MASTER COMBINATION AND CONTRIBUTION AGREEMENT
AMONG THE ▇▇▇▇▇▇ PARTIES,
THE REIT PARTIES AND THE
MANAGEMENT PARTIES
THIS MASTER COMBINATION AND CONTRIBUTION AGREEMENT ("Combination
Agreement") is made as of the 8th day of November, 1996, as amended, among each
of the limited partnerships set forth in Schedule I attached hereto
(individually referred to as a "Transferor" and collectively as "Transferors");
▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇" and, together with the Transferors, the "▇▇▇▇▇▇
Parties"); ASR Investments Corporation, a Maryland corporation (the "REIT");
▇▇▇▇▇▇ & Associates, Inc., a Washington corporation ("Associates"); Heritage
Communities L.P., a Delaware limited partnership ("Heritage LP"); Heritage
Residential Group, Inc., an Arizona corporation wholly owned by the REIT
("Heritage Residential"); Heritage SGP Corporation, an Arizona corporation
wholly owned by the REIT ("Heritage SGP" and, collectively with the REIT,
Heritage LP and Heritage Residential, the "REIT Parties"); Pima Mortgage Limited
Partnership, an Arizona limited partnership ("Pima Mortgage"); Pima Realty
Advisors, Inc., an Arizona corporation ("Pima Realty" and, collectively with
Associates and Pima Mortgage, the "Management Parties"), ▇▇▇ ▇. ▇▇▇▇▇ ("Grove"),
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. ("▇▇▇▇▇▇"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇ ("Chan"). Winton, Grove,
▇▇▇▇▇▇ and ▇▇▇▇ are executing this Combination Agreement solely with respect to
certain mergers of entities owned by them, with respect to employment agreements
to be entered into by each of them individually, and to provide information
necessary to prepare certain offering materials and proxy statements as
described herein.
A. Each Transferor is the owner of the respective project listed
adjacent to its name in Schedule II attached hereto (the "Properties").
▇. ▇▇▇▇▇▇ is the general partner of each of the Transferors. ▇▇▇▇▇▇
also is the sole shareholder of Associates which acts as the property management
company for each of the Transferors pursuant to property management agreements
between Associates and each Transferor.
C. The REIT is a real estate investment trust that owns apartment
communities and other assets. The REIT's assets currently are managed by Pima
Mortgage pursuant to a management agreement and Pima Realty pursuant to various
property management agreements with respect to each of the REIT's apartment
properties.
D. The REIT and Heritage SGP are the sole general partners and Grove is
the sole limited partner of Heritage LP.
E. The REIT, Heritage LP and the Transferors desire to combine their
assets and to thereafter operate as a self-administered and self-managed REIT
rather than being externally managed. To accomplish the foregoing, the parties
hereto agree to enter into all, but not less than all, of the transactions
described below on the terms and conditions herein provided:
1. The REIT shall make a tender offer (the "Exchange Offer")
to each owner of limited partnership interests in a Transferor (the "Transferor
Partners") that is an Accredited Investor to tender limited partner interests in
the Transferors (the "Transferor Partnership Interests") in exchange for shares
of common stock in the REIT (the "REIT Stock") pursuant to the terms and
conditions of this Combination Agreement and a Letter of Transmittal in the form
of Exhibit A hereto (the "Letter of Transmittal") to be executed by each
Transferor Partner desiring to tender their Limited Partnership Interests in the
Exchange Offer. The REIT will enter into a Registration Agreement in the form of
Exhibit B covering resales of the REIT Stock received in the Exchange Offer
("Registration Agreement").
2. Upon the terms and subject to the conditions set forth in
this Combination Agreement, on the Closing Date, the REIT, Heritage SGP and the
Approving Transferors (as hereinafter defined) shall enter
into an amended and restated partnership agreement of Heritage LP in the form of
Exhibit C attached hereto (the "Amended Partnership Agreement") with such
changes thereto as ▇▇▇▇▇▇ and the REIT shall agree to prior to the Commitment
Date pursuant to which the REIT and Heritage SGP will make certain cash
contributions (the "REIT Initial Capital Contribution") to Heritage LP in
exchange for general partnership interests in Heritage LP ("GP Units"), and each
Approving Transferor will contribute the Property owned by the respective
Transferor in exchange for limited partnership interests in Heritage LP ("LP
Units") and cash. The GP Units and the LP Units shall be exchangeable for REIT
Stock on the first anniversary of the Closing Date. The Transferors, the REIT
and Heritage LP shall enter into a registration agreement in the form of Exhibit
D attached hereto (the "Exchange Registration Agreement") pursuant to which the
REIT shall agree to register under federal securities laws the shares of REIT
Stock to be issued in exchange for the LP Units. The contributions of the REIT
Initial Capital Contribution and the Properties in exchange for GP Units and LP
Units, respectively, are collectively referred to herein as the "Asset
Transfer."
3. The REIT, Heritage Residential, Pima Realty and certain
other parties shall enter into an agreement in the form of Exhibit E attached
hereto (the "Pima Realty/Pima Mortgage Merger Agreement") pursuant to which Pima
Realty shall merge with and into Heritage Residential (the "Pima Realty
Merger"). Each of JG Mortgage Advisors, Inc., JC Mortgage Advisors, Inc., and FP
Mortgage Advisors, Inc. (collectively, the "Pima Mortgage Partners"), the three
corporate partners of Pima Mortgage, shall also enter into the Pima Realty/Pima
Mortgage Merger Agreement pursuant to which each of the Pima Mortgage Partners
shall merge with and into Heritage Residential (the "Pima Mortgage Merger").
Heritage Residential, the REIT, Winton, and Associates shall enter into an
agreement in the form of Exhibit F attached hereto (the "Associates Merger
Agreement") pursuant to which, if such agreement is approved by ▇▇▇▇▇▇ as the
sole stockholder of Associates on or prior to the Commitment Date (as defined in
the Letter of Transmittal), Associates shall merge with and into Heritage
Residential (the "Associates Merger"). The Pima Realty/Pima Mortgage Merger
Agreement and the Associates Merger Agreement are collectively referred to
herein as the "Management Merger Agreements." Pursuant to the Associates Merger
Agreement, Heritage Residential shall become the manager of the Transferors,
including those Transferors that are not Approving Partnerships.
4. The REIT shall enter into employment agreements with each
of ▇▇▇▇▇▇, Grove, Parise, and Chan, each in the form to be agreed upon by the
parties thereto (the "Employment Agreements").
The Amended Partnership Agreement, the Registration Agreement, the
Exchange Registration Agreement, the Management Merger Agreements and the
Employment Agreements are sometimes hereinafter collectively referred to as the
"Related Agreements".
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Combination Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
EXCHANGE OFFER
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1.1 The Exchange Offer.
