable under
Section 2.1(c); and
(C) 25% of such increase (x) will be applied to offset the
decrease,if any, resulting from Section 2.4(b)(ii)(C), and (y)
will then be applied to increase the amounts payable under
Section 2.1(d).
(ii) If on or before July 27, 1998, AERC does not close on the
acquisition of any of the MIG REIT Properties the Purchase Price shall be
reduced by an amount determined by the following formula:
($32,500,000) multiplied by (1-(the Value of properties not acquired divided by
184,000,000))
Any adjustments pursuant to this subparagraph (ii) will be
applied as follows:
(A) 50% of such adjustment will be applied to reduce the amount
referred to in 2.1(b);
(B) 25% first to reduce the amount referred to in 2.1(c), and if
necessary 2.1(e); and,
(C) 25% first to reduce the amount referred to in 2.1(d), and if
necessary 2.1(f).
(iii) Any closing hereof without all of the MIG REIT Properties shall
require the prior written consent of MIGRA in its sole discretion.
(c) Limitation on Adjustments. Notwithstanding the above, in
no event shall the payment to be made pursuant to Section 2.1(b)(i) be reduced
pursuant to Section 2.4(a) or (b) to an amount less than 50% of the adjusted
aggregate Purchase Price, as decreased pursuant to Section 2.4(a) or as
increased or decreased pursuant to Section 2.4(b), and the parties shall reduce
the payment to be made pursuant to Section 2.1(e) and, if necessary, Section
2.1(f) so as to provide that the aggregate payments made hereunder will not
exceed the Purchase Price as adjusted hereunder. In no event shall the
percentage of the Purchase Price paid pursuant to Section 2.1(b)(i) be less
than 50% of the aggregate Purchase Price required to be paid hereunder.
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2.5 Disposition Fees. The amount of $2,316,000 and $2,500,000
set forth in each of Sections 2.1(e) and 2.1(f), respectively, shall be reduced
by 50% of the aggregate present value of the disposition and incentive fees
described in Schedule 2.5 which relate to properties which are neither sold to
AERC or whose owners have not consented to assignment to the Surviving
Corporation, MRI or AEMC, as the case may be, of the obligations of the
applicable MIGRA Company and/or affiliate as described in Section 2.4 on or
before the end of the Adjustment Period, such present value to be determined as
set forth in Schedule 2.5.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AERC
In order to induce MIGRA and the MIGRA Stockholders to enter
into this Agreement, AERC hereby represents and warrants to MIGRA and to the
MIGRA Stockholders that the statements contained in this Article III are true,
correct and complete.
3.1 Organization and Standing. AERC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Ohio with full power and authority (corporate and other) to own, lease, use
and operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. AERC is duly qualified to do business as a
foreign corporation and is in good standing under the laws of any other state of
the United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a Material
Adverse Effect (as defined in Section 9.2). AERC is not in default in the
performance, observance or fulfillment of any provision of its Articles of
Incorporation and Code of Regulations, in each case as in effect on the date
hereof (the "AERC Articles" and the "AERC Bylaws," respectively). AERC has
heretofore furnished to MIGRA and the MIGRA Stockholders a complete and correct
copy of the AERC Articles and AERC Bylaws.
3.2 Corporate Power and Authority. AERC has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Except for shareholder approval, the AERC Common Shares issuable pursuant to the
Merger and the other transactions contemplated by this Agreement (the "AERC
Shareholder Approval"), the execution by AERC of this Agreement and the
consummation by AERC of the transactions contemplated hereby (including the
issuance of the AERC Common Shares pursuant to the Merger) have been duly
authorized by all requisite corporate action on the part of AERC, including any
approvals required by the AERC Articles and the AERC Bylaws and the approval by
unanimous vote or consent of the Board of Directors of AERC (the "AERC Board
Recommendation"). This Agreement constitutes, and the other documents and
instruments to be delivered by AERC pursuant hereto when delivered will
constitute, the legal, valid and binding obligations of AERC, enforceable
against AERC in accordance with their respective terms.
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<PAGE> 14
3.3 Capitalization of AERC.
(a) As of September 30, 1997, AERC's authorized capital stock
consisted solely of (a) 41,000,000 AERC Common Shares, of which (i) 17,072,436
shares were issued and outstanding, and (ii) 1,963,083 shares were reserved for
issuance upon the exercise or conversion of options, warrants or convertible
securities granted or issuable by AERC, (b) 3,000,000 Class A Cumulative
Preferred Shares, without par value, of which 225,000 9 3/4% Class A Cumulative
Redeemable Preferred Shares ($250 liquidation preference per share) were issued
and outstanding, (c) 3,000,000 Class B Cumulative Preferred Shares, without par
value, of which none were issued and outstanding, and (d) 3,000,000
Noncumulative Preferred Shares, without par value, of which none were issued and
outstanding. Each outstanding share of AERC capital stock is duly authorized and
validly issued, fully paid and nonassessable, has not been issued in violation
of any preemptive or similar rights and has been issued in compliance with all
federal and state securities laws and the rules of the New York Stock Exchange
(the "NYSE"). The AERC Common Shares to be issued pursuant to this Agreement
have been duly authorized for issuance and when issued and delivered by AERC in
accordance with the provisions of this Agreement will be validly issued, fully
paid and non-assessable and will be issued free and clear of any liens, security
interests or other encumbrances of any kind whatsoever, other than those imposed
by securities laws or which are contemplated by Section 5.4. The AERC Common
Shares issued under this Agreement will not be subject to any preemptive or
similar rights. Assuming that the representations, warranties and covenants of
the MIGRA Stockholders set forth in the letters described in 6.3(j) shall be
true and complete, the AERC Common Shares to be issued pursuant to this
Agreement will be issued in compliance with all federal and state securities
laws and, if AERC is informed by the NYSE that AERC Shareholder Approval shall
have been obtained, the AERC Common Shares to be issued pursuant to this
Agreement will be issued in compliance with the rules of the NYSE.
3.4 Conflicts; Consents and Approvals. Neither the execution
and delivery by AERC of this Agreement nor the consummation by AERC of the
transactions contemplated by this Agreement will:
(a) conflict with or result in a breach of any provisions of
the AERC Articles or AERC Bylaws;
(b) result in a breach or violation of, a default under, or
the triggering of any payment or other material obligations pursuant
to, or accelerate vesting under, any of AERC's stock option plans, or
any grant or award under any of the foregoing;
(c) except for AERC's Credit Agreement with National City
Bank, violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of
notice or lapse of time or otherwise, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result
in the creation of any material lien, security interest, charge or
encumbrance upon, any of the properties of AERC or any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed
of trust or any license, franchise, permit, contract, undertaking,
agreement, lease or other instrument, or obligation to which AERC is a
party;
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<PAGE> 15
(d) violate any order, writ, injunction, or decree applicable
to AERC or, to the actual knowledge of AERC, any statute, rule or
regulation applicable to AERC; or
(e) require any action, consent, approval or authorization of,
review by, or declaration, filing or registration with, any third party
or any governmental authority, whether federal, state or local (a
"Governmental Authority"), other than (i) actions as may be required by
the Hart-Scott-Rodino Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), (ii) action to be
taken with respect to federal and state securities laws, (iii) the
filing of the Certificate of Merger with the Ohio Secretary of State,
(iv) the consent of National City Bank, and (v) AERC Stockholder
Approval;
except (i) in the case of clause (c) or (e) for any of the foregoing that are
set forth in Section 3.4 of the AERC Disclosure Schedule, (ii) in the case of
clauses (b) through (e) for any of the foregoing that would not, individually or
in the aggregate, have a Material Adverse Effect on AERC and (iii) in the case
of clause (e), for any of the foregoing which have been or will be obtained
prior to the Closing.
3.5 SEC Documents. AERC has filed all required forms, reports
and documents with the Securities and Exchange Commission ("SEC") required to be
filed by it pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations promulgated thereunder, all of which have complied
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act, respectively, and such rules and regulations. AERC has
previously furnished to MIGRA for delivery to the MIGRA Stockholders, copies of
all such forms, reports and documents filed by AERC with the SEC since January
1, 1994 (hereafter collectively referred to as the "Reports"). None of the
Reports, including, without limitation, any financial statements or schedules
included therein, at the time filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of AERC included in the Reports complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as otherwise noted in such financial statements) and
present fairly in all material respects the financial position, results of
operations, cash flows and changes in financial position of AERC and its
consolidated subsidiaries as of the dates or the periods indicated, subject, in
the case of unaudited interim consolidated financial statements, to normal
year-end adjustments.
(c) The AERC Common Shares to be issued under this Agreement
will be restricted shares within the meaning of the Securities Act.
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3.6 Absence of Certain Changes. Since June 30, 1997,
there has not been:
(a) (i) any change in the business, operations, assets,
properties, customer base, prospects, rights or condition (financial or
otherwise) of AERC, or (ii) any occurrence, circumstance or combination
thereof, in each case which has had a Material Adverse Effect on AERC;
or
(b) any material change in AERC's method of doing business or
any change in its accounting principles or practices or its method of
application of such principles or practices.
3.7 Brokerage and Finder's Fees. Neither AERC nor any of its
shareholders, directors, officers or employees has incurred, or will incur, on
behalf of AERC, any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement.
3.8 State Takeover Laws. Prior to the date hereof, the Board
of Directors of AERC has taken all action on the part of AERC, if any, necessary
to exempt under or make not subject to any state takeover law or other state law
that purports to limit or restrict business combinations or the ability to
acquire or vote shares: (i) the Merger and (ii) the other transactions
contemplated hereby.
3.9 REIT Status. AERC has qualified to be taxed as a real
estate investment trust pursuant to Section 856 through 860 of the Code for its
taxable years ended December 31, 1993, through December 31, 1996, and AERC
expects to so qualify for the fiscal year ending December 31, 1997.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MIGRA
In order to induce AERC to enter into this Agreement, MIGRA
and each of the MIGRA Stockholders, jointly and severally, hereby represent and
warrant to AERC and AEMC that the statements contained in this Article IV are
true, correct and complete.
4.1 Organization and Standing. MIGRA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida, with full power and authority (corporate and other) to own, lease, use
and operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. MIGRA is duly qualified to do business and
in good standing in each jurisdiction listed in Section 4.1 to the disclosure
schedule delivered by MIGRA to AERC and dated the date hereof (the "MIGRA
Disclosure Schedule"), is not qualified to do business in any other jurisdiction
and neither the nature of the business conducted by it nor the property it owns,
leases or operates requires it to qualify to do business as a foreign
corporation in any other jurisdiction, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a Material
Adverse Effect on MIGRA. MIGRA is not in default in the performance, observance
or fulfillment of any provision of its Articles of Incorporation, as amended and
restated, or its Bylaws, in each
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<PAGE> 17
case as in effect on the date hereof (the "MIGRA Articles" and the "MIGRA
Bylaws," respectively). MIGRA has heretofore furnished to AERC a complete and
correct copy of the MIGRA Articles and the MIGRA Bylaws.
4.2 Subsidiaries and Affiliates.
(a) MIGRA owns a 75% general partnership interest in Mortgage
Investors Group, Ltd. ("MIG Ltd."). MIGRA owns its interest in MIG Ltd. free and
clear of any pledge, mortgage, lien, charge or encumbrance of any kind
whatsoever (except any encumbrances contained in the MIG Ltd. Partnership
Documents, as defined below). MIG Ltd. is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Florida
with full power and authority (partnership and other) to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. MIG Ltd. is duly qualified to do business
and in good standing in each jurisdiction listed in Section 4.2 to the MIGRA
Disclosure Schedule, is not qualified to do business in any other jurisdiction
and neither the nature of the business conducted by it nor the property it owns,
leases or operates requires it to qualify to do business as a foreign limited
partnership in any other jurisdiction, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a Material
Adverse Effect on MIG Ltd. MIGRA is not in default in the performance,
observance or fulfillment of any provision of MIG Ltd's Partnership Agreement or
Partnership Certificate (the "MIG Ltd. Partnership Documents") nor, to its
actual knowledge, is any other partner thereof. MIGRA has heretofore furnished
to AERC a complete and correct copy of each of the MIG Ltd. Partnership
Documents.
(b) MIGRA owns a 40% general partnership interest in Stonemark
Investor Services, a general partnership ("Stonemark"). MIGRA owns its interest
in Stonemark free and clear of any pledge, mortgage, lien, charge or encumbrance
of any kind whatsoever (except any encumbrances contained in the Stonemark
Partnership Documents, as defined below). Stonemark is a general partnership
duly formed, validly existing and in good standing under the laws of the State
of Florida with full power and authority (partnership and other) to own, lease,
use and operate its properties and to conduct its business as and where now
owned, leased, used, operated and conducted. Stonemark is duly qualified to do
business and in good standing in each jurisdiction listed in Section 4.2 to the
MIGRA Disclosure Schedule, is not qualified to do business in any other
jurisdiction and neither the nature of the business conducted by it nor the
property it owns, leases or operates requires it to qualify to do business as a
foreign general partnership in any other jurisdiction, except where the failure
to be so qualified or in good standing in such jurisdiction would not have a
Material Adverse Effect on Stonemark. MIGRA is not in default in the
performance, observance or fulfillment of any provision of Stonemark's
Partnership Agreement or Partnership Certificate (the "Stonemark Partnership
Documents") nor, to its actual knowledge, is any other partner thereof. MIGRA
has heretofore furnished to AERC a complete and correct copy of each of the
Stonemark Partnership Documents.
(c) MIGRA owns a 1% general partnership interest in Mortgage
Investors Fund I, a limited partnership ("MIF I"). MIGRA owns its interest in
MIF I free and clear of any pledge, mortgage, lien, charge or encumbrance of any
kind whatsoever (except any encumbrances contained in MIF I Partnership
Documents, as defined below). MIF I is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of
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Michigan with full power and authority (partnership and other) to own, lease,
use and operate its properties and to conduct its business as and where now
owned, leased, used, operated and conducted. MIF I is duly qualified to do
business and in good standing in each jurisdiction listed in Section 4.2 to the
MIGRA Disclosure Schedule, is not qualified to do business in any other
jurisdiction and neither the nature of the business conducted by it nor the
property it owns, leases or operates requires it to qualify to do business as a
foreign limited partnership in any other jurisdiction, except where the failure
to be so qualified or in good standing in such jurisdiction would not have a
Material Adverse Effect on MIF I. MIGRA is not in default in the performance,
observance or fulfillment of any provision of MIF I's Partnership Agreement or
Partnership Certificate (the "MIF I Partnership Documents") nor, to its actual
knowledge, is any other partner thereof. MIGRA has heretofore furnished to AERC
a complete and correct copy of each of the MIF I Partnership Documents.
(d) MIGRA owns a 1% general partnership interest in Mortgage
Investors Fund II, a limited partnership ("MIF II"). MIGRA owns its interest in
MIF II free and clear of any pledge, mortgage, lien, charge or encumbrance of
any kind whatsoever (except any encumbrances contained in the MIF II Partnership
Documents, as defined below). MIF II is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware
with full power and authority (partnership and other) to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. MIF II is duly qualified to do business
and in good standing in each jurisdiction listed in Section 4.2 to the MIGRA
Disclosure Schedule, is not qualified to do business in any other jurisdiction
and neither the nature of the business conducted by it nor the property it owns,
leases or operates requires it to qualify to do business as a foreign general
partnership in any other jurisdiction, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a Material
Adverse Effect on MIF II. MIGRA is not in default in the performance, observance
or fulfillment of any provision of MIF II's Partnership Agreement or Partnership
Certificate (the "MIF II Partnership Documents") nor, to its actual knowledge,
is any other partner thereof. MIGRA has heretofore furnished to AERC a complete
and correct copy of each of the MIF II Partnership Documents.
(e) MIGRA owns a 1% general partnership interest in Mortgage
Investors Self Storage I, a limited partnership ("Storage"). MIGRA owns its
interest in Storage free and clear of any pledge, mortgage, lien, charge or
encumbrance of any kind whatsoever (except any encumbrances contained in the
Storage Partnership Documents. Storage is a general partnership duly formed,
validly existing and in good standing under the laws of the State of Florida
with full power and authority (partnership and other) to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Storage is duly qualified to do business
and in good standing in each jurisdiction listed in Section 4.2 to the MIGRA
Disclosure Schedule, is not qualified to do business in any other jurisdiction
and neither the nature of the business conducted by it nor the property it owns,
leases or operates requires it to qualify to do business as a foreign general
partnership in any other jurisdiction, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a Material
Adverse Effect on Storage. MIGRA is not in default in the performance,
observance or fulfillment of any provision of Storage's Partnership Agreement or
Partnership Certificate (the "Storage Partnership Documents") nor, to its actual
knowledge, is any other
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<PAGE> 19
partner thereof. MIGRA has heretofore furnished to AERC a complete and correct
copy of each of the Storage Partnership Documents.
(f) Except as set forth in (a) through (e) above or Section
4.2 or Section 4.4 of the MIGRA Disclosure Schedule, (i) neither MIGRA nor MIG
Ltd., Stonemark, MIF I, MIF II or Storage (such entities other than MIGRA
sometimes referred to herein collectively as the "Ventures") owns, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture or other entity or enterprise, and neither MIGRA nor
any of the Ventures is subject to any obligation or requirement to provide funds
to or make any investment (in the form of a loan, capital contribution or
otherwise) in any entity, except to the extent MIGRA is so bound with respect to
MIG Ltd. as provided in the MIG Ltd. Partnership Documents, and Stonemark, as
provided in the Stonemark Partnership Documents, and Storage, as provided in the
Storage Partnership Documents.
4.3 Corporate Power and Authority. MIGRA has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated by this
Agreement. Except for approval by the MIGRA Stockholders and Kathleen Gutin
("Gutin") in accordance with the FBCA and the MIGRA Articles and the MIGRA
Bylaws, the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of MIGRA, including unanimous approval by the Board
of Directors of MIGRA (the "MIGRA Board Recommendation"). Notwithstanding the
foregoing, MIGRA has all requisite power and authority to perform its
obligations hereunder and to consummate the Merger. This Agreement has been duly
executed and delivered by MIGRA and constitutes the legal, valid and binding
obligation of MIGRA, enforceable against MIGRA in accordance with its terms.
4.4 Capitalization. As of September 30, 1997, MIGRA's
authorized capital stock consisted solely of 100 shares of common stock, $1.00
par value per share ("MIGRA Common Stock"), of which (a) 85 shares were issued
and outstanding and (b) 15 shares were issued and held in treasury. Each
outstanding share of MIGRA capital stock is duly authorized and validly issued,
fully paid and nonassessable, and has not been issued in violation of any
pre-emptive or similar rights. Section 4.4 of the MIGRA Disclosure Schedule sets
forth the following, as of the date hereof: (a) the number of shares of MIGRA
Common Stock outstanding and (b) the liquidation preference for such shares,
including accumulated and unpaid dividends. Other than as set forth in Section
4.4 to the MIGRA Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale or transfer of
any securities of MIGRA by MIGRA or, to the actual knowledge of MIGRA and each
MIGRA Stockholder, any other person or entity, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of MIGRA, and MIGRA has no obligation of any kind to issue any additional
securities or to pay for securities of MIGRA or any predecessor. The issuance
and sale of all of the shares of capital stock described in this Section 4.4
have been in compliance with federal and state securities laws. The MIGRA
Disclosure Schedule accurately sets forth the names of, and the number of shares
of, each class of MIGRA capital stock. Except as set forth in Section 4.4 to the
MIGRA Disclosure Schedule, MIGRA has not agreed to register any securities under
the Securities Act or under any state
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<PAGE> 20
securities law or granted registration rights to any person or entity. Section
4.4 of the MIGRA Disclosure Schedule sets forth the equity structure of the
Ventures.
4.5 Conflicts; Consents and Approvals. Neither the execution
and delivery of this Agreement by MIGRA nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of,
the MIGRA Articles or the MIGRA Bylaws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the
giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any party (with the giving of notice, the
passage of time or otherwise) to terminate, accelerate, modify or call
a default under, or result in the creation of any material lien,
security interest, charge or encumbrance upon any of the properties or
assets of MIGRA or the Ventures (collectively, the "MIGRA Companies")
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which it is a
party;
(c) violate any order, writ, injunction or decree, or, to the
actual knowledge of MIGRA and each MIGRA Stockholder, any statute, rule
or regulations applicable to the MIGRA Companies; or
(d) require any action, consent, approval or authorization of,
or review by, or declaration, registration or filing by any of the
MIGRA Companies with, any third party or any Governmental Authority,
other than actions as may be required by the HSR Act, actions to be
taken with respect to federal and state securities laws, the filing of
the Certificate of Merger with the Ohio Secretary of State and the
Articles of Merger with the Florida Department of State and the
approval of the stockholders of MIGRA (other than the MIGRA
Stockholders);
except (i) in the case of clause (b) or (d) for any of the foregoing that are
set forth in Section 4.5 of the MIGRA Disclosure Schedule, (ii) in the case of
clauses (b) through (d) for any of the foregoing that would not, individually or
in the aggregate, have a Material Adverse Effect on the MIGRA Companies taken as
a whole and (iii) in the case of clause (d), for any of the forgoing which have
been or will be obtained prior to the Closing.
4.6 Absence of Certain Changes.
Except as expressly provided for or permitted under Section
5.3(a) of this Agreement, or as set forth in Section 4.6 to the MIGRA Disclosure
Schedule, since December 31, 1996, there has not been:
(a) (i) Any change in the business, operations, assets,
properties, customer base, prospects, rights or condition (financial or
otherwise) of the MIGRA Companies or (ii) any occurrence, circumstance,
or combination thereof which has had or which
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reasonably could be expected to result in a Material Adverse Effect on
the MIGRA Companies taken as a whole.
(b) Any declaration, setting aside or payment of any dividend
or any distribution (in cash or in kind) to any stockholder of MIGRA,
or any direct or indirect redemption, purchase or other acquisition by
MIGRA of any of its capital stock or issuance by MIGRA of any options,
warrants, rights or agreements to purchase or acquire such stock;
(c) Any transaction entered into or carried out by a MIGRA
Company involving a payment, individually or in the aggregate, in
excess of $100,000 other than in the ordinary and usual course of
business consistent with past practices;
(d) Any borrowing of, or agreement to borrow, funds by a MIGRA
Company, any incurring by a MIGRA Company of any other liability
(contingent or otherwise), except liabilities incurred in the usual and
ordinary course of its business (consistent with past practices), or
any endorsement, assumption or guarantee of payment or performance of
any loan or obligation of any other person by a MIGRA Company;
(e) Any material change in a MIGRA Company's method of doing
business or any change in its accounting principles or practices or its
method of application of such principles or practices;
(f) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance imposed or agreed to be
imposed on or with respect to the property or assets of a MIGRA
Company;
(g) Any sale, lease or other disposition of, or any agreement
to sell, lease or otherwise dispose of, any of the properties or assets
of a MIGRA Company, other than sales in the usual and ordinary course
of business for fair equivalent value to persons other than directors,
officers, stockholders, partners, or other affiliates of a MIGRA
Company;
(h) Any purchase of or any agreement to purchase assets (other
than purchases in the ordinary course of business consistent with past
practices) for an amount in excess of $50,000 for any one purchase or
$100,000 for all such purchases made by the MIGRA Companies
collectively or any lease or any agreement to lease, as lessee, any
capital assets with payments over the term thereof to be made by the
MIGRA Companies collectively exceeding an aggregate of $100,000;
(i) Any loan or advance made by a MIGRA Company to any person
which remains unpaid or will be unpaid as of Closing;
(j) Any modification, waiver, change, amendment, release,
rescission or termination of, or accord and satisfaction with respect
to, any material term, condition or provision of any Contract (as
defined in Section 4.17) to which a MIGRA Company is a party, or notice
thereof received by a MIGRA Company, other than any satisfaction
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<PAGE> 22
by performance in accordance with the terms thereof in the usual and
ordinary course of business; or
(k) Any labor dispute or disturbance materially and adversely
affecting the business operations or condition (financial or otherwise)
of a MIGRA Company, including without limitation the filing of any
petition or charge of unfair labor practice with any governmental or
regulatory authority, efforts to effect a union representation
election, actual or threatened employee strike, work stoppage or slow
down.
4.7 Officers, Employees and Compensation. Section 4.7 to the
MIGRA Disclosure Schedule sets forth the names of all directors, officers and
employees of the MIGRA Companies, the total salary, bonus, fringe benefits and
perquisites each received from the MIGRA Companies in the year ended December
31, 1996, and any changes to the foregoing which have occurred subsequent to
December 31, 1996. Except as disclosed in Section 4.7 to the MIGRA Disclosure
Schedule, there are no other forms of compensation paid to any such director,
officer or employee of the MIGRA Companies. Except as disclosed in Section 4.7
to the MIGRA Disclosure Schedule, the amounts accrued on the books and records
of the MIGRA Companies for vacation pay, sick pay, and all commissions and other
fees payable to agents, salesmen and representatives will be adequate to cover
liabilities for all such items. Except as set forth in Section 4.7 to the MIGRA
Disclosure Schedule, no MIGRA Company has become obligated, directly or
indirectly, to any stockholder, director or officer of MIGRA or partner of a
Venture or any person related to such person by blood or marriage, except for
current liability for such compensation. Except as set forth in Section 4.7 to
the MIGRA Disclosure Schedule, to the actual knowledge of MIGRA and each MIGRA
Stockholder, no stockholder, director, officer, agent or employee of the MIGRA
Companies or any person related to such person by blood or marriage holds any
position or office with or has any material financial interest, direct or
indirect, in any supplier, customer or account of, or other outside business
which has material transactions with, the MIGRA Companies. To the actual
knowledge of MIGRA and each MIGRA Stockholder, except as set forth in Schedule
4.7, no MIGRA Company has an agreement or understanding with any stockholder,
director, officer, partner, employee or representative thereof which would
influence any such person not to become associated with AERC from and after the
Closing or from serving the MIGRA Companies after the Closing in a capacity
similar to the capacity presently held.
4.8 Financial Statements.
(a) MIGRA has furnished to AERC the balance sheet of MIGRA and
the consolidated MIGRA Companies (MIG Ltd. and Stonemark) as of
December 31, 1996, and the related statements of income, changes in
stockholders' equity, and cash flows for the fiscal year then ended,
including, in each case, the related notes (collectively, the "Audited
Statements"), which are accompanied by the unqualified audit report of
Ernst & Young LLP. The Audited Statements, which have been initialed
for identification by the president of MIGRA, have been prepared from
and are in accordance with the books and records of the MIGRA and the
consolidated MIGRA Companies, and have been prepared in conformity with
GAAP applied on a consistent basis, and fairly present in all material
respects the financial condition of such companies as of the date
stated and the results of operations for the period then ended in
accordance with such practices.
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(b) When delivered in accordance with Section 5.3(d), each
balance sheet for MIGRA and the consolidated MIGRA Companies as of its
date and the related statements of income, changes in stockholders'
equity, and cash flows for the period beginning January 1, 1997 and
then ended, including the related notes (the "Interim Statements"),
shall have been prepared from and in accordance with the books and
records of such companies and in accordance with GAAP applied on a
basis consistent with that used in the Audited Statements, and shall
fairly present in all material respects the financial condition of such
companies as of such date and the results of operations for such period
in accordance with such practices, except for normal recurring audit
adjustments.
4.9 Taxes.
(a) Each of the MIGRA Companies has duly paid all taxes,
assessments, fees and other governmental charges (hereinafter, "taxes")
payable by it. Each MIGRA Company has duly filed all material federal,
state, local and foreign tax returns and tax reports required to be
filed by it and all such returns and reports are true, correct and
complete in all material respects. Except as disclosed in Section 4.9
to the MIGRA Disclosure Schedule, since December 31, 1988, none of such
returns and reports have been amended, and all taxes, arising under or
reflected on such returns and reports have been fully paid or shall be
fully accrued as liabilities in the Interim Statements, when delivered,
and shall be timely paid. No claim has been made by authorities in any
jurisdiction where a MIGRA Company did not file tax returns that it is
or may be subject to taxation therein.
(b) MIGRA has delivered or promptly after the earlier of
receipt of a requisite consent or execution and delivery of this
Agreement, will deliver to AERC copies of all federal, state, local,
and foreign income tax returns filed with respect to it and the MIGRA
Companies (and their respective predecessors) since their respective
formation. Section 4.9 of the MIGRA Disclosure Schedule sets forth the
dates and results of any and all audits conducted by taxing authorities
within the last five years or otherwise with respect to any tax year
for which assessment is not barred by any applicable statute of
limitations. Except as disclosed in Section 4.9 to the MIGRA Disclosure
Schedule, no waivers of any applicable statute of limitations for the
filing of any tax returns or payment of any taxes or assessments of any
deficient or unpaid taxes are outstanding; all deficiencies proposed as
a result of any audits have been paid or settled; and there is no
pending or, to the best knowledge of MIGRA, threatened federal, state,
local or foreign tax audit or assessment relating to a MIGRA Company
and there is no agreement with any federal, state, local, or foreign
taxing authority that may affect the subsequent tax liabilities of the
MIGRA Companies.
(c) [Intentionally Omitted]
(d) Except as set forth in Section 4.9 of the MIGRA Disclosure
Schedule, there exists no tax-sharing agreement or arrangement pursuant
to which any MIGRA Company is obligated to pay the tax liability of any
other person or to indemnify any other person with respect to any tax.
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(e) Section 4.9 of the MIGRA Disclosure Schedule includes a
list of all states, territories and jurisdictions to which any tax is
properly payable by the MIGRA Companies.
(f) MIGRA became an "S corporation," within the meaning of
Section 1361(a)(1) of the Code (an "S corporation"), for federal income
tax purposes on January 30, 1987, pursuant to a valid election made by
MIGRA, with the consent of all of its shareholders, and, except as set
forth in Section 4.9 of the MIGRA Disclosure Schedule, effective as of
such date, and MIGRA is and from such date always has been an S
corporation. MIGRA will not have, at the Effective Time, any earnings
or profits resulting from any period during which it (including any
predecessor in interest) was subject to taxation under Subchapter C of
the Code.
4.10 Compliance with Law.
(a) Except as set forth in Section 4.10 to the MIGRA
Disclosure Schedule and except for such matters as would not have a
Material Adverse Effect on the MIGRA Companies taken as a whole, the
MIGRA Companies are in compliance with all applicable laws, statutes,
orders, rules, regulations, policies or guidelines promulgated, or
judgments, decisions or orders entered by any Governmental Authority
(collectively, "Applicable Laws") to which the MIGRA Companies are
subject (i) including, without limitation, the Securities Act, the
Exchange Act, the Investment Advisors Act of 1940, as amended (the "40
Act"), the Employee Retirement Income Security Act, as amended
("ERISA"), any state or federal laws respecting rights of privacy and
all rules of professional conduct applicable to the MIGRA Companies and
(ii) excluding for the purposes of this Section 4.10, all Environmental
Laws (as defined in Section 4.22), as to which the sole representation
and warranty is set forth in Section 4.22. The MIGRA Companies have
heretofore made available to AERC copies of all material correspondence
received during the last three years from and to any Governmental
Authority and inspectors alleging a violation of any Applicable Law.
(b) Except as specifically set forth in Section 4.10 to the
MIGRA Disclosure Schedule, MIGRA and the MIGRA Companies, and each of
them, are (and as of the Effective Time will be) in full compliance
with the provisions of ERISA and all relevant state pension codes and
other laws (as and where applicable) with respect to the Pension Funds
and each of them is, or are, and at all relevant times have been, in
full compliance with the provisions of any individual or class
exemption relieving MIGRA, the other MIGRA Companies, and the Pension
Funds (as applicable) from compliance with relevant provisions of
ERISA, specifically including (without limitation) Prohibited
Transaction Class Exemption ("PTCE") No. 84-14 (March 13, 1984; as
amended Oct. 10, 1985) (relating to transactions by independent
qualified professional asset managers, or "QPAMs").
(c) Except as set forth in Section 4.10 of the MIGRA
Disclosure Schedule, neither MIGRA nor the other MIGRA Companies, or
any of them, is party to any contract, covenant or similar agreement or
undertaking, and no MIGRA Stockholder has actual knowledge of any
obligation under Applicable Law, which would prevent AERC
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from purchasing or offering to purchase the Managed Properties (as
defined in Section 4.12(c)), or any of them, from the Pension Funds (or
any corporation or trust in which the Pension Funds, individually or
collectively, have an interest) on or after the Effective Time,
provided full disclosure of all terms and affiliations, under terms
substantially identical to those set forth in Schedule 4.10(c) hereto,
is thereupon made to the applicable Pension Funds and all necessary or
appropriate independent approvals are provided (including, where
applicable, the receipt of an individual exemption from the relevant
provisions of Part 4, Title I of ERISA).
4.11 Intellectual Property. Set forth in Section 4.11 to the
MIGRA Disclosure Schedule is a true and complete list of (i) all of the MIGRA
Companies' foreign and domestic patents, patent applications, invention
disclosures filed in the patent offices of any countries, trademarks, service
marks or tradenames, copyrights (and any registrations or applications for
registration for any of the foregoing), and (ii) all material agreements to
which a MIGRA Company is a party which concern any Intellectual Property.
"Intellectual Property" shall mean proprietary rights of every kind, including,
without limitation, all domestic or foreign patents, patent applications,
intangible rights in inventions (whether or not patentable), products,
intangible rights in technologies, discoveries, copyrightable and copyrighted
works, apparatus, trade secrets, trademarks and trademark registration
applications and registrations, service marks and service mark registration
applications and registrations, trade names, trade dress, copyrights and
copyright registration applications and registrations, design rights, customer
lists, marketing and customer information, mask works rights, know-how,
licenses, technical information (whether confidential or otherwise), copyright
and trade secret rights in software, databases, methodologies and all
documentation thereof. The Intellectual Property set forth in Section 4.11 of
the MIGRA Disclosure Schedule, together with any other intellectual property
which a MIGRA Company owns or otherwise has the right to use, collectively is
sufficient for the operation of the business of the MIGRA Companies in
substantially the same manner as such business is at present conducted. Except
as set forth in Section 4.11 to the MIGRA Disclosure Schedule, MIGRA or another
MIGRA Company owns, free and clear of any liens, claims or encumbrances, the
Intellectual Property set forth thereon and has the exclusive right to bring
actions for the infringement thereof.
4.12 Title to and Condition of Properties.
(a) Except as set forth in Section 4.12 to the MIGRA
Disclosure Schedule, each MIGRA Company has good, valid and
indefeasible title to all of its material assets and properties of
every kind, nature and description, tangible or intangible, wherever
located, which constitute all of the property now used in and necessary
for the conduct of its business as presently conducted (including
without limitation all material property and assets shown or reflected
on the Audited Statements or the Interim Statements, when delivered,
but except for the real properties owned by the Ventures and the
Managed Properties, as defined in Section 4.12(c)). Except as set forth
in Section 4.12 to the MIGRA Disclosure Schedule and except for such
items as do not materially and adversely affect the use or operation of
the properties of each MIGRA Company, all such properties are owned
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions of any nature whatsoever, including
without limitation (i) rights or claims of parties in possession; (ii)
easements or claims of easements;
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(iii) encroachments, overlaps, boundary line or water drainage disputes
or any other matters; (iv) any lien or right to a lien for services,
labor or material furnished; (v) special tax or other assessments; (vi)
options to purchase, leases, tenancies, or land contracts; (vii)
contracts, covenants, or reservations which restrict the use of such
properties and (viii) violations of any Applicable Laws (other than
Environmental Laws, as to which the sole representation and warranty is
in Section 4.22) applicable to such properties. To the actual knowledge
of MIGRA and each MIGRA Stockholder, all such properties are usable for
their current uses without violating any Applicable Laws (other than
Environmental Laws, as to which the sole representation and warranty is
in Section 4.22), or any applicable private restriction, and such uses
are legal conforming uses in all material respects. Except as set forth
in Section 4.12 to the MIGRA Disclosure Schedule, no financing
statement under the Uniform Commercial Code or similar law naming
MIGRA, or, to the actual knowledge of MIGRA and each MIGRA Stockholder,
any Venture or any of their respective predecessors is on file in any
jurisdiction in which such MIGRA Company owns or manages property or
does business, and no MIGRA Company is a party to or bound under any
material agreement or legal obligation authorizing any party to file
any such financing statement. Section 4.12 to the MIGRA Disclosure
Schedule contains a complete and accurate list of the location of all
real property which is owned or leased, as lessee, by the MIGRA
Companies and describes the nature of their respective interest in that
real property. With respect to any real property leased, as lessee, by
a MIGRA Company, except as set forth in Section 4.12 of the MIGRA
Disclosure Schedule, such MIGRA Company has an insurable leasehold
interest in that real property.
(b) Except as set forth in Section 4.12 to the MIGRA
Disclosure Schedule, all plants and structures and all machinery and
equipment and tangible personal property owned, leased or used by the
MIGRA Companies are reasonably suitable for the purpose or purposes for
which they are being used (including compliance in all material
respects with all Applicable Laws, other than Environmental Laws (as to
which the sole representation and warranty is in Section 4.22), and are
in good and reasonable operating condition and repair, ordinary wear
and tear excepted. Section 4.12 to the MIGRA Disclosure Schedule lists,
and MIGRA has furnished or made available to AERC, copies of all
engineering, geologic and environmental reports prepared by or for the
MIGRA Companies with respect to the real property owned by MIGRA or any
MIGRA Company.
(c) With respect to each parcel of real property that is owned
by MIGRA, and/or a Venture or is managed by MIGRA or any of its
subsidiaries or affiliates (other than MIG Development Company), all of
which are listed on Exhibit A (each such parcel whether owned and/or
managed being hereinafter referred to as a "Managed Property"):
(i) True, correct and complete copies of all of the
following, together with any modifications or amendments
thereof which are currently in effect, have been or will be
made available to AERC promptly after the execution of this
Agreement: (A) all written leases and tenancy agreements with
tenants with respect to all or any portion of each Managed
Property ("Tenant Leases") and a current certified rent roll
(which shall be updated and certified by MIGRA as
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true, correct and complete to a date not earlier than three
days prior to the Closing), (B) all maintenance and service
contracts, supply contracts and other agreements, contracts
and contract rights relating to the ownership or operation of
each Managed Property, or any part thereof ("Project
Contracts"), and (C) all leases of equipment, vehicles and
other tangible personal property used by MIGRA in connection
with the management and operation of each Managed Property
("Personal Property Leases"). All of the Tenant Leases,
Project Contracts and Personal Property Leases are in full
force and effect. There has not occurred any action or failure
to act by MIGRA or the related owner of the Managed Property
("Owner") with respect to a Managed Property or, to the actual
knowledge of MIGRA and each MIGRA Stockholder, any other party
to any Tenant Lease, Project Contract or Personal Property
Lease which, with the giving of notice or the passage of time
or otherwise, would constitute a default in any material
respect or otherwise entitle either party to damages or a
right to terminate, and no such other party has given written
notice with respect to any adverse condition with respect to
any Managed Property or the use or repair of the same or of
any alleged material default by MIGRA or the related Owner
under any such Tenant Lease, Project Contract or Personal
Property Lease, which, individually or in the aggregate, will
have a material adverse effect on MIGRA or the Managed
Property. The information contained in the documents,
instruments or other writings to be delivered or made
available to AERC by MIGRA in accordance with the provisions
of this Section 4.12(c) was correct and accurate as of the
date of such writings.
(ii) Neither MIGRA nor any MIGRA Stockholder has any
actual knowledge that any federal, state and other taxes,
assessments, fees and other governmental charges with respect
to the Managed Property or the business conducted thereon
which are due and payable have not been paid prior to
delinquency.
(iii) Neither MIGRA nor any MIGRA Stockholder has
actual knowledge that any of the Permits (as defined in
Section 4.21(b)) are not currently valid and in full force and
effect.
(iv) Neither MIGRA nor any MIGRA Stockholder has
actual knowledge that each Managed Property, as constructed
and presently operated, does not comply with all applicable
zoning ordinances and regulations that any variances or
conditional use permits have been issued by any governmental
body which affect any Managed Property.
(v) True and correct copies of all financial
statements and records relating to each Managed Property, or
access thereto, will be made available promptly after the
earlier of the execution of a consent or a Purchase Agreement
by the Owner of such Managed Property. Copies of relevant
pages of each related Owner's tax returns for the calendar
years 1994, 1995 and 1996 relating to the Managed Property and
any other document or instrument reasonably requested by AERC
shall be delivered to AERC within three (3) days following
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the execution of this Agreement. There has been no material
adverse financial change with respect to any Managed Property
from that shown in the financial statements, tax returns and
records delivered or made available to AERC by MIGRA for such
Managed Property pursuant to this Agreement and there are no
material liabilities with respect to such Managed Property
other than those shown on such financial statements, tax
returns and records.
(vi) There are no brokerage commissions owing by
MIGRA or any affiliate thereof (A) with respect to any of the
Tenant Leases or otherwise relating to each Managed Property
which have not been paid and (B) no ongoing commission or
leasing fee obligations with respect to any Managed Property.
(d) Except as otherwise expressly provided in this Agreement,
the representations and warranties in this Section 4.12 are the sole
representations and warranties by MIGRA and/or the MIGRA Stockholders
with respect to the Managed Properties.
4.13 Investment Advisor.
(a) Investment Contracts, Funds and Clients.
(i) To the actual knowledge of MIGRA and the MIGRA
Stockholders, none of MIGRA, MIG Ltd. or any of their
respective subsidiaries currently serves, or has served at any
time during the past two fiscal years, as an investment
adviser (including sub-investment adviser), manager,
administrator, fund accountant, transfer agent and/or
distributor to any investment company, or series or portfolio
thereof, as that term is defined in Section 3 of the
Investment Company Act of 1940, as amended (the "ICA").
(ii) Section 4.13(a)(ii) to the MIGRA Disclosure
Schedule sets forth: (A) a list of all funds, trusts or other
accounts owned or controlled by MIGRA or MIGRA Ltd. that would
otherwise be deemed to be an investment company as defined in
the ICA but for the exemption contained in Section 3(c)(1),
the final clause of Section 3(c)(3), Section 3(c)(7), Section
3(c)(9), Section 3(c)(10) or Section 3(c)(11) of the ICA to
which MIGRA, MIG Ltd. or any of their respective subsidiaries
provide investment advisory, broker-dealer, administrative,
transfer agency, accounting, custody, management and/or
distribution services (each a "Fund") including (1) the assets
under management of each Fund, (2) the fee revenues applicable
to each Fund, (3) a description of the fees, including any
formula for the calculation thereof, charged to each Fund, (4)
the annualized revenues for each Fund, and (5) identification
of each exception from the definition of an investment company
under the ICA relied upon by such Fund; (B) a list of all
accounts of clients to which MIGRA, MIG Ltd. or any of their
respective subsidiaries provide management, investment
advisory, broker-dealer, transfer agency, accounting, custody,
administrative or distribution services on the date hereof,
including any Funds (each, a "Client"), identifying as to each
such account (1) the Client corresponding to such account, and
(2) whether such
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account is an institutional advisory account (an "ICG
Account") or a private client advisory account (a "PCG
Account")(all ICG and PCG Accounts are hereafter collectively
referred to as "Accounts"); (C) on an Account-by-Account
basis, the aggregate market value of assets under management,
a description of the fees charged and how such fees are
calculated, the fee revenues applicable to each ICG Account
and PCG Account, and the annualized revenues from each of the
ICG Accounts and PCG Accounts; (D) a summary of the total
assets under management and total annualized revenues for all
Accounts; and (E) true and correct form of all contracts in
effect on the date hereof to which MIGRA, MIG Ltd. or any of
their respective subsidiaries is a party pursuant to which
MIGRA, MIG Ltd. or their respective subsidiaries, as the case
may be, provides to any Client management, investment
advisory, broker-dealer, distribution, transfer agency,
accounting, custody, and/or administrative services (an
"Investment Contract"). Each Investment Contract and any
subsequent renewal thereof has been duly authorized, executed
and delivered by MIGRA, MIG Ltd. or their respective
subsidiaries, as the case may be, and, to the extent
applicable, is in compliance in all material respects with
Section 205 of the 40 Act and is a valid and binding agreement
of MIGRA, MIG Ltd. or their respective subsidiaries, as the
case may be, enforceable against MIGRA, MIG Ltd. or their
respective subsidiaries, as the case may be, in accordance
with its terms, and each of MIGRA or MIG Ltd., the applicable
subsidiary, the Fund and the Client party thereto is in
compliance in all material respects with the terms of each
Investment Contract to which it is a party, and to the best
knowledge of MIGRA and the MIGRA Stockholders, MIG Ltd., no
event has occurred or condition exists that constitutes or
with notice or the passage of time would constitute a default
thereunder. Except as set forth on Section 4.13(a)(ii) to the
MIGRA Disclosure Schedule, none of the Investment Contracts,
or any other arrangements or understandings relating to
rendering of investment advisory or management services,
including without limitation, all subadvisory services,
administration or distribution services to any Fund, Client or
other Person, contains any undertaking by MIGRA, MIG Ltd. or
their respective subsidiaries to cap fees or to reimburse any
or all fees thereunder.
(iii) Each Fund and Account has been, is being and
will be operated and/or managed in all material respects in
compliance with (A) its respective objectives, policies and
descriptions, including without limitation any limitation set
forth in the applicable prospectus or other offering document
for a Fund or governing instruments for a Fund or Account and
(B) all Applicable Laws.
(iv) To the best of MIGRA's knowledge, each Fund has
timely filed all tax returns and reports that such Fund is
required to file. Each Fund has timely paid, or reserved for,
taxes that such Fund is required to pay.
(b) Regulatory Compliance.
(i) (A) No Fund or Account is or has been required by
law to be registered as an Investment Company under the ICA;
(B) the shares of each Fund
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are duly and validly issued, fully paid and nonassessable and
are qualified for sale, or an exemption therefrom is in full
force and effect, in each state and territory of the United
States and the District of Columbia to the extent required
under Applicable Law; (C) all outstanding shares of each Fund
that were required to be registered under the Securities Act
have been sold pursuant to an effective registration statement
filed thereunder or were sold in compliance with an exemption
therefrom; (D) no such prospectus or offering document
relating to a Fund contained, as of its effective date, any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein in order to make
the statements therein not misleading or is subject to any
stop order or similar order restricting its use; and (E) each
Fund has operated and is currently operating in all material
respects in compliance with all laws applicable to it or its
business, including but not limited to the Securities Act, the
ICA and the 40 Act, and, assuming that each Fund, Account and
any other client of MIGRA or MIG Ltd. consent to the
assignment of their Investment Contract as required by the 40
Act prior to the merger of MIGRA into AERC, consummation of
the transactions contemplated hereby will not result in a
violation of any such laws.
(ii) Each Fund is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization and has full power, right and authority to own
its properties and to carry on its business as it is now
conducted, and is qualified to do business in each
jurisdiction where failure to so qualify would have a material
adverse effect. For purposes of this Section 4.13(b)(ii), a
Material Adverse Effect shall mean a material adverse effect
on the condition (financial or other), business, properties,
net worth or results of operations of a Fund.
(iii) The policies of MIGRA and MIG Ltd., as the case
may be, with respect to avoiding conflicts of interest, or the
conflicts or interest that exist, as the case may be, are set
forth in the most recent Form ADV thereof (or incorporated by
reference therein), as amended. There have been no violations
or allegations of violations of such policies that have
occurred or been made.
(iv) Neither MIGRA, MIG Ltd., their respective
subsidiaries, any Fund, nor, to the actual knowledge of MIGRA
and the MIGRA Stockholders, any person "associated" (as
defined under the 40 Act) with the any of them, has, for a
period of not less than ten years prior to the date hereof
been convicted of any crime or is or has been subject to any
disqualification that would be a basis for denial, suspension
or revocation or registration of an investment adviser under
Section 203(e) of the 40 Act or Rule 206(4)-4(b) thereunder or
a broker-dealer under Section 15 of the Exchange Act or for
disqualification as an investment adviser for any Investment
Company pursuant to Section 9(a) of the ICA, and there is no
basis for, or proceeding or investigation that is reasonably
likely to become the basis for, any such disqualification,
denial, suspension or revocation.
