CONTRIBUTION, EXCHANGE AND SALE AGREEMENT
FOR
MERIDIAN MALL
DATED AUGUST 27, 1998
TABLE OF CONTENTS
Page
ARTICLE I - BASIC DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - SALE, CONTRIBUTION AND EXCHANGE . . . . . . . . . . . . . . . 9
Section 2.l. Sale and Contribution . . . . . . . . . . . . . . 9
Section 2.2. Contribution Consideration. . . . . . . . . . . . 9
Section 2.3. Meridian Indebtedness.. . . . . . . . . . . . . . 9
Section 2.4. OP Units. . . . . . . . . . . . . . . . . . . . . 10
Section 2.5. Informational Materials . . . . . . . . . . . . . 11
Section 2.6. Registration Rights . . . . . . . . . . . . . . . 11
ARTICLE III - ACQUIROR'S DUE DILIGENCE . . . . . . . . . . . . . . . . . . 11
Section 3.1 Acquiror's Review and Meridian's Disclaimer . . . 11
Section 3.2 Material Adverse Matters. . . . . . . . . . . . . 16
Section 3.3 Title Exceptions. . . . . . . . . . . . . . . . . 21
ARTICLE IV - CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 22
Section 4.l Conditions. . . . . . . . . . . . . . . . . . . . 22
Section 4.2 Failure or Waiver of Conditions Precedent . . . . 26
ARTICLE V - COVENANTS WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . 26
Section 5.1 Transferors' Warranties and Representations . . . 26
Section 5.2 Transferors' Covenants. . . . . . . . . . . . . . 34
Section 5.3 Transferors' Additional Representations,
Warranties and Covenants. . . . . . . . . . . . 37
Section 5.4 Acquiror's Warranties and Representations . . . . 37
Section 5.5 Acquiror's Covenants. . . . . . . . . . . . . . . 40
Section 5.6 Survival/Limitations/Joinder. . . . . . . . . . . 46
ARTICLE VI - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.1 Acquiror's Deposit and Default. . . . . . . . . . 49
Section 6.2 Default by Meridian and/or Transferors. . . . . . 50
ARTICLE VII - CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.1 Escrow Arrangements . . . . . . . . . . . . . . . 51
Section 7.2 Closing . . . . . . . . . . . . . . . . . . . . . 55
Section 7.3 Prorations. . . . . . . . . . . . . . . . . . . . 55
Section 7.4 Other Closing Costs . . . . . . . . . . . . . . . 62
Section 7.5 Further Documentation . . . . . . . . . . . . . . 62
Section 7.6 Possession of the Properties. . . . . . . . . . . 62
Section 7.7 Escrow Instructions . . . . . . . . . . . . . . . 63
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ARTICLE VIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 63
Section 8.1 Damage or Destruction/Eminent Domain. . . . . . . 63
Section 8.2 Fees and Commissions. . . . . . . . . . . . . . . 64
Section 8.3 Successors and Assigns. . . . . . . . . . . . . . 64
Section 8.4 Notices . . . . . . . . . . . . . . . . . . . . . 65
Section 8.5 Arbitration of Disputes . . . . . . . . . . . . . 67
Section 8.6 Acquiror and Contributor Representatives. . . . . 69
Section 8.7 Time is of the Essence. . . . . . . . . . . . . . 69
Section 8.8 Incorporation by Reference. . . . . . . . . . . . 69
Section 8.9 Attorneys Fees. . . . . . . . . . . . . . . . . . 69
Section 8.10 Construction. . . . . . . . . . . . . . . . . . . 69
Section 8.11 Governing Law . . . . . . . . . . . . . . . . . . 69
Section 8.12 Operating Records . . . . . . . . . . . . . . . . 69
Section 8.13 Confidentiality . . . . . . . . . . . . . . . . . 70
Section 8.14 Counterparts. . . . . . . . . . . . . . . . . . . 70
Section 8.15 Entire Agreement. . . . . . . . . . . . . . . . . 70
Section 8.16 Tax Returns . . . . . . . . . . . . . . . . . . . 71
Section 8.17 Waiver of Jury Trial. . . . . . . . . . . . . . . 71
Section 8.18 Binding Agreement . . . . . . . . . . . . . . . . 71
Section 8.19 Code or Treasury Regulation Reference . . . . . . 71
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CONTRIBUTION, EXCHANGE AND SALE AGREEMENT
THIS CONTRIBUTION, EXCHANGE AND SALE AGREEMENT ("Agreement') is
made and entered into as of this 18th day of August, 1998, by and
between MERIDIAN MALL ASSOCIATES LIMITED L.C., an Ohio limited
liability company ("Meridian"), and CBL & ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership ("Acquiror").
RECITALS
A. Meridian is the owner of an enclosed mall regional shopping
center, known as "Meridian Mall", located in Meridian Township, ▇▇▇▇▇▇
County, Michigan, as described on the legal description attached to
the Deed attached hereto as EXHIBIT A (the "Property").
B. Subject to the terms and conditions set forth in this
Agreement, Acquiror desires to acquire the Property from Meridian and
Meridian desires to contribute the Property to Acquiror, in exchange
for cash and OP Units (hereafter defined).
AGREEMENT
NOW, THEREFORE, Acquiror and Meridian do hereby agree as
follows:
ARTICLE I
BASIC DEFINITIONS
"Accredited Investor" shall mean an "accredited investor" as
such term is defined in Regulation D promulgated under the Securities
Act (as hereinafter defined).
"Additional Exceptions" shall have the meaning set forth in
SECTION 3.3(A).
"Additional Title Exception Notice" shall have the meaning set
forth in SECTION 3.3(B).
"Adjustments" shall mean Meridian's Closing Costs, any
prorations described in SECTION 7.3 below and other adjustments set
forth in this Agreement.
"Adverse Matters" shall mean any material facts or circumstances
relating to the status of the Property and/or the Outlot Parcels
constituting inaccuracies in the Disclosure Materials or matters
discovered in the course of on-site inspections of the Property and/or
the Outlot Parcels (provided that any such matters which are
reimbursable by tenants pursuant to the terms of the Leases shall not
be "Adverse Matters" for purposes of this Agreement) that are
identified by Acquiror prior to the expiration of the Confirmation
Period in accordance with the provisions of this Agreement and that
diminish the fair market value of such Property and/or the Outlot
Parcels; provided, however, that in no event shall any of the
following constitute Adverse Matters: (i) any matters included or
disclosed in the Disclosure Materials set forth in the Disclosure
Materials List & Statement, (ii) economic, competitive, general or
specific market conditions, (iii) the Permitted Exceptions,
(iv) methodologies of or express assumptions in financial
projections, calculations or reports included within the Disclosure
Materials set forth in the Disclosure Materials List & Statement, or
(v) any matters otherwise known by Acquiror as of the date of this
Agreement.
"Adverse Matters Amount" shall mean the amount, if any, of any
decrease in the fair market value of the Property and/or the Outlot
Parcels caused by any Adverse Matters relating to the Property and/or
the Outlot Parcels, after netting against such decrease the amount of
any increase in the fair market value of the Property and/or the
Outlot Parcels resulting from the discovery prior to the expiration
of the Confirmation Period of any inaccuracies in the rent roll
contained in the Disclosure Materials.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a federal holiday.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. section9601 et seq., as amended.
"Close" or "Closing" shall have the meaning set forth in SECTION
7.2.
"Closing Date" shall mean August 27, 1998, unless extended
pursuant to the provisions of SECTION 3.2 OR SECTION 4.1(C) hereof;
provided, however, that in the event that the Closing has not
occurred by August 31, 1998, Meridian may, at its sole discretion,
terminate this Agreement, by giving notice to Acquiror within seven
(7) days thereafter, as to which time shall be of the essence,
provided that Janesville and Sellers under each of the Other
Agreements shall have also terminated the Other Agreements, in which
event the Deposit shall be returned to Acquiror and no party shall
have any further rights or obligations hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall mean that certain
Confidentiality Agreement dated March 24, 1998, as clarified by
letter from Acquiror to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
dated March 25, 1998, executed by Acquiror for the benefit of
Meridian with respect to the Disclosure Materials and this
transaction.
"Confirmation Letter" shall mean the letter in the form of
EXHIBIT C, attached hereto and made a part hereof, to be delivered by
Acquiror to Meridian on or prior to the close of the Confirmation
Period pursuant to SECTION 3.2.
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"Confirmation Period" shall mean the period commencing on
June 3, 1998, and ending at 5:00 p.m. Eastern Standard Time on
July 8, 1998; provided, however, that the Confirmation Period may
expire earlier, at Acquiror's election, upon delivery by Acquiror to
Meridian of the Confirmation Letter, in which event Acquiror shall be
deemed to have absolutely and conclusively waived any further
Confirmation Period.
"Contract Period" shall mean the period from the date of this
Agreement through and including the Closing Date.
"Contracts" shall mean all maintenance, service and other
operating contracts, equipment leases and other arrangements or
agreements to which Meridian is a party, affecting the ownership,
repair, maintenance, management, leasing or operation of the
Property, but excluding all Leases.
"Deed" shall mean a limited warranty deed in the form attached
hereto as Exhibit A, which will convey title to the Land subject to
the Permitted Exceptions. The Deed shall recite that it is also
subject to all other matters of record.
"Deposit" shall have the meaning set forth in SECTION 6.1.
"Disclosure Materials" shall mean all those materials relating
to the Property that are generally described in SECTION A of the
Disclosure Materials List & Statement, all of which have been made
available to Acquiror in a so-called "data room" containing files of
information on the Property.
"Disclosure Materials List & Statement" shall mean the list of
Disclosure Materials and the statements relating to the Property set
forth on EXHIBIT D.
"Environmental Laws" shall mean all applicable federal, state
and local laws, rules, regulations, codes, policies and ordinances,
and binding determinations, orders, permits, licenses, injunctions,
writs, decrees or rulings of any governmental or judicial authority,
relative to or that govern air quality, soil quality, water quality,
wetlands, solid waste, hazardous waste, hazardous or toxic
substances, pollution or the protection of public health, human
health or the environment, including, but not limited to, CERCLA, the
Hazardous Material Transportation Act (49 U.S.C. section 1801 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. section 1251 et seq.), the
Safe Drinking Water Act (42 U.S.C. section 201 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.), the Clean
Air Act (42 U.S.C. section 7401 et seq.), the Toxic Substances Control Act
(15 U.S.C. section 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. section 136 et seq.), and the Occupational Safety
and Health Act of 1970 (29 U.S.C. section 651 et seq.), as each of these
laws may have been amended, and any analogous or related, federal,
state or local statutes and the regulations promulgated pursuant
thereto whether currently in existence or hereafter enacted.
"Equipment" shall mean all of the following items (if any) to
the extent owned or leased by Meridian: all fixtures, fittings,
appliances, apparatus, equipment, supplies, machinery, carpeting and
other materials installed, located or stored on the Property, and
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other personal property and any replacements thereof, or additions
thereto, actually or constructively affixed, or attached to the
Property, or placed upon, under or used in any way in connection with
the complete and comfortable use, enjoyment, occupancy and/or
operation of the Property, including, without limitation, all parts
of the plumbing, heating, ventilating, air-conditioning, electrical
and mechanical systems of the Improvements; elevators; incinerators;
trash compactors; all equipment, materials and supplies used or
usable in connection with the maintenance, repair and cleaning of the
Property and the interior and exterior of all Improvements; all racks
or similar apparatus necessary for the placement and/or retention of
broadcasting antennae or other telecommunication equipment and
property on the roof of or otherwise within or about the
Improvements; all keys and master keys; all built-in equipment; all
heating, air-conditioning, freezing, lighting, incinerating and power
equipment; lampposts; all electrical equipment, transformers, wiring,
conduit, meters, fixtures aid apparatus; engines; pipes; pumps;
tanks; motors; hydraulic equipment; conduits; lifting, cleaning, fire
prevention, fire extinguishing, smoke detection, refrigerating,
ventilating and communications apparatus; boilers, furnaces, oil
burners or units thereof and any firing and control apparatus used in
connection therewith; appliances; air-cooling and air-conditioning
apparatus; vacuum cleaning systems; storage systems; built-in or
attached shelving; shades; awnings; windows; attached cabinets;
partitions; ducts and compressors; rugs and carpets; draperies;
landscaping, sod, arbors, shrubs, plants, trees, planters and
planting beds or boxes; retaining walls and enclosures; directories;
mailboxes; signs; television or radio antennae; together with all
building materials and equipment now or hereafter delivered to the
Property and intended to be installed therein, thereon or thereunder,
including but not limited to, lumber, plaster, cement, plumbing,
fixtures, pipe, lath, wallboard, cabinets, nails, sinks, toilets,
furnaces, heaters, brick, tile, water heaters, glass, doors,
flooring, paint, lighting fixtures, heating and ventilating
appliances and equipment, locks and lockets; together with all
additions, accessions, proceeds, products, replacements, renewals and
substitutions of and for all of the foregoing, including without
limitation those items listed on EXHIBIT E.
"Exchange" shall mean the transfer of the Property in exchange
for OP Units and cash.
"Governmental Authorities" shall mean all agencies, bureaus,
departments and officials of federal, state, county, municipal and
local governments and public authorities.
"Gross Consideration" shall mean the total consideration to be
paid to Meridian by Acquiror prior to Adjustments and other
deductions set forth in SECTION 2.2.
"Ground Lease" shall mean the collective reference to the
documents listed on EXHIBIT F.
"Hazardous Materials" shall mean any pollutant, contaminant,
substance or waste containing hazardous substances, as those terms
are defined or listed in CERCLA, and any other individual or class of
pollutants, contaminants, wastes or materials defined, listed,
designated, regulated, classified or identified under any applicable
Environmental Laws. This
4
definition of Hazardous Materials includes friable asbestos, petroleum
or petroleum-based products, radioactive materials, flammable explosives
and polychlorinated biphenyls.
"HVAC Plant" means equipment, machinery and other property
within the Real Property which produces water for use in the heating
and air conditioning of a portion of the Real Property.
"Improvements" shall mean any and all structures, buildings,
facilities, parking areas or other improvements situated on the Real
Property and owned by Meridian, together with all Equipment situated
on the Real Property, to the extent that such Equipment constitutes a
fixture.
"In-Negotiation Leases" shall mean those leases or modifications
to existing Leases listed on EXHIBIT G.
"Intangible Property" shall mean the right, title and interest
(if any) of Meridian in: (a) any and all permits, entitlements,
filings, building plans, specifications and working drawings,
certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties
(including, without limitation the roof warranties listed on EXHIBIT
H hereto) and guarantees, engineering, soils, pest control, survey,
environmental, appraisal, market and other reports relating to the
Property, (b) all trade names, service marks, designations and logos,
and the appurtenant goodwill, including, without limitation, the name
"Meridian Mall" and any variation thereof, and all tenant lists,
advertising materials and telephone exchange numbers identified with
the Property, and (c) all books, records, files and correspondence
relating to the Property and (d) all other transferable intangible
property, miscellaneous rights, benefits, or privileges of any kind
or character with respect to the Property, provided that the
Intangible Property shall not include any claims, actions, causes of
action, judgments, accounts receivable, cash, securities and cash
equivalents, or the name of Meridian.
"Janesville Property" shall mean that certain shopping center
located in Janesville, Wisconsin, which is owned by Janesville
Properties Co. Limited Partnership ("Janesville"), an Ohio limited
partnership.
"Janesville Transaction" shall mean the transaction in which
Acquiror shall acquire the Janesville Property.
"Land" shall mean the real property owned in fee by Meridian
described in the legal description attached hereto as EXHIBIT A.
"Lease List" shall mean the list of Leases set forth on EXHIBIT I.
5
"Leases" shall mean all leases, rental agreements or other
agreements (including all renewals, amendments or modifications
thereto) which entitle any person to the occupancy or use of any
portion of the Real Property and all guarantees thereof.
"Legal Requirements" shall mean all statutes, laws, ordinances,
rules, regulations, executive orders and requirements of all
Governmental Authorities which are applicable to the Property or any
part thereof or the use or manner of use thereof, or to the owners,
tenants or occupants thereof in connection with such ownership,
occupancy or use, including, without limitation, Environmental Laws.
"Letter of Credit" shall mean an unconditional, irrevocable,
renewable and transferable demand letter of credit, the beneficiary
of which shall be Acquiror or Meridian as the case may be,
substantially in the form(s) set forth in EXHIBIT J.
"Materiality Threshold Amount" shall mean Five Hundred Thousand
Dollars ($500,000).
"Meridian Indebtedness" shall mean the loan of $48,500,000.00 to
Meridian's predecessor from T-L Advance, Inc. on December 15, 1992,
evidenced by a Promissory Note and secured by a Mortgage and Security
Agreement and other instruments (collectively, the "Meridian Loan
Documents").
"Meridian Related Parties" shall mean Meridian and its partners,
members, managers, shareholders, officers, directors, affiliates and
agents, and the respective heirs, executors, administrators, personal
representatives, successors and assigns of each of the foregoing.
"Meridian's Closing Costs" shall mean those closing costs for
which Meridian is responsible pursuant to SECTIONS 7.2 AND 7.3
hereof.
"Net Contribution Consideration" shall have the meaning set
forth in SECTION 2.2.
"OP Unit Recipients" shall mean those members of Meridian
identified on EXHIBIT B-2 that shall receive OP Units at the Closing,
and their respective heirs, personal representatives, successors and
assigns permitted in accordance with this Agreement and the
Partnership Agreement.
"OP Units" shall mean Class B Common Units of Acquiror, to be
issued pursuant to the provisions of SECTION 4.4 of the Partnership
Agreement, which shall be entitled to the same rights and privileges
as Acquiror's currently outstanding Common Units except as set forth
in the Acknowledgment in the form attached hereto as EXHIBIT K (the
"Acknowledgment").
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"Other Agreements" shall mean the Outlot Purchase Agreements and
that certain Contribution and Exchange Agreement dated of even date
herewith concerning the Janesville Property.
"Outlot Parcels" shall mean those parcels of real property
contiguous to the Real Property which are owned by the Outlot
Partnerships and which are being acquired by Acquiror or Acquiror's
affiliates contemporaneously with the Closing of this transaction
pursuant to the Outlot Purchase Agreements.
"Outlot Partnerships" shall mean East Lansing Properties Co.,
Parkway Enterprises Limited Partnership and Township Properties Co.
which are the respective owners of the Outlot Parcels.
"Outlot Purchase Agreement" shall mean the three (3) agreements
of even date herewith between Acquiror or its affiliate and the
Outlot Partnerships, respectively, for the purchase of the Outlot
Parcels.
"Partnership Agreement" shall mean the Second Amended and
Restated Agreement of Limited Partnership of Acquiror, dated June 30,
1998, attached hereto as EXHIBIT L.
"Permitted Exceptions" shall mean the various matters affecting
title to the Properties that are approved or deemed approved by
Acquiror pursuant to SECTION 3.3(C).
"Personal Property" shall mean all Equipment, furniture,
furnishings, trade fixtures and other tangible personal property
directly or indirectly owned by Meridian, that is located at and used
in connection with the operation of the Real Property.
"Property" shall mean the shopping center property known as
"Meridian Mall", which is comprised of the Real Property, Personal
Property, Leases, Contracts and Intangible Property that is a part
thereof.
"REA" shall mean the
(1) Operating Agreement between Meridian Mall Associates,
Meridian Plaza and ▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation dated June 1, 1981,
recorded in Liber 1380, Page 1112 of ▇▇▇▇▇▇ County, Michigan
Records, as amended by a Supplement to Operating Agreement dated
June 1, 1981, a second Supplement to Operating Agreement dated
as of August 11, 1986, a third Supplement to Operating Agreement
dated as of October 31, 1986, and a fourth Supplement to
Operating Agreement dated July 21, 1987, which was recorded in
Liber 1649, Page 256 of ▇▇▇▇▇▇ County, Michigan Records (the
"▇▇▇▇▇▇ ▇▇▇").
(2) Reciprocal Easement Agreement dated August 31, 1977,
between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustees, and
Meridian Plaza, recorded in Liber 1241,
7
Page 938 of ▇▇▇▇▇▇ County, Michigan Records, as the same may
have been amended as set forth on Exhibit P.
(3) Reciprocal Easement Agreement dated as of October 2,
1992, between Meridian Mall Associates, Meridian Plaza and Park
Central Properties, recorded in Liber 2021, Page 839 of ▇▇▇▇▇▇
County, Michigan Records, as the same may have been amended as
set forth on Exhibit P.
(4) Reciprocal Easement Agreement, dated June 15, 1989,
by and between Meridian Mall Associates and Meridian Plaza and
Parkway Enterprises Limited Partnership recorded in Liber 1760,
Page 891 of ▇▇▇▇▇▇ County Records, as the same may have been
amended as set forth on Exhibit P.
"Real Property" shall mean the Land, the leasehold estate under
the Ground Lease, the Improvements and all rights, privileges,
easements, and appurtenances to the Land or the Improvements,
including, without limitation, (i) any air, development, water,
hydrocarbon or mineral rights held by Meridian, (ii) all licenses,
easements, rights-of-way, claims, rights or benefits, covenants,
conditions and servitudes and other appurtenances used or connected
with the beneficial use or enjoyment of the Land, the leasehold
estate under the Ground Lease or the Improvements, (iii) all rights
or interests relating to any roads, alleys or parking areas adjacent
to or servicing the Land, the leasehold estate under the Ground Lease
or the Improvements, and (iv) all condemnation awards to be made in
lieu of any of the foregoing, or for damages to the Real Property by
reason of the change of grade of any street, highway or avenue.
"Registration Rights Agreement" shall mean EXHIBIT M hereof.
"REIT" shall mean CBL & Associates Properties, Inc., a Delaware
corporation.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Sellers" shall mean those members of Meridian identified as
Exhibit B-1 that shall receive cash at the Closing.
"Stock" shall mean the common stock of the REIT.