(a) Offer to Purchase. Provided that nothing shall have
occurred that would result in a failure to satisfy any of the terms or
conditions set forth in Article 7 of this Combination Agreement, as promptly as
practicable following the execution of this Combination Agreement, the REIT
shall commence the Exchange Offer by delivering the Exchange Offer Documents (as
defined below) to each Transferor Partner. Each Transferor Partner that is an
Accredited Investor shall have the right to tender all or any part of the
Transferor Partnership Interests owned by such Transferor Partner by delivering
a validly executed Letter of Transmittal to ASR prior to the Commitment Date (as
defined in the Letter of Transmittal). Each Transferor Partner desiring to
tender a Transferor Partnership Interest shall execute and deliver to ▇▇▇▇▇▇, as
custodian, a custody agreement and Power
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of Attorney in the form of Exhibit H attached hereto (the "Custody Agreement")
pursuant to which ▇▇▇▇▇▇ will make and accept deliveries by and on behalf of the
Transferor Partners as provided in the Custody Agreement. The obligations of the
REIT to accept for purchase and to purchase any Transferor Partnership Interests
tendered by the Transferor Partners of a particular Transferor shall be subject
only to the conditions set forth in this Combination Agreement (including the
Minimum Condition). The REIT shall not be entitled to accept for purchase or
purchase the Transferor Partnership Interests tendered unless all of the
conditions to the consummation of the transactions contemplated in this
Combination Agreement are satisfied or waived as provided herein.
(b) Purchase Price. Subject to the conditions set forth in
Article 7 of this Combination Agreement, on the Closing Date, the Custodian
shall deliver the Letters of Transmittal to the REIT, and the REIT shall deliver
to the Custodian, as agent for each Transferor Partner of an Approving
Partnership on whose behalf the Custodian delivered a Letter of Transmittal, a
certificate registered in such Transferor Partner's name for the number of
shares of REIT Stock equal to (i) the Exchange Value of all of the Transferor
Partnership Interests tendered and accepted for purchase divided by (ii) the
REIT Stock Price. No fractional shares of REIT Stock shall be issued in the
Exchange Offer. Each Transferor Partner will be issued a whole share of REIT
Stock in lieu of any fractional share interest to which such Transferor Partner
would otherwise be entitled. For purposes of determining the number of shares of
REIT Stock to be issued in the Exchange Offer, Transferor Partnership Interests
held by one person in multiple accounts shall be aggregated.
(c) Exchange Offer Documents. As soon as practicable after the
Execution Date, the REIT shall prepare a Private Offering Memorandum as
described in Section 4.5 hereof covering the REIT Stock to be offered in the
Exchange Offer, which will comply in all material respects with the provisions
of applicable federal and state securities laws, and will contain Letters of
Transmittal and a Custody Agreement appointing ▇▇▇▇▇▇ the Transferor Partners'
Custodian to make deliveries for the Transferor Partners at the Closing (the
Private Offering Memorandum, the Letters of Transmittal and the Custody
Agreement, together with any supplements or amendments thereto, are referred to
herein collectively as the "Exchange Offer Documents"). The REIT shall prepare
and make all filings under applicable state Blue Sky Laws to qualify or exempt
from qualification the REIT Stock offered pursuant to the Exchange Offer.
(d) Election to Tender Transferor Partnership Interests. The
election of a Transferor Partner to tender all or a part of the Transferor
Partnership Interests owned by the Transferor Partner shall be made by such
Transferor Partner's execution of a Letter of Transmittal and the return of the
Letter of Transmittal to the Custodian for delivery to the REIT pursuant to the
Custody Agreement. Following the Commitment Date the tender of Transferor
Partnership Interests shall be irrevocable.
(e) Consent to Admission of REIT as Partner. The Letter of
Transmittal shall provide that the Transferor Partner tendering a Transferor
Partnership Interest in a Transferor (i) consents to the admission of the REIT
as a substituted limited partner upon the purchase of such Transfer Partnership
Interest and (ii) waives any right of first refusal granted under the
Transferor's partnership agreement to the Transferor Partner or the Transferor
in connection with the Exchange Offer. ▇▇▇▇▇▇, as general partner of the
Transferor, consents to the admission of the REIT as a substituted limited
partner of each Approving Transferor as of the Closing Date. Promptly following
the Closing Date, each Approving Transferor shall file any certificates
necessary to reflect the admission of the REIT as a substituted limited partner.
(f) Term. The Exchange Offer shall remain open until the
Commitment Date, which shall be 5:00 p.m., Houston, Texas time on February
27,1997. The Exchange Offer shall expire on April 30, 1997 (the "Expiration
Date"). If the Exchange Offer is not consummated prior to the Expiration Date,
the REIT and the Custodian shall promptly return to the Transferor Partner the
Letter of Transmittal and all other materials delivered to the REIT and the
Custodian by the Transferor Partner pursuant to this Combination Agreement.
Prior to the Commitment Date, the REIT shall not amend or modify the terms of
the Exchange Offer without the prior consent of ▇▇▇▇▇▇. After the Commitment
Date, the Exchange Offer shall not be amended or modified.
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1.2 Tender of ▇▇▇▇▇▇'▇ Transferor Partnership Interests. Upon the terms
and subject to the conditions set forth in this Combination Agreement, on the
Commitment Date, in addition to ▇▇▇▇▇▇'▇ right to tender all or any part of his
Transferor Partnership Interests pursuant to Section 1.1 hereof, ▇▇▇▇▇▇ shall
have the right to tender all or any part of his right to receive distributions
as a general partner in one or more Transferors to the REIT in exchange for
shares of REIT Stock pursuant to the Exchange Offer on the same terms and
subject to the same conditions as set forth in Section 1.1 above. At the
Closing, the REIT shall accept for payment all assignments of the right to
receive distributions as a general partner tendered by ▇▇▇▇▇▇ in Approving
Partnerships and shall not accept for payment assignments of the right to
receive distributions as a general partner in all other Transferors. If the
tender of the right to receive general partner distributions is accepted, the
REIT shall acquire all right, title and interest to all distributions made by
the Transferor with respect to the interest acquired, but the REIT shall not be
substituted as a general partner. ▇▇▇▇▇▇ shall remain as the general partner of
the applicable Transferor.
1.3 Internal Revenue Code Section 754 Election. Unless a Transferor has
a valid election in place pursuant to Internal Revenue Code Section 754, each
Transferor hereby agrees to make such an election effective for such
Transferor's taxable year in which the Exchange Offer is consummated.
ARTICLE 2
ASSET TRANSFER
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2.1 The Asset Transfer. Provided that nothing shall have occurred that
would result in a failure to satisfy any of the terms or conditions set forth in
this Combination Agreement, immediately following the transactions set forth in
Article 1 hereof, the REIT and each Approving Transferor shall consummate the
Asset Transfer. The REIT and Heritage SGP shall make a cash capital contribution
to Heritage LP in accordance with Section 2.2(b) hereof and will continue to be
general partners of Heritage LP. Each of the Approving Transferors shall
contribute and convey the Property owned by each such Approving Transferor to
Heritage LP in exchange for LP Units and cash as set forth in Section 2.2(c)
hereof. Promptly following the issuance of LP Units and the delivery of cash to
the Approving Transferors, each of the Approving Transferors shall dissolve and
distribute the LP Units as a liquidating distribution to each partner of the
Approving Transferors that is an "accredited investor" and shall deliver cash as
a liquidating distribution to each partner of the Approving Transferors that is
not an accredited investor in accordance with Section 2.2(d) hereof. Pursuant to
the terms of the Amended Partnership Agreement, the GP Units and the LP Units
shall be exchangeable for REIT Stock on the first anniversary of the Closing
Date. Pursuant to the Exchange Registration Agreement, the REIT shall agree to
register under federal securities laws the shares of REIT Stock to be issued
upon conversion of the GP Units and LP Units.
