SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 26, 1996
(Date of Earliest Event Reported)
Commission File No. 1-12590
GABLES RESIDENTIAL TRUST
A MARYLAND CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 58-2077868
2859 PACES FERRY ROAD
ATLANTA, GEORGIA 30339
TELEPHONE: (770) 436-4600
<PAGE>
Item 5. Other Events
Apartment Community Acquisition:
On July 26, 1996, Gables Residential Trust (collectively with its subsidiaries,
the "Company") through Gables Realty Limited Partnership (the "Operating
Partnership", of which the Company owns the sole general partner and currently
holds an approximate 81.9% economic interest), acquired Morning Grove
Apartments, a multifamily apartment community located in Memphis, Tennessee,
comprised of 500 apartment homes (the "Property"), from Morning Grove
Apartments, L.L.C., a Tennessee limited liability company. The occupancy rate of
the 500 apartment homes was approximately 93% as of July 26, 1996.
The acquisition was financed primarily through the assumption of a $19.8 million
mortgage note payable and the issuance of 243,787 minority units of limited
partnership interest in the Operating Partnership ("Units").
Financial Statements and Exhibits:
(a) Financial Statements of Property Acquired
The financial statements relating to the acquisition of Morning Grove
Apartments are attached hereto as Exhibit 99.1 and incorporated herein by
this reference.
(b) Pro Forma Financial Information
The unaudited pro forma financial information relating to the acquisition of
Morning Grove Apartments, in addition to the previously filed acquisition of
Pin Oak Green and Pin Oak Park Apartments, are attached hereto as Exhibit
99.2 and incorporated herein by this reference.
(c) Exhibits
Exhibit
No. Description
- ----------- ----------------------------------------------------------------
10.1 Agreement for Contribution between Gables Realty Limited Partnership
and Morning Grove Apartments, L.L.C., dated June 24, 1996. The
exhibits to this agreement are referred to in, but not filed with,
this exhibit. Such exhibits have been omitted for purposes of this
filing, but will be furnished to the Commission supplementally upon
request.
10.2 Addendum to Agreement for Contribution between Gables Realty
Limited Partnership and Morning Grove Apartments, L.L.C. dated
June 24, 1996.
10.3 Registration Rights Agreement between Gables Residential Trust
and Morning Grove Apartments, L.L.C. dated July 26, 1996.
99.1 Financial statements of Morning Grove Apartments.
99.2 Pro forma financial information related to the acquisition of
Morning Grove Apartments and relating to the acquisition of Pin Oak
Green and Pin Oak Park Apartments (pursuant to previous information
filed in Form 8-K/A, dated April 23, 1996).
23.1 Consent of Independent Public Accountants.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GABLES RESIDENTIAL TRUST
Date: August 12, 1996 By: /s/ Marvin R. Banks, Jr.
------------------------
Marvin R. Banks, Jr.
Vice President and Chief
Financial Officer
<PAGE>
Index to Exhibits
Exhibit
No. Description
- ----------- ----------------------------------------------------------------
10.1 Agreement for Contribution between Gables Realty Limited Partnership
and Morning Grove Apartments, L.L.C., dated June 24, 1996. The
exhibits to this agreement are referred to in, but not filed with,
this exhibit. Such exhibits have been omitted for purposes of this
filing, but will be furnished to the Commission supplementally upon
request.
10.2 Addendum to Agreement for Contribution between Gables Realty
Limited Partnership and Morning Grove Apartments, L.L.C. dated
June 24, 1996.
10.3 Registration Rights Agreement between Gables Residential Trust
and Morning Grove Apartments, L.L.C. dated July 26, 1996.
99.1 Financial statements of Morning Grove Apartments.
99.2 Pro forma financial information related to the acquisition of
Morning Grove Apartments and relating to the acquisition of Pin Oak
Green and Pin Oak Park Apartments (pursuant to previous information
filed in Form 8-K/A, dated April 23, 1996).
23.1 Consent of Independent Public Accountants.
Exhibit 99.1
STATEMENTS OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR MORNING GROVE APARTMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of Gables Residential Trust:
We have audited the accompanying statement of excess of revenues over specific
operating expenses of Morning Grove Apartments (the "Property") for the year
ended December 31, 1995. This financial statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of excess of revenues over specific
operating expenses 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 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.
As described in Note 2, this financial statement excludes certain expenses that
would not be comparable with those resulting from the operations of the Property
after acquisition by the Company. The accompanying financial statement was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and is not intended to be a complete
presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the excess of revenues over specific operating expenses
(exclusive of expenses described in Note 2) of Morning Grove Apartments for the
year ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
August 9, 1996
<PAGE>
MORNING GROVE APARTMENTS
STATEMENTS OF EXCESS OF REVENUES OVER SPECIFIC OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31,1995
(AMOUNTS IN THOUSANDS)
Six Months
Ended
June 30, Year Ended
1996 December 31,
(UNAUDITED) 1995
-------------- -------------
Revenues:
Rental revenues (Note 1) $1,546 $2,111
Other property revenues 53 65
------ ------
Total property revenues 1,599 2,176
Specific Operating Expenses (Note 2):
Property operating and maintenance 430 537
Excess of Revenues Over Specific Operating
-------- ---------
Expenses $1,169 $1,639
======== =========
<PAGE>
MORNING GROVE APARTMENTS
NOTES TO STATEMENTS OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
For the Six Months Ended June 30, 1996 (Unaudited)
and the Year Ended December 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
DESCRIPTION OF PROPERTY ACQUIRED
On July 26, 1996, Gables Residential Trust (collectively with its
subsidiaries, the "Company") through Gables Realty Limited Partnership (the
"Operating Partnership", of which the Company owns the sole general partner and
currently holds an approximate 81.9% economic interest), acquired Morning Grove
Apartments, a multifamily apartment community located in Memphis, Tennessee,
comprised of 500 apartment homes (the "Property"). The occupancy rate of the 500
apartment homes was approximately 93% as of July 26, 1996.
The acquisition was financed primarily through the assumption of a $19.8 million
mortgage note payable and the issuance of 243,787 minority units of limited
partnership interest in the Operating Partnership ("Units").
The Property's construction was completed in three phases, the last of which was
completed in early 1996.
RENTAL REVENUE RECOGNITION
- --------------------------
The Property is leased under operating leases with terms generally equal to one
year or less. Rental revenue is recognized when earned which materially
approximates revenue recognition on a straight-line basis.
2. BASIS OF ACCOUNTING
- -- -------------------
The accompanying statements of excess of revenues over specific operating
expenses are presented on the accrual basis. These statements have been prepared
in accordance with the applicable rules and regulations of the Securities and
Exchange Commission for real estate properties acquired. Accordingly, the
statements exclude certain historical expenses not comparable to the operations
of the Property after acquisition, such as depreciation, interest and management
fees.
Exhibit 99.2
GABLES RESIDENTIAL TRUST
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The unaudited consolidated statements of operations are presented as if the
Company acquired Pin Oak Green, Pin Oak Park Apartments and Morning Grove
Apartments as of the beginning of each period presented. In management's
opinion, all adjustments necessary to present fairly the effects of the property
and partnership acquisitions have been made.
The unaudited pro forma consolidated statements of operations are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the Company had acquired the properties as of the
beginning of each period presented, nor do they purport to represent the results
of operations for future periods.
<PAGE>
<TABLE>
GABLES RESIDENTIAL TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30,1996
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Pin Oak Green Additional
Company Morning Grove & Pin Oak Park Pro Forma Company
Historical Apartments Apartments Adjustments Pro Forma
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental revenues $47,458 $1,546 (A) $4,744 (A) $0 $53,748
Other property revenues 2,330 53 (A) 74 (A) 2,457
------------------------- ---------------- ----------------------------
Total property revenues 49,788 1,599 4,818 56,205
Property management - third party 1,965 1,965
Olympic revenues, net 230 230
Other 602 602
-----------------------------------------------------------------------------------
Total revenues 52,585 1,599 4,818 59,002
-----------------------------------------------------------------------------------
Property operating and maintenance (exclusive
of items shown separately below) 17,313 430 (A) 1,686 (A) 19,429
Depreciation and amortization 8,296 1,312 (B) 9,608
Amortization of deferred financing costs 667 667
Property management - owned 1,342 1,342
Property management - third party 1,488 1,488
General and administrative 1,515 1,515
Abandoned real estate pursuit costs 62 (C), 62
Interest 8,991 3,063 (D) 12,054
Credit enhancement fees 303 303
-----------------------------------------------------------------------------------
Total expenses 39,977 430 1,686 4,375 46,468
-----------------------------------------------------------------------------------
Income before equity in income
of joint ventures and interest income 12,608 1,169 3,132 (4,375) 12,534
Equity in income of joint ventures 108 108
Interest income 159 159
-----------------------------------------------------------------------------------
Income before minority interest
and extraordinary loss, net 12,875 1,169 3,132 (4,375) 12,801
Minority interest of unitholders in
Operating Partnership (2,243) (121)(E) (2,364)
------------------------------------------------------------------ ----------
Income before extraordinary loss, net 10,632 1,169 3,132 (4,496) 10,437
Extraordinary loss, net of minority interest (520) (520)
-----------------------------------------------------------------------------------
Net income $10,112 $1,169 $3,132 ($4,496) $9,917
===================================================================================
Weighted average number of shares outstanding 15,694 15,694
=========== ==========
Per Share Information:
Income before extraordinary loss, net $0.68 $0.67
=========== ==========
Net income $0.64 $0.63
=========== ==========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
GABLES RESIDENTIAL TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,1995
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Morning Pin Oak Green Additional
Company Grove & Pin Oak Park Pro Forma Company
Historical Apartments Apartments Adjustments Pro Forma
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental revenues $72,703 $2,111 (A) $9,200 (A) $0 $84,014
Other property revenues 3,268 65 (A) 140 (A) 3,473
--------------------------- ---------------- -------------------------------
Total property revenues 75,971 2,176 9,340 87,487
Property management - third party 4,289 4,289
Other 1,500 1,500
------------------------------------------------------------------------------------
Total revenues 81,760 2,176 9,340 93,276
------------------------------------------------------------------------------------
Property operating and maintenance (exclusive
of items shown separately below) 28,228 537 (A) 3,414 (A) 32,179
Depreciation and amortization 12,669 2,293 (B) 14,962
Amortization of deferred financing costs 932 932
Property management - owned 2,170 2,170
Property management - third party 3,178 3,178
General and administrative 2,736 2,736
Abandoned real estate pursuit costs 133 (C), 133
Interest 13,088 5,546 (D) 18,634
Credit enhancement fees 710 710
------------------------------------------------------------------------------------
Total expenses 63,844 537 3,414 7,839 75,634
------------------------------------------------------------------------------------
Income before equity in income
of joint ventures and interest income 17,916 1,639 5,926 (7,839) 17,642
Equity in income of joint ventures 64 64
Interest income 389 389
------------------------------------------------------------------------------------
Income before minority interest
and extraordinary loss, net 18,369 1,639 5,926 (7,839) 18,095
Minority interest of unitholders in
Operating Partnership (4,029) (77)(E) (4,106)
------------------------------------------------------------------ -------------
Income before extraordinary loss, net 14,340 1,639 5,926 (7,916) 13,989
Extraordinary loss, net of minority interest (784) (784)
------------------------------------------------------------------------------------
Net income $13,556 $1,639 $5,926 ($7,916) $13,205
====================================================================================
Weighted average number of shares outstanding 11,436 11,436
============= =============
Per Share Information:
Income before extraordinary loss, net $1.25 $1.22
============= =============
Net income $1.19 $1.15
============= =============
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
GABLES RESIDENTIAL TRUST
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
(A) Reflects rental revenues, other property revenues and property operating
and maintenance expenses (exclusive of depreciation expense) for Morning
Grove Apartments (the "Property") acquired on July 26, 1996 and Pin Oak
Green and Pin Oak Park Apartments acquired on April 23, 1996. The
Property's construction was completed in three phases, the last of which
was completed in early 1996.
(B) Reflects depreciation expense for the operational portion of the Property
during the periods presented and Pin Oak Green and Pin Oak Park Apartments
acquired on April 23, 1996.
(C) Reflects interest expense associated with borrowings under the Company's
unsecured revolving credit facility which were utilized to acquire Pin Oak
Green and Pin Oak Park Apartments. The Company's borrowings bear interest
at LIBOR plus 1.65%. If interest rates under the unsecured revolving credit
facility fluctuated 0.125%, interest costs on the pro forma credit facility
indebtedness would increase or decrease by approximately $82,000 on an
annualized basis.
(D) Reflects interest expense, for the operational portion of the Property
during the periods presented, associated with the 7.5% fixed-rate mortgage
note payable assumed by the Company in connection with the Property
acquisition.
(E) Reflects (i) the portion of all of the preceding pro forma adjustments
attributable to the minority interest unitholders in the Operating
Partnership and (ii) an adjustment to minority interest associated with the
issuance of minority units of limited partnership interest in the Operating
Partnership in connection with the Property acquisition.
GABLES RESIDENTIAL TRUST
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The unaudited pro forma consolidated balance sheet is presented as if the April
23, 1996 acquisition of Pin Oak Green and Pin Oak Park Apartments and the July
26, 1996 acquisition of Morning Grove Apartments had occurred as of June 30,
1996.
The unaudited pro forma consolidated balance sheet is not necessarily indicative
of what the actual financial position would have been at June 30, 1996 nor does
it purport to represent the future financial position of the Company.
<PAGE>
<TABLE>
GABLES RESIDENTIAL TRUST
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Pro Forma
Acquisition
Company Adjustments Company
Historical (A) Pro Forma
-----------------------------------------------
<S> <C> <C> <C>
ASSETS:
Real estate assets:
Land $97,407 $16,057 $113,464
Building 509,742 71,036 580,778
Furniture, fixtures and equipment 41,545 4,229 45,774
Construction in progress 53,920 53,920
Land held for future development 2,148 2,148
-----------------------------------------------
Real estate assets before accumulated depreciation 704,762 91,322 796,084
Less: accumulated depreciation (64,548) (64,548)
-----------------------------------------------
Net real estate assets 640,214 91,322 731,536
Cash and cash equivalents 8,281 (300) 7,981
Restricted cash 5,397 90 5,487
Deferred charges, net 5,744 5,744
Other assets, net 11,229 (400) 10,829
-----------------------------------------------
Total assets $670,865 $90,712 $761,577
===============================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes payable $380,547 $84,089 $464,636
Accrued interest payable 1,689 1,689
Dividend payable 7,727 7,727
Real estate taxes payable 6,497 444 6,941
Accounts payable and accrued expenses - construction 3,977 3,977
Accounts payable and accrued expenses - operating 5,403 5,403
Security deposits 2,027 479 2,506
-----------------------------------------------
Total liabilities 407,867 85,012 492,879
-----------------------------------------------
Minority interest of unitholders in Operating Partnership 46,179 3,716 49,895
-----------------------------------------------
Shareholders' equity:
Common shares, $0.01 par value, 100,000,000
shares authorized, 16,097,284 shares issued
and outstanding at June 30, 1996 161 161
Additional paid-in capital 261,142 261,142
Accumulated earnings (deficit) (44,484) 1,984 (42,500)
-----------------------------------------------
Total shareholders' equity 216,819 1,984 218,803
-----------------------------------------------
Total liabilities and shareholders' equity $670,865 $90,712 $761,577
===============================================
<FN>
The accompanying notes are an integral part of this balance sheet.
</FN>
</TABLE>
<PAGE>
GABLES RESIDENTIAL TRUST
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
(A) Reflects the April 23, 1996 acquisition of Pin Oak Green and Pin Oak Park
Apartments and the July 26, 1996 acquisition of Morning Grove Apartments,
the related application of the earnest money deposit to the purchase price,
the assumption of a mortgage note payable and the issuance of minority
units of limited partnership interest in the Operating Partnership as
primary consideration for the purchase price of Morning Grove Apartments,
the assumption of certain escrow accounts related to the assumed mortgage
note payable in connection with the acquisition of Morning Grove
Apartments, borrowings under the credit facility for the acquisition of Pin
Oak Green and Pin Oak Park Apartments as primary consideration for the
purchase of Pin Oak Green and Pin Oak Park Apartments, and the assumption
of the security deposit and real estate tax liabilities.
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K, into the Company's previously filed
Registration Statements on Form S-8 (File Nos. 333-00618 and 33-83054) and Form
S-3 (File Nos. 33-90032, 33-89000, 33-93672 and 333-40).