(v) Each current prospectus (which term, as used in
this Agreement, shall include any related statement of
additional information and any private placement
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<PAGE> 31
memorandum), as amended or supplemented, relating to each
Fund, and all current supplemental advertising and marketing
material relating to each Fund or used by MIGRA or MIG Ltd.
complies in all material respects with the Securities Act and
the rules and regulations thereunder, the ICA and the rules
and regulations thereunder, the 40 Act and the rules and
regulations thereunder, applicable state laws and, where
applicable, the rules and regulations of the National
Association of Securities Dealers, Inc. or any affiliate
thereof (NASD). None of such prospectuses, amendments,
supplements or supplemental advertising and marketing
materials, as of their respective dates, includes, included or
will include an untrue statement of a material fact or omits,
omitted or will omit to state a material fact necessary in
order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(vi) Both MIGRA and MIG Ltd. have operated and are
currently operating their investment advisory business in
compliance with all Applicable Laws in all material respects,
including, without limitation, the Exchange Act, the 40 Act
and the rules and regulations thereunder.
(vii) MIGRA's and MIG Ltd.'s practices and the
practices of their subsidiaries are, and have been at all
times since May 1, 1986 and July 6, 1987, respectively, in all
material respects in compliance with the provisions of the
Exchange Act, the 40 Act and similar state laws, and the rules
and regulations under each, relating to the selection of
brokers to execute transactions in Clients' accounts. Neither
MIGRA nor MIG Ltd. has purchased or sold securities for
Clients' accounts.
(viii) There exists no "out of balance" or similar
condition with respect to any customer account maintained by
MIGRA, MIG Ltd., their respective subsidiaries, or any Fund.
(ix) None of MIGRA, MIG Ltd. or any of their
respective subsidiaries has been, or is currently required to
be, registered as a broker-dealer with the SEC under ss.15 of
the Exchange Act or with any state securities administrator
under any applicable state securities laws.
(x) None of MIGRA, MIG Ltd. or any of their
respective subsidiaries has been or currently is registered,
or is required to be registered, as a "commodity pool
operator" or a "commodity trading advisor" with the
Commodities Futures Trading Commission.
(c) Investment Adviser Registration. MIGRA and MIG Ltd. each
are duly registered as an investment adviser under the 40 Act and under
all applicable state, federal and foreign investment adviser or related
laws. MIGRA and MIG Ltd. have delivered to AERC a true and complete
copy of both MIGRA's and MIG Ltd.'s currently effective Form ADV, as
filed with the SEC and has made available to AERC all state, federal
and foreign registration forms, all prior Form ADV filings and all
reports filed by both MIGRA and MIG Ltd. with the SEC under the 40 Act
and the rules promulgated
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thereunder or otherwise and under similar state, federal and foreign
statutes within the last five years, and will provide to AERC such
forms and reports as are filed from and after the date hereof and prior
to the Closing Date. The information contained in such forms and
reports was or will be true and complete as of the time of filing and,
except as indicated on a subsequent form or report filed before the
Closing Date, continues to be true and complete. Each such registration
is in full force and effect, and MIGRA and MIG Ltd. agree to maintain
such registration between the date of this Agreement and the
consummation of the Merger.
(d) Status of Accounts. Except as indicated in Section 4.13 of
the MIGRA Disclosure Schedule, no Client has provided any notice in
writing to MIGRA or MIG Ltd. of, and no MIGRA Stockholder has any
actual knowledge that any Client has, any intent to (i) terminate its
Investment Contract with such MIGRA Company, or (ii) reduce the amount
of assets under management by such MIGRA Company. Neither MIGRA or MIG
Ltd. nor any MIGRA Stockholder has encouraged any Client to take any
action described in the preceding sentence nor, to the actual knowledge
of MIGRA and each MIGRA Stockholder, is there any existing state of
facts or circumstances, or any state of facts or circumstances arising
solely by virtue of the consummation of the transactions which are the
subject of this Agreement, which would require any Clients under
Applicable Laws or by an applicable Contract to take any action
described in the preceding sentence.
4.14 Litigation. Except (i) as set forth in Section 4.14 to
the MIGRA Disclosure Schedule and (ii) suits, claims or actions fully covered
(subject to deductible amounts) by insurance policies issued by an insurer(s)
and which has been accorded a rating by A.M. Best Company, Inc. (or any
successor rating agency) of A-/X (or any replacement rating of equivalent
stature) or better, and as to which such insurer has not disputed coverage,
there is no suit, claim, action, proceeding or formal or informal investigation
(an "Action") pending or, to the actual knowledge of a MIGRA Company (or any
MIGRA Stockholder), threatened against MIGRA or any officer or director of any
MIGRA Company which, individually or in the aggregate, if adversely determined,
would have a Material Adverse Effect on the MIGRA Companies taken as a whole or
a Material Adverse Effect on the ability of the MIGRA to consummate the
transactions contemplated hereby. No MIGRA Company is subject to any outstanding
order, writ, injunction or decree which, individually or in the aggregate,
insofar as can be reasonably foreseen, could have a Material Adverse Effect on
the MIGRA Companies taken as a whole or a Material Adverse Effect on the ability
of MIGRA to consummate the transactions contemplated hereby. Except as set forth
in Section 4.14 to the MIGRA Disclosure Schedule, (i) there has not been any
Action which is pending, or to the actual knowledge of MIGRA and each MIGRA
Stockholder, threatened against a MIGRA Company relating to its method of doing
business or its relationship with past, existing or future users or purchasers
of its services, and (ii) no MIGRA Company has been subject to any outstanding
order, writ, injunction or decree relating to its method of doing business or
its relationship with past, existing or future customers, lessees, users,
purchasers or licensees of any Intellectual Property or services, in any such
case within the three (3) years prior to the date hereof.
4.15 Brokerage and Finder's Fees; Expenses. Neither any MIGRA Company
nor any stockholder, director or officer, partner which is an affiliate of MIGRA
or employee
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thereof, has incurred or will incur on behalf of a MIGRA Company, any brokerage,
finder's or similar fee in connection with the transactions contemplated by this
Agreement.
4.16 Employee Benefit Plans.
(a) For purposes of this Section 4.16, the following terms
have the definitions given below:
"Controlled Group Liability" means any and all liabilities
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections
412 and 4971 of the Code, (iv) the continuation coverage requirements
of section 601 et seq. of ERISA and Section 4980B of the Code, and (v)
corresponding or similar provisions of foreign laws or regulations, in
each case other than pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
"Plans" means all written and material non-written employee
benefit plans, programs, policies, practices, and other arrangements
providing benefits to any employee or former employee or beneficiary or
dependent thereof, and whether covering one person or more than one
person, sponsored or maintained by MIGRA Companies or any of its
subsidiaries or to which MIGRA or any of its subsidiaries contributes
or is obligated to contribute. Without limiting the generality of the
foregoing, the term "Plans" includes all employee welfare benefit plans
within the meaning of Section 3(1) of ERISA and all employee pension
benefit plans within the meaning of Section 3(2) of ERISA.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer
Plan, as those terms are defined in Part I of Subtitle E of Title IV of
ERISA.
(b) Except as set forth in Section 4.16 to the MIGRA
Disclosure Schedule:
(i) Section 4.16 to the MIGRA Disclosure Schedule
lists all Plans. With respect to each Plan, MIGRA has made
available to AERC a true, correct and complete copy of: (A)
all current plan documents, benefit schedules, trust
agreements, and insurance contracts and other funding
vehicles; (B) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (C) the current summary
plan description, if any; (D) the most recent annual financial
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report, if any; and (E) the most recent determination letter
from the Internal Revenue Service, if any.
(ii) The Internal Revenue Service has issued a
favorable determination letter with respect to each Plan that
is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Plan"), and each
Qualified Plan has been operated in material compliance with
the Code.
(iii) All contributions required to be made to any
Plan by Applicable Laws or by any plan document or other
contractual undertaking, and all premiums due or payable with
respect to insurance policies funding any Plan, for any period
through the date hereof have been timely made or paid in full
and through the Closing Date will be timely made or paid in
full or, to the extent not required to be made or paid on or
before the date hereof or the Closing Date, as applicable,
have been or will be fully reflected in the Audited Statements
and the Interim Statements.
(iv) MIGRA and its subsidiaries have complied, and
are now in material compliance with all provisions of ERISA,
the Code and all laws and regulations applicable to the Plans.
Each Plan has been operated in material compliance with its
terms. There is not now, and there are no existing,
circumstances that could give rise to, any requirement for the
posting of security with respect to a Plan or the imposition
of any lien on the assets of MIGRA or any of its subsidiaries
under ERISA or the Code. Each Plan includes provisions which
reserve the rights of the sponsor of the Plan to amend or
terminate the Plan.
(v) No Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. No Plan is a
"multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under
common control, within the meaning of Section 4063 of ERISA (a
"Multiple Employer Plan"), nor has MIGRA or any of its
subsidiaries or any of their respective ERISA Affiliates, at
any time within five years before the date hereof, contributed
to or been obligated to contribute to any Multiemployer Plan
or Multiple Employer Plan.
(vi) Except for the continuation coverage
requirements of Section 601 ET SEQ. of ERISA and Section 4980B
of the Code, there does not now exist, and there are no
existing, circumstances that could result in, any Controlled
Group Liability that would be a liability of MIGRA or any of
its subsidiaries following the Closing. Without limiting the
generality of the foregoing, neither MIGRA nor any of its
subsidiaries nor any of their respective ERISA Affiliates has
engaged in any transaction described in Section 4069 or
Section 4204 of ERISA.
(vii) Except for health continuation coverage as
required by Section 4980B of the Code or Part 6 of Title I of
ERISA or as required by applicable
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state insurance laws, neither MIGRA nor any of its
subsidiaries has any liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or
dependents thereof.
(viii) Except as set forth in Section 4.16(i) to the
MIGRA Disclosure Schedule, neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated hereby will result in, cause the accelerated
vesting or delivery of, or increase the amount or value of,
any payment or benefit to any employee, officer, director or
consultant of MIGRA or any of its subsidiaries and Section
4.16(i) to the MIGRA Disclosure Schedule specifies the amount
of any such payment or benefit. Without limiting the
generality of the foregoing and except as set forth in Section
4.16(i) to the MIGRA Disclosure Schedule, no amount paid or
payable by MIGRA or any of its subsidiaries in connection with
the transactions contemplated hereby either solely as a result
thereof or as a result of such transactions in conjunction
with any other events will be an "excess parachute payment"
within the meaning of Section 280G of the Code.
(ix) There are no pending or, to the knowledge of
MIGRA, threatened claims (other than claims for benefits in
the ordinary course), lawsuits or arbitrations which have been
instituted against the Plans, or, to the knowledge of MIGRA,
any fiduciaries thereof with respect to their duties to the
Plans or the assets of any of the trusts under any of the
Plans which could reasonably be expected to result in any
material liability of MIGRA or any of its subsidiaries.
(x) Each of the Plans is, and has always been,
operating in material compliance with all applicable laws, and
all persons who participate in the operation of such Plans and
all Plan "fiduciaries" (within the meaning of Section 3(21) of
ERISA) have always acted in material compliance with
applicable laws, the Plan documents and written descriptions
of the Plans, and Part 4 of Title I of ERISA.
(xi) Each Plan that is intended to qualify for
favorable tax treatment under Code Section 125 so qualifies
and has been operated in material compliance with Code Section
125.
(xii) Full payment has been made, or shall be made in
accordance with 29 C.F.R. ss. 2510.3-102 (to the extent
applicable with regard to employee contributions), of all
amounts which MIGRA or any affiliate thereof is required to
pay under the terms of each of the Plans subject to such
Department of Labor regulation (with regard to employee
contributions), and all such amounts properly accrued through
the Effective Time with respect to the current plan year
thereof will be timely paid. Each Plan sponsored or maintained
by MIGRA which is an "employee welfare benefit plan" (within
the meaning of Section 3(1) of ERISA) is, and at all relevant
times within the past three (3) years has been, fully insured
by one (1) or more insurance companies licensed to engage in
the business of insurance in the State of Florida.
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4.17 Contracts.
(a) Section 4.17 to the MIGRA Disclosure Schedule lists all
written contracts, agreements, guarantees, leases and executory commitments
which are material, individually or in the aggregate, to the business or
financial condition or results of operations of the MIGRA Companies taken as a
whole, which shall be deemed to include, without limitation, any thereof that
require future payments in excess of $100,000 (each a "Contract") to which a
MIGRA Company is a party. The foregoing dollar amount shall be a measure of
materiality solely for the purpose of the definition of the term "Contract." The
listing of Contracts separately lists all management agreements or similar
agreements relating to the Managed Properties ("Management Contracts") and all
agreements by and between a MIGRA Company and any Pension Fund or similar entity
to which any MIGRA Company provides investment advice ("Pension Fund
Contracts"). All such Contracts are valid and binding obligations of the MIGRA
Company named therein and, to the actual knowledge of MIGRA and each MIGRA
Stockholder, of each other party thereto. Section 4.17 to the MIGRA Disclosure
Schedule describes each termination or non-renewal that has occurred with
respect to any Contract with any customer or licensee of Intellectual Property
from January 1, 1996 to the date of this Agreement. Neither any MIGRA Company
nor, to the actual knowledge of MIGRA and each MIGRA Stockholder, any other
party thereto is in violation of or in default in respect of, nor has there
occurred an event or condition with respect to a MIGRA Company or to the actual
knowledge of MIGRA and each MIGRA Stockholder, any party thereto, which with the
passage of time or giving of notice (or both) would constitute a default under
or permit the termination of, any Contract.
(b) Except as set forth in Section 4.17 of the MIGRA
Disclosure Schedule or as contemplated by any other provision of this Agreement
or the transactions contemplated hereby, there are no Contracts or other
transactions between a MIGRA Company, on the one hand, and any officer or
director of MIGRA or any partner of a MIGRA Company.
4.18 [INTENTIONALLY OMITTED.]
4.19 Labor Matters. Except as set forth in Section 4.19 to the
MIGRA Disclosure Schedule, no MIGRA Company has any labor contracts, collective
bargaining agreements or employment or consulting agreements with any persons
employed by it or any persons otherwise performing services primarily for it
(the "MIGRA Company Business Personnel"). No MIGRA Company has engaged in any
unfair labor practice with respect to Company Business Personnel, and there is
no unfair labor practice complaint pending or, to the actual knowledge of MIGRA
and each MIGRA Stockholder, threatened, against any MIGRA Company with respect
to MIGRA Company Business Personnel. There is no labor strike, dispute, slowdown
or stoppage pending or, to the knowledge of MIGRA, threatened against any MIGRA
Company.
4.20 Undisclosed Liabilities. Except (i) as and to the extent
disclosed or reserved against on the balance sheet of MIGRA as of August 31,
1997 included in the Interim Statements, (ii) as incurred after the date thereof
in the ordinary course of business consistent with prior practice and not
prohibited by this Agreement, (iii) as set forth in Section 4.20 to the MIGRA
Disclosure Schedule or (iv) as set forth on Schedule A, no MIGRA Company has any
liabilities or obligations (other than liabilities or obligations for
Environmental Laws, as to which
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the sole representation and warranty is in Section 4.22) of any nature, whether
known or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due, that, individually or in the aggregate, could have a Material
Adverse Effect on the MIGRA Companies taken as a whole.
4.21 Operation of MIGRA's Business; Relationships.
(a) The relationships of the MIGRA Companies with their
respective clients and suppliers (including, without limitation, data
suppliers) are satisfactory and, to the actual knowledge of MIGRA and
each MIGRA Stockholder, the execution of this Agreement, the
consummation of the Merger and the other transactions contemplated
hereby will not materially adversely affect the relationships of the
MIGRA Companies with such clients or suppliers, provided that the
foregoing is not a representation and warranty that any such client or
supplier will provide any consent or approval of any such relationship
with AERC.
(b) MIGRA is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease,
manage and operate its properties and to the actual knowledge of MIGRA
and each MIGRA Stockholder, each Venture, their respective properties
and the owners of the Managed Properties with respect to the Managed
Properties, and MIGRA and each Venture has all of the foregoing
necessary to carry on its business as it is now being conducted
(collectively, the "Permits"), and there is no Action pending or, to
the actual knowledge of MIGRA and each MIGRA Stockholder, threatened
regarding any of the Permits. No MIGRA Company or Managed Property is
in conflict with, or in default or violation of any of the Permits,
except for any such conflicts, defaults or violations which,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the MIGRA Companies taken as a whole.
During the period commencing on January 1, 1997, and ending on the date
hereof, no MIGRA Company has received any notification alleging a
possible conflict, default or violation by a MIGRA Company of
Applicable Laws. The representations and warranties in this Section
4.21(b) shall not be deemed to be applicable with respect to Permits
under Environmental Laws.
4.22 Environmental Matters.
(a) As used herein, the term "Environmental Laws" means all
federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or industrial, toxic or hazardous substances
or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice
letters, orders, permits, plans or regulations issued, entered,
promulgated or approved thereunder.
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(b) During the period commencing January 1, 1994, and ending
on the Effective Time, except as set forth in Section 4.22 of the MIGRA
Disclosure Schedule, no MIGRA Company has received any written
notification from a Governmental Authority alleging a possible
conflict, default or violation of Environmental Laws relating to the
Managed Properties.
4.23 FBCA and State Takeover Laws. Prior to the date hereof,
the Board of Directors of MIGRA has taken all action on the part of MIGRA, if
any, necessary to exempt under or make not subject to any state takeover law or
other state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares: (i) the Merger and (iii) the other
transactions contemplated hereby.
4.24 Insurance. Except as set forth in Section 4.24 to the
MIGRA Disclosure Schedule, the MIGRA Companies are presently insured, and during
each of the past five calendar years have been insured, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. Except as set forth in Section 4.24 to the
MIGRA Disclosure Schedule, the policies of fire, theft, liability, professional
practice and other insurance maintained with respect to the assets or businesses
of the MIGRA Companies may be continued by the Surviving Corporation without
modification or premium increase after the Effective Time and for the duration
of their current terms which terms expire as set forth in Section 4.24 to the
MIGRA Disclosure Schedule.
4.25 Books of Account; Records. Each MIGRA Company's general
ledgers, stock record books, minute books and other material records relating to
the assets, properties, contracts and outstanding legal obligations of such
MIGRA Company are, in all material respects, complete and correct, and have been
maintained in accordance with good business practices and the matters contained
therein are appropriate and accurately reflected in the Audited Statements and
the Interim Statements.
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ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period
from and after the execution of this Agreement.
5.1 Mutual Covenants.
(a) General. Each of the parties shall use its reasonable
efforts to take all action and to do all things necessary, proper or
advisable to consummate the Merger and the transactions contemplated by
this Agreement (including, without limitation, using its reasonable
efforts to cause the conditions set forth in Article VI for which they
are responsible to be satisfied as soon as reasonably practicable and
to prepare, execute and deliver such further instruments and take or
cause to be taken such other and further action as any other party
hereto shall reasonably request).
(b) Other Governmental Matters. Each of the parties shall use
its reasonable efforts to take any additional action that may be
necessary, proper or advisable in connection with any other notices to,
registrations or filings with, and authorizations, consents and
approvals of any Governmental Authority (and, in the case of AERC, the
NYSE) that it may be required to give, make or obtain.
(c) Public Announcements. AERC and MIGRA shall consult with
each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any transaction
contemplated herein and shall not issue any such press release or make
any such public statement without the prior consent of MIGRA and AERC,
respectively, which consent shall not be unreasonably withheld or
delayed; PROVIDED, HOWEVER, that AERC or MIGRA may, without the prior
consent of the other, issue such press release or make such public
statement as may be required by law or the rules of the NYSE if it has
used its reasonable efforts to consult with the other and to obtain
consent but has been unable to do so in a timely manner.
(d) Investment Advisory Contracts. Each of MIGRA and AERC
shall use its reasonable efforts (which shall not include the payment
of money) to obtain, prior to the Closing Date, the consent of the
applicable parties to the Relevant Contracts to the assignment of the
Relevant Contracts to AERC or, within 90 days of the Closing Date to
enter into the New Relevant Contracts.
(e) Tax-Free Treatment. Each of MIGRA and AERC shall use all
reasonable efforts to cause the Merger to constitute a tax-free
"reorganization" under Section 368(a) of the Code including, without
limitation, reporting the Merger as a tax-free reorganization and in
exercising the election set forth in Section 5.2(l) in a manner that is
consistent with such treatment.
(f) Confidentiality. From the date hereof to the Effective
Time, MIGRA will make available for inspection by designated officers,
attorneys, accountants and other
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representatives of AERC (collectively, "AERC Representatives"), at all
reasonable times during normal business hours, such financial and other
information relating to the business, financial condition and
management of its businesses, including the records and files,
correspondence, audits and properties, as well as all information
relating to commitments, contracts, titles and financial position, or
otherwise pertaining to the business and affairs, of the MIGRA
Companies, and the identity of, and, to the extent not prohibited or
otherwise restricted by confidentiality or other obligations,
information pertaining to, the Pension Funds and any other Clients, as
AERC may reasonably request to enable such party to make a reasonably
informed judgment as to whether to consummate the Merger and the
transactions contemplated hereby (all such information is referred to
collectively herein as the "Proprietary Information"). Except as
otherwise provided herein, AERC shall (i) keep confidential all such
Proprietary Information, and (ii) not disclose any of the Proprietary
Information to any other person and (iii) not use or make use of the
Proprietary Information for (A) any purpose other than making such
reasonably informed judgment or (B) the furtherance of its own business
or that of any other person or entity or the detriment of the other
party's business; PROVIDED, HOWEVER, the foregoing undertaking will not
apply to: (i) disclosures to which the other party consents in writing;
(ii) information which is or becomes known or available publicly other
than as a result of a disclosure in violation of this Agreement; and
(iii) disclosures required to be made by law or by an order, decree,
rule, directive or demand of a court of law, an administrative,
regulatory, governmental or quasi-governmental agency or official, or
an arbitrator.
5.2 Covenants of AERC.
(a) Notification of Certain Matters. AERC shall give prompt
notice to MIGRA of (i) the occurrence or non-occurrence of any event
known to AERC the occurrence or non-occurrence of which would cause any
AERC representation or warranty contained in this Agreement to be
untrue or inaccurate at or prior to the Effective Time and (ii) any
material failure of AERC to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant
to this Section 5.2(a) shall not limit or otherwise affect (A) the
right of MIGRA to terminate this Agreement in accordance with Section
7.1 or (B) except to the extent set forth in Section 7.2, the other
remedies available to MIGRA hereunder. In addition, AERC shall give
prompt notice to MIGRA of any matter which, pursuant to its due
diligence, it determines should be included in the MIGRA Disclosure
Schedule.
(b) NYSE Listing. AERC shall use its reasonable efforts to
cause the AERC Common Shares issuable pursuant to the Merger to be
approved for listing on the NYSE, subject to official notice of
issuance, prior to the Effective Time, including, without limitation,
calling for a meeting to obtain through the use of reasonable efforts
the AERC Shareholder Approval if such approval is required by the NYSE.
(c) Exchange Act. For the period ending on the fourth
anniversary of the Closing Date, AERC will file the reports required to
be filed by it under the federal securities laws and the rules and
regulations adopted by the SEC thereunder (or, if AERC
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is not required to file such reports, it will, upon the request of any
MIGRA Stockholder, make publicly available other information so long as
necessary to permit sales under Rule 144 under the Securities Act or
any successor rule or regulation hereafter adopted by the SEC), to the
extent required from time to time to enable any MIGRA Stockholder who
receives AERC Common Shares in accordance with the terms of this
Agreement to sell such AERC Common Shares without registration under
the Securities Act within the limitations of the exemption provided by
(A) Rule 144 under the Securities Act, as such rule may be amended from
time to time, or (B) any successor rule or regulation hereafter adopted
by the SEC.
(d) Tax-Free Treatment. Provided the assets or lines of
business of MIGRA acquired in the Merger are sufficient to meet the
requirements described below in this Section 5.2(d), AERC will either
continue to operate a significant line of business of MIGRA's historic
business acquired in the Merger in satisfaction of the requirements of
Reg. ss.1.368-1(d)(3) or use a significant portion of MIGRA's historic
business assets acquired in the Merger to conduct AERC's business in
satisfaction of the requirements of Reg. ss.1.368-1(d)(4); provided
that AERC shall not be so required to use any assets or conduct any
business if, and to the extent, such action would, in the opinion of
outside counsel, cause AERC to breach its covenant set forth in Section
5.2(e).
(e) REIT Status. AERC covenants and agrees that it shall use
its best efforts to continue to be taxed as a real estate investment
trust pursuant to Sections 856 through 860 of the Code unless the Board
of Directors of AERC shall determine that it is in the best interest of
the shareholders of AERC to be taxed otherwise.
(f) Governmental Authorities. AERC and AEMC shall at the
expense of MIGRA cooperate with and assist MIGRA and each other MIGRA
Company in connection with any filings to be made with or consents to
be obtained from any Governmental Authority with jurisdiction over the
MIGRA Companies or the Managed Properties.
(g) Lehman Letter. AERC shall use all reasonable efforts to
assume at the Effective Time MIGRA's obligations under the Lehman
Letter (as defined in Section 6.2(h)).
(h) Contact with MIGRA Clients. During the 45 day due
diligence period which period shall expire on February 3, 1998 (the
"AERC Due Diligence Period") and otherwise prior to the Closing,
neither AERC nor any of its affiliates or any of their respective
officers, directors and employees ("AERC Contact Representatives")
shall (except as may be contemplated hereby in connection with the
acquisition of any Managed Property, AERC agreeing, however, that if
the Closing does not occur, AERC will not thereafter pursue such
acquisitions for a period of one year after the date of termination of
this Agreement) contact, directly or indirectly, or authorize or
instruct any agents, brokers or third party representatives ("AERC
External Representatives"), on behalf of AERC or any of its affiliates,
directly or indirectly, to solicit, initiate discussions with or make
any inquiries of, or make or implement any proposal or offer to, any
client of MIGRA and/or its affiliates identified in Schedule 5.2(h), or
request
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from any such client any information, with respect to the sale by such
client of any real property and, in the event the Closing does not
occur, AERC shall, and AERC shall cause its affiliates and the AERC
Contact Representatives and AERC External Representatives to, comply
with their obligations under the Standstill Agreement among the parties
dated November 5, 1997 (the "Standstill Agreement").
AERC and its affiliates and the AERC Contact
Representatives shall not be deemed to give an "authorization" or
"instruction" for the purposes of the foregoing if they request an AERC
External Representative to find candidate real properties in a
particular geographic area with specific characteristics which are
general enough not to identify a specific property and do not
specifically identify a client identified in Schedule 5.2(h) as an
owner thereof.
(i) Fairness Opinion. AERC shall use all reasonable efforts to
obtain on or prior to the Closing the fairness opinion referred to in
Section 6.3(l).
(j) Spinoff Transaction. AERC shall use all reasonable efforts
(which shall not include the payment of money other than filing fees
with Governmental Authorities and legal fees) to consummate the Spinoff
Transfer.
(k) Employment Agreement. Concurrently with the Closing, AERC
shall deliver to Mr. Wright an employment agreement in the form of
Exhibit E attached hereto (the "Employment Agreement"), fully executed
by AERC.
(l) "A" Contracts. If AERC acquires, none of the properties
known as Windsor Hollywood, Kirkman and the Pines on or prior to the
Closing Date, $10,000,000 payable in cash or AERC Common Shares as
elected by AERC will be paid to the MIGRA Stockholders in installments
of 50%, 18% and 32% on the Closing Date, the Second Issuance Date and
the Third Issuance Date, respectively; PROVIDED, HOWEVER that AERC
shall be deemed to have acquired Kirkman for purposes hereof even if it
does not acquire the interest of PF Funds, Inc. The amount paid under
this Section 5.2(l), if any, shall not constitute an adjustment to the
Purchase Price for purposes of the calculation in Section 8.3(a).
5.3 Covenants of MIGRA.
(a) Conduct of MIGRA's Operations. During the period from the
date of this Agreement to the Effective Time, MIGRA shall and, to the
extent within its control and not in conflict with its fiduciary
duty(ies), shall cause each Venture to, conduct its operations only in
the ordinary course, except as expressly contemplated by this Agreement
and the transactions contemplated hereby, and shall use all reasonable
efforts to maintain and preserve its business organization and its
material rights and franchises and to retain the services of its
officers and key employees and maintain its business relationships with
third parties, and to maintain all of its operating assets in their
current condition (normal wear and tear excepted), to the end that
their goodwill and ongoing business shall not be impaired in any
material respect. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective
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Time, MIGRA shall not and, to the extent within its control and not in
conflict with its fiduciary duty(ies), shall not permit any of the
Ventures to, except as otherwise expressly contemplated by this
Agreement and the transactions contemplated hereby or as set forth in
Section 5.3(a) to the MIGRA Disclosure Schedule, without the prior
written consent of AERC:
(i) do or effect any of the following actions with
respect to its securities: (A) adjust, split, combine or
reclassify its capital stock, (B) except as set forth in
Section 5.4(e), make, declare or pay any dividend or
distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for
any shares of its capital stock, (C) grant any person any
right or option to acquire any shares of its capital stock,
(D) issue, deliver or sell or agree to issue, deliver or sell
any additional shares of its capital stock or any securities
or obligations convertible into or exchangeable or exercisable
for any shares of its capital stock or such securities, or (E)
enter into any agreement, understanding or arrangement with
respect to the sale or voting of its capital stock; provided,
however, that MIGRA may make distributions (i) to MIGRA
Stockholders and Gutin, and each Venture may make
distributions to its partners, in an aggregate amount not to
exceed the aggregate federal, state and local liability
(exclusive of penalties and interest) of a MIGRA Stockholder
or Gutin or such partners, respectively, to the extent that
such liability arises from the net income and gain of MIGRA or
the applicable Venture(s) computed using the marginal tax
rates of the MIGRA Stockholder(s) or such partners,
respectively, who pay(s) federal, state and local tax based at
the highest such rates of all MIGRA Stockholders or Gutin or
such partners, respectively, after giving effect to other
income and losses of such MIGRA Stockholder(s) or Gutin or
such partners, respectively, and (ii) to partners of the
Ventures, to the extent mandatory under the applicable
partnership documents;
(ii) directly or indirectly sell, transfer, lease,
pledge, mortgage, encumber or otherwise dispose of any of its
material property or assets other than in the ordinary course
of business;
(iii) make or propose any changes in the MIGRA
Articles or the MIGRA Bylaws;
(iv) merge or consolidate with any other person or
acquire a material amount of assets or capital stock of any
other person or, enter into any confidentiality agreement with
any person (other than Pension Funds relating to this
Agreement);
(v) incur, create, assume or otherwise become liable
for any indebtedness for borrowed money in excess of $750,000
or assume, guarantee, endorse or otherwise as an accommodation
become responsible or liable for the obligations of any other
individual, corporation or other entity, other than in the
ordinary course of business consistent with past practice;
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(vi) create any subsidiaries;
(vii) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination
pay to, any officer, director, consultant or employee or
otherwise increase the compensation or benefits provided to
any officer, director, consultant or employee other than
salary increases granted in the ordinary course of business
consistent with past practice and except as may be required by
Applicable Law or a binding written contract in effect on the
date of this Agreement;
(viii) enter into, adopt or amend any employee
benefit or similar plan;
(ix) change its method of doing business, or change
any method or principle of accounting in a manner, that is
inconsistent in any material respect with past practice;
(x) settle any Actions, whether now pending or
hereafter made or brought, involving an amount in excess of
$50,000;
(xi) write up, write down or write off the book value
of any assets, individually or in the aggregate, in excess of
$100,000 except for depreciation and amortization in
accordance with GAAP consistently applied;
(xii) modify, amend or terminate, or waive, release
or assign any material rights or claims with respect to, any
Contract set forth in Section 4.17 to the MIGRA Disclosure
Schedule, or any confidentiality agreement to which MIGRA is a
party;
(xiii) incur or commit to any capital expenditures,
or obligations or liabilities in respect thereof, which in the
aggregate exceed or would exceed $50,000;
(xiv) make any material changes or modifications to
any pricing policy or investment policy or enter into any new
management agreements or leases on terms materially different
from those in effect in the ordinary and usual course of
business, consistent with past practice;
(xv) take any action to exempt or make not subject to
any other state takeover law or state law that purports to
limit or restrict business combinations or the ability to
acquire or vote shares, any person or entity (other than AERC)
or any action taken thereby, which person, entity or action
would have otherwise been subject to the restrictive
provisions thereof and not exempt therefrom;
(xvi) enter into or carry out any other transaction
which could reasonably be expected to have a Material Adverse
Effect on the MIGRA Companies taken as a whole;
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(xvii) permit or cause any MIGRA Company to do any of
the foregoing or agree or commit to do any of the foregoing;
or
(xviii) agree in writing or otherwise to take any of
the foregoing actions.
(b) No Solicitation. Unless and until this Agreement is
terminated in accordance with its terms, MIGRA shall not, and shall not
authorize, to the extent within its control and not in conflict with
its fiduciary duty(ies), or permit any Venture or any of its or the
Ventures' respective directors, officers, employees, agents or
representatives to, directly or indirectly, solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information
with respect to MIGRA in furtherance of, any inquiries or the making of
any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving MIGRA, or
acquisition of any capital stock or any material portion of the assets
of MIGRA, or any combination of the foregoing (a "Competing
Transaction"), or negotiate, explore or otherwise engage in discussions
with any person (other than AERC, AEMC or their respective directors,
officers, employees, agents and representatives) with respect to any
Competing Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate
the Merger or any other transactions contemplated by this Agreement.
Neither the Board of Directors of MIGRA nor any committee thereof shall
(A) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to AERC, the MIGRA Board Recommendation, (B) approve or
recommend, or propose publicly to approve or recommend, any Competing
Transaction or (C) cause MIGRA or, unless required pursuant to its
fiduciary duty(ies), any other MIGRA Company to enter into any letter
of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") related to any
Competing Transaction or proposal for a Competing Transaction. Unless
and until there is a termination of this Agreement in accordance with
Section 7.1, from and after the execution of this Agreement, MIGRA
shall immediately advise AERC in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals
relating to a Competing Transaction (including the specific terms
thereof and the identity of the other party or parties involved) and
promptly furnish to AERC a copy of any such proposal or inquiry in
addition to any information provided to or by any third party relating
thereto.
(c) Compliance with Regulatory Requirements. MIGRA shall, and,
to the extent within its control, and not in conflict with its
fiduciary duty(ies), cause each Venture, at the expense of AERC, to
cooperate with and assist AERC, AEMC and MRI in connection with any
filings to be made with or consents to obtained from any Governmental
Authority with jurisdiction over any of the MIGRA Companies or the
Managed Properties.
(d) Financial Statements. MIGRA shall deliver to AERC Interim
Statements within 20 days following the end of each calendar month
after the date hereof.
(e) Notification of Certain Matters. MIGRA shall give prompt
notice to AERC of (i) the occurrence or non-occurrence of any event
known to MIGRA the
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occurrence or non-occurrence of which would cause any MIGRA or MIGRA
Stockholder representation or warranty contained in this Agreement to
be materially untrue or inaccurate at or prior to the Effective Time
and (ii) any material failure of MIGRA or any MIGRA Stockholder to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.3(e) shall not limit
or otherwise affect (A) the right of AERC to terminate this Agreement
in accordance with Section 7.1 or (B) except to the extent set forth in
Section 7.2, the other remedies available to AERC hereunder.
(f) MIG Ltd. Purchase. MIGRA and the MIGRA Stockholders will
use reasonable efforts to have MIGRA and/or the MIGRA Stockholders
enter into a definitive purchase agreement with PF Funds, Inc. to
acquire its interest in MIG Ltd. at or before the Effective Time. The
parties acknowledge that the MIGRA Stockholders may transfer AERC
Common Shares to PF Funds, Inc. as some or all of the consideration for
that purchase; provided, however, that PF Funds shall agree to execute
a letter relating to investment intent and accredited investor status
(to the extent applicable) and trading restrictions imposed by Rule 144
under the Securities Act in a form substantially identical to that
delivered by the MIGRA Stockholders pursuant to Section 6.3(j).
(g) Development Properties. True and correct copies of all
financial statements and records relating to each of the properties
known as the Windsor Pines, Hollywood Pines and Kirkman properties,
which properties are more fully described on Exhibit A-1 hereto (the
"Development Properties"), or access thereto will be made available to
AERC promptly after the execution of this Agreement.
(h) Rights to Disposition Fees. MIGRA shall obtain from NYNEX
a letter to clarify that pursuant to the NYNEX Real Estate Investment
Management Contract dated February 7, 1995 disposition fees are payable
upon termination of such contract. If MIGRA does not obtain a letter
from NYNEX prior to the Closing Date, that portion of the AERC Common
Shares (payable ratably over the Second and Third Issuance Dates
pursuant Sections 2.1(e) and 2.1(f), as applicable) representing
$194,365 will be held in escrow to be delivered as follows: (i) to the
MIGRA Stockholders on the earlier to occur of (a) the date such letter
is received by AERC, and (b) the date all such disposition fees are
paid to AERC, or (ii) to AERC if on or before February 1, 2005 such
letter has not been received and such fees have not been paid. The
value of such AERC Common Shares shall be determined in accordance with
Section 2.1(e) and 2.1(f) (as the case may be).
5.4 Covenants of MIGRA Stockholders.
(a) Purchase Price Adjustment.
(i) At least three Business Days prior to the Closing
Date, the MIGRA Stockholders shall cause to be delivered to
AERC a statement of MIGRA, MIG Ltd. and Stonemark as of the
Closing Date, which statement shall set forth MIGRA's good
faith estimate of the current assets, including, without
limitation, advances made to MIG Development Company and other
affiliates of MIGRA (the "Current Assets") and all liabilities
(the "Liabilities") of MIGRA, and prorata based on its
ownership interest therein, of MIG Ltd. and Stonemark, as of
the Closing Date as defined and determined in accordance with
GAAP and in a manner consistent with the preparation of the
Audited Financial Statements.
(ii) If on the Second Issuance Date, the actual
amount of Current Assets collected by AERC on or before the
Second Issuance Date exceeds the actual amount of Liabilities
paid by AERC on or before the Second Issuance Date, then AERC
shall pay on the Second Issuance Date to the MIGRA
Stockholders either an amount of cash or AERC Common Shares,
as elected by each MIGRA Stockholder, equal in amount or value
(as determined in accordance with Section 2.1(c)),
respectively, to such excess. If on the Second Issuance Date,
the actual amount of such Liabilities exceeds the actual
amount of such Current Assets, then the MIGRA Stockholders
shall either (i) pay on the Second
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Issuance Date to AERC an amount equal to such excess or (ii)
notify AERC that the number of AERC Common Shares to be
received pursuant to Section 2.1(c) or 2.1(e) shall be reduced
by a number of the AERC Common Shares equal in value to such
excess, such value to be determined pursuant to Section 2.1(c)
or 2.1(e), respectively.
(b) Responsibility for Certain Obligations. The MIGRA
Stockholders shall jointly and severally pay when due the MIGRA
Stockholders Fixed Liabilities. If any MIGRA Stockholders Fixed
Liability is not paid when due, AERC shall have the right to pay the
amount of such MIGRA Stockholder Fixed Liability that is due and
payable and is not so paid and to reduce the amount of AERC Common
Shares to be received by the MIGRA Stockholders and Gutin pursuant to
Section 2.1 by the number of AERC Common Shares equal in value to the
amount of such MIGRA Stockholder Fixed Liability that is so paid, such
value to be determined as set forth in Section 2.1. Such reduction
shall apply to the installments of AERC Common Shares to be next
received.
(c) Non-Competition Agreements. Concurrently with the Closing,
each MIGRA Stockholder shall deliver to AERC a non-competition
agreement in the form of Exhibit D attached hereto (collectively, the
"Non-Competition Agreements"), fully executed by such MIGRA
Stockholder.
(d) Resignations. Concurrently with the Closing, each MIGRA
Stockholder who is an officer and/or a director of MIGRA shall resign
as an officer and/or director of MIGRA and, prior to or concurrently
with the Closing, MIGRA shall cause Gutin to resign as an officer
and/or director of MIGRA and to otherwise terminate her employment
therewith, effective as of the Effective Time.
(e) MIGRA Distributions. The MIGRA Stockholders shall, prior
to the Effective Time, cause MIGRA to make a distribution to the MIGRA
Stockholders and Gutin in an amount necessary to establish to the
reasonable satisfaction of AERC that MIGRA does not have any
accumulated earnings and profits from any period that MIGRA or any of
its predecessors were taxable as C corporations for federal income tax
purposes.
(f) Encumbrances on Conversion Rights. No MIGRA Stockholder
shall create, incur, assume or suffer to exist any pledge, lien,
security interest or other charge or encumbrances of any nature upon or
with respect to the Conversion Rights, except as may be contemplated by
that certain Pledge Agreement dated June 9, 1997, between Wayman and
Mr. Wright and the related Escrow Agrement date as of August 1, 1997
and except for a transfer to PF Funds as contemplated by and in
accordance with Section 5.3(f) of this Agreement.
(g) On or before the Closing, the MIGRA Stockholders shall (i)
use reasonable efforts to acquire the entire right, title and interest
of Gutin in and to the MIGRA Companies and (ii) approve by unanimous
vote or consent in accordance with the FBCA the execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby.
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(h) On or before the Closing, the MIGRA Stockholders shall (i)
terminate each such person's employment agreement with MIGRA, (ii)
cause MIGRA to terminate Gutin's employment agreement with MIGRA, and
(iii) terminate the Stockholder Agreement by and among the MIGRA
Stockholders, Gutin and MIGRA.
5.5 Covenants of Mr. Wright.
(a) Employment Agreement. Concurrently with the Closing, Larry
Wright shall deliver to AERC the Employment Agreement, fully executed
by Mr. Wright.
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions. The obligations of the parties hereto
to consummate the Merger shall be subject to fulfillment of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of
the Merger shall have been issued and remain in effect, and no statute,
rule or regulation shall have been enacted by any Governmental
Authority which prevents the consummation of the Merger.
(b) On the Closing Date and at the Effective Time, no stop
order or similar restraining order shall have been threatened by the
SEC or any state securities administrator prohibiting the Merger or the
issuance of the AERC Common Shares or the Conversion Rights.
(c) No Action shall be instituted by any Governmental
Authority which seeks to prevent consummation of the Merger or the
issuance of the AERC Common Shares or the Conversion Rights or seeking
material damages in connection with the transactions contemplated
hereby which continues to be outstanding.
6.2 Conditions to Obligations of MIGRA. The obligations of
MIGRA to consummate the Merger and the transactions contemplated hereby shall be
subject to the fulfillment of the following conditions unless waived by MIGRA:
(a) The representations and warranties of AERC set forth in
Article III shall be true and correct in all material respects on the
date hereof and on and as of the Closing Date as though made on and as
of the Closing Date (except for representations and warranties made as
of a specified date, which need be true and correct only as of the
specified date).
(b) AERC shall have performed in all material respects each
obligation and agreement and shall have complied in all material
respects with each covenant to be performed and complied with by it
hereunder at or prior to the Closing.
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(c) AERC shall have furnished MIGRA with a certificate dated
the Closing Date signed on behalf of it by the Chairman, President or
any Vice President to the effect that the conditions set forth in
Sections 6.2(a) and (b) have been satisfied.
(d) MIGRA shall have received the favorable legal opinion,
dated the Closing Date, of Baker & Hostetler LLP as to the matters
referred to in Exhibit B.
(e) The AERC Common Shares to be issued in the Merger and the
transactions contemplated hereby shall have been authorized for
inclusion on the NYSE, subject to official notice of issuance.
(f) AERC shall have furnished MIGRA with an opinion of Baker &
Hostetler LLP, substantially similar in form and content to the
opinions provided to underwriters in connection with public offerings
of AERC Common Shares, to the effect that AERC has qualified, and
currently qualifies, to be taxed as a REIT pursuant to Sections 856
through 860 of the Code.
(g) AERC shall not have entered into a definitive agreement to
merge or consolidate with any entity in a transaction valued in excess
of $200,000,000, unless such merger or consolidation shall be for the
sole purpose of acquiring real property and shall not result in a
change in the senior management of AERC.
(h) AERC shall have assumed the obligations of MIGRA under
that certain letter agreement dated May 1, 1997, between MIGRA and
Lehman Brothers, as amended on September 10, 1997 (the "Lehman
Letter").
(i) AERC shall have received the AERC Shareholder Approval.
(j) AERC shall have acquired all of the MIG REIT Properties.
(k) AERC shall have received all material Governmental
Authority consent(s) and approval(s) required because of this
Agreement.
6.3 Conditions to Obligations of AERC. The obligation of AERC
to consummate the Merger and the other transactions contemplated hereby shall be
subject to the fulfillment of the following conditions unless waived by AERC:
(a) The representations and warranties of MIGRA set forth in
Article IV shall be true and correct in all material respects on the
date hereof and on and as of the Closing Date as though made on and as
of the Closing Date (except for representations and warranties made as
of a specified date, which need be true and correct only as of the
specified date).
(b) MIGRA shall have performed in all material respects each
obligation and agreement and shall have complied in all material
respects with each covenant to be performed and complied with by it
hereunder at or prior to the Effective Time.
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(c) MIGRA shall have furnished AERC with a certificate dated
the Closing Date signed on its behalf by its Chairman, President or any
Vice President to the effect that the conditions set forth in Sections
6.3(a) and (b) have been satisfied.
(d) AERC shall have received the favorable legal opinion,
dated the Closing Date, of (i) Mayer, Brown & Platt or other counsel
acceptable to AERC, as to the matters referred to in Exhibit C, and
(ii) Holland & Knight, as to matters referred to in Section 4.13.
(e) (i) at no cost to AERC or AEMC, AERC shall have acquired
the 10% partnership interest in MIG Ltd. owned by MIG Realty, Inc., an
affiliate of MIGRA, and (ii) AERC shall have acquired all of the MIG
REIT Properties.
(f) [INTENTIONALLY OMITTED]
(g) MIGRA and AERC shall have received all material customer,
vendor, lessee, licensee, licensor, Governmental Authority and other
third party consents and approvals required because of this Agreement
or the transactions contemplated by this Agreement, excluding consents
from clients of the MIGRA Companies and their affiliates regarding the
Relevant Contracts, as to which the provisions of Section 2.4(a) shall
be the sole consequence to the MIGRA Stockholders with respect to not
obtaining such consents.
(h) MIGRA shall not have received notice from any holder or
holders of the MIGRA Common Stock issued and outstanding on the record
date for the determination of MIGRA Stockholders entitled to vote on
the Merger that such holder or holders have exercised or intend to
exercise their appraisal rights under the FBCA.
(i) The Employment Agreement and the Noncompetition Agreements
shall have been entered into and shall remain in full force and effect
according to their respective terms as of the Closing.
(j) AERC shall have received letters addressed to it from each
of the MIGRA Stockholders relating to investment intent and accredited
investor status (to the extent applicable) and trading restrictions
which will be solely the trading restrictions imposed by Rule 144 under
the Securities Act relating to the AERC Common Shares in a form
reasonably required by AERC and reasonably acceptable to the MIGRA
Stockholders.
(k) AEMC or another affiliate of AERC shall have had its Form
ADV approved by the SEC.
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(l) AERC shall have received a favorable opinion from Morgan
Stanley Dean Witter as to the fairness of the Merger.
(m) AERC shall have received the AERC Shareholder Approval if
required by the NYSE as a condition to listing the AERC Common Shares
to be issued pursuant to this Agreement thereon.
(n) MIGRA and/or the MIGRA Stockholders shall have acquired
the interest in MIG Ltd. of PF Funds, Inc.
(o) On or before the Closing, the MIGRA Stockholders shall
have (i) acquired the entire right, title and interest of Gutin in and
to the MIGRA Companies, and (ii) approved by unanimous vote or consent
in accordance with the FBCA the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(p) On or before the Closing, the MIGRA Stockholders shall
have (i) terminated each such person's employment agreement with MIGRA
and (ii) terminated the Stockholders Agreement by and among the MIGRA
Stockholders, Gutin and MIGRA.
(q) AERC shall have received all material Governmental
Authority and National City Bank consent(s) and approval(s) required
because of this Agreement.