"Subsidiary Partnership" shall mean any partnership in which
Acquiror has or may acquire in the future a direct or indirect
interest.
"Surviving Covenants" shall mean those covenants set forth in
SECTIONS 3.1(C) and (D) and SECTION 8.2, as well as those covenants
which survive pursuant to their express provisions.
"Termination Trigger Amount" shall mean One Million Dollars
($1,000,000.00).
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"Title Company" shall mean Lawyers Title Insurance Company.
"Title Report" shall mean the Lawyers Title Insurance Company
Commitment ▇▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇, dated July 17, 1998 issued
with respect to the Real Property.
"Unadjusted Stock Price" shall mean the weighted (by trading
volume) average daily closing price of the Stock on the New York
Stock Exchange during the fifteen (15) trading days prior to the date
which is five (5) days prior to the Closing Date.
"Violations" shall mean violations of Legal Requirements with
respect to the Property.
ARTICLE II
CONTRIBUTION AND EXCHANGE
Section 2.l Contribution. Meridian agrees to contribute
and convey and Acquiror agrees to accept and assume from Meridian,
for the Net Contribution Consideration and on the terms and
conditions set forth in this Agreement, fee simple and leasehold
title to the Real Property and good and valid title to the remainder
of the Property.
Section 2.2. Contribution Consideration. The Gross
Consideration shall be One Hundred Three Million Two Hundred Twenty-
Five Thousand Dollars ($103,225,000.00) and shall be delivered to
Meridian less (a) Adjustments which reduce the Gross Consideration;
and (b) the amount of the Meridian Indebtedness (including accrued
interest, prepayment penalties and premiums and all other sums due
thereunder) (the "Loan Payoff Amount"); plus any Adjustments which
increase the Gross Consideration (i.e., the Net Contribution
Consideration). The Net Contribution Consideration shall be
delivered partly in cash (the "Cash Consideration") and partly in OP
Units (the "Unit Consideration"). The allocation of the Net
Consideration between the Cash Consideration and the Unit
Consideration shall be in accordance with EXHIBITS B-1 and B-2. The
value of the OP Units shall be determined pursuant to the formula set
forth below. Provided that all conditions precedent to Acquiror's
obligations to Close as set forth in this Agreement have been
satisfied and fulfilled or waived in writing by Acquiror, the Net
Contribution Consideration shall be delivered to Meridian at Closing
pursuant to SECTION 7.2.
Section 2.3. Meridian Indebtedness. Subject to the terms
of this Agreement, the Property shall be subject to the Meridian
Indebtedness when Acquiror acquires the Property at Closing.
Acquiror shall assume Meridian's obligation to repay the Loan Payoff
Amount, to the extent set forth in a letter from the lender under the
Meridian Loan Documents to be delivered to Acquiror prior to Closing.
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Section 2.4. OP Units.
(a) The portion of the Net Contribution Consideration
constituting the Unit Consideration shall be paid by issuance of
OP Units to Meridian in accordance with EXHIBIT B-2. Meridian
acknowledges that the OP Units are not certificated and that,
therefore, the issuance of the OP Units shall be evidenced by
the execution and delivery by Acquiror's general partner of the
Acknowledgment.
(b) The number of OP Units to be delivered in
satisfaction of payment of the Unit Consideration shall be the
number obtained by dividing the Unit Consideration by the
Unadjusted Stock Price. Meridian and Acquiror hereby agree,
conclusively and unconditionally, that such determination as to
the number of OP Units comprising the Unit Consideration shall
be made based upon the Unadjusted Stock Price, regardless of the
price per share of Stock (or any other securities of the REIT)
on the day of Closing, or at any time before or after Closing.
If such calculation would result in a fractional number of OP
Units to be delivered, the Acquiror shall pay the fractional
amount in cash so as to provide for delivery of a round number
of OP Units.
(c) Meridian has delivered or shall deliver to Acquiror a
completed questionnaire ("Investor Questionnaire") providing
information concerning each OP Unit Recipient's status as an
Accredited Investor. On the basis of the information set forth
in the Investor Questionnaires previously delivered to Acquiror
but subject to the provisions of Section 2.4(f), Acquiror agrees
to permit each member of Meridian listed on Exhibit B-2 to
become an OP Unit Recipient and to be admitted as a limited
partner in Acquiror provided that this transaction Closes in
accordance with its terms and each such party executes an
Acknowledgment.
(d) As a condition of receiving OP Units, each member of
Meridian that is an OP Unit Recipient shall deliver to Acquiror,
or to any other party designated by Acquiror, any documentation
that may be required under the Partnership Agreement or any
charter document of the REIT, and such other information and
documentation as may reasonably be requested by Acquiror, at
such time as any OP Units are exchanged for Stock as a condition
of exchanging OP Units. The preceding covenant shall survive
the Closing and shall not merge into any of the conveyancing
documentation delivered at Closing.
(e) The parties acknowledge that the OP Unit Recipients
intend to treat this transaction relating to the exchange of the
Property for OP Units as a tax-free partnership contribution
pursuant to Section 721 of the Code. Acquiror shall cooperate
in all reasonable respects with the OP Unit Recipients to
effectuate such exchange; provided that so long as Acquiror
shall perform in accordance with the terms of this Agreement and
shall not be in breach of any representations, warranties or
covenants set forth herein, (i) Acquiror shall have no liability
whatsoever for any tax
10
liability or related expenses of Meridian or any OP Unit Recipient
except as expressly provided herein, and (ii) Acquiror shall have
no obligation to incur any cost, expense or liability, except as
expressly provided herein, unless Meridian or any OP Unit Recipient
has agreed to reimburse and/or indemnify Acquiror to Acquiror's
reasonable satisfaction in connection therewith.
(f) In the event that any of the Perlick entities shall
not have delivered its Investor Questionnaire which is
reasonably satisfactory to Acquiror as of the Closing Date, the
Closing shall occur, but such Perlick entities shall receive
cash in lieu of OP Units.
Section 2.5. Informational Materials. A true and correct
copy of the Partnership Agreement has been furnished by Acquiror to
Meridian. Meridian hereby covenants and agrees that, prior to the
Closing, it shall cause each OP Unit Recipient to deliver to Acquiror
an Acknowledgment that the ownership of OP Units by such OP Unit
Recipient and its respective rights and obligations as a limited
partner of the Acquiror (including, without limitation their right to
transfer, encumber, pledge and exchange OP Units) shall be subject to
all of the express limitations, terms, provisions and restrictions
set forth in the Partnership Agreement. In that regard, Meridian
hereby covenants and agrees that, at Closing, it shall cause each OP
Unit Recipient to execute any and all documentation reasonably
required by the Acquiror and the REIT to formally memorialize the
provisions of this SECTION 2.5. Each OP Unit Recipient further
acknowledges that it has received and reviewed, prior to the date of
this Agreement, the REIT's Annual Report on Form 10-K and Annual
Report to Shareholders for the year ended December 31, 1997, the
REIT's Proxy Statement soliciting proxy materials in connection with
the REIT's 1997 annual meeting, the REIT's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 and all forms 8-K filed by
the REIT with the SEC Subsequent to December 31, 1997 and all press
releases of the REIT since that date and Meridian agrees and
covenants that each OP Unit Recipient shall so acknowledge on or
prior to the Closing Date. All of the materials and information
referred to in this SECTION 2.5 are listed on EXHIBIT O hereto and
shall be collectively referred to as "Informational Materials."
Section 2.6. Registration Rights. At Closing, Acquiror
shall cause the REIT to confer to each OP Unit Recipient the benefits
of the Registration Rights Agreement, a copy of which has been
delivered to Meridian and is attached hereto as EXHIBIT M.
ARTICLE III
ACQUIROR'S DUE DILIGENCE
Section 3.1 Acquiror's Review and Meridian's Disclaimer.
(a) Acquiror acknowledges that Meridian has afforded
Acquiror and Acquiror's agents and representatives the
opportunity to review all of the Disclosure Materials prior to
the date of this Agreement and will continue to make them
available
11
hereafter. In addition to the Disclosure Materials,
and subject to subparagraph (b) below, Meridian will make the
Property available for inspection by Acquiror and/or Acquirors
representatives and agents (as well as Acquiror's lenders and
their respective representatives, agents and contractors) and
such parties shall, at Acquiror's risk, be entitled to conduct
one or more property condition inspections and environmental
audits of the Property and in connection with any of the
foregoing to undertake such reasonable and customary physical,
environmental and other evaluations and/or investigations and/or
inspections of the Property as Acquiror and/or its lenders and
their respective representatives or agents deems appropriate.
Acquiror's (and its lenders') rights hereunder shall, without
limitation specifically include the following:
(i) The Acquiror and/or its lenders and their
respective representatives and agents shall have the
right, subject to the rights of tenants under their
respective Leases, to evaluate and inspect the physical
properties and structures of all Improvements on the
Property, the geological character of the Property, the
compliance of the Property with all Legal Requirements,
the status of operations and title of the Property and
matters of the survey, availability of utilities,
maintenance status and other matters pertaining to the
condition of the Property collectively (the "Property
Condition");
(ii) The Acquiror and its lenders and their
respective representatives and agents shall have the right
to conduct such interviews with tenants and/or adjoining
property owners as Acquiror desires and Meridian shall
facilitate the same; and
(iii) The Acquiror and/or its lenders and their
respective representatives and agents shall have the right
to examine the environmental status, compliance, quality
and condition of the Property, including any and all
Improvements and the subsurface thereof, and all adjacent
and proximate properties (subject to the rights of the
owners and/or occupants of such adjacent and proximate
properties) (the "Environmental Status").
Meridian shall also provide Acquiror and its lenders with
access to the Property and all books, records, files and
documents pertaining to the Property in Meridian's or Meridian's
managing agent's possession or at Meridian's reasonable disposal
at all reasonable times.
(b) Acquiror's exercise of the rights of review and
confirmation set forth in subsection (a) above shall be subject
to the following limitations: (i) any entry onto the Property by
Acquiror, its agents or representatives, shall be during normal
business hours following reasonable prior notice to Meridian and
at Meridian's discretion, accompanied by a representative of
Meridian, (ii) Acquiror shall not conduct any
12
drilling, test borings or other disturbance of the Property for
review of soils, compaction, environmental, structural or other
conditions without the prior written consent of Meridian as to the
location and the time of such testing which, at Meridian's discretion,
shall be performed in the presence of a representative of
Meridian, (iii) any discussions or interviews with any
constituent partner, member, manager, shareholder, officer or
director of Meridian or any tenants of the Property or their
personnel, at Meridian's discretion, shall be conducted in the
presence of Meridian or its representatives, (iv) any
discussions or interviews with employees at the Property shall,
at Meridian's election, be conducted in the presence of Meridian
or their representatives, (v) Acquiror shall exercise reasonable
diligence not to disturb the use or occupancy or the conduct of
business at the Property and (vi) Acquiror shall indemnify,
protect, defend and hold Meridian and the Meridian Related
Parties harmless from and against any and all claims, demands,
losses, damages, liabilities, causes of action, liens, costs and
expenses, including, without limitation, reasonable attorneys'
fees and costs (to the extent permitted by law) (but expressly
excluding consequential or incidental damages) related to or
arising out of any entry or inspections performed by Acquiror,
its agents or representatives pursuant to clause (ii) of this
SECTION 3.1(B) or otherwise in violation of the provisions of
this SECTION 3.1(B), and Acquiror, at Acquiror's sole cost and
expense, shall promptly restore the Property and any damage
caused to the Property by any such inspection; provided that
except as expressly set forth herein, Acquiror shall have no
liability to Meridian arising from (x) any physical condition of
or the presence or disturbance of any Hazardous Material at the
Property existing prior to Acquiror's (or its representatives'
or agents') entry, whether known or unknown to Meridian, or
(y) any acts or omissions of Meridian or any of its employees,
agents or contractors (including, without limitation, any damage
due to errors or omissions in information provided to Acquiror
or its employees, agents or contractors) relating to
environmental matters. Meridian shall at all times exercise
reasonable diligence in providing Acquiror with access or
information that Acquiror requests, but shall bear no liability
if Meridian is not able despite reasonable efforts to afford
Acquiror such access or information. If Meridian elects to be
present during the Acquiror's exercise of the rights of review
and confirmation as provided herein, the Meridian shall make its
representative available in a timely fashion so as not to delay
or interfere with Acquiror's schedule or activities in
exercising its rights of review and confirmation. The
provisions of this SECTION 3.1(B) shall survive the Closing.
(c) Acquiror acknowledges (i) that Acquiror has entered
into this Agreement with the intention of making and relying
upon its own investigation of the physical, environmental,
economic and legal condition of the Property, (ii) that, other
than as specifically set forth in this Agreement, Meridian or
anyone acting or claiming to act on behalf of Meridian is not
making and has not at any time made any representation or
warranty of any kind or nature, either oral or written, directly
or indirectly, expressed, implied, statutory or otherwise, with
respect to the Property, including, without limitation,
representations or warranties as to habitability,
merchantability, fitness for a particular purpose, title (other
than Meridian's limited
13
warranty of title set forth in the Deed), zoning, tax consequences,
latent or patent physical or environmental condition, health or
safety matters, utilities, operating history or projections,
valuation, projections, the applicability of any laws, rules or
regulations or compliance therewith, or the truth, accuracy or
completeness of the Disclosure Materials, (iii) other than as
specifically set forth in this Agreement, Acquiror is not relying
upon and is not entitled to rely upon any representations and/or
warranties made by Meridian or anyone acting or claiming to act on
behalf of Meridian, (iv) that the Disclosure Materials include certain
soil, environmental and physical reports prepared for Meridian
or Meridian's lenders by third parties as to which reports
Acquiror has no right of reliance except as expressly provided
in such reports, and Acquiror acknowledges that Acquiror has
conducted an independent evaluation and Meridian or anyone
acting or claiming to act on behalf of Meridian has made no
representations or warranties whatsoever as to accuracy,
completeness or adequacy of such reports and (v) that the
Disclosure Materials include certain economic projections that
reflect assumptions as to future market status and future
Property income and expense with respect to the Property which
are inherently uncertain and as to which Meridian has made no
representation, guaranty or warranty whatsoever. Acquiror
further acknowledges that Acquiror has not received from
Meridian or anyone acting or claiming to act on behalf of
Meridian, any accounting, tax, legal, architectural,
engineering, property management or other advice with respect to
this transaction and that Acquiror is relying solely upon the
advice of its own accounting, tax, legal, architectural,
engineering, property management and other advisors. Based upon
Acquiror's familiarity with the Property, Acquiror's due
diligence relating to the Property and Acquiror's experience and
knowledge as to the market in which the Property is situated and
as to investment in and operation of real estate in the nature
of the Property and commercial real estate in general, Acquiror
shall acquire the Property on the Closing Date in its "AS IS,
WHERE IS AND WITH ALL FAULTS" condition, without any
representation or warranty whatsoever except as expressly
provided in this Agreement, as aforesaid, and, except as
expressly provided in this Agreement, Acquiror fully assumes the
risk that adverse latent or patent physical, structural,
environmental, economic or legal conditions may not have been
revealed by Acquiror's investigations. Meridian and Acquiror
acknowledge that the Net Contribution Consideration to be paid
to Meridian for the Property has taken into account that the
Property is being contributed as the case may be, subject to the
provisions of this SECTION 3.1. Except as set forth in SECTION
5.6 nothing in this SECTION 3.1 shall be deemed to impair, limit
or otherwise affect Acquiror's rights under this Agreement in
respect of the representations, warranties and covenants of
Meridian set forth in this Agreement and the other express
provisions hereof binding on Meridian, and except as set forth
in SECTION 5.6 nothing contained in this SECTION 3.1 shall be
deemed to constitute a waiver by Acquiror of its rights at law
or in equity, if any, to seek contribution or other recourse
against Meridian in the event of a claim asserted against
Acquiror by a third party with respect to liabilities arising
from or relating to a breach of any express representations,
warranties or covenants by Meridian hereunder to the extent that
such representation, warranty or covenant has
14
not been terminated pursuant to Section 5.6 (a). Meridian and
Acquiror agree that the provisions of this SECTION 3.1 shall
survive the Closing of this transaction.
(d) Without limiting the generality of the provisions of
this SECTION 3.1, except as expressly provided in this
Agreement, Meridian makes no representations or warranties as to
the presence or absence of any Hazardous Materials in, on, under
or about the Properties. Except as expressly provided in
Section 5.1(b) (xviii) or (xxii) of this Agreement. Acquiror
specifically waives any private right of action provided , and
agrees (for itself or anyone deriving rights by or through
Acquiror) not to ▇▇▇ or join Meridian in any suit, claim or
cause of action relating to environmental matters under CERCLA
or any other Environmental Laws and/or any principles of common
law to recover or be reimbursed for any liabilities, costs,
fees, or expenses from Meridian, Meridian Related Parties, or
any predecessors in interest; provided, however, that in no
circumstances will Acquiror protect, defend, hold harmless,
reimburse or indemnify Meridian or any Meridian Related Party in
any way from claims brought against Meridian or any Meridian
Related Party by any third parties in connection with the
presence of any Hazardous Materials or any violation of
Environmental Laws and/or common law relating to environmental
matters existing prior to the Closing Date. The provisions of
this SECTION 3.1(D) shall survive the Closing of this
transaction.
(e) Subject solely to SECTION 7.3 and the representations
set forth in SECTION 5.1, except as may be limited as set forth
in SECTION 5.6, effective as of the Closing Date, Acquiror, for
itself and its agents, partners, members, shareholders,
officers, directors, managers, affiliates, successors and
assigns, hereby releases and forever discharges Meridian and the
Meridian Related Parties from any and all rights, claims,
actions, causes of action, demands and liabilities at law or in
equity, whether known or unknown at the time of this Agreement
(collectively, "Claims"), which Acquiror has or may have in the
future, arising out of or related to the physical, structural,
environmental, economic or legal condition of the Property,
including, without limitation, all claims in tort or contract
and any claim for indemnification or contribution arising under
CERCLA or any other Environmental Laws or any other federal,
state or local statute, rule or ordinance now or at any time
hereafter in effect relating to liability of property owners or
operators for environmental matters, but excluding (i) claims
and liabilities specified in SECTION 5.2, subject to the
limitations in SECTION 5.6, or (ii) claims arising as a result
of gross negligence or wilful wrongdoing on the part of
Meridian. Without limiting the foregoing, on the Closing Date,
Acquiror shall be deemed to have waived, relinquished and
released Meridian and all of the Meridian Related Parties from
any and all Claims and other matters arising out of latent or
patent defects or physical conditions, violations of applicable
laws and any and all other acts, omissions, events,
circumstances or matters affecting the Property, subject,
however, to Acquiror's rights and remedies provided for in this
Agreement in the event of the breach of any of Meridian's
express warranties, representations or covenants contained
herein, subject to the limitations in SECTION 5.6, and subject
to the next to last sentence of SECTION 3.1(C) hereof.
15
Section 3.2 Material Adverse Matters.
(a) On or prior to the last day of the Confirmation
Period, Acquiror has delivered to Meridian the Confirmation
Letter, as attached as EXHIBIT C, confirming, other than as
specified in the Confirmation Letter, Acquiror's satisfaction as
to the absence of any Adverse Matters Amount in excess of the
Materiality Threshold Amount. Acquiror's failure to deliver to
Meridian, on or prior to the last day of the Confirmation
Period, an executed Confirmation Letter shall be conclusively
deemed as Acquiror's confirmation of the absence of any Adverse
Matters Amount in excess of the Materiality Threshold Amount.
Other than for (i) breaches of Meridian's representations,
warranties and covenants as expressly set forth in this
Agreement that are discovered following the close of the
Confirmation Period, (ii) matters identified in tenant or lender
estoppel certificates which are inconsistent with written
disclosures or representations by Meridian on or prior to the
date hereof, (iii) matters discovered in the documents listed in
Exhibit I and designated with an asterisk OR (iv) events which
occur following the Confirmation Period but prior to Closing and
which are not covered by insurance or condemnation proceeds
(which are governed by SECTION 8.1 hereof) (collectively, "Post
Confirmation Period Material Events"), Acquiror and Meridian
shall have no rights or obligations based upon, and Acquiror
specifically waives any rights or claims relating to, any
Adverse Matters not identified (in accordance with the terms of
this Agreement) in the Confirmation Letter for any reason
whatsoever, including, without limitation, (i) mandatory
exclusion from the Confirmation Letter because the Adverse
Matters Amount does not exceed the Materiality Threshold Amount,
or (ii) Acquiror's failure or inability for any reason (unless
such reason results from Meridian's deliberate and malicious
action or inaction) to identify such Adverse Matters prior to
the close of the Confirmation Period.
(b) If the Adverse Matters Amount exceeds the Materiality
Threshold Amount, the Confirmation Letter shall set forth
(i) the exact nature of any claimed Adverse Matters that
contributed to such excess and the manner in which any such
claimed Adverse Matters have an adverse effect on the value of
the Property and/or the Outlot Parcels and (ii) reasonably
detailed evidence of the existence of such Adverse Matters and
Acquiror's rationale for and calculation of the Adverse Matters
Amount.
(c) If the Adverse Matters Amount, as reflected in the
Confirmation Letter, is less than Termination Trigger Amount but
more than the Materiality Threshold Amount, the Gross
Consideration shall be reduced by the Property's pro rata share
(based on the portion of the Adverse Matters Amount attributable
to the Property, with any excess allocated among Meridian and
the Outlot Parcels in a manner equitably determined by the
sellers of such properties) (its "Pro Rata Share") of the excess
of (i) the Adverse Matters Amount over (ii) the Materiality
Threshold Amount as reduced by the excess, if any, of the
Materiality Threshold Amount in the Janesville Transaction over
the Adverse Matters Amount in the Janesville Transaction. For
example, if the
16
Adverse Matters Amount is $750,000 (i.e.