/s/ Arthur Andersen LLP
Atlanta, Georgia
August 9, 1996
THE MORNING GROVE APARTMENTS
SHELBY COUNTY, TENNESSEE
AGREEMENT FOR CONTRIBUTION
THIS AGREEMENT FOR CONTRIBUTION ("Agreement"), made and entered into as
of the Effective Date (as hereinafter defined), by and between GABLES REALTY
LIMITED PARTNERSHIP, a Delaware limited partnership ("Gables" or "Partnership")
and its assignees or designees, and MORNING GROVE APARTMENTS, L.L.C., a
Tennessee limited liability company ("Contributor");
W I T N E S S E T H:
WHEREAS, Contributor desires to contribute and convey certain real estate
and personal property to Partnership in return for an ownership interest in
Partnership and admission as a limited partner in Partnership, in a manner to be
treated as a contribution of property to a partnership in exchange for an
interest therein to be governed for tax purposes by Section 721 of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Partnership, in turn, desires to contribute and convey said real
estate and personal property to Gables-Tennessee Properties, a Tennessee general
partnership ("GTP"), and, to that end, requests that Contributor convey said
real estate and personal property directly to GTP;
NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Contributor and Partnership hereby agree as follows:
1. CONVEYANCE OF PROPERTY. Subject to and in accordance with all of the
terms and conditions hereinafter set out, Contributor agrees to contribute to
Partnership, by way of conveying to GTP at Partnership's direction, and
Partnership agrees to cause GTP to accept from Contributor, the following
described property (all of which is herein collectively referred to as the
"Property"):
(a) all that certain real estate more particularly described in
Exhibit "A," attached hereto and incorporated herein by reference, together
with all rights, ways, privileges and easements appurtenant thereto and
Contributor's right, title and interest, if any, in and to all streets,
public or private alleys and public or private ways adjoining or crossing
the same (the "Land");
(b) all of the buildings, structures, fixtures, facilities,
installations and other improvements of every kind and description now or
hereafter in, on, over and under the Land, including, without limitation,
any and all plumbing, air conditioning, heating, ventilating, mechanical,
electrical and other utility systems, parking lots and facilities,
landscaping, roadways, sidewalks, swimming pools and other recreational
facilities, security devices, signs and light fixtures (collectively, the
"Improvements") (the Land and Improvements are collectively referred to
herein as the "Premises");
(c) all furniture, furnishings, fixtures, equipment, machinery,
maintenance vehicles and equipment, tools, parts, recreational equipment,
carpeting, window treatments, stationery and other office supplies, and
other tangible personal property of every kind and description situated in,
on, over and under the Premises or used in connection therewith, owned by
Contributor or in which Contributor otherwise has an interest as a lessee
thereof (to the extent any such lease is, by its terms, assignable without
the consent of any third party) and which is not owned by tenants under the
Leases (as hereinafter defined), together with all replacements and
substitutions therefor (the foregoing, together with the intangible
personal property hereinafter identified, being collectively referred to
herein as the "Personal Property"), including the itemization of Personal
Property attached hereto as Exhibit "B";
(d) all existing surveys, blue prints, drawings, plans and
specifications (including, without limitation, architectural, civil,
structural, electrical, mechanical and plumbing plans and specifications)
and other documentation for or with respect to the Property or any part
thereof which are in Contributor's possession or control; all marketing
artwork, construction drawings, soil tests, environmental reports;
appraisals and police reports which are in Contributor's possession or
control; all available tenant lists and data, correspondence with past,
present and prospective tenants, vendors, suppliers, utility companies and
other third parties, booklets, manuals and promotional and advertising
materials concerning the Property or any part thereof; and such other
existing books, records and documents (including, without limitation, those
relating to ad valorem taxes and leases) used in connection with the
operation of the Property or any part thereof which are in Contributor's
possession or control; and
(e) all right, title and interest of Contributor in and to the Leases
and Service Contracts (as hereinafter defined) and the other intangible
personal property (other than cash and accounts receivable) now or
hereafter owned by Contributor or in which Contributor otherwise has an
interest and used in connection with or arising from the business now or
hereafter conducted on or from the Property or any part thereof, including,
without limitation, claims, choses in action, lease and other contract
rights, names, and, if available, telephone exchange numbers. A summary of
all current tenant leases affecting the Premises or any part thereof (the
"Leases," with such summary being referred to herein as the "Rent Roll"),
including each tenant's name, a description of the space leased, the amount
of rent due and the amount of any security, pet, redecorating or other
deposit paid, the term of each Lease, and a description of any right to
renew or extend each Lease is attached hereto as Exhibit "C." A list of all
employment, union, purchase, service and maintenance agreements, equipment
leases and any other agreements, contracts, licenses and permits (and any
and all amendments thereto) affecting or pertaining in any way to the
Property or any part thereof (collectively, the "Service Contracts") is
attached hereto as Exhibit "D."
2. EARNEST MONEY. (a) Within two (2) days after the Effective Date,
Partnership shall deposit with Lawyer's Title Insurance Corporation
("Escrowee"), the sum of One Hundred Fifty Thousand Dollars ($150,000.00) (the
"Earnest Money"). The Earnest Money shall thereafter be held by Escrowee and be
invested, applied, disbursed or disposed of by Escrowee as provided in this
Agreement and the Earnest Money Escrow Agreement attached hereto as Exhibit "E."
All interest earned on the Earnest Money shall become part of the Earnest Money
to be applied, disbursed or disposed of in the same manner as the Earnest Money.
(b) On the Closing Date (as hereinafter defined), the Earnest Money
shall be delivered by Escrowee to or for the account of Contributor as part
payment of the Price.
3. PRICE AND PAYMENT. (a) The price shall be the sum of Twenty-Five Million
Seven Hundred Thousand Dollars ($25,700,000.00) (the "Price") and shall be
delivered as follows:
(i) The assumption by GTP (which assumption is at the direction of
Partnership) of Contributor's indebtedness (including accrued interest) to
Teachers (as hereinafter defined) to which the Property is subject.
(ii) The admission of Contributor as an Additional Limited Partner [as
defined in that certain First Amended and Restated Agreement of Limited
Partnership of Gables Realty Limited Partnership, dated as of January 26,
1994, as amended (the "Partnership Agreement")] in Partnership and the
issuance by Partnership to Contributor of Partnership Units (as defined in
the Partnership Agreement) and a corresponding Partnership Interest (as
defined in the Partnership Agreement). The number of Partnership Units to
be issued to Contributor pursuant to this Section 3 shall be determined by
dividing $5,700,000.00 the Original Unit Amount (as hereinafter defined) by
the Applicable Price. As used herein, the term "Applicable Price" shall
mean the average closing price of the common shares ("Common Shares") of
beneficial interest of Gables Residential Trust, a Maryland real estate
investment trust ("Gables REIT"), for the twenty (20) trading days
immediately preceding the Closing Date. As used herein, the term "Original
Unit Amount" shall mean the lesser of (A) Five Million Seven Hundred
Thousand Dollars ($5,700,000.00), and (B) the difference between the Price
and the amount of the indebtedness (including accrued interest) to be
assumed by GTP pursuant to Section 3(a)(i) on the Closing Date.
(iii) The balance of the Price, if any, which amount shall equal
$25,700,000.00 less the indebtedness assumed pursuant to Section 3(a)(i)
(including accrued interest) and less the Original Unit Amount, and which
amount is subject to further adjustment, prorations and the application of
the Earnest Money as set forth herein, shall be delivered in cash at
Closing (as hereinafter defined).
(b) Contributor acknowledges that the market price of the Common
Shares may vary considerably between (i) the Effective Date and (ii) the
Closing Date, and, subject to the provisions of Section 17(b)(vi),
Contributor has agreed to assume such risk with respect to the Partnership
Units to be received by Contributor pursuant to Section 3. Such changes in
price may result from changes in prevailing interest rates, industry or
company performance, stock market fluctuations, or other reasons.
(c) In the event Partnership determines that it possesses material,
non-public information about Partnership or Gables REIT as of the Effective
Date that has not been disclosed to Contributor, Partnership will contact
Contributor (but no later than five (5) business days prior to the Closing
Date) to disclose such information (an "Original Units Disclosure"), and
Contributor (i) agrees that it will keep any such information confidential
and will give Partnership a statement acknowledging Contributor's
obligations under applicable securities laws to not trade on or disclose
such information in each case until or unless such information is disclosed
publicly by Partnership or Gables REIT, and (ii) shall have the right
(which must be exercised in writing within three (3) business days of the
date of such Original Units Disclosure) to reduce the number of Partnership
Units to be received by Contributor pursuant to Section 3(a)(ii)
aboveOriginal Unit Amount to an amount less than the Original Unit Amount
as calculated in accordance with the terms of Section 3(a)(ii) above,
including a reduction to NO Dollars ($-0-), and to make a corresponding
increase in the portion of the Price to be paid in cash. The exercise of
any such right by Contributor shall be accompanied by a written statement
by Contributor that it is electing to reduce the Original Unit Amount
solely because of the Original Unit Disclosure.
(d) The following applies to the Partnership Units (and the Common
Shares that may be issued by Gables REIT upon presentation of the
Partnership Units for redemption) that are being offered and may be issued
and sold hereby:
THE SECURITIES OFFERED HEREBY ARE NOT REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR STATE SECURITIES LAWS AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. FOR THIS REASON, AS WELL AS THE
RESTRICTIONS ON TRANSFER OF SUCH SECURITIES DESCRIBED IN THE MATERIAL
ENCLOSED OR PROVIDED IN CONNECTION HEREWITH, AN INVESTOR MAY BE REQUIRED TO
BEAR THE FINANCIAL RISK OF HIS OR HER INVESTMENT IN THE COMPANY FOR AN
INDEFINITE PERIOD OF TIME.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM.
ANY OFFEREE HAVING QUESTIONS REGARDING THIS OFFERING, OR DESIRING ANY
ADDITIONAL INFORMATION OR DOCUMENTS TO VERIFY OR SUPPLEMENT THE INFORMATION
CONTAINED IN THIS MEMORANDUM, SHOULD CONTACT PARTNERSHIP BY CALLING (770)
436-4000.
FOR TENNESSEE INVESTORS:
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF GABLES REIT AND THE PARTNERSHIP AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. EACH OFFEREE SHOULD
CONSULT HIS OR HER OWN INVESTMENT ADVISOR, LEGAL COUNSEL AND TAX ADVISOR AS
TO THE BUSINESS, LEGAL, TAX AND RELATED MATTERS CONCERNING HIS OR HER
INVESTMENT.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO THE REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD
BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(e) It is hereby acknowledged that, except as otherwise provided in
this Section 3(e), Contributor, in its capacity as a holder of Partnership
Units (as hereinafter defined), will receive a full quarterly distribution
each quarter for which Contributor is a holder of Partnership Units on the
relevant holder of record date. The quarterly distribution rate, the holder
of record date and the distribution payment date are determined and
declared by Partnership on a quarterly basis. It is also acknowledged that
Contributor should not be entitled to the portion of the first quarterly
distribution to be paid to Contributor related to the period from the first
day of the quarter to the Closing Date. Accordingly, the first quarterly
distribution to be paid to Contributor will be prorated at Closing. The
prorated portion of the first quarterly distribution that Contributor is
entitled to receive (the "Prorated Distribution") shall be calculated by
multiplying (i) the first quarterly distribution (equal to the number of
Partnership Units issued to Contributor multiplied by the quarterly
distribution rate) by (ii) the percentage of the number of days in the
quarter from the Closing Date through the last day of the quarter divided
by the total number of days in the quarter. Such Prorated Distribution
shall be paid in advance to Contributor at Closing. After the Closing Date,
Contributor shall not receive quarterly distributions until the second
distribution date following the Closing Date, at which time Contributor
shall be treated similarly to the other holders of Partnership Units. In
the event the Closing Date occurs prior to the determination and
declaration of the quarterly distribution rate, the most recent quarter's
distribution rate shall be used in the Prorated Distribution calculation at
Closing. Should the actual quarterly distribution rate differ from the
quarterly distribution rate used in the Prorated Distribution calculation,
such differential shall be adjusted for in the first quarterly distribution
made by Gables to holders of Partnership Units following the Closing Date.
4. INSPECTION PERIOD. (a) Partnership shall have until 5:00 p.m., C.S.T.,
on the forty-fifth (45th) day immediately following the Trigger Date (as
hereinafter defined), within which to inspect the Property and review the
assumption documents to be used in connection with the assumption of the
Teachers Loan (as hereinafter defined) (the "Inspection Period"). If for any
reason whatsoever Partnership determines that the Property and said assumption
documents are not suitable for its purposes, in its sole and absolute
discretion, and notifies Contributor in writing of such decision prior to the
expiration of the Inspection Period, this Agreement shall automatically
terminate and the Earnest Money shall be returned to Partnership, less One
Hundred Dollars ($100.00), which Escrowee shall pay to Contributor as due
consideration for this Agreement, and thereafter no party hereto shall have any
rights or obligations under this Agreement, except as otherwise specifically set
forth herein. Partnership's failure to so notify Contributor prior to the
expiration of the Inspection Period shall be deemed a waiver by Partnership of
its right to terminate this Agreement pursuant to this Section 4(a), and this
Agreement shall continue in full force and effect. By its execution hereof,
Partnership confirms to Contributor that the loan documents executed by
Contributor on April 26, 1996 in connection with the initial funding of the
Teachers Loan are acceptable. From the Effective Date through the expiration of
the Inspection Period, Partnership and its agents, engineers, surveyors,
appraisers, auditors and other representatives shall have the right to enter
upon the Property at reasonable times to inspect, examine, survey, obtain
engineering inspections, appraise, and otherwise do that which, in the opinion
of Partnership, is reasonably necessary to determine the boundaries, acreage and
condition of the Property and to determine the suitability of the Property for
the uses intended by Partnership (including, without limitation, inspect, review
and copy any and all documents in the possession or control of Contributor, its
agents, contractors or employees, and which pertain to the construction,
ownership, use, occupancy or operation of the Property or any part thereof).
Also, from the Effective Date through the expiration of the Inspection Period,
Partnership shall have the right to examine all of Contributor's books, files
and records relating in any way to the Property. Contributor shall make such
books, files and records available for examination by Partnership and
Partnership's agents and representatives, who shall have the right to make
copies of such books, files and records and to extract therefrom such
information as Partnership may desire, and who shall have the right to audit and
have certified, thoroughly and completely, all income and expenses, profits and
losses, and operational results of the Property. Partnership shall, and it does
hereby agree to indemnify and hold Contributor, Contributor's property manager
and Contributor's asset manager, harmless from and against any and all claims,
demands, liabilities, judgments, causes of actions, costs, expenses and fees
(including reasonable attorneys' fees and expense incurred on account of any of
the foregoing) arising or in any way relating to any damage or injury to any of
the Property or any person on or about the Premises caused by Partnership or any
employee, agent, representative or consultant of Partnership arising out of
Partnership's inspection of the Property which are not the result of
Contributor's, or its agents, willful misconduct or negligence; provided,
however, Partnership shall not be liable for any consequential or incidental
damages flowing from Partnership's election not to purchase the Property. Except
as otherwise provided in this Agreement, Partnership does hereby covenant and
warrant unto Contributor that it will pay all expenses incurred on account of
any of Partnership's investigations on or about the Property and will promptly
remove any lien or judgment which may hereinafter encumber the Property or any
part thereof on account of such failure to pay such expense.
(b) As soon as possible after the Effective Date, Contributor shall
deliver to Partnership copies of the following which Contributor has in its
possession or under its control relating to the Property: (i) all monthly
and quarterly income and expense statements for the Property; (ii) all
audited annual financial statements for the Property; (iii) the real and
personal property tax assessments and tax bills with respect to the
Property, together with proof of payment thereof, for the past three (3)
tax years; (iv) all available warranties and guaranties, including, without
limitation, the warranties and guaranties specifically set forth in Exhibit
"F" attached hereto; (v) licenses, approvals, entitlements and permits
relating to the development and operation of the Property; (vi) soils,
geological and engineering studies and reports, if any; (vii) maintenance
work orders (or requests) and other maintenance reports, if any; (viii) all
equipment lease agreements, including any and all amendments thereto and
related correspondence; (ix) all other contracts, and any amendments
thereto; (x) any notices of violations of law received by Contributor; (xi)
the standard form lease for the Property, if any; (xii) the management
contract for the Property, and any amendments thereto; (xiii) all
environmental studies and reports; (xiv) certificates of insurance
currently in effect, together with a statement of the premiums payable with
respect thereto; (xv) copies of all Certificates of Occupancy for the
Property; (xvi) all construction documents including site plans, zoning
approvals, building permits, plans and specifications (including, but not
limited to, plans, specifications, drawings and designs for architectural,
civil, structural, mechanical, electrical, plumbing and landscaping);
(xvii) all information and documentation relating in any way to the
annexation of the Property by the City of Memphis, Tennessee; (xviii) all
information and documentation relating in any way to the Louisiana-Pacific
Inner-Seal Siding class action lawsuit; (xix) any document, report or item
not specifically enumerated herein but which has been or will be delivered
to Teachers (as hereinafter defined); (xx) a copy of the general contract
for the construction of the Improvements; and (xxi) all documents executed
in connection with the Teachers Loan and all documents to be used in
connection with GTP's assumption thereof. For purposes of this Agreement,
the term "Trigger Date" shall mean the date on which Partnership shall have
received both the last of the items described in this Section 4(b) and a
written notice from Contributor stating that the item(s) accompanying said
written notice are the last of the items described in this Section 4(b) and
that all of the other items described in this Section 4(b) have been
delivered to Partnership.