2.2 Contribution of Property to Heritage LP.
(a) Amendment to Heritage Partnership Agreement. Upon the
terms and subject to the conditions set forth in this Combination Agreement, on
the Closing Date and immediately following the Exchange Offer and the admission
of the REIT as a limited partner of the Approving Partnerships, the Approving
Transferors, the REIT and Heritage SGP shall amend the Heritage Partnership
Agreement by executing and delivering the Amended Partnership Agreement
admitting the Approving Transferors as limited partners and providing for the
capital contributions in accordance with this Article 2.
(b) Capital Contributions. On the Closing Date, the REIT,
Heritage SGP and each Approving Transferor shall make the following capital
contributions to Heritage LP:
(i) The REIT and Heritage SGP shall make a cash
capital contribution equal on an aggregate basis to the REIT Initial Capital
Contribution which shall be the sum of:
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(A) that portion of the Mortgage Debts to be
repaid or assumed and cancelled by Heritage LP in accordance with Section 2.3
hereof including, without limitation, any prepayment fees or premiums,
assumption fees and other costs associated therewith), plus
(B) the amount required to satisfy any
monetary liens which the REIT elects to satisfy pursuant to Section 2.4(e), plus
(C) the Properties Closing Costs paid and to
be paid by Heritage LP or the REIT (on behalf of Heritage LP or on behalf of the
Approving Transferor) pursuant to Section 8.11, plus or minus, as appropriate
(D) the Prorations, plus
(E) all costs and expenses incurred and to
be incurred by Heritage LP, the REIT or Heritage SGP (on behalf of Heritage LP)
in the performance of its due diligence hereunder, and plus
(F) any cash required to be distributed to
non-Accredited Investors pursuant to Section 2.2(d) hereof.
(ii) Each Approving Transferor shall contribute and
convey the Property owned by such Approving Transferor to Heritage LP as
hereinafter provided subject only to the Transferred Debt as described in
Section 2.3 hereof.
(iii) Notwithstanding the foregoing, if, taking into
consideration the proposed contributions to the capital of Heritage LP by the
REIT, Heritage SGP, and each of the Approving Transferors in accordance with
Section 2.2(b) hereof, Heritage LP would not be consolidated with the REIT for
financial accounting and reporting purposes because the respective Partnership
Interests of the REIT or Heritage SGP in Heritage LP is insufficient, then at
the Closing the REIT or Heritage SGP may contribute cash to Heritage LP in
exchange for additional GP Units in Heritage LP at the rate of one GP Unit for
each $18.10 contributed in the minimum amount sufficient to permit Heritage LP
to be consolidated with the REIT for financial accounting and reporting
purposes.
(c) Issuance of Partnership Units. In exchange for the capital
contributions provided in Section 2.2(b) hereof, Heritage LP shall issue on the
Closing Date (i) to each Approving Transferor a number of LP Units equal to the
number of LP Units or the amount of cash to be distributed by the Approving
Transferor under Section 2.2(d); and (ii) to the REIT and Heritage SGP a number
of GP Units (rounded to a whole unit) equal to the REIT Initial Capital
Contribution divided by the REIT Stock Price allocated between them on a pro
rata basis based upon their respective contributions. At the Closing, each
Approving Transferor shall deliver to Heritage LP a certificate setting forth
the number of LP Units and the amount of cash to be distributed by the Approving
Transferor to the partners of such Approving Transferor.
(d) Distribution of LP Units. Each Approving Transferor
intends to dissolve and liquidate promptly following the Closing Date. In
connection with such liquidation, each Approving Transferor shall distribute to
each of its partners (i) who Heritage LP reasonably determines to be an
Accredited Investor a number of LP Units equal to the Exchange Value
attributable to such partner's interest in the Approving Transferor divided by
the REIT Stock Price and (ii) who Heritage LP reasonably determines is not an
Accredited Investor, an amount of cash equal to the number of shares of REIT
Stock that the partner would have been entitled to if such partner were an
Accredited Investor multiplied by the average closing price of a share of REIT
stock in the American Stock Exchange Composite Transactions as reported in the
Wall Street Journal for the 90 trading days immediately prior to the Closing
Date. Heritage LP shall deliver to ▇▇▇▇▇▇ at the Closing a list of the limited
partners of the Transferor that Heritage LP has determined not to be Accredited
Investors. The REIT, as general partner of Heritage LP, consents to the transfer
of the LP Units to the partners of the Transferors determined by ▇▇▇▇▇▇ to
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be Accredited Investors pursuant to the distribution and liquidation of the
Approving Transferor. If a partner of an Approving Transferor transfers an
interest in the Approving Transferor prior to the distribution of the LP Units
to such partner, distribution of the LP Units to the partner of the Approving
Transferor shall be subject to satisfaction by the partner of the Approving
Transferor and the transferee of the requirements of Section 11.3.1 of the
Amended Partnership Agreement.
2.3 Indebtedness.
(a) Mortgage Debt. The REIT, Heritage LP and the Transferors
acknowledge and agree that the Properties are subject to the Mortgage Debt from
the lenders ("Lenders") described on Schedule III attached hereto. The
Properties shall be acquired by Heritage LP subject to the Mortgage Debt,
provided that the Lender of such Mortgage Debt shall execute a consent, estoppel
letter, transfer agreement, and modification with respect to such Mortgage Debt
as shall be acceptable to Heritage LP, acting reasonably.
(b) Lender Consent. From and after the date hereof, the
parties shall proceed in good faith and with due diligence to attempt to secure
any lender consent and estoppel letter from the Lenders and to negotiate any
transfer agreement or modifications to the Loan Documents in order for Heritage
LP to acquire the Properties subject to such Mortgage Debt. Heritage LP agrees
that it shall accept each Property subject to the Mortgage Debt, provided that
the Lender agrees that such Mortgage Debt shall be non-recourse to Heritage LP
on the same terms that such Mortgage Debt is currently non-recourse to the
Transferor and the Lender executes the agreements contemplated by Section
2.3(a). Heritage LP shall not acquire any Property subject to a Mortgage Debt
unless the relevant Approving Transferor and ▇▇▇▇▇▇ are released from any
liability with respect to such Mortgage Debt, unless otherwise agreed to by
▇▇▇▇▇▇ or the Approving Transferor, as applicable. Any Mortgage Debt to which a
Property is subject upon transfer to Heritage LP is herein referred to as
"Transferred Debt".
(c) Refinancing of Mortgage Debt. In the event that a Lender
does not agree to the transfer of a Mortgage Debt as contemplated by Sections
2.3(a) and (b), or if for any reason Heritage LP is unable to acquire a Property
subject to a Mortgage Debt, Heritage LP shall have the right to (i) refinance
all or a portion of such Mortgage Debt on terms it determines to be acceptable
to it in its discretion; (ii) pay all or any portion of such Mortgage Debt from
the proceeds of the Initial REIT Capital Contribution; or (iii) exclude such
Property from the transactions contemplated hereby in accordance with Section
7.1(i) hereof.
2.4 Inspection.
(a) Due Diligence Period. The REIT shall have until November
11, 1996, unless earlier terminated by agreement of the REIT (the "Due Diligence
Period"), to perform its due diligence review and examination of the Properties,
the Title Reports, the Surveys, the UCC Searches, the Loan Documents and all
information to be provided or made available by Transferors, as set forth below,
and to determine, in its sole and absolute discretion, whether to proceed with
the transactions contemplated under this Combination Agreement.