$250,000 above the Materiality Threshold Amount for the
Property), and the Adverse Matters Amount in the Janesville
Transaction is $400,000 (i.e. $100,000 below the Materiality
Threshold Amount for the Janesville Transaction), the Gross
Consideration for the Property shall be reduced by the
Property's Pro Rata Share of $150,000 instead of $250,000. In
such event the parties shall be obligated to Close this
transaction on the Closing Date in accordance with the terms of
this Agreement, but Meridian shall have the right to arbitrate
the Adverse Matters Amount pursuant to the arbitration
provisions set forth in SECTION 8.5 below. In the event that
the Janesville Transaction does not close prior to or
substantially contemporaneously with the Closing hereunder, the
calculation of the reduction in the Gross Consideration pursuant
to this SECTION 3.2(C) shall be made without regard to the
Adverse Matters Amount in the Janesville Transaction; provided,
however, that promptly following the closing of the Janesville
Transaction, such reduction in the Gross Consideration shall be
recalculated to take account of the excess, if any, of the
Materiality Threshold Amount in the Janesville Transaction over
the Adverse Matters Amount in the Janesville Transaction,
whereupon Meridian or Acquiror, as the case may be, shall pay,
in accordance with the terms of SECTION 7.3(G), to the other
party an amount equal to the adjustment that should have been
made in the Gross Consideration. The provisions of this Section
3.2(c) shall survive the Closing.
(d) If the Adverse Matters Amount, as reflected in the
Confirmation Letter, is greater than the Termination Trigger
Amount, then Acquiror shall elect in the Confirmation Letter
either (i) to Close this transaction on the basis of a reduction
of the Gross Consideration by the Property's Pro Rata Share of
the difference between the Termination Trigger Amount and the
Materiality Threshold Amount (but without any reduction in the
Gross Consideration for the excess over the Termination Trigger
Amount), or (ii) to terminate this Agreement (the "Termination
Notice"). Upon receipt by Meridian of the Confirmation Letter
with a Termination Notice, Meridian shall elect, within five (5)
Business Days thereafter, one of the following: (A) to agree to
the termination of this Agreement, in which event the Deposit
shall be returned to Acquiror; (B) to agree to Close this
transaction on the basis of a reduction in the Gross
Consideration in the full amount of the Property's Pro Rata
Share of the excess of the Adverse Matters Amount over the
Materiality Threshold Amount, in which event the parties shall
be obligated to Close this transaction on the Closing Date in
accordance with the terms of this Agreement, or (C) to elect to
pursue arbitration pursuant to SECTION 8.5 below, in which
event, Meridian shall be obligated to Close the transaction (in
accordance with clause (B) of this sentence but using the
arbitrator's determination of the Adverse Matters Amount as the
basis for reducing the Gross Consideration) if the arbitrator(s)
agree(s) with Meridian's position regarding the Adverse Matters
Amount, or Meridian shall be permitted to terminate this
Agreement if the arbitrator(s) agree(s) with Acquiror's position
regarding the Adverse Matters Amount, or, in the alternative, to
Close this transaction in accordance with Clause (B) of this
sentence. In the event that Acquiror shall elect to Close this
transaction pursuant to clause (i) above, Meridian shall have
the right to arbitrate the Adverse Matters Amount pursuant
17
to the arbitration provisions set forth in SECTION 8.5, but
notwithstanding the outcome of said arbitration, Meridian shall
be obligated to Close this transaction, provided that the
reduction in the Gross Consideration shall be the difference
between the lesser of the Property's Pro Rata Share of the
Termination Trigger Amount or the Adverse Matters Amount
determined by arbitration, on the one hand, and, on the other
hand, the Materiality Threshold Amount. Notwithstanding
anything to the contrary set forth in this Agreement, if the
Property's Pro Rata Share of the Adverse Matters Amount exceeds
ten percent (10%) of the Gross Consideration, Acquiror may elect
to terminate this Agreement without regard to Meridian's
willingness to reduce the Gross Consideration by an amount equal
to the Property's Pro Rata Share of the excess of the Adverse
Matters Amount over the Materiality Threshold Amount, subject
to Meridian's right to arbitrate the Adverse Matters Amount
pursuant to SECTION 8.5. Notwithstanding anything herein to the
contrary, the amount of the reduction in the Gross Consideration
shall be reduced by the Property's Pro Rata Share of the excess,
if any, of the Materiality Threshold Amount over the Adverse
Matters Amount in the Janesville Transaction.
(e) In the event that Meridian has elected to pursue
arbitration pursuant to clause (C) of SECTION 3.2(D) hereof, the
termination by Acquiror pursuant to clause (ii) of such Section
shall not be effective until the conclusion of such arbitration.
If such arbitration shall have determined that the Adverse
Matters Amount is greater than the Termination Trigger Amount,
this Agreement shall be terminated unless Meridian elects,
within five (5) Business Days after receipt of notice of such
determination through arbitration to agree to Close this
transaction on the basis of a reduction in the Gross
Consideration in the full amount of the Property's Pro Rata
Share of the excess of the Adverse Matters Amount over the
Materiality Threshold Amount by giving written notice to
Acquiror, in which event the Closing shall occur on the second
business day after Acquiror receives such notice. In addition,
if Meridian shall have elected to pursue arbitration pursuant to
clause (C) of SECTION 3.2(D), Meridian shall have the right to
require that the Closing occur on the Closing Date prior to the
conclusion of the arbitration, in which event the parties shall
be obligated to Close this transaction on the Closing Date and
the Gross Consideration shall be reduced by the Property's Pro
Rata Share of the excess of the Adverse Matters Amount over the
Materiality Threshold Amount as determined by such arbitration.
Escrow arrangements shall be made pursuant to the provisions of
SECTION 8.5(D) hereof.
(f) In the event that Post-Confirmation Period Material
Events (as defined in SECTION 3.2(A)) occur prior to the Closing
Date, Acquiror as its sole remedy shall be entitled to
recalculate the Adverse Matters Amount by adding to the amount
of Adverse Matters discovered during the Confirmation Period the
amount of any new Adverse Matters created as a result of a Post
Confirmation Period Material Event and deliver a new
Confirmation Notice to Meridian prior to the scheduled Closing
Date setting forth the results of such recalculation and
containing the information required under SECTION 3.2(A).
Thereupon, the procedures set forth in SECTIONS 3.2(B),(C),(D)
18
and (E) shall be implemented, and the Closing Date shall be
delayed a sufficient period of time to permit such
implementation.
(g) Notwithstanding anything in this Agreement to the
contrary, any matters identified by Acquiror prior to the
Closing Date that constitute breaches of representations,
warranties and covenants and also constitute Adverse Matters
shall be treated solely as Adverse Matters and shall not be the
subject of any claim for breach of representation, warranty or
covenant under ARTICLE V.
(h) Notwithstanding anything to the contrary set forth
above, Acquiror and Meridian agree that the following categories
of Adverse Matters ("Non-Curable Adverse Matters"), if
discovered or occurring with respect to the Property and/or the
Outlot Parcels at any time after the date hereof and prior to
Closing, are not readily quantifiable or are otherwise not of a
nature which Acquiror should be obligated to accept even if
Meridian were prepared to reduce the Net Consideration: A
release of Hazardous Materials which is of such seriousness as
to materially adversely affect the viability of the Property
and/or the Outlot Parcels as a shopping center. Within three
(3) Business Days following the discovery or occurrence of a
Non-Curable Adverse Matter, Acquiror shall notify Meridian of
the nature of the Non-Curable Adverse Matter and that Acquiror
elects (i) to terminate this Agreement; (ii) to Close this
transaction without adjustment to the Net Meridian
Consideration, notwithstanding the existence of such Non-Curable
Adverse Matter, or (iii) to Close this transaction provided that
Meridian agrees to cure such Non-Curable Adverse Matter in a
manner reasonably satisfactory to Acquiror or to reduce the Net
Consideration by an amount reasonably acceptable to Acquiror.
In the event that Acquiror elects item (iii) in the preceding
sentence, Meridian shall elect, by written notice to Acquiror,
within five (5) Business Days thereafter, either (x) to agree to
cure the Non-Curable Adverse Matter in a manner proposed in such
notice or to accept a reduction in the Net Contribution
Consideration by an amount proposed in such notice, or (y) to
terminate this Agreement. If Meridian elects to terminate this
Agreement, Acquiror shall have the right, by written notice to
Meridian within five (5) Business Days thereafter, to proceed to
Close the transaction without cure or reduction, in which event
Meridian shall be obligated to Close the transaction.
Notwithstanding anything to the contrary set forth above, in the
event the Meridian disputes the existence of a Non-Curable
Adverse Matter alleged by Acquiror, Meridian shall be entitled
to arbitrate the matter pursuant to the provisions of
SECTION 8.5.
(i) Acquiror has advised Meridian that the environmental
engineers engaged by Acquiror to perform due diligence with
respect to the Property (the "Consultant") have advised
Acquiror and U.S. Bank, N.A., its proposed lender for the
acquisition, that core samples and additional Phase II
environmental survey work, which shall be reasonably approved by
Meridian in writing (the "Phase II Work") must be performed to
determine whether there are any Petroleum products in the Soil
which have been released from certain oil pipelines that crossed
the Property during the 1960's (the
19
"Potential Pipeline Spill") in the three (3) areas designated by
the Consultant where spills occurred in 1963, 1968 and 1969.
Following the execution of this Agreement Acquiror shall as
promptly as is reasonably practical perform such Phase II Work.
If any environmental contamination of the Property is revealed by
the Phase II Work which requires abatement or management under
applicable laws, the Acquiror's Consultant, in conjunction with
Meridian's Consultant, whose reasonable fees, costs and expenses
will be paid by Acquiror, shall provide a detailed analysis of the
costs of regulatory reporting, monitoring and/or remediation of same
in the manner and to the extent required by applicable law (the
"Remediation"). In the event Meridian disputes the existence of
such contamination, the extent of the required Remediation or
the PPS Costs, Meridian shall be entitled to arbitrate the
matter pursuant to SECTION 8.5 by giving notification five (5)
Business Days after Acquiror notifies Meridian of the required
Remediation, and/or estimated PPS Costs. (The estimated
reporting, monitoring and remediation costs, as so determined
are herein called the "PPS Costs"). Within one (1) day after
the determination of the PPS Costs, Meridian and Acquiror shall,
on the request of either party, execute a statement confirming
the PPS Costs (the "Confirmation"). Failure by either party to
respond within five (5) days after receipt of notice shall be
deemed an agreement with the other party's statement of the PPS
Costs. If the PPS Costs are $1,000,000, or less, Acquiror shall
be required to Close the transaction without any reduction or
abatement of the Gross Consideration. If the PPS Costs are more
than $1,000,000 but less than $3,000,000, the Closing shall
occur, but the Gross Consideration shall be reduced by 50% of
the excess of the PPS Costs over $1,000,000. If the PPS Costs
exceed $3,000,000 either Acquiror or Meridian shall have the
right to terminate this Agreement by giving notice within two
(2) Business Days after the PPS Costs are determined unless the
other party elects, within two (2) Business Days after notice of
the first party's election to terminate, to bear the entire cost
of such excess; provided that if the PPS Costs exceed
$10,000,000 Meridian may not reinstate the Agreement following a
termination by Acquiror. Failure by the parties to give a
termination notice within the time periods set forth herein
shall be deemed to be an irrevocable waiver of such termination
right in which event the Closing shall occur and the Gross
Consideration shall be reduced by 50% of the excess of the PPS
Costs over $1,000,000. Upon the termination of this Agreement
hereunder the Deposit shall be returned to Acquiror. The
provisions of this SECTION 3.2(I) shall govern and control all
matters relating to the Potential Pipeline Spill. The reduction
in the Gross Consideration with respect to the Potential
Pipeline Spill as set forth in this paragraph shall be
Meridian's sole obligations with respect to payment of the PPS
Costs. Notwithstanding any provision of this paragraph to the
contrary, in no event shall Acquiror be required to proceed to
Closing and Acquiror shall retain the right to terminate this
Agreement unless the PPS Costs have been fully resolved as
provided in this SECTION 3.2(I). Acquiror shall have the right
to terminate all (but not less than all) of this Agreement, the
Janesville Agreement and the Other Agreements if following the
Phase II environmental assessment the institutional lending
community would not provide non-recourse financing with recourse
to Acquiror but not to its partners (with normal carve outs and
an environmental indemnity) on normal terms and conditions,
20
assuming the PPC Costs are secured by the borrower with cash or
other security, for the remediation of the Potential Pipeline
Spill and/or taking account any risk assessment analysis. Any
dispute concerning the institutional lending community standard
shall be resolved by arbitration in accordance with Section 8.5.
Time shall be of the essence with regard to the time periods set
forth herein.
Section 3.3 Title Exceptions.
(a) Acquiror has secured and may continue to secure, at
Acquiror's expense, during the Confirmation Period any
additional title report or survey updates desired by Acquiror.
Any title exceptions or issues disclosed by title or survey
updates, disclosed by Meridian to Acquiror or otherwise
identified by Acquiror, and which are not within the definition
of Permitted Exceptions, shall be referred to as "Additional
Exceptions." Acquiror, in any event, shall endeavor in good
faith to cause the Title Company to delete or insure over any
Additional Exceptions prior to Acquiror's expression of such
matters in an Additional Exception Notice (as hereinafter
defined).
(b) Acquiror shall have the right to deliver a notice to
Meridian identifying any Additional Exceptions ("Additional
Exception Notice") (i) on or prior to the expiration of the
Confirmation Period, and (ii) on or prior to the Closing Date
solely with respect to matters that (A) are set forth in an
update to the Title Report first received by Acquiror after the
expiration of the Confirmation Period which materially and
adversely affect the Property or Acquiror's rights in the
Property, or (B) arise as a result of an act or omission of
Meridian or any of its members, employees or agents and
materially and adversely affect the Property or Acquiror's
rights in the Property. Acquiror's failure to deliver any such
notice in timely fashion shall be deemed an approval of the
applicable Additional Exceptions disclosed to Acquiror in the
Title Report or any title or survey updates, or disclosed to
Acquiror by Meridian in writing or otherwise discovered by
Acquiror during the Confirmation Period. Except as set forth
above, Acquiror shall have no right to deliver an Additional
Exception Notice following the close of the Confirmation Period.
If Acquiror delivers an Additional Exception Notice within such
period, Acquiror and Meridian shall promptly attempt to agree
upon the method or cost to cure or remove such Additional
Exception or, if not susceptible to cure or removal such
Additional Exception shall be deemed to be an Adverse Matter and
shall be resolved in accordance with the procedures set forth in
SECTION 3.2. Notwithstanding the foregoing, Acquiror shall not
have the right to object to any Additional Exception if the
Title Company is willing to affirmatively insure or endorse over
such Additional Exception at Meridian's expense.
(c) "Permitted Exceptions" shall refer to (i) all Leases
listed on the Lease List; (ii) any and all exceptions to title
set forth in the Title Report attached as EXHIBIT P or the
Survey identified on EXHIBIT P, (iii) zoning ordinances and
regulations and other similar laws or regulations governing use
or enjoyment of the Property, (iv) matters affecting title
created by or with the written consent of Acquiror,
21
(v) liens to secure taxes and assessments not yet due and payable,
(vi) mortgages or deeds of trust and related encumbrances
securing the Meridian Indebtedness, (vii) the Ground Lease,
(viii) the REA and (ix) any Additional Exceptions agreed to or
accepted by Acquiror in writing in accordance with the terms of
this Agreement. Notwithstanding the foregoing, on the Closing
Date, Meridian shall, at Meridian' sole cost and expense, remove
any liens of any mortgages or deeds of trust securing
indebtedness of Meridian (excluding therefrom the Meridian Loan
Documents), liens for other monetary obligations that are not
assumed by Acquiror (for such purposes, all unpaid installments
of assessments not yet due and payable collected with ad valorem
real estate taxes shall be assumed by Acquiror, subject to the
prorations set forth in SECTION 7.3, and represent Permitted
Exceptions) and any title matters created in violation of
Meridian' covenant set forth in SECTION 5.2(H), except for any
Additional Exceptions agreed to or accepted by Acquiror in
writing in accordance with the terms of this Agreement.
(d) Meridian shall have no obligation to execute any
affidavits or indemnifications in connection with the issuance
of the Title Policy (hereinafter defined in SECTION 4.1(A)),
excepting only customary affidavits such as regarding authority,
the non-foreign status of Meridian, the rights of tenants in
possession and the status of mechanics' liens in the form
attached hereto as EXHIBIT Q.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4. l Conditions.
(a) Notwithstanding anything in this Agreement to the
contrary, Acquiror's obligation to acquire the Property shall be
subject to and contingent upon the satisfaction or waiver of
each of the following conditions precedent at or prior to
Closing:
(i) The written commitment, upon the sole
condition of the payment of any regularly scheduled
premium, of the Title Company to issue, with respect to
the Property, an American Land Title Association Owner's
Policy of Title Insurance in conformity with the Title
Report (to the extent the same relates to the Property)
(the "Title Policy") insuring Meridian's fee simple and
leasehold title to the Real Property on the Closing Date
in an amount equal to the Gross Consideration, subject
only to the printed conditions and exceptions of such
policy, the Permitted Exceptions and such Additional
Exceptions as are agreed to by Acquiror pursuant to
SECTION 3.3(B) above, together with such customary
endorsements and affirmative coverage as Acquiror shall
reasonably request; provided that Meridian shall bear no
additional expense as a result thereof;
22
(ii) Meridian's performance, observance or tender
of performance of all Closing obligations and other
material covenants and conditions required of Meridian
under this Agreement;
(iii) All representations and warranties of Meridian
set forth in SECTIONS 5.1(A) hereof shall be true and
correct in all material respects on and as of the Closing
Date as if made on and as of such date and Meridian shall
have so certified in writing (provided that nothing herein
is intended to abrogate Acquiror's right to terminate this
transaction pursuant to SECTION 3.2 based upon breaches of
the representations and warranties set forth in SECTION
5.1(B));
(iv) Receipt by Acquiror no later than the Closing
Date of the following estoppel letters:
(A) Estoppel letters from Hudsons, Mervyns,
Service Merchandise and ▇.▇. ▇▇▇▇▇▇ (collectively,
the "Majors") dated no earlier than sixty (60) days
prior to Closing in the form required under their
respective Leases (provided that Meridian shall make
reasonable efforts to obtain estoppel letters on the
form attached hereto as EXHIBIT R); and
(B) Estoppels dated no earlier than sixty (60)
days prior to Closing in the form attached hereto as
EXHIBIT R from all tenants under Leases of Ten
Thousand (10,000) square feet or more of gross
leasable area within the Property and from not less
than seventy-five (75%) of all other tenants of the
Property leasing less than ten thousand (10,000)
square feet computed by reference to gross leasable
area; and
(C) In addition to the foregoing estoppels, a
master estoppel in the form attached hereto as
EXHIBIT S (the "Master Estoppel") from Meridian with
respect to all Leases (other than the Leases
described in subparagraph (A) and Leases of 10,000
square feet or more of gross leasable area unless
Acquiror has waived in writing such conditions as to
any such Lease) for which estoppels have not been
obtained and delivered. For one (1) year after
Closing, Meridian shall use its reasonable good faith
efforts to obtain and deliver such tenant estoppels.
Any statements made by Meridian in such Master
Estoppel shall constitute warranties and
representations by Meridian which shall survive the
Closing until the earlier to occur of (x) the first
anniversary of the Closing Date, or (y) the date on
which any tenant supplies its own estoppel, to the
extent such tenant's estoppel covers the items set
forth in the Master Estoppel; provided, however, that
to the extent that any tenant estoppel differs
materially from the Master Estoppel, Acquiror
23
shall be permitted to treat such material difference as
a claim for breach of a representation or warranty
pursuant to SECTION 5.5(B); and provided, further,
that, notwithstanding anything in this Agreement to
the contrary, Acquiror shall have until the earlier
of (i) three (3) months after the receipt by Acquiror
of the tenant estoppel in question, or (ii) one (1)
year after Closing, to deliver a Claim Notice to
Meridian with respect to such breach; and
(D) Estoppel letters from the lessor under
each Ground Lease dated no earlier than forty-five
(45) days prior to the Closing in the form attached
hereto as EXHIBIT T.
Notwithstanding anything in this Agreement to the
contrary, if the foregoing condition (iv) has not been
satisfied or waived on or before the scheduled Closing
Date, Meridian shall have the right to extend the Closing
Date until the earlier of (x) sixty (60) days following
the scheduled Closing Date or (y) the date on which such
conditions are satisfied or waived.
(v) The execution and delivery by all OP Unit
Recipients of the Acknowledgment.
(vi) There having occurred no Non-Curable Adverse
Matters following the Contract Date; unless the foregoing
condition is waived by Acquiror pursuant to the provisions
of SECTION 3.2(H).
(vii) The following shall not have occurred:
(A) the bankruptcy of any Major; or
(B) the actual, or delivery of notice of,
closing of business of the store operated by any of
the Majors other than for repairs, inventory,
remodeling and similar matters which are intended to
be on a temporary basis.
(viii) There being no material litigation or
other proceeding pending against the Property that would
have a material adverse effect on the Property or
Acquiror's use thereof as a shopping center.
(ix) Intentionally Deleted.
(x) Intentionally Deleted.
24
(xi) Receipt by Escrow Agent of a payoff letter
with respect to the Meridian Indebtedness confirming the
Loan Payoff Amount, together with any instruments
necessary to confirm the satisfaction in full of the Loan
Payoff Amount;
(xii) The Ground Lease not having been terminated,
no default beyond applicable cure period then existing
thereunder and no notice of default having been delivered
to Meridian by any ground lessor thereunder which has not
been cured;
(xiii) Each ground lessor under the Ground Lease
shall have delivered a joinder and subordination or other
similar agreement in the form attached hereto as Exhibit
T-1; and
(xiv) Each ground lessor shall have consented (to
the extent it has any right to consent) in writing to the
financing to be put on the Property by Acquiror
immediately following the Closing.