(c) The foregoing notwithstanding, in the event this transaction fails
to close for any reason, Partnership shall immediately repair any damage it
or any of its employees, agents, representatives or consultants may have
caused to the Property or any part thereof while conducting any one or more
of the studies, audits, examinations, inspections or other due diligence
activities pursuant to the terms of this Section 4 and return the Property
substantially to its condition existing immediately prior to such damage,
all at Partnership's sole cost and expense. Partnership shall promptly
return to Contributor all information, material, reports, surveys,
appraisals, financial information, books and records and all other
information of and relating to the Property received from Contributor or
any agent, consultant, representative or employee of Contributor or
otherwise compiled by Partnership or any employee, agent, representative or
consultant of Partnership (excluding, however, any internally-generated
documents), together with all copies of any of the foregoing. Partnership
acknowledges that all of the foregoing information, material and reports,
are confidential and proprietary to Contributor, and Partnership has taken
and will continue to take all reasonable actions necessary and proper to
protect Contributor's confidential and proprietary information, material
and reports from any and all unauthorized disclosures to any party other
than the investors, lenders, attorneys and other consultants related to or
retained or consulted by Partnership.
(d) The obligations and indemnifications set forth above shall survive
the Closing and/or any termination of this Agreement and remain fully
enforceable against Partnership for a period of six (6) months from the
Effective Date, at which time all such obligations and indemnifications
shall terminate.
(e) Notwithstanding anything to the contrary set forth in this
Agreement, in the event this Agreement has not been terminated in
accordance with the terms of Section 4(a) above and provided that, as of
the expiration of the Inspection Period, Partnership shall have notified
Contributor that all issues relating in any way to GTP's assumption of
Contributor's permanent loan with Teachers Insurance and Annuity
Association of America ("Teachers") (the "Teachers Loan") have not been
resolved and/or satisfied, as determined by Partnership in its sole and
absolute discretion, then the Inspection Period (as it relates solely to
the assumption of the Teachers Loan) shall be automatically extended until
Partnership notifies Contributor that all issues related to GTP's
assumption of the Teachers Loan have been satisfied, as determined by
Partnership in its sole and absolute discretion; provided, always, however,
that, this Agreement shall automatically terminate on July 31, 1996 unless
the parties hereto expressly agree in writing to the contrary.
5. SURVEY. (a) Within ten (10) days after the Effective Date, Contributor,
at its expense, shall deliver to Partnership an "As-Built" survey (the "Survey")
of the Premises prepared by a surveyor selected by Contributor and reasonably
acceptable to Partnership. Said Survey shall be sufficient to remove the
standard survey exception found in ALTA title insurance policies, shall indicate
the exact metes, bounds and acreage of the Premises, shall be a class "A" survey
and shall show the exact location of all encroachments, easements, utility
lines, rights-of-way, set-back lines and encumbrances affecting the Premises.
The Survey also shall indicate the number and location of all surface parking
spaces, carports, garages and storage buildings located on the Property. The
Survey shall be certified to Contributor, Partnership, GTP and Title Insurer (as
hereinafter defined), and the certification on the Survey shall include: (i) a
certification that no part of the Premises is located within an area known as a
"special flood hazard area" as defined in the Flood Disaster Protection Act of
1973; (ii) a certification that there are no visible encumbrances or
restrictions on the Premises other than those shown on the Survey; (iii) a
certification that all easements, restrictions, set back lines and other matters
which are reflected on the Title Report (as hereinafter defined) are shown on
the Survey; and (iv) all other certifications reasonably required by Partnership
or Title Insurer. After said Survey shall have been completed and approved by
Partnership as set forth below, Exhibit "A" hereto shall automatically be
amended to conform to the legal description appearing in said Survey, and,
thereafter, said new legal description shall be the legal description of the
Premises for all purposes relating to this Agreement. At the request of either
Contributor or Partnership, the parties hereto shall execute and deliver a
written amendment to this Agreement setting forth said new legal description;
however, no such written amendment shall be necessary.
(b) If the Survey (i) is for good cause not acceptable to Title
Insurer; or (ii) shows easements, encroachments or other conditions that
are not approved by Partnership or if the legal description contained in
the Survey is unacceptable to Partnership for any reasonable reason, then
Partnership shall notify Contributor in writing of such Survey objections
on or before the expiration of the Inspection Period. Within three (3) days
of its receipt of Partnership's Survey objections, Contributor shall
deliver written notice to Partnership stating which of Partnership's Survey
objections Contributor elects to either cure or satisfy on or before
Closing and which of such objections Contributor either will not or cannot
cure (those which Contributor either cannot or will not cure being
hereinafter referred to as "Disputed Survey Objections"). Contributor's
failure to respond within said three (3) day period shall be deemed a
refusal by Contributor to cure or satisfy Partnership's Survey objections.
In the event Contributor notifies Partnership of any Disputed Survey
Objections, Partnership may either (A) waive any such Disputed Survey
Objection and proceed to Closing with no reduction in the Price, in which
event each such Disputed Survey Objection shall become a Permitted
Exception (as hereinafter defined), or (B) terminate this Agreement and
receive a full refund of the Earnest Money, less One Hundred Dollars
($100.00), which Escrowee shall pay to Contributor as due consideration for
this Agreement, and neither party shall have any further rights or
obligations hereunder, except as otherwise expressly set forth herein. If
any Survey objection which Contributor elects to cure is not cured or
satisfied by Contributor prior to Closing, Partnership shall be entitled to
the rights and remedies set forth in this Section 5(b), unless such Survey
objection results from a default by Contributor under this Agreement in
which case Partnership shall have the right to exercise its remedies under
Section 19 hereof. If Contributor does so cure or satisfy such Survey
objection, then this Agreement shall continue in full force and effect.
6. TITLE. (a) Contributor covenants to convey to GTP (which conveyance
is at the direction of, and shall constitute a contribution by Contributor to,
Partnership) at Closing good and marketable title in and to the Property. For
the purposes of this Agreement, "good and marketable title" shall mean, with
respect to the tangible Personal Property and the items covered by Sections 1(d)
and 1(e) hereof, ownership which is free of all claims, liens and encumbrances
of any kind or nature whatsoever other than the Permitted Exceptions; and, with
respect to the Premises, fee simple ownership which is insurable by Title
Insurer at the then current standard rates under its standard form of owner's
policy of title insurance (1992 ALTA Owner's Policy Form), with the standard
printed exceptions therein deleted and without exception other than for the
Permitted Exceptions and with such affirmative insurance or endorsements as
Partnership shall reasonably require. The issuance by Title Insurer of a title
insurance policy which complies with this Section 6 (the "Title Policy") shall
be conclusive evidence of delivery of fee simple title acceptable to GTP.
(b) Within ten (10) days after the Effective Date, Contributor, at its
expense, shall obtain or cause to be obtained a title insurance commitment
issued by Escrowee (sometimes also referred to herein as "Title Insurer")
setting forth the condition of title to the Premises and the requirements
to be fulfilled as a condition to insuring good and marketable title to the
Premises, and true, correct and legible copies of all instruments creating
or evidencing exceptions to title (collectively, the "Title Report") and
shall immediately deliver a copy to Partnership upon receipt of same.
(c) Except as expressly permitted by the terms hereof, at or prior to
Closing, Contributor shall comply with the requirements to be fulfilled and
which may be fulfilled by Contributor without the payment of money, unless
otherwise required to be fulfilled by this Agreement, as a condition to
Title Insurer insuring good and marketable title to the Premises,
including, but not limited to, paying all taxes, assessments and any other
monetary liens of sums certain which constitute a lien upon the Premises
(other than those not then due and payable for the current calendar year or
those arising from Partnership's inspection of the Property) and paying all
indebtedness secured by the Premises (excluding, however, any indebtedness
expressly assumed pursuant to the terms hereof).
(d) Partnership shall have until the expiration of the Inspection
Period to give written notice to Contributor specifying any objections
Partnership may have to the Title Report, and/or the Survey (those
exceptions to either the Survey or the Title Report to which Partnership
does not object prior to said date are referred to herein as "Permitted
Exceptions"); provided, however, Partnership hereby agrees that the
contract between Contributor and Institutional Network Communications, a
division of Telemedia Communications, Inc., dated November 8, 1993, as
amended on April 22, 1994 and June 12, 1995, regarding cable service for
the Property is acceptable and shall be considered a Permitted Exception
for purposes of this Agreement. Within three (3) days of its receipt of
Partnership's title objections, Contributor shall deliver written notice to
Partnership stating which of such title objections Contributor elects to
either cure or satisfy on or before Closing and which of the title
objections Contributor either will not or cannot cure (those which
Contributor either cannot or will not cure being hereinafter referred to as
"Disputed Title Objections"). Contributor's failure to respond within said
three (3) day period shall be deemed a refusal by Contributor to cure or
satisfy Partnership's title objections. In the event Contributor notifies
Partnership of any Disputed Title Objections, Partnership may either (i)
waive any such Disputed Title Objection and proceed to Closing with no
reduction in the Price, in which event such Disputed Title Objection shall
become a Permitted Exception, or (ii) terminate this Agreement and receive
a full refund of the Earnest Money, less One Hundred Dollars ($100.00),
which Escrowee shall pay to Contributor as due consideration for this
Agreement, and neither party shall have any further rights or obligations
hereunder, except as otherwise expressly set forth herein. If any title
objection which Contributor elects to cure is not cured or satisfied by
Contributor prior to Closing, Partnership shall be entitled to the rights
and remedies set forth in this Section 6(d), unless such title objection
results from a default by Contributor under this Agreement, in which case
Partnership shall have the right to exercise its remedies under Section 19
hereof. If Contributor does so cure or satisfy such title objection, then
this Agreement shall continue in full force and effect.
(e) If, after the condition of title to the Premises has been approved
by Partnership in accordance with the terms of Sections 5 and 6 hereof, the
Premises becomes encumbered or subject to any matter other than a Permitted
Exception or a matter created by Partnership or with Partnership's written
consent, or any update or certification to the Survey or the Title Report
that may be required by Title Insurer or requested by Partnership indicates
that the Premises has become subject to any matter other than the Permitted
Exceptions or a matter created by Partnership or with Partnership's written
consent, and Contributor is unable or unwilling to remove any such matter
prior to Closing, then Partnership shall have the option to either (i)
waive such matter and proceed to Closing with no reduction in the Price, or
(ii) terminate this Agreement and receive a full refund of the Earnest
Money, less One Hundred Dollars ($100.00), which Escrowee shall pay to
Contributor as due consideration for this Agreement, and thereafter neither
party shall have any further rights or obligations hereunder, except as
otherwise expressly set forth herein, unless such matter results from a
default by Contributor under this Agreement, in which case Partnership
shall have the right to exercise its remedies under Section 19 hereof.
(f) By its execution hereof, Contributor acknowledges that it has
received and reviewed a copy of that certain letter agreement (the "LTIC
Letter") executed by Title Insurer and dated April 26, 1996 regarding Title
Insurer's willingness to issue an Owner's Policy naming GTP as the insured,
at a simultaneous issue rate. By its execution hereof, Partnership
acknowledges that Title Insurer's obligations under the LTIC Letter are
subject to the satisfaction of certain conditions precedent therein
specified. Additionally, Contributor agrees to cooperate with Partnership
and GTP to enable GTP to obtain the benefits offered by Title Insurer in
the LTIC Letter, such cooperation to include, but not be limited to,
surrendering for cancellation the Owner's Policy Contributor received in
connection with the closing of the Teachers Loan.
7. CLOSING. (a) Subject to all conditions precedent set forth herein and
the automatic extension provision of Section 7(b) below, and provided that this
Agreement has not been previously terminated in accordance with the terms
hereof, the "Closing" of the transaction contemplated hereby (that is, the
payment of the Price, the transfer of title to the Property, and the
satisfaction of all other terms and conditions of this Agreement) shall be held
at the offices of Baker, Donelson, Bearman & Caldwell, 165 Madison Avenue, Suite
1800, Memphis, Tennessee 38103, and shall commence at 10:00 a.m., C.S.T., on the
fifteenth (15th) day following the expiration of the Inspection Period, or on
such other date as Partnership and Contributor may mutually agree in writing
(the "Closing Date").
(b) Notwithstanding the terms and provisions of Section 7(a) above, in
the event the effective monthly rental revenue (i.e., rental revenue due
and collected for the current month, net of concessions, calculated over
the complete term of the Leases in place during the specific calendar month
for which the revenue test is being calculated) generated by the Property
has not equalled or exceeded Two Hundred Eighty-Nine Thousand Four Hundred
Forty-Six Dollars ($289,446.00) (the "Target Revenue") for at least one (1)
calendar month preceding the Closing Date, the Closing Date automatically
shall be extended until the fifth (5th) business day following the date on
which the Property shall have generated the Target Revenue; provided,
however, in the event the Target Revenue has not been reached by July 31,
1996, this Agreement shall automatically terminate, and the Escrowee shall
return the Escrow Money to Partnership, less One Hundred Dollars ($100.00),
which Escrowee shall pay to Contributor as due consideration for this
Agreement, and thereafter neither party shall have any further rights or
obligations hereunder, except as otherwise expressly set forth herein.
(c) Notwithstanding anything to the contrary set forth in this Section
7, Partnership, after the original Closing Date but prior to July 31, 1996,
shall have the unconditional right to require Contributor to close the
transaction contemplated hereby even though the Target Revenue has not been
achieved. In order to exercise this right, Partnership shall deliver
written notice thereof to Contributor and the Closing shall occur seven (7)
days following Contributor's receipt of Partnership's notice.
8. CLOSING PRORATIONS AND ADJUSTMENTS. (a) All matters involving prorations
or adjustments to be made in connection with the Closing and not specifically
provided for in some other provision of this Agreement shall be prorated as of
midnight of the day before the Closing Date (the "Adjustment Date").
(b) Such prorations or adjustments shall be made as follows:
(i) (A) At or before Closing, all ad valorem taxes and any other
similar assessments (hereinafter collectively referred to as "Taxes"),
if any, with respect to the Property for the calendar year 1995 or any
year prior to 1995 shall be paid by Contributor. Any Taxes for 1996
shall be prorated, based upon the amount of such Taxes for 1996, if
available, or if not, an estimate of the Taxes based on Taxes due for
1995. If the actual amount of such Taxes for 1996 is more or less than
the amount of such estimated Taxes, GTP and Contributor, promptly upon
receipt by either of them of the notice or bill for such Taxes, shall
make the proper adjustment so that the proration will be accurate,
based upon the actual amount of such Taxes for 1996, and payment shall
be made promptly by Contributor or GTP, whichever shall be required to
make such payment, to the other party for the purpose of making such
adjustment. After the Closing, GTP shall have the right, in the name
of Contributor and/or GTP, to contest and appeal any such Taxes or
assessment. If GTP obtains a refund of any Taxes or assessments that
have been previously paid, upon receipt thereof GTP shall pay to
Contributor a prorated portion of such refund, net of costs (including
attorney's fees) of obtaining such refund, relating to the period
during which Contributor owned the Property. The parties further agree
that any portion of the 1996 taxes (together with any amount escrowed
for insurance premiums) which have been placed in escrow with Teachers
pursuant to the Teachers Loan (the "Teachers Tax and Insurance
Escrow") shall be considered and credited to Contributor when the
proration of ad valorem taxes required hereby is undertaken.
(B) As of the Effective Date and except for ad valorem real
property taxes paid (and to be paid) to Shelby County, Tennessee,
ad valorem real property taxes are not levied with respect to the
Property by the Cities of Memphis or Germantown, Tennessee, or
any other municipality or political subdivision of the State of
Tennessee ("City Taxes"). Subject to the terms and conditions of
this Section 8(b)(i)(B), and in the event the City Taxes are
levied on the Property, Contributor hereby agrees to pay the City
Taxes for the tax years 1996-2000; provided, however,
Contributor's liability for the City Taxes, in no event, shall
exceed One Million Dollars ($1,000,000.00). Additionally,
Contributor's potential liability for the payment of the City
Taxes shall decrease on a yearly basis for each year in which the
City Taxes are not required to be paid with respect to the
Property, such decrease to be in accordance with the schedule
attached hereto as Exhibit "G." Moreover, Phillip H. McNeill,
Sr., Clyde L. Patton, Jr. and Bruce C. Taylor (collectively, the
"Principals"), jointly and severally, shall guarantee
Contributor's obligation to pay the City Taxes in accordance with
the terms hereof. Each of the Principals shall execute and
deliver to GTP at Closing a guaranty (each a "City Taxes
Guaranty") evidencing the foregoing obligation. The form of the
City Taxes Guaranty is attached hereto as Exhibit "H."