(b) Access. During the Due Diligence Period, and at all times
prior to the Closing Date, Transferors and ▇▇▇▇▇▇ shall provide the REIT and
Pima Realty as well as their respective employees, contractors, consultants,
agents and representatives, with complete access to all files, books, records
and other materials in the possession or control of Transferors or ▇▇▇▇▇▇ and
relating to the Properties and the right to examine, inspect and make copies of
such materials as they may deem appropriate. Transferors shall also provide for
such parties to have reasonable access to the Real Properties (including the
Improvements thereon) for the purpose of conducting surveys, architectural,
drainage, soils, mechanical systems, engineering, geotechnical and environmental
inspections and tests (including sampling and invasive testing for the presence
of Hazardous Materials performed in connection with Phase I and Phase II
environmental audits, feasibility studies and any other inspections, studies or
tests reasonably required by them. The REIT shall also have the right to conduct
a "walk-through" of each of the Properties prior to the Closing Date upon
appropriate notice, subject to the rights of all tenants under their Leases.
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(c) Information. The information to be made available by
Transferors and ▇▇▇▇▇▇ with respect to the Properties shall include, but not be
limited to, the following (to the extent that such information is in the
possession or control of Transferors or ▇▇▇▇▇▇): construction plans,
specifications, certificates of completion and all files related to any
contemplated developments on any of the properties; correspondence; documents,
contracts and agreements; copies of all development agreements, approvals,
permits, site plans, licenses, entitlements, subdivision maps, environmental
reports, and all studies, reports or investigations performed in connection with
the securing of any governmental or quasi-governmental approval for the
development of any of such properties or construction of improvements thereon;
all permits, licenses and approvals relating to the ownership, operation or
occupancy of any improvements; plans and specifications for any on- or off-site
infrastructure to be installed, including all contracts, costs estimates and
contribution agreements relating thereto; all leases, lease guaranties and lease
files; utility bills; all management, marketing, service, supply, material,
equipment lease or maintenance contracts which pertain to the furnishing of
services, materials, leasehold equipment, or maintenance to the Properties and
similar agreements (the "Service Contracts"); maintenance work orders and
service requests for the prior two years (including, but not limited to, those
pertaining to boiler or other heating, ventilation or air conditioning systems)
; information relative to the payment history of each tenant; copies of
operating and financial statements (balance sheets, income, proformas, expense
and capital improvements) detailing the operating history of the properties for
the last three years including year-to-date information (the "Operating and
Financial Statements"); the Loan Documents; notices, citations, correspondence
or memoranda from any government or quasi-government authority or agency; and
all other materials relating to the Properties in the possession or control of
any Transferor or ▇▇▇▇▇▇, it being the intention of the parties that Transferors
and ▇▇▇▇▇▇ will disclose to the REIT and the other parties performing the due
diligence review herein provided for any and all information in the possession
or control of such parties, their property managers, and any other affiliated
entity to the extent it relates to the Properties. In the course of its
investigations, the REIT may make inquiries to third parties including, without
limitation, tenants, the Lenders, contractors, property managers, parties to
other contracts and municipal, local and other government officials and
representatives, and the Transferors consent to such inquiries.
Each Transferor and ▇▇▇▇▇▇ shall also make available
to the REIT all the books and records, financial statements, income tax returns,
contracts, employee records and other information with respect to the respective
Transferor as may be reasonably required by the REIT in order to perform its due
diligence review of the respective Transferor.
(d) Transferors' Deliveries. Transferors shall deliver to the
REIT within ten (10) days after the Execution Date: (i) a current rent roll and
delinquency report (a "Rent Roll") for each Real Property; (ii) a list of all
material permits, approvals and entitlements required for the Real Properties
known to Transferors; (iii) a schedule of Service Contracts (a "Schedule of
Service Contracts") for each Real Property; (iv) plans and specifications, in
the possession or control of Transferors for any major capital expenditures
relating to any Real Property; (v) to the extent in the possession or control of
Transferors, a full set of construction documents, including all plans and
specifications for all tenant improvements; (vi) a schedule of all actions and
lawsuits or other litigation or proceedings pending or outstanding within the
past four years in which any Transferor is a party; (vii) all title information
for the Real Properties in the possession or control of Transferors or their
attorneys; (viii) surveys for the Real Properties in the possession or control
of Transferors or their attorneys; (ix) a schedule of all insurance carried and
the costs thereof (a "Schedule of Insurance") with respect to each Real
Property; (x) a schedule of all warranties covering any roof, any improvements
on Tangible Personal Property on or pertaining to any Real Property; (xi) a
schedule of all environmental reports in Transferors' possession or control (a
"Schedule of Environmental Reports") for each Real Property, copies of all
environmental reports in Transferors' possession or control for each Real
Property and a list of any Hazardous Materials reported by any tenant to any
Transferor as being in use on any Real Properties; (xii) copies of all Loan
Documents; (xiii) a schedule of Tenant Options (a "Schedule of Tenant Options")
for each Real Property and copies of all Tenant Options; (xiv) property tax
notices and real and personal property tax returns filed, relating to the
Properties, for the two years prior to the year of execution of this Combination
Agreement, and the current year to date; (xv) copies of all governmental notices
of
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code or other violations pertaining to any Property, if any, whether or not now
corrected, received by Transferors during the past four years; and (xvi) a
schedule of Loan Documents (a "Schedule of Loan Documents") for each Real
Property.
(e) Title and Survey.
(i) Within 10 days after the Execution Date,
Transferors shall deliver to the REIT (A) Title Reports for the Real Properties
together with legible copies of all documents underlying exceptions to title
(including those in the "Requirements" section); (B) Surveys for the Real
Properties; and (C) UCC Searches for Transferors and for each Real Property and
for such other parties as the REIT may reasonably request. The REIT shall be
entitled to approve or object to any matters disclosed by the Title Reports,
Surveys or UCC Searches by delivering written notice of such approval or
objection to Transferors and the Title Company on or before fifteen (15) days
after delivery to the REIT of the Title Report, Surveys or UCC Searches, said
notice to specify in reasonable detail any matter to which the REIT objects. If
any party subsequently issues any amendment to the Title Report, Surveys or UCC
Searches disclosing any additional matters or changes in the legal description
or additional requirements of the REIT, the REIT shall be entitled to approve or
object to any such matter not disclosed by the Title Report, Surveys or UCC
Searches or any previous amendment thereto by delivering written notice of such
approval or objection to Transferors and the Title Company on or before five (5)
days after the Title Company has delivered to the REIT the amendment to the
Title Report, Surveys or UCC Searches said notice to specify in reasonable
detail any matter to which the REIT objects.
(ii) If the REIT delivers any notice of objection to
any matter, within five (5) days in writing after receipt of such objection,
Transferors shall notify the REIT and the Title Company whether Transferors are
unable or unwilling to remove or satisfy such matter objected to by the REIT on
or before Closing. If any Transferor does not give such notice, such Transferor
shall be deemed to be unable or unwilling to remove or satisfy such matter. If
any Transferor so indicates its inability or unwillingness to remove any matter
objected to by the REIT on or before Closing, the REIT may, within five (5) days
after receipt of such written notice from such Transferor (or ten (10) days from
the date of the REIT's objection if such Transferor does not respond in writing
to the REIT's objection), notify Transferors and the Title Company in writing of
the REIT's election to (A) proceed under this Combination Agreement with respect
to such Property and waive the REIT's objections, or (B) exclude the Property
and the Transferor subject to objection from the transactions contemplated in
this Combination Agreement. If the REIT does not give such notice, then this
Combination Agreement shall automatically terminate with respect to the
Transferor and the Property subject to objection.