(xv) The purchase by Acquiror or its affiliates of
the Outlot Parcels shall have closed, or shall close
immediately after the Closing of this transaction;
provided, however, that Acquiror shall be deemed to have
waived the condition set forth in this clause (xv) if the
failure of any Outlot Parcel(s) to close shall have been
caused by the default of the Acquiror or its affiliates
under the Outlot Purchase Agreement in question.
(b) Notwithstanding anything in this Agreement to the
contrary, Meridian's obligation to sell the Property shall be
subject to and contingent upon the satisfaction or waiver of the
following conditions precedent at or prior to Closing:
(i) Acquiror's performance or tender of
performance of all Closing obligations and other material
covenants and conditions required of Acquiror under this
Agreement;
(ii) All representations and warranties of Acquiror
set forth in ARTICLE V hereof shall be true and correct in
all material respects on and as of the Closing Date as if
made on and as of such date and Acquiror shall have so
certified in writing; and
(iii) The purchase by Acquiror of the Outlot Parcels
shall have closed, or shall close immediately after the
Closing of this transaction, provided, however, that
Meridian shall be deemed to have waived the condition set
forth in this clause (iii) if the failure of any Outlot
Parcel(s) to close shall have been caused by any reason
other than the default of Acquiror under the Outlot
Purchase Agreement with respect thereto; and
25
(iii) The execution and delivery by Acquiror of
the Acknowledgment.
Section 4.2 Failure or Waiver of Conditions Precedent. If
any of the conditions set forth in SECTION 4.1 are not fulfilled or
waived at or prior to Closing, then the party benefitted by such
condition may, by written notice to the other party, terminate this
Agreement, whereupon all rights and obligations hereunder of each
party shall cease and terminate and be of no further force or effect
except for the Surviving Covenants, unless the other party is able to
secure the satisfaction of the noted condition within five (5)
Business Days of such termination notice, in which event this
Agreement shall not terminate. Notwithstanding the foregoing, the
termination of this Agreement pursuant to this SECTION 4.2 shall not
be deemed to waive any rights that a party may have pursuant to
Article VI of this Agreement. Either party may, at its election, at
any time or times at or before the Closing, waive in writing the
benefit of any of the conditions set forth in SECTION 4.1(A) and
SECTION 4.1(B). In any event, Acquiror's consent to the Close of
escrow pursuant to this Agreement shall waive any remaining
unfulfilled conditions except as otherwise specified by the
provisions in writing. If this Agreement is terminated by Acquiror
as a result of the failure of any condition set forth in SECTION
4.1(A) or by Meridian as a result of the failure of the condition set
forth in SECTIONS 4.1(B)(I), the Title Company, as escrow agent,
shall return the full amount of the Deposit to Acquiror, together
with any interest accrued thereon. Notwithstanding anything to the
contrary contained herein, (i) Acquiror may only waive the condition
set forth in SECTION 4.1(A)(XV) hereof if all of Acquiror's
conditions precedent in each of the Outlot Purchase Agreements (other
than those under which the seller thereunder shall have defaulted)
shall have been satisfied or waived and the purchaser thereunder
shall be ready, willing and able to close thereunder, and (ii)
Meridian may only waive the conditions set forth in
SECTION 4.1(B)(III) hereof if all of the seller's conditions
precedent in each of the Outlot Purchase Agreements (other than those
under which Acquiror shall have defaulted) shall have been satisfied
or waived and the sellers thereunder shall be ready, willing and able
to close thereunder.
ARTICLE V
COVENANTS WARRANTIES AND REPRESENTATIONS
Section 5.1 Meridian's Warranties and Representations.
Meridian makes the following representations and warranties to
Acquiror, provided that Acquiror acknowledges and agrees that each of
such representations and warranties shall be deemed expressly
qualified by any information set forth on the Disclosure Materials
List and Statement or in the Disclosure Materials set forth on the
Disclosure Materials List & Statement.
(a) Organizational Representations. Meridian represents
and warrants as follows:
26
(i) Meridian is a limited liability company
organized, validly existing and in good standing under the
laws of the State of Ohio and has qualified to do business
in the State of Michigan. Meridian has full power and
lawful authority to enter into and carry out the terms and
provisions of this Agreement and to execute and deliver
all documents which are contemplated by this Agreement,
and all actions of Meridian necessary to confer such power
and authority upon the persons executing this Agreement
(and all documents which are contemplated by this
Agreement) on behalf of Meridian have been taken and this
Agreement constitutes a valid and legally binding
obligation of Meridian enforceable against Meridian in
accordance with its terms), subject to applicable
bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance or other similar laws
affecting the rights of creditors generally and to
principles of equity.
(ii) Meridian's execution and delivery of this
Agreement, the consummation of the transactions
contemplated hereby and the performance of Meridian's
obligations under the instruments required to be delivered
by Meridian at the Closing, do not and will not require
the consent, approval or other authorization of, or
registration, declaration or filing with, or payment of
any premium, fee or penalty to any Governmental Authority
(excepting the recordation of Closing documents to the
extent contemplated in this Agreement and any transfer
taxes payable in connection therewith) and do not and will
not result in the creation of or claim of any lien, charge
or encumbrance upon the Property or any portion thereof or
any violation of, or default under, any law, regulation,
rule, order or judgment of any Governmental Authority or
any term or provision of any agreement, instrument,
mortgage, loan agreement or similar document to which
Meridian is a party or by which Meridian is bound.
(iii) There is no litigation, investigation or
proceeding pending or, to Meridian's knowledge,
contemplated or threatened against Meridian that, if
decided adversely to Meridian, would materially and
adversely affect the value of the Property or Meridian's
ability to perform Meridian's obligations under this
Agreement or any other instrument or document related
hereto.
(iv) Meridian is not a "foreign person" as defined
in Section 1445(f)(3) of the Code.
(v) As of December 31, 1997, Meridian's adjusted
tax basis in the Property for federal income tax purposes
was approximately as set forth on EXHIBIT U, and the
scheduled tax depreciation, cost recovery and amortization
deductions for future years are approximately as set forth
on such Exhibit. Except as noted on such Exhibit,
adjusted tax basis and the scheduled tax depreciation,
cost recovery and amortization deductions for future years
for state income tax purposes do not differ materially
from the federal amounts.
27
(vi) As of December 31, 1997, the "outside tax
basis" of each of the OP Unit Recipients, their capital
accounts and share of liabilities is approximately as set
forth on EXHIBIT V apportioned to the extent that an OP
Unit Recipient may be receiving some cash as consideration
for this transaction.
(vii) Intentionally Deleted.
(viii) Intentionally Deleted.
(ix) Intentionally Deleted.
(x) Intentionally Deleted.
(xi) Intentionally Deleted.
(xii) Intentionally Deleted.
(xiii) Intentionally Deleted.
(xiv) Intentionally Deleted.
(xv) Intentionally Deleted.
(b) Property Status. Meridian represents and warrants
with respect to the Property, except as otherwise disclosed in
the Disclosure Materials set forth on the Disclosure Materials
List and Statement (EXHIBIT D hereof):
(i) Attached hereto as EXHIBIT I is a Lease List
(Rent Roll) with respect to the Property which is true,
correct and complete.
(ii) (A) The Lease List for the Property lists all
of the Leases affecting the Property. Meridian has made
true, correct and complete originals or copies of all
Leases (except for those documents designated with an
asterisk) in effect as of the date hereof available to
Acquiror for its review. To Meridian's knowledge, except
as may be set forth on the Lease List, each Lease
identified on the Lease List is in full force and effect
and has not been modified, assumed or extended except as
specified, and, except as disclosed in the Disclosure
Materials List and Statement, no tenant is in material
default under any such Lease and Meridian has not received
written notice of any material default by the landlord
under any such Lease. No tenant or other person or entity
has an option to purchase or right of first refusal with
respect to the sale of all or any part of the Property.
28
(B) The list of REAs set forth in this Agreement
with respect to the Property is true, correct and
complete. The REAs listed herein constitute all of the
REAs affecting the Property. Meridian has made true,
correct and complete originals or copies of all REAs in
effect as of the date hereof available to Acquiror for its
review. To Meridian's knowledge, each REA identified in
this Agreement is in full force and effect and has not
been modified, assumed or extended except as specified,
and, except as disclosed in the Disclosure Materials List
and Statement, no party to an REA is in material default
under any such REA and Meridian has not received written
notice of any material default by a party to an REA. No
party to an REA or other person or entity has an option to
purchase or right of first refusal with respect to the
sale of all or any part of the Property.
(iii) All leasing commissions in respect of the
current terms of the Leases or REAs currently in effect
have been or will be paid in full by Meridian, except as
provided on EXHIBIT Y.
(iv) Except as set forth on EXHIBIT Z, Meridian has
received no written notice within the thirty-six (36)
month period immediately preceding the date hereof, from
any tenant under any Lease which is still outstanding and
otherwise has no knowledge that such tenant is entitled to
any reduction in, refund of or counterclaim or offset
against, or is otherwise disputing, any rents paid,
payable or to become payable by such tenant thereunder or
any other sums due any tenant pursuant to the terms of its
Lease, or is entitled to cancel or terminate its Lease or
to be released of any of its material obligations
thereunder.
(v) To Meridian 's knowledge, all work which is
required to be performed by Meridian under each Lease has
been performed to the Tenant's satisfaction or as required
to be performed by Meridian pursuant to such Lease, except
for work not completed and listed on EXHIBIT AA, and the
party indicated thereon shall be responsible for payment
of the same.
(vi) All amounts in respect of tenant cash
allowances, lease takeover payments or takeback payment
obligations and all other tenant cash inducements have
been paid or satisfied in full, except as set forth on
EXHIBIT BB, and the party indicated thereon shall be
responsible for payment of the same.
(vii) All security deposits currently held pursuant
to the Leases are listed on EXHIBIT I hereto (including
all accrued interest thereon, which is listed separately).
All security deposits furnished to the landlord under the
Leases have been held and applied in compliance with the
applicable Leases.
29
(viii) No person or entity using or occupying
space at the Property under any Lease is an affiliate of
Meridian, nor does Meridian or any affiliate thereof have
any interest (other than owning securities of such
affiliate which is publicly traded) in any such person or
entity.
(ix) There are no unexpired "free rent" periods (or
similar concessions) granted to any tenants under any of
the Leases, except as set forth on EXHIBIT I.
(x) Meridian has not received any notice from a
tenant within the thirty-six (36) month period preceding
the date of this Agreement that has not been cured stating
that a condition exists that would now permit a Tenant to
cancel or terminate such Lease (or any portion thereof),
to be released from liability under such Lease or cease
operating or reduce its obligations under such Lease.
(xi) Meridian has made originals or copies of all
Contracts in effect as of the date hereof which survive
the Closing available to Acquiror for its review, all of
the documents comprising such Contracts being identified
in EXHIBIT CC hereto.
(xii) Except as set forth on EXHIBIT CC, Meridian
has not given or received any written notice of default to
or from any party to a Contract which survives the Closing
which is still outstanding and otherwise has no knowledge
that Meridian or any such party has defaulted in any
material respects in performing any of its material
obligations under such Contract.
(xiii) Except as set forth on EXHIBIT CC, no
cancellation or termination fee is payable in connection
with the early termination of any Contract which survives
the Closing.
(xiv) Meridian has no direct or indirect ownership
interest in any service provider or any fees payable to
such provider under any contract which will remain in
effect after the Closing.
(xv) There are no agreements with brokers or any
other persons or entities providing for the management or
leasing of the Property or with contractors providing for
construction within the Property which will remain in
effect following the Closing, except as set forth on
EXHIBIT CC or elsewhere in this Agreement.
(xvi) The copies of the Disclosure Materials
provided to Acquiror are, to Meridian's knowledge, true,
accurate and complete in all material respects.
30
(xvii) To Meridian's knowledge, within the
thirty-six (36) month period preceding the date of this
Agreement, Meridian has received no written notice from
any Governmental Authorities that eminent domain
proceedings for the condemnation of or any zoning, land
use or similar proceedings relating to the Property or any
part of the Property are pending and, to Meridian's
knowledge, no such proceedings are threatened (in
writing).
(xviii) To Meridian's knowledge, within the
thirty-six (36) month period preceding the date of this
Agreement, Meridian has received no written notice of and
has no knowledge of any threatened (in writing) or pending
litigation against Meridian, including litigation pursuant
to any Environmental Law, which, if decided adversely to
Meridian, would materially and adversely affect the
Property;
(xix) To Meridian's knowledge, within the thirty-six
(36) month period preceding the date of this Agreement,
Meridian has received no written notice that has not been
cured or corrected from any Governmental Authority that
the improvements constituting the Property are presently
in violation of any applicable building codes;
(xx) To Meridian's knowledge, Meridian has received
no written notice from any Governmental Authority that has
not been cured or corrected that the current use of the
Property is in violation of any applicable zoning, land
use or other similar law affecting the Property;
(xxi) To Meridian's knowledge, no Taxes or
Assessments are currently the subject of protest or
appeal.
(xxii) To Meridian's knowledge, Meridian has not
received any written notice within the thirty-six (36)
month period preceding the date of this Agreement which
has not been cured or corrected (A) from any Governmental
Authority of any failure by Meridian to obtain any
certificate, permit, license or approval (including those
required under Environmental Law) with respect to the
Property, or any intended revocation, modification or
cancellation of any of the same or (B) any violation of
any restriction, condition, covenant or agreement
contained in any easement, restrictive covenant or any
similar instrument or agreement which constitutes a
Permitted Exception.
(xxiii) To Meridians' knowledge, there are no
Contracts with respect to the Property that are not
cancelable by the owner of the Property within thirty (30)
days after written notice, except as disclosed on EXHIBIT
CC.
(xxiv) Attached hereto as EXHIBIT F is a list of
all of the documents constituting the Ground Lease and
true, correct and complete copies of each of
31
such documents have been delivered to Acquiror. The Ground
Lease is in full force and effect, Meridian has not
assigned or otherwise transferred any of its rights
thereunder (other than in connection with the Meridian
Indebtedness). Meridian has not sent or received any
written notice to or from the ground lessor thereunder
asserting or alleging that ground lessor or Meridian, as
the case may be, is in default of the Ground Lease which
default remains uncured and Meridian has no knowledge of
any continuing default by ground lessor or Meridian
thereunder. No consent or approval of the ground lessor
under the Ground Lease is required in connection with
Meridian's execution and delivery of the Assignment of
Ground Lease (as defined below). Meridian owns the
leasehold interest under the Ground Lease free and clear
from all liens and encumbrances (except as set forth on
EXHIBIT P hereof) and such leasehold interest has not been
pledged, transferred or encumbered, in each case except as
set forth in the Title Report.
(xxv) Except as set forth in the environmental
reports listed on EXHIBIT D included within the Disclosure
Materials, any reports or studies prepared by or for
Acquiror, and any reports obtained by Acquiror: (A) to
Meridian's knowledge, within the thirty-six (36) month
period preceding the date of this Agreement, Meridian has
received no written notice from any Governmental Authority
which has not been cured or corrected of the presence of
any Hazardous Materials presently deposited, stored, or
otherwise located on, under, in or about the Property,
except for Hazardous Materials used by Meridian or tenants
of the Property in the ordinary course of business or as
part of their inventory; and (B) to Meridian's knowledge,
there is one (1) underground storage tank on the Property
used in connection with the HVAC Plant.
(xxvi) A schedule of the material items of
personal property owned by Meridian included in the sale
is attached hereto as EXHIBIT E, which Exhibit separately
identifies any leased personal property, the leases for
which are listed on EXHIBIT E-1 annexed hereto.
(xxvii) Meridian is not a party to, or otherwise
bound by, any union or collective bargaining agreement
that would be binding on Acquiror after the Closing.
(xxviii) There are no tax abatements or exemptions
affecting the Property and, within the thirty-six (36)
month period preceding the date of this Agreement, to
Meridian's knowledge, Meridian has not received any
written notice of any proposed public improvement
assessments.
(xxix) To Meridian's knowledge, except for the
property depicted on EXHIBIT DD and the Outlot Parcels,
there is no real property other than the
32
Property that comprises the regional shopping center commonly
known as "Meridian Mall" located in the Meridian Township,
Michigan area and, except for the property depicted on EXHIBIT
DD and the Outlot Parcels, Meridian and Meridian Related
Parties do not own or lease any real property other than
the Property that is used in connection with the operation
of, or is located adjacent to, the Outlets of the
regional shopping center commonly known as "Meridian Mall"
located in the Meridian Township, Michigan area.
(xxx) True, complete and correct copies of the
financial statements identified on EXHIBIT D hereto have
previously been delivered to Acquiror and fairly and
accurately present the assets, liabilities, financial
position and condition, results or operations and changes
in financial positions of the subjects thereof as of the
dates thereof for the period referred to therein.
(xxxi) To Meridian's knowledge, within the
thirty-six (36) month period preceding the date of this
Agreement, Meridian has received no notice of outstanding
unpaid obligations to pay the cost of connection of any
utility lines, pipes or other equipment serving the
Property.
(xxxii) (A) To Meridian's knowledge, within the
thirty-six (36) month period preceding the date of this
Agreement, Meridian has not received any notice that
development, site assessment or other similar fees payable
in connection with the Property have not been paid, and
(B) to Meridian's knowledge, no such fees are payable
after the date hereof with respect to the Property as it
exists on the date hereof.
(xxxiii) Except for the REAs there are no
reciprocal easement agreements or similar agreements
affecting the Property.
(xxxiv) To Meridian's knowledge, within the
thirty-six (36) month period preceding the date of this
Agreement, Meridian has not received written notice from a
Governmental Authority that has not been cured or
corrected that the number of parking spaces at the
Property is required to be increased above the number of
parking spaces existing on the date hereof.
(xxxv) To Meridian's knowledge, within the
thirty-six (36) month period proceeding the day of this
Agreement, Meridian has not received written notice from
any Board of Fire Underwriters of any defect or inadequacy
in connection with the Property or its operation.
(xxxvi) Meridian is presently maintaining the
insurance policies and coverage set forth in the insurance
summary dated November 7, 1997 included in the Disclosure
Materials.
33
(xxxvii) In the thirty-six (36) month period
preceding the date hereof, to Meridian's knowledge,
Meridian has not received any written notice of any
proposed (but not yet implemented) increase in the real
estate taxes or assessed valuation of the Property.
As used in this Agreement, "Leases" shall include the ▇▇▇▇▇▇ ▇▇▇
and "tenants" shall include ▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation. As used
herein, the term "Meridian's knowledge" or words of similar effect
shall mean and be limited to, the current actual knowledge of any of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as being the
persons having knowledge of the Property; provided, however, that
said individuals shall not be deemed to have personally made any
representations or warranties and shall not have any personal
liability therefor, and, provided, further that except as expressly
provided herein no independent investigation or study shall have been
performed for purposes of such representations and warranties. Each
such individual's knowledge shall not include information or material
which may be in the possession of any agent or employee of Meridian
or the named individuals, but of which the named individuals are not
actually aware. Meridian shall have no liability for the breach of
any representations or warranties absent a judicial finding that the
named individual(s) withheld material information known to such
individual from Acquiror with respect to the subject matter of the
representation or warranty or falsified information delivered to and
relied upon by Acquiror and that such action amounted to a violation
of a representation or warranty expressly set forth in this
Agreement. None of the named individuals, shall bear personal
responsibility for any breach of such representation or warranty.
Section 5.2 Meridian's Covenants. Meridian hereby
covenants, and agrees, as follows:
(a) During the Contract Period, Meridian will exercise
reasonable and good faith efforts to operate and maintain the
Property in the ordinary course of business and in a manner
consistent with current practices and as may be required by any
Lease, REA, Contract or applicable Legal Requirement and the
Meridian Loan Documents.
(b) During the Contract Period, Meridian will not sell or
otherwise dispose of any significant items of the Personal
Property unless replaced with an item of like value, quality and
utility.
(c) During the Contract Period, Meridian shall not enter
into or modify any Contracts relating to the operation or
maintenance of the Property, except for those entered into in
the ordinary course of business and which are cancelable upon
not more than thirty (30) days' prior notice (with any
cancellation fee being paid by Meridian) or those otherwise
approved by Acquiror, which approval shall not be unreasonably
withheld and shall be deemed given if Acquiror should fail to
approve or disapprove proposed Contract matters in writing
within five (5) Business Days following Acquiror's receipt of
Meridian's written request. At Acquiror's written
34
request, Meridian shall deliver notice of termination on the
Closing Date as to any and all Contracts that Acquiror desires to
terminate, provided that such termination shall be effective
following any notice or waiting period for such termination
described in the Contract and that Meridian shall not be required
to bear any termination or cancellation fee or charge that may be
assessed under such Contract based upon an early termination. The
existing Management Agreement for the Property shall be
terminated as of the Closing Date and Meridian shall pay all
termination fees, if any, in connection therewith.
(d) Meridian shall terminate, or cause to be to be
terminated, (such termination to be effective as of 11:59 p.m.
on the day immediately preceding the Closing Date) all employees
of Meridian or the manager of the Property who are employed in
connection with the Property and shall pay, or cause to be paid,
when due all wages and other sums payable in connection with any
such terminations, including, without limitation, any and all
amounts due (i) for severance pay, (ii) on account of accrued
vacation, (iii) under any applicable union agreement or pension
plan by reason of withdrawal thereunder or otherwise, and (iv)
under the Workers Adjustment and Retraining Notification Act
("WARN Act").
(e) Meridian agrees to defend, indemnify and hold
harmless Acquiror and its agents from and against any and all
losses, claims, obligations, liabilities, and expenses
(including, without limitation attorneys' fees and
disbursements) of every kind and description, contingent or
otherwise, arising out of (i) any claims under the Workers
Adjustment and Retraining Notification Act and/or the
Comprehensive Omnibus Budget Reconciliation Act ("COBRA");
(ii) any claims asserted at any time by any person that was
employed at the Property at any time prior to the Closing to the
extent such claims are based on acts or omissions which occurred
prior to Closing; and/or (iii) Meridian's failure to comply with
its obligations under SECTION 5.2(D) immediately above.