(r) AERC shall have received the opinion, dated the Closing
Date, of Ernst & Young LLP, that MIGRA has no earnings or profits as of
the Closing Date.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual consent of AERC and MIGRA;
(b) by either AERC or MIGRA if any permanent injunction or
other order of a court or other competent Governmental Authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(c) by either AERC or MIGRA if the Merger shall not have been
consummated on or before June 2, 1998 if AERC's Proxy Statement is not
reviewed by the SEC and on or before June 30, 1998 if AERC's Proxy
Statement is reviewed by the SEC, unless extended by the Boards of
Directors of both AERC and MIGRA (provided that the right to terminate
this Agreement under this Section 7.1(c) shall not be available to any
party whose failure or whose affiliate's failure to perform any
material covenant
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or obligation under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date);
(d) by AERC if MIGRA or any MIGRA Stockholder has materially
breached any covenant or agreement contained in this Agreement and such
breach is either not capable of being cured prior to the Closing or, if
such breach is capable of being cured, is not so cured within a
reasonable amount of time;
(e) by MIGRA if AERC has materially breached any covenant or
agreement contained in this Agreement and such breach is either not
capable of being cured prior to the Closing or, if such breach is
capable of being cured, is not so cured within a reasonable amount of
time;
(f) by AERC if at any time the representations and warranties
of MIGRA or the MIGRA Stockholders set forth in Article IV shall not be
true and correct in all material respects (it being understood and
agreed that representations and warranties made as of a specified date,
need be true only as of such specified date);
(g) by MIGRA or the MIGRA Stockholders if at any time the
representations and warranties of AERC set forth in Article III shall
not be true and correct in all material respects (it being understood
and agreed that representation and warranties made as of a specified
date, need be true only as of such specified date); or
(h) by either AERC or MIGRA if the MIG REIT Properties are
acquired by any one other than AERC.
7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of this Section 7.2, Article VIII and Sections 9.8 and 9.10, shall
become void and have no further effect, without any liability on the part of any
party or its directors, officers or stockholders. Notwithstanding the foregoing,
nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for a material breach of any representation and warranty of, or
covenant or agreement by, such party in this Agreement, which liability may be
recoverable pursuant to Article VIII, and provided, further, that if it shall be
determined pursuant to Section 8.5 that termination of this Agreement resulted
from an intentional breach of this Agreement, then, in addition to other
remedies under this Section 7.2, Article VIII and Section 9.8 for breach of this
Agreement, the party so found to have intentionally breached this Agreement
shall indemnify and hold harmless the other parties for their respective
reasonable costs, fees and expenses, including, without limitation, the fees and
expenses of their counsel and accountants, as well as fees and expenses incident
to negotiation, preparation and execution of this Agreement and related
documentation ("Costs"). Notwithstanding any provision of this Agreement to the
contrary, in the event of the termination of this Agreement, (i) by reason of a
breach by MIGRA or any MIGRA Stockholder under this Agreement, the limitation of
liability referred to in Section 8.3 shall be inapplicable, but in no event
shall the maximum aggregate liability of MIGRA and/or the MIGRA Stockholders
under this Agreement, which liability, with respect to the MIGRA Stockholders,
shall be solely with respect to a breach of any covenant or agreement of MIGRA
and/or the MIGRA Stockholders in this Agreement or the Additional Documents (as
defined in Section
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8.1(a)), exceed the Purchase Price, as adjusted hereunder (the "Adjusted
Purchase Price") and (ii) by reason of a breach by AERC under this Agreement,
the maximum aggregate liability of AERC under this Agreement shall not exceed
the Adjusted Purchase Price. In the event of termination of this Agreement
pursuant to Section 7.1, MIGRA shall not be liable to AERC under the indemnity
agreement in Section 8.2(a)(i)(A) in respect of a breach of a representation or
warranty made by MIGRA or any MIGRA Stockholder contained in this Agreement on
the Closing Date to the extent, but only to the extent, that (w) such
representation or warranty was true and correct when made, (x) MIGRA has
notified AERC of such breach in accordance with the Agreement and (y) such
breach is the result solely of the occurrence of a circumstance or an event
subsequent to the date hereof.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after adoption of this Agreement by MIGRA Stockholders or
by AERC shareholders, as the case may be, but after any such approval, no
amendment shall be made which by law requires further approval or authorization
by the MIGRA Stockholders or the AERC shareholders without such further approval
or authorization. Notwithstanding the foregoing, this Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective
Time, AERC (with respect to MIGRA and the MIGRA Stockholders) and MIGRA (with
respect to AERC and AEMC) by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of such party, (b) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations, Warranties and Agreements.
(a) Subject to the limitations set forth in Section 8.3 and
8.6, below, and notwithstanding any investigation conducted at any time
with regard thereto by or on behalf of AERC or MIGRA or the MIGRA
Stockholders, all representations, warranties, covenants and agreements
of MIGRA, the MIGRA Stockholders and AERC in this Agreement and in any
other documents executed or delivered by MIGRA, the MIGRA Stockholders
or AERC pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement (other than the Standstill
Agreement, Contribution and Partnership Interests Purchase Agreement
and documentation executed and delivered in connection therewith, and
documents delivered in connection with the acquisition of the real
properties listed on Exhibit A, which, in each case, shall survive in
accordance with their respective terms) (the "Additional Documents")
shall survive the execution, delivery
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and performance of this Agreement and the Additional Documents. All
representations and warranties of MIGRA, the MIGRA Stockholders or AERC
set forth in this Agreement and in the Additional Documents shall be
deemed to have been made again by MIGRA, the MIGRA Stockholders or
AERC, as the case may be, at and as of the Effective Time (except for
representations and warranties made as of a specified date, which need
be true and correct only as of the specified date). This Section 8.1
shall not limit any covenant or agreement of the parties hereto, which
by its terms contemplates performance after the Effective Time or after
the termination of this Agreement.
(b) As used in this Article VIII, any reference to a
representation, warranty or covenant contained in any section of this
Agreement shall include the Schedule and any Exhibit relating to such
section.
8.2 Indemnification.
(a) Subject to the limitations set forth in Sections 8.3 and
8.6, by virtue of the approval and adoption of this Agreement and the
Merger by MIGRA and the MIGRA Stockholders, MIGRA (prior to the
Closing) and the MIGRA Stockholders (prior to Closing, for each MIGRA
Stockholder solely with respect to Indemnifiable Claims described in
clause (i) (B) below as a result of any breach by such MIGRA
Stockholder, and subsequent to the Closing, with respect to all
Indemnifiable Claims), shall jointly and severally indemnify and hold
harmless AERC from and against any and all (i) demands, claims, suits,
actions, or causes of action ("Claims") asserted against, resulting to,
imposed upon, or incurred, sustained by, asserted by or suffered by
AERC, directly or indirectly, as a result of or arising from (A) any
inaccuracy in or breach of any of the representations and warranties
made by MIGRA and/or the MIGRA Stockholders in this Agreement or the
Additional Documents, (B) the breach of any covenant or agreement of
MIGRA and/or the MIGRA Stockholders contained in this Agreement or the
Additional Documents, (C) any Claims relating to the MIGRA Stockholders
Fixed Liabilities and (D) any Claims relating to any liability or
obligation of any nature of the MIGRA Companies or any MIGRA Company,
matured or unmatured, liquidated or unliquidated, fixed or contingent,
or known or unknown, arising out of matters prior to or at the
Effective Time, other than (w) any Claim with respect to any of the
Managed Properties, as to which the sole indemnification obligation of
MIGRA Stockholders is in Section 8.2(a)(i)(A), (x) any Claim arising
out of the failure to obtain any consent or approval necessary to
effect the Merger and the other transactions contemplated by this
Agreement (provided that MIGRA and/or the MIGRA Stockholders, as
applicable, have all complied with their respective obligations under
the relevant provisions of Sections 5.1, 5.3 and 5.4 with respect to
obtaining the consent or approval at issue and AERC has complied with
its obligations under the relevant provisions of Section 5.2 with
respect to obtaining such consent or approval), (y) any Claim with
respect to any increase in insurance premiums with respect to insurance
covered in Section 4.24 and (z) as otherwise expressly provided in this
Agreement, and (ii) losses, liabilities, damages and expenses,
including without limitation interest, penalties, reasonable attorneys'
fees, any and all expenses actually incurred, in investigating,
preparing or defending against any such Claim, commenced or threatened,
and any and all amounts paid in settlement of any
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such Claim (collectively, "Damages") (collectively, "Indemnifiable
Claims" when used in the context of AERC as the Indemnified Party (as
defined in Section 8.3(c)).
(b) Subject to the limitations set forth in Section 8.3 and
8.6, by virtue of the approval and adoption of this Agreement by AERC,
AERC hereby covenants and agrees to indemnify and hold harmless MIGRA
(prior to the Closing) and the MIGRA Stockholders, both prior and
subsequent to the Closing, from and against any and all (i) Claims
asserted against, resulting to, imposed upon, or incurred, sustained
by, asserted by or suffered by MIGRA or any or all of the MIGRA
Stockholders, directly or indirectly, as a result of or arising from
(A) any inaccuracy in or breach of any of the representations and
warranties made by AERC in this Agreement or (B) the breach of any
covenant of AERC contained in this Agreement and(ii) all related
Damages (collectively, "Indemnifiable Claims" when used in the context
of MIGRA or the MIGRA Stockholders as the Indemnified Party.
(c) For purposes of this Article VIII, all Damages shall be
computed net of any insurance coverage or tax benefit which reduces the
Damages that would otherwise be sustained; provided that in all cases
the timing of the receipt or realization of insurance proceeds shall be
taken into account in determining the amount of reduction of Damages.
(d) AERC shall be deemed to have suffered Damages arising out
of or resulting from the matters referred to in Section 8.2(a) if the
same shall be suffered by any subsidiary or affiliate of AERC,
including without limitation, MIGRA after the Effective Time.
8.3 Limitations on Indemnification. Rights to indemnification
under this Article VIII are subject to the following limitations:
(a) AERC shall not be entitled to indemnification hereunder
with respect to an Indemnifiable Claim arising out of a breach of a
representation, warranty, covenant or agreement (or, if more than one
such Indemnifiable Claim is asserted, with respect to all such
Indemnifiable Claims), unless the aggregate amount of Damages with
respect to such Indemnifiable Claim or Claims exceeds $500,000 (the
"Basket"), in which event AERC shall be entitled to indemnification
hereunder for Damages with respect to all Indemnifiable Claims in
excess of the Basket; provided, however, that in no event shall AERC be
entitled to indemnification hereunder, including without limitation
Section 8.2(a)(i)(D), for Damages in an amount in excess of the
difference between (i) the Adjusted Purchase Price and (ii) the
aggregate value of the decreases to the number of AERC Common Shares
receivable by the MIGRA Stockholders made pursuant to Sections 2.4, 2.5
and 5.4, such difference herein referred to as the "MIGRA Cap"; and
further, provided, however, that notwithstanding the joint and several
indemnification obligation of the MIGRA Stockholders, no MIGRA
Stockholder at any time shall have to pay Damages in excess of the
amount of the Purchase Price actually received by such MIGRA
Stockholder at such time, it being understood that such excess shall
become immediately due and payable on the immediately succeeding date
when an installment of AERC Common Shares becomes payable pursuant to
Section 2.1 (to the extent of the
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value of the AERC Common Shares receivable on such date), and any
remaining excess and any additional subsequent Damages also shall
become so immediately due and payable on the immediately succeeding
date when such an installment becomes so payable (to the extent of the
value of the AERC Common Shares receivable on such date); and further,
provided, however, that no MIGRA Stockholder shall be liable for
Damages in an amount in excess of his or her pro rata share, as
determined by reference to the relative number of shares of MIGRA
Conversion Stock held thereby, of the MIGRA Cap; and provided further,
in the event that AERC has actual knowledge of a breach of this
Agreement which entitles it to terminate this Agreement pursuant to
Section 7.1(d) or 7.1(f) (whether or not it also has the right to
terminate under Section 7.1(h)) and elects not to exercise any such
right of termination and to waive all (but not less than all) of such
breaches (and the right to terminate under Section 7.1(h)) solely for
the purpose of effecting the Closing pursuant to Section 7.4, no MIGRA
Stockholder shall be liable for Damages caused by the representations
and warranties which are known to be not true and correct and (subject
to the last sentence of this Section 8.3(a)) Claims under Section
8.2(a)(i)(D) relating to liabilities and potential liabilities, which
to the actual knowledge of MIGRA or any MIGRA Stockholder or AERC, were
in existence, at the Effective Time in excess of his or her pro rata
share, determined as aforesaid, of either (i) if the price adjustment
referred to in Section 5.2(l) shall occur, 10% of the sum of
$10,000,000 plus the Adjusted Purchase Price, or (ii) if the price
adjustment referred to in Section 5.2(l) shall not occur, 10% of the
Adjusted Purchase Price. In the event the MIGRA Stockholders become
liable for Damages pursuant to this Section, each MIGRA Stockholder
shall have the right to elect, by written notice to AERC, to pay the
amount of Damages in cash or by a reduction of the number of AERC
Common Shares otherwise receivable thereby equal in value to the amount
of Damages; provided, that in the event a MIGRA Stockholder exercises
his or her rights pursuant to Section 8.5 as to the Indemnifiable Claim
or Claims in question, such number of AERC Common Shares shall be
placed in escrow pursuant to an escrow agreement, and with an escrow
agent, mutually agreed upon by AERC and the applicable MIGRA
Stockholder(s). For purposes of the preceding sentence, the value of
the AERC Common Shares shall be determined in the following order of
priority: (i) at the Effective Time, pursuant to Section 2.1(b); (ii)
on the Second Issuance Date, (A) first, pursuant to Section 2.1(c) and
(B) second, pursuant to Section 2.1(e) and (iii) on the Third Issuance
Date, (A) first, pursuant to Section 2.1(d) and (B) second, pursuant to
Section 2.1(f). The limits on indemnification contained in this
subsection shall not apply in the event of a breach of the
representations and warranties contained in Section 4.9(f) and the
Basket shall not be applicable to any failure to pay any Claims
relating to the MIGRA Stockholders Fixed Liabilities, or any Claims(s)
under Section 8.2(a)(i)(D) relating to liabilities and potential
liabilities of the MIGRA Companies or a MIGRA Company which, to the
actual knowledge of MIGRA or any MIGRA Stockholder, were in existence
at the Effective Time (whether or not the amount of such liability or
potential liability was quantified or quantifiable at the Effective
Time), including, without limitation, any such liabilities and
obligations listed on the MIGRA Disclosure Schedule.
(b) Neither MIGRA nor the MIGRA Stockholders shall be entitled
to indemnification hereunder with respect to an Indemnifiable Claim
arising out of a breach of a representation, warranty, covenant or
agreement (or, if more than one such
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Indemnifiable Claim is asserted, with respect to all such Indemnifiable
Claims) unless the aggregate amount of Damages with respect to such
Indemnifiable Claim or Claims exceeds the Basket, in which event MIGRA
or the MIGRA Stockholders shall be entitled to indemnification
hereunder for Damages with respect to all Indemnifiable Claims in
excess of the Basket; provided, however, that in no event shall MIGRA
and the MIGRA Stockholders be entitled to such indemnification for such
Damages in an amount in excess of the Adjusted Purchase Price.
(c) The obligation of indemnity (i) with respect to the
representations and warranties set forth in Article III shall terminate
two years after the Closing and (ii) with respect to any
representations and warranties relating to the Managed Properties shall
terminate two years after the Closing unless, in either case, an
Indemnifiable Claim has been brought with respect thereto prior to such
termination; provided that with respect to the representations and
warranties set forth in Sections 3.1 through 3.3, 4.1 through 4.4, and
4.9 and with respect to the MIGRA Stockholders Liabilities, the
obligation of indemnity shall extend to the expiration of the
applicable statute of limitations, if later; and provided further, that
nothing contained in the preceding portion of this Section 8.3(c) shall
be construed to limit the survival of the representations and
warranties in Article IV (other than those covered by the preceding
portion of this Section 8.3(c) or the obligation of indemnity contained
in Section 8.2(a)(i)(D), which representations and warranties and
obligation shall survive the Closing and shall extend to the expiration
of the applicable statute of limitations).
(d) The foregoing provisions of this Section 8.3
notwithstanding, if, prior to the termination of any obligation to
indemnify, written notice of a claimed breach or other occurrence or
matter giving rise to a claim of indemnification is given by the party
seeking indemnification (the "Indemnified Party") to the party from
whom indemnification is sought (the "Indemnifying Party"), or an
Indemnifiable Claim is commenced against the Indemnified Party, the
Indemnified Party shall not be precluded from seeking indemnification
for such claimed breach, occurrence, other matter, or an Indemnified
Claim from the Indemnifying Party in accordance with Section 8.4 or
8.5, as applicable.
8.4 Procedure for Indemnification with Respect to Third
Party Claims.
(a) If the Indemnified Party determines to seek
indemnification under this Article VIII with respect to Indemnifiable
Claims resulting from the assertion of liability by third parties, it
shall give prompt notice to the Indemnifying Party after it becomes
aware of any such Indemnifiable Claim (such notice to be given in any
event within the shorter of 15 days or the number of days necessary to
respond to the Indemnifiable Claim), which notice shall set forth such
material information with respect to such Indemnifiable Claim as is
then reasonably available to the Indemnified Party. If any such
liability is asserted against the Indemnified Party and the Indemnified
Party notifies the Indemnifying Party of such liability, the
Indemnifying Party shall be entitled, if it so elects by written notice
delivered to the Indemnified Party within 10 days after receiving the
Indemnified Party's notice, to assume the defense of such asserted
liability with counsel reasonably satisfactory to the Indemnified
Party. Notwithstanding the foregoing:
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(i) the Indemnified Party shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel
shall be payable by the Indemnified Party; (ii) the Indemnified Party
shall not have any obligation to give any notice of any assertion of
liability by a third party unless such assertion is in writing; and
(iii) the rights of the Indemnified Party to be indemnified in respect
of Indemnifiable Claims resulting from the assertion of liability by
third parties shall not be adversely affected by its failure to give
notice pursuant to the foregoing provisions unless, and, if so, only to
the extent that, the Indemnifying Party is materially prejudiced by
such failure. With respect to any assertion of liability by a third
party that results in an Indemnifiable Claim, the Parties shall make
available to each other all relevant information in their possession
which is material to any such assertion.
(b) In the event that the Indemnifying Party fails to assume
the defense of the Indemnified Party against any such Indemnifiable
Claim, within 15 days after receipt of the Indemnified Party's notice
of such Indemnifiable Claim, the Indemnified Party shall have the right
to defend, compromise or settle such Indemnifiable Claim on behalf, for
the account, and at the risk of the Indemnifying Party.
(c) Notwithstanding anything in this Section 8.4 to the
contrary, (i) if there is a reasonable likelihood that an Indemnifiable
Claim may materially and adversely affect the Indemnified Party, its
corporate parent, if any, its subsidiaries or affiliates, including
without limitation MIGRA after the Effective Time if AERC is the
Indemnified Party, other than as a result of money damages or other
money payments (each, a "Non-monetary Indemnifiable Claim"), then the
Indemnified Party shall provide written notice to the Indemnifying
Party to such effect explaining the reasons therefor and, if the
Indemnifying Party consents thereto (which consent shall not be
unreasonably withhold or delayed), the Indemnifying Party shall have
the right, at the cost and expense of the Indemnifying Party, to defend
such Indemnifiable Claim; and (ii) neither the Indemnifying Party nor
the Indemnified Party shall, without the other's prior written consent
(which consent shall not be unreasonably withheld or delayed), settle
or compromise (i) any Indemnifiable Claim or consent to entry of any
judgment in respect of any Indemnifiable Claim, in each case involving
money damages or other money payments, unless such settlement,
compromise or consent includes as an unconditional term the giving by
the claimant or the plaintiff to the Indemnified Party (and its
corporate parent, if any, its subsidiaries and affiliates including
without limitation MIGRA after the Effective Time if AERC is the
Indemnified Party) a release from all liability in respect of such
Indemnifiable Claim or (ii) any Non-monetary Indemnifiable Claim.
8.5 Procedure For Indemnification with Respect to Non-Third
Party Claims. In the event that the Indemnified Party asserts the existence of
an Indemnifiable Claim giving rise to Damages (but excluding Indemnifiable
Claims resulting from the assertion of liability by third parties), it shall
give written notice to the Indemnifying Party specifying the nature and amount
of the Indemnifiable Claim asserted. If the Indemnifying Party, within 15
business days after receipt of such notice by the Indemnified Party, has not
given written notice to the Indemnified Party announcing its intent to contest
such assertion by the Indemnified Party, such assertion shall be deemed accepted
and the amount of Indemnifiable Claim shall be deemed a valid Indemnifiable
Claim. In the event, however, that the Indemnifying Party contests the
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<PAGE> 59
assertion of an Indemnifiable Claim by giving such written notice to the
Indemnified Party within such 15 business day period, then if the parties,
acting in good faith, cannot reach agreement with respect to such Indemnifiable
Claim within 20 days after such notice, the contested assertion of the claim
shall be referred to arbitration in Cleveland, Ohio, in accordance with the
then-current rules of the American Arbitration Association. The parties shall
select an arbitrator who resides other than in Greater Cleveland or south
Florida. The determination made in accordance with such rules shall be delivered
in writing to the parties and shall be final and binding and conclusive on the
parties and the amount of the Indemnifiable Claim, if any, determined to exist
shall be a valid Indemnifiable Claim. Each Party shall pay its own legal,
accounting and other fees in connection with such a contest; provided that if
the contested Claim is referred to and ultimately determined by arbitration and
the position of the nonprevailing party is not upheld in any material respect by
the arbitrators, the legal, auditing and other fees of the prevailing party and
the fees and expenses of any arbitrator shall be borne by the nonprevailing
Party.
8.6 Termination of MIGRA's Warranties. Notwithstanding any
provisions of this Agreement to the contrary: (a) all representations,
warranties and covenants made by MIGRA in this Agreement or the Additional
Documents shall terminate as to MIGRA (but only as to MIGRA, but not as to the
MIGRA Stockholders, if, and to the extent made by them) as of the Effective
Time; and (b) after the Effective Time, MIGRA shall not have any obligation or
liability to any MIGRA Stockholder as a direct or indirect result of any breach
of representation, warranty or covenant for which the MIGRA Stockholders have or
may have liability to AERC pursuant to the terms of this Agreement.
8.7 Sole Remedies. Except as provided in Section 7.2 or
Section 9.8, the remedies provided in this Article VIII shall be the sole and
exclusive remedies of the parties hereto and shall preclude the assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other parties hereto.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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<PAGE> 60
IF TO MIGRA OR THE MIGRA STOCKHOLDERS:
MIG REALTY ADVISORS, INC.
Attn: Larry Wright
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
WITH A COPY TO:
MAYER, BROWN & PLATT
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Phone (202) 778-0600
Fax (202) 861-0473
IF TO AERC:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Jeffrey Friedman
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8700
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Albert T. Adams, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7499
Fax (216) 696-0740
9.2 Interpretation. When a reference is made in this Agreement
to an Article or Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The headings and the table of
contents contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. For the
purposes of any provision of this Agreement, a "Material Adverse Effect" with
respect to any party shall mean a material adverse effect on the assets,
liabilities, results of operations or financial condition of such party and its
subsidiaries taken as a whole. For purposes of this Agreement, unless otherwise
provided expressly, a "subsidiary" of any person means another person, an amount
of the voting securities or other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other
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<PAGE> 61
governing body (or, if there are no such voting securities or interests, 50% or
more of the equity interests of which) is owned directly or indirectly by such
first person.
9.3 Counterparts. This Agreement may be executed in
counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
9.4 Entire Agreement. This Agreement (including the documents
and the instruments referred to herein) constitutes the entire agreement among
the parties and supersede all prior agreements and understandings, agreements or
representations by or among the parties, written and oral, with respect to the
subject matter hereof and thereof; provided, however, that the existing
confidentiality agreements between AERC and MIGRA shall continue to be in full
force and effect.
9.5 Third Party Beneficiaries. Except as set forth in the next
sentence, nothing in this Agreement, express or implied, is intended or shall be
construed to create any third party beneficiaries. AEMC, as the successor to the
business conveyed in the Spinoff Transfer, is an intended third party
beneficiary of Article IV, and the obligations of MIGRA and the MIGRA
Stockholders in Articles V and VIII of this Agreement.
9.6 Governing Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of Ohio. Except as provided otherwise in Section 8.5, all actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Ohio state or federal court sitting in Cleveland, Ohio.
9.7 Consent to Jurisdiction; Venue. Except with respect to any
claim or proceeding arising out of Section 8.5:
(a) Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the state courts of Ohio and to the jurisdiction of
the United States District Court for the Northern District of Ohio, for the
purpose of any action or proceeding arising out of or relating to this Agreement
and each of the parties hereto irrevocably agrees that all claims in respect to
such action or proceeding may be heard and determined exclusively in any Ohio
state or federal court sitting in the City of Cleveland. Each of the parties
hereto agrees that a final judgment in any action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each of the parties hereto irrevocably consents to the
service of any summons and complaint and any other process in any other action
or proceeding relating to the Merger, on behalf of itself or its property, by
the personal delivery of copies of such process to such party. Nothing in this
Section 9.7 shall affect the right of any party hereto to serve legal process in
any other manner permitted by law.
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<PAGE> 62
9.8 Specific Performance; Other Equitable Relief.
(a) The transactions contemplated by this Agreement are
unique. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled hereunder, each of
the parties hereto is entitled to a decree of specific performance, provided
such party is not in material default hereunder and may be entitled to pursue
the judicial determination referred to in the second sentence of Section 7.2.
(b) AERC acknowledges and agrees that, in the event of a
breach of Section 5.1(f) and Section 5.2(h) of this Agreement, MIGRA may not
have an adequate remedy at law and would be entitled to equitable relief. AERC
hereby consents to the entry of an injunctive or otherwise order by a court of
competent jurisdiction intended to enforce the terms and intent of Section
5.2(h) of this Agreement.
9.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
9.10 Expenses. Subject to the provisions of Section 7.2, all
costs and expenses incurred by AERC in connection with this Agreement and the
transactions contemplated hereby shall be paid by it, and all such costs and
expenses incurred by MIGRA and the MIGRA Stockholders shall be paid by MIGRA.
Notwithstanding any provision of this Agreement or any other Agreement executed
or delivered by or on behalf of MIGRA to the contrary, MIGRA shall be solely
responsible for payment of up to $40,000 owed to Stonemark Apartments II, Inc.
("Stonemark"), if any, upon the closing of the transactions contemplated by that
certain purchase agreement between AERC and Stonemark.
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<PAGE> 63
IN WITNESS WHEREOF, AERC and MIGRA have signed this Agreement
as of the date first written above.
ASSOCIATED ESTATES REALTY
CORPORATION
By:_______________________________________
Name: __________________
Title: ___________________
MIG REALTY ADVISORS, INC.
By:________________________________
Name: __________________
Title: ___________________
MIGRA STOCKHOLDERS
- ----------------------------
Name:
- ----------------------------
Name:
- ----------------------------
Name:
- ----------------------------
Name:
- ----------------------------
Name:
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<PAGE> 64
<TABLE>
<CAPTION>
SCHEDULE 2.1
ALLOCATION OF AERC SHARES
At Third At Second At Third
At Effective At Second Issuance Issuance Issuance
Time Issue Date Date Per Date Per Date Per
Per 2.1(b) Per 2.1(c) 2.1(d) 2.1(e) 2.1(f)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James Cote 21.10% 21.10% 21.10% 21.10% 21.10%
Gregory Golz 8.10% 8.10% 8.10% 8.10% 8.10%
William 8.10% 8.10% 8.10% 8.10% 8.10%
Hughes
Louis Vogt 11.30% 11.30% 11.30% 11.30% 11.30%
Larry Wright 51.40% 51.40% 51.40% 51.40% 51.40%
</TABLE>
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<PAGE> 65
Exhibit A
PROPERTIES
MANAGED PROPERTIES
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<PAGE> 66
Exhibit B
OPINION OF AERC'S COUNSEL
1. AERC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio with all requisite
corporate power and authority to own and operate its properties and to conduct
its businesses as now conducted.
2. AERC has all requisite corporate power and authority to
execute and deliver the Agreement and to perform its obligations thereunder.
3. The execution and delivery of the Agreement by AERC, and
the consummation by AERC of the transactions contemplated thereby have been duly
authorized by all requisite corporate action on the part of AERC. The Agreement
has been duly executed and delivered by AERC, and the Agreement constitutes the
legal, valid and binding obligation of AERC, enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity and public
policy.
4. Neither the execution and delivery of the Agreement by AERC
nor the consummation of the transactions contemplated thereby will conflict
with, or result in a breach of, any provision of the AERC Articles or the AERC
Code of Regulations.
5. All AERC Common Shares to be issued in the Merger will be
duly authorized and validly issued, fully paid and nonassessable and will not be
issued in violation of any preemptive or similar rights.
6. All actions on the part of AERC have been taken necessary
to exempt under or make not subject to any state takeover law or other state law
that purports to limit or restrict business combinations or the ability to
acquire or vote shares: (i) the execution of the Agreement, (ii) the Merger and
(iii) the transactions contemplated by the Agreement.
7. Upon the filing of the Certificate of Merger with the Ohio
Secretary of State, the Merger will be effective under the Ohio Revised Code in
accordance with the terms of the Agreement and the Certificate of Merger.
We express no opinion as to any violation of law that might
result, in whole or in part, from any competitive effect, actual or potential,
of the transactions contemplated by the Agreement.
<PAGE> 67
The foregoing opinions are limited to the laws of the State of
Ohio and applicable federal law of the United States of America and we express
no opinion as to the law of any other jurisdiction. To the extent that any
matter with respect to which we give any opinion herein is governed by the laws
of any other jurisdiction, we have assumed, with your permission and without
investigation, that such laws are the same as the internal substantive laws of
the State of Ohio. We assume no obligation to update such opinions to reflect
any facts or circumstances that hereafter may come to our attention or any
changes in the laws that hereafter may occur. The opinions contained herein are
provided to you for your exclusive use solely in connection with the
transactions contemplated by the Agreement and may not be otherwise used or
relied upon by you or any other person for any purpose whatsoever, without in
each instance our prior written consent.
Very truly yours,
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<PAGE> 68
Exhibit C
OPINION OF MIGRA'S COUNSEL
[to be revised to reflect structure
and investment company matters]
1. MIGRA is a corporation organized, validly existing and in
good standing under the laws of the State of Florida with full corporate power
and authority to own, and operate its properties and to conduct its business as
now conducted.
2. MIGRA has all requisite corporate power and authority to
execute and deliver the Agreement, and to perform its obligations thereunder.
3. The execution and delivery by MIGRA of the Agreement and
the consummation by MIGRA of the transactions contemplated by the Agreement have
been duly authorized by all necessary corporate action on the part of MIGRA. The
Agreement has been duly executed and delivered by MIGRA, and constitutes the
legal, valid and binding obligation of MIGRA, enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity and public
policy.
4. Neither the execution and delivery of the Agreement by
MIGRA nor the consummation of the transactions contemplated thereby will
conflict with, or result in a breach of, any provision of the Articles of
Incorporation, as amended, or the Bylaws, as amended, of MIGRA.
5. All actions on the part of MIGRA have been taken necessary
to exempt under or make not subject to any state takeover law or other state law
that purports to limit or restrict business combinations or the ability to
acquire or vote shares: (i) the execution of the Agreement, (ii) the Merger and
(iii) the transactions contemplated by the Agreement.
6. Upon the filing of the Certificate of Merger with the
Florida Secretary of State, the Merger will be effective under the FBCA in
accordance with the terms of the Agreement and the Certificate of Merger.
We express no opinion as to any violation of law that might
result, in whole or in part, from any anticompetitive effect, actual or
potential, of the transactions contemplated by the Agreement.
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<PAGE> 69
The foregoing opinions are limited to the laws of the State of
Florida and applicable federal law of the United States of America. We express
no opinion as to the law of any other jurisdiction. To the extent that any
matter with respect to which we give any opinion herein is governed by the laws
of any other jurisdiction, we have assumed, with your permission and without
investigation, that such laws are the same as the internal substantive laws of
the State of Florida. We assume no obligation to update such opinions to reflect
any facts or circumstances that hereafter may come to our attention or any
changes in the laws that hereafter may occur. The opinions contained herein are
provided to you for your exclusive use solely in connection with the
transactions contemplated by the Agreement and may not be otherwise used or
relied upon by you or any other person for any purpose whatsoever, without in
each instance our prior written consent.
Very truly yours,
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<PAGE> 1
Exhibit 2.02
PURCHASE AGREEMENT
MIG REIT/MORGAN PLACE, INC.
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
----
PURCHASE AGREEMENT.......................................................... 1
1. Agreement to Buy and Sell................................. 2
2. Liabilities............................................... 3
3. Consideration and Payment/Earnest Money................... 4
4. Representations and Warranties of Seller.................. 7
5. Representations and Warranties of Buyer................... 9
6. Seller's Covenants........................................ 11
7. Title and Possession of the Property...................... 13
8. Conditions to Closing..................................... 16
9. Deliveries................................................ 18
10. Due Diligence Period...................................... 20
11. Closing Date.............................................. 23
12. Prorations and Closing Costs.............................. 24
13. Fire or Other Casualty.................................... 27
14. Condemnation and Eminent Domain........................... 27
15. Indemnification........................................... 28
16. Miscellaneous............................................. 30
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<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
-ii-
<PAGE> 4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG REIT/MORGAN PLACE, INC., a
Florida corporation, ("Seller") and ASSOCIATED ESTATES REALTY CORPORATION, an
Ohio corporation ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 186-unit apartment complex known as Morgan Place
located in Atlanta, Georgia; which real property is more fully described on
EXHIBIT A attached hereto and made a part hereof, together with all buildings,
fixtures and other improvements located thereon and therein and including all
appurtenant rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
NOW, THEREFORE, for good and valuable consideration received
to the full
<PAGE> 5
satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
(f) prepaid rentals under Tenant Leases, if any, and any other
miscellaneous deposits and prepaid expenses related to the ownership or
operation of the Project
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<PAGE> 6
(collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "Morgan Place" or "Morgan Place
Apartments" and derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured,
liquidated or unliquidated, fixed or contingent, or known or unknown, and
whether arising out of occurrences prior to, at or after the Closing, except as
provided hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for
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<PAGE> 7
the Property will be the following, payable by Buyer to Seller
as follows:
(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in escrow by
Buyer on or before the Closing Date (defined below) in immediately available
funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Eleven Million Six
Hundred Thousand Dollars ($11,600,000).
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York
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<PAGE> 8
Stock Exchange. No certificates for fractional Common Shares shall be issued or
delivered in connection with the transaction contemplated by this Agreement. To
the extent that a fractional Common Share would otherwise have been deliverable
under the formula set out in the preceding portion of this Section 3(a), Seller
shall be entitled to receive a cash payment therefor in an amount equal to the
value (determined with reference to the closing price of Common Shares as
reported on the New York Stock Exchange Composite Tape on the last full Trading
Day immediately prior to the Closing Date) of such fractional interest. Such
payment with respect to fractional shares is merely intended to provide a
mechanical rounding off of, and is not separately bargained for, consideration.
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit the sum of One Hundred
Sixteen Thousand Dollars ($116,000) (the "Earnest Money Deposit") therein. Buyer
shall notify Seller of the opening, the deposit, the number of the escrow, and
the employee or employees of the Title Company in charge of the escrow. Each
party shall execute such documentation governing the Earnest Money Escrow that
reflects the relevant provisions of this Agreement and as may otherwise be
required by the escrow agent, including reasonable standard form escrow
conditions. The Earnest Money Deposit shall be deposited in an interest bearing
account as instructed by Buyer and any interest earned shall be added to the
Earnest Money Deposit. In the event that the parties proceed to the Closing,
then the Earnest Money Deposit, together with all interest earned thereon, shall
be applied towards the Cash Payment. Except as otherwise expressly set forth in
Section 11 of this Agreement, upon the termination of this Agreement, the
Earnest Money Deposit, together with all interest earned thereon, shall be
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<PAGE> 9
returned by the Title Company to Buyer. Seller acknowledges that it has
disclosed to Buyer any legal conditions or requirements, imposed by law or
contract upon its interest in such Earnest Money Escrow by the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or relevant state
law, and Seller assumes all responsibility for ensuring the written provisions
of the agreement governing such Earnest Money Escrow complies with any such
requirements as they apply to Seller; provided, that Buyer (or its nominee)
shall comply with any requirements identified to Buyer by Seller in writing, so
long as identified prior to Buyer's establishing said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a corporation duly
organized and validly existing under the laws of the State of Florida
with the power and authority to execute this Agreement and sell the
Property on the terms herein set forth. Seller, is duly authorized to
so act, and all requisite action has been taken by Seller to authorize
the execution and delivery of this Agreement, the performance by Seller
of its obligations hereunder and the consummation of the transactions
contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable
-6-
<PAGE> 10
against Seller in accordance with their respective terms.
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or disclosing material litigation, material zoning
or building code violations or material environmental law violations at
the Property which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined and
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such Merger Agreement contemplates the sale of property pursuant to
this Agreement; and (B) said Merger Agreement, if consummated, would
cause MIGRA's shareholders to become substantial shareholders in Buyer
or Buyer's parent and its affiliated entities, and cause certain
officers and directors of MIGRA to become officers and directors of
Buyer or Buyer's parent and its affiliates. Each such shareholder has
been provided the opportunity to ask questions and receive from MIGRA
information regarding the Property, the consideration to be paid
therefore, and MIGRA's interest in the transactions contemplated by
this Agreement, to the extent such information is in the possession of
MIGRA or may be obtained without unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby acknowledges and agrees
that the representations and warranties made in this Agreement by Seller shall
be unaffected by any such due diligence, investigation or analysis; provided,
however, that Buyer shall not be entitled to recover on any representation or
warranty set forth in this Agreement if Buyer's due diligence made Buyer
actually aware, prior to Closing, of any condition of, concerning or relating to
the Property which is contrary to those representations and warranties, but no
such knowledge shall affect the rights of Buyer to decline to close hereunder if
any of the Closing conditions under Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on the
attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of
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<PAGE> 12
the Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and warranties set forth in this Section 4 shall be deemed
renewed by Seller on the Closing Date as if made at such time and shall survive
the Closing of the transactions contemplated hereby for a period of one (1)
year; provided, that the representations and warranties contained in Subsection
4(g) shall survive the Closing of the transactions contemplated hereby for a
period of six (6) years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Buyer pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
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pursuant hereto.
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to Section 856 through 860 of the Internal
Revenue Code, for each of its taxable years ended December 31, 1993
through December 31, 1996, and the Buyer expects to so qualify for the
fiscal year ending December 31, 1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
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(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in effect on the date
hereof.
(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project Contract or Personal Property Lease or enter into
or renew any contract or agreement pertaining to any item of Property
unless such contract or agreement can be terminated at will without
obligation after the Closing or (B) incur any mortgage indebtedness or
other material indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
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<PAGE> 15
(i) On or before the Closing Date, cause to be terminated any
management contract relating to the Property which is not assumed by
Buyer consistent with the terms and conditions of the transaction
described on EXHIBIT H attached hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR ss. 2510.3- 101, then
Seller covenants that all discretionary actions of Seller under this
Agreement shall be conducted by a fiduciary of Seller which is
independent of MIGRA or, in the
case of an entity which holds plan assets, pursuant to directions of
the investors in such entity who are independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided
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<PAGE> 16
that Buyer pay the costs of all such endorsements), in the amount of
the total consideration paid by Buyer to Seller for the Property (the
"Title Policy") issued by the Title Company, as assurance that upon
Closing, the Buyer holds and will hold good, valid and insurable title
in fee simple absolute to the Property including all rights, privileges
and easements appurtenant to the Property free and clear of all
encumbrances whatsoever, except the following (collectively, the
"Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or encumbrances upon, title to the
Property which would appear in the Title Policy. Buyer shall have until
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the end of the Due Diligence Period (as defined in Section 10 of this
Agreement) to review such items and to give notice to Seller of such
objections as Buyer may have to any matters set forth in the Title
Commitment or survey which were not referenced in the Approved Title
Report. Seller understands and agrees that prior to the expiration of
the Due Diligence Period, Buyer may deliver to Seller an objection
letter or objection letters at any time during the Due Diligence Period
and Seller agrees that any such delivery or deliveries shall not be
construed in any way to limit or restrict Buyer's right to deliver
additional objections to Seller at any time during Due Diligence
Period. If Buyer timely (i.e during the Due Diligence Period) objects
to any special assessments, defects or encumbrances, Seller shall have
until the end of the Due Diligence Period to have such exceptions
cured, either by the removal of such exceptions or by the procurement
of title insurance endorsements or other resolution satisfactory to
Buyer providing coverage against loss or damage as a result of such
exceptions. If Seller shall not cure such defects or encumbrances to
Buyer's satisfaction by the end of the Due Diligence Period, Buyer, at
its option, may (i) terminate this Agreement upon written notice of
termination to Seller in accordance with Section 10 of this Agreement,
in which event neither party shall thereafter have any liability to the
other (except as to matters which, under any other provision of this
Agreement are expressly stated to survive a termination of this
Agreement), and all funds previously paid or deposited by Buyer,
including all accrued interest, shall be returned to Buyer, or (ii)
waive its objection to the defects or encumbrances and proceed to the
Closing in which event all such waived defects or encumbrances shall be
deemed to be Permitted Exceptions hereunder. Notwithstanding the above,
any defects in the nature of consensual liens affirmatively granted by
Seller or non-consensual monetary liens which do not exceed
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<PAGE> 18
Twenty Five Thousand Dollars ($25,000) in the aggregate that can be
released by payment of the underlying obligation shall be removed,
bonded or title insured over by Seller and if not so removed, bonded or
title insured over by the Closing then the Appraised Value shall be
reduced by an amount sufficient to satisfy such obligations. Buyer
shall conclusively be deemed to have waived all objections to any title
or survey defect, encumbrance or exception reflected or referenced in
the Title Commitment or survey as to which Buyer fails to deliver to
Seller a written objection by the end of the Due Diligence Period, and
all such matters shall thereafter be deemed to be Permitted Exceptions
for purposes of this Agreement.
8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Buyer through written notice to Seller, Buyer's
obligations under this Agreement are expressly conditioned upon the
satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with all covenants as set forth in Section 6 herein,
and shall have otherwise performed all of its obligations
hereunder, in all material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
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<PAGE> 19
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence Period (as
hereafter defined) and the financial condition of the Property
shall not have changed in any material and adverse respect
from the condition reflected in the then most current
financial statements and other relevant financial materials
delivered by Seller to Buyer during the Due Diligence Period
(as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as defined in the Merger Agreement)
and the transactions contemplated by the Portfolio Purchase
Agreements shall have closed simultaneously with, or
immediately preceding or immediately following the Closing of
this transaction; and
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<PAGE> 20
(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration Rights
Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Seller through written notice to Buyer, Seller's
obligations under this Agreement are expressly conditioned upon the
occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
(iii) the closing of the Merger (as defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
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<PAGE> 21
(c) Since the Portfolio Properties constitute substantially
all of the assets of MIG Residential REIT, Inc., a Maryland corporation
("MIG REIT"), through MIG REIT's ownership of all the shares of Seller
and the Other Owners, MIG REIT's Board of Directors has a fiduciary
obligation to the holders of MIG REIT stock to maximize the current and
long term value of their shares in MIG REIT. Accordingly, it is agreed
that, notwithstanding anything in this Agreement to the contrary,
Seller shall have the right (the "Fiduciary Out") to terminate this
Agreement and cancel the Earnest Money Escrow on the following terms
and conditions:
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's
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<PAGE> 22
sending the Fiduciary Out Notice to Buyer shall constitute an
election by Seller to terminate this Agreement and cancel the
Earnest Money Escrow, subject to subsection (v) below.
(v) If a Fiduciary Out Notice is sent to Buyer, Buyer
shall have the right to elect, by giving Seller written notice
thereof within ten (10) business days after such Fiduciary Out
Notice is sent to Buyer, to either: (A) do nothing, or (B)
propose terms and conditions for Buyer to purchase the
Property which are at least as advantageous to Seller as the
terms and conditions set forth in such
Fiduciary Out Notice, which proposed terms and conditions
shall include a total purchase price for all the Portfolio
Properties at least equal to the total purchase price proposed
by the Third Party Buyer named in such Fiduciary Out Notices,
plus $250,000. If Buyer elects to do nothing, Seller shall
have no obligation to sell the Property to Buyer, but Buyer
shall have the right to be paid the Break-Up Fee (as defined
below) on the same contingent basis specified in subsection
(vii)(B) below. If Buyer proposes such new terms and
conditions which are accepted by Seller, in Seller's role and
absolute discretion, the Break-Up Fee shall not be payable to
Buyer and the parties shall proceed with and complete the
purchase and sale of the Property in accordance therewith. If
Buyer elects to do nothing, or if Seller does not accept such
new terms and conditions proposed by Buyer, Seller shall give
written notice to Buyer and the Title Company that this
Agreement is terminated and the Earnest Money Escrow is
canceled (the "Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the Appraised Value and
shall be paid to Buyer simultaneously with the delivery of the
Termination Notice, by wire transfer of immediately available
federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE
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<PAGE> 23
REMEDY AGAINST SELLER FOR TERMINATING THIS AGREEMENT UNDER
THIS SECTION 8(c).
9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed,
in customary form acceptable to Buyer (the "Deed"), conveying good and
insurable fee simple title to the Project to Buyer, free and clear of
all mortgages, pledges, liens, security interests, encumbrances and
restrictions, except the Permitted Exceptions. The Permitted Exceptions
shall be specifically, and not categorically, set forth in the Deed as
exceptions to title.