(iii) Notwithstanding anything contained to the
contrary herein, if the REIT fails to timely notify Transferors and the Title
Company of any objections to, or its unequivocal approval of the Title Report,
Surveys or UCC Searches or any amendment or modification thereto, or if the REIT
fails to timely notify Transferors and the Title Company of its election to
either terminate or proceed with this transaction after delivery by Transferors
to the REIT of notice of its inability or unwillingness to remove any matter
objected to by the REIT, then the REIT shall be deemed to not object to any
matter in the Title Report, or any modification thereto.
(iv) Notwithstanding anything to the contrary in this
Section 2.4(e), regardless of any other objection from the REIT, Transferors
shall satisfy all pecuniary encumbrances (other than the Mortgage Debt) or
otherwise have all such encumbrances removed as liens against the Properties on
or before the Closing at their own expense. Transferors shall not place any
consensual lien, encumbrance or easement against the Properties following the
date of this Combination Agreement without the prior written consent of the
REIT. If Transferors fail to satisfy or remove any monetary lien on or prior to
Closing, the REIT may apply a portion of the REIT Initial Capital Contribution
to satisfy the monetary lien and reduce the Deemed Value of the related
Property. Transferors shall be required to deposit any additional funds at
Closing to satisfy any remaining monetary liens against the Properties.
8
(v) Transferors shall comply with all requirements to
the issuance of the Title Policies (as defined herein) to be delivered at the
Closing. If the REIT has not received all Title Reports and Surveys at least
thirty (30) days before the expiration of the Due Diligence Period, then such
period shall be extended as it relates to survey and title matters only, on a
day-for-day basis, until all Title Reports and Surveys have been received by the
REIT.
(vi) The term "Permitted Exceptions" shall mean
Transferred Debt and all exceptions to title to the Real Properties (other than
monetary liens and those other matters which Transferors have agreed to cure in
accordance with Section 2.4(e)(iv) hereof), which have not been cured and which
the Title Insurer has not agreed to insure over or waive during the Due
Diligence Period and which the REIT shall be deemed to have approved by failing
to exclude the Property and the Transferor of such Property from this
Combination Agreement as provided in Section 2.4(e)(ii) hereof.
(f) Indemnity. Prior to the Closing, the REIT shall not place
any liens on the Properties and will indemnify, defend and hold Transferors
harmless from all claims and liabilities (including reasonable attorneys' fees
and expenses actually incurred) asserted against Transferors or the respective
owners as a result of any entry by or on behalf of the REIT. If any inspection
or test disturbs any of the Properties, the REIT will cause the damaged
properties to be restored to the same condition as existed prior to any such
inspections or tests.
2.5 Actions With Respect to Properties Prior to Closing.
(a) Operations.
(i) Transferors agree that prior to the Closing they
shall continue to operate and manage the Real Properties in the ordinary course
of business in accordance with past practice (which includes the construction,
development and management of properties and the making of tenant improvements
thereon) and shall perform regular maintenance, maintain existing insurance
coverage, perform their respective obligations under all leases with tenants,
Service Contracts and Loan Documents applicable to the Real Properties owned by
them, commit no waste to the Properties and pay and discharge, in the ordinary
course of business, liabilities and obligations relating to the Real Properties.
Transferors shall not, without the prior consent of the REIT, which consent
shall not be unreasonably withheld or delayed, incur, create or assume any new
indebtedness, other than accounts payable, taxes and similar amounts incurred in
the ordinary course of business, nor grant any new lien, mortgage, security
interest or pledge of any kind on any of the Real Properties prior to the
Closing.
(ii) Transferors agree that prior to the Closing they
shall consult with the REIT prior to terminating any Lease or Service Contract
(except in the ordinary course of business) or entering into or modifying any
contract or agreements relating to the Real Properties which would be binding on
Heritage LP or the REIT after the Closing. The REIT shall have the right to
approve, such approval not to be unreasonably withheld or delayed, any material
new contracts or contract modifications which are proposed by Transferors.
(iii) Transferors may enter into new Leases and
modify existing Leases relating to Real Properties without the REIT's consent so
long as such leases comply with the leasing standards existing on the date
hereof with respect to the applicable property with such exceptions as are
typically made in the ordinary course of business and are on Transferor's
standard form, subject to customary modifications thereto. Transferors shall,
however, consult with the REIT concerning all proposed Leases or Lease
modifications relating to Real Properties, and shall secure the REIT's prior
approval, such approval not to be unreasonably withheld or delayed, for any
Lease or tenant not meeting the foregoing requirements or any Lease modification
that would shorten the term, reduce the rent or otherwise relieve the tenant of,
or impose upon the landlord, any material obligation not set forth in the
current Lease.
(iv) Transferors shall notify the REIT of any matters
that may arise prior to the Closing that could have a material effect on any of
the Properties, such as pending or threatened litigation, notices
9
of violations from governmental or quasi-governmental authorities or agencies,
tenant defaults, bankruptcies or insolvencies and asserted landlord defaults.
(v) Except with the prior written consent of the REIT
(which consent shall not to be unreasonably withheld or delayed), Transferors
shall not accept rents or occupancy payments from any tenant at any Real
Property for more than one month in advance except in the ordinary course of
business.
(b) Tenant Estoppels. For Real Properties that are not
apartment complexes, Transferors shall endeavor in good faith to secure tenant
estoppels in the form of Exhibit I attached hereto ("Estoppel Certificates")
from all tenants of all of the Real Properties prior to the Closing. The REIT
acknowledges that certain Major Tenants may not sign the form tenant estoppel
attached as Exhibit I, and in such event, an alternative tenant estoppel from
such Major Tenants may be delivered in satisfaction of Transferors' obligations
under the preceding sentence if such alternative form is satisfactory to the
REIT in the exercise of the REIT's reasonable commercial judgment. Transferors
shall be responsible for filling in the required information in each Estoppel
Certificate, for delivering the forms to the tenants and for following up with
tenants as necessary to secure such estoppels. The REIT will use reasonable
efforts to assist Transferors in securing such estoppels.
2.6 Damage. The risk of loss of or damage to a Real Property by reason
of any insured or uninsured casualty during the period up to and including the
Closing Date shall be borne by the applicable Transferor. In the event of any
material damage to or destruction of any Real Property or any portion thereof
(notice of which shall promptly be given to the REIT by the applicable
Transferor), the REIT may, at its option by notice to such Transferor given
within ten (10) days after the REIT is notified of such damage or destruction
(and the Closing shall be extended, if necessary to give the REIT such 10-day
period to respond to such notice) (i) elect to proceed under this Combination
Agreement with respect to such Property, in which event the Transferor shall, at
the Closing, assign to Heritage LP all insurance proceeds (including rent loss
insurance to the period from and after the Closing Date) for the damage,
Heritage LP shall assume responsibility for the repair of the Real Property, and
Heritage LP shall receive a credit at the Closing for any uninsured portion of
the damage and any deductible under the insurance policy; or (ii) exclude such
Property and Transferor from the transactions contemplated in this Combination
Agreement.
"Material damage" and "materially damaged" means, with respect
to the applicable Real Property, damage for which the cost to repair reasonably
exceeds one percent (1%) of such Property's Deemed Value or which would permit
any Major Tenant to terminate its Lease (if such Real Property is not an
apartment complex).