(ii) All costs and expenses of operating the Property which have
accrued as of the Adjustment Date shall be paid by Contributor, on or
before the Closing Date, or promptly upon receipt of bills therefor.
All costs and expenses of operating the Property which are accrued on
or after the Adjustment Date shall be paid by GTP. Contributor shall
transfer or credit to GTP at Closing an amount equal to the aggregate
amount of all security, pet, redecorating or other deposits refundable
to tenants under the Leases. GTP will accept such transfer or credit
of funds and agree to hold harmless and indemnify Contributor for any
claim, liability and/or expense relating thereto and accruing after
the Closing Date.
(iii) Rents shall be prorated to the Adjustment Date based upon
actual rents received for the month of Closing. After Closing, GTP
shall use its reasonable efforts to collect delinquent rents, and pay
the portion attributable to the period Contributor owned the Property
to Contributor upon collection. All rent payments received shall be
applied first to the most recent rent payments coming due, unless
otherwise directed by the payor thereof. Any rents received by
Contributor after the Closing from any collection agencies retained by
Contributor before the Closing shall be prorated to the Adjustment
Date; provided, however, that neither Contributor nor any such
collection agency shall have the authority to compromise any rent
settlement after the Closing Date or to dispossess any tenant without
the prior written approval of GTP.
(iv) All receivables from the Property which are accrued as of
the Adjustment Date, to the extent collected, shall be paid to
Contributor or, if collected by GTP after the Adjustment Date, shall
be promptly paid over as and when collected, to Contributor. All sums
collected by GTP shall be first applied to accrued obligations due to
GTP, if any, of the tenant making such payment.
(v) Final readings and final billings for utilities shall be made
as of the Adjustment Date. Contributor shall pay all outstanding
amounts due as of such time. Contributor shall also be entitled to,
and may, following Closing, obtain any applicable refunds of security
deposits with any utility companies. If final readings and billings
cannot be obtained as of Closing, the final bills, when received,
shall be prorated based upon the number of days Contributor owned the
Property in such final billing period. Partnership or GTP shall, at or
prior to the Closing, make any deposits required for utilities and
other services of the Property.
(vi) Partnership shall have the right, in the exercise of its
sole discretion, to approve all Service Contracts pertaining to the
Property which shall survive the Closing. Contributor shall pay all
charges for deliveries made and services rendered up to the Adjustment
Date and any date after the Adjustment Date if the deliveries made and
services rendered thereafter relate to Service Contracts not accepted
in the manner described herein and which were not terminated or
cancelled by Contributor as required by the terms hereof. Any items on
order but undelivered as of the Adjustment Date shall be reviewed and
accepted or cancelled as desired by Partnership; only those items
accepted by Partnership shall be paid for by Partnership or GTP. On or
before the expiration of the Inspection Period, Partnership shall
deliver written notice to Contributor specifying which of the Service
Contracts described in Exhibit "D" attached hereto will be accepted by
Partnership. Partnership hereby reserves the right to approve or
disapprove any and all other Service Contracts which may affect the
Property. Those Service Contracts not accepted by Partnership shall be
terminated or cancelled by Contributor on or before the Closing Date.
Partnership's failure to notify Contributor as required in this
Section 8(b)(vi) shall be deemed a rejection by Partnership of all of
the Service Contracts. Notwithstanding anything to the contrary set
forth herein, in no event shall Partnership or GTP be bound by the
terms of the contracts between Contributor and its management company
and Contributor and its asset management company which are in effect
as of the Effective Date.
(vii) Contributor shall pay at Closing all sales and use taxes
and similar taxes imposed by the State of Tennessee or any political
subdivision thereof on any lease or tenancy for the period prior to
the Closing Date. Furthermore, if any such sales tax, use tax or other
similar tax shall be assessed after the Closing Date on any Lease or
tenancy for the period of time prior to the Closing Date, Contributor
agrees to pay or reimburse GTP for the same promptly upon
Contributor's receipt of GTP's written request therefor.
(viii) Notwithstanding anything to the contrary contained in this
Agreement, Contributor shall pay any management fee due as of the
Closing Date on account of the Property to its property management
company.
(ix) At Closing, Partnership shall pay Contributor an amount
equal to one-half (1/2) of the then existing balance of the escrow
account (the "Repair Reserve") established by Contributor pursuant to
that certain Collateral Security and Escrow Agreement dated April 26,
1996, and executed by Contributor in connection with the Teachers
Loan.
(c) Notwithstanding anything to the contrary set forth in this
Agreement, if pursuant to the provisions of this Agreement and the
adjustments and prorations required hereby, the proceeds from the
transactions contemplated hereby due to be delivered to Contributor are
less than $25,700,000.00, all downward adjustments in the portion of the
Price to be delivered to Contributor at Closing shall be made first from
the cash to be delivered to Contributor pursuant to Section 3(a)(iii)
hereof and second from the Partnership Units to be delivered to Contributor
pursuant to Section 3(a)(ii) hereof. For purposes of making this
adjustment, the Partnership Units shall be valued by using the Applicable
Price.
(d) The provisions of this Section 8 shall survive the Closing and
remain fully enforceable against Partnership, GTP, Contributor and the
Principals.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) In order to induce
Partnership to consummate the transaction contemplated hereby, Contributor and
the Principals hereby jointly and severally represent, warrant and covenant to
Partnership and GTP that the following are true statements as of the Effective
Date, and Contributor and the Principals agree to deliver a certificate at
Closing specifying any changes occurring between the Effective Date and the
Closing, in accordance with Section 12 hereof.
(i) Contributor is a validly organized and existing Tennessee
Limited Liability Company with full power and authority to enter into
and fully perform and comply with the terms of this Agreement, and the
Principals, as individuals, constitute all of the members of
Contributor.
(ii) Contributor is the sole owner of, and has good and
marketable fee simple title to, the Property, and the Property is free
and clear of all liens, encumbrances, claims, demands, easements,
covenants, conditions, restrictions and encroachments of any kind or
nature other than the Permitted Exceptions. Contributor will not enter
into any agreement to lease, sell, mortgage or otherwise encumber or
dispose of its interest in the Property or any part thereof, except
for this Agreement, the Permitted Exceptions, or as otherwise
specifically set forth in this Agreement.
(iii) No written notice of default that remains uncured and that
would have the effect of binding Partnership or GTP after the Closing
has been received by Contributor under any agreement, instrument or
document to which it is a party or under any policy of insurance
affecting the Property.
(iv) Contributor has not received any written notice from a
Governmental Authority (as hereinafter defined), and otherwise has no
knowledge, of the violation of any applicable federal, state, county,
municipal, or other governmental or quasi-governmental statute, law,
ordinance, judgment, writ, decree, injunction, rule, ruling,
regulation, restriction or order (all of the foregoing being
hereinafter collectively referred to as the "Legal Requirements")
affecting the Property or the construction, development, use,
operation, maintenance or management thereof, which violation has not
been corrected.
(v) Contributor has not received written notice of any judgment,
writ, decree, injunction or order entered in any action, suit or
proceeding brought by any federal, state, county, municipal or other
governmental or quasi-governmental agency, department, board,
commission, bureau, or other entity or instrumentality (each, a
"Governmental Authority") or any other person enjoining or restraining
it in respect of any business practice or the conduct of business in
any respect relating to the Property which, if not complied with,
would materially and adversely affect the present use or operation of
the Property.
(vi) Contributor has not received written notice of any action,
suit, or other proceeding that is pending nor is there any action,
suit or proceeding pending, contemplated or threatened by or against
Contributor, the Principals or the property which would, if adversely
determined, materially and adversely affect the rights of Partnership
or GTP, or Contributor's or the Principal's ability to perform under
this Agreement, any agreement required hereunder to be executed or
delivered or any transaction contemplated hereby and thereby.
(vii) No written notice has been received by Contributor with
respect to any requirement by any insurance company which has issued
an insurance policy with respect to the Property or by any board of
fire underwriters or other body exercising similar functions, as to
which there has been no compliance.
(viii) Contributor has not received written notice, and otherwise
has no knowledge that any consent, authorization, variance, license,
permit or approval (collectively, the "Approvals") relating to or
required for the operation or occupancy of the Property and required
in order for Contributor to carry out the transaction contemplated
hereby has not been validly and unconditionally obtained (or, if there
existed any condition with respect thereto, such condition has been
satisfied) or is not in full force and effect. True, accurate and
complete copies of all Approvals in Contributor's possession will be
delivered to Partnership prior to the Closing. All fees, charges, and
other payments in connection with the Approvals have been paid in
full. Without the prior written approval of Partnership, as of
Closing, there will be no application for any Approval which is
pending.
(ix) Contributor has delivered to Partnership true, accurate and
complete copies of the Service Contracts.
(x) Contributor has not done anything to cause any hook-up or
connection fee, non-recurrent charge or assessment in connection with
any utility serving the Property to be payable after the Closing.
(xi) Other than the Leases and the Permitted Exceptions, there
are no other lease amendments or agreements between Contributor and
the tenants under the Leases. Contributor has made and knows of no
other agreements (whether written or oral) in the nature of a lease
affecting the Property.
(xii) A true and accurate Rent Roll for the Property is attached
hereto as Exhibit "C," and a true and accurate Rent Roll for the
Property updated as of the Closing Date, satisfactory to Partnership
in its discretion, will be delivered to Partnership and GTP at
Closing. Except as otherwise expressly disclosed on the attached Rent
Roll and the updated Rent Roll to be delivered to and approved by
Partnership and GTP (in their sole discretion) at Closing, Contributor
represents and warrants that (A) those tenants referenced in the Rent
Roll are in occupancy of the Property pursuant to the Leases, (B) the
tenants have commenced to pay full rent on a monthly basis under the
Leases, (C) no advance payment or prepayment of rents, fees, or other
charges for more than the current month have been made under the
Leases, (D) there are no security deposits (whether in the form of
cash or other forms of deposits) or other monies which have been
received or are being held by or on behalf of Contributor for the
account of the tenants pursuant to the Leases which have not been
credited or transferred to GTP, (E) the tenants are not in arrears in
the payment of any rent or any sum due under the Leases, (F) all rents
and other sums payable under the Leases were paid without offset,
concession, rebate, abatement, deduction or allowance, (G) the Leases
are valid and binding on the parties thereto and are in full force and
effect, (H) Contributor has neither given, caused to be given, nor
received any outstanding notice that any default not heretofore owed
exists under any of the Leases, and Contributor has no knowledge of
any uncured event of default or event which, with the passage of time
or the giving of notice or both, would constitute an event of default
under the Leases, and (I) except for the Leases, neither Contributor
nor anyone acting on its behalf, has entered into or made or given any
binding commitment or option to lease space with respect to the
Property, or any portion thereof.
(xiii) Contributor has not received written notice from any
tenant, and otherwise has no knowledge, that any tenant disputes the
computation of any rents or other sums payable pursuant to a Lease or
claims a breach of any covenant, representation or warranty made by
the Contributor or its agent under any Lease.
(xiv) All brokerage commissions, finder's fees, and similar
payments, however denominated, due or owing with respect to any of the
Leases or otherwise with respect to the Property have been paid.
(xv) As of the Closing Date and except as required in connection
with the Teachers Loan, no right or interest of Contributor under any
of the Leases will be assigned, mortgaged, hypothecated, or otherwise
encumbered by or through Contributor.
(xvi) No proceeding seeking reduction in real estate taxes
imposed upon the Property or the assessed valuation of any portion
thereof (the "Tax Assessment Proceeding") have been instituted by
Contributor which are currently pending.
(xvii) There are no employees of Contributor employed in
connection with the use, operation, maintenance or management of the
Property whom Partnership or GTP would be obligated to retain or
compensate or provide benefits for after the Closing Date.
(xviii) Except as disclosed in any report, study, audit, or other
materials delivered to Partnership by Contributor: (A) no Hazardous
Substance (as hereinafter defined) is located on the property in
violation of Environmental Laws (as hereinafter defined); (B) no
underground storage tanks are located on the Property; (C) the
Property has never been used as a dump for waste material; (D) the
Property complies with, and at all times has complied with, all
applicable Environmental Laws; (E) the materials incorporated into the
Premises (including, but not limited to, any landfill) do not include
asbestos, urea formaldehyde, lead or other materials generally known
to be potentially toxic; and (F) there is not and has never been
landfill containing decomposable material, petroleum wells, mineral
bearing mines, sewage treatment facilities, underground storage tanks,
radon or other toxic emissions within 2,000 feet of any boundary of
the Land.
As used herein, a "Hazardous Substance" shall be defined as any
substance which (1) is designated as hazardous, toxic or dangerous or
similarly designated under any Environmental Laws, (2) is regulated
under any Environmental Laws or by any governmental or
quasi-governmental agency, or (3) could be a hazard to health, safety
or property values. Without limiting the foregoing, the term
"Hazardous Substance" shall also include underground storage tanks,
asbestos, urea formaldehyde insulation, polychlorinated biphenyls
(PCBs), dioxins and petroleum products. Moreover, the term "Hazardous
Substance" also shall mean any form of explosive, radioactive
material, hazardous waste, toxic substance, or related material, any
material which is in fact hazardous to life or property and any other
substances and/or material defined or designated as a hazardous or
toxic substance, or waste by any federal, state or local law or
environmental statute, regulation, or ordinance.
As used herein, the term "Environmental Laws" means all law
relating to hazardous waste, chemical substances or mixtures or
hazardous, toxic, dangerous or unhealthy substances or conditions or
relating to the interaction of the use or ownership of property and
the environment, whether such law is: (1) criminal or civil, (2)
federal, state or local, or (3) statutory, common law or
administrative rules, regulations, orders and/or decrees.
(xix) Neither the execution, delivery and performance of this
Agreement or any other agreement contemplated hereunder nor the
carrying out by Contributor of the transaction contemplated hereby or
thereby will conflict with, result in a breach of, constitute a
default under or accelerate the maturity of (A) any applicable
provision of Contributor's organizational documents or other governing
instrument, (B) any applicable Legal Requirement affecting Contributor
or the Property or (C) any other agreement, indenture or instrument to
which Contributor is a party or by which Contributor or all or any
portion of the Property is or may be bound or affected. No consent of
any third party is required in order for Contributor to enter into
this Agreement or any other agreement contemplated hereunder or for
Contributor to carry out the transaction contemplated hereby or
thereby.
(xx) There are no outstanding or unpaid judgments against
Contributor with respect to the Property or against the Property.
(xxi) Contributor knows of no (A) pending or contemplated
condemnation proceeding affecting, or which may affect, all or any
portion of the Property, (B) proposed or pending proceeding to change
or redefine the zoning classification of all or any portion of the
Property, or (C) proposed change in road patterns or grades which may
adversely affect access to the roads providing a means of ingress to
or egress from the Property.
(xxii) The construction, operation, and present use of the
Property comply in all respects with all applicable zoning statutes,
ordinances, regulations, and laws including, without limitation, the
Americans with Disabilities Act and all applicable fair housing laws,
rules, ordinances and regulations (collectively, the "Classification")
and restrictions, covenants, easements, and cross-easements affecting
the Property. As of Closing, the Classification is not subject to any
conditional variance or conditional permit granted with respect to the
Property, and does not require any further approval nor any other
action. The conveyance of the Property to GTP (which conveyance is at
the direction of, and shall constitute a contribution by Contributor
to, Partnership) for the uses and in the manner now prevailing will
not affect the Classification.
(xxiii) The Property, and all components thereof, including, but
not limited to, parking lots, electrical systems, roofs,
air-conditioning systems, plumbing systems and heating systems are
and, on the Closing Date, will be in good condition and repair and in
working order, will perform the work or function for which intended,
will be free of any and all physical, structural and/or mechanical
defects, and will comply with all applicable building codes, rules and
regulations.
(xxiv) All necessary utilities required for the present use,
operation, maintenance, and management of the Property, as fully
occupied, including, without limitation, electricity, natural gas,
storm sewer and drainage, sanitary sewer, water, fire protection
facilities, telephone, and similar systems, have been completed, are
in good working order, and comply with all Legal Requirements, and all
fees and assessments associated therewith, based on current and
projected usage, are paid in full or are payable by tenants.