(f) During the Contract Period, Meridian will not execute
or modify in any fashion any REAs or Leases (i) without promptly
notifying Acquiror of the proposed REA, lease or modification
and providing Acquiror with copies of the proposed REA, lease or
modification documents which shall be subject to Acquiror's
approval, which approval shall not be unreasonably withheld and
which shall be deemed given if Acquiror should fail to approve
or disapprove such proposed REA, lease or modification in
writing within five (5) Business Days following Acquiror's
receipt of Meridian's written request, (ii) as to any Lease or
REA termination, and (iii) as to any Lease or REA providing for
or creating an obligation for payment of any brokerage
commission irrespective of when due or providing for payment of
any tenant improvement allowance or other concession, or as to
any lease or REA (or modification of a Lease or REA) pertaining
to premises in excess of 10,000 rentable square feet, without
Acquiror's prior consent, which consent shall be deemed given as
to the leases set forth in EXHIBITS G, G-1 AND G-2 hereof
(provided that the same are
35
entered into on substantially the terms set forth on such exhibits
and pursuant to documentation reasonably acceptable to Acquiror (with
the understanding that Acquiror shall grant its consent to leases of
a kind generally used by Meridian with respect to the type of tenant
in question), and which otherwise shall not be unreasonably withheld
and shall be deemed given if Acquiror should fail to approve or
disapprove proposed lease matters in writing within five (5) Business
Days following Acquiror's receipt of Meridian's written request.
(g) During the Contract Period, Meridian shall comply in
all material respects with the provisions of all of the Leases,
REAs and Contracts that survive the Closing.
(h) During the Contract Period, Meridian shall not
voluntarily create, consent to or acquiesce in the creation of
liens or exceptions to title other than the Permitted Exceptions
without Acquiror's prior written consent, provided that Acquiror
shall not unreasonably withhold or delay consent to any proposed
matters affecting title which Meridian would execute in the
ordinary course of business and are beneficial to the Property
and do not give rise to any monetary or other material
obligation extending beyond the Closing Date.
(i) During the Contract Period, Meridian shall maintain
policies of property casualty insurance and rental loss
insurance (if any) for the Improvements with coverage, terms,
conditions and deductible amounts substantially consistent with
Meridian's property casualty insurance policies currently in
effect.
(j) Intentionally Deleted.
(k) During the Contract Period, the business of Meridian
shall be conducted in the ordinary course and in a manner
consistent with past practice, and Meridian shall not, prior to
the Closing, except in connection with an assignment, transfer
or distribution to an assignee permitted by Section 8.3(b)
hereof, (i) sell, convey, assign, transfer or otherwise dispose
of any of its assets, except that Meridian may, from time to
time, sell or otherwise dispose of worn out or obsolete
Equipment in the normal course of its business, provided that
the same shall be replaced with equipment of at least equal
value and utility; (ii) enter into any agreement of merger or
consolidation with any other person; (iii) enter into any other
transaction which is not in the ordinary course of its business
either in nature or in the amount involved; (iv) liquidate or
make any distribution of the Property or any portion thereof; or
(v) modify the Operating Agreement.
(l) Intentionally Deleted.
(m) During the Contract Period, (i) Meridian shall comply
in all respects with the terms of the Ground Lease, (ii)
Meridian shall not cancel, amend or terminate the Ground Lease
and (iii) Meridian shall provide Acquiror with copies of any and
all notices delivered with respect to the Ground Lease.
36
(n) During the Contract Period, Meridian shall not
initiate or settle any proceeding with respect to the reduction
of any Taxes.
(o) During the Contract Period, Meridian will notify
Acquiror of any of the following matters: (i) notices of
default given or received by Meridian with respect to any REA,
Lease or Contract surviving Closing, (ii) litigation commenced
by Meridian, or litigation for which Meridian has received
written notice commenced or threatened in writing against
Meridian with respect to the Property, (iii) notices received by
Meridian of condemnation proceedings commenced or directed
against all or any portion of the Property, (iv) casualty losses
to all or any portion of the Property, and (v) notice of any
Violation received by Meridian.
(p) Intentionally Deleted.
(q) Intentionally Deleted.
(r) Intentionally Deleted.
(s) Except to the extent arising from the acts or
omissions of Acquiror, its agents, employees or contractors,
Meridian agrees to defend, indemnify and hold harmless Acquiror
and its agents from and against any and all losses, claims,
obligations, liabilities and expenses arising out of any tort
claims (other than environmental claims) asserted against
Acquiror or Meridian or either of their agents arising out of
incidents or occurrences prior to the Closing Date, unless
covered by insurance; provided that the foregoing indemnity
shall not include attorneys fees incurred by Acquiror or its
agents in connection with defending Acquiror or its agents with
respect to such tort claims.
(t) Meridian agrees to defend, indemnify and hold
harmless Acquiror and its agents from and against any and all
losses, claims, obligations, liabilities and expenses arising
out of (i) any breaches prior to the Closing Date of any of the
Meridian Loan Documents or (ii) any breaches, at any time, of
any obligations with respect to the Meridian Loan Documents
other than the payment of the Loan Payoff Amount. Acquiror
shall notify Meridian of any alleged material breaches within
(30) days after it has knowledge of such claimed breach.
Section 5.3 Intentionally Deleted.
Section 5.4 Acquiror's Warranties and Representations.
Acquiror represents and warrants to Meridian and the OP Unit
Recipient that the following are true as of the date of this
Agreement:
(a) Acquiror is a duly formed and validly existing
limited partnership under the laws of the State of Delaware and
is in good standing under the laws of said State. Acquiror has
the full right, authority and power to enter into this
Agreement, to
37
consummate the transactions contemplated herein
and to perform Acquiror's obligations hereunder and under those
documents and instruments to be executed by Acquiror on the
Closing Date, and each of the individuals executing this
Agreement on behalf of Acquiror is authorized to do so, and this
Agreement constitutes a valid and legally binding obligation of
Acquiror enforceable against Acquiror in accordance with its
terms, subject to applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance
or other similar laws affecting the rights of creditors
generally and to principles of equity.
(b) Acquiror's execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and the
performance of Acquiror's obligations under the instruments
required to be delivered by Acquiror on the Closing Date, do not
and will not result in any violation of, or default under, any
term or provision of any agreement, instrument, mortgage, loan
agreement or similar document to which Acquiror is a party or by
which Acquiror is bound.
(c) There is no litigation, investigation or proceeding
pending or, to the best of Acquiror's knowledge, contemplated or
threatened in writing against Acquiror that would materially
impair or materially adversely affect Acquiror's ability to
perform its obligations under this Agreement or any other
instrument or document related hereto.
(d) Acquiror and, as applicable, its agents, have
complied fully with all terms and conditions of the
Confidentiality Agreement and have not communicated with any
tenant of the Property or any officers, managers, employees,
lawyers, accountants, consultants or agents of any such tenant,
in each case without prior consent of Meridian except to the
extent permitted in the Confidentiality Agreement.
(e) Acquiror's taxpayer identification number is 62-
1542285.
(f) The Acquiror and each of the existing Subsidiary
Partnerships qualifies as a partnership for federal income tax
purposes and is not treated as an association taxable as a
corporation under Section 7701 or Section 7704 of the Code or
any other provision.
(g) Neither the Acquiror nor any of the Subsidiary
Partnerships has any plan or intention to sell or dispose of the
Property or any substituted basis property (within the meaning
of Section 7701(a)(42) of the Code) with respect thereto for a
period of twelve (12) years other than in a nonrecognition
transaction in which no gain or loss is recognized (as described
in Treasury Regulation Section 1.704-3(a)(8)).
(h) Intentionally Deleted.
(i) (i) The execution of this Agreement and associated
documents and the transactions contemplated herein do not
conflict with the REIT's organizational
38
documents or any shareholder or voting trust agreements applicable
to the REIT; (ii) the execution of this Agreement and the associated
documents and the transactions contemplated herein do not conflict
with any documents applicable to Acquiror or any partnership
interests in Acquiror; (iii) Acquiror is duly authorized to issue
the OP Units; (iv) no consents or approvals are necessary to issue
the OP Units or for the REIT to be bound by the Registration
Rights Agreement (except for such consents or approvals as shall
have been obtained); (v) upon issuance of the OP Units, the
OP Units will be validly issued, fully paid and, except as
provided by law, non-assessable and the OP Units are free
of liens (except for liens created by the acts of Meridian
or any OP Unit Recipient); (vi) there are no preemptive
or similar rights, options, warrants or convertible or
exchangeable securities (or instruments exchangeable or
convertible into any of the foregoing) or puts, calls,
commitments or agreements or arrangements or undertakings of any
kind to which the Acquiror or the REIT is bound; (vii) no
bankruptcy or reorganization filings have been made by or are
contemplated by or, to Acquiror's knowledge, against Acquiror or
the REIT; and (viii) the Informational Materials for the
Acquiror and the REIT do not contain any untrue statement of
material fact or omit any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
(j) Intentionally Deleted.
(k) The REIT is a real estate investment trust within the
meaning of Section 856(a) of the Code.
(l) The REIT has no plan or intention to assume or
guarantee, or to allow any other partner (other than Meridian or
the OP Unit Recipients) to assume or guarantee, any debt to
which the Property is subject.
(m) The REIT is a duly formed and validly existing
corporation under the laws of the State of Delaware and is in
good standing under the laws of the State. The REIT has full
right, power, and authority to join in this Agreement for the
purposes set forth herein and each of the individuals executing
this Agreement on behalf of the REIT is authorized to do so.
(n) Acquiror has validly made an election under
Section 754 of the Code.
As used herein, the terms "Acquiror's knowledge" or words
of similar effect shall mean, and be limited to, the current actual
knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, H. ▇▇▇
▇▇▇▇▇▇▇, Jr., or ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ as being the persons having
knowledge of the subject matter, provided, however, that said
individuals shall not be deemed to have personally made
representations or warranties and shall not have any personal
liability therefor. Each such individual's knowledge shall not
include information or material which may be in the possession of
Acquiror, but of which the named individuals are not actually
39
aware. Acquiror shall have no liability for the breach of any
representations or warranties absent any arbitrated or judicial
finding that the named individual(s) failed to disclose material
information known to such individual to Meridian with respect to the
subject matter of the representations or warranty or falsified
information delivered to and relied upon by Meridian and that such
action amounted to a violation of representation or warranty
expressly set forth in this Agreement. None of the individuals
identified above shall bear personal responsibility for any breach of
such representation or warranty.
Section 5.5 Acquiror's Covenants. Acquiror hereby
covenants and agrees as follows, all of which covenants shall survive
the Closing of the transaction contemplated by this Agreement:
(a) Acquiror shall indemnify, protect, defend and hold
the Meridian Related Parties harmless from and against, any and
all claims, demands, losses, damages, liabilities, causes of
action, liens, costs and expenses (excluding punitive and
consequential damages) including, without limitation, reasonable
attorneys' fees and costs (to the extent permitted by law),
directly or indirectly related to, arising out of or in any
manner connected with (i) the Property to the extent that the
same directly or indirectly relates to, arises out of, or is in
any manner connected with any incidents or occurrences
occurring from and after the Closing Date and/or (ii) any
breaches of Acquiror's obligations under this Agreement or in
any instrument, document or agreement executed or delivered by
Acquiror in connection with the transaction contemplated by this
Agreement.
(b) For a period of twelve (12) years following the
Closing Date, the Acquiror will at all times qualify, and cause
each Subsidiary Partnership to qualify, as a partnership for
federal income tax purposes and not as an association taxable as
a corporation under Section 7701 or Section 7704 of the Code or
any other provision of the Code.
(c) Except to the extent permitted in SECTION 5.5(H), the
Acquiror shall not, and shall not permit the Subsidiary
Partnerships to, sell, transfer or otherwise dispose of the
Property or any substituted basis property (within the meaning
of Section 7701(a)(42) of the Code) with respect thereto for a
period of twelve (12) years following the Closing Date other
than in a nonrecognition transaction in which no gain or loss is
recognized (as described in Treasury Regulation Section 1.704-
3(a)(8)) (a "Nonrecognition Transaction").
(d) The Acquiror will allocate items of income, gain,
loss and deduction with respect to the Property using the
traditional method described in Treasury Regulation Section
1.704-3(b).
40
(e) (i) Except to the extent permitted in SECTION
5.5(H), the Acquiror shall not, and shall not permit the
Subsidiary Partnerships, within the period of twelve (12) years
following the Closing Date, to reduce the aggregate principal
balance (other than through scheduled periodic amortization of
principal -- such amortization will be no more rapid than would
occur on a 25 year straight-line self-amortizing loan at the
then market interest rate -- or as required by law) of the
"nonrecourse liabilities" (as defined in Treasury Regulation
Section 1.752-1(a)(2)) allocable in the aggregate to Meridian
and the Meridian Related Parties, as the case may be, pursuant
to Treasury Regulation Section 1.752-3(a)(1) and (a)(2), as in
effect as of the date hereof, below the amount so allocable
immediately following Closing (but not taking into account the
effect of any refinancing). The share of liabilities
allocable to each Meridian and each Meridian Related Party
immediately following the Closing Date (but not taking into
account the effect of any refinancing) is hereinafter
referred to as the "Initial Tier Two Share" of Meridian and
each Meridian or Meridian Related Party, as the case may be.
For the avoidance of doubt, Acquiror's obligations under
this clause (i) shall be deemed satisfied if Acquiror causes
the Property to be encumbered by a mortgage loan in the
principal amount of at least $47 million and (w) such loan
is secured by the Property, (x) such loan is not secured by
any other assets of the Acquiror, (y) the lender has no
recourse to any assets of Acquiror other than the security
for the loan and no partner of Acquiror bears the economic
risk of loss for the loan (within the meaning of Treasury
Regulation Section 1.752-2), disregarding for this purpose any
rights of the lender and payment obligations of any person that
are disregarded under Treasury Regulation Section 1.752-2(b)(4)
and (z) CBL shall treat at least $47 million of such loan as
allocable to the Property. A loan (a "Nonrecourse First
Mortgage Loan") shall be treated as satisfying the
requirements of the preceding sentence (A) even if it is
secured by the Property and by other property (such as the
Outparcels), if the principal amount of the loan exceeds the
value of such other property by at least $47 million and (B)
even if the Property also secures another loan (a "Second
Mortgage Loan") which is recourse to the Acquiror or to a
partner of the Acquiror, but only if such Second Mortgage
Loan is subordinate to the First Mortgage Loan.
(ii) Acquiror may incur a Described Loan (defined
below) and secure it with a mortgage on the Property. In
that case, Acquiror will, except upon the occurrence of a
Change of Law (defined below), take the position for federal
and state income tax purposes that the Described Loan
(including any replacement debt that is a Described Loan) is
a nonrecourse loan that is properly allocable to the
Property pursuant to section 752 of the Code, and will use
its commercially reasonable best efforts to cause such
position to be sustained.
A Described Loan is a loan (i) that is secured by the
Property, (ii) for which no partner of Acquiror bears the
economic risk of loss (within the meaning of Treasury
Regulation Section 1.752-2), disregarding for this purpose any
rights of the lender and payment obligations of any person that
are disregarded under Treasury Regulation Section 1.752-2(b)(4),
and (iii) that gives the lender, upon default, the rights of
a general unsecured creditor against the assets of the
Acquiror (other than against the Property, with respect to
which the lender would be in a position of mortgagee). If a
Described
41
Loan is secured both by the Property and by other
property (such as the Outparcels), the Described Loan shall
be treated as allocable to the Property only to the extent
of the excess of the principal amount of such loan over the
fair market value of the other property.
A Change of Law includes: (w) the enactment of legislation,
(x) the issuance of final or temporary regulations or the
issuance of proposed regulations (but only on or after the
later of (i) the adoption of such proposed regulations in
final form or (ii) 90 days prior to the proposed effective
date of such proposed regulations), (y) the publication by
the IRS of a revenue ruling or other formal written guidance
applicable to taxpayers generally, or (z) a final
determination by a court, in each case to the effect that a
Described Loan (or a substantially similar loan whether or
not issued by the Acquiror) is not properly treated for tax
purposes in the manner described in the first paragraph of
this clause (ii).
In the event of a Change of Law, Acquiror shall, as promptly
as practicable upon becoming aware of such Change of Law,
provide Meridian with a "Notice" containing the following
information: that a Change of Law has occurred, together
with a general description of the nature of the Change of
Law; the approximate amount of the "excess nonrecourse
liabilities" described in Treasury Regulation Section 1.752-
3(a)(3) allocable under the Code to Meridian as of the date
of the Notice, and an estimate of such amount as of a date
that is 60 days after the date of the Notice; and an
acknowledgment by Acquiror that it will provide Meridian
with an opportunity to execute Bottom Guaranties (defined
below) in an amount at least as great as the Initial Tier
Two Share of Meridian. Within 20 business days of receipt
of such Notice, Meridian may notify Acquiror that it desires
to execute a Bottom Guaranty. If Meridian so notifies
Acquiror, then, 10 business days after Acquiror provides
documents to Meridian for execution to effect such Bottom
Guaranties, or, if Meridian does not so notify Acquiror, 30
days after receipt of such Notice (the "Release Date"),
Acquiror's obligations under clause (i) hereof shall be
deemed satisfied so long as Acquiror maintains in place the
Described Loan with an outstanding principal balance of at
least $47 million. Alternatively, Acquiror may provide
documents to Meridian for execution to effect a Bottom
Guaranty at the time it provides the Notice to Meridian. In
that event, the Release Date shall occur 20 days after the
receipt of the Notice. In any event, however, Acquiror
shall be required to indemnify Meridian and each Meridian
and Meridian Related Party with respect to events (e.g.,
deemed distributions) occurring prior to the Release Date;
provided, however, that Acquiror's indemnification
obligation under clause (i) with respect to Meridian and
each Meridian Related Party arising out of events prior to
the Release Date shall be limited to the amount shown in
Exhibit EE plus interest at the underpayment rate imposed by
Section 6621 of the Code.
A Bottom Guaranty is a guaranty by Meridian or each Meridian
Related Party, as the case may be, that has all of the
following features: (A) The guaranteed loan is nonrecourse
against the assets of any partner of Acquiror (except that
other partners may also guarantee the debt, on a basis that
is pari passu with Meridian (a "Pari Passu Guaranty") to the
extent permitted below). (B) The loan to value ratio of the
guaranteed loan, together with any senior indebtedness
encumbering the collateral, at the time that the Bottom
Guaranty is put in place, must not exceed 60%. (C)
42
The amount of the Bottom Guaranty, together with any Pari Passu
Guaranties, must not exceed 15% of the principal balance of
the guaranteed loan. (D) The lender is permitted to look to
the guarantor for payment only after first exhausting any
remedies against the collateral (e.g., foreclosure) and
against the other assets of the Acquiror as a general
unsecured creditor. (E) Any recovery by lender of amounts
owed to it, pursuant to its exercise of remedies in (D)
above against the collateral and the other assets of
Acquiror, shall be applied against any amounts otherwise
owing under a Bottom Guaranty and any Pari Passu Guaranty.
(F) The principal balance of the guaranteed loan must be at
least $10 million. (G) Acquiror must provide to Meridian,
at Acquiror's cost, an opinion, reasonably acceptable to
Meridian, to the effect that the guaranty is valid, binding
and enforceable under applicable law. Such opinion may
assume Meridian is duly organized, validly existing, in good
standing in its state of organization and has the power and
authority to execute and deliver the Bottom Guaranty. (H)
The Bottom Guaranty must generally have a term that does not
expire prior to the 12th anniversary of Closing Date or if
earlier, the maturity date of the guaranteed loan (which
shall in no event be earlier than two years after the date
of receipt of the Notice), provided, however, that the
Bottom Guaranty shall, by its terms, terminate at an earlier
date upon the occurrence of any of the following events:
(w) death of Meridian, (x) a disposition (if, at the time of
such disposition, the requirements of B hereof are
satisfied) by Meridian of its entire direct and indirect
interest in Acquiror in a transaction in which gain or loss,
if any, would be recognized for federal income tax purposes,
(y) any other transaction in which Meridian's tax basis in
its direct or indirect interest in Acquiror is adjusted to
its fair market value at such time (if, at the time of such
transaction, the requirements of (B) hereof are satisfied),
and (z) a disposition by the Acquiror of the property that
secures the loan. If the Bottom Guaranty expires, other
than by operation of (H) hereof, prior to the 12th
anniversary of the Closing Date, Acquiror shall be required
to offer Meridian and each Meridian Related Person executing
a Bottom Guaranty in accordance with this Section a
substitute Bottom Guaranty meeting the requirements of this
Section at least 60 days prior to the expiration of the
initial Bottom Guaranty. Prior to a disposition by Acquiror
of property that secures a loan on which there is a Bottom
Guaranty, or the repayment of such loan, Meridian shall
first be offered an opportunity to execute a substitute
Bottom Guaranty of a like amount.
Acquiror will not seek a private letter ruling from the IRS
with respect to the allocation of nonrecourse debt arising
out a Described Loan. If Acquiror seeks such a private
letter ruling with respect to any other indebtedness,
Acquiror will offer the agent for the Meridian Related
Parties the opportunity to have the private letter ruling
solicitation apply to the Described Loan.
For the avoidance of doubt, references contained in this Section
5.5(e) to Meridian shall be deemed to apply also to each
Meridian Related Party to the extent that such Meridian Related
Party then holds OP Units directly or indirectly (except to the
extent otherwise provided in Section 5.5(j) and shall cease to
refer to Meridian if, as and when Meridian ceases to hold OP
Units.