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the Board of
Directors of Seller authorizing the execution and delivery of
this Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate Regarding Projects and
Personal Property Leases substantially in the form of EXHIBIT
D attached hereto and made a part hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the
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<PAGE> 24
Property is located, originals of all certificates of
occupancy (or the jurisdictional equivalent of a certificate
of occupancy) for all apartment units on the Property, if
available, and if not available, true and correct copies
thereof;
(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
(x) A certificate of Seller in the form of EXHIBIT F
attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
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(i) Settlement statements agreed to by Seller and
executed by Buyer;
(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and substance
acceptable to Buyer and Seller, pursuant to which Buyer
accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(v) Duly executed resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of
this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees that
prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on EXHIBIT K attached
hereto and made a part hereof (the "Approved Due Diligence Materials") and that
Buyer has approved the Approved Due Diligence Materials and all information
contained therein. For a period of thirty (30) days following execution of this
Agreement (the "Due Diligence Period"), Buyer shall be permitted to conduct its
own limited inspections of the Property for the sole purposes of updating the
Approved Due Diligence Materials, with respect to: (i) obtaining a so-called
"Phase I Environmental Assessment" of the Property, (ii) obtaining structural
and engineering assessments of the Property, (iii) obtaining the Title
Commitment referenced in Section
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7 hereof and (iv) updating or upgrading the survey referenced on EXHIBIT K (the
"Updated Due Diligence"). Seller shall grant reasonable access to Buyer and its
representatives to the Property for the purpose of conducting the Updated Due
Diligence. Seller shall have the right to coordinate and accompany Buyer on any
of such inspections. Any and all inspections, examinations, analyses and audits
deemed necessary by Buyer shall be performed at Buyer's expense and shall not
physically damage the Property. Buyer shall promptly and completely repair and
restore any and all damage to the Property that may be caused by, or may occur
in connection with or as a result of, any inspection, investigation, audit, test
or visit to the Property by Buyer, its employees, and authorized agents and
consultants. Buyer shall indemnify, protect, defend and hold Seller and its
agents, employees and representatives harmless from and against any and all
loss, cost, claim, liability, damage or expense (including, without limitation,
attorneys' fees and expenses) arising out of physical damages or injuries to
persons or property caused by Buyer's inspections, investigations, audits, tests
or visits to the Property. Buyer's restoration and indemnification obligations
set forth in this Section shall survive the Closing or termination of this
Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due Diligence discloses any information
which is not contained in the Approved Due Diligence Materials and which could
reasonably be expected to have a material adverse impact on the value of the
Property ("A Material Adverse Condition"), then, Buyer, in Buyer's sole
discretion, may terminate this Agreement (by giving notice of such termination
to Seller, including Buyer's specific reasons therefor). Buyer shall notify
Seller in writing either during or at the end of the Due Diligence Period with
respect to whether or not Buyer has discovered any such Material Adverse
Condition. If Buyer's written notice to Seller indicates that the Updated Due
Diligence has not
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disclosed a Material Adverse Condition, then the parties shall, subject to the
satisfaction of the conditions set forth herein, proceed to the Closing. If
Buyer's written notice to Seller indicates that the Updated Due Diligence has
disclosed a Material Adverse Condition, then this Agreement shall terminate and
the Earnest Money Deposit (including all interest earned thereon) shall be
returned to Buyer. Upon termination of this Agreement by Buyer pursuant to this
Section 10, neither party shall thereafter be under any further liability to the
other, except as to matters which this Agreement expressly states are to survive
a termination of this Agreement. Notwithstanding anything to the contrary
contained in this Section 10, if Buyer does not notify Seller by the end of the
Due Diligence Period with respect to whether or not the Updated Due Diligence
has disclosed a Material Adverse Condition, then Buyer shall be deemed to have
notified Seller that the Updated Due Diligence has not disclosed any Material
Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established through written notice given by Buyer to Seller and shall not be
later than ten (10) days after the end of the Due Diligence Period (the
"Scheduled Closing Date"). Notwithstanding the foregoing, in the event that
Buyer determines that the applicable rules of the New York Stock Exchange
require its shareholders approval of the transactions contemplated by the Merger
Agreement or this Agreement, then Buyer shall have the right at any time up
until the Scheduled Closing Date, upon written notice to Seller, to extend the
Scheduled Closing Date in order to permit Buyer to obtain such shareholder
approval, to a date which is no later than (i) ninety (90) days after the date
of this
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Agreement, if the Securities and Exchange Commission ("SEC") informs Buyer that
it will not provide comments to its proxy statement or (ii) one hundred thirty
five days (135) after the date of this Agreement, if the SEC provides comments
to its proxy statement. After the expiration of the Due Diligence Period, Buyer
shall not have the right to terminate this Agreement except pursuant to the
provisions of Sections 8(a), 13 or 14 of this Agreement. IF BUYER SHALL DEFAULT
IN ITS OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER SHALL RECEIVE THE
EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) AS LIQUIDATED
DAMAGES AND NEITHER PARTY SHALL THEREAFTER BE UNDER ANY FURTHER LIABILITY TO THE
OTHER, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT WITH RESPECT TO
THE PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT. THE
PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY
BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS
SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE
EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise mutually agreed to by the parties (the "Adjustment
Date"), by the Title Company based on
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information provided by the parties, as follows:
(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being greater than those
shown on the tax duplicate available at Closing or because of any
additions or corrections to the tax duplicate assessed by reason of
Buyer's acquisition of the Property, then Seller shall promptly pay all
such increases allocable to the period prior to the Closing and Seller
shall protect, indemnify, defend, and hold Buyer harmless from and
against all such real estate tax and assessment increases, which
obligations on the part of the Seller shall survive the Closing. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later decreased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being less than those
shown on the tax duplicate available at Closing or because of any
corrections to the tax duplicate assessed by reason of Buyer's
acquisition of the Property or because of any post-Closing reduction
in, or refund or rebate of, any taxes relating wholly or in part to a
period before the Closing, then Buyer shall promptly pay to Seller the
savings allocable to the period prior to the Closing (less any costs
incurred by Buyer to any unaffiliated third parties in connection
with obtaining the reduction of such tax bill), which obligation shall
survive the Closing. Any
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special assessments that are a lien on the Property as of the date of
this Agreement shall be paid by Seller without proration. Any special
assessments that become a lien on the Property after the date of this
Agreement shall be paid as follows: Seller shall pay all installments
that are due and payable prior to the Closing Date and Buyer shall pay
all installments that become due and payable on or after the Closing
Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller (outside
of escrow) the portion of such current rents attributable to periods
prior to the Adjustment Date. Additionally, in the event that any
tenant, who as of the Closing is delinquent in the rental payments due
Seller, delivers to Buyer a rent check in an amount in excess of the
rent due Buyer for the month for which such check is delivered, Buyer
shall allocate such excess first to pay reasonable outside collection
costs, if any, paid to unaffiliated third parties, then to pay rents
which become due after Closing, then pay remaining funds to Seller for
any rents delinquent prior to Closing and were due as of the date such
payment was received; provided, however, in no event shall Buyer be
obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be obtained prior to
Closing, the final bills, when received, shall be prorated as of the
Adjustment Date and the Title Company shall hold in escrow an amount
equal to 125% of the reasonably anticipated amount of such billings,
based upon the most recent available
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billings for similar periods until the Title Company shall have
received notice of payment of such bills, at which time any remaining
amount being withheld for such purpose shall be distributed to the
Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) any state or local real or personal
property transfer taxes, documentary stamps, fees or other charges
relating to the transfer of the Property. Buyer shall pay in connection
with this transaction the following closing costs: (i) all recording
fees, (ii) the costs of the Title Policy and all endorsements thereto
and (iii) all escrow charges. Each party shall pay its own attorneys'
fees. All closing costs allocable to Seller, including, without
limitation, any prorations to which Buyer may be entitled by reason of
the foregoing shall be credited against the balance of the Appraised
Value to be paid at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds received by or payable to Seller as a result of such
damage or destruction plus an amount equal to any insurance policy deductible;
or (b) by written notice of termination given to Seller not later than thirty
(30) days after Seller provides Buyer with written notice of such damage or
destruction, terminate this Agreement and receive any documents, instruments and
funds previously deposited or paid
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including the Earnest Money Deposit (together with all interest earned thereon).
If an unsubstantial portion of the Property (i.e. 10% or less of the value)
shall, prior to the Closing, be damaged or destroyed by fire or any other cause
and such damage shall not have been repaired or reconstructed prior to the
Closing in a good and workmanlike manner to the reasonable satisfaction of
Buyer, then Buyer shall be obligated to proceed to close the transaction
contemplated hereby, but shall receive from Seller, on the Closing Date, an
assignment of proceeds of the insurance payable under Seller's insurance policy
plus an amount equal to any insurance policy deductible. Upon termination of
this Agreement by Buyer pursuant to this Section 13, neither party shall
thereafter be under any further liability to the other, except as otherwise
expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received pertaining
to a taking of all or a portion of the Property by way of condemnation, eminent
domain or similar procedure for a taking of the Property in connection with any
public or quasi-public use.
15. INDEMNIFICATION.
(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify, protect, defend and hold Seller and its
representatives, successors and assigns harmless from
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and against any and all claims, demands, losses, liabilities, damages,
awards, judgements, penalties, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or in connection with (i)
the Property or the ownership thereof or arising under, relating to or
concerning any of the Tenant Leases, Permits, Deposits, Personal
Property Leases, Project Contracts, Intangible Rights if such claims,
demands, losses, liabilities, damages or expenses first arise, accrue
or exist or relate to any period of time from or after the Closing
(except to the extent that such indemnification obligation would arise
directly as a result of the inaccuracy of any representation or
warranty made by Seller hereunder), or (ii) the inaccuracy or any
representation or warranty made by Buyer hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits, Deposits,
Personal Property Leases, Project Contracts or the Intangible Rights),
but only if such claims, demands, losses, liabilities, damages or
expenses first arose, accrued, existed or related to any period of time
before the Closing (except to the extent that such indemnification
obligation would arise directly as a result of the inaccuracy of any
representation made by Buyer hereunder).
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii)
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of Section 15(a) or Section 15(b) must be asserted in writing and with
specificity by the date (the "Claim Expiration Date") which for the
matters referenced in Section 4(g) of this Agreement is six (6) years
after the Closing Date and with respect to the other provisions of this
Agreement is three hundred sixty five (365) days after the Closing
Date, and any and all claims not so asserted by the applicable Claim
Expiration Date shall automatically expire and be deemed to have been
forever waived, released and of no force or effect and (B) the total
amounts recoverable by Buyer against Seller or by Seller against Buyer
with respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
16. MISCELLANEOUS.
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing. Unless otherwise expressly required or permitted
by the terms of this Agreement, any notice required or permitted to be
given hereunder by the parties shall be delivered by facsimile,
personally, by a reputable overnight delivery service or by certified
or registered mail to the parties at the facsimile number or addresses
set forth below (as the case may be), unless different addressees or
facsimile numbers are given by one party to the other:
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<PAGE> 35
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
WITH A COPY TO:
Cox, Castle & Nicholson, LLP
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
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Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any reason any such commission shall become due, the
party who retained such broker shall pay any such commission and agrees
to indemnify and save the other party harmless from any and all claims
for any such commission and from any attorneys' fees and litigation or
other expenses relating to any such claim.
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(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or otherwise, and shall take or cause to be taken
such other or further action, as either party shall reasonably request
at any time or from time to time within the one hundred twenty (120)
days immediately following the Closing Date in order to effectuate the
terms and provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
(h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be extended to the first
succeeding business which is not a federal holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to the best of Seller's Knowledge", "Seller's Actual
Knowledge", "Actual Knowledge of Seller" or "the Knowledge or Seller",
or any similar term or reference, it shall mean and be
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limited to the actual conscious knowledge of Seller, without any
investigation or inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any other matters that
it is required to disclose in connection with its legal reporting
requirements or as otherwise required in accordance with applicable law
based upon the advise of its legal counsel, without the prior express
written consent of Seller; provided, however, that this provision shall
not apply to data that is in the public domain or is clearly not
confidential in nature. The provisions of this Section 17(j) shall
survive the Closing or any termination of this Agreement. Buyer's
undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing the provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this Agreement, or any memorandum thereof, to be
recorded.
(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver
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the Registration Rights Agreement attached hereto and made a part
hereof as EXHIBIT J.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG REIT/MORGAN PLACE, INC.
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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<PAGE> 41
EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
LEASES AND CLOSING AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of
________________, 19___, by and between _____________________________
("Assignor"), and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Assignee"),
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under the Tenant
Leases relating to the tenant deposits (including, without limitation, security
deposits) and prepaid rent.
C-2
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2. Conveyance of Other Property. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. Limitation on Assumption of Obligations. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
4. Power of Attorney. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
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<PAGE> 44
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties other
than Assignor, in the name of, at the expense of and for the
benefit of Assignee, any and all proceedings at law, in equity
or otherwise which Assignee, its successors and assigns may
deem proper with regard to the assets and properties hereby
conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the
C-4
<PAGE> 45
laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
________________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Print Name:_______________ Vice President
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
______________________________
Notary Public
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<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
______________________________
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
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<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
CONTRACTS AND PERSONAL PROPERTY LEASES
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
______________________________
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
______________________________
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between ________________
and AERC (the "Agreement"), that except as set forth on Attachment 1 attached
hereto and made a part hereof, the representations and warranties of AERC as
set forth in the Agreement were true and correct when made and are true and
correct as of the Closing Date. AERC acknowledges and agrees that the disclosure
of the matters set forth on Attachment 1 shall in no way affect the rights of
Seller (as defined in the Agreement) to decline to proceed to the Closing (as
defined in the Agreement) or any way modify or amend the provisions of
Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By ___________________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
Exhibit 2.03
PURCHASE AGREEMENT
MIG REIT/ANNEN WOODS, INC.
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
----
PURCHASE AGREEMENT........................................................ 1
1. Agreement to Buy and Sell............................... 2
2. Liabilities............................................. 3
3. Consideration and Payment/Earnest Money................. 4
4. Representations and Warranties of Seller................ 7
5. Representations and Warranties of Buyer................. 9
6. Seller's Covenants...................................... 11
7. Title and Possession of the Property.................... 13
8. Conditions to Closing................................... 16
9. Deliveries.............................................. 18
10. Due Diligence Period.................................... 20
11. Closing Date............................................ 23
12. Prorations and Closing Costs............................ 24
13. Fire or Other Casualty.................................. 27
14. Condemnation and Eminent Domain......................... 27
15. Indemnification......................................... 28
16. Miscellaneous........................................... 30
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<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
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<PAGE> 4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG REIT/ANNEN WOODS, INC., a
Maryland corporation, ("Seller") and ASSOCIATED ESTATES REALTY CORPORATION, an
Ohio corporation ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 132-unit apartment complex known as Annen Woods located
in Baltimore, Maryland; which real property is more fully described on EXHIBIT A
attached hereto and made a part hereof, together with all buildings, fixtures
and other improvements located thereon and therein and including all appurtenant
rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
NOW, THEREFORE, for good and valuable consideration received
to the full
<PAGE> 5
satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
(f) prepaid rentals under Tenant Leases, if any, and any other
miscellaneous deposits and prepaid expenses related to the ownership or
operation of the Project
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<PAGE> 6
(collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "Annen Woods" or "Annen Woods
Apartments" and derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured,
liquidated or unliquidated, fixed or contingent, or known or unknown, and
whether arising out of occurrences prior to, at or after the Closing, except as
provided hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for
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<PAGE> 7
the Property will be the following, payable by Buyer to Seller
as follows:
(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in escrow by
Buyer on or before the Closing Date (defined below) in immediately available
funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Nine Million One
Hundred Thousand Dollars ($9,100,000).
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York
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<PAGE> 8
Stock Exchange. No certificates for fractional Common Shares shall
be issued or delivered in connection with the transaction contemplated by this
Agreement. To the extent that a fractional Common Share would otherwise have
been deliverable under the formula set out in the preceding portion of this
Section 3(a), Seller shall be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the closing price of
Common Shares as reported on the New York Stock Exchange Composite Tape on the
last full Trading Day immediately prior to the Closing Date) of such fractional
interest. Such payment with respect to fractional shares is merely intended to
provide a mechanical rounding off of, and is not separately bargained for,
consideration
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit the sum of One Hundred
Thousand Dollars ($100,000) (the "Earnest Money Deposit") therein. Buyer shall
notify Seller of the opening, the deposit, the number of the escrow, and the
employee or employees of the Title Company in charge of the escrow. Each party
shall execute such documentation governing the Earnest Money Escrow that
reflects the relevant provisions of this Agreement and as may otherwise be
required by the escrow agent, including reasonable standard form escrow
conditions. The Earnest Money Deposit shall be deposited in an interest bearing
account as instructed by Buyer and any interest earned shall be added to the
Earnest Money Deposit. In the event that the parties proceed to the Closing,
then the Earnest Money Deposit, together with all interest earned thereon, shall
be applied towards the Cash Payment. Except as otherwise expressly set forth in
Section 11 of this Agreement, upon the termination of this Agreement, the
Earnest Money Deposit, together with all interest earned thereon, shall be
returned
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<PAGE> 9
by the Title Company to Buyer. Seller acknowledges that it has disclosed to
Buyer any legal conditions or requirements, imposed by law or contract upon its
interest in such Earnest Money Escrow by the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or relevant state law, and Seller assumes all
responsibility for ensuring the written provisions of the agreement governing
such Earnest Money Escrow complies with any such requirements as they apply to
Seller; provided, that Buyer (or its nominee) shall comply with any requirements
identified to Buyer by Seller in writing, so long as identified prior to Buyer's
establishing said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a corporation duly
organized and validly existing under the laws of the State of Maryland
with the power and authority to execute this Agreement and sell the
Property on the terms herein set forth. Seller, is duly authorized to
so act, and all requisite action has been taken by Seller to authorize
the execution and delivery of this Agreement, the performance by Seller
of its obligations hereunder and the consummation of the transactions
contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable
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<PAGE> 10
against Seller in accordance with their respective terms.
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or disclosing material litigation, material zoning
or building code violations or material environmental law violations at
the Property which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined
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<PAGE> 11
and such Merger Agreement contemplates the sale of property pursuant to
this Agreement; and (B) said Merger Agreement, if consummated, would
cause MIGRA's shareholders to become substantial shareholders in Buyer
or Buyer's parent and its affiliated entities, and cause certain
officers and directors of MIGRA to become officers and directors of
Buyer or Buyer's parent and its affiliates. Each such shareholder has
been provided the opportunity to ask questions and receive from MIGRA
information regarding the Property, the consideration to be paid
therefore, and MIGRA's interest in the transactions contemplated by
this Agreement, to the extent such information is in the possession of
MIGRA or may be obtained without unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby acknowledges and agrees
that the representations and warranties made in this Agreement by Seller shall
be unaffected by any such due diligence, investigation or analysis; provided,
however, that Buyer shall not be entitled to recover on any representation or
warranty set forth in this Agreement if Buyer's due diligence made Buyer
actually aware, prior to Closing, of any condition of, concerning or relating to
the Property which is contrary to those representations and warranties, but no
such knowledge shall affect the rights of Buyer to decline to close hereunder if
any of the Closing conditions under Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on the
attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of
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<PAGE> 12
the Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and warranties set forth in this Section 4 shall be deemed
renewed by Seller on the Closing Date as if made at such time and shall survive
the Closing of the transactions contemplated hereby for a period of one (1)
year; provided, that the representations and warranties contained in Subsection
4(g) shall survive the Closing of the transactions contemplated hereby for a
period of six (6) years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Buyer pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
pursuant hereto.
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<PAGE> 13
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to Section 856 through 860 of the Internal
Revenue Code, for each of its taxable years ended December 31, 1993
through December 31, 1996, and the Buyer expects to so qualify for the
fiscal year ending December 31, 1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
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<PAGE> 14
(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in effect on the date
hereof.
(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project Contract or Personal Property Lease or enter into
or renew any contract or agreement pertaining to any item of Property
unless such contract or agreement can be terminated at will without
obligation after the Closing or (B) incur any mortgage indebtedness or
other material indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
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<PAGE> 15
(i) On or before the Closing Date, cause to be terminated any
management contract relating to the Property which is not assumed by
Buyer consistent with the terms and conditions of the transaction
described on EXHIBIT H attached hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR ss. 2510.3- 101, then
Seller covenants that all discretionary actions of Seller under this
Agreement shall be conducted by a fiduciary of Seller which is
independent of MIGRA or, in the case of an entity which holds plan
assets, pursuant to directions of the investors in such entity who are
independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided
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<PAGE> 16
that Buyer pay the costs of all such endorsements), in the amount of
the total consideration paid by Buyer to Seller for the Property (the
"Title Policy") issued by the Title Company, as assurance that upon
Closing, the Buyer holds and will hold good, valid and insurable title
in fee simple absolute to the Property including all rights, privileges
and easements appurtenant to the Property free and clear of all
encumbrances whatsoever, except the following (collectively, the
"Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or
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encumbrances upon, title to the Property which would appear in the
Title Policy. Buyer shall have until the end of the Due Diligence
Period (as defined in Section 10 of this Agreement) to review such
items and to give notice to Seller of such objections as Buyer may have
to any matters set forth in the Title Commitment or survey which were
not referenced in the Approved Title Report. Seller understands and
agrees that prior to the expiration of the Due Diligence Period, Buyer
may deliver to Seller an objection letter or objection letters at any
time during the Due Diligence Period and Seller agrees that any such
delivery or deliveries shall not be construed in any way to limit or
restrict Buyer's right to deliver additional objections to Seller at
any time during Due Diligence Period. If Buyer timely (i.e during the
Due Diligence Period) objects to any special assessments, defects or
encumbrances, Seller shall have until the end of the Due Diligence
Period to have such exceptions cured, either by the removal of such
exceptions or by the procurement of title insurance endorsements or
other resolution satisfactory to Buyer providing coverage against loss
or damage as a result of such exceptions. If Seller shall not cure such
defects or encumbrances to Buyer's satisfaction by the end of the Due
Diligence Period, Buyer, at its option, may (i) terminate this
Agreement upon written notice of termination to Seller in accordance
with Section 10 of this Agreement, in which event neither party shall
thereafter have any liability to the other (except as to matters which,
under any other provision of this Agreement are expressly stated to
survive a termination of this Agreement),
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<PAGE> 18
and all funds previously paid or deposited by Buyer, including all
accrued interest, shall be returned to Buyer, or (ii) waive its
objection to the defects or encumbrances and proceed to the Closing in
which event all such waived defects or encumbrances shall be deemed to
be Permitted Exceptions hereunder. Notwithstanding the above, any
defects in the nature of consensual liens affirmatively granted by
Seller or non-consensual monetary liens which do not exceed Twenty Five
Thousand Dollars ($25,000) in the aggregate that can be released by
payment of the underlying obligation shall be removed, bonded or title
insured over by Seller and if not so removed, bonded or title insured
over by the Closing then the Appraised Value shall be reduced by an
amount sufficient to satisfy such obligations. Buyer shall conclusively
be deemed to have waived all objections to any title or survey defect,
encumbrance or exception reflected or referenced in the Title
Commitment or survey as to which Buyer fails to deliver to Seller a
written objection by the end of the Due Diligence Period, and all such
matters shall thereafter be deemed to be Permitted Exceptions for
purposes of this Agreement.
8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Buyer through written notice to Seller, Buyer's
obligations under this Agreement are expressly conditioned upon the
satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with
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<PAGE> 19
all covenants as set forth in Section 6 herein, and shall have
otherwise performed all of its obligations hereunder, in all
material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence Period (as
hereafter defined) and the financial condition of the Property
shall not have changed in any material and adverse respect
from the condition reflected in the then most current
financial statements and other relevant financial materials
delivered by Seller to Buyer during the Due Diligence Period
(as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as that term is defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction; and
(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration
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<PAGE> 20
Rights Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Seller through written notice to Buyer, Seller's
obligations under this Agreement are expressly conditioned upon the
occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
(iii) the closing of the Merger (as that term is
defined in the Merger Agreement) and the transactions
contemplated by the Portfolio Purchase Agreements shall have
closed simultaneously with, or immediately preceding or
immediately following the Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
(c) Since the Portfolio Properties constitute substantially
all of the assets of MIG Residential REIT, Inc., a Maryland corporation
("MIG REIT"), through MIG REIT's ownership of all the shares of Seller
and the Other Owners, MIG REIT's Board of Directors has a fiduciary
obligation to the holders of MIG REIT stock to maximize the current and
long term value of their shares in MIG REIT. Accordingly, it is agreed
that, notwithstanding anything in this Agreement to the contrary,
Seller shall have the right (the "Fiduciary Out") to terminate this
Agreement and cancel the Earnest Money Escrow on the following terms
and conditions:
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<PAGE> 21
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's sending the Fiduciary
Out Notice to Buyer shall constitute an election by Seller to
terminate this Agreement and cancel the Earnest Money Escrow,
subject to subsection (v) below.
(v) If a Fiduciary Out Notice is sent to Buyer, Buyer
shall have the right to elect, by giving Seller written notice
thereof within ten (10) business days after such Fiduciary Out
Notice is sent to Buyer, to either: (A) do nothing, or
(B) propose terms and conditions for Buyer to purchase the
Property which are at least as advantageous to Seller as the
terms and conditions set forth in such Fiduciary Out Notice,
which proposed terms and conditions shall include a total
purchase price for all the Portfolio Properties at least equal
to the total purchase price proposed by the Third Party Buyer
named in such Fiduciary Out Notices, plus $250,000. If Buyer
elects to do nothing, Seller shall have no obligation to sell
the Property to Buyer, but Buyer shall have the right to be
paid the Break-Up Fee (as defined below) on the same
contingent basis specified in subsection (vii)(B) below. If
Buyer proposes such new terms and conditions which are
accepted by Seller, in Seller's role and
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<PAGE> 22
absolute discretion, the Break-Up Fee shall not be payable to
Buyer and the parties shall proceed with and complete the
purchase and sale of the Property in accordance therewith. If
Buyer elects to do nothing, or if Seller does not accept such
new terms and conditions proposed by Buyer, Seller shall give
written notice to Buyer and the Title Company that this
Agreement is terminated and the Earnest Money Escrow is
canceled (the "Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the Appraised Value and
shall be paid to Buyer simultaneously with the delivery of the
Termination Notice, by wire transfer of immediately available
federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE REMEDY AGAINST SELLER FOR
TERMINATING THIS AGREEMENT UNDER THIS SECTION 8(c).
9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed, in customary form
acceptable to Buyer (the "Deed"), conveying good and insurable fee
simple title to the Project to Buyer, free and clear of all mortgages,
pledges, liens, security interests, encumbrances and restrictions,
except the Permitted Exceptions. The Permitted Exceptions shall be
specifically, and not categorically, set forth in the Deed as
exceptions to title.
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<PAGE> 23
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the Board of
Directors of Seller authorizing the execution and delivery of
this Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate Regarding Projects and
Personal Property Leases substantially in the form of EXHIBIT
D attached hereto and made a part hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the Property is located, originals of
all certificates of occupancy (or the jurisdictional
equivalent of a certificate of occupancy) for all apartment
units on the Property, if available, and if not available,
true and correct copies thereof;
(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
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<PAGE> 24
(x) A certificate of Seller in the form of EXHIBIT F
attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
(i) Settlement statements agreed to by Seller and
executed by Buyer;
(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and substance
acceptable to Buyer and Seller, pursuant to which Buyer
accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
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<PAGE> 25
(v) Duly executed resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of
this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees that
prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on EXHIBIT K attached
hereto and made a part hereof (the "Approved Due Diligence Materials") and that
Buyer has approved the Approved Due Diligence Materials and all information
contained therein. For a period of thirty (30) days following execution of this
Agreement (the "Due Diligence Period"), Buyer shall be permitted to conduct its
own limited inspections of the Property for the sole purposes of updating the
Approved Due Diligence Materials, with respect to: (i) obtaining a so-called
"Phase I Environmental Assessment" of the Property, (ii) obtaining structural
and engineering assessments of the Property, (iii) obtaining the Title
Commitment referenced in Section 7 hereof and (iv) updating or upgrading the
survey referenced on EXHIBIT K (the "Updated Due Diligence"). Seller shall grant
reasonable access to Buyer and its representatives to the Property for the
purpose of conducting the Updated Due Diligence. Seller shall have the right to
coordinate and accompany Buyer on any of such inspections. Any and all
inspections, examinations, analyses and audits deemed necessary by Buyer shall
be performed at Buyer's expense and shall not physically damage the Property.
Buyer shall promptly and completely repair and restore any and all damage to the
Property that may be caused by, or may occur in connection with or as a result
of, any inspection, investigation, audit, test or visit to the Property by
Buyer, its employees, and authorized
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agents and consultants. Buyer shall indemnify, protect, defend and hold Seller
and its agents, employees and representatives harmless from and against any and
all loss, cost, claim, liability, damage or expense (including, without
limitation, attorneys' fees and expenses) arising out of physical damages or
injuries to persons or property caused by Buyer's inspections, investigations,
audits, tests or visits to the Property. Buyer's restoration and indemnification
obligations set forth in this Section shall survive the Closing or termination
of this Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due Diligence discloses any information
which is not contained in the Approved Due Diligence Materials and which could
reasonably be expected to have a material adverse impact on the value of the
Property ("A Material Adverse Condition"), then, Buyer, in Buyer's sole
discretion, may terminate this Agreement (by giving notice of such termination
to Seller, including Buyer's specific reasons therefor). Buyer shall notify
Seller in writing either during or at the end of the Due Diligence Period with
respect to whether or not Buyer has discovered any such Material Adverse
Condition. If Buyer's written notice to Seller indicates that the Updated Due
Diligence has not disclosed a Material Adverse Condition, then the parties
shall, subject to the satisfaction of the conditions set forth herein, proceed
to the Closing. If Buyer's written notice to Seller indicates that the Updated
Due Diligence has disclosed a Material Adverse Condition, then this Agreement
shall terminate and the Earnest Money Deposit (including all interest earned
thereon) shall be returned to Buyer. Upon termination of this Agreement by Buyer
pursuant to this Section 10, neither party shall thereafter be under any further
liability to the other, except as to matters which this Agreement expressly
states are to survive a termination of this Agreement. Notwithstanding anything
to the contrary contained in this Section 10, if Buyer does not notify Seller by
the end of the Due
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Diligence Period with respect to whether or not the Updated Due Diligence
has disclosed a Material Adverse Condition, then Buyer shall be deemed to have
notified Seller that the Updated Due Diligence has not disclosed any Material
Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established through written notice given by Buyer to Seller and shall not be
later than ten (10) days after the end of the Due Diligence Period (the
"Scheduled Closing Date"). Notwithstanding the foregoing, in the event that
Buyer determines that the applicable rules of the New York Stock Exchange
require its shareholders approval of the transactions contemplated by the Merger
Agreement or this Agreement, then Buyer shall have the right at any time up
until the Scheduled Closing Date, upon written notice to Seller, to extend the
Scheduled Closing Date in order to permit Buyer to obtain such shareholder
approval, to a date which is no later than (i) ninety (90) days after the date
of this Agreement, if the Securities and Exchange Commission ("SEC") informs
Buyer that it will not provide comments to its proxy statement or (ii) one
hundred thirty five days (135) after the date of this Agreement, if the SEC
provides comments to its proxy statement. After the expiration of the Due
Diligence Period, Buyer shall not have the right to terminate this Agreement
except pursuant to the provisions of Sections 8(a), 13 or 14 of this Agreement.
IF BUYER SHALL DEFAULT IN ITS OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER
SHALL RECEIVE THE EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON)
AS LIQUIDATED DAMAGES AND NEITHER PARTY SHALL THEREAFTER BE UNDER ANY
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<PAGE> 28
FURTHER LIABILITY TO THE OTHER, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS
AGREEMENT WITH RESPECT TO THE PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION
OF THIS AGREEMENT. THE PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE
EVENT OF A DEFAULT BY BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO
DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE
THAT THE EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN
AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S
DAMAGES AND AS SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN
EQUITY, IN THE EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise mutually agreed to by the parties (the "Adjustment
Date"), by the Title Company based on information provided by the parties, as
follows:
(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax
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<PAGE> 29
duplicate being greater than those shown on the tax duplicate available
at Closing or because of any additions or corrections to the tax
duplicate assessed by reason of Buyer's acquisition of the Property,
then Seller shall promptly pay all such increases allocable to the
period prior to the Closing and Seller shall protect, indemnify,
defend, and hold Buyer harmless from and against all such real estate
tax and assessment increases, which obligations on the part of the
Seller shall survive the Closing. If any real estate taxes prorated at
Closing or assessments paid by Seller (as set forth below) are later
decreased for any reason whatsoever, including, without limitation, the
real estate taxes and assessments shown on the later issued actual tax
duplicate being less than those shown on the tax duplicate available at
Closing or because of any corrections to the tax duplicate assessed by
reason of Buyer's acquisition of the Property or because of any
post-Closing reduction in, or refund or rebate of, any taxes relating
wholly or in part to a period before the Closing, then Buyer shall
promptly pay to Seller the savings allocable to the period prior to the
Closing (less any costs incurred by Buyer to any unaffiliated third
parties in connection with obtaining the reduction of such tax bill),
which obligation shall survive the Closing. Any special assessments
that are a lien on the Property as of the date of this Agreement shall
be paid by Seller without proration. Any special assessments that
become a lien on the Property after the date of this Agreement shall be
paid as follows: Seller shall pay all installments that are due and
payable prior to the Closing Date and Buyer shall pay all installments
that become due and payable on or after the Closing Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller
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<PAGE> 30
(outside of escrow) the portion of such current rents attributable to
periods prior to the Adjustment Date. Additionally, in the event that
any tenant, who as of the Closing is delinquent in the rental payments
due Seller, delivers to Buyer a rent check in an amount in excess of
the rent due Buyer for the month for which such check is delivered,
Buyer shall allocate such excess first to pay reasonable outside
collection costs, if any, paid to unaffiliated third parties, then to
pay rents which become due after Closing, then pay remaining funds to
Seller for any rents delinquent prior to Closing and were due as of the
date such payment was received; provided, however, in no event shall
Buyer be obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be
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obtained prior to Closing, the final bills, when received, shall be
prorated as of the Adjustment Date and the Title Company shall hold in
escrow an amount equal to 125% of the reasonably anticipated amount of
such billings, based upon the most recent available billings for
similar periods until the Title Company shall have received notice of
payment of such bills, at which time any remaining amount being
withheld for such purpose shall be distributed to the Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) any state or local real or personal
property transfer taxes, documentary stamps, fees or other charges
relating to the transfer of the Property and (ii) one-half of any
escrow charges. Buyer shall pay in connection with this transaction the
following closing costs: (i) all recording fees, (ii) the costs of the
Title Policy and all endorsements thereto and (iii) one-half of any
escrow charges. Each party shall pay its own attorneys' fees. All
closing costs allocable to Seller, including, without limitation, any
prorations to which Buyer may be entitled by reason of the foregoing
shall be credited against the balance of the Appraised Value to be paid
at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds
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received by or payable to Seller as a result of such damage or destruction plus
an amount equal to any insurance policy deductible; or (b) by written notice of
termination given to Seller not later than thirty (30) days after Seller
provides Buyer with written notice of such damage or destruction, terminate this
Agreement and receive any documents, instruments and funds previously deposited
or paid including the Earnest Money Deposit (together with all interest earned
thereon). If an unsubstantial portion of the Property (i.e. 10% or less of the
value) shall, prior to the Closing, be damaged or destroyed by fire or any other
cause and such damage shall not have been repaired or reconstructed prior to the
Closing in a good and workmanlike manner to the reasonable satisfaction of
Buyer, then Buyer shall be obligated to proceed to close the transaction
contemplated hereby, but shall receive from Seller, on the Closing Date, an
assignment of proceeds of the insurance payable under Seller's insurance policy
plus an amount equal to any insurance policy deductible. Upon termination of
this Agreement by Buyer pursuant to this Section 13, neither party shall
thereafter be under any further liability to the other, except as otherwise
expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received pertaining
to a taking of all or a portion of the Property by way of condemnation, eminent
domain
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or similar procedure for a taking of the Property in connection with any public
or quasi-public use.
15. INDEMNIFICATION.
(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify, protect, defend and hold Seller and its
representatives, successors and assigns harmless from and against any
and all claims, demands, losses, liabilities, damages, awards,
judgements, penalties, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or in connection with (i)
the Property or the ownership thereof or arising under, relating to or
concerning any of the Tenant Leases, Permits, Deposits, Personal
Property Leases, Project Contracts, Intangible Rights if such claims,
demands, losses, liabilities, damages or expenses first arise, accrue
or exist or relate to any period of time from or after the Closing
(except to the extent that such indemnification obligation would arise
directly as a result of the inaccuracy of any representation or
warranty made by Seller hereunder), or (ii) the inaccuracy or any
representation or warranty made by Buyer hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits, Deposits,
Personal Property Leases, Project Contracts or the Intangible Rights),
but only if such claims, demands, losses, liabilities, damages or
expenses first arose, accrued, existed or related to any period
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<PAGE> 34
of time before the Closing (except to the extent that such
indemnification obligation would arise directly as a result of the
inaccuracy of any representation made by Buyer hereunder).
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii) of Section 15(a) or Section 15(b)
must be asserted in writing and with specificity by the date (the
"Claim Expiration Date") which for the matters referenced in Section
4(g) of this Agreement is six (6) years after the Closing Date and with
respect to the other provisions of this Agreement is three hundred
sixty five (365) days after the Closing Date, and any and all claims
not so asserted by the applicable Claim Expiration Date shall
automatically expire and be deemed to have been forever waived,
released and of no force or effect and (B) the total amounts
recoverable by Buyer against Seller or by Seller against Buyer with
respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
16. MISCELLANEOUS.
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing. Unless otherwise expressly required or permitted
by the terms of this Agreement, any notice required or permitted to be
given hereunder by the parties shall be delivered by facsimile,
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<PAGE> 35
personally, by a reputable overnight delivery service or by certified
or registered mail to the parties at the facsimile number or addresses
set forth below (as the case may be), unless different addressees or
facsimile numbers are given by one party to the other:
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
WITH A COPY TO:
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<PAGE> 36
Cox, Castle & Nicholson, LLP
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any reason any such commission shall become due, the
party who retained such broker shall pay any such commission and agrees
to indemnify and save the other party harmless from any
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<PAGE> 37
and all claims for any such commission and from any attorneys' fees and
litigation or other expenses relating to any such claim.
(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or otherwise, and shall take or cause to be taken
such other or further action, as either party shall reasonably request
at any time or from time to time within the one hundred twenty (120)
days immediately following the Closing Date in order to effectuate the
terms and provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
(h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be extended to the first
succeeding business which is not a federal holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to
-34-
<PAGE> 38
the best of Seller's Knowledge", "Seller's Actual Knowledge", "Actual
Knowledge of Seller" or "the Knowledge or Seller", or any similar term
or reference, it shall mean and be limited to the actual conscious
knowledge of Seller, without any investigation or inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any other matters that
it is required to disclose in connection with its legal reporting
requirements or as otherwise required in accordance with applicable law
based upon the advise of its legal counsel, without the prior express
written consent of Seller; provided, however, that this provision shall
not apply to data that is in the public domain or is clearly not
confidential in nature. The provisions of this Section 17(j) shall
survive the Closing or any termination of this Agreement. Buyer's
undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing the provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this
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<PAGE> 39
Agreement, or any memorandum thereof, to be recorded.
(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver the Registration Rights Agreement attached
hereto and made a part hereof as EXHIBIT J.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG REIT/ANNEN WOODS, INC.
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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<PAGE> 41
EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
LEASES AND CLOSING AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of
________________, 19___, by and between _____________________________
("Assignor"), and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Assignee"),
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under the
Tenant Leases relating to the tenant deposits (including, without limitation,
security deposits) and prepaid rent.
C-2
<PAGE> 43
2. Conveyance of Other Property. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. Limitation on Assumption of Obligations. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
4. Power of Attorney. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
C-3
<PAGE> 44
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties other
than Assignor, in the name of, at the expense of and for the
benefit of Assignee, any and all proceedings at law, in equity
or otherwise which Assignee, its successors and assigns may
deem proper with regard to the assets and properties hereby
conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the
C-4
<PAGE> 45
laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
________________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Print Name:_______________ Vice President
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
______________________________
Notary Public
C-6
<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
______________________________
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
C-7
<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
CONTRACTS AND PERSONAL PROPERTY LEASES
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
______________________________
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between _________________
and AERC (the "Agreement"), that except as set forth on Attachment 1 attached
hereto and made a part hereof, the representations and warranties of AERC as
set forth in the Agreement were true and correct when made and are true and
correct as of the Closing Date. AERC acknowledges and agrees that the
disclosure of the matters set forth on Attachment 1 shall in no way affect
the rights of Seller (as defined in the Agreement) to decline to proceed to the
Closing (as defined in the Agreement) or any way modify or amend the provisions
of Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By ___________________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
Exhibit 2.04
PURCHASE AGREEMENT
MIG PEACHTREE CORPORATION
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
----
PURCHASE AGREEMENT........................................................ 1
1. Agreement to Buy and Sell............................... 2
2. Liabilities............................................. 3
3. Consideration and Payment/Earnest Money................. 4
4. Representations and Warranties of Seller................ 7
5. Representations and Warranties of Buyer................. 9
6. Seller's Covenants...................................... 11
7. Title and Possession of the Property.................... 13
8. Conditions to Closing................................... 16
9. Deliveries.............................................. 18
10. Due Diligence Period.................................... 20
11. Closing Date............................................ 23
12. Prorations and Closing Costs............................ 24
13. Fire or Other Casualty.................................. 27
14. Condemnation and Eminent Domain......................... 28
15. Indemnification......................................... 28
16. Miscellaneous........................................... 30
-i-
<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
-ii-
<PAGE> 4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG PEACHTREE CORPORATION, Florida
corporation, ("Seller") and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio
corporation ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 156-unit apartment complex known as Peachtree located
in Chesterfield, Missouri; which real property is more fully described on
EXHIBIT A attached hereto and made a part hereof, together with all buildings,
fixtures and other improvements located thereon and therein and including all
appurtenant rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
NOW, THEREFORE, for good and valuable consideration received
to the full
<PAGE> 5
satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
(f) prepaid rentals under Tenant Leases, if any, and any other
miscellaneous deposits and prepaid expenses related to the ownership or
operation of the Project
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(collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "Peachtree Apartments" and
derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured, liquidated
or unliquidated, fixed or contingent, or known or unknown, and whether arising
out of occurrences prior to, at or after the Closing, except as provided
hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for the Property will be the following, payable by Buyer to Seller
as follows:
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(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in escrow by
Buyer on or before the Closing Date (defined below) in immediately available
funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Nine Million Seven
Hundred Thousand Dollars ($9,700,000).
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York Stock Exchange. No certificates for fractional Common Shares shall
be issued or delivered in
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<PAGE> 8
connection with the transaction contemplated by this Agreement. To the extent
that a fractional Common Share would otherwise have been deliverable under the
formula set out in the preceding portion of this Section 3(a), Seller shall be
entitled to receive a cash payment therefor in an amount equal to the value
(determined with reference to the closing price of Common Shares as reported on
the New York Stock Exchange Composite Tape on the last full Trading Day
immediately prior to the Closing Date) of such fractional interest. Such payment
with respect to fractional shares is merely intended to provide a mechanical
rounding off of, and is not separately bargained for, consideration.
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit [1% of the appraised value
of the Property, but in no event less than One Hundred Thousand Dollars
($100,000) (the "Earnest Money Deposit") therein. Buyer shall notify Seller of
the opening, the deposit, the number of the escrow, and the employee or
employees of the Title Company in charge of the escrow. Each party shall execute
such documentation governing the Earnest Money Escrow that reflects the relevant
provisions of this Agreement and as may otherwise be required by the escrow
agent, including reasonable standard form escrow conditions. The Earnest Money
Deposit shall be deposited in an interest bearing account as instructed by
Buyer and any interest earned shall be added to the Earnest Money Deposit. In
the event that the parties proceed to the Closing, then the Earnest Money
Deposit, together with all interest earned thereon, shall be applied towards the
Cash Payment. Except as otherwise expressly set forth in Section 11 of this
Agreement, upon the termination of this Agreement, the Earnest Money Deposit,
together with all interest earned thereon, shall be returned by the Title
Company to Buyer. Seller acknowledges
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that it has disclosed to Buyer any legal conditions or requirements, imposed by
law or contract upon its interest in such Earnest Money Escrow by the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or relevant state
law, and Seller assumes all responsibility for ensuring the written provisions
of the agreement governing such Earnest Money Escrow complies with any such
requirements as they apply to Seller; provided, that Buyer (or its nominee)
shall comply with any requirements identified to Buyer by Seller in writing, so
long as identified prior to Buyer's establishing said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a corporation duly
organized and validly existing under the laws of Maryland with the
power and authority to execute this Agreement and sell the Property on
the terms herein set forth. Seller, is duly authorized to so act, and
all requisite action has been taken by Seller to authorize the
execution and delivery of this Agreement, the performance by Seller of
its obligations hereunder and the consummation of the transactions
contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms.
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<PAGE> 10
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or disclosing material litigation, material zoning
or building code violations or material environmental law violations at
the Property which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined and such Merger Agreement contemplates the sale of property
pursuant to this
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<PAGE> 11
Agreement; and (B) said Merger Agreement, if consummated, would cause
MIGRA's shareholders to become substantial shareholders in Buyer or
Buyer's parent and its affiliated entities, and cause certain officers
and directors of MIGRA to become officers and directors of Buyer or
Buyer's parent and its affiliates. Each such shareholder has been
provided the opportunity to ask questions and receive from MIGRA
information regarding the Property, the consideration to be paid
therefore, and MIGRA's interest in the transactions contemplated by
this Agreement, to the extent such information is in the possession of
MIGRA or may be obtained without unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby acknowledges and agrees
that the representations and warranties made in this Agreement by Seller shall
be unaffected by any such due diligence, investigation or analysis; provided,
however, that Buyer shall not be entitled to recover on any representation or
warranty set forth in this Agreement if Buyer's due diligence made Buyer
actually aware, prior to Closing, of any condition of, concerning or relating to
the Property which is contrary to those representations and warranties, but no
such knowledge shall affect the rights of Buyer to decline to close hereunder if
any of the Closing conditions under Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on the
attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of the
Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and
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<PAGE> 12
warranties set forth in this Section 4 shall be deemed renewed by Seller on the
Closing Date as if made at such time and shall survive the Closing of the
transactions contemplated hereby for a period of one (1) year; provided, that
the representations and warranties contained in Subsection 4(g) shall survive
the Closing of the transactions contemplated hereby for a period of six (6)
years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Buyer pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
pursuant hereto.
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<PAGE> 13
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to Section 856 through 860 of the Internal
Revenue Code, for each of its taxable years ended December 31, 1993
through December 31, 1996, and the Buyer expects to so qualify for the
fiscal year ending December 31, 1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in
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<PAGE> 14
effect on the date hereof.
(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project Contract or Personal Property Lease or enter into
or renew any contract or agreement pertaining to any item of Property
unless such contract or agreement can be terminated at will without
obligation after the Closing or (B) incur any mortgage indebtedness or
other material indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
(i) On or before the Closing Date, cause to be terminated any
management
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<PAGE> 15
contract relating to the Property which is not assumed by Buyer
consistent with the terms and conditions of the transaction described
on EXHIBIT H attached hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR ss. 2510.3- 101, then
Seller covenants that all discretionary actions of Seller under this
Agreement shall be conducted by a fiduciary of Seller which is
independent of MIGRA or, in the case of an entity which holds plan
assets, pursuant to directions of the investors in such entity who are
independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided that Buyer
pay the costs of all such endorsements), in the amount of the total
consideration
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paid by Buyer to Seller for the Property (the "Title Policy") issued by
the Title Company, as assurance that upon Closing, the Buyer holds and
will hold good, valid and insurable title in fee simple absolute to the
Property including all rights, privileges and easements appurtenant to
the Property free and clear of all encumbrances whatsoever, except the
following (collectively, the "Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or encumbrances upon, title to the
Property which would appear in the Title Policy. Buyer shall have until
the end of the Due Diligence Period (as defined in Section 10 of this
Agreement) to review
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<PAGE> 17
such items and to give notice to Seller of such objections as Buyer may
have to any matters set forth in the Title Commitment or survey which
were not referenced in the Approved Title Report. Seller understands
and agrees that prior to the expiration of the Due Diligence Period,
Buyer may deliver to Seller an objection letter or objection letters at
any time during the Due Diligence Period and Seller agrees that any
such delivery or deliveries shall not be construed in any way to limit
or restrict Buyer's right to deliver additional objections to Seller at
any time during Due Diligence Period. If Buyer timely (i.e during the
Due Diligence Period) objects to any special assessments, defects or
encumbrances, Seller shall have until the end of the Due Diligence
Period to have such exceptions cured, either by the removal of such
exceptions or by the procurement of title insurance endorsements or
other resolution satisfactory to Buyer providing coverage against loss
or damage as a result of such exceptions. If Seller shall not cure such
defects or encumbrances to Buyer's satisfaction by the end of the Due
Diligence Period, Buyer, at its option, may (i) terminate this
Agreement upon written notice of termination to Seller in accordance
with Section 10 of this Agreement, in which event neither party shall
thereafter have any liability to the other (except as to matters which,
under any other provision of this Agreement are expressly stated to
survive a termination of this Agreement), and all funds previously paid
or deposited by Buyer, including all accrued interest, shall be
returned to Buyer, or (ii) waive its objection to the defects or
encumbrances and proceed to the Closing in which event all such waived
defects or encumbrances shall be deemed to be Permitted Exceptions
hereunder. Notwithstanding the above, any defects in the nature of
consensual liens affirmatively granted by Seller or non-consensual
monetary liens which do not exceed Twenty Five Thousand Dollars
($25,000) in the aggregate that can be released by payment
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<PAGE> 18
of the underlying obligation shall be removed, bonded or title insured
over by Seller and if not so removed, bonded or title insured over by
the Closing then the Appraised Value shall be reduced by an amount
sufficient to satisfy such obligations. Buyer shall conclusively be
deemed to have waived all objections to any title or survey defect,
encumbrance or exception reflected or referenced in the Title
Commitment or survey as to which Buyer fails to deliver to Seller a
written objection by the end of the Due Diligence Period, and all such
matters shall thereafter be deemed to be Permitted Exceptions for
purposes of this Agreement.