2.7 Condemnation. In the event of any threatened, commenced or
consummated proceedings in eminent domain, including, without limitation, any
conveyance in lieu thereof (notice of which shall promptly be given to the REIT
by the applicable Transferor) (a "Condemnation Proceeding"), which would
constitute a material condemnation respecting Real Property, the REIT may, at
its option, by notice to the applicable Transferor given within ten (10) days
after the REIT is notified of such actual or possible proceedings (and the
Closing shall be extended, if necessary, to give the REIT such 10-day period to
respond to such notice) (i) elect to proceed under this Combination Agreement
with respect to such Property, in which event the Transferor shall, at the
Closing, assign to Heritage LP its entire right, title and interest in and to
any condemnation award, and Heritage LP shall have the sole right prior to
Closing (subject to the applicable Transferor's approval which shall not be
unreasonably withheld or delayed) and after the Closing to negotiate and
otherwise deal with the condemning authorities in respect of such matters; or
(ii) exclude such Property and Transferor from the transactions contemplated in
this Combination Agreement.
"Material condemnation" means with respect to a Real Property,
a taking of (i) more than ten percent (10%) of the land constituting the Real
Property, (ii) more than ten percent (10%) of the parking for the buildings on
the Real Property (unless the same can, on the remaining Real Property so
affected, be replaced), (iii) any part of the buildings on the Real Property,
(iv) a means of access to the Real Property unless alternative
10
means of access exist which in the REIT's judgment are adequate to serve the
Real Property, or (v) materially adversely affect the use or value of the Real
Property.
2.8 Prorations. The items in this Section 2.8 with respect to each of
the Real Properties shall be apportioned or prorated between the respective
Approving Transferor and Heritage LP as of the end of the day preceding the
Closing Date in order to determine the amount of the Proration with respect to
such Property. The parties shall compute or estimate all prorations prior to the
Closing Date, and Approving Transferors shall supply Heritage LP before the
Closing satisfactory supporting evidence for all such adjustments:
(a) Taxes and Assessments. General real estate taxes and
assessments imposed by governmental authority ("Taxes") and any assessments by
private covenant constituting a lien or charge on each Real Property for the
then-current calendar year or other current tax period not yet due and payable,
together with, if applicable, state and local taxes thereon. If the Closing
occurs prior to the receipt of the tax ▇▇▇▇ for any Real Property for the
calendar year or other applicable tax period for such Real Property in which the
Closing occurs, Taxes for such calendar year or other applicable tax period for
such Real Property shall be prorated based upon the most recent ascertainable
assessed values and tax rates. All prorations shall be based upon a fraction
determined by dividing the number of days elapsed through the date of the
Closing by 365.
(b) Collected Rent. All collected rent and other income (and
any applicable state or local tax on rent) under Leases in effect at the Closing
but excluding payments that may constitute rent but are provided for in other
subparagraphs of this Section 2.8. Each Approving Transferor shall be charged
with any rentals collected by such Approving Transferor before the Closing, but
applicable to any period of time after such Closing. Any rent and other income
delinquent as of the Closing shall not be prorated. Heritage LP shall use
reasonable efforts (which efforts shall not require Heritage LP or the REIT to
initiate any lawsuit) to collect any rent delinquent as of the Closing, and any
rent delinquent as of the Closing but collected after the Closing shall be
applied first to current rent obligations then to delinquent rent in inverse
order of incurrence, with any amounts applied to any period prior to the Closing
remitted to the respective Approving Transferor. Heritage LP may treat any rent
received after the 27th of any month as rent for the next month. Once the
Closing has occurred, no Approving Transferor shall have any right to seek by
legal action or otherwise collection of any rents delinquent for any period
prior to the Closing, unless the tenant has vacated the premises under the Lease
before the Closing and the Lease is not assigned to Heritage LP.
(c) Utilities. To the extent such expenses are the obligation
of an Approving Transferor and not tenants under Leases, utilities, including
water, sewer, electric, and gas, based upon the last reading of meters prior to
the Closing. If the utility company will not issue separate bills, such
Approving Transferor's portion will be charged against such Approving Transferor
and Heritage LP will pay the entire ▇▇▇▇ after the Closing. If any Approving
Transferor has paid any utilities in advance in the ordinary course of business,
then the Approving Transferor shall be credited for Heritage LP's portion of
such payment at the Closing. The amount of deposits, if any, with utility
companies that are transferrable and that are assigned by any Approving
Transferor to Heritage LP at the Closing shall be credited to such Approving
Transferor. The amount of any deposits with utility companies that are not
transferable and that are not assigned by any Approving Transferor to Heritage
LP at the Closing shall remain the property of such Approving Transferor.
(d) Fees and Charges Under Service Contracts. To the extent
such expenses are the obligations of any Approving Transferor and not of
tenant's under the Lease, fees and charges under any Service Contracts relating
to the Real Properties that are being assigned to and assumed by Heritage LP at
the Closing on the basis of the periods to which such Service Contracts relate.
(e) CAM Charges. Common area maintenance charges and other
operating expenses paid by tenants under Lease ("CAM Charges") and actually
received by any Approving Transferor. At the Closing, the Transferor shall be
charged for CAM Charges received by such Approving Transferor that relate to
periods after the Closing and any portion of CAM Charges not actually paid by
any tenants for the year of Closing or other
11
applicable period (but only as to the portion of the year or such other period
during which such Approving Transferor owned the Real Property and such amounts
that have not previously been paid by such Approving Transferor).
(f) Transferred Debt. Interest accrued through the day prior
to the Closing Date and not yet due and payable and any principal, interest and
other amounts due and payable at the Closing Date pursuant to the Transferred
Debt; provided, however, transfer fees due and payable to holders of Transferred
Debt shall be paid in accordance with Section 8.11 hereof.
(g) Insurance. Premiums or other fees payable in connection
with any insurance policies that are being assigned to and assumed by Heritage
LP at the Closing.
(h) Other Expenses. All other liabilities related to the
ownership or operation of the Properties that Heritage LP may agree to assume or
take subject to in writing.
(i) Contractors and Suppliers. Amounts payable to contractors,
subcontractors, designers, suppliers, architects, engineers and others who have
performed services or labor or supplied material in connection with any of the
Properties.
(j) Leasing Commissions. Leasing or other fees or commissions
payable in connection with any Lease or any renewal or extension of any Lease,
but only to the extent that such fees or commissions have been disclosed to
Heritage LP and the REIT on the Rent Roll. For the avoidance of doubt, the
parties acknowledge that with respect to the majority of Leases, all commissions
due to brokers for the initial term of such Leases have been previously paid by
the Transferors on a "cash out" basis and there will be no proration of those
commissions at Closing; however, Heritage LP acknowledges that, as described on
the Rent Rolls, commissions for renewals and extensions of such Leases may be
due and payable in the future on a "cash out" basis at the time of the
applicable tenant's exercise of a renewal or option to extend or may be payable,
for such extension or renewal, on a monthly basis.
2.9 Tenant Deposits. All tenant deposits, including without limitation,
refundable security deposits, refundable pet deposits and key deposits, and
advance rental deposits (and interest thereon if required by law or contract to
be earned thereon) shall be transferred to Heritage LP at the Closing, and
Heritage LP shall assume the obligations to refund such deposits to such tenants
in accordance with their respective Leases after Closing, but only to the extent
the obligation to refund such deposits arises after Closing.