(xxv) All utilities required for the use, operation, maintenance
and management of the Property either enter the Property through
adjoining public streets or, if they pass through adjoining private
land, do so in accordance with valid public easements or private
easements inuring to the benefit of GTP.
(xxvi) The improvements include sufficient parking spaces to
comply with: (A) all Legal Requirements, including, but not limited
to, zoning requirements; and (B) all parking commitments contained in
the Leases.
(xxvii) True, accurate and complete copies of all personal
property tax bills, if any, with respect to the Property payable for
the currently and immediately preceding tax year have been delivered
by Contributor to Partnership. All personal property taxes due and
payable with respect to the Property and all interest and penalties
payable with respect thereto, if any, have been fully paid.
(xxviii) Contributor has good title to all of the Personal
Property, it is all in good working order, none of it is leased or
subject to any liens or conditional sales contracts, and the Personal
Property is sufficient to comply with all requirements of the Leases
for the Property.
(xxix) The Improvements, including all landscaping, have been
completed and there are no known interior or exterior structural
defects in the Improvements or any material defect in the plumbing,
electrical, mechanical, heating, ventilating or air conditioning
systems or other systems. All such systems are in good working order,
and all roofs and basements, if any, of the Improvements are in good
condition and free of known leaks.
(xxx) All oil and/or gas burners, incinerators, furnaces and
other fuel burning devises at the Property comply in all material
respects with all Legal Requirements, including, without limitation,
all air pollution and environmental control laws, orders, rules and
regulations.
(xxxi) There has been no damage to any portion of the Property
caused by fire or casualty which has not been fully repaired or
restored.
(xxxii) All conditions and requirements of all Approvals have
been fully satisfied. Except for the existing Approvals, there are no
Approvals required to fully and completely use, operate, maintain and
manage the Property as the same is now used, operated, maintained and
managed. The consummation of the transaction contemplated hereby will
not increase any obligations or affect any time periods under any
existing Approval or cause any existing Approval to lapse. All of the
Approvals are transferable with the Property to GTP without charge
(which transfer of Approvals is at the direction of, and shall
constitute a contribution by Contributor to, Partnership).
(xxxiii) All representations contained in the Leases made by the
Contributor or its agents, as the landlord thereunder, are true and
correct.
(xxxiv) There is no pending imposition of any special or other
assessments for public betterments or otherwise, any proposed or
pending special assessments affecting the Property or any portion
thereof, or any penalties or interest due with respect to real estate
taxes assessed against all or any portion of the Property that are
payable by the owner of the Property or could result in a lien against
the Property.
(xxxv) The Property is in compliance with any applicable
restrictive or protective covenants or conditions of record, and with
any conditions or restrictions in any deed of record.
(xxxvi) No part of the Property contains a cemetery or burial
ground and no part of the Property has been designated as wetlands
under any federal, state or local law or regulation or by any
governmental agency.
(xxxvii) Contributor and the Principals have had an opportunity
to review the Partnership Agreement and other materials relating to
Gables and Gables REIT and understand the risks of, and other
considerations relating to, the purchase of the Partnership Units and
Common Shares. Contributor and the Principals, by reason of their
individual business and financial experience, together with the
business and financial experience of those persons, if any, retained
by them to represent or advise them with respect to the investment in
the Partnership Units and Common Shares (A) have such knowledge,
sophistication and experience in financial and business matters and in
making investment decisions of this type that Contributor and the
Principals are capable of evaluating the merits and risks of an
investment in Gables and Gables REIT and of making an informed
investment decision, (B) are capable of protecting their own interest
or have engaged representatives or advisors to assist them in
protecting their interest, and (C) are capable of bearing the economic
risk of such investment. If Contributor and/or the Principals have
retained a person to represent or advise them with respect to their
investment in Partnership Units and Common Shares that may be made
hereby, then, at Gables' request, Contributor and/or the Principals,
as the case may be, shall, prior to or at Closing, (1) acknowledge in
writing such representation, and (2) cause such representative or
advisor to deliver a certificate to Gables containing such
representations as are reasonably requested by Gables.
(xxxviii) Contributor and the Principals understand that an
investment in Gables and Gables REIT involves substantial risks.
Contributor and the Principals have been given the opportunity to make
a thorough investigation of the proposed activities of Gables and
Gables REIT and have been furnished with materials relating to Gables
and Gables REIT and its proposed activities. Contributor and the
Principals have been afforded the opportunity to obtain any additional
information deemed necessary by Contributor and/or the Principals, as
the case may be, to verify the accuracy of any representations made or
information conveyed to Contributor and the Principals. Contributor
and the Principals confirm that all documents, records, and books
pertaining to their investment in Gables and Gables REIT and requested
by Contributor and/or the Principals have been made available or
delivered to Contributor and/or the Principals, as the case may be.
Contributor and the Principals have had an opportunity to ask
questions of and receive answers from Gables and Gables REIT, or from
a person(s) or entity acting on Gables' and Gables REIT's behalf
concerning the terms and conditions of this investment.
(xxxix) The Partnership Units to be issued to Contributor in
connection with the transactions contemplated hereby, and any Common
Shares of Gables REIT subsequently issued in consideration therefor,
will be acquired by Contributor for its own account for investment
only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any
participation therein, without prejudice, however, to Contributor's
right (subject to the terms of the Partnership Units) at all times to
(A) sell or otherwise dispose of all or any part of its Partnership
Units and Common Shares under an exemption from such registration
available under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws (including,
without limitation, by way of a distribution of the Partnership Units
by Contributor to the Principals, the only three (3) members thereof,
consent for such distribution to such three (3) Principals and their
admission to the Partnership as substitute limited partners being
hereby given), and (B) obtain cash or Common Shares of Gables REIT,
pursuant to the terms of Section 8.6 of the Partnership Agreement, and
sell any such Common Shares pursuant to an effective registration
statement, or an exemption from registration under the Securities Act,
and subject, nevertheless, to the disposition of its assets being at
all times within its control.
(xl) Contributor and the Principals acknowledge that (A) the
Partnership Units to be issued to Contributor in connection with the
transactions contemplated hereby, and any Common Shares subsequently
issued in consideration therefor, have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities Act and
applicable state securities laws and, if such Partnership Units and
Common Shares are represented by certificates, such certificates will
bear a legend to such effect, (B) the Gables REIT's and Gables'
reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of Contributor and
the Principals contained herein, (C) such Partnership Units and Common
Shares, therefore, cannot be resold unless registered under the
Securities Act and applicable state securities laws, or unless an
exemption from registration is available, (D) there is no public
market for such Partnership Units, (E) Gables has no obligation or
intention to register such Partnership Units or Common Shares for
resale under the Securities Act or any state securities laws or to
take any action that would make available any exemption from the
registration requirements of such laws, (F) Contributor is organized
and existing under and by virtue of the laws of the State of Tennessee
and is in good standing thereunder, and (G) the Principals are each
residents of the State of Tennessee. Contributor and the Principals
hereby acknowledge that because of the restrictions on transfer or
assignment of such Partnership Units to be issued hereunder which are
set forth in the Partnership Agreement, Contributor may have to bear
the economic risk of the investment commitment evidenced by this
Agreement and any Partnership Units purchased hereby for an indefinite
period of time, although (1) under the terms of the Partnership
Agreement, Partnership Units will be redeemable at the request of the
holder thereof at any time for cash or, at the election of Gables
REIT, exchanged for Common Shares and (2) the holder of any such
Common Shares issued upon a presentation of Partnership Units for
redemption will be afforded certain rights to have such Common Shares
registered for resale under the Securities Act or applicable state
securities laws under the Registration Rights Agreement attached
hereto as Exhibit "I."
(xli) Contributor and the Principals are "accredited investors"
as defined in Regulation D promulgated under the Securities Act.
(xlii) Contributor agrees that it will only transfer or
distribute the Partnership Units (and each of the Principals agrees
that he will only transfer any Partnership Units that he may receive
from Contributor) to persons or entities that make representations to
Gables and Gables REIT of the type set forth herein, and otherwise so
as to cause no violation of applicable federal and state securities
laws by Gables and Gables REIT, and no transfer in contravention of
such agreement shall be recognized by Gables.
(xliii) The three (3) Principals are the only members of
Contributor, and the Principals and Contributor have no intent to
admit additional members to Contributor.
(b) The foregoing warranties, representations and covenants of
Contributor and the Principals shall survive the execution and delivery of
this Agreement, the Closing and delivery of all documents and any and all
performances required by this Agreement.
(c) Notwithstanding anything to the contrary set forth herein, the
representations and warranties of this Section 9(xviii), (xxii) and (xxvi)
are made to the "best of Contributor's and the Principals' knowledge." For
purposes of this Agreement, the phrase "best of Contributor's and the
Principals' knowledge" means the actual knowledge, information or belief of
the Principals or LEDIC Management, the property manager at the Premises,
but shall not include within such term or phrase the knowledge, information
and belief of any other person.
10. PARTNERSHIP'S WARRANTIES. In order to induce Contributor to consummate
the transaction contemplated hereby, Partnership hereby represents and warrants
to Contributor that the following are true statements as of the Effective Date
or will be true statements as of the Closing Date, and Partnership agrees to
deliver a certificate at Closing specifying any changes occurring between the
Effective Date and the Closing, in accordance with Section 12 hereof.
(a) Partnership has full power and authority to enter into and fully
perform and comply with the terms of this Agreement.
(b) Partnership will make an on-site inspection of the Property,
including all Personal Property, Leases and the books and records relating
to the operation of the Property, and will investigate the Property to
Partnership's satisfaction; and, except as specifically provided in this
Agreement to the contrary, Contributor is released from all responsibility
and liability regarding the condition, valuation or utility of the
Property. Except as specifically provided in Section 9 hereof, Partnership
has not relied on any warranties, promises, understandings or
representations, express or implied, of Contributor or any agent of
Contributor relating to the Property. Partnership acknowledges that any and
all general leasing information (i.e., general information concerning the
leasing of real property in Cordova, Shelby County, Tennessee, but
excluding any specific information concerning the Property and any
information contained in the Rent Roll), feasibility or marketing reports,
or other general information of any type that Partnership has received or
may receive from Contributor or Contributor's agents and which is not
specifically related to the Property was or is furnished on the express
condition that Partnership shall or would make an independent verification
of the accuracy of any and all such information, all such information being
furnished without any warranty whatsoever, except as specifically provided
in this Agreement. Partnership agrees that, except as specifically provided
in Section 9 hereof, Partnership will not attempt to assert any liability
against Contributor and/or its agents for furnishing such information.
(c) The Partnership Units and admission of Contributor as an
Additional Limited Partner have been duly approved by all necessary
authority.
(d) The Partnership Agreement, a copy of which is attached hereto as
Exhibit "J," is true, correct and complete.
(e) This Agreement and the Registration Rights Agreement have been
duly approved and the Common Shares which Contributor may receive pursuant
to the terms of Section 8.6 of the Partnership Agreement, have been
authorized, but not issued.
(f) There has been no material adverse change in the legal status of
Gables REIT between April 30, 1996 and the Effective Date.
(g) The foregoing warranties and representations of Partnership shall
survive the execution and delivery of this Agreement, the Closing and
delivery of all documents and any and all performances required by this
Agreement.
11. CONTRIBUTOR'S ENVIRONMENTAL INDEMNITY. Notwithstanding anything to the
contrary set forth herein, from the Closing Date and thereafter, Contributor
agrees to indemnify, defend and hold harmless Partnership and/or GTP and their
respective successors and assigns from and against any and all loss, cost or
damage including, but not limited to, reasonable attorneys' fees and court costs
suffered or incurred by Partnership and/or GTP and their respective successors
and assigns as a result of any third party action brought against Partnership
and/or GTP under Environmental Laws pertaining to any matter, condition or act
on the Property involving Environmental Laws or Hazardous Substances which
existed or arose between the date Contributor took title to the Property and the
Closing Date, whether or not Contributor has knowledge thereof as of the Closing
Date.
12. CLOSING DOCUMENTS. (a) At or prior to Closing, each party shall deliver
to the other party appropriate evidence to establish the authority of such party
to enter into and close the transaction contemplated hereby. Additionally,
Contributor and/or, as the case may be, the Principals and Patton & Taylor
Construction Co., Inc. shall execute and deliver to GTP (which delivery shall be
at the direction of, and shall be required to consummate the contribution of the
Property by Contributor to, Partnership) at Closing:
(i) a warranty deed duly executed and acknowledged, subject only
to the Permitted Exceptions, sufficient to transfer and convey to GTP
fee simple title to the Premises as required by this Agreement, and
otherwise in form and substance acceptable to Partnership, GTP and
Title Insurer;
(ii) the Title Policy;
(iii) a bill of sale sufficient to transfer to GTP title to the
tangible Personal Property and containing appropriate warranties of
title as required by this Agreement;
(iv) a letter in form and substance satisfactory to GTP, advising
tenants under the Leases of the change in ownership of the Premises,
of GTP's future liability for tenant security, pet, redecorating or
other deposits refundable under the Leases, and directing them to pay
rent to GTP or as GTP may direct;
(v) any and all affidavits, certificates or other documents
required by Title Insurer in order to cause it to issue an owner's
title insurance policy in the form and condition required by this
Agreement;
(vi) a City Taxes Guaranty;
(vii) a counterpart of an assignment of the Leases (together with
a transfer of all security deposits listed in the Rent Roll delivered
by Contributor pursuant to Section 12(a)(viii) below) and those
Service Contracts accepted by Partnership and GTP's assumption of the
duties and obligations thereunder arising on or after the Closing
Date, (the counterpart delivered pursuant to this provision shall
contain indemnification provisions providing that Contributor shall
indemnify Partnership and GTP against any claims arising under the
Leases and/or the Service Contracts accruing on or before the Closing
Date and that GTP shall similarly indemnify Contributor against those
claims accruing after the Closing Date, said indemnification
provisions being in form and substance reasonably acceptable to
Contributor, Partnership and GTP and their attorneys);
(viii) an updated Rent Roll certified by Contributor as being
true, accurate and complete in all material respects as of the Closing
Date;
(ix) all of the original Leases and written Service Contracts to
be assumed by GTP (provided that Contributor shall have the right to
make all such original Leases and Service Contracts available to GTP
at the Premises), and, to the extent in Contributor's possession or
control, any and all building plans, surveys, site plans, engineering
plans and studies, utility plans, landscaping plans, development
plans, specifications, drawings, marketing artwork, construction
drawings, environmental reports, soil tests, complete warranty book
including all contractors and subcontractors and other documentation
concerning all or any part of the Property (all of which shall be made
available to GTP at the Premises);
(x) any warranties or guaranties which are in any way applicable
to the Property or any part thereof and which by their terms are
freely transferrable to GTP;
(xi) to the extent in the possession or control of Contributor,
all keys for the Property, with identification of the lock to which
each such key relates (which shall be made available to GTP at the
Premises);
(xii) Contributor's affidavit stating, under penalty of perjury,
Contributor's U.S. taxpayer identification number and that Contributor
is not a foreign person within the meaning of Section 1445 of the
Code;
(xiii) a certificate specifying any changes occurring between the
Effective Date and the Closing Date with respect to the
representations and warranties made by Contributor and the Principals
in this Agreement;
(xiv) a duly executed Amendment to the Partnership Agreement and
signature page thereto admitting Contributor as an Additional Limited
Partner;
(xv) an assignment or such other document(s) as are required by
Partnership to transfer the Teachers Tax and Insurance Escrow from
Contributor to or for the benefit of GTP;
(xvi) an assignment or such other document(s) as are required by
Partnership to transfer the entire Repair Reserve from Contributor to
or for the benefit of GTP;
(xvii) a Registration Rights Agreement executed by Contributor
and substantially in the form of Exhibit "I," attached hereto;
(xviii) a General Contractor's Guaranty wherein the general
contractor for the Improvements shall guarantee the construction and
workmanship of each building comprising the Improvements for a period
of one (1) year following the date on which the first occupant of each
such building takes possession thereof, such General Contractor's
Guaranty to be in the form of Exhibit "K" attached hereto; and
(xix) all other documents reasonably required by Partnership or
GTP in order to perfect the conveyance, transfer and assignment of the
Property to GTP (including, without limitation, an assignment of
Contributor's rights or interests in general intangibles pertaining to
the Premises, an assignment of the currently effective Certificate of
Occupancy for the Premises if required by applicable law, an
assignment to Partnership of Contributor's rights or interests in the
General Contractor's Guaranty, and evidence of Patton & Taylor
Construction Co., Inc.'s consent to Contributor's assignment of the
General Contractor's Guaranty).