(f) Acquiror shall notify the Meridian Related Parties
not less than sixty (60) days (or, if Acquiror itself has less
than sixty (60) days prior notice, as promptly as practicable)
prior to any event that would result in a taxable distribution
(or deemed distribution) of cash in excess of the tax basis in
the OP Units held by any Meridian Related Party. To the extent
that it is affected by an event described in the preceding
sentence, any Meridian Related Party (an "Affected Party") may
inform the Acquiror of any action it desires to take in order to
increase its "economic risk of loss" within the
43
meaning of Treasury Regulation Section 1.752-2 (each such action, an
"Incurrence") with respect to the liabilities of Acquiror or any
Subsidiary Partnership. Unless advised by counsel that no
reasonable basis exists for treating the proposed Incurrences in
the manner intended by the Affected Parties (in which event,
Acquiror shall promptly so inform the Affected Parties),
Acquiror shall cooperate in a commercially reasonable manner
with the Affected Parties in structuring the liabilities of
Acquiror and the Subsidiary Partnerships, and the guarantees
thereof, to facilitate the Incurrences in a manner that results
in the least amount of real economic risk being borne by each
Affected Party, provided, however, that Acquiror shall not be
required to incur any material expense or liability (other than
an expense or liability as to which the Affected Parties agree
to reimburse and indemnify Acquiror), and provided further that
in structuring any such arrangements, Acquiror shall not be
required to take or permit any action that would materially
adversely affect other holders of Common Units. Acquiror shall
be permitted to offer its other partners the opportunity to
enter into arrangements substantially equivalent to the
Incurrences at the time the Incurrences are structured.
Acquiror shall allocate to each Affected Party for federal and
state income tax purposes an additional amount of its
liabilities equal to the amount of any Incurrence and shall take
no position inconsistent therewith, unless advised by counsel
that as a result of a material change in circumstances (beyond
the control of Acquiror) or law occurring after implementation
of the Incurrence, no reasonable basis exists for such an
allocation. Notwithstanding the other provisions of this
subsection 5.5(f), if, in connection with notices given to the
Affected Parties under this subsection 5.5(f), the aggregate of
the additional liabilities to be allocated to the Affected
Parties as a result of the Incurrences (as determined
immediately after such Incurrences) does not exceed the amount
of the taxable distributions described in such notices by at
least the Materiality Threshold Amount, Acquiror shall not be
required to give subsequent notices under this subsection 5.5(f)
unless the aggregate taxable distributions that would be
described in such subsequent notices would equal or exceed the
Materiality Threshold Amount.
(g) Acquiror shall treat the transfer of the Property in
exchange for the Unit Consideration pursuant to this Agreement,
for purposes of all federal income tax returns, reports and
other filings, as a tax-free contribution of property to the
Acquiror by the OP Unit Recipients that is governed by the
provisions of Section 721 of the Code (except to the extent
resulting from the application of SECTION 7.4(B) hereof), and
shall take no position inconsistent therewith. Acquiror shall
similarly treat the transfer of the Property pursuant to this
Agreement for all state and local tax purposes.
(h) Notwithstanding SECTION 5.5(C) and 5.5(E), the
Acquiror may, and may permit the Subsidiary Partnerships, within
the period of (12) twelve years following the Closing Date, to
(i) sell, transfer or otherwise dispose of the Property, the
Membership Interests or any substituted basis property (within
the meaning of Section 7701(a)(42) of the Code) with respect
thereto in a transaction that is not a Nonrecognition
Transaction (a "Taxable Transaction") or (ii) act in a manner
44
otherwise prohibited by SECTION 5.5(E), provided, however, that
in any case described in (i) or (ii) above, Acquiror shall pay,
indemnify and hold harmless each of the Meridian Related Parties
against its Tax Costs, within the meaning of SECTION 5.5(I), and
provided, further, that prior to the occurrence of any event
described in clauses (i) or (ii) of this SECTION 5.5(H), the
Acquiror shall first establish a security arrangement to the
reasonable satisfaction of eighty percent (80%) of the Meridian
Related Parties as measured on the basis of their respective
percentage interests in the Acquiror at such time.
Notwithstanding anything to the contrary in this Agreement
(including, without limitation, under SECTION 5.6(E)),
Acquiror's obligations under the previous sentence shall be the
Meridian Related Parties' sole and exclusive remedy with respect
to Acquiror's obligations under SECTIONS 5.5(C) AND (E).
(i) For purposes of SECTION 5.5(H), the Tax Cost of each
Meridian Related Party shall mean the sum of, (i) in the case of
(A) a Taxable Transaction described in SECTION 5.5(H)(I), any
liability for taxes arising in connection with such Taxable
Transaction and as a direct or indirect result of the operation
of Section 704(c) of the Code and the Treasury Regulations
promulgated thereunder (or any comparable state or local
provisions), (B) an event described in SECTION 5.5(H)(II), any
liability for federal, state or local taxes arising as a direct
or indirect result of such event, (ii) any costs and expenses
including, without limitation, interest, penalties, reasonable
attorneys' and accountants fees, and any other costs directly or
indirectly related to, arising out of or in any manner connected
with the payments described in this sentence, and (iii) any
additional liability for taxes associated with the receipt of
any payments of amounts described in clauses (i), (ii) and (iii)
of this SECTION 5.5(I). In determining such Tax Cost in the
case of any Meridian Related Party that holds its interest in
Acquiror through one or more related entities treated as
partnerships for federal income tax purposes and in making the
determination set forth in the last proviso of SECTION 5.5(J)
hereof, it shall be assumed that all such entities had in effect
a valid election under Section 754 of the Code for all periods
during which such Meridian Related Party held its interest in
Acquiror. Prior to engaging in a transaction described in
SECTION 5.5(H), Acquiror may require any or all of the Meridian
Related Parties to reasonably cooperate with it in estimating
the Tax Cost of such transaction within 60 days of such request,
provided, however, that Acquiror shall reimburse and indemnify
such Meridian Related Parties for any costs incurred in
connection with such request.
(j) Notwithstanding any other provision of this Agreement
to the contrary, the Acquiror's covenants and obligations
contained in SECTION 5.5(D), (F), (G), (H) AND (I) and Section
8.3(a) shall not terminate prior to the expiration of the
applicable statute of limitations for the assessment or
imposition of any tax upon a Meridian Related Party, as the case
may be, for any tax liability directly or indirectly related to,
arising out of or in any manner connected with a breach of any
such covenant or obligation; provided, further, however, that
the twelve (12) year period set forth in SECTION 5.5(C) AND (E)
hereof
45
shall terminate with respect to a Meridian Related Party
if there has been a Basis Step-Up Transaction with respect to
all of such party's OP Units. For this purpose, a Basis Step-Up
Transaction with respect to an OP Unit shall mean a taxable sale
or other taxable disposition of an OP Unit, the death of an
individual Meridian Related Party or, in the case in which a
Meridian Related Party holds its interest in the OP Unit through
one or more entities treated as partnerships for federal income
tax purposes, a taxable sale or other disposition of such
Meridian Related Party's interest in the entity; provided,
however, in each case, that such Basis Step-Up Transaction
results in a full step-up of the basis of such OP Unit for
federal income tax purposes to its then fair market value and
provided further that a termination of the twelve year period as
described in this SECTION 5.4(J) shall be without prejudice to
any rights of a Meridian Related Party in respect of any breach,
occurring prior to the time of such termination by Acquiror or a
Subsidiary Partnership, of any obligation hereunder.
(k) Acquiror consents in advance to the admittance of the
OP Unit Recipients as limited partners of Acquiror.
(l) All OP Units shall be transferable in accordance with
the terms of the Partnership Agreement and this Agreement.
(m) Acquiror agrees that it shall cause the REIT to
reserve a sufficient quantity of authorized Stock at all times
to accommodate the immediate exchange of OP Units for Stock or
Acquiror shall pay in cash the market value of the Stock for
which the OP Units would have been exchanged.
Section 5.6 Survival/Limitations/Joinder.
(a) Subject to subsection (b) below, the parties agree
that, except for the Surviving Covenants, Meridian's
representations, warranties and covenants contained in this
Agreement and in any document executed by Meridian pursuant to
this Agreement shall terminate on the Closing Date, except that
(i) those representations, warranties and covenants contained in
SECTIONS 5.1(A)(I), (II) AND (III) 5.1(B)(III), (VIII), (XI),
(XII), (XIII), (XIV), (XV), (XVII), (XIX), (XX), (XXII),
(XXIII), CLAUSE (A) OF (XXV),
46
(XXVI), (XXVII), (XXIX), (XXX), (XXXI), CLAUSE (A) OF (XXXII),
(XXXIV), (XXXV) AND (XXXVII) AND 5.2(K) AND (S), 6.2, 7.3 AND 7.4
shall terminate on the first anniversary of the Closing Date,
(ii) those covenants set forth in SECTION 5.2(D) AND 5.2(E)
shall terminate eighteen (18) months after the Closing Date,
(iii) those representations, warranties and covenants contained
in SECTIONS 5.1(A) (EXCEPT AS SET FORTH ABOVE), 7.5, AND 8.2
shall terminate on the sixth anniversary of the Closing Date
unless, in any event, a Claim Notice has been previously delivered,
in which event the representation, warranty or covenant in question
shall survive until the claim is resolved. Any such termination
shall apply to known as well as unknown breaches of such
representations, warranties or covenants. Subject to subsection
(b) below, Acquiror's waiver and release set forth in SECTION 3.1
shall apply fully to liabilities under such representations,
warranties and covenants. Acquiror specifically acknowledges
and agrees that such termination of liability represents a
material element of the consideration to Meridian.
(b) Any claim of Acquiror, based upon a breach of any
representation or warranty of Meridian or upon a breach of any
of the covenants of Meridian shall be expressed, if at all, in
writing delivered to Meridian promptly following Acquiror's
discovery of such breach, which writing shall set forth in
reasonable detail the basis and character of the claim ("Claim
Notice"). Notwithstanding the foregoing, subject to SECTION
6.2, (i) Acquiror shall not make any claim on account of a
breach of representations, warranties or covenants discovered
after the Closing Date unless and until (A) the aggregate
measure of such claims exceeds Three Hundred Sixty-Eight
Thousand Five Hundred Dollars ($368,500.00), and (B) the
aggregate measure of such Claims with respect to the Janesville
Transaction and this transaction exceeds Five Hundred Thousand
Dollars ($500,000.00), (ii) Meridian's aggregate liability for
all claims arising out of such representations, warranties or
covenants discovered after the Closing Date shall not exceed Two
Million Two Hundred Nine Thousand Five Hundred Dollars
($2,209,500.00), (iii) all claims for breach of representations,
warranties or covenants discovered prior to the Closing Date
shall be governed by the procedures set forth in SECTION 3.2
rather than this SECTION 5.6, and (iv) Acquiror shall not have
the right to deliver to Meridian Claim Notices with respect to
any breach of representation, warranty or covenants after the
expiration of the survival of the representation, warranty or
covenant in question..
(c) Intentionally Deleted.
(d) Meridian shall have a period of thirty (30) days
within which to cure any breach identified in a Claim Notice,
or, if such breach cannot reasonably be cured within such thirty
(30) days, an additional reasonable time period, so long as such
cure has been commenced within such thirty (30) days and is at
all times diligently pursued; provided, however, that such
additional reasonable period shall not extend beyond sixty (60)
days if Acquiror is incurring damages as a result of Meridian's
failure to cure
47
such breach. If the breach is not cured after
actual written notice and within such cure period, Acquiror's
sole remedy shall be an action at law for damages against
Meridian, which must be commenced, if at all, within a period of
forty-five (45) days following the date of delivery of the Claim
Notice; provided, however, that if Meridian commences to cure
and thereafter terminates such cure effort without completing
such cure, then Acquiror shall have an additional thirty (30)
days from the date of written notice from Meridian of such
termination within which to commence an action at law for
damages as a consequence of the failure to cure.
(e) The parties agree that Acquiror's representations and
warranties contained in SECTION 5.4 and any representation made
in accordance with SECTION 8.3 of this Agreement and the
covenants set forth in SECTION 5.5 of this Agreement and in any
document executed by Acquiror pursuant to this Agreement shall
survive the Closing of this transaction.
(f) Acquiror and the REIT agree that, except as otherwise
provided in this Agreement, in the event of the breach of any
representation or warranty contained in SECTION 5.4 of this
Agreement and any representation made in accordance with
SECTION 8.3 of this Agreement and in any document executed by
Acquiror pursuant to this Agreement and any covenant set forth
in SECTION 5.5 which survives the Closing, Meridian and/or any
of the OP Unit Recipients shall have all remedies available at
law or in equity with respect to such breach, including, without
limitation, the right to injunctive relief to prevent any such
breach. Any provision of this Agreement to the contrary
notwithstanding, in no event or circumstance whatsoever shall
liability by asserted or recourse be had against any partner of
Acquiror, the REIT or its officers, directors, shareholders,
employees or agents as to any claim arising directly or
indirectly, in full or in part, pursuant to this Agreement;
provided, however, that the foregoing shall not preclude any
claim against the Acquiror, even if such claim is based upon the
covenants, warranties or representations of or with respect to
the REIT or the satisfaction of any judgment against the REIT,
as general partner of Acquiror.
(g) Meridian shall deposit with the Title Company
immediately after Closing cash and/or OP Units equal to Two
Million Two Hundred Nine Thousand Five Hundred Dollars
($2,209,500.00) (the "Claim Deposit") to secure any claims owed
by Meridian pursuant to this Agreement for breach by Meridian of
representations, warranties or covenants and not waived pursuant
to the provisions of this Agreement as of Closing. If Claim
Notices aggregating claims less than Two Million Two Hundred
Nine Thousand Five Hundred Dollars ($2,209,500.00) shall have
been delivered after Closing and prior to the first anniversary
of the Closing Date, subject to Meridian's right to contest, the
Title Company shall deliver to Meridian cash or OP Units equal
in amount to the difference between the amount of claims
specified in the Claim Notices and the amount of such Claim
Deposit. To the extent Claim Notices have been delivered to
Meridian, the Claim Deposit shall remain with the Title
48
Company until such claims shall have been resolved; provided,
however, that as claims become resolved, the Title Company shall
deliver to Meridian or Acquiror, as the case may be, the amount
held for such claim upon written notice from Meridian's Agent and
Acquiror (acting reasonably) directing the Title Company to
release such amount to Meridian or Acquiror. The Title Company
shall invest the cash portion of the Claim Deposit in United
States Treasury bills or notes with a ninety day maturity. Any
dividends payable with respect to OP Units held in the Claim
Deposit shall belong to the OP Unit Recipients and interest on
the cash shall be allocated to the Sellers.
ARTICLE VI
DEFAULT
Section 6.1 Acquiror's Deposit and Default.
Contemporaneously with (i.e., within forty-eight (48) hours of) the
execution of this Agreement, Acquiror shall deliver to the Title
Company, as escrow agent, for deposit, an amount equal to One Million
Five Hundred Thousand Dollars ($1,500,000) (the "Deposit"), which
Deposit may, at Acquiror's sole election, be in the form of a Letter
of Credit. The Title Company shall invest any cash Deposit in United
States Treasury bills or notes with a ninety (90) day maturity. In
the event that this transaction is consummated as contemplated by
this Agreement, then the entire amount of the Deposit, together with
any interest accrued thereon, shall be returned to Acquiror at
Closing. The entire amount of the Deposit, together with any
interest accrued thereon, shall be returned immediately to Acquiror
and neither party shall have any further rights or obligations
hereunder except with respect to the Surviving Covenants (a) in the
event of a termination of this Agreement pursuant to SECTION 3.2 or
as the result of the failure of any of the conditions precedent set
forth in SECTION 4.1(A) above, (b) in the event that (i) the
conditions precedent set forth in SECTION 4.1(B) shall have been
satisfied or waived, (ii) Acquiror shall have performed fully or
tendered full performance of Acquiror's material Closing obligations
hereunder and (iii) Meridian shall fail to perform its material
Closing obligations under this Agreement, or (c) in the event that
this Agreement shall be terminated pursuant to the provisions of
SECTION 8.1 hereof. IN THE EVENT OF BREACH OF THIS AGREEMENT BY
ACQUIROR, THE ENTIRE AMOUNT OF THE DEPOSIT, PLUS ACCRUED INTEREST,
SHALL BE DELIVERED TO AND RETAINED BY MERIDIAN AS LIQUIDATED DAMAGES.
ACQUIROR AND MERIDIAN HEREBY ACKNOWLEDGE AND AGREE THAT MERIDIAN'S
DAMAGES IN THE EVENT OF SUCH A BREACH OF THIS AGREEMENT BY ACQUIROR
WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE
DEPOSIT PLUS ACCRUED INTEREST IS THE PARTIES' BEST AND MOST ACCURATE
ESTIMATE OF THE DAMAGES MERIDIAN WOULD SUFFER IN THE EVENT THE
TRANSACTION PROVIDED FOR IN THIS AGREEMENT FAILS TO CLOSE AND THAT
SUCH ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE
DATE OF THIS AGREEMENT. ACQUIROR AND MERIDIAN AGREE THAT MERIDIAN'S
RIGHT TO RETAIN THE DEPOSIT PLUS ACCRUED
49
INTEREST SHALL BE THE SOLE REMEDY OF MERIDIAN IN THE EVENT OF A
BREACH OF THIS AGREEMENT BY ACQUIROR PRIOR TO CLOSING.
This SECTION 6.1 is intended only to liquidate and limit
Meridian's rights to damages arising due to Acquiror's failure to
purchase the Property and shall not limit the indemnification
obligations of Acquiror pursuant to (i) the Confidentiality
Agreement, (ii) any other documents delivered pursuant to this
Agreement or (iii) SECTIONS 3.1(B), 3.1(C), 3.1(D), 5.5, 5.6(E), 8.2,
8.9 AND 8.13 of this Agreement. In no event shall Acquiror or any
Acquiror Related Parties be liable to Meridian for any consequential
or punitive damages based upon a breach of this Agreement, including,
without limitation, breaches of representation, warranty or covenant.
Section 6.2 Default by Meridian (a) If (i) the conditions
precedent set forth in SECTION 4.1(B) shall have been satisfied or
waived, and (ii) Meridian shall fail to perform its material Closing
obligations under this Agreement and Acquiror shall not have
terminated this Agreement as permitted hereunder, then, in addition
to the return of the Deposit set forth in SECTION 6.1 Acquiror shall
have the right to recover its actual monetary damages from Meridian
up to an aggregate maximum amount equal to Two Million Two Hundred
Nine Thousand Five Hundred Dollars ($2,209,500.00) or, in the
alternative, to pursue an action for specific performance as its sole
remedy; provided, however, that upon the occurrence of an Intentional
Material Default (as hereinafter defined), Acquiror may seek damages
(not subject to any floor or cap) from Meridian provided that, solely
in the event of an Intentional Material Default described in Clauses
(i) and (ii) below, Acquiror has diligently in good faith sought and
been unable to obtain specific performance within six (6) months
after the occurrence of such Intentional Material Default.
"Intentional Material Default" means any of the following: (i) sale
directly or indirectly of all or any portion of the Property to a
person other than Acquiror or the execution of an agreement for the
same; (ii) effecting a financing encumbering all or any portion of
the Property or the execution of an agreement for the same;
(iii) material modification or termination after July 16, 1998, of
Leases aggregating in excess of 20,000 square feet, except in
accordance with this Agreement; and (iv) entering into any Contracts
after July 16, 1998, which are not cancelable at Closing and which
result in a material adverse economic impact on Acquiror or the
Property, except in accordance with this Agreement. Except as
expressly provided in this SECTION 6.2, Meridian's liabilities
relating to a breach of representation, warranty or covenant shall be
subject to the provisions of Section 5.6 and any additional
limitations set forth in this Agreement.
(b) Subject to the provisions of this SECTION 6.2, in no
event shall Meridian or any Meridian Related Parties be liable to
Acquiror for any consequential or punitive damages based upon any
breach of this Agreement, including, without limitation, breaches of
representation, warranty or covenant. Subject to the provisions of
this SECTION 6.2, Acquiror further agrees that recourse for any
liability of Meridian under this Agreement or any document or
instrument delivered simultaneously or in connection with or pursuant
to this Agreement shall be limited to Two Million Two Hundred Nine
Thousand Five Hundred
50
Dollars ($2,209,500.00). Subject to applicable principles of fraudulent
conveyance, in no event shall Acquiror seek satisfaction for any
obligation from any partners, members, managers, shareholders, officers,
directors, employees, agents, legal representatives, successors or
assigns of Meridian, nor shall any of the foregoing have any personal
liability for any such obligations of Meridian.
ARTICLE VII
CLOSING
Section 7.1 Escrow Arrangements. An escrow for the
contribution and exchange contemplated by this Agreement has been
opened by Acquiror and Meridian with the Title Company as escrow
agent. On the Closing Date, Acquiror and Meridian shall each deliver
escrow instructions to Title Company consistent with this
ARTICLE VII, and designating the Title Company as the "Reporting
Person" for the transaction pursuant to Section 6045(e) of the Code.
In addition, the parties shall deposit in escrow with the Title
Company as escrow agent, on the Closing Date (unless otherwise
provided in this SECTION 7.1), the documents described below and
shall deposit on the Closing Date the funds described below:
(a) Meridian shall deposit (or cause to be deposited),
with respect to itself or the Property, the following:
(i) a duly executed and acknowledged Deed for the
Land;
(ii) four (4) counterparts of an assignment of the
Ground Lease in Form as set forth on Exhibit TT (the
"Assignment of Ground Lease");
(iii) a duly executed ▇▇▇▇ of sale pertaining to the
Personal Property in the form attached to this Agreement
as Exhibit PP (the "▇▇▇▇ of Sale");
(iv) four (4) duly executed counterparts of an
assignment pertaining to the Intangible Property in the
form attached to this Agreement as Exhibit QQ (the
"Assignment of Intangibles");
(v) four (4) duly executed counterparts of an
assignment and assumption pertaining to the Leases in the
form attached to this Agreement as Exhibit RR (the
"Assignment of Leases");
(vi) four (4) duly executed counterparts of an
assignment and assumption pertaining to any Contracts
being assumed by Acquiror, in the form attached to this
Agreement as Exhibit SS (the "Assignment of Contracts");
51
(vii) four (4) duly executed counterparts of an
assignment and assumption pertaining to the REA's in the
form attached to this Agreement as Exhibit UU.