8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Buyer through written notice to Seller, Buyer's
obligations under this Agreement are expressly conditioned upon the
satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with all covenants as set forth in Section 6 herein,
and shall have otherwise performed all of its obligations
hereunder, in all material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence
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<PAGE> 19
Period (as hereafter defined) and the financial condition of
the Property shall not have changed in any material and
adverse respect from the condition reflected in the then most
current financial statements and other relevant financial
materials delivered by Seller to Buyer during the Due
Diligence Period (as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as defined in the Merger Agreement)
and the transactions contemplated by the Portfolio Purchase
Agreements shall have closed simultaneously with, or
immediately preceding or immediately following the Closing of
this transaction; and
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<PAGE> 20
(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration Rights
Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Seller through written notice to Buyer, Seller's
obligations under this Agreement are expressly conditioned upon the
occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
(iii) the closing of the Merger (as defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
(c) Since the Portfolio Properties constitute substantially
all of the assets of
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<PAGE> 21
MIG Residential REIT, Inc., a Maryland corporation ("MIG REIT"),
through MIG REIT's ownership of all the shares of Seller and the Other
Owners, MIG REIT's Board of Directors has a fiduciary obligation to the
holders of MIG REIT stock to maximize the current and long term value
of their shares in MIG REIT. Accordingly, it is agreed that,
notwithstanding anything in this Agreement to the contrary, Seller
shall have the right (the "Fiduciary Out") to terminate this Agreement
and cancel the Earnest Money Escrow on the following terms and
conditions:
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's sending the Fiduciary
Out Notice to Buyer shall constitute an election by Seller to
terminate this Agreement and cancel the Earnest Money Escrow,
subject to subsection (v) below.
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<PAGE> 22
(v) If a Fiduciary Out Notice is sent to Buyer, Buyer
shall have the right to elect, by giving Seller written notice
thereof within ten (10) business days after such Fiduciary Out
Notice is sent to Buyer, to either: (A) do nothing, or (B)
propose terms and conditions for Buyer to purchase the
Property which are at least as advantageous to Seller as the
terms and conditions set forth in such Fiduciary Out Notice,
which proposed terms and conditions shall include a total
purchase price for all the Portfolio Properties at least equal
to the total purchase price proposed by the Third Party Buyer
named in such Fiduciary Out Notices, plus $250,000. If Buyer
elects to do nothing, Seller shall have no obligation to sell
the Property to Buyer, but Buyer shall have the right to be
paid the Break-Up Fee (as defined below) on the same
contingent basis specified in subsection (vii)(B) below. If
Buyer proposes such new terms and conditions which are
accepted by Seller, in Seller's role and absolute discretion,
the Break-Up Fee shall not be payable to Buyer and the parties
shall proceed with and complete the purchase and sale of the
Property in accordance therewith. If Buyer elects to do
nothing, or if Seller does not accept such new terms and
conditions proposed by Buyer, Seller shall give written notice
to Buyer and the Title Company that this Agreement is
terminated and the Earnest Money Escrow is canceled (the
"Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the Appraised Value and
shall be paid to Buyer simultaneously with the delivery of the
Termination Notice, by wire transfer of immediately available
federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE REMEDY AGAINST SELLER FOR
TERMINATING THIS AGREEMENT UNDER THIS SECTION 8(c).
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9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed, in customary form
acceptable to Buyer (the "Deed"), conveying good and insurable fee
simple title to the Project to Buyer, free and clear of all mortgages,
pledges, liens, security interests, encumbrances and restrictions,
except the Permitted Exceptions. The Permitted Exceptions shall be
specifically, and not categorically, set forth in the Deed as
exceptions to title.
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the Board of
Directors of Seller authorizing the execution and delivery of
this Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate Regarding Projects and
Personal Property Leases substantially in the form of EXHIBIT
D attached hereto and made a part hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the Property is located, originals of
all certificates of occupancy (or the jurisdictional
equivalent of a certificate of occupancy) for all apartment
units on the Property, if
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available, and if not available, true and correct copies
thereof;
(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
(x) A certificate of Seller in the form of EXHIBIT F
attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
(i) Settlement statements agreed to by Seller and
executed by Buyer;
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(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and substance
acceptable to Buyer and Seller, pursuant to which Buyer
accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(v) Duly executed resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of
this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees that
prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on EXHIBIT K attached
hereto and made a part hereof (the "Approved Due Diligence Materials") and that
Buyer has approved the Approved Due Diligence Materials and all information
contained therein. For a period of thirty (30) days following execution of this
Agreement (the "Due Diligence Period"), Buyer shall be permitted to conduct its
own limited inspections of the Property for the sole purposes of updating the
Approved Due Diligence Materials, with respect to: (i) obtaining a so-called
"Phase I Environmental Assessment" of the Property, (ii) obtaining structural
and engineering assessments of the Property, (iii) obtaining the Title
Commitment referenced in Section
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7 hereof and (iv) updating or upgrading the survey referenced on EXHIBIT K (the
"Updated Due Diligence"). Seller shall grant reasonable access to Buyer and its
representatives to the Property for the purpose of conducting the Updated Due
Diligence. Seller shall have the right to coordinate and accompany Buyer on any
of such inspections. Any and all inspections, examinations, analyses and audits
deemed necessary by Buyer shall be performed at Buyer's expense and shall not
physically damage the Property. Buyer shall promptly and completely repair and
restore any and all damage to the Property that may be caused by, or may occur
in connection with or as a result of, any inspection, investigation, audit, test
or visit to the Property by Buyer, its employees, and authorized agents and
consultants. Buyer shall indemnify, protect, defend and hold Seller and its
agents, employees and representatives harmless from and against any and all
loss, cost, claim, liability, damage or expense (including, without limitation,
attorneys' fees and expenses) arising out of physical damages or injuries to
persons or property caused by Buyer's inspections, investigations, audits, tests
or visits to the Property. Buyer's restoration and indemnification obligations
set forth in this Section shall survive the Closing or termination of this
Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due Diligence discloses any information
which is not contained in the Approved Due Diligence Materials and which could
reasonably be expected to have a material adverse impact on the value of the
Property ("A Material Adverse Condition"), then, Buyer, in Buyer's sole
discretion, may terminate this Agreement (by giving notice of such termination
to Seller, including Buyer's specific reasons therefor). Buyer shall notify
Seller in writing either during or at the end of the Due Diligence Period with
respect to whether or not Buyer has discovered any such Material Adverse
Condition. If Buyer's written notice to Seller indicates that the Updated Due
Diligence has not
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disclosed a Material Adverse Condition, then the parties shall, subject to the
satisfaction of the conditions set forth herein, proceed to the Closing. If
Buyer's written notice to Seller indicates that the Updated Due Diligence has
disclosed a Material Adverse Condition, then this Agreement shall terminate and
the Earnest Money Deposit (including all interest earned thereon) shall be
returned to Buyer. Upon termination of this Agreement by Buyer pursuant to this
Section 10, neither party shall thereafter be under any further liability to the
other, except as to matters which this Agreement expressly states are to survive
a termination of this Agreement. Notwithstanding anything to the contrary
contained in this Section 10, if Buyer does not notify Seller by the end of the
Due Diligence Period with respect to whether or not the Updated Due Diligence
has disclosed a Material Adverse Condition, then Buyer shall be deemed to have
notified Seller that the Updated Due Diligence has not disclosed any Material
Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established through written notice given by Buyer to Seller and shall not be
later than ten (10) days after the end of the Due Diligence Period (the
"Scheduled Closing Date"). Notwithstanding the foregoing, in the event that
Buyer determines that the applicable rules of the New York Stock Exchange
require its shareholders approval of the transactions contemplated by the Merger
Agreement or this Agreement, then Buyer shall have the right at any time up
until the Scheduled Closing Date, upon written notice to Seller, to extend the
Scheduled Closing Date in order to permit Buyer to obtain such shareholder
approval, to a date which is no later than (i) ninety (90) days after the date
of this
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Agreement, if the Securities and Exchange Commission ("SEC") informs Buyer that
it will not provide comments to its proxy statement or (ii) one hundred thirty
five days (135) after the date of this Agreement, if the SEC provides comments
to its proxy statement. After the expiration of the Due Diligence Period, Buyer
shall not have the right to terminate this Agreement except pursuant to the
provisions of Sections 8(a), 13 or 14 of this Agreement. IF BUYER SHALL DEFAULT
IN ITS OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER SHALL RECEIVE THE
EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) AS LIQUIDATED
DAMAGES AND NEITHER PARTY SHALL THEREAFTER BE UNDER ANY FURTHER LIABILITY TO THE
OTHER, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT WITH RESPECT TO
THE PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT. THE
PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY
BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS
SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE
EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise mutually agreed to by the parties (the "Adjustment
Date"), by the Title Company based on
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information provided by the parties, as follows:
(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being greater than those
shown on the tax duplicate available at Closing or because of any
additions or corrections to the tax duplicate assessed by reason of
Buyer's acquisition of the Property, then Seller shall promptly pay all
such increases allocable to the period prior to the Closing and Seller
shall protect, indemnify, defend, and hold Buyer harmless from and
against all such real estate tax and assessment increases, which
obligations on the part of the Seller shall survive the Closing. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later decreased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being less than those
shown on the tax duplicate available at Closing or because of any
corrections to the tax duplicate assessed by reason of Buyer's
acquisition of the Property or because of any post-Closing reduction
in, or refund or rebate of, any taxes relating wholly or in part to a
period before the Closing, then Buyer shall promptly pay to Seller the
savings allocable to the period prior to the Closing (less any costs
incurred by Buyer to any unaffiliated third parties in connection with
obtaining the reduction of such tax bill), which obligation shall
survive the Closing. Any
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special assessments that are a lien on the Property as of the date of
this Agreement shall be paid by Seller without proration. Any special
assessments that become a lien on the Property after the date of this
Agreement shall be paid as follows: Seller shall pay all installments
that are due and payable prior to the Closing Date and Buyer shall pay
all installments that become due and payable on or after the Closing
Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller (outside
of escrow) the portion of such current rents attributable to periods
prior to the Adjustment Date. Additionally, in the event that any
tenant, who as of the Closing is delinquent in the rental payments due
Seller, delivers to Buyer a rent check in an amount in excess of the
rent due Buyer for the month for which such check is delivered, Buyer
shall allocate such excess first to pay reasonable outside collection
costs, if any, paid to unaffiliated third parties, then to pay rents
which become due after Closing, then pay remaining funds to Seller for
any rents delinquent prior to Closing and were due as of the date such
payment was received; provided, however, in no event shall Buyer be
obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be obtained prior to
Closing, the final bills, when received, shall be prorated as of the
Adjustment Date and the Title Company shall hold in escrow an amount
equal to 125% of the reasonably anticipated amount of such billings,
based upon the most recent available
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billings for similar periods until the Title Company shall have
received notice of payment of such bills, at which time any remaining
amount being withheld for such purpose shall be distributed to the
Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) one-half of any state or local real or
personal property transfer taxes, documentary stamps, fees or other
charges relating to the transfer of the Property and (ii) one-half of
any escrow charges. Buyer shall pay in connection with this transaction
the following closing costs: (i) all recording fees, (ii) the costs of
the Title Policy and any endorsements thereto, (iii) one-half of any
escrow charges and (iv) one-half of any state or local real or personal
property transfer taxes, documentary stamps, fees or other charges
relating to the transfer of the Property. Each party shall pay its own
attorneys' fees. All closing costs allocable to Seller, including,
without limitation, any prorations to which Buyer may be entitled by
reason of the foregoing shall be credited against the balance of the
Appraised Value to be paid at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds received by or payable to Seller as a result of such
damage or destruction plus an amount equal to any insurance
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policy deductible; or (b) by written notice of termination given to Seller not
later than thirty (30) days after Seller provides Buyer with written notice of
such damage or destruction, terminate this Agreement and receive any documents,
instruments and funds previously deposited or paid including the Earnest Money
Deposit (together with all interest earned thereon). If an unsubstantial portion
of the Property (i.e. 10% or less of the value) shall, prior to the Closing, be
damaged or destroyed by fire or any other cause and such damage shall not have
been repaired or reconstructed prior to the Closing in a good and workmanlike
manner to the reasonable satisfaction of Buyer, then Buyer shall be obligated to
proceed to close the transaction contemplated hereby, but shall receive from
Seller, on the Closing Date, an assignment of proceeds of the insurance payable
under Seller's insurance policy plus an amount equal to any insurance policy
deductible. Upon termination of this Agreement by Buyer pursuant to this Section
13, neither party shall thereafter be under any further liability to the other,
except as otherwise expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received pertaining
to a taking of all or a portion of the Property by way of condemnation, eminent
domain or similar procedure for a taking of the Property in connection with any
public or quasi-public use.
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<PAGE> 33
15. INDEMNIFICATION.
(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify, protect, defend and hold Seller and its
representatives, successors and assigns harmless from and against any
and all claims, demands, losses, liabilities, damages, awards,
judgements, penalties, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or in connection with (i)
the Property or the ownership thereof or arising under, relating to or
concerning any of the Tenant Leases, Permits, Deposits, Personal
Property Leases, Project Contracts, Intangible Rights if such claims,
demands, losses, liabilities, damages or expenses first arise, accrue
or exist or relate to any period of time from or after the Closing
(except to the extent that such indemnification obligation would arise
directly as a result of the inaccuracy of any representation or
warranty made by Seller hereunder), or (ii) the inaccuracy or any
representation or warranty made by Buyer hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits, Deposits,
Personal Property Leases, Project Contracts or the Intangible Rights),
but only if such claims, demands, losses, liabilities, damages or
expenses first arose, accrued, existed or related to any period of time
before the Closing (except to the extent that such indemnification
obligation would
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<PAGE> 34
arise directly as a result of the inaccuracy of any representation made
by Buyer hereunder).
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii) of Section 15(a) or under Section
15(b) must be asserted in writing and with specificity by the date (the
"Claim Expiration Date") which for the matters referenced in Section
4(g) of this Agreement is six (6) years after the Closing Date and with
respect to the other provisions of this Agreement is three hundred
sixty five (365) days after the Closing Date, and any and all claims
not so asserted by the applicable Claim Expiration Date shall
automatically expire and be deemed to have been forever waived,
released and of no force or effect and (B) the total amounts
recoverable by Buyer against Seller or by Seller against Buyer with
respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
16. MISCELLANEOUS.
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing. Unless otherwise expressly required or permitted
by the terms of this Agreement, any notice required or permitted to be
given hereunder by the parties shall be delivered by facsimile,
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<PAGE> 35
personally, by a reputable overnight delivery service or by certified
or registered mail to the parties at the facsimile number or addresses
set forth below (as the case may be), unless different addressees or
facsimile numbers are given by one party to the other:
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
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<PAGE> 36
WITH A COPY TO:
Cox, Castle & Nicholson, LLP
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any
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<PAGE> 37
reason any such commission shall become due, the party who retained
such broker shall pay any such commission and agrees to indemnify and
save the other party harmless from any and all claims for any such
commission and from any attorneys' fees and litigation or other
expenses relating to any such claim.
(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or otherwise, and shall take or cause to be taken
such other or further action, as either party shall reasonably request
at any time or from time to time within the one hundred twenty (120)
days immediately following the Closing Date in order to effectuate the
terms and provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
(h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be
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extended to the first succeeding business which is not a federal
holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to the best of Seller's Knowledge", "Seller's Actual
Knowledge", "Actual Knowledge of Seller" or "the Knowledge or Seller",
or any similar term or reference, it shall mean and be limited to the
actual conscious knowledge of Seller, without any investigation or
inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any other matters that
it is required to disclose in connection with its legal reporting
requirements or as otherwise required in accordance with applicable law
based upon the advise of its legal counsel, without the prior express
written consent of Seller; provided, however, that this provision shall
not apply to data that is in the public domain or is clearly not
confidential in nature. The provisions of this Section 17(j) shall
survive the Closing or any termination of this Agreement. Buyer's
undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing
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<PAGE> 39
the provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this Agreement, or any memorandum thereof, to be
recorded.
(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver the Registration Rights Agreement attached
hereto and made a part hereof as EXHIBIT J.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG PEACHTREE CORPORATION
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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<PAGE> 41
EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
LEASES AND CLOSING AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of
________________, 19___, by and between _____________________________
("Assignor"), and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Assignee"),
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under the Tenant
Leases relating to the tenant deposits (including, without limitation, security
deposits) and prepaid rent.
C-2
<PAGE> 43
2. Conveyance of Other Property. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. Limitation on Assumption of Obligations. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
4. Power of Attorney. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
C-3
<PAGE> 44
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties other
than Assignor, in the name of, at the expense of and for the
benefit of Assignee, any and all proceedings at law, in equity
or otherwise which Assignee, its successors and assigns may
deem proper with regard to the assets and properties hereby
conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the
C-4
<PAGE> 45
laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
________________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Print Name:_______________ Vice President
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
______________________________
Notary Public
C-6
<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
______________________________
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
C-7
<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
CONTRACTS AND PERSONAL PROPERTY LEASES
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
______________________________
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
______________________________
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between _________________
and AERC (the "Agreement"), that except as set forth on Attachment 1 attached
hereto and made a part hereof, the representations and warranties of AERC as
set forth in the Agreement were true and correct when made and are true and
correct as of the Closing Date. AERC acknowledges and agrees that the disclosure
of the matters set forth on Attachment 1 shall in no way affect the rights of
Seller (as defined in the Agreement) to decline to proceed to the Closing (as
defined in the Agreement) or any way modify or amend the provisions of
Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By ___________________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
Exhibit 2.05
PURCHASE AGREEMENT
MIG FLEETWOOD, LTD.
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
PURCHASE AGREEMENT......................................................... 1
1. Agreement to Buy and Sell................................ 2
2. Liabilities.............................................. 3
3. Consideration and Payment/Earnest Money.................. 4
4. Representations and Warranties of Seller................. 7
5. Representations and Warranties of Buyer.................. 9
6. Seller's Covenants....................................... 11
7. Title and Possession of the Property..................... 13
8. Conditions to Closing.................................... 16
9. Deliveries............................................... 18
10. Due Diligence Period..................................... 20
11. Closing Date............................................. 23
12. Prorations and Closing Costs............................. 24
13. Fire or Other Casualty................................... 27
14. Condemnation and Eminent Domain.......................... 28
15. Indemnification.......................................... 28
16. Miscellaneous............................................ 30
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<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
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<PAGE> 4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG FLEETWOOD, LTD., a Texas limited
partnership ("Seller") and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio
corporation ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 104-unit apartment complex known as Fleetwood located
in Houston, Texas; which real property is more fully described on EXHIBIT A
attached hereto and made a part hereof, together with all buildings, fixtures
and other improvements located thereon and therein and including all appurtenant
rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
NOW, THEREFORE, for good and valuable consideration received
to the full
<PAGE> 5
satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
(f) prepaid rentals under Tenant Leases, if any, and any other
miscellaneous deposits and prepaid expenses related to the ownership or
operation of the Project
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<PAGE> 6
(collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "Fleetwood Apartments" and
derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured, liquidated
or unliquidated, fixed or contingent, or known or unknown, and whether arising
out of occurrences prior to, at or after the Closing, except as provided
hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for the Property will be the following, payable by Buyer to Seller
as follows:
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<PAGE> 7
(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in
escrow by Buyer on or before the Closing Date (defined below) in immediately
available funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Six Million Seven
Hundred Fifty Thousand Dollars ($6,750,000).
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York
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<PAGE> 8
Stock Exchange. No certificates for fractional Common Shares shall be issued or
delivered in connection with the transaction contemplated by this Agreement. To
the extent that a fractional Common Share would otherwise have been deliverable
under the formula set out in the preceding portion of this Section 3(a), Seller
shall be entitled to receive a cash payment therefor in an amount equal to the
value (determined with reference to the closing price of Common Shares as
reported on the New York Stock Exchange Composite Tape on the last full Trading
Day immediately prior to the Closing Date) of such fractional interest. Such
payment with respect to fractional shares is merely intended to provide a
mechanical rounding off of, and is not separately bargained for, consideration.
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit of One Hundred Thousand
Dollars ($100,000) (the "Earnest Money Deposit") therein. Buyer shall notify
Seller of the opening, the deposit, the number of the escrow, and the employee
or employees of the Title Company in charge of the escrow. Each party shall
execute such documentation governing the Earnest Money Escrow that reflects the
relevant provisions of this Agreement and as may otherwise be required by the
escrow agent, including reasonable standard form escrow conditions. The Earnest
Money Deposit shall be deposited in an interest bearing account as instructed by
Buyer and any interest earned shall be added to the Earnest Money Deposit. In
the event that the parties proceed to the Closing, then the Earnest Money
Deposit, together with all interest earned thereon, shall be applied towards the
Cash Payment. Except as otherwise expressly set forth in Section 11 of this
Agreement, upon the termination of this Agreement, the Earnest Money Deposit,
together with all interest earned thereon, shall be returned
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<PAGE> 9
by the Title Company to Buyer. Seller acknowledges that it has disclosed to
Buyer any legal conditions or requirements, imposed by law or contract upon its
interest in such Earnest Money Escrow by the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or relevant state law, and Seller assumes all
responsibility for ensuring the written provisions of the agreement governing
such Earnest Money Escrow complies with any such requirements as they apply to
Seller; provided, that Buyer (or its nominee) shall comply with any requirements
identified to Buyer by Seller in writing, so long as identified prior to Buyer's
establishing said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a limited
partnership duly organized and validly existing under the laws of the
State of Texas with the power and authority to execute this Agreement
and sell the Property on the terms herein set forth. Seller, is duly
authorized to so act, and all requisite action has been taken by Seller
to authorize the execution and delivery of this Agreement, the
performance by Seller of its obligations hereunder and the consummation
of the transactions contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable
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<PAGE> 10
against Seller in accordance with their respective terms.
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or disclosing material litigation, material zoning
or building code violations or material environmental law violations at
the Property which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined and
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such Merger Agreement contemplates the sale of property pursuant to
this Agreement; and (B) said Merger Agreement, if consummated, would
cause MIGRA's shareholders to become substantial shareholders in Buyer
or Buyer's parent and its affiliated entities, and cause certain
officers and directors of MIGRA to become officers and directors of
Buyer or Buyer's parent and its affiliates. Each such shareholder has
been provided the opportunity to ask questions and receive from MIGRA
information regarding the Property, the consideration to be paid
therefore, and MIGRA's interest in the transactions contemplated by
this Agreement, to the extent such information is in the possession of
MIGRA or may be obtained without unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby acknowledges and agrees
that the representations and warranties made in this Agreement by Seller shall
be unaffected by any such due diligence, investigation or analysis; provided,
however, that Buyer shall not be entitled to recover on any representation or
warranty set forth in this Agreement if Buyer's due diligence made Buyer
actually aware, prior to Closing, of any condition of, concerning or relating to
the Property which is contrary to those representations and warranties, but no
such knowledge shall affect the rights of Buyer to decline to close hereunder if
any of the Closing conditions under Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on the
attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of
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the Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and warranties set forth in this Section 4 shall be deemed
renewed by Seller on the Closing Date as if made at such time and shall survive
the Closing of the transactions contemplated hereby for a period of one (1)
year; provided, that the representations and warranties contained in Subsection
4(g) shall survive the Closing of the transactions contemplated hereby for a
period of six (6) years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Buyer pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
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pursuant hereto.
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to Section 856 through 860 of the Internal
Revenue Code, for each of its taxable years ended December 31, 1993
through December 31, 1996, and the Buyer expects to so qualify for the
fiscal year ending December 31, 1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
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<PAGE> 14
(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in effect on the date
hereof.
(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project Contract or Personal Property Lease or enter into
or renew any contract or agreement pertaining to any item of Property
unless such contract or agreement can be terminated at will without
obligation after the Closing or (B) incur any mortgage indebtedness or
other material indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
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<PAGE> 15
(i) On or before the Closing Date, cause to be terminated any
management contract relating to the Property which is not assumed by
Buyer consistent with the terms and conditions of the transaction
described on EXHIBIT H attached hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR ss. 2510.3- 101, then
Seller covenants that all discretionary actions of Seller under this
Agreement shall be conducted by a fiduciary of Seller which is
independent of MIGRA or, in the case of an entity which holds plan
assets, pursuant to directions of the investors in such entity who are
independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided
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<PAGE> 16
that Buyer pay the costs of all such endorsements), in the amount of
the total consideration paid by Buyer to Seller for the Property (the
"Title Policy") issued by the Title Company, as assurance that upon
Closing, the Buyer holds and will hold good, valid and insurable title
in fee simple absolute to the Property including all rights, privileges
and easements appurtenant to the Property free and clear of all
encumbrances whatsoever, except the following (collectively, the
"Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or encumbrances upon, title to the
Property which would appear in the Title Policy. Buyer shall have until
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the end of the Due Diligence Period (as defined in Section 10 of this
Agreement) to review such items and to give notice to Seller of such
objections as Buyer may have to any matters set forth in the Title
Commitment or survey which were not referenced in the Approved Title
Report. Seller understands and agrees that prior to the expiration of
the Due Diligence Period, Buyer may deliver to Seller an objection
letter or objection letters at any time during the Due Diligence Period
and Seller agrees that any such delivery or deliveries shall not be
construed in any way to limit or restrict Buyer's right to deliver
additional objections to Seller at any time during Due Diligence
Period. If Buyer timely (i.e during the Due Diligence Period) objects
to any special assessments, defects or encumbrances, Seller shall have
until the end of the Due Diligence Period to have such exceptions
cured, either by the removal of such exceptions or by the procurement
of title insurance endorsements or other resolution satisfactory to
Buyer providing coverage against loss or damage as a result of such
exceptions. If Seller shall not cure such defects or encumbrances to
Buyer's satisfaction by the end of the Due Diligence Period, Buyer, at
its option, may (i) terminate this Agreement upon written notice of
termination to Seller in accordance with Section 10 of this Agreement,
in which event neither party shall thereafter have any liability to the
other (except as to matters which, under any other provision of this
Agreement are expressly stated to survive a termination of this
Agreement), and all funds previously paid or deposited by Buyer,
including all accrued interest, shall be returned to Buyer, or (ii)
waive its objection to the defects or encumbrances and proceed to the
Closing in which event all such waived defects or encumbrances shall be
deemed to be Permitted Exceptions hereunder. Notwithstanding the above,
any defects in the nature of consensual liens affirmatively granted by
Seller or non-consensual monetary liens which do not exceed
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Twenty Five Thousand Dollars ($25,000) in the aggregate that can be
released by payment of the underlying obligation shall be removed,
bonded or title insured over by Seller and if not so removed, bonded or
title insured over by the Closing then the Appraised Value shall be
reduced by an amount sufficient to satisfy such obligations. Buyer
shall conclusively be deemed to have waived all objections to any title
or survey defect, encumbrance or exception reflected or referenced in
the Title Commitment or survey as to which Buyer fails to deliver to
Seller a written objection by the end of the Due Diligence Period, and
all such matters shall thereafter be deemed to be Permitted Exceptions
for purposes of this Agreement.
8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Buyer through written notice to Seller, Buyer's
obligations under this Agreement are expressly conditioned upon the
satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with all covenants as set forth in Section 6 herein,
and shall have otherwise performed all of its obligations
hereunder, in all material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
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<PAGE> 19
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence Period (as
hereafter defined) and the financial condition of the Property
shall not have changed in any material and adverse respect
from the condition reflected in the then most current
financial statements and other relevant financial materials
delivered by Seller to Buyer during the Due Diligence Period
(as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as defined in the Merger Agreement)
and the transactions contemplated by the Portfolio Purchase
Agreements shall have closed simultaneously with, or
immediately preceding or immediately following the Closing of
this transaction; and
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<PAGE> 20
(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration Rights
Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Seller through written notice to Buyer, Seller's
obligations under this Agreement are expressly conditioned upon the
occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
(iii) the closing of the Merger (as defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
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(c) Since the Portfolio Properties constitute substantially
all of the assets of MIG Residential REIT, Inc., a Maryland corporation
("MIG REIT"), through MIG REIT's ownership of all the shares of Seller
and the Other Owners, MIG REIT's Board of Directors has a fiduciary
obligation to the holders of MIG REIT stock to maximize the current and
long term value of their shares in MIG REIT. Accordingly, it is agreed
that, notwithstanding anything in this Agreement to the contrary,
Seller shall have the right (the "Fiduciary Out") to terminate this
Agreement and cancel the Earnest Money Escrow on the following terms
and conditions:
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's
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<PAGE> 22
sending the Fiduciary Out Notice to Buyer shall constitute an
election by Seller to terminate this Agreement and cancel the
Earnest Money Escrow, subject to subsection (v) below.
(v) If a Fiduciary Out Notice is sent to Buyer, Buyer
shall have the right to elect, by giving Seller written notice
thereof within ten (10) business days after such Fiduciary Out
Notice is sent to Buyer, to either: (A) do nothing, or (B)
propose terms and conditions for Buyer to purchase the
Property which are at least as advantageous to Seller as the
terms and conditions set forth in such Fiduciary Out Notice,
which proposed terms and conditions shall include a total
purchase price for all the Portfolio Properties at least equal
to the total purchase price proposed by the Third Party Buyer
named in such Fiduciary Out Notices, plus $250,000. If Buyer
elects to do nothing, Seller shall have no obligation to sell
the Property to Buyer, but Buyer shall have the right to be
paid the Break-Up Fee (as defined below) on the same
contingent basis specified in subsection (vii)(B) below. If
Buyer proposes such new terms and conditions which are
accepted by Seller, in Seller's role and absolute discretion,
the Break-Up Fee shall not be payable to Buyer and the parties
shall proceed with and complete the purchase and sale of the
Property in accordance therewith. If Buyer elects to do
nothing, or if Seller does not accept such new terms and
conditions proposed by Buyer, Seller shall give written notice
to Buyer and the Title Company that this Agreement is
terminated and the Earnest Money Escrow is canceled (the
"Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the Appraised Value and
shall be paid to Buyer simultaneously with the delivery of the
Termination Notice, by wire transfer of immediately available
federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE
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REMEDY AGAINST SELLER FOR TERMINATING THIS AGREEMENT UNDER
THIS SECTION 8(c).
9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed,
in customary form acceptable to Buyer (the "Deed"), conveying good and
insurable fee simple title to the Project to Buyer, free and clear of
all mortgages, pledges, liens, security interests, encumbrances and
restrictions, except the Permitted Exceptions. The Permitted Exceptions
shall be specifically, and not categorically, set forth in the Deed as
exceptions to title.
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the general
partner of Seller authorizing the execution and delivery of
this Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate Regarding Projects and
Personal Property Leases substantially in the form of EXHIBIT
D attached hereto and made a part hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the
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<PAGE> 24
Property is located, originals of all certificates of
occupancy (or the jurisdictional equivalent of a certificate
of occupancy) for all apartment units on the Property, if
available, and if not available, true and correct copies
thereof;
(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
(x) A certificate of Seller in the form of EXHIBIT F
attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
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(i) Settlement statements agreed to by Seller and
executed by Buyer;
(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and substance
acceptable to Buyer and Seller, pursuant to which Buyer
accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(v) Duly executed resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of
this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees that
prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on EXHIBIT K attached
hereto and made a part hereof (the "Approved Due Diligence Materials") and that
Buyer has approved the Approved Due Diligence Materials and all information
contained therein. For a period of thirty (30) days following execution of this
Agreement (the "Due Diligence Period"), Buyer shall be permitted to conduct its
own limited inspections of the Property for the sole purposes of updating the
Approved Due Diligence Materials, with respect to: (i) obtaining a so-called
"Phase I Environmental Assessment" of the Property, (ii) obtaining structural
and engineering assessments of the Property, (iii) obtaining the Title
Commitment referenced in Section
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7 hereof and (iv) updating or upgrading the survey referenced on EXHIBIT K (the
"Updated Due Diligence"). Seller shall grant reasonable access to Buyer and its
representatives to the Property for the purpose of conducting the Updated Due
Diligence. Seller shall have the right to coordinate and accompany Buyer on any
of such inspections. Any and all inspections, examinations, analyses and audits
deemed necessary by Buyer shall be performed at Buyer's expense and shall not
physically damage the Property. Buyer shall promptly and completely repair and
restore any and all damage to the Property that may be caused by, or may occur
in connection with or as a result of, any inspection, investigation, audit, test
or visit to the Property by Buyer, its employees, and authorized agents and
consultants. Buyer shall indemnify, protect, defend and hold Seller and its
agents, employees and representatives harmless from and against any and all
loss, cost, claim, liability, damage or expense (including, without limitation,
attorneys' fees and expenses) arising out of physical damages or injuries to
persons or property caused by Buyer's inspections, investigations, audits, tests
or visits to the Property. Buyer's restoration and indemnification obligations
set forth in this Section shall survive the Closing or termination of this
Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due Diligence discloses any information
which is not contained in the Approved Due Diligence Materials and which could
reasonably be expected to have a material adverse impact on the value of the
Property ("A Material Adverse Condition"), then, Buyer, in Buyer's sole
discretion, may terminate this Agreement (by giving notice of such termination
to Seller, including Buyer's specific reasons therefor). Buyer shall notify
Seller in writing either during or at the end of the Due Diligence Period with
respect to whether or not Buyer has discovered any such Material Adverse
Condition. If Buyer's written notice to Seller indicates that the Updated Due
Diligence has not
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disclosed a Material Adverse Condition, then the parties shall, subject to the
satisfaction of the conditions set forth herein, proceed to the Closing. If
Buyer's written notice to Seller indicates that the Updated Due Diligence has
disclosed a Material Adverse Condition, then this Agreement shall terminate and
the Earnest Money Deposit (including all interest earned thereon) shall be
returned to Buyer. Upon termination of this Agreement by Buyer pursuant to this
Section 10, neither party shall thereafter be under any further liability to the
other, except as to matters which this Agreement expressly states are to survive
a termination of this Agreement. Notwithstanding anything to the contrary
contained in this Section 10, if Buyer does not notify Seller by the end of the
Due Diligence Period with respect to whether or not the Updated Due Diligence
has disclosed a Material Adverse Condition, then Buyer shall be deemed to have
notified Seller that the Updated Due Diligence has not disclosed any Material
Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established through written notice given by Buyer to Seller and shall not be
later than ten (10) days after the end of the Due Diligence Period (the
"Scheduled Closing Date"). Notwithstanding the foregoing, in the event that
Buyer determines that the applicable rules of the New York Stock Exchange
require its shareholders approval of the transactions contemplated by the Merger
Agreement or this Agreement, then Buyer shall have the right at any time up
until the Scheduled Closing Date, upon written notice to Seller, to extend the
Scheduled Closing Date in order to permit Buyer to obtain such shareholder
approval, to a date which is no later than (i) ninety (90) days after the date
of this
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Agreement, if the Securities and Exchange Commission ("SEC") informs Buyer that
it will not provide comments to its proxy statement or (ii) one hundred thirty
five days (135) after the date of this Agreement, if the SEC provides comments
to its proxy statement. After the expiration of the Due Diligence Period, Buyer
shall not have the right to terminate this Agreement except pursuant to the
provisions of Sections 8(a), 13 or 14 of this Agreement. IF BUYER SHALL DEFAULT
IN ITS OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER SHALL RECEIVE THE
EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) AS LIQUIDATED
DAMAGES AND NEITHER PARTY SHALL THEREAFTER BE UNDER ANY FURTHER LIABILITY TO THE
OTHER, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT WITH RESPECT TO
THE PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT. THE
PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY
BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS
SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE
EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise mutually agreed to by the parties (the "Adjustment
Date"), by the Title Company based on
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information provided by the parties, as follows:
(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being greater than those
shown on the tax duplicate available at Closing or because of any
additions or corrections to the tax duplicate assessed by reason of
Buyer's acquisition of the Property, then Seller shall promptly pay all
such increases allocable to the period prior to the Closing and Seller
shall protect, indemnify, defend, and hold Buyer harmless from and
against all such real estate tax and assessment increases, which
obligations on the part of the Seller shall survive the Closing. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later decreased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being less than those
shown on the tax duplicate available at Closing or because of any
corrections to the tax duplicate assessed by reason of Buyer's
acquisition of the Property or because of any post-Closing reduction
in, or refund or rebate of, any taxes relating wholly or in part to a
period before the Closing, then Buyer shall promptly pay to Seller the
savings allocable to the period prior to the Closing (less any costs
incurred by Buyer to any unaffiliated third parties in connection with
obtaining the reduction of such tax bill), which obligation shall
survive the Closing. Any
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special assessments that are a lien on the Property as of the date of
this Agreement shall be paid by Seller without proration. Any special
assessments that become a lien on the Property after the date of this
Agreement shall be paid as follows: Seller shall pay all installments
that are due and payable prior to the Closing Date and Buyer shall pay
all installments that become due and payable on or after the Closing
Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller (outside
of escrow) the portion of such current rents attributable to periods
prior to the Adjustment Date. Additionally, in the event that any
tenant, who as of the Closing is delinquent in the rental payments due
Seller, delivers to Buyer a rent check in an amount in excess of the
rent due Buyer for the month for which such check is delivered, Buyer
shall allocate such excess first to pay reasonable outside collection
costs, if any, paid to unaffiliated third parties, then to pay rents
which become due after Closing, then pay remaining funds to Seller for
any rents delinquent prior to Closing and were due as of the date such
payment was received; provided, however, in no event shall Buyer be
obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be obtained prior to
Closing, the final bills, when received, shall be prorated as of the
Adjustment Date and the Title Company shall hold in escrow an amount
equal to 125% of the reasonably anticipated amount of such billings,
based upon the most recent available
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billings for similar periods until the Title Company shall have
received notice of payment of such bills, at which time any remaining
amount being withheld for such purpose shall be distributed to the
Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) one-half of any state or local real or
personal property transfer taxes, documentary stamps, fees or other
charges relating to the transfer of the Property, (ii) the costs of the
Title Policy (other than the costs of the endorsements thereto) and
(iii) one-half of any escrow charges. Buyer shall pay in connection
with this transaction the following closing costs: (i) all recording
fees, (ii) the costs of the endorsements to the Title Policy, (iii)
one-half of any escrow charges and (iv) one-half of any state or local
real or personal property transfer taxes, documentary stamps, fees or
other charges relating to the transfer of the Property. Each party
shall pay its own attorneys' fees. Each party shall pay its own
attorneys' fees. All closing costs allocable to Seller, including,
without limitation, any prorations to which Buyer may be entitled by
reason of the foregoing shall be credited against the balance of the
Appraised Value to be paid at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds received by or
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payable to Seller as a result of such damage or destruction plus an amount equal
to any insurance policy deductible; or (b) by written notice of termination
given to Seller not later than thirty (30) days after Seller provides Buyer with
written notice of such damage or destruction, terminate this Agreement and
receive any documents, instruments and funds previously deposited or paid
including the Earnest Money Deposit (together with all interest earned thereon).
If an unsubstantial portion of the Property (i.e. 10% or less of the value)
shall, prior to the Closing, be damaged or destroyed by fire or any other cause
and such damage shall not have been repaired or reconstructed prior to the
Closing in a good and workmanlike manner to the reasonable satisfaction of
Buyer, then Buyer shall be obligated to proceed to close the transaction
contemplated hereby, but shall receive from Seller, on the Closing Date, an
assignment of proceeds of the insurance payable under Seller's insurance policy
plus an amount equal to any insurance policy deductible. Upon termination of
this Agreement by Buyer pursuant to this Section 13, neither party shall
thereafter be under any further liability to the other, except as otherwise
expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received pertaining
to a taking of all or a portion of the Property by way of condemnation, eminent
domain
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or similar procedure for a taking of the Property in connection with any public
or quasi-public use.
15. INDEMNIFICATION.
(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify, protect, defend and hold Seller and its
representatives, successors and assigns harmless from and against any
and all claims, demands, losses, liabilities, damages, awards,
judgements, penalties, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or in connection with (i)
the Property or the ownership thereof or arising under, relating to or
concerning any of the Tenant Leases, Permits, Deposits, Personal
Property Leases, Project Contracts, Intangible Rights if such claims,
demands, losses, liabilities, damages or expenses first arise, accrue
or exist or relate to any period of time from or after the Closing
(except to the extent that such indemnification obligation would arise
directly as a result of the inaccuracy of any representation or
warranty made by Seller hereunder), or (ii) the inaccuracy or any
representation or warranty made by Buyer hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits, Deposits,
Personal Property Leases, Project Contracts or the Intangible Rights),
but only if such claims, demands, losses, liabilities, damages or
expenses first arose, accrued, existed or related to any period
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<PAGE> 34
of time before the Closing (except to the extent that such
indemnification obligation would arise directly as a result of the
inaccuracy of any representation made by Buyer hereunder).
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii) of Section 15(a) or under Section
15(b) must be asserted in writing and with specificity by the date (the
"Claim Expiration Date") which for the matters referenced in Section
4(g) of this Agreement is six (6) years after the Closing Date and with
respect to the other provisions of this Agreement is three hundred
sixty five (365) days after the Closing Date, and any and all claims
not so asserted by the applicable Claim Expiration Date shall
automatically expire and be deemed to have been forever waived,
released and of no force or effect and (B) the total amounts
recoverable by Buyer against Seller or by Seller against Buyer with
respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
16. MISCELLANEOUS.
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing. Unless otherwise expressly required or permitted
by the terms of this Agreement, any notice
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required or permitted to be given hereunder by the parties shall be
delivered by facsimile, personally, by a reputable overnight delivery
service or by certified or registered mail to the parties at the
facsimile number or addresses set forth below (as the case may be),
unless different addressees or facsimile numbers are given by one party
to the other:
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
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<PAGE> 36
WITH A COPY TO:
Cox, Castle & Nicholson, LLP
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any
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reason any such commission shall become due, the party who retained
such broker shall pay any such commission and agrees to indemnify and
save the other party harmless from any and all claims for any such
commission and from any attorneys' fees and litigation or other
expenses relating to any such claim.
(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or otherwise, and shall take or cause to be taken
such other or further action, as either party shall reasonably request
at any time or from time to time within the one hundred twenty (120)
days immediately following the Closing Date in order to effectuate the
terms and provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
(h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be
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extended to the first succeeding business which is not a federal
holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to the best of Seller's Knowledge", "Seller's Actual
Knowledge", "Actual Knowledge of Seller" or "the Knowledge or Seller",
or any similar term or reference, it shall mean and be limited to the
actual conscious knowledge of Seller, without any investigation or
inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any other matters that
it is required to disclose in connection with its legal reporting
requirements or as otherwise required in accordance with applicable law
based upon the advise of its legal counsel, without the prior express
written consent of Seller; provided, however, that this provision shall
not apply to data that is in the public domain or is clearly not
confidential in nature. The provisions of this Section 17(j) shall
survive the Closing or any termination of this Agreement. Buyer's
undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing the
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provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this Agreement, or any memorandum thereof, to be
recorded.
(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver the Registration Rights Agreement attached
hereto and made a part hereof as EXHIBIT J.
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IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG FLEETWOOD, LTD.
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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<PAGE> 41
EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
LEASES AND CLOSING AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of
________________, 19___, by and between _____________________________
("Assignor"), and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Assignee"),
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under the Tenant
Leases relating to the tenant deposits (including, without limitation, security
deposits) and prepaid rent.
C-2
<PAGE> 43
2. Conveyance of Other Property. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. Limitation on Assumption of Obligations. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
4. Power of Attorney. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
C-3
<PAGE> 44
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties other
than Assignor, in the name of, at the expense of and for the
benefit of Assignee, any and all proceedings at law, in equity
or otherwise which Assignee, its successors and assigns may
deem proper with regard to the assets and properties hereby
conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the
C-4
<PAGE> 45
laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
________________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Print Name:_______________ Vice President
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
______________________________
Notary Public
C-6
<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
______________________________
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
C-7
<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
CONTRACTS AND PERSONAL PROPERTY LEASES
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
______________________________
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
______________________________
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between __________________
and AERC (the "Agreement"), that except as set forth on Attachment 1 attached
hereto and made a part hereof, the representations and warranties of AERC as
set forth in the Agreement were true and correct when made and are true and
correct as of the Closing Date. AERC acknowledges and agrees that the
disclosure of the matters set forth on Attachment 1 shall in no way affect the
rights of Seller (as defined in the Agreement) to decline to proceed to the
Closing (as defined in the Agreement) or any way modify or amend the provisions
of Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By ___________________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
Exhibit 2.06
PURCHASE AGREEMENT
MIG REIT FALLS, L.L.C.
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
PURCHASE AGREEMENT......................................................... 1
1. Agreement to Buy and Sell................................ 2
2. Liabilities.............................................. 3
3. Consideration and Payment/Earnest Money.................. 4
4. Representations and Warranties of Seller................. 7
5. Representations and Warranties of Buyer.................. 10
6. Seller's Covenants....................................... 11
7. Title and Possession of the Property..................... 13
8. Conditions to Closing.................................... 16
9. Deliveries............................................... 18
10. Due Diligence Period..................................... 20
11. Closing Date............................................. 23
12. Prorations and Closing Costs............................. 24
13. Fire or Other Casualty................................... 27
14. Condemnation and Eminent Domain.......................... 27
15. Indemnification.......................................... 28
16. Miscellaneous............................................ 30
</TABLE>
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<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
-ii-
<PAGE> 4
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG REIT FALLS, L.L.C., a North
Carolina limited liability company ("Seller") and ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation ("Buyer"),
W I T N E S S E T H:
--------------------
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 276-unit apartment complex known as Windsor Falls
located in Raleigh, North Carolina; which real property is more fully described
on EXHIBIT A attached hereto and made a part hereof, together with all
buildings, fixtures and other improvements located thereon and therein and
including all appurtenant rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
<PAGE> 5
NOW, THEREFORE, for good and valuable consideration received
to the full satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
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<PAGE> 6
(f) prepaid rentals under Tenant Leases, if any, and any other
miscellaneous deposits and prepaid expenses related to the ownership or
operation of the Project (collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "Windsor Falls" or "Windsor
Falls Apartments" and derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured,
-3-
<PAGE> 7
liquidated or unliquidated, fixed or contingent, or known or unknown, and
whether arising out of occurrences prior to, at or after the Closing, except as
provided hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for the Property will be the following, payable by Buyer to Seller
as follows:
(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in escrow by
Buyer on or before the Closing Date (defined below) in immediately available
funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Seventeen Million Six
Hundred Thousand Dollars ($17,600,000).
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<PAGE> 8
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York Stock Exchange. No certificates for fractional Common Shares shall
be issued or delivered in connection with the transaction contemplated by this
Agreement. To the extent that a fractional Common Share would otherwise have
been deliverable under the formula set out in the preceding portion of this
Section 3(a), Seller shall be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the closing price of
Common Shares as reported on the New York Stock Exchange Composite Tape on the
last full Trading Day immediately prior to the Closing Date) of such fractional
interest. Such payment with respect to fractional shares is merely intended to
provide a mechanical rounding off of, and is not separately bargained for,
consideration.
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit One Hundred Seventy Six
Thousand Dollars ($176,000) (the "Earnest Money Deposit") therein. Buyer shall
notify Seller of the opening, the deposit, the number of the escrow, and the
employee or employees of the Title Company in charge of the escrow. Each party
shall execute such documentation governing the Earnest Money Escrow that
reflects the relevant provisions of
-5-
<PAGE> 9
this Agreement and as may otherwise be required by the escrow agent, including
reasonable standard form escrow conditions. The Earnest Money Deposit shall be
deposited in an interest bearing account as instructed by Buyer and any interest
earned shall be added to the Earnest Money Deposit. In the event that the
parties proceed to the Closing, then the Earnest Money Deposit, together with
all interest earned thereon, shall be applied towards the Cash Payment. Except
as otherwise expressly set forth in Section 11 of this Agreement, upon the
termination of this Agreement, the Earnest Money Deposit, together with all
interest earned thereon, shall be returned by the Title Company to Buyer. Seller
acknowledges that it has disclosed to Buyer any legal conditions or
requirements, imposed by law or contract upon its interest in such Earnest Money
Escrow by the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or relevant state law, and Seller assumes all responsibility for
ensuring the written provisions of the agreement governing such Earnest Money
Escrow complies with any such requirements as they apply to Seller; provided,
that Buyer (or its nominee) shall comply with any requirements identified to
Buyer by Seller in writing, so long as identified prior to Buyer's establishing
said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a limited liability
company duly organized and validly existing under the laws of the State
of North Carolina with the power and authority to execute this
Agreement and sell the Property on the terms herein set forth. Seller,
is duly authorized to so act, and all requisite action has been taken
by Seller to authorize the execution and delivery of this Agreement,
the performance by
-6-
<PAGE> 10
Seller of its obligations hereunder and the consummation of the
transactions contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms.