2.10 Income and Sales Taxes. All income, sales, gross receipts or
compensation taxes and similar taxes and fees imposed upon any Approving
Transferor under applicable local or state law shall be paid by the respective
Approving Transferor at the Closing.
2.11 Permit Fees. Customary fees payable with respect to the transfer
of permits and licenses assigned by any Approving Transferor to Heritage LP at
the Closing with the consent or approval, if required, of the issuer thereof
shall be paid by Heritage LP.
2.12 Wages. Approving Transferors shall pay the wages, employment taxes
and fringe benefits applicable thereto payable to employees, if any, of such
Approving Transferors as of their discharge on the Closing Date.
2.13 Escrow Accounts. The parties acknowledge that the Transferred
Debts to be assumed have Escrow Accounts. Upon the Closing (a) if requested by
an Approving Transfer, Heritage LP shall reimburse such Approving Transferor for
the amount such Approving Transferor has deposited into the Escrow Account with
respect to each Real Property, whereupon such Approving Transferor shall assign
to Heritage LP, and Heritage LP shall have sole right and ownership of, all
funds in such Escrow Account; or (b) each Approving Transferor shall
12
withdraw all funds that it has deposited in each Escrow Account, whereupon
Heritage LP shall make the appropriate deposits into the Escrow Account.
ARTICLE 3
PROPERTY MANAGEMENT COMPANY MERGERS;
------------------------------------
INTERNALIZATION OF PROPERTY MANAGEMENT
--------------------------------------
3.1 Pima Realty Merger. Immediately following the execution of this
Combination Agreement, Pima Realty, Pima Mortgage, Heritage Residential, Grove,
▇▇▇▇▇▇ and ▇▇▇▇ shall enter into the Pima Realty/Pima Mortgage Merger Agreement
that shall provide for Pima Realty to be merged with and into Heritage
Residential (the "Pima Realty Merger") on the Closing Date with Heritage
Residential continuing its corporate existence as the surviving corporation. The
Pima Realty/Pima Mortgage Merger Agreement shall provide for the conversion of
Pima Realty's shares of common stock into the right to receive 26,560 shares of
REIT Stock, and such other terms and conditions as shall be set forth in the
Pima Realty/Pima Mortgage Merger Agreement. By their execution of this
Combination Agreement, each of Grove, ▇▇▇▇▇▇ and Chan, in their capacities as
the sole stockholders of Pima Realty, vote for, adopt, consent to and approve
the Pima Realty Merger. Subject to the Fairness Opinion not being withdrawn or
modified, the REIT, as the sole shareholder of Heritage Residential, hereby
votes for, adopts, consents to and approves the Pima Realty Merger and the Pima
Realty/Pima Mortgage Merger Agreement.
3.2 Pima Mortgage Merger. Immediately following the execution of this
Combination Agreement, each of Grove, ▇▇▇▇▇▇ and ▇▇▇▇, each as the sole
stockholder of JG Mortgage Advisors, Inc., JC Mortgage Advisors, Inc. and FP
Mortgage Advisors, Inc., respectively, the three corporate partners of Pima
Mortgage (the "Pima Mortgage Partners"), shall cause each of the Pima Mortgage
Partners to enter into the Pima Realty/Pima Mortgage Merger Agreement that shall
provide for each of the Pima Mortgage Partners to be merged with and into
Heritage Residential (the "Pima Mortgage Merger") on the Closing Date with
Heritage Residential continuing its corporate existence as the surviving
corporation. The Pima Realty/Pima Mortgage Merger Agreement shall provide for
the conversion of all issued and outstanding shares of common stock of each of
the Pima Mortgage Partners into the right to receive 235,440 shares of REIT
Stock, and such other terms and conditions as shall be set forth in the Pima
Realty/Pima Mortgage Merger Agreement. By their execution of this Combination
Agreement, each of Grove, ▇▇▇▇▇▇ and ▇▇▇▇, each as the sole stockholder of JG
Mortgage Advisors, Inc., JC Mortgage Advisors, Inc. and FP Mortgage Advisors,
Inc., respectively, vote for, adopt, consent to and agree to the Pima Mortgage
Merger. Subject to receipt of a favorable fairness opinion, the REIT, as the
sole shareholder of Heritage Residential, hereby votes for, adopts, consents to
and approves the Pima Mortgage Merger and the Pima Realty/Pima Mortgage Merger
Agreement.
3.3 Associates Merger. Immediately following the execution of this
Combination Agreement, Associates and Heritage Residential shall enter into the
Associates Merger Agreement that shall provide for Associates to be merged with
and into Heritage Residential (the "Associates Merger") on the Closing Date with
Heritage Residential continuing its corporate existence as the surviving
corporation. The Associates Merger Agreement shall provide for the conversion of
Associates' shares of common stock into the right to receive 70,284 shares of
REIT Stock and such other terms and conditions as shall be set forth in the
Associates Merger Agreement. The REIT, as the sole shareholder of Heritage
Residential, hereby votes for, adopts, consents to and approves the Associates
Merger and the Associates Merger Agreement.
3.4 Employment Agreements. On the Closing Date, the REIT and each of
Winton, Grove, ▇▇▇▇▇▇ and ▇▇▇▇ shall enter into the Employment Agreements.
13
3.5 Appointment of ▇▇▇▇▇▇ as Director. Prior to the Closing Date, the
REIT shall take all necessary action to increase the number of directors by one
and to appoint ▇▇▇▇▇▇ as a director effective as of the Closing Date to serve
until the next annual election of directors.
3.6 Fairness Opinion; All Documents Delivered. The REIT Parties have
received an opinion, dated November 8, 1996, from ▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc. to the
effect that the consideration to be received by the REIT in the Pima Mortgage
Merger and Pima Realty Merger is fair to the REIT, from a financial point of
view (the "Fairness Opinion"). A copy of the Fairness Opinion has been provided
to the Transferors. The REIT has provided copies of all documents regarding the
Pima Realty Merger and the Pima Realty Merger to the Transferors, and there are
no other agreements, understandings or arrangements with respect to such
mergers.
ARTICLE 4
PARTNER AND STOCKHOLDER APPROVALS;
----------------------------------
PROXY AND REGISTRATION FILINGS;
-------------------------------
OFFERING MEMORANDUM
-------------------
4.1 Approval by ▇▇▇▇▇▇, as General Partner. ▇▇▇▇▇▇ hereby approves and
consents to the Exchange Offer and Asset Transfer and represents and warrants
that he has (i) determined that this Combination Agreement and the transactions
contemplated hereby, including the Exchange Offer and Asset Transfer, taken
together, are in the best interests of the Transferor Partners, (ii) approved
this Combination Agreement and the transactions contemplated hereby, including
the Exchange Offer and Asset Transfer, and (iii) will recommend that the
Transferor Partners accept the Exchange Offer or approve and adopt this
Combination Agreement and the Asset Transfer; provided, however, that such
recommendation may be withdrawn, modified or amended by ▇▇▇▇▇▇ if he determines
in good faith to do so in the exercise of his fiduciary duties, based upon
written advice of counsel. ▇▇▇▇▇▇ hereby agrees to cooperate with the REIT in
preparing the Private Offering Memorandum and the REIT Proxy Statement and to
provide such information about ▇▇▇▇▇▇ and the Transferors as the REIT shall
reasonably request.