(viii) a certificate from Meridian certifying
that Meridian is not a "foreign person" as defined in
Section 1445(f)(3) of the Code ("FIRPTA Certificate");
(ix) a certificate from Meridian reaffirming, as of
the Closing Date, the representations and warranties made
in SECTION 5.1(A) in form as set forth on EXHIBIT GG;
(x) evidence reasonably required by Acquiror
demonstrating that (i) Meridian is an entity validly
existing and in good standing under the laws of Ohio and
Michigan or the jurisdiction in which it was formed, and
(ii) Meridian's execution and delivery of this Agreement
and the other documents delivered pursuant hereto and the
consummation of the transactions contemplated hereby have
been fully authorized, which evidence, if Meridian is a
corporation, or a partnership or limited liability company
in which any of the general partners or managers, as the
case may be, is a corporation, shall mean (x) certified
copies of corporate resolutions duly adopted by the board
of directors of Meridian (or its corporate general partner
or manager) approving Meridian's execution and delivery of
this Agreement and the other documents delivered pursuant
hereto and the consummation of the transactions
contemplated hereby, (y) certificates of incumbency and
(z) certificates of good standing;
(xi) the estoppels from the Majors, the other
tenants, the ground lessor under the Ground Lease, the
parties to the REA (other than ▇▇▇▇▇▇'▇, which will be
required to provide an estoppel in the form to be provided
by the Majors) (which REA estoppels shall provide that
each REA is in full force and effect, that there is no
default beyond applicable cure period thereunder, and
there are no amounts required to be paid or work required
to be performed that have not been paid or performed to
date), and the Master Estoppel of Meridian pursuant to
SECTION 4.1(A)(IV) hereof;
(xii) the Registration Rights Agreement, dated as of
the Closing Date and duly executed by each OP Unit
Recipient; in form as set forth on EXHIBIT M hereof;
(xiii) the Acknowledgment, duly executed by each
OP Unit Recipient;
52
(xiv) notices directing Tenants, among other things,
to make future payments to Acquiror, in form set forth on
EXHIBIT HH hereof;
(xv) any transfer tax forms, if applicable, and
other forms and documents reasonably required by the Title
Company;
(xvi) any and all other documents reasonably
requested or required in order to consummate the
transactions contemplated herein.
In addition, Meridian shall deliver to Acquiror on the Closing Date,
outside of escrow, the originals of all Leases, the Ground Lease,
▇▇▇▇▇▇'▇ ▇▇▇, the Contracts (if not terminated at or before Closing)
or copies thereof if originals are not available, tenant files, plans
of the Property, leasing brochures for the Property, and all keys to
the Property and all other property relating to the Property in the
possession or control of Meridian.
(b) Acquiror shall deposit:
(i) Immediately available funds in an amount equal
to the sum of (A) the Cash Consideration, plus (B) the
amount required to pay off the Meridian Indebtedness
immediately subsequent to Closing, plus (C) an amount
sufficient to pay Acquiror's share of all escrow costs and
Closing expenses;
(ii) four (4) duly executed counterparts for each
of the Assignment of Ground Lease, the Assignment of
Intangibles, Assignment of Leases, Assignment of Contracts
and Assignment of REA's;
(iii) a certificate duly executed by Acquiror in
favor of Meridian confirming the waivers and
acknowledgments set forth in SECTIONS 3.1 AND 5.6 above;
(iv) any and all other documents reasonably
requested or required in order to consummate the
transactions contemplated herein;
(v) evidence reasonably required by Meridian
demonstrating that (A) Acquiror is an entity in good
standing under the laws of the jurisdiction in which was
formed, and (B) Acquiror's execution and delivery of this
Agreement and the other documents delivered pursuant
hereto and the consummation of the transaction
contemplated hereby have been fully authorized, which
evidence shall mean (1) certified copies of corporate
resolutions duly adopted by the board of directors of the
REIT, as Acquiror's general partner, approving Acquiror's
execution and delivery of this Agreement and the other
documents delivered pursuant hereto and the consummation
of the transactions contemplated hereby, (2) certificates
of incumbency and (3) certificates of good standing;
53
(vi) a certificate of Acquiror reaffirming as of
the Closing Date the representations and warranties made
by Acquiror in ARTICLE V.
(vii) the Acknowledgment, duly executed by the
general partner(s) of Acquiror with respect to each OP
Unit Recipient;
(viii) the Registration Rights Agreement dated as
of the Closing Date and duly executed by the general
partner of Acquiror.
(ix) a copy of the Partnership Agreement and all
organization documents of the REIT, duly certified by the
REIT as true, complete and correct, and a certified copy
of the Certificate of Limited Partnership of Acquiror from
the Secretary of State of the state of its formation,
dated not more than twenty (20) days before the Closing
Date;
(x) a copy, certified by the Secretary of State of
the REIT's state of incorporation, of the Articles of
Incorporation of the REIT and a good standing certificate
of the REIT;
(xi) an opinion by counsel for the REIT addressed
to each OP Unit Recipient stating that the Acquiror and
any existing Subsidiary Partnership each qualifies as a
partnership for federal income tax purposes and is not
treated as an association taxable as a corporation under
Section 7704 of the Code or any other provision, which
opinion shall be subject to such counsel's usual
assumptions and qualifications and reliance upon officer's
certificates in similar types of opinions previously given
by such counsel;
(xii) an opinion by counsel for the REIT addressed
to each OP Unit Recipient stating that the REIT is
qualified to operate, is currently operating as and its
proposed methods of operations will enable it to continue
to operate as a real estate investment trust within the
meaning of Section 856(a) of the Code, which opinion shall
be subject to such counsel's usual assumptions and
qualifications and reliance upon officer's certificates in
similar types of opinions previously given by such
counsel;
(xiii) an opinion by counsel for the REIT
addressed to each OP Unit Recipient stating that the
Acquiror and REIT, respectively, have been duly organized
and are in good standing, that the OP Units have been
issued in accordance with all applicable Legal
Requirements and the Partnership Agreement, that the OP
Unit Recipients are limited partners of Acquiror as of the
Closing, and that this transaction is exempt from pre-
closing approval requirements under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act which opinion shall be subject to such counsel's usual
assumptions and qualifications and reliance upon
54
officer's certificates in similar types of opinions
previously given by such counsel; and
(xiv) any other forms or documents reasonably
requested by the Title Company.
Section 7.2 Closing. The Title Company shall Close the
transaction contemplated by this Agreement ("Closing") on the Closing
Date (as may be extended pursuant to the terms hereof) by:
(a) issuing the Title Policy to Acquiror;
(b) delivering to Acquiror the ▇▇▇▇ of Sale, the FIRPTA
Certificates, and two (2) (fully executed in counterpart) of the
Assignment of Ground Lease, Assignment of Intangibles,
Assignment of Leases, Assignment of Contracts and Assignment of
REA's;
(c) delivering to Meridian (i) two (2) originals (fully
executed in counterpart) of the Assignment of Ground Lease, the
Assignment of Intangibles, Assignment of Leases, Assignment of
Contracts and Assignment of REA's and the Acknowledgment, (ii)
the certificate described in SECTION 7.1(B)(III) above, (iii)
the opinions of counsel to the REIT described in SECTIONS
7.1(B)(XI), 7.1(B)(XII) AND 7.1(B)(XIII), and (iv) the
Acknowledgment;
(d) returning the Deposit to Acquiror; and
(e) delivering to the parties designated therein any
other instruments delivered into escrow by Meridian pursuant to
SECTION 7.1(A) or Acquiror pursuant to SECTION 7.1(B).
Section 7.3 Prorations.
(a) Taxes. (i) Meridian shall be responsible for all
real estate taxes and assessments on the Property which are not
billed directly by the taxing authorities to tenants ("Taxes and
Assessments") through the Closing. At Closing the first portion
of Taxes and Assessments for the 1998 calendar year will have
been paid by Meridian with the last portion due in December
1998, so that there shall be deducted from the Gross
Consideration an amount equal to the proration of the Taxes and
Assessments payable in 1998 determined as follows:
(a) the total Taxes and Assessments payable
in 1998 will be divided by 365;
55
(b) that quotient shall be multiplied by
the number of days beginning January 1, 1998
and ending on the day preceding the Closing
Date; and
(c) the amount of Tax and Assessments paid
by Meridian for the first portion of 1998
shall be subtracted from that product and
Acquiror shall get a credit against the Gross
Consideration in the amount of such balance.
(ii) Personal property taxes shall be prorated as of the
Closing Date.
(b) Prepaid Expenses. Acquiror shall be charged for
those prepaid expenses allocable to any period after the Closing
Date, including, without limitation, prepaid rents under any
personal property or ground leases, annual permit and
confirmation fees, fees for licenses and all security or other
deposits paid by Meridian to third parties.
(c) Intentionally Deleted.
(d) Property Income and Expense. The following
prorations and adjustments shall occur as of the Closing Date.
Meridian shall receive and retain all income arising from the
Property to the Closing Date and shall bear all expenses of the
operation of the Property to the Closing Date. Prior to the
Closing Date, Meridian shall provide all information to Acquiror
and the Title Company reasonably required to calculate such
prorations and adjustments and representatives of Acquiror and
Meridian shall together make such calculations (and shall
deliver such calculations to the Title Company at least one (l)
Business Day prior to Closing):
(i) General. (A) Subject to the specific
provisions of clause (ii) below, income and expense shall
be prorated on the basis of a thirty (30)-day month and on
a cash basis (except for items of income and expense that
are payable less frequently than monthly, which shall be
prorated on an accrual basis). All such items
attributable to the period on or prior to the Closing Date
shall be credited to Meridian; all such items attributable
to the period following the Closing Date shall be credited
to Acquiror. Acquiror shall be credited at Closing with
(1) any portion of security deposits made pursuant to the
Leases that are refundable to existing tenants and have
not been applied to outstanding tenant obligations in
accordance with the terms of the applicable Lease and (2)
rent from tenants prepaid beyond the Closing Date.
Acquiror shall not be entitled to any interest on Lease
deposits or prepaid rent accrued on or before the Closing
Date, except to the extent any such amount of interest is
required to be accrued and refunded or paid to any tenant
under a Lease. Meridian shall be credited with any
refundable deposits or bonds held by any utility,
56
governmental agency or service contractor, to the extent
such deposits or bonds are assigned to Acquiror on the
Closing Date.
(B) Acquiror shall be credited at Closing with
any tenant allowances or other tenant inducements to be
paid in cash or cash equivalents (excluding rental
abatement) by Acquiror after the Closing Date with respect
to the current term of any Lease executed, or any
extension or expansion of premises option exercised, in
each case, prior to the date of this Agreement, and with
respect to the In-Negotiation Leases executed prior to the
Closing Date (but not for the Prospective Leases listed on
EXHIBIT G-1 and the Lease Extension Modifications listed
on EXHIBIT G-2). Meridian shall be responsible for the
payment of any leasing commissions with respect to the
current term of any lease executed, or any option to
extend or expand the leased premises which has been
exercised, in each case, prior to the date of this
Agreement and with respect to the In-Negotiation Leases
executed within six (6) months of the Closing (but not for
the Prospective Leases listed on EXHIBIT G-1 and the Lease
Extension Modifications listed on EXHIBIT G-2). With
respect to In-Negotiation Leases not executed on the
Closing Date, but which are executed within six (6) months
of the Closing Date, Meridian shall be responsible for the
payment of any leasing commissions and shall reimburse
Acquiror for any tenant allowances to be paid in cash
pursuant to the In-Negotiation Leases, within thirty (30)
days following receipt of an invoice which may be rendered
when the In-Negotiation Leases shall have been executed by
both parties and construction has been completed. In the
alternative, Acquiror shall have the right to deduct the
amount of the tenant allowances to be paid in cash from
the "In-Negotiation Lease Deposit" being held by the Title
Company pursuant to the provisions of SECTION 7.3(I)
hereof.
(C) Acquiror shall assume all obligations for
any leasing commissions, tenant improvements and other
allowances with respect to the Prospective Leases set
forth on EXHIBIT G-1 and Lease Extension Modifications set
forth on EXHIBIT G-2, executed not later than six (6)
months after the Closing. Meridian shall be credited at
Closing with any leasing commissions or allowances paid in
cash or incurred by Meridian to the extent such items
relate to Prospective Leases or Lease Extension
Modifications executed in accordance with the terms of
this Agreement prior to the Closing Date. Any amounts
payable to Meridian which are not credited at Closing to
Meridian and are due pursuant to this paragraph shall be
paid within thirty (30) days following receipt of an
invoice which may be rendered when the Prospective Lease
or Lease Extension Modification shall have been executed
by both parties.
57
(D) All fixed rent currently paid or payable
under the Ground Lease shall be prorated between Meridian
and Acquiror as of the Closing Date. Percentage Rent
payable under the Ground Lease shall be prorated in the
same manner as set forth in SECTION 7.2(D)(II)(F), except
that the reference to "365" shall be changed to "182".
(ii) Rents.
(A) Fixed or minimum rents and Taxes and
Assessments (collectively referred to in this Section 7.2
(d)(ii)(A) as "Rents") payable by tenants under the Leases
shall be prorated as and when collected (whether such
collection occurs prior to, on, or after the Closing
Date). Acquiror shall receive a credit for the amounts
actually received by Meridian on or before the Closing
Date and which pertain to any period after the Closing
Date. Acquiror shall not receive a credit at the Closing
for any Rents for the month in which the Closing occurs
which are in arrears and have not then been received.
Notwithstanding any provision of this Agreement, Meridian
shall have the right, in its sole discretion prior to
Closing, to apply any security deposits held by Meridian
under any Leases to remedy any default or delinquencies
under such Leases in accordance with the terms thereof.
As to any tenants that are delinquent in the payment of
Rent on the Closing Date, Acquiror shall use reasonable
efforts (but shall not be required to commence legal
action) to collect or cause to be collected such
delinquent Rents for twelve (12) months following the
Closing Date. Any and all Rents so collected by Acquiror
following the Closing (less a deduction for all reasonable
collection costs and expenses incurred by Acquiror) shall
be successively applied to the payment of (1) Rent due and
payable in the month in which the Closing occurs, (2) Rent
due and payable in the months succeeding the month in
which the Closing occurs (up to and including the month in
which payment is made) and (3) Rent due and payable in the
months preceding the month in which the Closing occurs.
If all or part of any Rents or other charges received by
Acquiror following the Closing are allocable to Meridian
pursuant to the foregoing sentence, then such sums shall
be promptly paid to Meridian. Meridian reserves the right
to collect delinquent Rents owed to Meridian as of the
Closing Date and to pursue any damages remedy Meridian may
have against any tenant or former tenants with respect to
delinquent Rents, but shall have no right to exercise any
other remedy under the Lease (including, without
limitation, termination, eviction, or commencing
involuntary bankruptcy proceeding against tenants).
Meridian shall promptly pay to Acquiror amounts allocable
to Acquiror pursuant to this Section.
(B) Intentionally Deleted.
(C) With respect to the Promotion Fund - Media
Fund (the "PM Fund"), Meridian shall pay all invoices
received prior to the Closing Date and shall deliver to
Acquiror the funds therein that exist on the Closing Date.
58
Acquiror shall pay all invoices related to the PM Fund
received by Acquiror or Meridian on or after the Closing
Date whether relating to periods before or after the
Closing Date. Meridian warrants that the amounts
remaining in the PM Fund as of the Closing Date will be
sufficient to satisfy all outstanding obligations with
respect to the PM Funds incurred prior to the Closing
Date. The provisions of the immediately preceding
sentence shall survive the Closing for one (1) year.
(D) With respect to the gift certificate
program, commencing on or about December 15, 1997 Landlord
has been under contract with Mid-America Money Order
Company ("Mid-America") to operate the gift certificate
program for the Property, so that Mid-America is
responsible for honoring any gift certificates redeemed by
customers of the Property sold while Mid-America's Gift
Certificate Trust Agreement has been in effect. Meridian
shall cause Mid-America to deliver an estoppel certificate
confirming the foregoing facts and stating the amounts of
gift certificates outstanding for which it is responsible.
Meridian will pay to Acquiror on the Closing Date an
amount equal to the unexpired gift certificates issued by
Meridian prior to the commencement of the program with
Mid-America as set forth on EXHIBIT JJ hereto, which
Meridian warrants to be true and complete. The provisions
of the immediately preceding sentence shall survive the
Closing for one (1) year.
(E) Any charges for common area, insurance
charges, operating and maintenance expenses, compactor
charges, escalation rents or charges, electricity charges,
HVAC charges, cost of living increases or any other
charges of a similar nature other than fixed or base rent
under the Leases (collectively, "Additional Rents") shall
be prorated as of the Closing Date between Acquiror and
Meridian on or before the date which is sixty (60) days
following the Closing Date, based on the actual amount
spent and received as of the Closing Date and the amount
that will be paid by tenants under their Leases for the
calendar year 1998. Meridian shall provide Acquiror with
information regarding Additional Rents which were received
by Meridian on or prior to Closing and the amount of
reimbursable expenses paid or incurred by Meridian on or
prior to Closing on before the date which is sixty (60)
days following the Closing ("Reconciliation"). Upon
reasonable notice and during normal business hours,
Meridian shall make available to the Acquiror all
information reasonably required to confirm the
Reconciliation. In the event of any overpayment of
Additional Rents by the tenants to Meridian, Meridian
shall promptly, but in no event later than thirty (30)
days after date of the Reconciliation, pay to Acquiror the
amount of such overpayment, or such amount may be taken
from the Claim Deposit, at Meridian's election. In the
event of an anticipated underpayment of Additional Rents
by the tenants to Meridian, Acquiror shall pay to
Meridian' Agent the amount of such
59
underpayment within thirty (30) days following Acquiror's
receipt of such Reconciliation.
(F) With respect to percentage rents due from
tenants for lease years which end on or before the Closing
Date, Meridian shall be entitled to all such percentage
rents. With respect to percentage rents due from tenants
with lease years that end between the day after the
Closing Date and the first anniversary of the Closing
Date, Acquiror shall pay to Meridian the percentage rent
received by Acquiror for such lease year times a fraction
the numerator of which shall be the number of days between
the beginning of such lease year and including the Closing
Date, and the denominator of which shall be 365. Such
amount shall be paid within thirty (30) days after
Acquiror receives such percentage rents. Upon reasonable
notice and during normal business hours, Acquiror shall
make available to Meridian all information reasonably
required to reconcile the amounts payable hereunder with
respect to percentage rent. Acquiror shall deliver to
Meridian on a quarterly basis copies of all annual
statements of gross sales received by Acquiror with
respect to the period covered by the percentage rent
proration. In the event that Acquiror audits any tenant
paying percentage rent with respect to the period of the
proration or before, Acquiror shall deliver to Meridian a
copy of the results of such audit within thirty (30) days
following receipt and Meridian will be entitled to any
additional percentage rent for the period of the proration
and before. If any percentage rent has been collected by
Meridian before the Closing, the parties will adjust the
amounts owed hereunder to reflect such receipt of funds.
(G) With respect to HVAC charges, the monthly
billing paid by each tenant shall be prorated as of the
Closing Date in the same manner that fixed rents are
prorated and there will be no proration of the central
cooling system expenses. Meridian will ▇▇▇▇ for chilled
water at the end of calendar year 1998 and will reimburse
Meridian's Agent based upon a fraction of the chilled
water income times a fraction the numerator of which is
the number of days between the date that the chillers were
turned on in 1998, and the denominator of which is the
total number of days that the chillers were operating
during the calendar year 1998.
(f) Partnership Distributions - Dilution
Reduction. Distributions in respect of the OP Units
acquired by the OP Unit Recipients shall begin to accrue
from and after the Closing Date (notwithstanding the fact that
such date may not be the applicable Record Date under the
Partnership Agreement), and the amount of distributions paid or
to be paid to the OP Unit Recipients for the calendar
quarter in which the Closing Date occurs shall be prorated
accordingly. For example, if the Closing Date is August 1,
1998, the OP Unit Recipients shall be entitled to 61/92 of
the distribution to be made in respect of the OP Units for the
third quarter of 1998 when such distribution is paid with
respect to all Common Units of Acquiror. In
60
addition, distributions to be paid to the OP Unit Recipients
for the one (1) year period following the Closing shall be
reduced to reflect the dilution resulting from this Transaction
in accordance with the Acknowledgment. The exact amount of
such dilution shall be calculated at Closing and reflected
in the Acknowledgment.
(g) Adjustments to Prorations. After the Closing, the
Meridian' Agent and Acquiror shall from time to time, as soon as
practicable after accurate information becomes available, and in
any event within three hundred sixty-five (365) days following
the Closing Date, recalculate and reapportion any of the items
subject to proration or apportionment (i) which were not
prorated and apportioned at the Closing because of the
unavailability of the information necessary to compute such
proration, or (ii) which were prorated or apportioned at the
Closing based upon estimated or incomplete information or (iii)
for which any errors or omissions in computing prorations at the
Closing are discovered subsequent thereto, and thereafter the
proper party shall be reimbursed based on the results of such
recalculation and reapportionment. Unless otherwise specified
herein, all such reimbursements shall be made on or before
thirty (30) days after receipt of notice of the amount due.
Any such reimbursements not timely paid shall bear interest at
the rate often percent (10%) per annum from the due date until
all such unpaid sums together with all interest accrued thereon
is paid.
(h) Rental Concessions. There shall be no proration or
reduction of the Gross Consideration with respect to any tenants
that have the right to ▇▇▇▇▇ rent or additional rent for a
period of time after the Closing; and there shall be no
proration or reduction in the Gross Consideration with respect
to signed leases for which rent shall not have commenced as a
result of a construction allowance, inducement payment or
otherwise.