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or
-7-
<PAGE> 11
disclosing material litigation, material zoning or building code
violations or material environmental law violations at the Property
which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined and such Merger Agreement contemplates the sale of property
pursuant to this Agreement; and (B) said Merger Agreement, if
consummated, would cause MIGRA's shareholders to become substantial
shareholders in Buyer or Buyer's parent and its affiliated entities,
and cause certain officers and directors of MIGRA to become officers
and directors of Buyer or Buyer's parent and its affiliates. Each such
shareholder has been provided the opportunity to ask questions and
receive from MIGRA information regarding the Property, the
consideration to be paid therefore, and MIGRA's interest in the
transactions contemplated by this Agreement, to the extent such
information is in the possession of MIGRA or may be obtained without
unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby
-8-
<PAGE> 12
acknowledges and agrees that the representations and warranties made in this
Agreement by Seller shall be unaffected by any such due diligence, investigation
or analysis; provided, however, that Buyer shall not be entitled to recover on
any representation or warranty set forth in this Agreement if Buyer's due
diligence made Buyer actually aware, prior to Closing, of any condition of,
concerning or relating to the Property which is contrary to those
representations and warranties, but no such knowledge shall affect the rights of
Buyer to decline to close hereunder if any of the Closing conditions under
Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on the
attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of the
Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and warranties set forth in this Section 4 shall be deemed
renewed by Seller on the Closing Date as if made at such time and shall survive
the Closing of the transactions contemplated hereby for a period of one (1)
year; provided, that the representations and warranties contained in Subsection
4(g) shall survive the Closing of the transactions contemplated hereby for a
period of six (6) years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement
-9-
<PAGE> 13
constitutes, and the other documents and instruments to be delivered by
Buyer pursuant hereto when delivered will constitute, the legal, valid
and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
pursuant hereto.
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to Section 856 through 860 of the Internal
Revenue Code, for each of its taxable years ended December 31, 1993
through December 31, 1996, and the Buyer expects to so qualify for the
fiscal year ending December 31, 1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
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<PAGE> 14
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in effect on the date
hereof.
(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project
-11-
<PAGE> 15
Contract or Personal Property Lease or enter into or renew any contract
or agreement pertaining to any item of Property unless such contract or
agreement can be terminated at will without obligation after the
Closing or (B) incur any mortgage indebtedness or other material
indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
(i) On or before the Closing Date, cause to be terminated any
management contract relating to the Property which is not assumed by
Buyer consistent with the terms and conditions of the transaction
described on EXHIBIT H attached hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR sec. 2510.3-
-12-
<PAGE> 16
101, then Seller covenants that all discretionary actions of Seller
under this Agreement shall be conducted by a fiduciary of Seller which
is independent of MIGRA or, in the case of an entity which holds plan
assets, pursuant to directions of the investors in such entity who are
independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided that Buyer
pay the costs of all such endorsements), in the amount of the total
consideration paid by Buyer to Seller for the Property (the "Title
Policy") issued by the Title Company, as assurance that upon Closing,
the Buyer holds and will hold good, valid and insurable title in fee
simple absolute to the Property including all rights, privileges and
easements appurtenant to the Property free and clear of all
encumbrances whatsoever, except the following (collectively, the
"Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
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<PAGE> 17
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or encumbrances upon, title to the
Property which would appear in the Title Policy. Buyer shall have until
the end of the Due Diligence Period (as defined in Section 10 of this
Agreement) to review such items and to give notice to Seller of such
objections as Buyer may have to any matters set forth in the Title
Commitment or survey which were not referenced in the Approved Title
Report. Seller understands and agrees that prior to the expiration of
the Due Diligence Period, Buyer may deliver to Seller an objection
letter or objection letters at any time during the Due Diligence Period
and Seller agrees that any such delivery or deliveries shall not be
construed in any way to limit or restrict Buyer's right to deliver
additional objections to Seller at any time during Due Diligence
Period. If Buyer timely (i.e during the Due Diligence Period) objects
to any special assessments, defects or encumbrances, Seller shall have
until the end of the Due Diligence Period to
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have such exceptions cured, either by the removal of such exceptions or
by the procurement of title insurance endorsements or other resolution
satisfactory to Buyer providing coverage against loss or damage as a
result of such exceptions. If Seller shall not cure such defects or
encumbrances to Buyer's satisfaction by the end of the Due Diligence
Period, Buyer, at its option, may (i) terminate this Agreement upon
written notice of termination to Seller in accordance with Section 10
of this Agreement, in which event neither party shall thereafter have
any liability to the other (except as to matters which, under any other
provision of this Agreement are expressly stated to survive a
termination of this Agreement), and all funds previously paid or
deposited by Buyer, including all accrued interest, shall be returned
to Buyer, or (ii) waive its objection to the defects or encumbrances
and proceed to the Closing in which event all such waived defects or
encumbrances shall be deemed to be Permitted Exceptions hereunder.
Notwithstanding the above, any defects in the nature of consensual
liens affirmatively granted by Seller or non-consensual monetary liens
which do not exceed Twenty Five Thousand Dollars ($25,000) in the
aggregate that can be released by payment of the underlying obligation
shall be removed, bonded or title insured over by Seller and if not so
removed, bonded or title insured over by the Closing then the Appraised
Value shall be reduced by an amount sufficient to satisfy such
obligations. Buyer shall conclusively be deemed to have waived all
objections to any title or survey defect, encumbrance or exception
reflected or referenced in the Title Commitment or survey as to which
Buyer fails to deliver to Seller a written objection by the end of the
Due Diligence Period, and all such matters shall thereafter be deemed
to be Permitted Exceptions for purposes of this Agreement.
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8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Buyer through written notice to Seller, Buyer's
obligations under this Agreement are expressly conditioned upon the
satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with all covenants as set forth in Section 6 herein,
and shall have otherwise performed all of its obligations
hereunder, in all material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence Period (as
hereafter defined) and the financial condition of the Property
shall not have changed in any material and adverse respect
from the condition reflected in the then most current
financial statements and other relevant financial materials
delivered by Seller to Buyer during the Due Diligence Period
(as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
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(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as defined in the Merger Agreement)
and the transactions contemplated by the Portfolio Purchase
Agreements shall have closed simultaneously with, or
immediately preceding or immediately following the Closing of
this transaction; and
(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration Rights
Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Seller through written notice to Buyer, Seller's
obligations under this Agreement are expressly conditioned upon the
occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
(iii) the closing of the Merger (as defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
(c) Since the Portfolio Properties constitute substantially
all of the assets of MIG Residential REIT, Inc., a Maryland corporation
("MIG REIT"), through MIG REIT's ownership of all the shares of Seller
and the Other Owners, MIG REIT's Board of Directors has a fiduciary
obligation to the holders of MIG REIT stock to maximize the current and
long term value of their shares in MIG REIT. Accordingly, it is agreed
that,
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notwithstanding anything in this Agreement to the contrary, Seller
shall have the right (the "Fiduciary Out") to terminate this Agreement
and cancel the Earnest Money Escrow on the following terms and
conditions:
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's sending the Fiduciary
Out Notice to Buyer shall constitute an election by Seller to
terminate this Agreement and cancel the Earnest Money Escrow,
subject to subsection (v) below.
(v) If a Fiduciary Out Notice is sent to Buyer, Buyer
shall have the right to elect, by giving Seller written notice
thereof within ten (10) business days after such Fiduciary Out
Notice is sent to Buyer, to either: (A) do nothing, or (B)
propose terms and conditions for Buyer to purchase the
Property which are at least as advantageous to Seller as the
terms and conditions set forth in such
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<PAGE> 22
Fiduciary Out Notice, which proposed terms and conditions
shall include a total purchase price for all the Portfolio
Properties at least equal to the total purchase price proposed
by the Third Party Buyer named in such Fiduciary Out Notices,
plus $250,000. If Buyer elects to do nothing, Seller shall
have no obligation to sell the Property to Buyer, but Buyer
shall have the right to be paid the Break-Up Fee (as defined
below) on the same contingent basis specified in subsection
(vii)(B) below. If Buyer proposes such new terms and
conditions which are accepted by Seller, in Seller's role and
absolute discretion, the Break-Up Fee shall not be payable to
Buyer and the parties shall proceed with and complete the
purchase and sale of the Property in accordance therewith. If
Buyer elects to do nothing, or if Seller does not accept such
new terms and conditions proposed by Buyer, Seller shall give
written notice to Buyer and the Title Company that this
Agreement is terminated and the Earnest Money Escrow is
canceled (the "Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the Appraised Value and
shall be paid to Buyer simultaneously with the delivery of the
Termination Notice, by wire transfer of immediately available
federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE REMEDY AGAINST SELLER FOR
TERMINATING THIS AGREEMENT UNDER THIS SECTION 8(c).
9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed,
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in customary form acceptable to Buyer (the "Deed"), conveying good and
insurable fee simple title to the Project to Buyer, free and clear of
all mortgages, pledges, liens, security interests, encumbrances and
restrictions, except the Permitted Exceptions. The Permitted Exceptions
shall be specifically, and not categorically, set forth in the Deed as
exceptions to title.
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the members
of Seller authorizing the execution and delivery of this
Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate Regarding Projects and
Personal Property Leases substantially in the form of EXHIBIT
D attached hereto and made a part hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the Property is located, originals of
all certificates of occupancy (or the jurisdictional
equivalent of a certificate of occupancy) for all apartment
units on the Property, if available, and if not available,
true and correct copies thereof;
(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
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<PAGE> 24
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
(x) A certificate of Seller in the form of EXHIBIT F
attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
(i) Settlement statements agreed to by Seller and
executed by Buyer;
(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
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<PAGE> 25
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and substance
acceptable to Buyer and Seller, pursuant to which Buyer
accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(v) Duly executed resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of
this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees that
prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on EXHIBIT K attached
hereto and made a part hereof (the "Approved Due Diligence Materials") and that
Buyer has approved the Approved Due Diligence Materials and all information
contained therein. For a period of thirty (30) days following execution of this
Agreement (the "Due Diligence Period"), Buyer shall be permitted to conduct its
own limited inspections of the Property for the sole purposes of updating the
Approved Due Diligence Materials, with respect to: (i) obtaining a so-called
"Phase I Environmental Assessment" of the Property, (ii) obtaining structural
and engineering assessments of the Property, (iii) obtaining the Title
Commitment referenced in Section 7 hereof and (iv) updating or upgrading the
survey referenced on EXHIBIT K (the "Updated Due Diligence"). Seller shall grant
reasonable access to Buyer and its
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<PAGE> 26
representatives to the Property for the purpose of conducting the Updated Due
Diligence. Seller shall have the right to coordinate and accompany Buyer on any
of such inspections. Any and all inspections, examinations, analyses and audits
deemed necessary by Buyer shall be performed at Buyer's expense and shall not
physically damage the Property. Buyer shall promptly and completely repair and
restore any and all damage to the Property that may be caused by, or may occur
in connection with or as a result of, any inspection, investigation, audit, test
or visit to the Property by Buyer, its employees, and authorized agents and
consultants. Buyer shall indemnify, protect, defend and hold Seller and its
agents, employees and representatives harmless from and against any and all
loss, cost, claim, liability, damage or expense (including, without limitation,
attorneys' fees and expenses) arising out of physical damages or injuries to
persons or property caused by Buyer's inspections, investigations, audits, tests
or visits to the Property. Buyer's restoration and indemnification obligations
set forth in this Section shall survive the Closing or termination of this
Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due Diligence discloses any information
which is not contained in the Approved Due Diligence Materials and which could
reasonably be expected to have a material adverse impact on the value of the
Property ("A Material Adverse Condition"), then, Buyer, in Buyer's sole
discretion, may terminate this Agreement (by giving notice of such termination
to Seller, including Buyer's specific reasons therefor). Buyer shall notify
Seller in writing either during or at the end of the Due Diligence Period with
respect to whether or not Buyer has discovered any such Material Adverse
Condition. If Buyer's written notice to Seller indicates that the Updated Due
Diligence has not disclosed a Material Adverse Condition, then the parties
shall, subject to the satisfaction
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of the conditions set forth herein, proceed to the Closing. If Buyer's written
notice to Seller indicates that the Updated Due Diligence has disclosed a
Material Adverse Condition, then this Agreement shall terminate and the Earnest
Money Deposit (including all interest earned thereon) shall be returned to
Buyer. Upon termination of this Agreement by Buyer pursuant to this Section 10,
neither party shall thereafter be under any further liability to the other,
except as to matters which this Agreement expressly states are to survive a
termination of this Agreement. Notwithstanding anything to the contrary
contained in this Section 10, if Buyer does not notify Seller by the end of the
Due Diligence Period with respect to whether or not the Updated Due Diligence
has disclosed a Material Adverse Condition, then Buyer shall be deemed to have
notified Seller that the Updated Due Diligence has not disclosed any Material
Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established through written notice given by Buyer to Seller and shall not be
later than ten (10) days after the end of the Due Diligence Period (the
"Scheduled Closing Date"). Notwithstanding the foregoing, in the event that
Buyer determines that the applicable rules of the New York Stock Exchange
require its shareholders approval of the transactions contemplated by the Merger
Agreement or this Agreement, then Buyer shall have the right at any time up
until the Scheduled Closing Date, upon written notice to Seller, to extend the
Scheduled Closing Date in order to permit Buyer to obtain such shareholder
approval, to a date which is no later than (i) ninety (90) days after the date
of this Agreement, if the Securities and Exchange Commission ("SEC")
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informs Buyer that it will not provide comments to its proxy statement or (ii)
one hundred thirty five days (135) after the date of this Agreement, if the SEC
provides comments to its proxy statement. After the expiration of the Due
Diligence Period, Buyer shall not have the right to terminate this Agreement
except pursuant to the provisions of Sections 8(a), 13 or 14 of this Agreement.
IF BUYER SHALL DEFAULT IN ITS OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER
SHALL RECEIVE THE EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON)
AS LIQUIDATED DAMAGES AND NEITHER PARTY SHALL THEREAFTER BE UNDER ANY FURTHER
LIABILITY TO THE OTHER, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT
WITH RESPECT TO THE PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION OF THIS
AGREEMENT. THE PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF
A DEFAULT BY BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE
EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN AGREED
UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES
AND AS SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN
THE EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise
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mutually agreed to by the parties (the "Adjustment Date"), by the Title Company
based on information provided by the parties, as follows:
(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being greater than those
shown on the tax duplicate available at Closing or because of any
additions or corrections to the tax duplicate assessed by reason of
Buyer's acquisition of the Property, then Seller shall promptly pay all
such increases allocable to the period prior to the Closing and Seller
shall protect, indemnify, defend, and hold Buyer harmless from and
against all such real estate tax and assessment increases, which
obligations on the part of the Seller shall survive the Closing. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later decreased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being less than those
shown on the tax duplicate available at Closing or because of any
corrections to the tax duplicate assessed by reason of Buyer's
acquisition of the Property or because of any post-Closing reduction
in, or refund or rebate of, any taxes relating wholly or in part to a
period before the Closing, then Buyer shall promptly pay to Seller the
savings allocable to the period prior to the Closing (less any costs
incurred by Buyer to any unaffiliated third parties in
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connection with obtaining the reduction of such tax bill), which
obligation shall survive the Closing. Any special assessments that are
a lien on the Property as of the date of this Agreement shall be paid
by Seller without proration. Any special assessments that become a lien
on the Property after the date of this Agreement shall be paid as
follows: Seller shall pay all installments that are due and payable
prior to the Closing Date and Buyer shall pay all installments that
become due and payable on or after the Closing Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller (outside
of escrow) the portion of such current rents attributable to periods
prior to the Adjustment Date. Additionally, in the event that any
tenant, who as of the Closing is delinquent in the rental payments due
Seller, delivers to Buyer a rent check in an amount in excess of the
rent due Buyer for the month for which such check is delivered, Buyer
shall allocate such excess first to pay reasonable outside collection
costs, if any, paid to unaffiliated third parties, then to pay rents
which become due after Closing, then pay remaining funds to Seller for
any rents delinquent prior to Closing and were due as of the date such
payment was received; provided, however, in no event shall Buyer be
obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be obtained prior to
Closing, the final bills, when received, shall be prorated as of the
Adjustment Date and the Title Company shall hold in escrow an amount
equal to 125%
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of the reasonably anticipated amount of such billings, based upon the
most recent available billings for similar periods until the Title
Company shall have received notice of payment of such bills, at which
time any remaining amount being withheld for such purpose shall be
distributed to the Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) any state or local real or personal
property transfer taxes, documentary stamps, fees or other charges
relating to the transfer of the Property. Buyer shall pay in connection
with this transaction the following closing costs: (i) all recording
fees, (ii) the costs of the endorsements to the Title Policy and all
endorsements thereto and (iii) any escrow charges. Each party shall pay
its own attorneys' fees. All closing costs allocable to Seller,
including, without limitation, any prorations to which Buyer may be
entitled by reason of the foregoing shall be credited against the
balance of the Appraised Value to be paid at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds received by or payable to Seller as a result of such
damage or destruction plus an amount equal
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to any insurance policy deductible; or (b) by written notice of termination
given to Seller not later than thirty (30) days after Seller provides Buyer with
written notice of such damage or destruction, terminate this Agreement and
receive any documents, instruments and funds previously deposited or paid
including the Earnest Money Deposit (together with all interest earned thereon).
If an unsubstantial portion of the Property (i.e. 10% or less of the value)
shall, prior to the Closing, be damaged or destroyed by fire or any other cause
and such damage shall not have been repaired or reconstructed prior to the
Closing in a good and workmanlike manner to the reasonable satisfaction of
Buyer, then Buyer shall be obligated to proceed to close the transaction
contemplated hereby, but shall receive from Seller, on the Closing Date, an
assignment of proceeds of the insurance payable under Seller's insurance policy
plus an amount equal to any insurance policy deductible. Upon termination of
this Agreement by Buyer pursuant to this Section 13, neither party shall
thereafter be under any further liability to the other, except as otherwise
expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received pertaining
to a taking of all or a portion of the Property by way of
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<PAGE> 33
condemnation, eminent domain or similar procedure for a taking of the Property
in connection with any public or quasi-public use.
15. INDEMNIFICATION.
----------------
(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify, protect, defend and hold Seller and its
representatives, successors and assigns harmless from and against any
and all claims, demands, losses, liabilities, damages, awards,
judgements, penalties, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or in connection with (i)
the Property or the ownership thereof or arising under, relating to or
concerning any of the Tenant Leases, Permits, Deposits, Personal
Property Leases, Project Contracts, Intangible Rights if such claims,
demands, losses, liabilities, damages or expenses first arise, accrue
or exist or relate to any period of time from or after the Closing
(except to the extent that such indemnification obligation would arise
directly as a result of the inaccuracy of any representation or
warranty made by Seller hereunder), or (ii) the inaccuracy or any
representation or warranty made by Buyer hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits,
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<PAGE> 34
Deposits, Personal Property Leases, Project Contracts or the Intangible
Rights), but only if such claims, demands, losses, liabilities, damages
or expenses first arose, accrued, existed or related to any period of
time before the Closing (except to the extent that such indemnification
obligation would arise directly as a result of the inaccuracy of any
representation made by Buyer hereunder).
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii) of Section 15(a) or under Section
15(b) must be asserted in writing and with specificity by the date (the
"Claim Expiration Date") which for the matters referenced in Section
4(g) of this Agreement is six (6) years after the Closing Date and with
respect to the other provisions of this Agreement is three hundred
sixty five (365) days after the Closing Date, and any and all claims
not so asserted by the applicable Claim Expiration Date shall
automatically expire and be deemed to have been forever waived,
released and of no force or effect and (B) the total amounts
recoverable by Buyer against Seller or by Seller against Buyer with
respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
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<PAGE> 35
16. MISCELLANEOUS.
--------------
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing. Unless otherwise expressly required or permitted
by the terms of this Agreement, any notice required or permitted to be
given hereunder by the parties shall be delivered by facsimile,
personally, by a reputable overnight delivery service or by certified
or registered mail to the parties at the facsimile number or addresses
set forth below (as the case may be), unless different addressees or
facsimile numbers are given by one party to the other:
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
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<PAGE> 36
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
WITH A COPY TO:
---------------
Cox, Castle & Nicholson, LLP
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
------------
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
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<PAGE> 37
WITH A COPY TO:
---------------
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any reason any such commission shall become due, the
party who retained such broker shall pay any such commission and agrees
to indemnify and save the other party harmless from any and all claims
for any such commission and from any attorneys' fees and litigation or
other expenses relating to any such claim.
(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or
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<PAGE> 38
otherwise, and shall take or cause to be taken such other or further
action, as either party shall reasonably request at any time or from
time to time within the one hundred twenty (120) days immediately
following the Closing Date in order to effectuate the terms and
provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
(h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be extended to the first
succeeding business which is not a federal holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to the best of Seller's Knowledge", "Seller's Actual
Knowledge", "Actual Knowledge of Seller" or "the Knowledge or Seller",
or any similar term or reference, it shall mean and be limited to the
actual conscious knowledge of Seller, without any investigation or
inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any
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<PAGE> 39
other matters that it is required to disclose in connection with its
legal reporting requirements or as otherwise required in accordance
with applicable law based upon the advise of its legal counsel, without
the prior express written consent of Seller; provided, however, that
this provision shall not apply to data that is in the public domain or
is clearly not confidential in nature. The provisions of this Section
17(j) shall survive the Closing or any termination of this Agreement.
Buyer's undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing the provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this Agreement, or any memorandum thereof, to be
recorded.
(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver the Registration Rights Agreement attached
hereto and made a part hereof as EXHIBIT J.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG REIT FALLS, L.L.C.
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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<PAGE> 41
EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
----------------------------
LEASES AND CLOSING AGREEMENT
----------------------------
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of
________________, 19___, by and between _____________________________
("Assignor"), and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Assignee"),
W I T N E S S E T H :
---------------------
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
-------------------------
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under
C-2
<PAGE> 43
the Tenant Leases relating to the tenant deposits (including, without
limitation, security deposits) and prepaid rent.
2. CONVEYANCE OF OTHER PROPERTY. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. LIMITATION ON ASSUMPTION OF OBLIGATIONS. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
C-3
<PAGE> 44
4. POWER OF ATTORNEY. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties other
than Assignor, in the name of, at the expense of and for the
benefit of Assignee, any and all proceedings at law, in equity
or otherwise which Assignee, its successors and assigns may
deem proper with regard to the assets and properties hereby
conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
--------------
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
C-4
<PAGE> 45
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
_______________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Vice President
Print Name:_______________
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
------------------------------
Notary Public
C-6
<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
------------------------------
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
C-7
<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
---------------------------------------
CONTRACTS AND PERSONAL PROPERTY LEASES
--------------------------------------
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
------------------------------
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
---------------------------------
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
---------------------------------
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
-------------------
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between
_______________________ and AERC (the "Agreement"), that except as set forth on
Attachment 1 attached hereto and made a part hereof, the representations and
warranties of AERC as set forth in the Agreement were true and correct when made
and are true and correct as of the Closing Date. AERC acknowledges and agrees
that the disclosure of the matters set forth on Attachment 1 shall in no way
affect the rights of Seller (as defined in the Agreement) to decline to proceed
to the Closing (as defined in the Agreement) or any way modify or amend the
provisions of Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By_______________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
Exhibit 2.07
PURCHASE AGREEMENT
MIG 20TH & CAMPBELL CORPORATION
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
PURCHASE AGREEMENT.......................................................... 1
1. Agreement to Buy and Sell................................. 2
2. Liabilities............................................... 3
3. Consideration and Payment/Earnest Money................... 4
4. Representations and Warranties of Seller.................. 7
5. Representations and Warranties of Buyer................... 9
6. Seller's Covenants........................................ 11
7. Title and Possession of the Property...................... 13
8. Conditions to Closing..................................... 16
9. Deliveries................................................ 18
10. Due Diligence Period...................................... 20
11. Closing Date.............................................. 23
12. Prorations and Closing Costs.............................. 24
13. Fire or Other Casualty.................................... 27
14. Condemnation and Eminent Domain........................... 28
15. Indemnification........................................... 28
16. Miscellaneous............................................. 30
-i-
<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
-ii-
<PAGE> 4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG 20TH AND CAMPBELL CORPORATION, an
Arizona corporation ("Seller") and ASSOCIATED ESTATES REALTY CORPORATION, an
Ohio corporation ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 204-unit apartment complex known as 20th & Campbell
Apartments located in Phoenix, Arizona; which real property is more fully
described on EXHIBIT A attached hereto and made a part hereof, together with all
buildings, fixtures and other improvements located thereon and therein and
including all appurtenant rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
NOW, THEREFORE, for good and valuable consideration received
to the full
<PAGE> 5
satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
(f) prepaid rentals under Tenant Leases, if any, and any other
miscellaneous deposits and prepaid expenses related to the ownership or
operation of the Project
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<PAGE> 6
(collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "20th & Campbell" or "20th and
Campbell Apartments" and derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured,
liquidated or unliquidated, fixed or contingent, or known or unknown, and
whether arising out of occurrences prior to, at or after the Closing, except as
provided hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for
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<PAGE> 7
the Property will be the following, payable by Buyer to Seller as follows:
(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in escrow by
Buyer on or before the Closing Date (defined below) in immediately available
funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Thirteen Million
Dollars ($13,000,000).
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York
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<PAGE> 8
Stock Exchange. No certificates for fractional Common Shares shall be issued or
delivered in connection with the transaction contemplated by this Agreement. To
the extent that a fractional Common Share would otherwise have been deliverable
under the formula set out in the preceding portion of this Section 3(a), Seller
shall be entitled to receive a cash payment therefor in an amount equal to the
value (determined with reference to the closing price of Common Shares as
reported on the New York Stock Exchange Composite Tape on the last full Trading
Day immediately prior to the Closing Date) of such fractional interest. Such
payment with respect to fractional shares is merely intended to provide a
mechanical rounding off of, and is not separately bargained for, consideration
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit One Hundred Thirty Thousand
Dollars ($130,000) (the "Earnest Money Deposit") therein. Buyer shall notify
Seller of the opening, the deposit, the number of the escrow, and the employee
or employees of the Title Company in charge of the escrow. Each party shall
execute such documentation governing the Earnest Money Escrow that reflects the
relevant provisions of this Agreement and as may otherwise be required by the
escrow agent, including reasonable standard form escrow conditions. The Earnest
Money Deposit shall be deposited in an interest bearing account as instructed by
Buyer and any interest earned shall be added to the Earnest Money Deposit. In
the event that the parties proceed to the Closing, then the Earnest Money
Deposit, together with all interest earned thereon, shall be applied towards the
Cash Payment. Except as otherwise expressly set forth in Section 11 of this
Agreement, upon the termination of this Agreement, the Earnest Money Deposit,
together with all interest earned thereon, shall be returned
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<PAGE> 9
by the Title Company to Buyer. Seller acknowledges that it has disclosed to
Buyer any legal conditions or requirements, imposed by law or contract upon its
interest in such Earnest Money Escrow by the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or relevant state law, and Seller assumes all
responsibility for ensuring the written provisions of the agreement governing
such Earnest Money Escrow complies with any such requirements as they apply to
Seller; provided, that Buyer (or its nominee) shall comply with any requirements
identified to Buyer by Seller in writing, so long as identified prior to Buyer's
establishing said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a corporation duly
organized and validly existing under the laws of Arizona with the power
and authority to execute this Agreement and sell the Property on the
terms herein set forth. Seller, is duly authorized to so act, and all
requisite action has been taken by Seller to authorize the execution
and delivery of this Agreement, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable
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<PAGE> 10
against Seller in accordance with their respective terms.
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or disclosing material litigation, material zoning
or building code violations or material environmental law violations at
the Property which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined and
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<PAGE> 11
such Merger Agreement contemplates the sale of property pursuant to
this Agreement; and (B) said Merger Agreement, if consummated, would
cause MIGRA's shareholders to become substantial shareholders in Buyer
or Buyer's parent and its affiliated entities, and cause certain
officers and directors of MIGRA to become officers and directors of
Buyer or Buyer's parent and its affiliates. Each such shareholder has
been provided the opportunity to ask questions and receive from MIGRA
information regarding the Property, the consideration to be paid
therefore, and MIGRA's interest in the transactions contemplated by
this Agreement, to the extent such information is in the possession of
MIGRA or may be obtained without unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby acknowledges and agrees
that the representations and warranties made in this Agreement by Seller shall
be unaffected by any such due diligence, investigation or analysis; provided,
however, that Buyer shall not be entitled to recover on any representation or
warranty set forth in this Agreement if Buyer's due diligence made Buyer
actually aware, prior to Closing, of any condition of, concerning or relating to
the Property which is contrary to those representations and warranties, but no
such knowledge shall affect the rights of Buyer to decline to close hereunder if
any of the Closing conditions under Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on the
attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of
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<PAGE> 12
the Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and warranties set forth in this Section 4 shall be deemed
renewed by Seller on the Closing Date as if made at such time and shall survive
the Closing of the transactions contemplated hereby for a period of one (1)
year; provided, that the representations and warranties contained in Subsection
4(g) shall survive the Closing of the transactions contemplated hereby for a
period of six (6) years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Buyer pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
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<PAGE> 13
pursuant hereto.
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to Section 856 through 860 of the Internal
Revenue Code, for each of its taxable years ended December 31, 1993
through December 31, 1996, and the Buyer expects to so qualify for the
fiscal year ending December 31, 1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
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<PAGE> 14
(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in effect on the date
hereof.
(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project Contract or Personal Property Lease or enter into
or renew any contract or agreement pertaining to any item of Property
unless such contract or agreement can be terminated at will without
obligation after the Closing or (B) incur any mortgage indebtedness or
other material indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
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<PAGE> 15
(i) On or before the Closing Date, cause to be terminated any
management contract relating to the Property which is not assumed by
Buyer consistent with the terms and conditions of the transaction
described on EXHIBIT H attached hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR ss. 2510.3- 101, then
Seller covenants that all discretionary actions of Seller under this
Agreement shall be conducted by a fiduciary of Seller which is
independent of MIGRA or, in the case of an entity which holds plan
assets, pursuant to directions of the investors in such entity who are
independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided
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<PAGE> 16
that Buyer pay the costs of all such endorsements), in the amount of
the total consideration paid by Buyer to Seller for the Property (the
"Title Policy") issued by the Title Company, as assurance that upon
Closing, the Buyer holds and will hold good, valid and insurable title
in fee simple absolute to the Property including all rights, privileges
and easements appurtenant to the Property free and clear of all
encumbrances whatsoever, except the following (collectively, the
"Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or encumbrances upon, title to the
Property which would appear in the Title Policy. Buyer shall have until
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<PAGE> 17
the end of the Due Diligence Period (as defined in Section 10 of this
Agreement) to review such items and to give notice to Seller of such
objections as Buyer may have to any matters set forth in the Title
Commitment or survey which were not referenced in the Approved Title
Report. Seller understands and agrees that prior to the expiration of
the Due Diligence Period, Buyer may deliver to Seller an objection
letter or objection letters at any time during the Due Diligence Period
and Seller agrees that any such delivery or deliveries shall not be
construed in any way to limit or restrict Buyer's right to deliver
additional objections to Seller at any time during Due Diligence
Period. If Buyer timely (i.e during the Due Diligence Period) objects
to any special assessments, defects or encumbrances, Seller shall have
until the end of the Due Diligence Period to have such exceptions
cured, either by the removal of such exceptions or by the procurement
of title insurance endorsements or other resolution satisfactory to
Buyer providing coverage against loss or damage as a result of such
exceptions. If Seller shall not cure such defects or encumbrances to
Buyer's satisfaction by the end of the Due Diligence Period, Buyer, at
its option, may (i) terminate this Agreement upon written notice of
termination to Seller in accordance with Section 10 of this Agreement,
in which event neither party shall thereafter have any liability to the
other (except as to matters which, under any other provision of this
Agreement are expressly stated to survive a termination of this
Agreement), and all funds previously paid or deposited by Buyer,
including all accrued interest, shall be returned to Buyer, or (ii)
waive its objection to the defects or encumbrances and proceed to the
Closing in which event all such waived defects or encumbrances shall be
deemed to be Permitted Exceptions hereunder. Notwithstanding the above,
any defects in the nature of consensual liens affirmatively granted by
Seller or non-consensual monetary liens which do not exceed
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<PAGE> 18
Twenty Five Thousand Dollars ($25,000) in the aggregate that can be
released by payment of the underlying obligation shall be removed,
bonded or title insured over by Seller and if not so removed, bonded or
title insured over by the Closing then the Appraised Value shall be
reduced by an amount sufficient to satisfy such obligations. Buyer
shall conclusively be deemed to have waived all objections to any title
or survey defect, encumbrance or exception reflected or referenced in
the Title Commitment or survey as to which Buyer fails to deliver to
Seller a written objection by the end of the Due Diligence Period, and
all such matters shall thereafter be deemed to be Permitted Exceptions
for purposes of this Agreement.
8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Buyer through written notice to Seller, Buyer's
obligations under this Agreement are expressly conditioned upon the
satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with all covenants as set forth in Section 6 herein,
and shall have otherwise performed all of its obligations
hereunder, in all material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
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<PAGE> 19
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence Period (as
hereafter defined) and the financial condition of the Property
shall not have changed in any material and adverse respect
from the condition reflected in the then most current
financial statements and other relevant financial materials
delivered by Seller to Buyer during the Due Diligence Period
(as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as defined in the Merger Agreement)
and the transactions contemplated by the Portfolio Purchase
Agreements shall have closed simultaneously with, or
immediately preceding or immediately following the Closing of
this transaction; and
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<PAGE> 20
(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration Rights
Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Seller through written notice to Buyer, Seller's
obligations under this Agreement are expressly conditioned upon the
occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
(iii) the closing of the Merger (as defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
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(c) Since the Portfolio Properties constitute substantially
all of the assets of MIG Residential REIT, Inc., a Maryland corporation
("MIG REIT"), through MIG REIT's ownership of all the shares of Seller
and the Other Owners, MIG REIT's Board of Directors has a fiduciary
obligation to the holders of MIG REIT stock to maximize the current and
long term value of their shares in MIG REIT. Accordingly, it is agreed
that, notwithstanding anything in this Agreement to the contrary,
Seller shall have the right (the "Fiduciary Out") to terminate this
Agreement and cancel the Earnest Money Escrow on the following terms
and conditions:
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's
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<PAGE> 22
sending the Fiduciary Out Notice to Buyer shall constitute an
election by Seller to terminate this Agreement and cancel the
Earnest Money Escrow, subject to subsection (v) below.
(v) If a Fiduciary Out Notice is sent to Buyer, Buyer
shall have the right to elect, by giving Seller written notice
thereof within ten (10) business days after such Fiduciary Out
Notice is sent to Buyer, to either: (A) do nothing, or (B)
propose terms and conditions for Buyer to purchase the
Property which are at least as advantageous to Seller as the
terms and conditions set forth in such Fiduciary Out Notice,
which proposed terms and conditions shall include a total
purchase price for all the Portfolio Properties at least equal
to the total purchase price proposed by the Third Party Buyer
named in such Fiduciary Out Notices, plus $250,000. If Buyer
elects to do nothing, Seller shall have no obligation to sell
the Property to Buyer, but Buyer shall have the right to be
paid the Break-Up Fee (as defined below) on the same
contingent basis specified in subsection (vii)(B) below. If
Buyer proposes such new terms and conditions which are
accepted by Seller, in Seller's role and absolute discretion,
the Break-Up Fee shall not be payable to Buyer and the parties
shall proceed with and complete the purchase and sale of the
Property in accordance therewith. If Buyer elects to do
nothing, or if Seller does not accept such new terms and
conditions proposed by Buyer, Seller shall give written notice
to Buyer and the Title Company that this Agreement is
terminated and the Earnest Money Escrow is canceled (the
"Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the Appraised Value and
shall be paid to Buyer simultaneously with the delivery of the
Termination Notice, by wire transfer of immediately available
federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE
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REMEDY AGAINST SELLER FOR TERMINATING THIS AGREEMENT UNDER
THIS SECTION 8(c).
9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed, in customary form
acceptable to Buyer (the "Deed"), conveying good and insurable fee
simple title to the Project to Buyer, free and clear of all mortgages,
pledges, liens, security interests, encumbrances and restrictions,
except the Permitted Exceptions. The Permitted Exceptions shall be
specifically, and not categorically, set forth in the Deed as
exceptions to title.
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the Board of
Directors of Seller authorizing the execution and delivery of
this Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate Regarding Projects and
Personal Property Leases substantially in the form of EXHIBIT
D attached hereto and made a part hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the
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Property is located, originals of all certificates of
occupancy (or the jurisdictional equivalent of a certificate
of occupancy) for all apartment units on the Property, if
available, and if not available, true and correct copies
thereof;
(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
(x) A certificate of Seller in the form of EXHIBIT F
attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
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(i) Settlement statements agreed to by Seller and
executed by Buyer;
(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and substance
acceptable to Buyer and Seller, pursuant to which Buyer
accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(v) Duly executed resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of
this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees that
prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on EXHIBIT K attached
hereto and made a part hereof (the "Approved Due Diligence Materials") and that
Buyer has approved the Approved Due Diligence Materials and all information
contained therein. For a period of thirty (30) days following execution of this
Agreement (the "Due Diligence Period"), Buyer shall be permitted to conduct its
own limited inspections of the Property for the sole purposes of updating the
Approved Due Diligence Materials, with respect to: (i) obtaining a so-called
"Phase I Environmental Assessment" of the Property, (ii) obtaining structural
and engineering assessments of the Property, (iii) obtaining the Title
Commitment referenced in Section
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7 hereof and (iv) updating or upgrading the survey referenced on EXHIBIT K (the
"Updated Due Diligence"). Seller shall grant reasonable access to Buyer and its
representatives to the Property for the purpose of conducting the Updated Due
Diligence. Seller shall have the right to coordinate and accompany Buyer on any
of such inspections. Any and all inspections, examinations, analyses and audits
deemed necessary by Buyer shall be performed at Buyer's expense and shall not
physically damage the Property. Buyer shall promptly and completely repair and
restore any and all damage to the Property that may be caused by, or may occur
in connection with or as a result of, any inspection, investigation, audit, test
or visit to the Property by Buyer, its employees, and authorized agents and
consultants. Buyer shall indemnify, protect, defend and hold Seller and its
agents, employees and representatives harmless from and against any and all
loss, cost, claim, liability, damage or expense (including, without limitation,
attorneys' fees and expenses) arising out of physical damages or injuries to
persons or property caused by Buyer's inspections, investigations, audits, tests
or visits to the Property. Buyer's restoration and indemnification obligations
set forth in this Section shall survive the Closing or termination of this
Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due Diligence discloses any information
which is not contained in the Approved Due Diligence Materials and which could
reasonably be expected to have a material adverse impact on the value of the
Property ("A Material Adverse Condition"), then, Buyer, in Buyer's sole
discretion, may terminate this Agreement (by giving notice of such termination
to Seller, including Buyer's specific reasons therefor). Buyer shall notify
Seller in writing either during or at the end of the Due Diligence Period with
respect to whether or not Buyer has discovered any such Material Adverse
Condition. If Buyer's written notice to Seller indicates that the Updated Due
Diligence has not
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disclosed a Material Adverse Condition, then the parties shall, subject to the
satisfaction of the conditions set forth herein, proceed to the Closing. If
Buyer's written notice to Seller indicates that the Updated Due Diligence has
disclosed a Material Adverse Condition, then this Agreement shall terminate and
the Earnest Money Deposit (including all interest earned thereon) shall be
returned to Buyer. Upon termination of this Agreement by Buyer pursuant to this
Section 10, neither party shall thereafter be under any further liability to the
other, except as to matters which this Agreement expressly states are to survive
a termination of this Agreement. Notwithstanding anything to the contrary
contained in this Section 10, if Buyer does not notify Seller by the end of the
Due Diligence Period with respect to whether or not the Updated Due Diligence
has disclosed a Material Adverse Condition, then Buyer shall be deemed to have
notified Seller that the Updated Due Diligence has not disclosed any Material
Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established through written notice given by Buyer to Seller and shall not be
later than ten (10) days after the end of the Due Diligence Period (the
"Scheduled Closing Date"). Notwithstanding the foregoing, in the event that
Buyer determines that the applicable rules of the New York Stock Exchange
require its shareholders approval of the transactions contemplated by the Merger
Agreement or this Agreement, then Buyer shall have the right at any time up
until the Scheduled Closing Date, upon written notice to Seller, to extend the
Scheduled Closing Date in order to permit Buyer to obtain such shareholder
approval, to a date which is no later than (i) ninety (90) days after the date
of this
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<PAGE> 28
Agreement, if the Securities and Exchange Commission ("SEC") informs Buyer that
it will not provide comments to its proxy statement or (ii) one hundred thirty
five days (135) after the date of this Agreement, if the SEC provides comments
to its proxy statement. After the expiration of the Due Diligence Period, Buyer
shall not have the right to terminate this Agreement except pursuant to the
provisions of Sections 8(a), 13 or 14 of this Agreement. IF BUYER SHALL DEFAULT
IN ITS OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER SHALL RECEIVE THE
EARNEST MONEY DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) AS LIQUIDATED
DAMAGES AND NEITHER PARTY SHALL THEREAFTER BE UNDER ANY FURTHER LIABILITY TO THE
OTHER, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT WITH RESPECT TO
THE PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT. THE
PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY
BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS
SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE
EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise mutually agreed to by the parties (the "Adjustment
Date"), by the Title Company based on
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information provided by the parties, as follows:
(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being greater than those
shown on the tax duplicate available at Closing or because of any
additions or corrections to the tax duplicate assessed by reason of
Buyer's acquisition of the Property, then Seller shall promptly pay all
such increases allocable to the period prior to the Closing and Seller
shall protect, indemnify, defend, and hold Buyer harmless from and
against all such real estate tax and assessment increases, which
obligations on the part of the Seller shall survive the Closing. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later decreased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being less than those
shown on the tax duplicate available at Closing or because of any
corrections to the tax duplicate assessed by reason of Buyer's
acquisition of the Property or because of any post-Closing reduction
in, or refund or rebate of, any taxes relating wholly or in part to a
period before the Closing, then Buyer shall promptly pay to Seller the
savings allocable to the period prior to the Closing (less any costs
incurred by Buyer to any unaffiliated third parties in connection with
obtaining the reduction of such tax bill), which obligation shall
survive the Closing. Any
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special assessments that are a lien on the Property as of the date of
this Agreement shall be paid by Seller without proration. Any special
assessments that become a lien on the Property after the date of this
Agreement shall be paid as follows: Seller shall pay all installments
that are due and payable prior to the Closing Date and Buyer shall pay
all installments that become due and payable on or after the Closing
Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller (outside
of escrow) the portion of such current rents attributable to periods
prior to the Adjustment Date. Additionally, in the event that any
tenant, who as of the Closing is delinquent in the rental payments due
Seller, delivers to Buyer a rent check in an amount in excess of the
rent due Buyer for the month for which such check is delivered, Buyer
shall allocate such excess first to pay reasonable outside collection
costs, if any, paid to unaffiliated third parties, then to pay rents
which become due after Closing, then pay remaining funds to Seller for
any rents delinquent prior to Closing and were due as of the date such
payment was received; provided, however, in no event shall Buyer be
obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be obtained prior to
Closing, the final bills, when received, shall be prorated as of the
Adjustment Date and the Title Company shall hold in escrow an amount
equal to 125% of the reasonably anticipated amount of such billings,
based upon the most recent available
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billings for similar periods until
the Title Company shall have received notice
of payment of such bills, at which time any remaining amount being
withheld for such purpose shall be distributed to the Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) any state or local real or personal
property transfer taxes, documentary stamps, fees or other charges
relating to the transfer of the Property, (ii) the costs of the Title
Policy (other than the costs of the endorsements thereto) and (iii)
one-half of any escrow charges. Buyer shall pay in connection with this
transaction the following closing costs: (i) all recording fees, (ii)
the costs of the endorsements to the Title Policy and (iii) one-half of
any escrow charges. Each party shall pay its own attorneys' fees. All
closing costs allocable to Seller, including, without limitation, any
prorations to which Buyer may be entitled by reason of the foregoing
shall be credited against the balance of the Appraised Value to be paid
at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds received by or payable to Seller as a result of such
damage or destruction plus an amount equal to any insurance policy deductible;
or (b) by written notice of termination given to Seller not later than thirty
(30)
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days after Seller provides Buyer with written notice of such damage or
destruction, terminate this Agreement and receive any documents, instruments and
funds previously deposited or paid including the Earnest Money Deposit (together
with all interest earned thereon). If an unsubstantial portion of the Property
(i.e. 10% or less of the value) shall, prior to the Closing, be damaged or
destroyed by fire or any other cause and such damage shall not have been
repaired or reconstructed prior to the Closing in a good and workmanlike manner
to the reasonable satisfaction of Buyer, then Buyer shall be obligated to
proceed to close the transaction contemplated hereby, but shall receive from
Seller, on the Closing Date, an assignment of proceeds of the insurance payable
under Seller's insurance policy plus an amount equal to any insurance policy
deductible. Upon termination of this Agreement by Buyer pursuant to this Section
13, neither party shall thereafter be under any further liability to the other,
except as otherwise expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received pertaining
to a taking of all or a portion of the Property by way of condemnation, eminent
domain or similar procedure for a taking of the Property in connection with any
public or quasi-public use.
15. INDEMNIFICATION.
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(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify, protect, defend and hold Seller and its
representatives, successors and assigns harmless from and against any
and all claims, demands, losses, liabilities, damages, awards,
judgements, penalties, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or in connection with (i)
the Property or the ownership thereof or arising under, relating to or
concerning any of the Tenant Leases, Permits, Deposits, Personal
Property Leases, Project Contracts, Intangible Rights if such claims,
demands, losses, liabilities, damages or expenses first arise, accrue
or exist or relate to any period of time from or after the Closing
(except to the extent that such indemnification obligation would arise
directly as a result of the inaccuracy of any representation or
warranty made by Seller hereunder), or (ii) the inaccuracy or any
representation or warranty made by Buyer hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits, Deposits,
Personal Property Leases, Project Contracts or the Intangible Rights),
but only if such claims, demands, losses, liabilities, damages or
expenses first arose, accrued, existed or related to any period of time
before the Closing (except to the extent that such indemnification
obligation would arise directly as a result of the inaccuracy of any
representation made by Buyer hereunder).
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<PAGE> 34
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii) of Section 15(a) or under Section
15(b) must be asserted in writing and with specificity by the date (the
"Claim Expiration Date") which for the matters referenced in Section
4(g) of this Agreement is six (6) years after the Closing Date and with
respect to the other provisions of this Agreement is three hundred
sixty five (365) days after the Closing Date, and any and all claims
not so asserted by the applicable Claim Expiration Date shall
automatically expire and be deemed to have been forever waived,
released and of no force or effect and (B) the total amounts
recoverable by Buyer against Seller or by Seller against Buyer with
respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
16. MISCELLANEOUS.
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing. Unless otherwise expressly required or permitted
by the terms of this Agreement, any notice required or permitted to be
given hereunder by the parties shall be delivered by facsimile,
personally, by a reputable overnight delivery service or by certified
or registered mail to the
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<PAGE> 35
parties at the facsimile number or addresses set forth below (as the
case may be), unless different addressees or facsimile numbers are
given by one party to the other:
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
WITH A COPY TO:
Cox, Castle & Nicholson, LLP
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<PAGE> 36
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any reason any such commission shall become due, the
party who retained such broker shall pay any such commission and agrees
to indemnify and save the other party harmless from any
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<PAGE> 37
and all claims for any such commission and from any attorneys' fees and
litigation or other expenses relating to any such claim.
(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or otherwise, and shall take or cause to be taken
such other or further action, as either party shall reasonably request
at any time or from time to time within the one hundred twenty (120)
days immediately following the Closing Date in order to effectuate the
terms and provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
(h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be extended to the first
succeeding business which is not a federal holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to
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<PAGE> 38
the best of Seller's Knowledge", "Seller's Actual Knowledge", "Actual
Knowledge of Seller" or "the Knowledge or Seller", or any similar term
or reference, it shall mean and be limited to the actual conscious
knowledge of Seller, without any investigation or inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any other matters that
it is required to disclose in connection with its legal reporting
requirements or as otherwise required in accordance with applicable law
based upon the advise of its legal counsel, without the prior express
written consent of Seller; provided, however, that this provision shall
not apply to data that is in the public domain or is clearly not
confidential in nature. The provisions of this Section 17(j) shall
survive the Closing or any termination of this Agreement. Buyer's
undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing the provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this
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<PAGE> 39
Agreement, or any memorandum thereof, to be recorded.