(b) Partnership and GTP also shall deliver or cause to be delivered to
Contributor at Closing:
(i) the Price;
(ii) such documents, instruments, or certificates as are
reasonably required by Title Insurer for GTP to acquire the Property
pursuant to this Agreement;
(iii) a certificate specifying any changes occurring between the
Effective Date and the Closing Date with respect to the
representations and warranties made by Partnership in this Agreement;
(iv) a counterpart of an assignment of the Leases (together with
a transfer of all security deposits listed in the Rent Roll delivered
by Contributor pursuant to Section 12(a)(viii) above) and those
Service Contracts accepted by Partnership and GTP's assumption of the
duties and obligations thereunder arising on or after the Closing
Date(the counterpart delivered pursuant to this provision shall
contain indemnification provisions providing that Contributor shall
indemnify Partnership and GTP against any claims arising under the
Leases and/or the Service Contracts accruing on or before the Closing
Date and that GTP shall similarly indemnify Contributor against those
claims accruing after the Closing Date, said indemnification
provisions being in form and substance reasonably acceptable to
Contributor, Partnership and GTP and their attorneys);
(v) Teachers' assumption agreement;
(vi) a duly executed Amendment to the Partnership Agreement
admitting Contributor as an Additional Limited Partner; and
(vii) a Registration Rights Agreement executed by Gables REIT and
substantially in the form of Exhibit "I," attached hereto.
13. CLOSING COSTS. (a) Contributor shall pay the following: (i) one-half
(1/2) of the escrow and closing fees of Escrowee, if any; (ii) the cost of the
Survey and all updates thereof; (iv) the fees of Contributor's and the
Principals' attorneys; (v) any and all brokerage fees incurred by Contributor;
and (vi) all other incidental costs incurred by Contributor.
(b) Partnership and/or GTP shall pay (i) one-half (1/2) of the escrow
and closing fees of Escrowee, if any; (ii) the costs associated with any
due diligence activity that Partnership elects to undertake on its own
pursuant to the terms of Section 4(a) hereof; (iii) the entire title
premium associated with insuring GTP's title to the Property, together with
the costs of searching title since the date of the Teachers Loan and the
cost, if any, of affirmative insurance and endorsements requested by GTP or
Partnership; provided, however, in the event Partnership and GTP are able
to take advantage of the benefits offered in the LTIC Letter, this Section
13(b)(iii) shall not be interpreted to mean that Contributor is entitled to
be reimbursed in any way for title insurance costs paid or to be paid by
Contributor in connection with the Teachers Loan; it being the intention
hereof that Contributor shall be responsible for the title premium and
related charges required by the terms of the Teachers Loan; (iv) recording
fees and transfer taxes due with respect to the warranty deed; (v) the
attorney's fees and expenses incurred by Partnership and GTP in connection
with the acquisition of the Property; (vi) the attorney's fees and expenses
incurred by Partnership and GTP in connection with the negotiation and
documentation of the assumption of the Teachers' Loan; (vii) the attorney's
fees and expenses incurred by Partnership in connection with the
preparation of the Amendment to the Partnership Agreement described in
Section 12(a)(xiv); (viii) the attorney's fees and expenses incurred by
Partnership in connection with the preparation of the Registration Rights
Agreement described in Section 12(a)(xvii); (ix) the attorney's fees and
expenses incurred by Partnership in connection with the preparation of SEC
opinion letters; (x) the fees and expenses of Partnership's accountants
incurred in connection with the preparation of the required accountant's
SEC opinion letter; (xi) the costs and expenses associated with the
preparation and delivery of directors' consent packages; (xii) filing fees
associated with the filing of the Registration Rights Agreement; and (xiii)
all other incidental costs incurred by Partnership. All other costs and
expenses of the transaction contemplated hereby shall be borne by the party
incurring the same.
14. BROKER AND BROKER'S COMMISSION. (a) Partnership, GTP and Contributor
each represent and warrant to the other that, except as provided in Section
14(b) below, such party has not employed a real estate broker, agent or
consultant in connection with the transaction contemplated hereby. Contributor
hereby covenants and agrees to defend, indemnify and hold harmless Partnership
and GTP against and from any and all loss, expense, liability, cost, claim,
demand, damages, action, cause of action, and suit arising out of or in any
manner relating to the alleged employment or use by Contributor of any real
estate broker, agent or consultant in connection with this transaction.
Partnership hereby covenants and agrees to defend, indemnify, and hold harmless
Contributor against and from any and all loss, expense, liability, cost, claim,
demand, damages, action, cause of action and suit arising out of or in any
manner relating to the alleged employment or use by Partnership or GTP of any
real estate broker, agent or consultant in connection with this transaction. The
indemnities set forth in this Section 14(a) shall survive the Closing.
(b) Contributor hereby represents that Contributor has engaged Smith
Barney, Inc., 388 Greenwich, New York, New York 10013, as its financial
advisor to assist in the structuring and consummation of the transactions
contemplated by this Agreement in accordance with Contributor's separate
agreement with Smith Barney, Inc. Contributor hereby agrees to hold
Partnership and GTP harmless from any liability on account of any and all
amounts and/or performances due to be paid and/or made by Contributor to
Smith Barney, Inc. pursuant to said separate agreement.
15. CASUALTY LOSS AND CONDEMNATION. If, prior to Closing, the Property or
any part thereof (a) shall be condemned, or destroyed or materially damaged by
fire or other casualty (that is, damage or destruction which Partnership
reasonably believes could be in excess of $50,000.00) or (b) shall be the
subject of a condemnation proceeding and actual notice of such proceeding shall
have been served on Contributor, Partnership shall have the option either to
terminate this Agreement or to consummate the transaction contemplated by this
Agreement notwithstanding such condemnation, destruction or material damage.
Within two (2) days of any casualty to or destruction of all or any part of the
Property or Contributor's receipt of actual notice of a condemnation proceeding
affecting the Property, Contributor shall deliver notice thereof to Partnership.
After its receipt of such notice, Partnership shall have sixty (60) days within
which to deliver notice to Contributor stating which of the options available to
Partnership pursuant to the terms of this Section 15 Partnership has elected to
pursue. Notwithstanding anything to the contrary set forth in this Agreement, in
the event the Closing Date is scheduled during this sixty (60) day decision
period, then, in such event, the Closing Date automatically shall be extended to
allow Partnership the full benefit of said sixty (60) day decision period. If
the Closing Date is so extended and Partnership elects to consummate the
transaction contemplated by this Agreement, then, the Closing shall occur on the
fifth (5th) business day following Contributor's receipt of Partnership's notice
stating that Partnership has elected to consummate the transaction contemplated
by this Agreement, or at such earlier date as Contributor and Partnership may
mutually agree in writing. Partnership's failure to deliver notice to
Contributor as required in this Section 15 shall be deemed an election by
Partnership to terminate this Agreement. If Partnership elects to consummate the
transaction contemplated by this Agreement, GTP shall be entitled to receive the
condemnation proceeds or take part in the settlement of the loss under all
policies of insurance applicable to the destruction or damage and receive the
proceeds of insurance applicable thereto, and Contributor shall, at Closing and
thereafter, execute and deliver to GTP all required proofs of loss, assignments
of claims and other similar items. If Partnership elects to terminate this
Agreement, the Earnest Money shall be returned to Partnership by the Escrowee,
less One Hundred Dollars ($100.00), which Escrowee shall pay to Contributor as
due consideration for this Agreement, at which time this Agreement shall
terminate and neither party shall have any further rights or obligations under
this Agreement, except as specifically set forth herein. If there is any other
damage or destruction (that is, damage or destruction which Partnership
reasonably believes could be $50,000.00 or less), to the Property or any part
thereof, Contributor, at its election, shall either assign all insurance claims
pertaining to such damage or destruction to GTP by executing and delivering to
GTP at Closing and thereafter all required proofs of loss, assignments of claims
and other similar items, or allow Partnership a credit against the Price in an
amount reasonably acceptable to both Contributor and Partnership equal to the
reasonably estimated cost of repair. If Partnership elects to take an assignment
of all insurance claims as provided for in this Section 15, Partnership shall
receive at Closing a credit against the Price in an amount equal to any
deductible(s) and uninsured amounts applicable thereto.
16. OPERATION OF PROPERTY THROUGH CLOSING. Contributor hereby agrees that
from the Effective Date through the Closing Date:
(a) Except as otherwise provided in this Section 16, Contributor shall
manage and operate the Property in accordance with sound and prudent
business practices in the same manner as Contributor has heretofore
operated the Property, and keep the Premises and the tangible Personal
Property in good condition and repair, ordinary wear and tear excepted.
Contributor will not make any change in its normal and customary billing
practices, and shall continue to apply rents and hold security deposits in
the ordinary course of business and pursuant to the applicable provisions
of the Leases.
(b) Except with respect to the Teachers Loan and without the prior
written consent of Partnership, Contributor shall not sell, mortgage,
pledge, hypothecate or otherwise transfer or dispose of all or any part of
the Property or any interest therein, nor shall Contributor initiate,
consent to, approve or otherwise take any action with respect to zoning or
any other governmental rules or regulations presently applicable to all or
any part of the Property.
(c) Without the prior written consent of Partnership, Contributor
shall not terminate, modify, extend, amend or renew any Service Contract or
enter into any new Service Contract, except Service Contracts entered into
or renewed after the Effective Date which will be terminated or otherwise
cancelled on or before the Closing Date. Additionally, Contributor shall
not terminate, modify, extend, amend or renew any Lease from and after the
date hereof except in the normal course of Contributor's business.
(d) Any new Lease or Service Contract entered into after the Effective
Date hereof shall be subject to the covenants, representations and
warranties set forth in this Agreement with respect to Leases and Service
Contracts.
(e) Contributor will continue to operate and maintain the Premises in
the same manner in which Contributor has heretofore operated and maintained
the Premises and in accordance with the standard operating practices and
procedures that Contributor has heretofore followed in its operation of the
Premises. Additionally, Contributor will continue to rent all unoccupied
rental units at the Premises in the normal course of its business and in
accordance with the leasing requirements established by the Teachers Loan,
and will not deviate from those requirements without first obtaining
Partnership's written consent, such consent not to be unreasonably
withheld. Moreover, all prospective tenants for the unoccupied rental units
shall meet the standard credit qualifications for prospective tenants which
Contributor has heretofore utilized. Any unoccupied rental unit vacated
more than three (3) days prior to Closing will be put in a "rent-ready"
condition by Contributor, and, as of Closing, all management contracts
pertaining to the Property will be terminated. Partnership shall receive a
credit against the Price equal to One Thousand Dollars ($1,000.00) for each
rental unit that is not in a "rent-ready" condition as of the Closing Date
and was required by the terms hereof to be in such condition.
(f) Contributor shall comply in all material respects with all
federal, state, municipal and other governmental laws, ordinances,
requirements, rules, regulations, notices and orders, and all agreements,
covenants, conditions, easements and restrictions relating to the Property,
including, without limitation, any such requirements, rules, regulations,
notices or orders issued or imposed after the Effective Date, provided
that, if compliance by Contributor requires the aggregate expenditure of an
amount in excess of Three Hundred Thousand Dollars ($300,000.00),
Contributor shall have the option of terminating this Agreement, in which
event Partnership shall be entitled to a return of the Earnest Money, less
One Hundred Dollars ($100.00), which Escrowee shall pay to Contributor as
due consideration for this Agreement, at which time this Agreement shall
terminate and neither party shall have any rights or obligations under this
Agreement, except as otherwise specifically set forth herein.
(g) Contributor shall promptly give written notice to the Partnership
of the occurrence of any event which materially adversely affects the truth
or accuracy of any representation or warranty made or to be made by
Contributor and/or the Principals under or pursuant to this Agreement.
(h) Partnership shall have such access to the Property as is
reasonably necessary during normal business hours for it to inspect the
Property to assure that Contributor is complying with the requirements of
this Section 16.
(i) Contributor shall maintain in full force and effect its presently
existing insurance coverages.
17. CONDITIONS PRECEDENT. (a) The obligations of Partnership under this
Agreement are contingent upon the occurrence of the following, the failure of
which shall, at the election of Partnership, acting in its sole and absolute
discretion, cause this Agreement to terminate:
(i) Contributor and the Principals shall have performed all of
their obligations hereunder;
(ii) Contributor and/or the Principals shall not be in default
hereunder;
(iii) The concurrent closing of the assumption of the Teachers
Loan by GTP, on terms acceptable to Partnership;
(iv) The Property shall have generated the Target Revenue;
(v) Contributor and/or the Principals shall have made all
deliveries required hereunder;
(vi) There shall have been no material adverse change to any of
Contributor's and/or the Principal's representations and warranties as
of Closing; and
(vii) The Applicable Price shall be greater than or equal to (A)
the average closing price of the Common Shares for the twenty (20)
trading days preceding the Effective Date minus (B) Two Dollars
($2.00).
(b) The obligations of Contributor under this Agreement are contingent
upon the occurrence of the following, the failure of which shall, at the
election of Contributor, acting in its sole and absolute discretion, cause
this Agreement to terminate:
(i) Partnership shall have performed all of its obligations
hereunder;
(ii) Partnership shall not be in default hereunder;
(iii) Partnership shall have made all deliveries required
hereunder;
(iv) There shall have been no material adverse change to any of
Partnership's representations and warranties as of Closing;
(v) The concurrent closing of the assumption of the Teachers Loan
by GTP on terms acceptable to Contributor; and
(vi) The Applicable Price shall be less than or equal to (A) Two
Dollars ($2.00) plus (B) the average closing price of the Common
Shares for the twenty (20) trading days preceding the Effective Date.
18. DEFAULT. (a) Contributor is in default under this Agreement if any one
or more of the following shall occur:
(i) Contributor and/or the Principal's fail to comply with or
perform in any material respect any covenant, agreement, or obligation
to be complied with or performed by Contributor and/or the Principals,
as the case may be, hereunder within the time limits and in the manner
required by this Agreement, and such noncompliance or nonperformance
shall continue unremedied for a period of three (3) days from
Contributor's receipt of written notice thereof from Partnership;
(ii) Any representation or warranty by Contributor and/or the
Principals set out herein shall prove to be false or misleading in any
respect; or
(iii) If Contributor and/or the Principals fail to consummate
this Agreement for any reason, except Partnership's default hereunder
or the termination of this Agreement by Partnership or Contributor
pursuant to a right granted under the terms and provisions hereof, and
such failure shall continue unremedied for a period of three (3) days
from Contributor's receipt of written notice thereof from Partnership.
(b) Partnership is in default under this Agreement if any one or more
of the following shall occur:
(i) Partnership fails to comply with or perform in any material
respect any covenant, agreement, or obligation to be complied with or
performed by Partnership hereunder within the time limits and in the
manner required by this Agreement, and such noncompliance or
nonperformance shall continue unremedied for a period of three (3)
days from Partnership's receipt of written notice thereof from
Contributor;
(ii) Any representation or warranty by Partnership set out herein
shall prove to be false or misleading in any respect; or
(iii) If Partnership fails to consummate this Agreement for any
reason except Contributor's default hereunder or the termination of
this Agreement by Partnership or Contributor pursuant to a right
granted under the terms and provisions hereof, and such failure shall
continue unremedied for a period of three (3) days from Partnership's
receipt of written notice thereof.
19. REMEDIES. (a) THE PARTIES HAVE DISCUSSED AND NEGOTIATED IN GOOD FAITH
UPON THE QUESTION OF DAMAGES TO BE SUFFERED BY CONTRIBUTOR IN THE EVENT
PARTNERSHIP IS IN DEFAULT UNDER THIS AGREEMENT, AND THEY HEREBY AGREE THAT
LIQUIDATED DAMAGES IN THE AMOUNT OF THE EARNEST MONEY PLUS REASONABLE ATTORNEYS'
FEES AND EXPENSES INCURRED BY CONTRIBUTOR IN CONNECTION HEREWITH ARE AND WILL BE
REASONABLE. IN THE EVENT OF SUCH DEFAULT, CONTRIBUTOR SHALL BE ENTITLED TO AND
SHALL RECEIVE SUCH LIQUIDATED DAMAGES, AND PARTNERSHIP SHALL HAVE NO ADDITIONAL
LIABILITY WHATSOEVER.
(b) IF CONTRIBUTOR IS IN DEFAULT UNDER THIS AGREEMENT, PARTNERSHIP
SHALL HAVE THE RIGHT (i) TO TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO
BOTH CONTRIBUTOR AND ESCROWEE ON OR BEFORE THE CLOSING DATE, TO RECEIVE A
REFUND OF THE EARNEST MONEY AND TO RECOVER FROM CONTRIBUTOR LIQUIDATED
DAMAGES EQUAL TO ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00) PLUS
REASONABLE ATTORNEYS' FEES AND EXPENSES INCURRED BY PARTNERSHIP IN
CONNECTION HEREWITH, OR (iii) TO SEEK THE REMEDY OR RECOURSE OF SPECIFIC
PERFORMANCE.