(i) Pending Leases. With respect to any In-Negotiation
Leases which shall not have been signed on the Closing Date, on
the Closing Date Meridian shall deposit (the "In-Negotiation
Lease Deposit") with the Title Company an amount equal to one
year of Fixed Minimum Rent and CAM, Taxes and insurance charges
(based on 1998 estimates being charged to tenants) payable with
respect to such In-Negotiation Leases. The Title Company shall
invest the In-Negotiation Lease Deposit in United States
Treasury bills or notes with a ninety (90) day maturity. In the
event that any In-Negotiation Lease is not signed within six (6)
months following the Closing, the Title Company shall deliver to
Acquiror the portion of the In-Negotiation Deposit applicable to
such In-Negotiation Lease. If an In-Negotiation Lease shall be
executed within the six (6) month period following the Closing,
the Title Company shall deliver to Meridian the portion of the
In-Negotiation Deposit attributable to such In-Negotiation
Lease. Following the Closing Date, subject to Acquiror's
reasonable approval rights, Meridian or its designee shall
continue the negotiation in good faith and shall use reasonable
efforts to obtain the execution of the In-Negotiation Leases,
Prospective Leases, and Lease Extension Modifications during the
six-month period
61
following the Closing Date and Acquiror shall
cooperate in that endeavor. With respect to payment of leasing
commissions relating to In-Negotiation Leases, Prospective
Leases and Lease Extension Modifications executed not later than
six (6) months after the Closing Date, Acquiror will pay
Meridian or its designated agents 50% of such commission on
signing and 50% of such commission on opening.
(j) Timing. Except as otherwise expressly set forth in
this Agreement, all prorations shall be made as of 11:59 p.m. on
the night before the Closing. Five (5) days prior to Closing,
Meridian and Acquiror shall agree upon the proration schedule
which will be used by the parties in determining the Net
Consideration to be received by Meridian at Closing, subject to
post-closing adjustments pursuant to the terms of this
Agreement.
Section 7.4 Other Closing Costs.
(a) Meridian shall be responsible for (i) one-half (1/2)
of any governmental documentary transfer or transaction taxes or
fees due on this transaction, (ii) one-half (1/2) of any escrow
fee to the Title Company, (iii) one-half (1/2) of the cost of
issuing the Title Report, and (iv) one-half (1/2) of any cost of
the ALTA/ACSM survey of the Property ("Survey") incurred by
Meridian in 1997 and 1998 and for all prior survey costs and
expenses.
(b) Acquiror shall be responsible for and pay (i) one-
half (1/2) of any governmental documentary transfer or
transaction taxes or fees due on this transaction, (ii) one-half
(1/2) of any escrow fee to the Title Company, (iii) one-half
(1/2) of the cost of issuing the Title Report, (iv) one-half
(1/2) of any cost of the Survey incurred by Meridian in 1997
and 1998, and (v) any title premium in connection with the
issuance of the Title Policies (including endorsements, standard
or extended coverage and any related survey update costs).
(c) Notwithstanding anything to the contrary set forth in
this Agreement, it is understood that any reference to amounts
to be "paid" by Meridian at the Closing shall mean that such
amounts shall be treated as an Adjustment to the Gross
Consideration and, consequently, Acquiror shall be responsible
for providing the cash to pay all amounts required to complete
the Closing. Any amounts to be paid by Acquiror to Meridian
after the Closing will be paid in cash.
Section 7.5 Further Documentation. At or following the
Closing, Acquiror, Meridian shall execute any certificate or other
instruments required by this Agreement, by law or local custom or
otherwise reasonably requested by the other party to effect the
transactions contemplated by this Agreement.
Section 7.6 Possession of the Properties. Meridian shall
grant and deliver to Acquiror on the Closing Date exclusive
possession of the Property, in the condition required
62
by this Agreement, subject only to the Permitted Exceptions, free
and clear of all tenancies and rights of occupants other than
occupants and rights under the Leases.
Section 7.7 Escrow Instructions. The provisions of this
Agreement shall be deemed to be escrow instructions to the Title
Company, which the Title Company hereby accepts. The Title Company
shall have the right to require the parties to execute standard
escrow conditions, but in the event of any conflict between the
provisions of this Agreement and such standard escrow conditions, the
provisions of this Agreement shall control.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Damage or Destruction/Eminent Domain.
(a)(i) Acquiror shall be bound to acquire the
Property as required by the terms of this Agreement without
regard to the occurrence or effect of any damage to or
destruction of the Property or condemnation of any Property by
right of eminent domain, provided that the occurrence of any
damage or destruction to the Property involves repair costs
equal to or less than ten percent (10%) of the Gross
Consideration with respect to insured casualties and five
percent (5%) of the Gross Consideration with respect to
uninsured casualties ("Damage Threshold Amount"), and any
condemnation that does not materially and adversely affect the
use or value of the Property ("Immaterial Condemnation"). If
Acquiror is so bound to purchase the Property notwithstanding
the occurrence of damage, destruction or condemnation, or if
Acquiror elects not to terminate this Agreement pursuant to
SECTION 8.1(B), then upon the Closing in the event of damage
covered by insurance or an Immaterial Condemnation occurring
during the Contract Period, Acquiror shall receive a credit
against the Gross Consideration in the amount (net of collection
costs and costs of repair reasonably incurred by the Meridian
and not then reimbursed) of any insurance proceeds or
condemnation award collected and retained by Meridian as a
result of any such damage, destruction or condemnation, plus (in
the case of damage) the amount of the deductible portion of the
Meridian's insurance policy, and Meridian shall assign to
Acquiror all rights to such net insurance proceeds or
condemnation awards as shall not have been collected prior to
the Closing. In the event of damage not covered by insurance,
the amount of such damage shall be treated as an Adverse Matter
pursuant to SECTION 3.2.
(ii) In the event of any assignment of insurance
proceeds in accordance with this Section, Meridian shall notify
Acquiror of any disputes between Meridian and the insurance
carrier related to the claim giving rise to such proceeds.
Meridian will reasonably cooperate with Acquiror in attempting
to collect such proceeds from the insurance carrier and if, in
the reasonable judgment of Acquiror, a collection action is
necessary to obtain such proceeds, the reasonable costs of such
63
collection action will be divided equally between Meridian and
Acquiror. The provisions of this SECTION 8.1(A) shall survive
the Closing.
(b) If, prior to the Closing Date, any Property suffers
damage or destruction that involves repair costs in excess of
the Damage Threshold Amount or condemnation that materially and
adversely affects the use and value of the Property, then
Acquiror may terminate this Agreement by giving written notice
to Meridian within five (5) Business Days after Acquiror
receives notice of the occurrence of such damage or
condemnation, in which event the Deposit shall be returned to
Acquiror. If the parties disagree as to whether or not Acquiror
is entitled to terminate this Agreement pursuant to this SECTION
8.1(B), then such disagreement shall be promptly submitted to
arbitration pursuant to SECTION 8.5.
Section 8.2 Fees and Commissions. Meridian represents and
warrants to Acquiror, and Acquiror represents and warrants to
Meridian, that no person or entity other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
can properly claim a right to a real estate broker's or investment
banker's commission, finder's fee, acquisition fee or other
brokerage-type compensation (collectively, "Real Estate
Compensation") with respect to the transaction contemplated by this
Agreement based upon the acts of the representing party. Meridian
shall be responsible for any Real Estate Compensation that may be due
to ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney resulting from the transaction contemplated
by this Agreement. Meridian shall indemnify, protect, defend and
hold Acquiror harmless from and against, any and all claims, demands,
losses, damages, liabilities, causes of action, liens, costs and
expenses including, without limitation, reasonable attorneys' fees
and costs (to the extent permitted by law) and returned commissions,
directly or indirectly related to, arising out of or in any manner
connected with, in whole or in part, from any claim for Real Estate
Compensation by any person or entity with respect to the transaction
contemplated by this Agreement based upon the acts of Meridian.
Acquiror shall indemnify, protect, defend and hold each of Meridian
and the Meridian Related Parties harmless from and against, any and
all claims, demands, losses, damages, liabilities, causes of action,
liens, costs and expenses including, without limitation, reasonable
attorneys' fees and costs (to the extent permitted by law) and
returned commissions, directly or indirectly related to, arising out
of or in any manner connected with, in whole or in part, any claim
for Real Estate Compensation by any person or entity (other than
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇) with respect to the transaction contemplated by
this Agreement based upon the acts of the Acquiror.
Section 8.3 Successors and Assigns. (a) Acquiror may not
assign any of Acquiror's rights or duties hereunder without the prior
written consent of Meridian, which consent may be withheld by
Meridian in its absolute discretion.; provided, however, that
Acquiror may assign this Agreement to a wholly-owned affiliate of
Acquiror (an "Affiliate") without Meridian's consent (but with prior
notice to Meridian) provided that Acquiror (i) represents that such
Affiliate is, as of the Closing Date, an entity that is disregarded
as an entity separate from its owner for federal income tax purposes
(in accordance with Treasury Regulation Section 301.7701-3(b)(1)(ii))
and for applicable state income tax purposes ("Ignored"), and
(ii) agrees to pay, indemnify and hold harmless each of Meridian and
64
the Meridian Related Parties against (A) any liability for federal,
state or local taxes arising as a direct or indirect result of any
failure of an Affiliate to be Ignored, as of the Closing Date,
(B) any costs and expenses including, without limitation, interest,
penalties, reasonable attorneys' and accounting fees, and any other
costs directly or indirectly related to, arising out of or in any
manner connected with the payments described in this sentence, and
(C) any additional liability for taxes associated with the receipt of
any payments of amounts described in clauses (A) and (B) of this
SECTION 8.3. Notwithstanding any such assignment, Acquiror agrees
that Acquiror shall remain primarily liable for all representations,
warranties and covenants by Acquiror set forth in this Agreement and
the OP Units shall be issued by Acquiror and the covenants of Section
5.4 shall continue as obligations of Acquiror.
(b) Meridian shall only be permitted to assign this
Agreement to an entity or entities to which title to the
Property has been transferred (or which entity has the right to
receive title) and which entity(ies) are comprised solely of
persons and/or entities that are members of Meridian as of the
date of this Agreement, and only if (A) such entities execute
and deliver to Acquiror an instrument pursuant to which the
assignee assumes this Agreement on a joint and several basis and
(B) Meridian agrees that Meridian shall remain primarily liable
for all representations, warranties and covenants by Meridian
set forth in this Agreement and shall not be released from any
of its obligations hereunder.
Section 8.4 Notices. All notices or other communications
required or provided to be sent by either party shall be in writing
and shall be sent by United States Postal Service, postage prepaid,
by certified mail, return receipt requested, or by any nationally
known overnight delivery service, or by courier hand delivery,
provided a receipt is obtained therefor, or by facsimile transmission
provided a confirmation is received therefor. All notices shall be
deemed to have been given forty-eight (48) hours following deposit in
the United States Postal Service or upon delivery if sent by
overnight delivery service, courier or facsimile. All notices shall
be addressed to the party at the address below:
To Meridian: Meridian Mall Associates Limited
LC
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
and: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
65
and: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Associates
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
and: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
North Point
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
To Acquiror: CBL & Associates Limited Partnership
Attention: President
One Park Place
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Watermill Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
66
with a copy to: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
CBL & Associates Properties, Inc.
One Park Place
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any address or name specified above may be changed by notice given to
the addressee by the other party in accordance with this SECTION 8.4.
The inability to deliver because of a changed address of which no
notice was given, or rejection or other refusal to accept any notice,
shall be deemed to be the receipt of the notice as of the date of
such inability to deliver or rejection or refusal to accept.
Any notice required hereunder to a Meridian Related Party which holds
OP Units, shall be deemed given if sent to such party in the manner
set forth in Section 8.4 of the Agreement at the address set forth in
a letter given by Meridian and each OP Unit Recipient at the Closing
to Acquiror directing Acquiror to deliver the OP Units directly to
the Recipients or at such other address as to which an OP Unit
Recipient shall notify Acquiror pursuant to the provisions of
Section 8.4 hereof.
Section 8.5 Arbitration of Disputes.
(a) Controversies or claims to be submitted to
arbitration pursuant to SECTIONS 3.2, 3.3, 4.2 or 8.1(B) above
shall be resolved exclusively and solely by a "baseball-style"
arbitration conducted before a single Arbitrator selected under
the mutual-elimination procedures set forth in Section 13 of the
Commercial Rules of the American Arbitration Association ("AAA
Rules"). A "baseball-style" arbitration shall be one in which
each of Acquiror and Meridian makes its best case and the
Arbitrator selects which one of the two is more correct, without
averaging of the two positions of the parties. Arbitration
shall be conducted in Boston, Massachusetts and Acquiror
Meridian hereby consent to jurisdiction over their respective
persons before the American Arbitration Association in Boston
Massachusetts and before state and federal courts in Boston
Massachusetts for any proceedings to enforce an arbitration
award or decision rendered pursuant to this Agreement. Acquiror
and Meridian hereby agree that Boston, Massachusetts is a proper
venue for all of the foregoing proceedings. The Arbitrator(s)
shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is
arbitrable shall be determined by the Arbitrator(s). The
Arbitrator(s) shall use best efforts to conduct a hearing on the
merits within five (5) Business Days after the appointment of
the Arbitrator(s). The loser of the Arbitration shall pay all
costs in connection therewith. The instructions to the
Arbitrator shall state that the arbitration must be completed
within ten (10) Business Days, but neither party shall have the
right to terminate the
67
Arbitration unless such Arbitrators' decision shall not be
rendered within sixty (60) days of the date of commencement
of the Arbitration proceeding. If such Arbitration is
terminated, the parties will immediately commence another
Arbitration to resolve the issue.
(b) Judgment upon the arbitration award may be entered in
any court of competent jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests
such action for judicial relief.
(c) Notwithstanding anything to the contrary set forth
above, in the event that any arbitrable dispute involves the
environmental or physical condition of the Property, the matter
shall be submitted for decision to a single referee (the
"Referee"). The Referee shall be a person of recognized
expertise in the applicable discipline chosen by Acquiror from a
list of three (3) potential Referees presented by Meridian
within one (1) week following the demand for arbitration. The
Referee shall use his or her best efforts to conduct an informal
hearing on the matter in dispute within ten (10) days of
selection, and to render a decision within thirty (30) days of
selection. The losing party shall pay all costs, including the
fee of the Referee.
(d) Notwithstanding anything to the contrary set forth
above, in the event either party demands arbitration pursuant to
the provisions of this Agreement, except as otherwise expressly
provided hereunder, the Closing Date shall be deferred until the
matter is decided pursuant to the provisions of this SECTION
8.5, unless Meridian elects to complete the arbitration after
the Closing by delivering written notice to Acquiror within
three (3) Business Days following receipt or delivery of an
arbitration notice. In the event that Meridian elects to
complete the arbitration after the Closing, a portion of the Net
Consideration comprised of OP Units and cash (in the same
proportion as the allocation of the Net Consideration between
cash and OP Units) equal in value to the estimated amount in
dispute in excess of the Materiality Threshold Amount (as
reasonably determined by Acquiror) shall be held in escrow by
the Title Company following the Closing pending completion of
the arbitration. In the event that the Arbitrator's or
Referee's determination results in a reduction in the Net
Consideration pursuant to the terms of this Agreement, the Title
Company shall return to Acquiror OP Units and cash with a value
equal to the amount of such reduction and the balance of the OP
Units and cash held in escrow shall be released to for
allocation among the OP Unit Recipients. In the event that the
arbitration involves economic issues, such as, for example,
discrepancies between the rents reflected on the Tenant List
attached to this Agreement and the actual Leases, the parties
agree that the estimated amount held in escrow pursuant to this
SECTION 8.5(D) shall be determined by using a cap rate of eight
and 25/100 percent (8.25%).
68
Section 8.6 Acquiror and Contributor Representatives.
(a) Acquiror shall be entitled to rely upon any notice,
approval or decision with respect to the Property, if the same
is given, made or expressed by the following individuals acting
on behalf of Meridian: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
(b) Meridian shall be entitled to rely upon any notice,
approval or decision given, made or expressed by the following
individuals acting on behalf of Acquiror: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇.
Section 8.7 Time is of the Essence. Time is of the
essence of every provision contained in this Agreement.
Section 8.8 Incorporation by Reference. All of the
exhibits and schedules attached to this Agreement or referred to
herein and all documents in the nature of such exhibits, when
executed, are by this reference incorporated in and made a part of
this Agreement.
Section 8.9 Attorneys Fees. In the event any dispute
between Acquiror and Meridian should result in litigation, the
prevailing party shall be reimbursed for all reasonable costs
incurred in connection with such litigation including without
limitation, reasonable attorneys' fees and costs. Attorneys fees
shall be included in the cap on Meridian's exposure set forth in this
Agreement.
Section 8.10 Construction. The parties acknowledge that
each party and its counsel have reviewed and revised this Agreement
and that the normal rules of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of this Agreement or any amendments
or exhibits hereto.
Section 8.11 Governing Law. This Agreement shall be
construed and interpreted in accordance with and shall be governed
and enforced in all respects according to the laws of the State of
Michigan (without giving effect to principles of conflicts of laws).
Section 8.12 Operating Records. At the Closing Meridian
agrees to deliver to Acquiror Meridian's unaudited monthly balance
sheets and income statements for the Property for the 1998 calendar
year through the last calendar quarter ended before the Closing Date
and for the comparable portion of the 1997 calendar year. Meridian
shall have reasonable access to the financial and all other records
delivered by Meridian to Acquiror.
Section 8.13 Confidentiality. (a) Acquiror and Meridian
acknowledge and agree that this Agreement and the terms and
conditions set forth are to be kept confidential and not disclosed to
any person or entity that is not a party to this Agreement or the
owner of an interest in the entities that are a party to this
Agreement, unless and until the Closing occurs in accordance with the
terms of this SECTION 8.13; provided, however, that in accordance
with the terms of the Confidentiality Agreement each party shall be
entitled to discuss and disclose
69
the transaction with employees, agents, consultants, attorneys,
accountants, lenders, clients and representatives of such party that
are engaged in this transaction, subject to the requirement that each
of the foregoing shall also be bound by the terms of this SECTION 8.13.
Any public release of information with respect to the pendency or content
of the transaction shall be subject to the approval of Acquiror and
Meridian. Notwithstanding the foregoing, after the execution of this
Agreement, Acquiror shall be permitted to disclose any matter
relating to the contemplated transaction, the Property or its
operating or financial results as Acquiror may reasonably determine
is necessary or advisable in connection with fulfilling the
Acquiror's or the REIT's obligations under state and federal
securities laws or in connection with discussions with financial
analysts, provided that any such disclosures shall be limited to the
categories of information set forth on EXHIBIT LL, and provided
further that Acquiror shall deliver to Meridian prior to release any
proposed press release relating to the transaction and shall afford
Meridian reasonable opportunity to comment thereon. None of the
Meridian or the Meridian Related Parties shall have any
responsibility with respect to the timing or content of any such
disclosures whatsoever except to the extent of any disclosure
required by applicable law to be made by Meridian, and Acquiror shall
indemnify, protect, defend and hold the Meridian and the Meridian
Related Parties harmless from and against, any and all claims,
demands, losses, damages, liabilities, causes of action, liens, costs
and expenses including, without limitation, reasonable attorneys'
fees and costs (to the extent permitted by law), directly or
indirectly related to, arising out of or in any manner connected
with, in whole or in part, any inaccuracies in Acquiror's disclosures
pertaining to this Agreement or the contemplated transactions except
for inaccuracies based on information provided by Meridian to
Acquiror. Notwithstanding anything to the contrary contained herein,
neither party shall make any public announcement or filing with
respect to this transaction until the expiration of each party's
right to terminate this Agreement pursuant to Section 3.2(i) hereof.
(b) Notwithstanding the termination of this Agreement,
any disclosure of information permitted by Acquiror or the REIT under
paragraph (a) above shall not be deemed a breach or violation by such
Person of the provisions of the Confidentiality Agreement.
Section 8.14 Counterparts. This Agreement may be executed
in one or more identical counterparts. All counterparts so executed
shall constitute one contract, binding on all parties, even though
all parties are not signatory to the same counterpart.
Section 8.15 Entire Agreement. The Confidentiality
Agreement and this Agreement, and the attached exhibits, which are by
this reference incorporated herein, and all documents in the nature
of such exhibits and schedules when executed, contain the entire
understanding of the parties and supersede any and all other written
or oral understanding.
Section 8.16 Waiver of Jury Trial. Acquiror and Meridian
waive any right to trial by jury of any claim arising under or with
respect to this Agreement, whether now existing or hereafter arising.
Acquiror and Meridian hereby agree that, except as provided in
SECTION 8.5, any such claim shall be decided by a court trial without
a jury and that any party hereto may
70
file an original counterpart or copy of this Section with any court as
written evidence of the consent of the other party hereto to the waiver
of its right of trial by jury.
Section 8.17 Binding Agreement. Subject to the provisions
of SECTION 8.3, the provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. All representations, warranties
and covenants shall not survive the Closing unless stated to the
contrary in this Agreement.
Section 8.18 Code or Treasury Regulation Reference. Any
reference in this Agreement to sections of the Code or Treasury
Regulations shall be deemed to include any successor provisions
thereto.
Section 8.19 OP Unit Recipient Third Party Beneficiaries.
Each OP Unit Recipient shall be deemed to be a third party
beneficiary of those provisions of this Agreement relating to OP
Units and shall have the right to institute any legal actions without
joining Meridian or any other OP Unit Recipient. No other party
shall be deemed to be a third party beneficiary of this Agreement.
71
IN WITNESS WHEREOF, Acquiror and Meridian have executed this
Agreement as of the day and year first written above.
ACQUIROR:
CBL & ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited partnership
By: CBL & Associates Properties, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
MERIDIAN:
MERIDIAN MALL ASSOCIATES LIMITED L.C.
an Ohio limited liability company
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Member