(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver the Registration Rights Agreement attached
hereto and made a part hereof as EXHIBIT J.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG 20TH & CAMPBELL CORPORATION
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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<PAGE> 41
EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
LEASES AND CLOSING AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of _____________,
19___, by and between ____________________________ ("Assignor"), and ASSOCIATED
ESTATES REALTY CORPORATION, an Ohio corporation ("Assignee"),
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under the Tenant
Leases relating to the tenant deposits (including, without limitation, security
deposits) and prepaid rent.
C-2
<PAGE> 43
2. Conveyance of Other Property. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. Limitation on Assumption of Obligations. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
4. Power of Attorney. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
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<PAGE> 44
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties other
than Assignor, in the name of, at the expense of and for the
benefit of Assignee, any and all proceedings at law, in equity
or otherwise which Assignee, its successors and assigns may
deem proper with regard to the assets and properties hereby
conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the
C-4
<PAGE> 45
laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
________________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Print Name:_______________ Vice President
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
______________________________
Notary Public
C-6
<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
______________________________
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
C-7
<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
CONTRACTS AND PERSONAL PROPERTY LEASES
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
______________________________
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
______________________________
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between _________________
and AERC (the "Agreement"), that except as set forth on Attachment 1 attached
hereto and made a part hereof, the representations and warranties of AERC as
set forth in the Agreement were true and correct when made and are true and
correct as of the Closing Date. AERC acknowledges and agrees that the disclosure
of the matters set forth on Attachment 1 shall in no way affect the rights of
Seller (as defined in the Agreement) to decline to proceed to the Closing (as
defined in the Agreement) or any way modify or amend the provisions of
Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By ___________________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
Exhibit 2.08
PURCHASE AGREEMENT
MIG DESERT OASIS CORPORATION
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
----
PURCHASE AGREEMENT......................................................... 1
1. Agreement to Buy and Sell................................ 2
2. Liabilities.............................................. 3
3. Consideration and Payment/Earnest Money.................. 4
4. Representations and Warranties of Seller................. 7
5. Representations and Warranties of Buyer.................. 9
6. Seller's Covenants....................................... 11
7. Title and Possession of the Property..................... 13
8. Conditions to Closing.................................... 16
9. Deliveries............................................... 18
10. Due Diligence Period..................................... 20
11. Closing Date............................................. 23
12. Prorations and Closing Costs............................. 24
13. Fire or Other Casualty................................... 27
14. Condemnation and Eminent Domain.......................... 28
15. Indemnification.......................................... 28
16. Miscellaneous............................................ 30
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<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
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<PAGE> 4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG DESERT OASIS CORPORATION, a
California corporation, ("Seller") and ASSOCIATED ESTATES REALTY CORPORATION, an
Ohio corporation ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 320-unit apartment complex known as Desert Oasis
located in Los Angeles, California; which real property is more fully described
on EXHIBIT A attached hereto and made a part hereof, together with all
buildings, fixtures and other improvements located thereon and therein and
including all appurtenant rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
NOW, THEREFORE, for good and valuable consideration received
to the full
<PAGE> 5
satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
(f) prepaid rentals under Tenant Leases, if any, and any other
miscellaneous deposits and prepaid expenses related to the ownership or
operation of the Project
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<PAGE> 6
(collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "Desert Oasis Apartments" and
derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured,
liquidated or unliquidated, fixed or contingent, or known or unknown, and
whether arising out of occurrences prior to, at or after the Closing, except as
provided hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for the Property will be the following, payable by Buyer to Seller
as follows:
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<PAGE> 7
(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in escrow by
Buyer on or before the Closing Date (defined below) in immediately available
funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Thirteen Million
Dollars ($13,000,000).
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York Stock Exchange. No certificates for fractional Common Shares shall
be issued or delivered in
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<PAGE> 8
connection with the transaction contemplated by this Agreement. To the extent
that a fractional Common Share would otherwise have been deliverable under the
formula set out in the preceding portion of this Section 3(a), Seller shall be
entitled to receive a cash payment therefor in an amount equal to the value
(determined with reference to the closing price of Common Shares as reported on
the New York Stock Exchange Composite Tape on the last full Trading Day
immediately prior to the Closing Date) of such fractional interest. Such payment
with respect to fractional shares is merely intended to provide a mechanical
rounding off of, and is not separately bargained for, consideration.
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit One Hundred Thirty Thousand
Dollars ($130,000) (the "Earnest Money Deposit") therein. Buyer shall notify
Seller of the opening, the deposit, the number of the escrow, and the employee
or employees of the Title Company in charge of the escrow. Each party shall
execute such documentation governing the Earnest Money Escrow that reflects the
relevant provisions of this Agreement and as may otherwise be required by the
escrow agent, including reasonable standard form escrow conditions. The Earnest
Money Deposit shall be deposited in an interest bearing account as instructed by
Buyer and any interest earned shall be added to the Earnest Money Deposit. In
the event that the parties proceed to the Closing, then the Earnest Money
Deposit, together with all interest earned thereon, shall be applied towards the
Cash Payment. Except as otherwise expressly set forth in Section 11 of this
Agreement, upon the termination of this Agreement, the Earnest Money Deposit,
together with all interest earned thereon, shall be returned by the Title
Company to Buyer. Seller acknowledges that it has disclosed to Buyer any legal
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<PAGE> 9
conditions or requirements, imposed by law or contract upon its interest in such
Earnest Money Escrow by the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or relevant state law, and Seller assumes all responsibility
for ensuring the written provisions of the agreement governing such Earnest
Money Escrow complies with any such requirements as they apply to Seller;
provided, that Buyer (or its nominee) shall comply with any requirements
identified to Buyer by Seller in writing, so long as identified prior to Buyer's
establishing said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a corporation duly
organized and validly existing under the laws of California with the
power and authority to execute this Agreement and sell the Property on
the terms herein set forth. Seller, is duly authorized to so act, and
all requisite action has been taken by Seller to authorize the
execution and delivery of this Agreement, the performance by Seller of
its obligations hereunder and the consummation of the transactions
contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms.
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<PAGE> 10
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or disclosing material litigation, material zoning
or building code violations or material environmental law violations at
the Property which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined and such Merger Agreement contemplates the sale of property
pursuant to this Agreement; and (B) said Merger Agreement, if
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consummated, would cause MIGRA's shareholders to become substantial
shareholders in Buyer or Buyer's parent and its affiliated entities,
and cause certain officers and directors of MIGRA to become officers
and directors of Buyer or Buyer's parent and its affiliates. Each such
shareholder has been provided the opportunity to ask questions and
receive from MIGRA information regarding the Property, the
consideration to be paid therefore, and MIGRA's interest in the
transactions contemplated by this Agreement, to the extent such
information is in the possession of MIGRA or may be obtained without
unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby acknowledges and agrees
that the representations and warranties made in this Agreement by Seller shall
be unaffected by any such due diligence, investigation or analysis; provided,
however, that Buyer shall not be entitled to recover on any representation or
warranty set forth in this Agreement if Buyer's due diligence made Buyer
actually aware, prior to Closing, of any condition of, concerning or relating to
the Property which is contrary to those representations and warranties, but no
such knowledge shall affect the rights of Buyer to decline to close hereunder if
any of the Closing conditions under Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on the
attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of the
Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and warranties set forth in this Section 4 shall be deemed
renewed by Seller on the Closing Date as if
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made at such time and shall survive the Closing of the transactions contemplated
hereby for a period of one (1) year; provided, that the representations and
warranties contained in Subsection 4(g) shall survive the Closing of the
transactions contemplated hereby for a period of six (6) years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Buyer pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
pursuant hereto.
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to
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Section 856 through 860 of the Internal Revenue Code, for each of its
taxable years ended December 31, 1993 through December 31, 1996, and
the Buyer expects to so qualify for the fiscal year ending December 31,
1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in effect on the date
hereof.
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(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project Contract or Personal Property Lease or enter into
or renew any contract or agreement pertaining to any item of Property
unless such contract or agreement can be terminated at will without
obligation after the Closing or (B) incur any mortgage indebtedness or
other material indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
(i) On or before the Closing Date, cause to be terminated any
management contract relating to the Property which is not assumed by
Buyer consistent with the terms
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and conditions of the transaction described on EXHIBIT H attached
hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR ss. 2510.3- 101, then
Seller covenants that all discretionary actions of Seller under this
Agreement shall be conducted by a fiduciary of Seller which is
independent of MIGRA or, in the case of an entity which holds plan
assets, pursuant to directions of the investors in such entity who are
independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided that Buyer
pay the costs of all such endorsements), in the amount of the total
consideration paid by Buyer to Seller for the Property (the "Title
Policy") issued by the Title Company, as
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assurance that upon Closing, the Buyer holds and will hold good, valid
and insurable title in fee simple absolute to the Property including
all rights, privileges and easements appurtenant to the Property free
and clear of all encumbrances whatsoever, except the following
(collectively, the "Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or encumbrances upon, title to the
Property which would appear in the Title Policy. Buyer shall have until
the end of the Due Diligence Period (as defined in Section 10 of this
Agreement) to review such items and to give notice to Seller of such
objections as Buyer may have to any matters
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<PAGE> 17
set forth in the Title Commitment or survey which were not referenced
in the Approved Title Report. Seller understands and agrees that prior
to the expiration of the Due Diligence Period, Buyer may deliver to
Seller an objection letter or objection letters at any time during the
Due Diligence Period and Seller agrees that any such delivery or
deliveries shall not be construed in any way to limit or restrict
Buyer's right to deliver additional objections to Seller at any time
during Due Diligence Period. If Buyer timely (i.e during the Due
Diligence Period) objects to any special assessments, defects or
encumbrances, Seller shall have until the end of the Due Diligence
Period to have such exceptions cured, either by the removal of such
exceptions or by the procurement of title insurance endorsements or
other resolution satisfactory to Buyer providing coverage against loss
or damage as a result of such exceptions. If Seller shall not cure such
defects or encumbrances to Buyer's satisfaction by the end of the Due
Diligence Period, Buyer, at its option, may (i) terminate this
Agreement upon written notice of termination to Seller in accordance
with Section 10 of this Agreement, in which event neither party shall
thereafter have any liability to the other (except as to matters which,
under any other provision of this Agreement are expressly stated to
survive a termination of this Agreement), and all funds previously paid
or deposited by Buyer, including all accrued interest, shall be
returned to Buyer, or (ii) waive its objection to the defects or
encumbrances and proceed to the Closing in which event all such waived
defects or encumbrances shall be deemed to be Permitted Exceptions
hereunder. Notwithstanding the above, any defects in the nature of
consensual liens affirmatively granted by Seller or non-consensual
monetary liens which do not exceed Twenty Five Thousand Dollars
($25,000) in the aggregate that can be released by payment of the
underlying obligation shall be removed, bonded or title insured over by
Seller and if
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<PAGE> 18
not so removed, bonded or title insured over by the Closing then the
Appraised Value shall be reduced by an amount sufficient to satisfy
such obligations. Buyer shall conclusively be deemed to have waived all
objections to any title or survey defect, encumbrance or exception
reflected or referenced in the Title Commitment or survey as to which
Buyer fails to deliver to Seller a written objection by the end of the
Due Diligence Period, and all such matters shall thereafter be deemed
to be Permitted Exceptions for purposes of this Agreement.
8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Buyer through written notice to Seller, Buyer's
obligations under this Agreement are expressly conditioned upon the
satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with all covenants as set forth in Section 6 herein,
and shall have otherwise performed all of its obligations
hereunder, in all material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence Period (as
hereafter defined) and the financial condition of the Property
shall not have changed in any material and adverse respect
from the condition reflected in the
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then most current financial statements and other relevant
financial materials delivered by Seller to Buyer during the
Due Diligence Period (as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as defined in the Merger Agreement
and the transactions contemplated by the Portfolio Purchase
Agreements shall have closed simultaneously with, or
immediately preceding or immediately following the Closing of
this transaction; and
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(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration Rights
Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and unless
expressly waived by Seller through written notice to Buyer, Seller's
obligations under this Agreement are expressly conditioned upon the
occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
(iii) the closing of the Merger (as defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
(c) Since the Portfolio Properties constitute substantially
all of the assets of MIG Residential REIT, Inc., a Maryland corporation
("MIG REIT"), through MIG REIT's
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ownership of all the shares of Seller and the Other Owners, MIG REIT's
Board of Directors has a fiduciary obligation to the holders of MIG
REIT stock to maximize the current and long term value of their shares
in MIG REIT. Accordingly, it is agreed that, notwithstanding anything
in this Agreement to the contrary, Seller shall have the right (the
"Fiduciary Out") to terminate this Agreement and cancel the Earnest
Money Escrow on the following terms and conditions:
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's sending the Fiduciary
Out Notice to Buyer shall constitute an election by Seller to
terminate this Agreement and cancel the Earnest Money Escrow,
subject to subsection (v) below.
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(v) If a Fiduciary Out Notice is sent to Buyer, Buyer
shall have the right to elect, by giving Seller written notice
thereof within ten (10) business days after such Fiduciary Out
Notice is sent to Buyer, to either: (A) do nothing, or (B)
propose terms and conditions for Buyer to purchase the
Property which are at least as advantageous to Seller as the
terms and conditions set forth in such Fiduciary Out Notice,
which proposed terms and conditions shall include a total
purchase price for all the Portfolio Properties at least equal
to the total purchase price proposed by the Third Party Buyer
named in such Fiduciary Out Notices, plus $250,000. If Buyer
elects to do nothing, Seller shall have no obligation to sell
the Property to Buyer, but Buyer shall have the right to be
paid the Break-Up Fee (as defined below) on the same
contingent basis specified in subsection (vii)(B) below. If
Buyer proposes such new terms and conditions which are
accepted by Seller, in Seller's role and absolute discretion,
the Break-Up Fee shall not be payable to Buyer and the parties
shall proceed with and complete the purchase and sale of the
Property in accordance therewith. If Buyer elects to do
nothing, or if Seller does not accept such new terms and
conditions proposed by Buyer, Seller shall give written notice
to Buyer and the Title Company that this Agreement is
terminated and the Earnest Money Escrow is canceled (the
"Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the Appraised Value and
shall be paid to Buyer simultaneously with the delivery of the
Termination Notice, by wire transfer of immediately available
federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE REMEDY AGAINST SELLER FOR
TERMINATING THIS AGREEMENT UNDER THIS SECTION 8(c).
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9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed,
in customary form acceptable to Buyer (the "Deed"), conveying good and
insurable fee simple title to the Project to Buyer, free and clear of
all mortgages, pledges, liens, security interests, encumbrances and
restrictions, except the Permitted Exceptions. The Permitted Exceptions
shall be specifically, and not categorically, set forth in the Deed as
exceptions to title.
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the Board of
Directors of Seller authorizing the execution and delivery of
this Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate Regarding Projects and
Personal Property Leases substantially in the form of EXHIBIT
D attached hereto and made a part hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the Property is located, originals of
all certificates of occupancy (or the jurisdictional
equivalent of a certificate of occupancy) for all apartment
units on the Property, if available, and if not available,
true and correct copies thereof;
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(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
(x) A certificate of Seller in the form of EXHIBIT F
attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
(i) Settlement statements agreed to by Seller and
executed by Buyer;
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(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and substance
acceptable to Buyer and Seller, pursuant to which Buyer
accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(v) Duly executed resolutions adopted by the Board of
Directors of Buyer authorizing the execution and delivery of
this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees that
prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on EXHIBIT K attached
hereto and made a part hereof (the "Approved Due Diligence Materials") and that
Buyer has approved the Approved Due Diligence Materials and all information
contained therein. For a period of thirty (30) days following execution of this
Agreement (the "Due Diligence Period"), Buyer shall be permitted to conduct its
own limited inspections of the Property for the sole purposes of updating the
Approved Due Diligence Materials, with respect to: (i) obtaining a so-called
"Phase I Environmental Assessment" of the Property, (ii) obtaining structural
and engineering assessments of the Property, (iii) obtaining the Title
Commitment referenced in Section 7 hereof and (iv) updating or upgrading the
survey referenced on EXHIBIT K (the "Updated Due
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<PAGE> 26
Diligence"). Seller shall grant reasonable access to Buyer and its
representatives to the Property for the purpose of conducting the Updated Due
Diligence. Seller shall have the right to coordinate and accompany Buyer on any
of such inspections. Any and all inspections, examinations, analyses and audits
deemed necessary by Buyer shall be performed at Buyer's expense and shall not
physically damage the Property. Buyer shall promptly and completely repair and
restore any and all damage to the Property that may be caused by, or may occur
in connection with or as a result of, any inspection, investigation, audit, test
or visit to the Property by Buyer, its employees, and authorized agents and
consultants. Buyer shall indemnify, protect, defend and hold Seller and its
agents, employees and representatives harmless from and against any and all
loss, cost, claim, liability, damage or expense (including, without limitation,
attorneys' fees and expenses) arising out of physical damages or injuries to
persons or property caused by Buyer's inspections, investigations, audits, tests
or visits to the Property. Buyer's restoration and indemnification obligations
set forth in this Section shall survive the Closing or termination of this
Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due Diligence discloses any information
which is not contained in the Approved Due Diligence Materials and which could
reasonably be expected to have a material adverse impact on the value of the
Property ("A Material Adverse Condition"), then, Buyer, in Buyer's sole
discretion, may terminate this Agreement (by giving notice of such termination
to Seller, including Buyer's specific reasons therefor). Buyer shall notify
Seller in writing either during or at the end of the Due Diligence Period with
respect to whether or not Buyer has discovered any such Material Adverse
Condition. If Buyer's written notice to Seller indicates that the Updated Due
Diligence has not disclosed a Material Adverse Condition, then the parties
shall, subject to the satisfaction of the
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conditions set forth herein, proceed to the Closing. If Buyer's written
notice to Seller indicates that the Updated Due Diligence has disclosed a
Material Adverse Condition, then this Agreement shall terminate and the Earnest
Money Deposit (including all interest earned thereon) shall be returned to
Buyer. Upon termination of this Agreement by Buyer pursuant to this Section 10,
neither party shall thereafter be under any further liability to the other,
except as to matters which this Agreement expressly states are to survive a
termination of this Agreement. Notwithstanding anything to the contrary
contained in this Section 10, if Buyer does not notify Seller by the end of the
Due Diligence Period with respect to whether or not the Updated Due Diligence
has disclosed a Material Adverse Condition, then Buyer shall be deemed to have
notified Seller that the Updated Due Diligence has not disclosed any Material
Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established through written notice given by Buyer to Seller and shall not be
later than ten (10) days after the end of the Due Diligence Period (the
"Scheduled Closing Date"). Notwithstanding the foregoing, in the event that
Buyer determines that the applicable rules of the New York Stock Exchange
require its shareholders approval of the transactions contemplated by the Merger
Agreement or this Agreement, then Buyer shall have the right at any time up
until the Scheduled Closing Date, upon written notice to Seller, to extend the
Scheduled Closing Date in order to permit Buyer to obtain such shareholder
approval, to a date which is no later than (i) ninety (90) days after the date
of this Agreement, if the Securities and Exchange Commission ("SEC") informs
Buyer that it will not
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provide comments to its proxy statement or (ii) one hundred thirty five days
(135) after the date of this Agreement, if the SEC provides comments to its
proxy statement. After the expiration of the Due Diligence Period, Buyer shall
not have the right to terminate this Agreement except pursuant to the provisions
of Sections 8(a), 13 or 14 of this Agreement. IF BUYER SHALL DEFAULT IN ITS
OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER SHALL RECEIVE THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) AS LIQUIDATED DAMAGES AND
NEITHER PARTY SHALL THEREAFTER BE UNDER ANY FURTHER LIABILITY TO THE OTHER,
EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT WITH RESPECT TO THE
PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT. THE PARTIES
HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY BUYER,
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS
SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE
EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise mutually agreed to by the parties (the "Adjustment
Date"), by the Title Company based on information provided by the parties, as
follows:
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(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being greater than those
shown on the tax duplicate available at Closing or because of any
additions or corrections to the tax duplicate assessed by reason of
Buyer's acquisition of the Property, then Seller shall promptly pay all
such increases allocable to the period prior to the Closing and Seller
shall protect, indemnify, defend, and hold Buyer harmless from and
against all such real estate tax and assessment increases, which
obligations on the part of the Seller shall survive the Closing. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later decreased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being less than those
shown on the tax duplicate available at Closing or because of any
corrections to the tax duplicate assessed by reason of Buyer's
acquisition of the Property or because of any post-Closing reduction
in, or refund or rebate of, any taxes relating wholly or in part to a
period before the Closing, then Buyer shall promptly pay to Seller the
savings allocable to the period prior to the Closing (less any costs
incurred by Buyer to any unaffiliated third parties in connection with
obtaining the reduction of such tax bill), which obligation shall
survive the Closing. Any special assessments that are a lien on the
Property as of the date of this Agreement shall be
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paid by Seller without proration. Any special assessments that become a
lien on the Property after the date of this Agreement shall be paid as
follows: Seller shall pay all installments that are due and payable
prior to the Closing Date and Buyer shall pay all installments that
become due and payable on or after the Closing Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller (outside
of escrow) the portion of such current rents attributable to periods
prior to the Adjustment Date. Additionally, in the event that any
tenant, who as of the Closing is delinquent in the rental payments due
Seller, delivers to Buyer a rent check in an amount in excess of the
rent due Buyer for the month for which such check is delivered, Buyer
shall allocate such excess first to pay reasonable outside collection
costs, if any, paid to unaffiliated third parties, then to pay rents
which become due after Closing, then pay remaining funds to Seller for
any rents delinquent prior to Closing and were due as of the date such
payment was received; provided, however, in no event shall Buyer be
obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be obtained prior to
Closing, the final bills, when received, shall be prorated as of the
Adjustment Date and the Title Company shall hold in escrow an amount
equal to 125% of the reasonably anticipated amount of such billings,
based upon the most recent available billings for similar periods until
the Title Company shall have received notice of payment of
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such bills, at which time any remaining amount being withheld for such
purpose shall be distributed to the Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) any state or local real or personal
property transfer taxes, documentary stamps, fees or other charges
relating to the transfer of the Property, (ii) the costs of the Title
Policy (other than the costs of the endorsements thereto) and (iii)
one-half of any escrow charges. Buyer shall pay in connection with this
transaction the following closing costs: (i) all recording fees, (ii)
the costs of the endorsements to the Title Policy and (iii) one-half of
any escrow charges. Each party shall pay its own attorneys' fees. All
closing costs allocable to Seller, including, without limitation, any
prorations to which Buyer may be entitled by reason of the foregoing
shall be credited against the balance of the Appraised Value to be paid
at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds received by or payable to Seller as a result of such
damage or destruction plus an amount equal to any insurance policy deductible;
or (b) by written notice of termination given to Seller not later than thirty
(30) days after Seller provides Buyer with written notice of such damage or
destruction, terminate this
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Agreement and receive any documents, instruments and funds previously deposited
or paid including the Earnest Money Deposit (together with all interest earned
thereon). If an unsubstantial portion of the Property (i.e. 10% or less of the
value) shall, prior to the Closing, be damaged or destroyed by fire or any other
cause and such damage shall not have been repaired or reconstructed prior to the
Closing in a good and workmanlike manner to the reasonable satisfaction of
Buyer, then Buyer shall be obligated to proceed to close the transaction
contemplated hereby, but shall receive from Seller, on the Closing Date, an
assignment of proceeds of the insurance payable under Seller's insurance policy
plus an amount equal to any insurance policy deductible. Upon termination of
this Agreement by Buyer pursuant to this Section 13, neither party shall
thereafter be under any further liability to the other, except as otherwise
expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received pertaining
to a taking of all or a portion of the Property by way of condemnation, eminent
domain or similar procedure for a taking of the Property in connection with any
public or quasi-public use.
15. INDEMNIFICATION.
(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify,
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protect, defend and hold Seller and its representatives, successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, costs and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the Property or the ownership thereof or arising
under, relating to or concerning any of the Tenant Leases, Permits,
Deposits, Personal Property Leases, Project Contracts, Intangible
Rights if such claims, demands, losses, liabilities, damages or
expenses first arise, accrue or exist or relate to any period of time
from or after the Closing (except to the extent that such
indemnification obligation would arise directly as a result of the
inaccuracy of any representation or warranty made by Seller hereunder),
or (ii) the inaccuracy or any representation or warranty made by Buyer
hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits, Deposits,
Personal Property Leases, Project Contracts or the Intangible Rights),
but only if such claims, demands, losses, liabilities, damages or
expenses first arose, accrued, existed or related to any period of time
before the Closing (except to the extent that such indemnification
obligation would arise directly as a result of the inaccuracy of any
representation made by Buyer hereunder).
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or
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<PAGE> 34
elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii) of Section 15(a) or under Section
15(b) must be asserted in writing and with specificity by the date (the
"Claim Expiration Date") which for the matters referenced in Section
4(g) of this Agreement is six (6) years after the Closing Date and with
respect to the other provisions of this Agreement is three hundred
sixty five (365) days after the Closing Date, and any and all claims
not so asserted by the applicable Claim Expiration Date shall
automatically expire and be deemed to have been forever waived,
released and of no force or effect and (B) the total amounts
recoverable by Buyer against Seller or by Seller against Buyer with
respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
16. MISCELLANEOUS.
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing. Unless otherwise expressly required or permitted
by the terms of this Agreement, any notice required or permitted to be
given hereunder by the parties shall be delivered by facsimile,
personally, by a reputable overnight delivery service or by certified
or registered mail to the parties at the facsimile number or addresses
set forth below (as the case may be), unless
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different addressees or facsimile numbers are given by one party to the
other:
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
WITH A COPY TO:
Cox, Castle & Nicholson, LLP
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
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<PAGE> 36
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any reason any such commission shall become due, the
party who retained such broker shall pay any such commission and agrees
to indemnify and save the other party harmless from any and all claims
for any such commission and from any attorneys' fees and litigation or
other
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expenses relating to any such claim.
(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or otherwise, and shall take or cause to be taken
such other or further action, as either party shall reasonably request
at any time or from time to time within the one hundred twenty (120)
days immediately following the Closing Date in order to effectuate the
terms and provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
\ (h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be extended to the first
succeeding business which is not a federal holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to the best of Seller's Knowledge", "Seller's Actual
Knowledge", "Actual Knowledge of
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Seller" or "the Knowledge or Seller", or any similar term or reference,
it shall mean and be limited to the actual conscious knowledge of
Seller, without any investigation or inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any other matters that
it is required to disclose in connection with its legal reporting
requirements or as otherwise required in accordance with applicable law
based upon the advise of its legal counsel, without the prior express
written consent of Seller; provided, however, that this provision shall
not apply to data that is in the public domain or is clearly not
confidential in nature. The provisions of this Section 17(j) shall
survive the Closing or any termination of this Agreement. Buyer's
undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing the provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this Agreement, or any memorandum thereof, to be
recorded.
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(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver the Registration Rights Agreement attached
hereto and made a part hereof as EXHIBIT J.
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IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG DESERT OASIS CORPORATION
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
LEASES AND CLOSING AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of
________________, 19___, by and between _____________________________
("Assignor"), and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Assignee"),
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under the
Tenant Leases relating to the tenant deposits (including, without limitation,
security deposits) and prepaid rent.
C-2
<PAGE> 43
2. Conveyance of Other Property. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. Limitation on Assumption of Obligations. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
4. Power of Attorney. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
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<PAGE> 44
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties other
than Assignor, in the name of, at the expense of and for the
benefit of Assignee, any and all proceedings at law, in equity
or otherwise which Assignee, its successors and assigns may
deem proper with regard to the assets and properties hereby
conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the
C-4
<PAGE> 45
laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
________________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Print Name:_______________ Vice President
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
______________________________
Notary Public
C-6
<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
______________________________
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
C-7
<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
CONTRACTS AND PERSONAL PROPERTY LEASES
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
______________________________
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
______________________________
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between _________________
and AERC (the "Agreement"), that except as set forth on Attachment 1 attached
hereto and made a part hereof, the representations and warranties of AERC as
set forth in the Agreement were true and correct when made and are true and
correct as of the Closing Date. AERC acknowledges and agrees that the disclosure
of the matters set forth on Attachment 1 shall in no way affect the rights of
Seller (as defined in the Agreement) to decline to proceed to the Closing (as
defined in the Agreement) or any way modify or amend the provisions of
Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By ___________________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
EXHIBIT 2.09
PURCHASE AGREEMENT
MIG HAMPTON CORPORATION
AND
ASSOCIATED ESTATES REALTY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
Page
----
PURCHASE AGREEMENT.............................................. 1
1. Agreement to Buy and Sell........................ 2
2. Liabilities...................................... 3
3. Consideration and Payment/Earnest Money.......... 4
4. Representations and Warranties of Seller......... 7
5. Representations and Warranties of Buyer.......... 9
6. Seller's Covenants............................... 11
7. Title and Possession of the Property............. 13
8. Conditions to Closing............................ 16
9. Deliveries....................................... 18
10. Due Diligence Period............................. 20
11. Closing Date..................................... 23
12. Prorations and Closing Costs..................... 24
13. Fire or Other Casualty........................... 27
14. Condemnation and Eminent Domain.................. 27
15. Indemnification.................................. 28
16. Miscellaneous.................................... 30
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<PAGE> 3
EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT A-1 - PORTFOLIO PROPERTIES
EXHIBIT B - LIST OF PERSONAL PROPERTY
EXHIBIT C - ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING
AGREEMENT
EXHIBIT D - CERTIFICATE OF SELLER REGARDING PROJECT CONTRACTS
AND PERSONAL PROPERTY LEASES
EXHIBIT E - LETTER REGARDING BOOKS AND RECORDS
EXHIBIT F - SELLER'S CERTIFICATE
EXHIBIT G - BUYER'S CERTIFICATE
EXHIBIT H - DESCRIPTION OF TRANSACTION
EXHIBIT I - INVESTMENT REPRESENTATION LETTER
EXHIBIT J - REGISTRATION RIGHTS AGREEMENT
EXHIBIT K - APPROVED DUE DILIGENCE MATERIALS
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<PAGE> 4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") made as of the
_____ day of January, 1998, by and between MIG HAMPTON CORPORATION, a Maryland
corporation, ("Seller") and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio
corporation ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller is the fee owner of that certain parcel of
real property on which a 352-unit apartment complex known as Hampton Point
located in Baltimore, Maryland; which real property is more fully described on
EXHIBIT A attached hereto and made a part hereof, together with all buildings,
fixtures and other improvements located thereon and therein and including all
appurtenant rights and easements relating thereto (the "Project");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of Seller's right, title and interest in and to
the Project and the other property of Seller described herein, for the purchase
price, on the terms and subject to the conditions set forth herein;
WHEREAS, certain other persons, directly or indirectly
affiliated with Seller (collectively, "Other Owners") are the respective owners
of the apartment projects set forth on EXHIBIT A-1 attached hereto and made a
part hereof, which properties are the subject of purchase agreements of even
date herewith between Buyer and the Other Owners, respectively (the "Portfolio
Purchase Agreements").
NOW, THEREFORE, for good and valuable consideration received
to the full
<PAGE> 5
satisfaction of each of them, the parties agree as follows:
1. AGREEMENT TO BUY AND SELL. Upon the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey to Buyer at
the Closing (as hereinafter defined), and Buyer agrees to buy and take from
Seller at the Closing, all of Seller's right, title, estate and interest in and
to the following (hereinafter collectively referred to as the "Property"):
(a) the Project and all rights, privileges, easements and
appurtenances appertaining thereto, including, without limitation, all
mineral and water rights, rights of way, easements, licenses or other
arrangements with respect to properties adjacent thereto;
(b) all appliances, fixtures, plumbing, incinerators, lighting
equipment, radiators, furnaces, boilers, hot water heaters, water
systems and air-conditioning equipment owned by Seller and located on
or in the Project or attached thereto;
(c) all furnishings, furniture, equipment, supplies and other
personal property owned by Seller, used or usable in connection with
the Project and located on or in the Project, including, without
limitation, the personal property listed on EXHIBIT B attached hereto
and made a part hereof (the "Personal Property");
(d) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other
governmental agency or body, if any, issued to or held by Seller and
related to the ownership or operation of the Project, to the extent
transferable (the "Permits");
(e) all leases, written or oral, and tenancies with tenants
with respect to all or any portion of the Project (the "Tenant
Leases");
(f) prepaid rentals under Tenant Leases, if any, and any
other miscellaneous deposits and prepaid expenses related to the
ownership or operation of the Project
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<PAGE> 6
(collectively, the "Deposits");
(g) all leases of equipment (if any), vehicles and other
tangible personal property used by Seller in connection with the
ownership and operation of the Project, to the extent such leases are
transferable (the "Personal Property Leases");
(h) all maintenance and service contracts, supply contracts
(to the extent Buyer elects to assume them) and other agreements,
contracts and contract rights relating to the ownership or operation of
the Property, or any part thereof to the extent such contracts,
agreements and rights are transferable (the "Project Contracts");
(i) all guaranties, warranties and other intangible rights
pertaining to the Property, or any part thereof including, without
limitation, all guaranties and warranties relating to the construction
of the Project including all rights under architects and construction
contracts (the "Intangible Rights");
(j) all books of account, customer lists, files, papers and
records relating to the Project;
(k) the right to use the name "Hampton Point" or "Hampton
Point Apartments" and derivations thereof.
2. LIABILITIES. Buyer shall not, by execution and delivery of
this Agreement, its purchase of the Property or otherwise, be deemed to have
assumed or otherwise become responsible for any liability or obligation of any
nature of Seller, whether relating to Seller's business or any of Seller's
assets, operations, businesses or activities, matured or unmatured,
liquidated or unliquidated, fixed or contingent, or known or unknown, and
whether arising out of occurrences prior to, at or after the Closing, except as
provided hereinbelow.
3. CONSIDERATION AND PAYMENT/EARNEST MONEY. The total
consideration for
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<PAGE> 7
the Property will be the following, payable by Buyer to Seller
as follows:
(a) Buyer shall deliver to Seller or Seller's designee a
number of common shares, without par value, of Buyer ("Common Shares") issued to
Seller (or its designee) computed as follows:
(i) if the Closing Share Price is greater than
or equal to 106% of the Average Share Price,
the number of Common Shares to be issued and
delivered shall be equal to ninety nine
percent (99%) of the Appraised Value of the
Property multiplied by 1.06 and divided by
the Closing Share Price;
(ii) if the Closing Share Price is less than or
equal to the Average Share Price, the number
of Common Shares to be issued and delivered
shall be equal to ninety nine percent (99%)
of the Appraised Value of the Property
divided by the Closing Share Price; or
(iii) if the Closing Share Price is
greater than the Average Share Price
but less than 106% of the Average
Share Price, the number of Common
Shares to be issued shall be equal
to ninety nine percent (99%) of the
Appraised Value of the Property
divided by the Average Share Price.
(b) One percent (1%) of the Appraised Value deposited in escrow by
Buyer on or before the Closing Date (defined below) in immediately available
funds (the "Cash Payment").
For purposes of this Agreement:
(A) Appraised Value shall mean an amount equal to Twenty Million Nine
Hundred Thousand Dollars ($20,900,000).
(B) Average Share Price shall mean the average of the closing prices on
the New York Stock Exchange of the Common Shares for the twenty (20) Trading
Days immediately preceding the date hereof.
(C) Closing Share Price shall mean the average closing prices on the
New York Stock Exchange of the Common Shares for the twenty (20) Trading Days
immediately preceding the Closing Date.
(D) Trading Days shall mean each day that Common Shares are traded on
the New York
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<PAGE> 8
Stock Exchange. No certificates for fractional Common Shares shall
be issued or delivered in connection with the transaction contemplated by this
Agreement. To the extent that a fractional Common Share would otherwise have
been deliverable under the formula set out in the preceding portion of this
Section 3(a), Seller shall be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the closing price of
Common Shares as reported on the New York Stock Exchange Composite Tape on the
last full Trading Day immediately prior to the Closing Date) of such fractional
interest. Such payment with respect to fractional shares is merely intended to
provide a mechanical rounding off of, and is not separately bargained for,
consideration.
Within five (5) business days following the execution of this
Agreement, Buyer shall open an escrow account (the "Earnest Money Escrow") with
First American Title Insurance Company, Troy, Michigan Office, Commercial
Advantage Division (the "Title Company") and deposit Two Hundred Nine Thousand
Dollars ($209,000) (the "Earnest Money Deposit") therein. Buyer shall notify
Seller of the opening, the deposit, the number of the escrow, and the employee
or employees of the Title Company in charge of the escrow. Each party shall
execute such documentation governing the Earnest Money Escrow that reflects the
relevant provisions of this Agreement and as may otherwise be required by the
escrow agent, including reasonable standard form escrow conditions. The Earnest
Money Deposit shall be deposited in an interest bearing account as instructed by
Buyer and any interest earned shall be added to the Earnest Money Deposit. In
the event that the parties proceed to the Closing, then the Earnest Money
Deposit, together with all interest earned thereon, shall be applied towards the
Cash Payment. Except as otherwise expressly set forth in Section 11 of this
Agreement, upon the termination of this Agreement, the Earnest Money Deposit,
together with all interest earned thereon, shall be returned
-5-
<PAGE> 9
by the Title Company to Buyer. Seller acknowledges that it has disclosed to
Buyer any legal conditions or requirements, imposed by law or contract upon its
interest in such Earnest Money Escrow by the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or relevant state law, and Seller assumes all
responsibility for ensuring the written provisions of the agreement governing
such Earnest Money Escrow complies with any such requirements as they apply to
Seller; provided, that Buyer (or its nominee) shall comply with any requirements
identified to Buyer by Seller in writing, so long as identified prior to Buyer's
establishing said Earnest Money Escrow.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that:
(a) Seller is, and will be at the Closing, a corporation duly
organized and validly existing under the laws of the State of Maryland
with the power and authority to execute this Agreement and sell the
Property on the terms herein set forth. Seller, is duly authorized to
so act, and all requisite action has been taken by Seller to authorize
the execution and delivery of this Agreement, the performance by Seller
of its obligations hereunder and the consummation of the transactions
contemplated hereby.
(b) Seller has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Seller pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Seller,
enforceable
-6-
<PAGE> 10
against Seller in accordance with their respective terms.
(c) To Seller's Knowledge, there is no litigation, proceeding
or action pending against Seller or the Property which questions the
validity of this Agreement or any action taken or to be taken by Seller
pursuant hereto.
(d) To Seller's Knowledge, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
will, in any material respect, constitute a violation of or be in
conflict with or constitute a default under any term or provision of
any material agreement to which Seller is a party, subject to the
obtaining of any required consents or authorizations of, or notices to
third parties from whom such consents or authorizations will be
obtained or to whom notices will be given prior to Closing.
(e) Seller has no Actual Knowledge of any material unresolved
litigation adversely affecting the Property or any notice, document or
writing threatening or disclosing material litigation, material zoning
or building code violations or material environmental law violations at
the Property which have not been disclosed to Buyer.
(f) To Seller's Knowledge: there has been no material adverse
financial change from that shown in Seller's most recent financial
statements delivered or made available to Buyer by Seller pursuant to
Section 10 hereof.
(g) The decision to enter into this Agreement has been
approved by the Board of Directors of Seller and by a vote of the
shareholders in accordance with applicable state law. Each such
shareholder has been advised that (A) as a result of MIGRA's entering
into the Merger Agreement (as defined in Section 11 hereof), the
business operations of MIGRA and Buyer or Buyer's parent will be
combined and
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<PAGE> 11
such Merger Agreement contemplates the sale of property pursuant to
this Agreement; and (B) said Merger Agreement, if consummated, would
cause MIGRA's shareholders to become substantial shareholders in Buyer
or Buyer's parent and its affiliated entities, and cause certain
officers and directors of MIGRA to become officers and directors of
Buyer or Buyer's parent and its affiliates. Each such shareholder has
been provided the opportunity to ask questions and receive from MIGRA
information regarding the Property, the consideration to be paid
therefore, and MIGRA's interest in the transactions contemplated by
this Agreement, to the extent such information is in the possession of
MIGRA or may be obtained without unreasonable expense.
Notwithstanding any due diligence, investigation or analysis
performed by Buyer, the representations and warranties made in this Agreement by
Seller shall have the same force and effect as if Buyer undertook no due
diligence, investigation or analysis and Seller hereby acknowledges and agrees
that the representations and warranties made in this Agreement by Seller shall
be unaffected by any such due diligence, investigation or analysis; provided,
however, that Buyer shall not be entitled to recover on any representation or
warranty set forth in this Agreement if Buyer's due diligence made Buyer
actually aware, prior to Closing, of any condition of, concerning or relating to
the Property which is contrary to those representations and warranties, but no
such knowledge shall affect the rights of Buyer to decline to close hereunder if
any of the Closing conditions under Section 8(a) hereof are not satisfied.
Except to the extent of any matters disclosed by Seller on
the attachment to EXHIBIT F hereof that will be delivered by Seller to Buyer at
Closing, and subject to the provisions of the preceding paragraph (without
affecting the rights of Buyer to decline to close hereunder if any of
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<PAGE> 12
the Closing conditions under Section 8(a) hereof are not satisfied), all of the
representations and warranties set forth in this Section 4 shall be deemed
renewed by Seller on the Closing Date as if made at such time and shall survive
the Closing of the transactions contemplated hereby for a period of one (1)
year; provided, that the representations and warranties contained in Subsection
4(g) shall survive the Closing of the transactions contemplated hereby for a
period of six (6) years.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that:
(a) Buyer has all necessary power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby, without the consent or
authorization of, or notice to, any third party, except those third
parties to whom such consents or authorizations have been or will be
obtained, or to whom notices have been or will be given, prior to the
Closing. This Agreement constitutes, and the other documents and
instruments to be delivered by Buyer pursuant hereto when delivered
will constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
(b) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will, in any
material respect, constitute a violation of or be in conflict with or
constitute a default under any term or provision of any agreement,
instrument or lease to which Buyer is a party.
(c) To the best of Buyer's knowledge, there is no litigation,
proceeding or action pending or threatened against or relating to Buyer
which might materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or which questions the
validity of this Agreement or any action taken or to be taken by Buyer
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<PAGE> 13
pursuant hereto.
(d) Buyer has qualified to be taxed as a real estate
investment trust pursuant to Section 856 through 860 of the Internal
Revenue Code, for each of its taxable years ended December 31, 1993
through December 31, 1996, and the Buyer expects to so qualify for the
fiscal year ending December 31, 1997.
All of the representations and warranties set forth in this
Section 5 shall be deemed renewed by Buyer on the Closing Date as if made at
such time and shall survive the closing of the transactions contemplated hereby
for a period of one (1) year.
6. SELLER'S COVENANTS. On and after the date hereof through
the Closing, except as otherwise consented to or approved by Buyer in writing or
required by this Agreement, Seller shall:
(a) Operate the Property and conduct or cause to be conducted
its business in the regular and ordinary course, including the renewal
and extension of Tenant Leases, consistent with past practices, and
exercise reasonable efforts to preserve intact the operation of the
Property.
(b) Maintain and keep the Property in good condition and
repair and in substantially the same condition as on the date hereof,
with the exception of ordinary wear and tear and damage as a result of
a casualty.
(c) Except in the ordinary course of business and with respect
to items of personal property that are no longer useful and have been
replaced with items of equivalent value, not remove, sell, mortgage,
pledge or otherwise encumber or dispose of any item of property,
without the prior written consent of Buyer, which consent will not
unreasonably withheld, delayed or conditioned.
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<PAGE> 14
(d) Continue to maintain all insurance on the Property
covering the risks and in the amounts of coverage in effect on the date
hereof.
(e) Duly observe and perform all material terms, conditions
and requirements of the Tenant Leases, the Project Contracts, the
Personal Property Leases, not knowingly do any act or omit to do any
act, which will, upon the occurrence thereof or with the passage of
time, cause a material breach or material default by Seller under any
Tenant Lease, Project Contract or Personal Property Lease and continue
to seek judicial and other appropriate relief with respect to any
tenant breaches under the Tenant Leases, in accordance with Seller's
past practices.
(f) Not, without the Buyer's prior written consent which shall
not be unreasonably withheld, delayed or conditioned (A) renew, amend
or extend any Project Contract or Personal Property Lease or enter into
or renew any contract or agreement pertaining to any item of Property
unless such contract or agreement can be terminated
at will without obligation after the Closing or (B) incur any mortgage
indebtedness or other material indebtedness relating to the Property.
(g) Not take, agree to take or affirmatively consent to the
taking of any action in the conduct of the business of Seller, or
otherwise, which would be contrary to or in breach of any of the terms
or provisions of this Agreement or which would cause any representation
of Seller contained herein to be or become materially untrue.
(h) Use its reasonable efforts (but without expending any
substantial funds or exposing itself to any liability or obligation or
risk) to obtain all necessary consents and authorizations of third
parties to the performance by Seller of its obligations hereunder and
the consummation of the transactions contemplated hereby.
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<PAGE> 15
(i) On or before the Closing Date, cause to be terminated any
management contract relating to the Property which is not assumed by
Buyer consistent with the terms and conditions of the transaction
described on EXHIBIT H attached hereto and made a part hereof.
(j) On or before the Closing Date, execute and deliver (or
cause its designees to execute and deliver) (i) the Investment
Representation Letter attached hereto and made a part hereof as EXHIBIT
I and (ii) the Registration Rights Agreement attached hereto and made a
part hereof as EXHIBIT J.
(k) If Seller is an "employee benefit plan" within the meaning
of Section (3)(3) of ERISA, whether or not Seller qualifies as a
"governmental plan" within Section 3(32) of ERISA, or an entity which
holds plan assets within the meaning of 29 CFR ss. 2510.3- 101, then
Seller covenants that all discretionary actions of Seller under this
Agreement shall be conducted by a fiduciary of Seller which is
independent of MIGRA or, in the case of an entity which holds plan
assets, pursuant to directions of the investors in such entity who are
independent of MIGRA.
7. TITLE AND POSSESSION OF THE PROPERTY.
(a) It shall be a condition to Buyer's obligation to close
hereunder that the Title Company deliver at Closing to Buyer an ALTA
owner's policy of title insurance, 1970 Form B, (rev. 10-17-70 and
10-17-84), or other rated form acceptable to Buyer (acting reasonably),
with the standard general exceptions deleted (or, with Buyer's
reasonable approval, insured over), subject to rights under the Tenant
Leases, and with such endorsements as Buyer may reasonably require,
including, without limitation, owner's comprehensive, survey, access,
tax parcel, utilities and contiguity endorsements (provided
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<PAGE> 16
that Buyer pay the costs of all such endorsements), in the amount of
the total consideration paid by Buyer to Seller for the Property (the
"Title Policy") issued by the Title Company, as assurance that upon
Closing, the Buyer holds and will hold good, valid and insurable title
in fee simple absolute to the Property including all rights, privileges
and easements appurtenant to the Property free and clear of all
encumbrances whatsoever, except the following (collectively, the
"Permitted Exceptions"):
(i) zoning ordinances and regulations; provided the
same do not interfere with the use of the Property as an
apartment complex;
(ii) general real estate taxes, which are a lien but
are not yet past due or delinquent at the Closing Date;
(iii) rights of tenants under Tenant Leases; and
(iv) such easements, covenants, conditions,
reservations and restrictions of record disclosed in Schedule
B of Seller's existing Title Policy (the "Approved Title
Report") and other matters disclosed to and approved by Buyer,
in writing, unless otherwise waived or deemed waived by Buyer
as hereinafter provided.
(b) Seller represents, warrants and covenants to Buyer that
upon the Closing Date Buyer will have complete possession of the
Property, subject only to the interests of the tenants under the Tenant
Leases and the other Permitted Exceptions.