20. BINDING EFFECT. (a) This Agreement constitutes the entire agreement
between Contributor and Partnership with respect to the Property and shall not
be modified or amended except in a written document signed by Contributor and
Partnership. Any prior agreement or understanding between Contributor and
Partnership concerning the Property is hereby rendered null and void.
(b) This Agreement shall be binding upon and enforceable against, and
shall inure to the benefit of, Partnership and Contributor and their
respective heirs, legal representatives, successors and assigns.
21. TIME OF THE ESSENCE. Time is of the essence of this Agreement. In the
computation of any period of time provided for in this Agreement or by law, the
day of the act or event from which the period of time runs shall be excluded,
and the last day of such period shall be included, unless it is a Saturday,
Sunday, or legal holiday, in which case the period shall be deemed to run until
the end of the next day which is not a Saturday, Sunday, or legal holiday.
22. NOTICE. All notices, requests, demands or other communications required
or permitted under this Agreement shall be in writing and delivered personally
or by certified mail, return receipt requested, postage prepaid, by telecopy or
other facsimile transmission, or by recognized overnight courier (such as
Federal Express), addressed as follows:
(a) If to Contributor: Morning Grove Apartments, L.L.C.
c/o McNeill Hospitality Corporation
4735 Spottswood, Suite 102
Memphis, Tennessee 38124-0777
Attention: Phillip H. McNeill, Sr.
Telecopy: (901) 761-1485
With a copy to: Wyatt, Tarrant and Combs
6075 Poplar Avenue, Suite 650
Memphis, Tennessee 38177-5000
Attention: Lawson F. Apperson
Telecopy: (901) 537-1010
(b) If to Partnership: Gables Realty Limited Partnership
c/o Gables Residential Trust
2925 Briarpark, Suite 1220
Houston, Texas 77042
Attention: Stephen G. Sweet
Telecopy: (713) 784-4650
With a copy to: Baker, Donelson, Bearman & Caldwell
2000 First Tennessee Building
Memphis, Tennessee 38103
Attention: Robert C. Liddon
Telecopy: (901) 577-2303
(c) If to Escrowee: Lawyers Title Insurance Corporation
6363 Poplar Avenue
Memphis, Tennessee 38119
Attention: William B. Norris
Telecopy: (901) 763-3320
All notices given in accordance with the terms hereof shall be deemed
received forty-eight (48) hours after posting, when delivered personally, or
when transmitted via telecopy or other facsimile transmission. Either party
hereto may change the address or telecopy number for receiving notices,
requests, demands or other communication by notice sent in accordance with the
terms of this Section.
23. CAPTIONS. The captions and headings used in this Agreement are for
convenience only and do not in any way restrict, modify or amplify the terms of
this Agreement.
24. EXHIBITS. Each and every exhibit referred to or otherwise mentioned in
this Agreement is attached to this Agreement and is and shall be construed to be
made a part of this Agreement by such reference or other mention at each point
at which such reference or other mention occurs, in the same manner and with the
same effect as if each exhibit were set forth in full and at length every time
it is referred to or otherwise mentioned.
25. DEFINED TERMS. Capitalized terms used in this Agreement shall have the
meaning ascribed to them at the point where first defined, irrespective of where
their use occurs, with the same effect as if the definitions of such terms were
set forth in full and at length every time such terms are used.
26. PRONOUNS. Wherever appropriate in this Agreement, personal pronouns
shall be deemed to include the other genders and the singular to include the
plural.
27. SEVERABILITY. If any term, covenant, condition of provision of this
Agreement, or the application thereof to any person or circumstance, shall ever
be held to be invalid or unenforceable, then in each such event, the remainder
of this Agreement or the application of such term, covenant, condition or
provision to any other person or any other circumstance (other than those as to
which it shall be invalid or unenforceable) shall not be thereby affected, and
each term, covenant, condition and provision hereof shall remain valid and
enforceable to the fullest extent permitted by law.
28. APPLICABLE LAW. This Agreement shall be governed by, construed under
and interpreted and enforced in accordance with the laws of the State in which
the Premises is located.
29. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and all such counterparts together
shall constitute one and the same instrument.
30. JUDICIAL INTERPRETATION. Should any provision of this Agreement require
judicial interpretation, it is agreed that the court interpreting or construing
the same shall not apply a presumption that the terms hereof shall be more
strictly construed against one party by reason of the rule of construction that
a document is to be construed more strictly against the party who itself or
through its agent prepared the same, it being agreed that the agents of all
parties have participated in the preparation hereof.
31. ATTORNEYS' FEES. If either party hereto employs an attorney to enforce
or defend its rights hereunder, the prevailing party shall be entitled to
recover its reasonable attorneys' fees and costs.
32. TAX MATTERS. (a) Contributor and each of the Principals shall provide
Partnership with all information with respect to the Property necessary to
enable Partnership to file all returns required for federal and state income tax
purposes, as determined in the reasonable discretion of Arthur Andersen & Co.,
certified public accountants.
(b) Contributor and each of the Principals agree to report the
transactions contemplated herein for federal and state income tax purposes,
and in any other filing or return required by law, consistently with the
manner such transactions are reported by Partnership for federal income tax
purposes.
(c) Notwithstanding anything to the contrary herein, it is the intent
of Partnership and Contributor that the contribution contemplated by this
Agreement be treated and reported for federal income tax purposes as a
transaction governed by Section 721 of the Code and it is the desire of
Contributor that such contribution not subject Contributor to income or
gain under Section 731 of the Code as a result of a deemed distribution of
money to Contributor by Partnership pursuant to Section 752(b) of the Code
in excess of Contributor's adjusted tax basis in Contributor's interest in
Partnership. Accordingly, Gables GP, Inc., a Texas corporation ("GGPI"),
the general partner of Partnership, shall:
(i) for a period of three (3) years from the Closing Date, cause
Partnership to maintain an amount of non-recourse debt secured by the
Property at least equal to Two Million Five Hundred Thousand Dollars
($2,500,000.00) (less any regularly or other scheduled principal
payments on such indebtedness);
(ii) subsequent to the three (3) year period referred to in
Section 32(c)(i) above, permit Contributor or the Principals to enter
into a guarantee or otherwise become contractually obligated to bear
the economic risk of loss within the meaning of Treasury Regulation
Section 1.752-2 with respect to a portion of indebtedness of the
Partnership, which amount shall not exceed Two Million Five Hundred
Thousand Dollars ($2,500,000.00); provided, however, any such
guarantee or other contractual obligation shall not be entered into if
such guarantee or other contractual obligation would cause any other
partner to recognize income pursuant to Section 752 of the Code if
such guarantee or other contractual obligation were entered into as of
the date of the Closing, and further provided that nothing in this
Section 32(c)(ii) shall preclude any other partner from entering into
any guarantee or other contractual obligation with regard to any
indebtedness to Partnership; and
(iii) to the extent consistent with and subject to GGPI's
fiduciary and statutory obligation to all partners (both present and
future) in Partnership, and, in all events to the extent consistent
with the best interests of all such partners considered as a whole,
and all of the Gables REIT's stockholders, for a period of three (3)
years following the Closing Date, use its good faith efforts to cause
any voluntary disposition of the Property to be one hundred percent
(100%) tax deferred under the Code.
(d) Notwithstanding anything to the contrary in the Partnership
Agreement, Partnership agrees to use the "traditional allocation method,"
as described in Treasury Regulation Section 1.704-3(a), with respect to the
Property.
33. SURVIVAL. No matter under this Agreement survives Closing except for
those matters for which express provision is made.
34. EFFECTIVE DATE. For purposes hereof, the term "Effective Date" shall
mean the date on which Partnership receives an original counterpart of this
Agreement which has been fully executed by each of Contributor and the
Principals.
IN WITNESS WHEREOF, Partnership and Contributor have caused this Agreement
to be executed and delivered as of the Effective Date.
PARTNERSHIP:
Date: GABLES REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: GABLES GP, INC., a Texas corporation,
Its Sole General Partner
By: /s/ Perry M. Parrott, Jr.
Printed Name: Perry M. Parrott, Jr.
Title: Vice President
CONTRIBUTOR:
Date: June 24, 1996 MORNING GROVE APARTMENTS, L.L.C.,
a Tennessee limited liability company
By: /s/ Phillip H. McNeill
Phillip H. McNeill, Sr.,
Chief Manager
CONSENT OF ESCROWEE
LAWYERS TITLE INSURANCE CORPORATION has joined in the execution of this
Agreement in order to agree to hold and disburse the Earnest Money in accordance
with the terms and provisions of this Agreement.
LAWYERS TITLE INSURANCE
CORPORATION
Date: June 24, 1996 By: /s/ William B. Norris
Printed Name: William B. Norris
Title: Escrow Manager
JOINDER OF PRINCIPALS
PHILLIP H. MCNEILL, SR., CLYDE PATTON, JR., and BRUCE C. TAYLOR, have
joined in the execution of this Agreement in order to (i) join in the making of
the representations, warranties and covenants set forth in Section 9 of this
Agreement, (ii) agree to execute and deliver to Partnership the documents which
the Principals are required to execute and deliver pursuant to the terms of
Sections 8 and 12 of this Agreement, and (iii) agree to comply with the terms
and provisions of Section 32 of this Agreement.
Date: June 24, 1996 /s/ PHILLIP H. MCNEILL, SR.
Date: June 24, 1996 /s/ CLYDE L. PATTON, JR.
Date: June 24, 1996 /s/ BRUCE C. TAYLOR
JOINDER OF GENERAL CONTRACTOR
PATTON & TAYLOR CONSTRUCTION CO., INC., a Tennessee corporation, has joined
in the execution of this Agreement in order to agree to execute and deliver to
Partnership the General Contractor's Guaranty.
PATTON & TAYLOR CONSTRUCTION CO.,
INC.
Date: June 24, 1996 By: /s/ Clyde Patton, Jr.
Printed Name:Clyde Patton, Jr.
Title: President
JOINDER OF GABLES--TENNESSEE PROPERTIES
Gables--Tennessee Properties, a Tennessee general partnership, joins in
the execution of this Agreement in order to acknowledge its agreement to accept
any contribution Partnership may make to Gables-Tennessee Properties pursuant to
the terms of this Agreement.
Date: June 24, 1996 GABLES-TENNESSEE PROPERTIES,
a Tennessee general partnership
BY: GABLES GP, INC., a Texas corporation,
Its General Partner
By: Perry M. Parrott, Jr.
Printed Name: Perry M. Parrott, Jr.
Title: Vice President
BY: GABLES REALTY LIMITED
PARTNERSHIP, a Delaware limited
partnership, Its General Partner
BY: GABLES GP, INC.,
a Texas corporation, Its Sole
General Partner
By: Perry M. Parrott, Jr.
Printed Name: Perry M. Parrott, Jr.
Title: Vice President
JOINDER OF GABLES GP, INC.
GABLES GP, INC., a Texas corporation, joins in the execution of this
Agreement in order to agree to be bound by the terms and provisions of Section
32(c)(i)-(iii) of this Agreement.
Date: June 24, 1996 GABLES GP, INC., a Texas
corporation
By: /s/ Perry M. Parrott, Jr.
Printed Name: Perry M. Parrott, Jr.
Title: Vice President
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is entered into as of
July 26, 1996 by and between Gables Residential Trust, a Maryland real estate
investment trust (the "COMPANY"), and Morning Grove Apartments, L.L.C., a
Tennessee limited liability company (the "HOLDER").
WHEREAS, the Holder on this day acquired 243,787 units (the "ACQUIRED
UNITS") of limited partnership interest ("UNITS") in Gables Realty Limited
Partnership, a Delaware limited partnership (the "OPERATING PARTNERSHIP"); and
WHEREAS, under the First Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of January 26, 1994 (the "PARTNERSHIP
AGREEMENT"), holders of Units may present such Units to the Partnership for
redemption, and any Units so presented may be acquired by Gables Residential
Trust, a Maryland real estate investment trust (the "COMPANY"), at the Company's
option, for cash or common shares of beneficial interest, par value $.01 per
share ("COMMON SHARES"), of the Company; and
WHEREAS, in partial consideration of the transaction relating to the
Acquired Units the Company, which owns a majority interest in the Operating
Partnership, has agreed to provide the Holder with registration rights with
respect to Common Shares, subject to the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements set forth herein, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"NASD" shall mean the National Association of Securities Dealers, Inc.
"PERSON" shall mean an individual, partnership, corporation, trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, as amended or supplemented by
any prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration Statement, and by
all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
"REGISTRABLE SHARES" shall mean the Shares, excluding (i) Shares for which
a Registration Statement relating to the sale thereof shall have become
effective under the Securities Act and which have been disposed of under such
Registration Statement, (ii) Shares sold pursuant to Rule 144 under the
Securities Act or (iii) Shares eligible for sale pursuant to Rule 144(k) under
the Securities Act.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing fees; (ii) all fees
and expenses incurred in connection with compliance with state securities or
"blue sky" laws (including reasonable fees and disbursements of counsel in
connection with "blue sky" qualification of any of the Registrable Shares and
the preparation of a Blue Sky Memorandum) and compliance with the rules of the
NASD; (iii) all expenses of any Persons in preparing or assisting in preparing,
word processing, printing and distributing any Registration Statement, any
Prospectus, certificates and other documents relating to the performance of and
compliance with this Agreement; (iv) all fees and expenses incurred in
connection with the listing, if any, of any of the Registrable Shares on any
securities exchange or exchanges pursuant to Section 4 hereof; and (v) the fees
and disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses of any special audit or "cold
comfort" letters required by or incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions relating to the sale or disposition of Registrable Shares by the
Holder, the fees and disbursements of counsel representing the Holder, and
transfer taxes, if any, relating to the sale or disposition of Registrable
Shares by the Holder, all of which shall be borne by the Holder in all cases.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company and any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act which
covers any of the Registrable Shares on an appropriate form, and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all materials incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHARES" shall mean any Common Shares issued or to be issued to the Holder
by the Company upon acquisition by the Company of any Acquired Units presented
to the Operating Partnership for redemption.
2. REGISTRATION.
(a) FILING OF SHELF REGISTRATION STATEMENT. Subject to the conditions set
forth in this Agreement, at the written request of the Holder at any time after
the date hereof the Company shall cause to be filed, as soon as reasonably
practicable after the date of such request, a Registration Statement under Rule
415 under the Securities Act relating to the sale by the Holder of all of the
Registrable Shares in accordance with the terms hereof, and shall use reasonable
efforts to cause such Registration Statement to be declared effective by the
SEC. The Company agrees to use reasonable efforts to keep the Registration
Statement continuously effective until the earliest of (a) the date on which the
Holder no longer holds any Registrable Shares or (b) the date on which all of
the Registrable Shares held or subsequently acquired by the Holder have become
eligible for sale pursuant to Rule 144(k) promulgated under the Securities Act
and the Company has delivered to the Holder an opinion of counsel to such effect
(hereinafter referred to as the "SHELF REGISTRATION EXPIRATION DATE").
(b) DEMAND REGISTRATION. Subject to the conditions set forth in this
Agreement, at any time after the Shelf Registration Expiration Date and while
any Registrable Shares are outstanding, the Company shall, at the written
request of the Holder if he is unable to sell his Registrable Shares pursuant to
Rule 144(k) under the Securities Act, cause to be filed as soon as practicable
after the date of such request a Registration Statement under Rule 415 under the
Securities Act relating to the sale by the Holder of all of the Registrable
Shares held by the Holder in accordance with the terms hereof, and shall use
reasonable efforts to cause such Registration Statement to be declared effective
by the SEC as soon as practicable thereafter. The Company may, in its sole
discretion, elect to file the Registration Statement before receipt of notice
from the Holder. The Company agrees to use reasonable efforts to keep the
Registration Statement continuously effective thereafter until the date on which
the Holder no longer holds any Registrable Shares.