(c) Buyer shall obtain, as promptly as reasonably practicable
after the execution of this Agreement a current commitment issued by
the Title Company to issue the Title Policy (the "Title Commitment")
which updates the Approved Title Report with copies of all instruments
referred to as exceptions or conditions in the Title Commitment that
were not set forth in the Approved Title Report, setting forth all real
estate taxes and special assessments, the state of record title to the
Property and all exceptions to, or encumbrances upon, title to the
Property which would appear in the Title Policy. Buyer shall have until
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the end of the Due Diligence Period (as defined in Section 10 of this
Agreement) to review such items and to give notice to Seller of such
objections as Buyer may have to any matters set forth in the Title
Commitment or survey which were not referenced in the Approved Title
Report. Seller understands and agrees that prior to the expiration of
the Due Diligence Period, Buyer may deliver to Seller an objection
letter or objection letters at any time during the Due Diligence Period
and Seller agrees that any such delivery or deliveries shall not be
construed in any way to limit or restrict Buyer's right to deliver
additional objections to Seller at any time during Due Diligence
Period. If Buyer timely (i.e during the Due Diligence Period) objects
to any special assessments, defects or encumbrances, Seller shall have
until the end of the Due Diligence Period to have such exceptions
cured, either by the removal of such exceptions or by the procurement
of title insurance endorsements or other resolution satisfactory to
Buyer providing coverage against loss or damage as a result of such
exceptions. If Seller shall not cure such defects or encumbrances to
Buyer's satisfaction by the end of the Due Diligence Period, Buyer, at
its option, may (i) terminate this Agreement upon written notice of
termination to Seller in accordance with Section 10 of this Agreement,
in which event neither party shall thereafter have any liability to the
other (except as to matters which, under any other provision of this
Agreement are expressly stated to survive a termination of this
Agreement), and all funds previously paid or deposited by Buyer,
including all accrued interest, shall be returned to Buyer, or (ii)
waive its objection to the defects or encumbrances and proceed to the
Closing in which event all such waived defects or encumbrances shall be
deemed to be Permitted Exceptions hereunder. Notwithstanding the above,
any defects in the nature of consensual liens affirmatively granted by
Seller or non-consensual monetary liens which do not exceed
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Twenty Five Thousand Dollars ($25,000) in the aggregate that can be
released by payment of the underlying obligation shall be removed,
bonded or title insured over by Seller and if not so removed, bonded or
title insured over by the Closing then the Appraised Value shall be
reduced by an amount sufficient to satisfy such obligations. Buyer
shall conclusively be deemed to have waived all objections to any title
or survey defect, encumbrance or exception reflected or referenced in
the Title Commitment or survey as to which Buyer fails to deliver to
Seller a written objection by the end of the Due Diligence Period, and
all such matters shall thereafter be deemed to be Permitted Exceptions
for purposes of this Agreement.
8. CONDITIONS TO CLOSING.
(a) Subject to the provisions of Sections 13 and 14 and
unless expressly waived by Buyer through written notice to Seller,
Buyer's obligations under this Agreement are expressly conditioned
upon the satisfaction or occurrence of the following conditions:
(i) The representations and warranties of Seller set
forth in Section 4 shall have been true and correct in all
material respects when made and shall be true and correct in
all material respects, as of the Closing and Seller shall have
complied with all covenants as set forth in Section 6 herein,
and shall have otherwise performed all of its obligations
hereunder, in all material respects;
(ii) All consents to or authorization of the
performance by Seller of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained;
(iii) Seller shall have delivered the items required
to be delivered to Buyer pursuant to Section 9 and delivered
or made available all other items and information required by
this Agreement in accordance with the terms of this Agreement;
(iv) Buyer shall have notified Seller pursuant to
Section 10 herein that Buyer has not discovered a Material
Adverse Condition (as defined in Section 10 herein) or Buyer
shall be deemed to have so notified Seller;
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<PAGE> 19
(v) The physical condition of the Property shall not
have changed in any material respect from the condition in
existence on the last day of the Due Diligence Period (as
hereafter defined) and the financial condition of the Property
shall not have changed in any material and adverse respect
from the condition reflected in the then most current
financial statements and other relevant financial materials
delivered by Seller to Buyer during the Due Diligence Period
(as hereinafter defined);
(vi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, Seller shall have
arranged without any cost or liability to Buyer for the
termination effective as of or prior to the Closing, of any
management contract of any property manager relating to the
Property and shall provide Buyer with written confirmation of
such termination on or prior to Closing;
(vii) The Title Company shall be ready, willing and
able to issue the Title Policy to Buyer in accordance with the
provisions of Section 7 hereof;
(viii) The transactions described on EXHIBIT H and
the closing of the Merger (as that term is defined in the
Merger Agreement) and the transactions contemplated by the
Portfolio Purchase Agreements shall have closed simultaneously
with, or immediately preceding or immediately following the
Closing of this transaction; and
(ix) Seller (or Seller's designees) shall have
executed and delivered the Investment Representation Letter
attached hereto as EXHIBIT I and the Registration Rights
Agreement attached hereto as EXHIBIT J.
(b) Subject to the provisions of Sections 13 and 14 and
unless expressly waived by Seller through written notice to
Buyer, Seller's obligations under this Agreement are expressly
conditioned upon the occurrence of the following events:
(i) The representations and warranties of Buyer set
forth in Section 5 and 16 of this Agreement shall have been
true and correct in all material respects when made and shall
be true and correct in all material respects, as of the
Closing and Buyer shall have otherwise performed all of its
obligations hereunder, in all material respects;
(ii) Buyer shall have delivered the items required to
be delivered to Seller pursuant to Section 9(c);
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<PAGE> 20
(iii) the closing of the Merger (as that term is
defined in the Merger Agreement) and the transactions
contemplated by the Portfolio Purchase Agreements shall have
closed simultaneously with, or immediately preceding or
immediately following the Closing of this transaction;
(iv) All consents to or authorization of the
performance by Buyer of its obligations hereunder and the
consummation of the transaction contemplated hereby shall have
been obtained; and
(v) Buyer shall have executed and delivered the
Registration Rights Agreement attached hereto as EXHIBIT J.
(c) Since the Portfolio Properties constitute
substantially all of the assets of MIG Residential REIT, Inc., a
Maryland corporation ("MIG REIT"), through MIG REIT's ownership of all
the shares of Seller and the Other Owners, MIG REIT's Board of
Directors has a fiduciary obligation to the holders of MIG REIT stock
to maximize the current and long term value of their shares in MIG
REIT. Accordingly, it is agreed that, notwithstanding anything in this
Agreement to the contrary, Seller shall have the right (the "Fiduciary
Out") to terminate this Agreement and cancel the Earnest Money Escrow
on the following terms and conditions:
(i) During the period between the date hereof and the
Schedule Closing Date, MIG REIT shall be entitled to provide
financial information about the Portfolio Properties to third
parties who request such information and sign a
confidentiality agreement substantially similar to the one
signed by Buyer. The parties intend that this Section 8(c)
will provide MIG REIT with an opportunity to sell the
Portfolio Properties on the following basis. After the date
hereof, MIG REIT shall cease or cause to cease all active
marketing of the Portfolio Properties by MIG REIT (or others
acting on behalf of MIG REIT) through the use of brokers,
financial advisors, advertising or other forms of active
solicitation. MIG REIT shall, however, be entitled to respond
to inquiries from third parties ("Third Party Buyers") to whom
information has been supplied previously, or who may learn of
the transaction contemplated in this Agreement through public
disclosure thereof.
(ii) The Third Party Buyers shall be entitled to make
offers (the "Third Party Officers") to purchase all of the
Portfolio Properties.
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<PAGE> 21
(iii) If MIG REIT's Committee of Independent
Directors recommends that any Third Party Offer should be
presented to MIG REIT's Board of Directors, Seller shall
provide Buyer with a complete copy of any Third Party Offer(s)
so presented promptly after the Board of Directors has had an
opportunity to review same.
(iv) If, in the opinion of MIG REIT's Board of
Directors, the terms of a Third Party Offer are superior to
the transactions contemplated in this Agreement and the
Portfolio Purchase Agreements, in that MIG REIT's shareholders
would realize more value as a result of the acceptance of such
Third Party Offer and, as a result, in the opinion of MIG
REIT's legal counsel, MIG REIT's directors would have a
fiduciary duty to accept such Third Party Offer, Seller shall
have the right to send Buyer a written notice (the "Fiduciary
Out Notice") to such effect. Seller's sending the Fiduciary
Out Notice to Buyer shall constitute an election by Seller to
terminate this Agreement and cancel the Earnest Money Escrow,
subject to subsection (v) below.
(v) If a Fiduciary Out Notice is sent to Buyer,
Buyer shall have the right to elect, by giving Seller written
notice thereof within ten (10) business days after such
Fiduciary Out Notice is sent to Buyer, to either: (A) do
nothing, or (B) propose terms and conditions for Buyer to
purchase the Property which are at least as advantageous to
Seller as the terms and conditions set forth in such Fiduciary
Out Notice, which proposed terms and conditions shall include
a total purchase price for all the Portfolio Properties at
least equal to the total purchase price proposed by the Third
Party Buyer named in such Fiduciary Out Notices, plus
$250,000. If Buyer elects to do nothing, Seller shall have no
obligation to sell the Property to Buyer, but Buyer shall have
the right to be paid the Break-Up Fee (as defined below) on
the same contingent basis specified in subsection (vii)(B)
below. If Buyer proposes such new terms and conditions which
are accepted by Seller, in Seller's role and absolute
discretion, the Break-Up Fee shall not be payable to Buyer and
the parties shall proceed with and complete the purchase and
sale of the Property in accordance therewith. If Buyer elects
to do nothing, or if Seller does not accept such new terms and
conditions proposed by Buyer, Seller shall give written notice
to Buyer and the Title Company that this Agreement is
terminated and the Earnest Money Escrow is canceled (the
"Termination Notice").
(vi) If Seller sends the Termination Notice, the
Title Company shall automatically and immediately without
further instruction from Seller to Buyer, release the Earnest
Money Deposit, plus accrued interest, to Buyer.
(vii) If Seller sends the Termination Notice, then
Seller shall be obligated to pay to Buyer an all-inclusive fee
(the "Break-Up Fee") for the purpose of compensating Buyer for
the loss of the opportunity to purchase the Property and
reimbursing Buyer for all out-of-pocket costs incurred by
Buyer in the course of its due diligence review. The Break-Up
Fee shall be three percent (3%) of the
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Appraised Value and shall be paid to Buyer simultaneously with
the delivery of the Termination Notice, by wire transfer of
immediately available federal funds.
UPON THE SENDING OF THE TERMINATION NOTICE, THIS AGREEMENT
SHALL BE TERMINATED AND THE BREAK-UP FEE SHALL BE PAID TO
BUYER AS PROVIDED ABOVE AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT BUYER'S ACTUAL DAMAGES AS A RESULT OF A
TERMINATION OF THIS AGREEMENT PURSUANT TO THIS SECTION 8(c)
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE BREAK-UP FEE HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF BUYER'S
DAMAGES AND AS BUYER'S EXCLUSIVE REMEDY AGAINST SELLER FOR
TERMINATING THIS AGREEMENT UNDER THIS SECTION 8(c).
9. DELIVERIES.
(a) Seller shall execute and deliver to Buyer through an
escrow with the Title Company as escrowee, at Closing, a good and
sufficient special or limited warranty deed, in customary form
acceptable to Buyer (the "Deed"), conveying good and insurable fee
simple title to the Project to Buyer, free and clear of all mortgages,
pledges, liens, security interests, encumbrances and restrictions,
except the Permitted Exceptions. The Permitted Exceptions shall be
specifically, and not categorically, set forth in the Deed as
exceptions to title.
(b) In addition, Seller shall deliver the following to Buyer
at or prior to the Closing:
(i) Duly executed resolutions adopted by the Board of
Directors of Seller authorizing the execution and delivery of
this Agreement by Seller, the performance by Seller of its
obligations hereunder and the consummation of the transactions
contemplated hereby, in such form as Buyer deems necessary or
desirable, in its discretion reasonably exercised;
(ii) Documents and instruments, in form and substance
acceptable to Buyer (acting reasonably), sufficient to convey,
transfer and assign to Buyer the Property (other than the
Property conveyed by the Deed), including, without limitation,
the Assignment and Assumption of Leases and Closing Agreement
substantially in the form of EXHIBIT C attached hereto and
made a part hereof and the Certificate
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Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(iii) Customary confirmation of authorization,
organization, valid existence, including legal opinions, as
Buyer may reasonably request;
(iv) All books, records and files relating to the
Property and the Seller's operation of the Property (but
Seller may retain copies of all of the foregoing), all of
which may alternatively be delivered to Buyer at the Property
at or prior to Closing together with a Letter Regarding Books
and Records substantially in the form of EXHIBIT E attached
hereto and made a part hereof;
(v) To the extent customarily issued in the
jurisdiction in which the Property is located, originals of
all certificates of occupancy (or the jurisdictional
equivalent of a certificate of occupancy) for all apartment
units on the Property, if available, and if not available,
true and correct copies thereof;
(vi) The originals of all Tenant Leases, Personal
Property Leases, Project Contracts and Permits, together with
all amendments and any attachments and supplements thereof,
all of which may alternatively be delivered to Buyer at the
Property upon or prior to Closing (but Seller may retain
copies of all of the foregoing);
(vii) A FIRPTA Affidavit duly executed by Seller
confirming that Seller is a not a "foreign person" under
Section 1445 of the Internal Revenue Code;
(viii) Settlement statements agreed to by Buyer and
executed by Seller;
(ix) Signed escrow instructions, reasonably
satisfactory to the Title Company and Buyer, in form and
substance sufficient to carry out the Closing;
(x) A certificate of Seller in the form of
EXHIBIT F attached hereto and made a part hereof;
(xi) Unless otherwise expressly instructed through
written notice from Buyer to Seller, documentation reasonably
acceptable to Buyer confirming the termination of any
management agreement relating to the Property;
(xii) A rent roll that is certified as true and
correct by Seller, to its Actual Knowledge, on the Closing
Date, dated as of a date not earlier than three (3) days
before the Closing Date;
(xiii) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement; and
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<PAGE> 24
(xiv) a copy of any affidavit required by the Title
Company to remove the standard printed exceptions from the
Title Policy.
(c) Buyer shall issue the Common Shares to or for the benefit
of Seller, or Seller's designees (provided that they make the
investment intent representations set forth in the Investment
Representation Letter) and deliver the Cash Payment through escrow on
the Closing Date and shall deliver the following documents to Seller on
or before the Closing:
(i) Settlement statements agreed to by Seller and
executed by Buyer;
(ii) Signed escrow instructions, reasonably
satisfactory to the Title Company and Seller, in form and
substance sufficient to carry out the Closing;
(iii) A certificate of Buyer in the form of EXHIBIT G
attached hereto and made a part hereof;
(iv) Documents and instruments, in form and
substance acceptable to Buyer and Seller, pursuant to which
Buyer accepts and assumes certain post Closing liabilities and
obligations of Assignor concerning the Property, including,
without limitation, the Assignment and Assumption of Leases
and Closing Agreement substantially in the form of EXHIBIT C
attached hereto and made a part hereof and the Certificate
Regarding Projects and Personal Property Leases substantially
in the form of EXHIBIT D attached hereto and made a part
hereof;
(v) Duly executed resolutions adopted by the Board
of Directors of Buyer authorizing the execution and delivery
of this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation of the transactions
contemplated hereby; and
(vi) Such other documents and instruments as may be
required by any other provision of this Agreement or as may
reasonably be required to give effect to the terms and intent
of this Agreement.
10. DUE DILIGENCE PERIOD. Buyer acknowledges and agrees
that prior to the execution of this Agreement, Buyer has received from Seller or
Seller has made available to Buyer true and correct copies of all of the
information regarding the Property which is described on
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<PAGE> 25
EXHIBIT K attached hereto and made a part hereof (the "Approved Due Diligence
Materials") and that Buyer has approved the Approved Due Diligence Materials and
all information contained therein. For a period of thirty (30) days following
execution of this Agreement (the "Due Diligence Period"), Buyer shall be
permitted to conduct its own limited inspections of the Property for the sole
purposes of updating the Approved Due Diligence Materials, with respect to: (i)
obtaining a so-called "Phase I Environmental Assessment" of the Property, (ii)
obtaining structural and engineering assessments of the Property, (iii)
obtaining the Title Commitment referenced in Section 7 hereof and (iv) updating
or upgrading the survey referenced on EXHIBIT K (the "Updated Due Diligence").
Seller shall grant reasonable access to Buyer and its representatives to the
Property for the purpose of conducting the Updated Due Diligence. Seller shall
have the right to coordinate and accompany Buyer on any of such inspections. Any
and all inspections, examinations, analyses and audits deemed necessary by Buyer
shall be performed at Buyer's expense and shall not physically damage the
Property. Buyer shall promptly and completely repair and restore any and all
damage to the Property that may be caused by, or may occur in connection with or
as a result of, any inspection, investigation, audit, test or visit to the
Property by Buyer, its employees, and authorized agents and consultants. Buyer
shall indemnify, protect, defend and hold Seller and its agents, employees and
representatives harmless from and against any and all loss, cost, claim,
liability, damage or expense (including, without limitation, attorneys' fees and
expenses) arising out of physical damages or injuries to persons or property
caused by Buyer's inspections, investigations, audits, tests or visits to the
Property. Buyer's restoration and indemnification obligations set forth in this
Section shall survive the Closing or termination of this Agreement.
Without limiting the rights accorded to Buyer pursuant to
Section 8 hereof, at any time during or at the end of the Due Diligence Period,
Buyer, in the event that Buyer's Updated Due
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Diligence discloses any information which is not contained in the Approved Due
Diligence Materials and which could reasonably be expected to have a material
adverse impact on the value of the Property ("A Material Adverse Condition"),
then, Buyer, in Buyer's sole discretion, may terminate this Agreement (by giving
notice of such termination to Seller, including Buyer's specific reasons
therefor). Buyer shall notify Seller in writing either during or at the end of
the Due Diligence Period with respect to whether or not Buyer has discovered any
such Material Adverse Condition. If Buyer's written notice to Seller indicates
that the Updated Due Diligence has not disclosed a Material Adverse Condition,
then the parties shall, subject to the satisfaction of the conditions set forth
herein, proceed to the Closing. If Buyer's written notice to Seller indicates
that the Updated Due Diligence has disclosed a Material Adverse Condition, then
this Agreement shall terminate and the Earnest Money Deposit (including all
interest earned thereon) shall be returned to Buyer. Upon termination of this
Agreement by Buyer pursuant to this Section 10, neither party shall thereafter
be under any further liability to the other, except as to matters which this
Agreement expressly states are to survive a termination of this Agreement.
Notwithstanding anything to the contrary contained in this Section 10, if Buyer
does not notify Seller by the end of the Due Diligence Period with respect to
whether or not the Updated Due Diligence has disclosed a Material Adverse
Condition, then Buyer shall be deemed to have notified Seller that the Updated
Due Diligence has not disclosed any Material Adverse Condition.
11. CLOSING DATE. Unless the parties otherwise agree in
writing, the transactions contemplated hereby shall be closed through escrow
(the "Closing") on the date that is concurrent with the closing of the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement") by and among Buyer, MIG Realty Advisors, Inc. ("MIGRA") and
certain shareholders of MIGRA (the "Closing Date"), which Closing Date shall be
established
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through written notice given by Buyer to Seller and shall not be later than ten
(10) days after the end of the Due Diligence Period (the "Scheduled Closing
Date"). Notwithstanding the foregoing, in the event that Buyer determines that
the applicable rules of the New York Stock Exchange require its shareholders
approval of the transactions contemplated by the Merger Agreement or this
Agreement, then Buyer shall have the right at any time up until the Scheduled
Closing Date, upon written notice to Seller, to extend the Scheduled Closing
Date in order to permit Buyer to obtain such shareholder approval, to a date
which is no later than (i) ninety (90) days after the date of this Agreement, if
the Securities and Exchange Commission ("SEC") informs Buyer that it will not
provide comments to its proxy statement or (ii) one hundred thirty five days
(135) after the date of this Agreement, if the SEC provides comments to its
proxy statement. After the expiration of the Due Diligence Period, Buyer shall
not have the right to terminate this Agreement except pursuant to the provisions
of Sections 8(a), 13 or 14 of this Agreement. IF BUYER SHALL DEFAULT IN ITS
OBLIGATIONS TO ACQUIRE THE PROPERTY, THEN SELLER SHALL RECEIVE THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) AS LIQUIDATED DAMAGES AND
NEITHER PARTY SHALL THEREAFTER BE UNDER ANY FURTHER LIABILITY TO THE OTHER,
EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT WITH RESPECT TO THE
PROVISIONS THAT EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT. THE PARTIES
HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY BUYER,
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY
DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE
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<PAGE> 28
PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS SELLER'S SOLE AND
EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN THE EVENT OF A DEFAULT
UNDER THIS AGREEMENT ON THE PART OF BUYER.
INITIALS: Seller_________ Buyer __________
12. PRORATIONS AND CLOSING COSTS. All prorations, adjustments
and final readings shall be made as of 11:59 pm of the day preceding the Closing
Date, unless otherwise mutually agreed to by the parties (the "Adjustment
Date"), by the Title Company based on information provided by the parties, as
follows:
(a) Payments under any Project Contracts or Personal Property
Leases and fees for any transferable licenses and permits which are
assigned to Buyer, shall be prorated.
(b) General real estate taxes shall be prorated, using for
such purpose the rate and valuation shown on the last available tax
duplicate, but subject to further adjustment as provided below. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later increased for any reason whatsoever,
including, without limitation, the real estate taxes and assessments
shown on the later issued actual tax duplicate being greater than those
shown on the tax duplicate available at Closing or because of any
additions or corrections to the tax duplicate assessed by reason of
Buyer's acquisition of the Property, then Seller shall promptly pay all
such increases allocable to the period prior to the Closing and Seller
shall protect, indemnify, defend, and hold Buyer harmless from and
against all such real estate tax and assessment increases, which
obligations on the part of the Seller shall survive the Closing. If any
real estate taxes prorated at Closing or assessments paid by Seller (as
set forth below) are later decreased for
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any reason whatsoever, including, without limitation, the real estate
taxes and assessments shown on the later issued actual tax duplicate
being less than those shown on the tax duplicate available at Closing
or because of any corrections to the tax duplicate assessed by reason
of Buyer's acquisition of the Property or because of any post-Closing
reduction in, or refund or rebate of, any taxes relating wholly or in
part to a period before the Closing, then Buyer shall promptly pay to
Seller the savings allocable to the period prior to the Closing (less
any costs incurred by Buyer to any unaffiliated third parties in
connection with obtaining the reduction of such tax bill), which
obligation shall survive the Closing. Any special assessments that are
a lien on the Property as of the date of this Agreement shall be paid
by Seller without proration. Any special assessments that become a lien
on the Property after the date of this Agreement shall be paid as
follows: Seller shall pay all installments that are due and payable
prior to the Closing Date and Buyer shall pay all installments that
become due and payable on or after the Closing Date.
(c) Collected rents shall be prorated based upon the total
rent roll payable for the month in which Closing occurs. In the event
that Buyer receives current rent from any tenants for the month in
which the Closing occurs, then Buyer shall deliver to Seller (outside
of escrow) the portion of such current rents attributable to periods
prior to the Adjustment Date. Additionally, in the event that any
tenant, who as of the Closing is delinquent in the rental payments due
Seller, delivers to Buyer a rent check in an amount in excess of the
rent due Buyer for the month for which such check is delivered, Buyer
shall allocate such excess first to pay reasonable outside collection
costs, if any, paid to unaffiliated third parties, then to pay rents
which become due after Closing, then pay remaining funds to Seller for
any rents delinquent prior to Closing and were due as of the
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date such payment was received; provided, however, in no event shall
Buyer be obligated to collect delinquent rents on Seller's behalf.
(d) Final readings and final billings for utilities shall be
made as of the Adjustment Date. Seller shall pay all outstanding
amounts due as of such time, or such amounts shall be credited to Buyer
at Closing. If final readings and billings cannot be
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obtained prior to Closing, the final bills, when received, shall be
prorated as of the Adjustment Date and the Title Company shall hold in
escrow an amount equal to 125% of the reasonably anticipated amount of
such billings, based upon the most recent available billings for
similar periods until the Title Company shall have received notice of
payment of such bills, at which time any remaining amount being
withheld for such purpose shall be distributed to the Seller.
(e) Buyer shall receive a credit at Closing for all deposits,
including security deposits, under the Tenant Leases which are not
delivered or assigned to Buyer at Closing.
(f) Seller shall pay in connection with this transaction the
following closing costs: (i) any state or local real or personal
property transfer taxes, documentary stamps, fees or other charges
relating to the transfer of the Property and (ii) one-half of any
escrow charges. Buyer shall pay in connection with this transaction the
following closing costs: (i) all recording fees, (ii) the costs of the
Title Policy and all endorsements thereto and (iii) one-half of any
escrow charges. Each party shall pay its own attorneys' fees. Each
party shall pay its own attorneys' fees. All closing costs allocable to
Seller, including, without limitation, any prorations to which Buyer
may be entitled by reason of the foregoing shall be credited against
the balance of the Appraised Value to be paid at Closing.
13. FIRE OR OTHER CASUALTY. Seller agrees to promptly advise
Buyer in writing of any material damage to the Property. If all or any
substantial portion of the Property (i.e. 10% or more of the value) shall, prior
to the Closing, be damaged or destroyed by fire or any other cause, and such
damage shall not have been repaired or reconstructed prior to the Closing in a
good and workmanlike manner to the reasonable satisfaction of Buyer, Buyer may,
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at Buyer's option: (a) remain obligated to perform this Agreement and receive
all insurance proceeds received by or payable to Seller as a result of such
damage or destruction plus an amount equal to any insurance policy deductible;
or (b) by written notice of termination given to Seller not later than thirty
(30) days after Seller provides Buyer with written notice of such damage or
destruction, terminate this Agreement and receive any documents, instruments and
funds previously deposited or paid including the Earnest Money Deposit (together
with all interest earned thereon). If an unsubstantial portion of the Property
(i.e. 10% or less of the value) shall, prior to the Closing, be damaged or
destroyed by fire or any other cause and such damage shall not have been
repaired or reconstructed prior to the Closing in a good and workmanlike manner
to the reasonable satisfaction of Buyer, then Buyer shall be obligated to
proceed to close the transaction contemplated hereby, but shall receive from
Seller, on the Closing Date, an assignment of proceeds of the insurance payable
under Seller's insurance policy plus an amount equal to any insurance policy
deductible. Upon termination of this Agreement by Buyer pursuant to this Section
13, neither party shall thereafter be under any further liability to the other,
except as otherwise expressly set forth in this Agreement.
14. CONDEMNATION AND EMINENT DOMAIN. If, prior to the Closing,
all or any portion of the Property shall be subjected to a taking, either total
or partial, by eminent domain, condemnation, or for any public or quasi-public
use, Buyer shall have the right to either (a) terminate this Agreement by giving
written notice of termination to Seller, in which event all funds and documents
deposited by Buyer and Seller shall be refunded or returned to the depositing
party and neither party shall thereafter be under any further liability to the
other and Buyer shall receive the Earnest Money Deposit, or (b) proceed to close
this transaction in which case Seller shall assign to Buyer at Closing all of
the proceeds and/or awards from such condemnation action. Seller and Buyer each
agree to forward promptly to the other any notice of intent received
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<PAGE> 33
pertaining to a taking of all or a portion of the Property by way of
condemnation, eminent domain or similar procedure for a taking of the Property
in connection with any public or quasi-public use.
15. INDEMNIFICATION.
(a) Subject to Section 15(c) of this Agreement, Buyer shall
fully indemnify, protect, defend and hold Seller and its
representatives, successors and assigns harmless from and against any
and all claims, demands, losses, liabilities, damages, awards,
judgements, penalties, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of or in connection with (i)
the Property or the ownership thereof or arising under, relating to or
concerning any of the Tenant Leases, Permits, Deposits, Personal
Property Leases, Project Contracts, Intangible Rights if such claims,
demands, losses, liabilities, damages or expenses first arise, accrue
or exist or relate to any period of time from or after the Closing
(except to the extent that such indemnification obligation would arise
directly as a result of the inaccuracy of any representation or
warranty made by Seller hereunder), or (ii) the inaccuracy or any
representation or warranty made by Buyer hereunder.
(b) Subject to Section 15(c) of this Agreement, Seller shall
fully indemnify, protect, defend and hold Buyer, its successors and
assigns harmless from and against any and all claims, demands, losses,
liabilities, damages, awards, judgements, penalties, and expenses
(including reasonable attorneys' fees and expenses) arising out of or
in connection with (i) the inaccuracy of any representation or warranty
made by Seller hereunder, or (ii) the ownership of the Property prior
to the Closing (including, without limitation, any claim, demand, loss,
liability, damage, award, judgement, penalty or expense arising under,
relating to or concerning any of the Tenant Leases, Permits, Deposits,
Personal Property Leases, Project Contracts or the Intangible Rights),
but only if such claims, demands,
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<PAGE> 34
losses, liabilities, damages or expenses first arose, accrued, existed
or related to any period of time before the Closing (except to the
extent that such indemnification obligation would arise directly as a
result of the inaccuracy of any representation made by Buyer
hereunder).
(c) Notwithstanding anything in the preceding Sections 15(a)
and 15(b) or elsewhere in this Agreement to the contrary, any claim for
indemnification under clause (ii) of Section 15(a) or under Section
15(b) must be asserted in writing and with specificity by the date (the
"Claim Expiration Date") which for the matters referenced in Section
4(g) of this Agreement is six (6) years after the Closing Date and with
respect to the other provisions of this Agreement is three hundred
sixty five (365) days after the Closing Date, and any and all claims
not so asserted by the applicable Claim Expiration Date shall
automatically expire and be deemed to have been forever waived,
released and of no force or effect and (B) the total amounts
recoverable by Buyer against Seller or by Seller against Buyer with
respect to such matters, shall not exceed, in the aggregate, Five
Hundred Thousand Dollars ($500,000) plus attorneys' fees and expenses
incurred in enforcing the indemnification provisions of this Section 15
after the detailed written claim described above was delivered to the
indemnifying party and such party refused to pay or satisfy such claim.
Nothing in this Section 15(c) shall limit claims for the specific
enforcement of this Agreement.
16. MISCELLANEOUS.
(a) This Agreement, including the Exhibits attached hereto,
shall be deemed to contain all of the terms and conditions agreed upon
with respect to the subject matter hereof, it being understood that
there are no outside representations or oral agreements.
(b) All notices, demands and the communications hereunder
shall be in writing.
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<PAGE> 35
Unless otherwise expressly required or permitted by the terms of this
Agreement, any notice required or permitted to be given hereunder by
the parties shall be delivered by facsimile, personally, by a reputable
overnight delivery service or by certified or registered mail to the
parties at the facsimile number or addresses set forth below (as the
case may be), unless different addressees or facsimile numbers are
given by one party to the other:
AS TO SELLER:
c/o MIG Residential REIT, Inc.
Attn: Mr. Robert H. Edelstein, Director
Fischer Center for Real Estate & Urban Economics
U.C. Berkeley
F602 Haas School of Business #6105
Berkeley, CA 94720
Phone (510) 643-6105
Fax (510) 643-7357
c/o MIG Residential REIT, Inc.
Attn: Mr. Jeffrey Fisher, Director
Indiana University School of Business
1309 East 10th Street, Suite 461
Bloomington, IN 47405
Phone (812) 336-9029
Fax (812) 855-9472
c/o MIG Residential REIT, Inc.
Attn: Ms. Susan M. Wachter, Director
Wharton Real Estate Center
256 South 37th Street
Lauder Fischer Hall
University of Pennsylvania
Phone (215) 898-6355
Fax (215) 573-4062
c/o MIG Residential REIT, Inc.
Attn: Larry E. Wright, President
MIG Realty Advisors
250 Australian Avenue, South, Suite 400
West Palm Beach, Florida 33401
Phone (561) 820-1300
Fax (561) 832-1622
-32-
<PAGE> 36
WITH A COPY TO:
Cox, Castle & Nicholson, LLP
Attn: Samuel H. Gruenbaum, Esq.
2049 Centry Park East, 28th Floor
Los Angeles, CA 90067
Phone (310) 277-4222
Fax (310) 277-7889
Mayer, Brown & Platt
Attn: Stuart P. Pergament, Esq.
2000 Pennsylvania Avenue, N.W.
Washington, DC 20006
Phone (202) 778-0600
Fax (202) 861-0473
AS TO BUYER:
ASSOCIATED ESTATES REALTY CORPORATION
Attn: Mr. Martin A. Fishman, Vice President
5025 Swetland Court
Richmond Heights, Ohio 44143-1467
Phone (216) 473-8780
Fax (216) 473-8105
WITH A COPY TO:
BAKER & HOSTETLER LLP
Attn: Paul E. Bennett, Esq.
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Phone (216) 861-7484
Fax (216) 696-0740
(c) Seller and Buyer each represents and warrants to the other
that such party has had no dealing with any real estate broker or agent
so as to entitle such broker or agent to any commission in connection
with the sale of the Property to Buyer, which representations and
warranties shall survive the closing of the transactions contemplated
hereby. If for any
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<PAGE> 37
reason any such commission shall become due, the party who retained
such broker shall pay any such commission and agrees to indemnify and
save the other party harmless from any and all claims for any such
commission and from any attorneys' fees and litigation or other
expenses relating to any such claim.
(d) This Agreement and the rights and duties hereunder may not
be assigned by Seller without the prior written consent of Buyer. This
Agreement and the rights and duties hereunder may not be assigned by
Buyer without the written consent of Seller; provided, that Buyer shall
have the right, without the consent of Seller, to designate a nominee
to take title to the Property on the Closing Date. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(e) After the Closing, the parties shall execute and deliver
such further documents and instruments of conveyance, sale, assignment,
transfer, assumption or otherwise, and shall take or cause to be taken
such other or further action, as either party shall reasonably request
at any time or from time to time within the one hundred twenty (120)
days immediately following the Closing Date in order to effectuate the
terms and provisions of this Agreement.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Property is
situated.
(g) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
(h) If the date for performance of any act under this
Agreement falls on a Saturday, Sunday or federal holiday, the date for
such performance shall automatically be
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<PAGE> 38
extended to the first succeeding business which is not a federal
holiday.
(i) Whenever in this Agreement reference is made to "Seller's
Knowledge", "to the best of Seller's Knowledge", "Seller's Actual
Knowledge", "Actual Knowledge of Seller" or "the Knowledge or Seller",
or any similar term or reference, it shall mean and be limited to the
actual conscious knowledge of Seller, without any investigation or
inquiry.
(j) Buyer agrees to keep confidential any information that it
has or will obtain relating to the Property or Seller with respect to
the Property and will not knowingly disclose that information to any
person or entity, other than (i) its employees, attorneys, accountants,
consultants and contractors performing under this Agreement whom it
directs to treat such information confidentially or (ii) in connection
with the disclosures that it will be making in connection with the
filing of the Registration Rights Agreement or any
other matters that it is required to disclose in connection with its
legal reporting requirements or as otherwise required in accordance
with applicable law based upon the advise of its legal counsel, without
the prior express written consent of Seller; provided, however, that
this provision shall not apply to data that is in the public domain or
is clearly not confidential in nature. The provisions of this Section
17(j) shall survive the Closing or any termination of this Agreement.
Buyer's undertakings set out in this Section 17(j) are of extraordinary
importance to Seller and damages for Buyer's breach hereof are not
readily ascertainable. Accordingly, Seller may obtain injunctive and
other equitable relief to enforce its rights under this Section 17(j).
Buyer agrees that upon any final adjudication by a court of competent
jurisdiction rendered in favor of Seller with respect to Buyer's breach
under this Section 17(j), Buyer will reimburse Seller, on demand, for
all costs and expenses (including attorneys' fees and expenses) paid or
incurred by Seller in enforcing the
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<PAGE> 39
provisions of this Section 17(j).
(k) Buyer and Seller acknowledge and agree that neither of
them shall cause this Agreement, or any memorandum thereof, to be
recorded.
(l) Buyer covenants that on or before the Closing Date, it
will execute and deliver the Registration Rights Agreement attached
hereto and made a part hereof as EXHIBIT J.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have signed four
counterparts of this Agreement, each of which shall be deemed to be an original
document, as of the date set forth above, which shall be the date on which this
Agreement is fully executed.
SELLER:
MIG HAMPTON CORPORATION
By: _______________________________
BUYER:
ASSOCIATED ESTATES REALTY
CORPORATION
By: _______________________________
Jeffrey I. Friedman, President
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<PAGE> 41
EXHIBIT A-1
PORTFOLIO PROPERTIES
1. Annen Woods
2. Hampton Point
3. Morgan Place
4. Fleetwood
5. Peachtree
6. Twentieth and Campbell
7. Desert Oasis
8. Windsor Falls
<PAGE> 42
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF
LEASES AND CLOSING AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASES AND CLOSING AGREEMENT
(this "Agreement"), made and entered into as of the _____ day of
________________, 19___, by and between _____________________________
("Assignor"), and ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Assignee"),
W I T N E S S E T H :
WHEREAS, pursuant to the provisions of that certain purchase
agreement between Assignor and Assignee dated ___________ (the "Purchase
Agreement"), Assignor has transferred an apartment project known as
______________________ located in ______________________ (the "Project"), to
Assignee; and
WHEREAS, in connection with such transfer of assets, the
parties have agreed to execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the entering into of this
Agreement and for other good and valuable consideration received to the full
satisfaction of Assignor and Assignee, the parties hereto agree as follows:
1. Agreement and Assumption.
(a) Assignor hereby conveys, transfers and assigns unto
Assignee, its successors and assigns, all right, title and interest, as of the
date hereof, which Assignor has or may have in and to (i) all leases, written or
oral, and tenancies with tenants with respect to all or any portion of the
Project (the "Tenant Leases") and (ii) all assignable maintenance and service
contracts, supply contracts, insurance policies (to the extent that Assignee
elects to assume them) and other assignable agreements, contracts and contract
rights relating to the ownership or operation of the Project, or any part
thereof (the "Project Contracts") and (iii) all assignable leases of equipment,
vehicles and other tangible personal property leased by Assignor and used by
Assignor in connection with the ownership and operation of the Project (the
"Personal Property Leases").
(b) Assignee hereby accepts the foregoing assignment and
agrees to keep, perform and observe (i) all of the obligations, terms and
conditions of the Tenant Leases, the Project Contracts and the Personal Property
Leases, first arising from and after or relating to any period of time after the
date of this Agreement and (ii) all obligations and liabilities under the Tenant
Leases relating to the tenant deposits (including, without limitation, security
deposits) and prepaid rent.
C-2
<PAGE> 43
2. Conveyance of Other Property. Assignor hereby conveys, sells,
transfers, assigns and delivers to and vests in Assignee, its successors and
assigns all of Assignor's right, title and interest in and to the following
(collectively the "Personal Property"):
(a) all furnishings, furniture, equipment, supplies and other
personal property owned by Assignor, used or usable in connection with the
Project and located on or in the Project;
(b) all licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body, if any, issued to or held by Assignor and related to the ownership of
the Project, to the extent transferable;
(c) all deposits and escrowed amounts with holder of any
indebtedness of Assignor which encumbers the Project, prepaid rentals under the
Tenant Leases, cash, accounts and notes receivable, and all other miscellaneous
deposits, receivables and prepaid expenses (including, without limitation,
prepaid insurance premiums) related to the ownership or operation of the
Project;
(d) all transferable guaranties, warranties and other
intangible rights pertaining to the Project, or any part thereof including,
without limitation, all transferable guaranties, and warranties relating to the
construction of the Project including all rights under architects and
construction contracts;
(e) all books of accounts, customer lists, files, papers and
records relating to the Project or Assignor's business with respect thereto; and
(f) the right to use the name "_____________________."
Assignor warrants to Assignee that it has good title to the
Personal Property (other than the right to use the name "__________________")
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions.
3. Limitation on Assumption of Obligations. With the exception of the
liabilities and obligations set out in the Purchase Agreement or expressly
assumed by Assignee pursuant to Section 1 of this Agreement, Assignee shall not,
by execution and delivery of this Agreement, be deemed to have assumed or
otherwise become responsible for any liability or obligation of any nature of
Assignor, whether relating to Assignor's business or any of Assignor's assets,
operations, businesses or activities, or claims of such liability or obligation,
matured or unmatured, liquidated or unliquidated, fixed or contingent, or known
or unknown, whether arising out of occurrences prior to, at or after the date
hereof.
4. Power of Attorney. Assignor hereby constitutes and appoints
Assignee, its successors and assigns, the true and lawful attorney of Assignor,
with full power of substitution, having full right and authority, for the
benefit of Assignee, its successors and assigns:
C-3
<PAGE> 44
(i) to demand and receive any and all assets and
properties hereby conveyed, transferred, assigned and
delivered;
(ii) to give receipts, releases and acquittances for
or in respect of the same or any part thereof;
(iii) to collect, for the account of Assignee, all
receivables and other items of Assignor transferred to
Assignee as provided herein and to endorse in the name of
Assignor any checks received on account of any such
receivables or items;
(iv) to institute and prosecute against parties
other than Assignor, in the name of, at the expense of and for
the benefit of Assignee, any and all proceedings at law, in
equity or otherwise which Assignee, its successors and assigns
may deem proper with regard to the assets and properties
hereby conveyed, transferred, assigned and delivered;
(v) to collect, assert or enforce against parties
other than Assignor any claim, right, title, debt or account
hereby conveyed, transferred, assigned and delivered; and
(vi) to defend or compromise against parties other
than Assignor any and all actions, suits or proceedings in
respect of any of the assets and properties hereby conveyed,
transferred, assigned, delivered, as Assignee, its successors
or assigns, shall consider desirable.
Assignor hereby declares that the foregoing powers are coupled with an interest
and shall not be revocable by it in any manner or for any reason.
5. Miscellaneous.
(a) This Agreement shall be deemed to contain all of the terms
and conditions respecting the subject matter hereof, it being understood that
there are no outside representations or oral agreements on which either party is
relying.
(b) Neither the execution and delivery of this Agreement nor
the performance by either party of its obligations hereunder shall in any manner
affect or impair the representations and warranties of the parties contained in
the Purchase Agreement, all of which shall survive for the respective periods
set forth in the Purchase Agreement.
(c) This Agreement shall be effective as of the date hereof.
(d) Notice required or permitted to be given hereunder by the
parties shall be given as set forth in the Purchase Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the
C-4
<PAGE> 45
laws of the State of ___________________.
(f) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.
(g) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
C-5
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have hereunto
subscribed their names as of the date first above written.
Signed and acknowledged ASSIGNOR:
in the presence of:
_______________________________
__________________________ By:____________________________
Print Name:_______________ Its:___________________________
__________________________
Print Name:_______________
ASSIGNEE:
__________________________ ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
Print Name:_______________
__________________________ By:____________________________
Martin A. Fishman
Print Name:_______________ Vice President
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ___________________, who acknowledged that he did sign the
foregoing instrument as _________________ of _____________________, that the
same is his free act and deed of said corporation and his free act and deed
personally and as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at ____________, ___________, this _____ day of ____________, 19___.
_____________________________
Notary Public
C-6
<PAGE> 47
STATE OF __________ )
) SS:
COUNTY OF _________ )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation,
by Martin A. Fishman, its Vice President, who acknowledged that he did sign the
foregoing instrument on behalf of said corporation and that the same is his free
act and deed individually and as such officer and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at _________, __________, this ____ day of ___________, 19___.
________________________________
Notary Public
This instrument prepared by:
Paul E. Bennett, Esq.
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
(216) 621-0200
C-7
<PAGE> 48
EXHIBIT D
CERTIFICATE OF SELLER REGARDING PROJECT
CONTRACTS AND PERSONAL PROPERTY LEASES
The undersigned certifies that, to the undersigned's Actual
Knowledge (as defined in the Purchase Agreement pursuant to which this
certificate is delivered) the only Project Contracts and Personal Property
Leases as defined by the Purchase Agreement between the undersigned and
Associated Estates Realty Corporation dated ______________ existing as of the
Closing Date, are as follows:
1. _______________________________________
2. _______________________________________
3. _______________________________________
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of the _____ day of ______________, 19__.
______________________________
By:___________________________
Its: ________________________
<PAGE> 49
EXHIBIT E
______________ __, 19___
Martin A. Fishman, Esq.
Associated Estates Realty Corporation
5024 Swetland Court
Richmond Heights, OH 44143
Dear Marty:
The undersigned (the "Seller") hereby certifies that to the
best of its Actual Knowledge (as that term is defined in the Purchase Agreement
pursuant to which this certificate is delivered), the financial books and
records (the "Books and Records") relating to the ______________ (the "Project")
are available at _____________________________. We have directed our agent who
is in possession of the Books and Records to make all of the Books and Records,
or true copies thereof and any backup documentation available for inspection and
copying by Associated Estates Realty Corporation ("AERC") and their auditors in
connection with AERC's reporting requirements on reasonable notice to the
undersigned.
________________________
By:_____________________________
Its:____________________________
<PAGE> 50
EXHIBIT F
SELLER'S CERTIFICATE
_______________________________ (the "Seller"), hereby
certifies, represents, and warrants to Associated Estates Realty Corporation
("AERC") pursuant to Section ______ of the Purchase Agreement by and between the
Seller and AERC dated as of ____________________________ (the "Agreement"), that
except as set forth on Attachment 1 attached hereto and made a part hereof, the
representations and warranties of Seller set forth in the Agreement were true
and correct when made and are true and correct as of the Closing Date. The
Seller acknowledges and agrees that the disclosure of the matters set forth on
Attachment 1 shall in no way affect the rights of Buyer to decline to proceed to
the Closing (as that term is defined in the Agreement) or any way modify or
amend the provisions of Section 8(a)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of the _____ day of ______________, 19___.
_______________________________
By:_____________________________
Its:____________________________
<PAGE> 51
ATTACHMENT 1
<PAGE> 52
EXHIBIT G
ASSOCIATED ESTATES REALTY CORPORATION
BUYER'S CERTIFICATE
Associated Estates Realty Corporation, an Ohio corporation
("AERC") certifies, represents, and warrants pursuant to Section _____ of the
Purchase Agreement dated as of ______________ by and between _________________
and AERC (the "Agreement"), that except as set forth on Attachment 1 attached
hereto and made a part hereof, the representations and warranties of AERC as
set forth in the Agreement were true and correct when made and are true and
correct as of the Closing Date. AERC acknowledges and agrees that the disclosure
of the matters set forth on Attachment 1 shall in no way affect the rights of
Seller (as defined in the Agreement) to decline to proceed to the Closing (as
defined in the Agreement) or any way modify or amend the provisions of
Section 8(b)(i) of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the ______ day of ________________, 19___.
ASSOCIATED ESTATES REALTY
CORPORATION
By ___________________________________
Martin A. Fishman, Vice President
<PAGE> 53
ATTACHMENT 1
<PAGE> 54
EXHIBIT H
1. The closing of the Merger provided for in the Merger Agreement (as defined in
the Purchase Agreement of which this exhibit is a part).
2. The closing under that certain Contribution and Partnership Interest Purchase
Agreement whereby Buyer's or Buyer's affiliate will acquire a partnership
interest in (i) MIG/Orlando Development, Ltd., (ii) MIG/Hollywood Development,
Ltd., (iii) MIG/Pines Development, Ltd. and (iv) HP Advisors.
3. Associated Estates Realty Corporation's acquisition of any number of the
apartment properties listed on Exhibit A of the Merger Agreement, provided that
the aggregate independently appraised value of such apartment properties must be
greater than or equal to $184,000,000 (inclusive of the property that is the
subject of the Purchase Agreement of which this exhibit is a part).
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-27429 and No. 33-88430) and in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-22419) of
Associated Estates Realty Corporation of our report dated January 29, 1998
relating to the statement of revenue and certain expenses of Country Club
Apartments which appears in the current report on Form 8-K of Associated
Estates Realty Corporation dated February 19, 1998.
/s/ PRICE WATERHOUSE LLP
Cleveland, Ohio
March 30, 1998
<PAGE> 1
EXHIBIT 23.02
Consent of Independent Certified Public Accountants
We consent to the use of (a) our report dated January 28, 1998, with
respect to the consolidated financial statements of MIG Residential REIT, Inc.
for each of the three years in the period ended December 31, 1997, (b) our
report dated February 2, 1998, with respect to the combined statement of revenue
and certain expenses for certain multifamily properties for the year ended
December 31, 1997, for those properties which were acquired by Associated
Estates Realty Corporation (AERC) on February 2, 1998, and (c) our report dated
February 20, 1998, with respect to the combined financial statements of MIG
Companies for the year ended December 31, 1997, included in this Current Report
on Form 8-K incorporated by reference in Registration Statements (Form S-3 No.
333-22419 and Forms S-8 No. 333-27429 and No. 33-88430) of AERC filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
West Palm Beach, Florida
March 30, 1998