(c) PIGGYBACK REGISTRATION. If at any time after the Shelf Registration
Expiration Date and while any Registrable Shares or Acquired Units are
outstanding (without any obligation to do so) the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Shares solely for cash (other than a registration statement (i) on Form
S-8 or any successor form to such Form or in connection with any employee or
director welfare, benefit or compensation plan, (ii) on Form S-4 or any
successor form to such Form or in connection with an exchange offer, (iii) in
connection with a rights offering exclusively to existing holders of Common
Shares, (iv) in connection with an offering solely to employees of the Company
or its Subsidiaries, or (v) relating to a transaction pursuant to Rule 145 of
the Securities Act), whether or not for its own account, the Company shall give
prompt written notice of such proposed filing to the Holder. The notice referred
to in the preceding sentence shall offer the Holder the opportunity to register
such amount of Registrable Shares as he may request (a "PIGGYBACK
REGISTRATION"). Subject to the provisions of Section 3 below, the Company shall
include in such Piggyback Registration, in the registration and qualification
for sale under the blue sky or securities laws of the various states and in any
underwriting in connection therewith all Registrable Shares for which the
Company has received a written request for inclusion therein within fifteen (15)
calendar days after the notice referred to above has been given by the Company
to the Holder. The Holder shall be permitted to withdraw all or part of his
Registrable Shares from a Piggyback Registration at any time prior to the
effective date of such Piggyback Registration. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company and the managing
underwriter advises the Company that the total number of Common Shares requested
to be included in such registration exceeds the number of Common Shares which
can be sold in such offering, the Company will include in such registration in
the following priority: (i) first, all Common Shares the Company proposes to
sell, (ii) second, the full number of applicable Common Shares requested to be
included in such registration by holders of Common Shares with prior or superior
piggyback registration rights and (iii) third, up to the full number of
applicable Registrable Shares and Common Shares requested to be included in such
registration by the Holder and other holders of Common Shares with piggyback
registration rights of similar priority which, in the opinion of such managing
underwriter, can be sold without adversely affecting the price range or
probability of success of such offering (with the number of such Registrable
Shares and other Common Shares of the Holder and such other holders,
respectively, to be included in the Piggyback Registration to be allocated pro
rata among the Holder and such other holders on the basis of the total number of
shares requested to be included in such registration by the Holder and such
other holders of Registrable Shares).
(d) The Company shall notify the Holder of the effectiveness of the
Registration Statement and shall furnish to the Holder the number of copies of
the Registration Statement (including any amendments, supplements and exhibits),
the Prospectus contained therein (including each preliminary prospectus and all
related amendments and supplements) and any documents incorporated by reference
in the Registration Statement or such other documents as the Holder may
reasonably request in order to facilitate his sale of the Registrable Shares in
the manner described in the Registration Statement.
(e) The Company shall prepare and file with the SEC from time to time such
amendments and supplements to the Registration Statement and Prospectus used in
connection therewith as may be necessary to keep the Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all the Registrable Shares until the earlier of (a) such
time as all of the Registrable Shares have been disposed of in accordance with
the intended methods of disposition by the Holder as set forth in the
Registration Statement or (b) the date on which the Registration Statement
ceases to be effective in accordance with the terms of this Section 2. Upon five
(5) business days' notice, the Company shall file any supplement or
post-effective amendment to the Registration Statement with respect to the plan
of distribution or the Holder's ownership interests in Registrable Shares that
is reasonably necessary to permit the sale of the Holder's Registrable Shares
pursuant to the Registration Statements. The Company shall file any necessary
listing applications or amendments to the existing applications to cause the
Shares registered under any Registration Statement to be then listed or quoted
on the primary exchange or quotation system on which the Common Shares are then
listed or quoted.
(f) The Company shall promptly notify the Holder of, and confirm in
writing, any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus related thereto or for additional
information. In addition, the Company shall promptly notify the Holder of, and
confirm in writing, the filing of the Registration Statement or any Prospectus,
amendment or supplement related thereto or any post-effective amendment to the
Registration Statement and the effectiveness of any post-effective amendment.
(g) At any time when a Prospectus relating to the Registration Statement is
required to be delivered under the Securities Act, the Company shall immediately
notify the Holder of the happening of any event as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. In such
event, the Company shall promptly prepare and furnish to the Holder a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of Registrable
Shares, such Prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Company will, if necessary, amend the Registration
Statement of which such Prospectus is a part to reflect such amendment or
supplement.
3. STATE SECURITIES LAWS. Subject to the conditions set forth in this
Agreement, the Company shall, in connection with the filing of any Registration
Statement hereunder, file such documents as may be necessary to register or
qualify the Registrable Shares under the securities or "Blue Sky" laws of such
states as the Holder may reasonably request, and the Company shall use its best
efforts to cause such filings to become effective; PROVIDED, HOWEVER, that the
Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any such state in which it is not then qualified or
to file any general consent to service of process in any such state. Once
effective, the Company shall use its best efforts to keep such filings effective
until the earlier of (a) such time as all of the Registrable Shares have been
disposed of in accordance with the intended methods of disposition by the Holder
as set forth in the Registration Statement, (b) in the case of a particular
state, the Holder has notified the Company that he no longer requires an
effective filing in such state in accordance with its original request for
filing or (c) the date on which the Registration Statement ceases to be
effective. The Company shall promptly notify the Holder of, and confirm in
writing, the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Shares for sale under the
securities or "Blue Sky" laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose.
4. EXPENSES. The Company shall bear all Registration Expenses incurred in
connection with the registration of the Registrable Shares pursuant to this
Agreement, except that the Holder shall be responsible for any brokerage or
underwriting commissions and taxes of any kind (including, without limitation,
transfer taxes) with respect to any disposition, sale or transfer of Registrable
Shares sold by him and for any legal, accounting and other expenses incurred by
him.
5. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify the
Holder against any and all losses, claims, damages, actions, liabilities, costs
and expenses (including without limitation reasonable fees, expenses and
disbursements of attorneys and other professionals), joint or several, arising
out of or based upon any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any Registration
Statement or Prospectus, or upon any untrue or alleged untrue statement of
material fact contained in the Registration Statement or any Prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, that the
Company shall not be liable to the Holder in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information regarding the Holder or his plan of distribution or ownership
interests which was furnished to the Company for use in connection with the
Registration Statement or the Prospectus contained therein by the Holder or (ii)
the Holder's failure to send or give a copy of the final prospectus furnished to
it by the Company through no fault of the Company at or prior to the time such
action is required by the Securities Act to the person claiming an untrue
statement or alleged untrue statement or omission or alleged omission if such
statement or omission was corrected in such final prospectus.
6. COVENANTS OF THE HOLDER. The Holder hereby agrees (a) to cooperate with
the Company and to furnish to the Company all such information concerning his
plan of distribution and ownership interests with respect to his Registrable
Shares in connection with the preparation of the Registration Statement and any
filings with any state securities commissions as the Company may reasonably
request, (b) to deliver or cause delivery of the Prospectus contained in the
Registration Statement to any purchaser of the shares covered by the
Registration Statement from the Holder and (c) to indemnify the Company, its
officers, directors, employees, agents, representatives and affiliates, and each
person, if any, who controls the Company within the meaning of the Securities
Act, and each other person, if any, subject to liability because of his
connection with the Company, against any and all losses, claims, damages,
actions, liabilities, costs and expenses arising out of or based upon (i) any
untrue statement or alleged untrue statement of material fact contained in
either a Registration Statement or the Prospectus contained therein, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if and to the extent
that such statement or omission occurs from reliance upon and in conformity with
written information regarding the Holder, his plan of distribution or ownership
interests, which was furnished to the Company by the Holder expressly for use
therein unless such statement or omission was corrected in writing to the
Company not less than two (2) business days prior to the date of the final
prospectus (as supplemented or amended, as the case may be) or (ii) the failure
by the Holder to deliver or cause to be delivered the Prospectus contained in
the Registration Statement (as amended or supplemented, if applicable) furnished
by the Company to the Holder to any purchaser of the shares covered by the
Registration Statement from the Holder through no fault of the Company.
7. SUSPENSION OF REGISTRATION REQUIREMENT.
(a) The Company shall promptly notify the Holder of, and confirm in
writing, the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose. The Company shall use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment.
(b) Notwithstanding anything to the contrary set forth in this Agreement,
the Company's obligation under this Agreement to use its best efforts to cause
the Registration Statement and any filings with any state securities commission
to become effective or to amend or supplement the Registration Statement shall
be suspended in the event and during such period as unforeseen circumstances
exist (including without limitation (i) an underwritten primary offering by the
Company if the Company is advised by the underwriters that sale of Registrable
Shares under the Registration Statement would have a material adverse effect on
the primary offering or (ii) pending negotiations relating to, or consummation
of, a transaction or the occurrence of an event that would require additional
disclosure of material information by the Company in the Registration Statement
or such filing, as to which the Company has a BONA FIDE business purpose for
preserving confidentiality or which renders the Company unable to comply with
SEC requirements) (such unforeseen circumstances being hereinafter referred to
as a "SUSPENSION EVENT") that would make it impractical or unadvisable to cause
the Registration Statement or such filings to become effective or to amend or
supplement the Registration Statement, but such suspension shall continue only
for so long as such event or its effect is continuing but in no event will that
suspension exceed 90 days. The Company shall notify the Holder of the existence
and, in the case of circumstances referred to in clause (i) of this Section
7(b), nature of any Suspension Event.
(c) The Holder agrees, if requested by the Company in the case of a
Company-initiated nonunderwritten offering or if requested by the managing
underwriter or underwriters in a Company-initiated underwritten offering, not to
effect any public sale or distribution of any of the securities of the Company
of any class included in such Registration Statement, including a sale pursuant
to Rule 144 or Rule 144A under the Securities Act (except as part of such
Company-initiated registration), during the 15-day period prior to, and during
the 60-day period beginning on, the date of effectiveness of each
Company-initiated offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or the managing underwriters;
PROVIDED, HOWEVER, that such 60-day period shall be extended by the number of
days from and including the date of the giving of any notice pursuant to Section
2(f) or (g) hereof to and including the date when each seller of Registrable
Shares covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 2(g) hereof.
8. BLACK-OUT PERIOD. Following the effectiveness of the Registration
Statement and the filings with any state securities commissions, the Holder
agrees that he will not effect any sales of the Registrable Shares pursuant to
theRegistration Statement or any such filings at any time after he has received
notice from the Company to suspend sales as a result of the occurrence or
existence of any Suspension Event or so that the Company may correct or update
the Registration Statement or such filing. The Holder may recommence effecting
sales of the Shares pursuant to the Registration Statement or such filings
following further notice to such effect from the Company, which notice shall be
given by the Company not later than five (5) after the conclusion of any such
Suspension Event.
9. ADDITIONAL SHARES. The Company, at its option, may register, under any
registration statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued Common Shares of the
Company or any Common Shares of the Company owned by any other shareholder or
shareholders of the Company.
10. CONTRIBUTION. If the indemnification provided for in Sections 5 and 6
is unavailable to an indemnified party with respect to any losses, claims,
damages, actions, liabilities, costs or expenses referred to therein or is
insufficient to hold the indemnified party harmless as contemplated therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, actions, liabilities, costs or expenses
in such proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the Holder, on the other hand, in connection with
the statements or omissions which resulted in such losses, claims, damages,
actions, liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Holder, on the other hand, shall be determined by reference to, among other
factors, whether the untrue or alleged untrue statement of a material fact or
omission to state a material fact relates to information supplied by the Company
or by the Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
PROVIDED, HOWEVER, that in no event shall the obligation of any indemnifying
party to contribute under this Section 10 exceed the amount that such
indemnifying party would have been obligated to pay by way of indemnification if
the indemnification provided for under Sections 5 or 6 hereof had been available
under the circumstances.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by PRO RATA allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 10, the Holder shall not be
required to contribute any amount in excess of the amount by which the gross
proceeds from the sale of shares exceeds the amount of any damages that the
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission. No indemnified party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any indemnifying party who was not guilty
of such fraudulent misrepresentation.
11. NO OTHER OBLIGATION TO REGISTER. Except as otherwise expressly provided
in this Agreement, the Company shall have no obligation to the Holder to
register the Registrable Shares under the Securities Act.
12. AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified, or supplemented or waived without the prior written consent
of the parties hereto.
13. NOTICES. Except as set forth below, all notices and other
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or
telecopier, registered or certified mail (return receipt requested), postage
prepaid or courier or overnight delivery service to the respective parties at
the following addresses (or at such other address for any party as shall be
specified by like notice, provided that notices of a change of address shall be
effective only upon receipt thereof), and further provided that in case of
directions to amend the Registration Statement pursuant to Section 2(e) or
Section 6, the Holder must confirm such notice in writing by overnight express
delivery with confirmation of receipt:
If to the Company: Gables Residential Trust 2859 Paces Ferry Road Suite
1400 Atlanta, GA 30339 Attn: Marcus E. Bromley, President Telecopy: (770)
435-7434 with a copy to: Goodwin, Procter & Hoar LLP Exchange Place Boston, MA
02109 Attn: Gilbert G. Menna, P.C. Telecopy: (617) 523-1231
If to the Holder: Morning Grove Apartments, L.L.C. c/o McNeill Hospitality
Corporation 4735 Spottswood, Suite 102 Memphis, TN 38124-0777 Attn: Phillip H.
McNeill, Sr. Telecopy: (901) 761-1485 In addition to the manner of notice
permitted above, notices given pursuant to Sections 2, 7 and 8 hereof may be
effected telephonically and confirmed in writing thereafter in the manner
described above.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
This Agreement may not be assigned by the Holder and any attempted assignment
hereof by the Holder will be void and of no effect and shall terminate all
obligations of the Company hereunder; PROVIDED THAT the Holder may assign his
rights hereunder in connection with any of the following types of dispositions
of Acquired Units or of Common Shares issued by the Company in consideration of
Acquired Units:
(i) a disposition to the Holder's spouse, siblings, parents or any
natural or adopted children or other descendants or to any personal trust
in which any such family member or the Holder retains the entire beneficial
interest;
(ii) a disposition by the Holder upon his death to his estate,
executor, administrator or personal representative or to the Holder's
beneficiaries pursuant to a devise or bequest or by laws of descent and
distribution;
(iii) a disposition by the Holder as a gift or other transfer without
consideration; and
(vi) a disposition by the Holder pursuant to a pledge, grant of
security interest or other encumbrance effected in a bona fide transaction
with an unrelated and unaffiliated pledgee;
PROVIDED, FURTHER, however, that any such assignment shall be effective
only if, and only so long as, the assignee of Acquired Units or Common Shares in
such disposition is an accredited investor under Regulation D of the Securities
Act and the disposition of Acquired Units or Common Shares to such assignee does
not otherwise cause the Company or the Operating Partnership to be in violation
of applicable federal or state securities laws.
In the event the Holder assigns his rights hereunder, the Shares or Units
shall remain subject to this Agreement and, as a condition of the validity of
such assignment, the transferee shall be required to execute and deliver a
counterpart of this Agreement (except that a pledgee shall not be required to
execute and deliver a counterpart of this Agreement until it forecloses upon
such Shares or Units). Thereafter, such transferee shall be deemed to be the
Holder for purposes of this Agreement.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland applicable to contracts made
and to be performed wholly within said State.
17. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
18. ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GABLES RESIDENTIAL TRUST
By: /S/ PERRY M. PARROTT, JR.
Name: Perry M. Parrott, Jr.
Title: Sr. Vice President
MORNING GROVE APARTMENTS, L.L.C.,
a Tennessee limited liability company
By: /S/ PHILLIP H. MCNEILL, SR.
Name: Phillip H. McNeill, Sr.
Title: Chief Manager
ADDENDUM
TO AGREEMENT FOR CONTRIBUTION
This Addendum to Agreement for Contribution ("Addendum") made and entered
into as of the 24th day of June, 1996, by and between GABLES REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership ("Partnership") and MORNING GROVE
APARTMENTS, L.L.C., a Tennessee limited liability company ("Contributor").
WITNESSETH
Whereas, Partnership and Contributor have simultaneously herewith executed
and entered into that certain Agreement for Contribution ("Agreement"), and
desire to supplement the Agreement as herein set forth.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1. Capitalized words used herein shall have the same meaning as set forth
in the Agreement.
2. Partnership agrees that in the event (i) the Title Policy delivered to
Partnership or to GTP at the Closing is delivered pursuant to the LTIC Letter,
and Contributor is required to surrender its existing owner's policy of title
insurance on the Property and, (ii) Title Insurer consents to the following
described waiver, then in such events, Gables and GTP will, by written
agreement, acceptable to Partnership and Contributor, delivered to Contributor
and Principals at the Closing, waive, release and relinquish any and all claims
that Gables or GTP may, at the Closing or thereafter, have against Contributor
and/or Principals relating to title to the Property.
IN WITNESS WHEREOF, the parties have executed this Addendum the day and
year first above mentioned.
CONTRIBUTOR:
MORNING GROVE APARTMENTS, L.L.C.
By: /s/ Phillip H. McNeill, Sr.
Phillip H. McNeill, Sr., Chief Manager
PARTNERSHIP:
GABLES REALTY LIMITED PARTNERSHIP
By: /s/ Perry M. Parrott, Jr.
Perry M. Parrot Jr.
Vice President