4.2 REIT Stockholder Approval. As soon as practicable after the
Execution Date, the REIT shall prepare and file with the Securities and Exchange
Commission (the "SEC"), a proxy statement and related proxy materials (the "REIT
Proxy Statement") prepared in accordance with Section 14(a) under the Exchange
Act and the rules and regulations promulgated thereunder in order to solicit the
approval of the REIT's stockholders of the issuance of the REIT Stock in the
Exchange Offer, upon exchange of LP Units, and pursuant to the Pima Mortgage
Merger, the Pima Realty Merger, and the Associates Merger. The REIT shall use
its best efforts to respond to any comments by the SEC regarding the REIT Proxy
Statement, and to receive notification or confirmation, from staff of the SEC
that they have no comments or no further comments on the REIT Proxy Statement.
The REIT will use its best efforts to mail the REIT Proxy Statement to its
stockholders as soon as practicable following the later of (i) notification (or
confirmation) by the SEC that it will have no comments or no further comments on
the REIT Proxy Statement and (ii) the Commitment Date. Such meeting of the
stockholders of the REIT shall be held in accordance with the laws of the State
of Maryland on or before the Expiration Date or as soon thereafter as is
practicable. The REIT, acting through its Board of Directors, shall recommend to
its stockholders approval of the issuance of REIT Stock as contemplated by this
Combination Agreement and the Amended Partnership Agreement, and shall solicit
proxies in favor of such approval and shall vote all proxies in accordance with
the instructions thereon at the meeting of the REIT's stockholders; provided,
however, that such recommendation and solicitation may be withdrawn, modified,
or amended by the Board of Directors if it determines in good faith to do so in
the exercise of the directors' fiduciary duties, based upon the written advice
of counsel.
4.3 REIT Proxy Statement. The REIT shall deliver the preliminary and
definitive REIT Proxy Statement to ▇▇▇▇▇▇ and each amendment thereto filed or
proposed to be filed. The REIT shall advise ▇▇▇▇▇▇ in writing (a) when the REIT
Proxy Statement shall have been cleared by the SEC and when any amendment of or
supplement to the preliminary REIT Proxy Statement is filed with the SEC, and
(b) when the SEC shall make a request or suggestion for any amendment to the
preliminary REIT Proxy Statement and the nature and substance
14
thereof. The REIT represents and warrants to each Transferor and ▇▇▇▇▇▇ that the
REIT Proxy Statement, when mailed to the REIT stockholders and at the date of
the REIT stockholder meeting, will conform in all material respects to the
requirements of the Exchange Act and the rules and regulations thereunder, and
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading; provided, however, that the REIT makes no representation or warranty
as to any of the information supplied in writing by ▇▇▇▇▇▇ or the Transferors.
4.4 Transferor Proxy Statement. As soon as practicable after the
Execution Date, the Transferors shall take all action necessary in accordance
with applicable law and each Transferor's governing instruments to obtain
approval of the Transferor Partners of the Asset Transfer. As soon as
practicable after the Execution Date, each Transferor shall prepare a proxy
statement ("Transferor Proxy Statement") for use by Transferor Partners in
connection with obtaining the approvals referred to in the preceding sentence
which shall comply in all material respects with the federal and state
securities laws. ▇▇▇▇▇▇ and each Transferor represent and warrant that the
Transferor Proxy Statement and any amendments or supplements thereto shall not
when sent to the Transferor Partners and at the Commitment Date contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, in light of the circumstances under which it was made, not
misleading. Each Transferor agrees to use its best efforts to send to its
limited partners a copy of the Transferor Proxy Statement, a related form of
proxy, together with the Private Offering Memorandum and the Letter of
Transmittal, promptly after the Private Offering Memorandum is provided to it.
The Letter of Transmittal shall provide that the election of a Transferor
Partner to tender a Transferor Partnership Interest in the Exchange Offer made
by such Transferor Partner shall constitute such Transferor Partner's vote for,
approval, consent to, and adoption of the Asset Transfer, and the approval of
the substitution of the REIT as a substitute limited partner as contemplated by
the Exchange Offer. If a Transferor has not received the consent of its partners
to the Asset Transfer on or prior to the Commitment Date as contemplated by
Section 1.1, such Transferor shall not be an Approving Transferor, and shall no
longer be bound by the terms of this Agreement and the Exchange Offer shall
automatically terminate as to the partners of such Transferor.
4.5 Preparation of Private Offering Memorandum. The REIT shall prepare
the Private Offering Memorandum describing the Exchange Offer and the REIT Stock
covered thereby and the Asset Transfer and the LP Units covered thereby. The
REIT shall prepare and make all filings under applicable state Blue Sky Laws to
qualify or exempt from qualification the securities offered pursuant to such
Exchange Offer and such Asset Transfer. The REIT shall deliver to ▇▇▇▇▇▇ copies
of the Private Offering Memorandum. The REIT represents and warrants to ▇▇▇▇▇▇
and the Transferors that, with respect to the REIT and its subsidiaries, the
Private Offering Memorandum and any amendments or supplements thereto shall not
when first sent or given to the Transferor Partners and at the Commitment Date
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the REIT makes no representation or warranty as to any of the
information supplied in writing by ▇▇▇▇▇▇ or the Transferors.
4.6 Registration Agreements. In connection with the Exchange Offer, the
REIT shall enter into the Registration Agreement pursuant to which the REIT
shall agree to file, promptly following the Closing Date, a registration
statement for resale, including a form of prospectus, and one or more amendments
thereto, on Form S-3 or other appropriate form covering the shares of REIT Stock
to be issued pursuant to the Exchange Offer as set forth in Section 1.1 hereof.
In connection with the conversion of the LP Units, the REIT shall enter into the
Exchange Registration Agreement pursuant to which the REIT shall agree to file
and use its best efforts to have declared effective on the date the LP Units are
first convertible into REIT Stock, a registration statement, including a form of
prospectus, and one or more amendments thereto, on Form S-3 or other appropriate
form, covering such shares of REIT Stock to be issued upon conversion of the LP
Units issued pursuant to the Asset Transfer as set forth in Section 2.2 hereof.
15
4.7 Information Respecting Transferors, ▇▇▇▇▇▇ and Associates. Each
Approving Transferor shall furnish in writing for inclusion in the REIT Proxy
Statement and each Transferor shall furnish for inclusion in the Private
Offering Memorandum such information about such Transferors, ▇▇▇▇▇▇ and
Associates that may be requested by the REIT Parties in writing. Each Transferor
represents and warrants that the information so supplied, as it may be revised
from time to time in writing by the respective Transferor, shall not, when sent
to the Transferor Partners or REIT stockholders and (with respect to the Private
Offering Memorandum) at the Commitment Date and (with respect to the REIT Proxy
Statement) at the Closing Date, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.8 Information Respecting the REIT. The REIT shall furnish in writing
for inclusion in the Transferor Proxy Statement such information about the REIT
Parties, the REIT's subsidiaries, Grove, ▇▇▇▇▇▇ and ▇▇▇▇ as may be requested by
▇▇▇▇▇▇. The REIT represents and warrants that the information so supplied, as it
may be revised from time to time in writing by the REIT, shall not when sent to
the Transferor Partners and at the Commitment Date contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein, in the light of the
circumstances under which they were made, shall not be misleading.
4.9 Amendments to the Proxy Statement and Private Offering Memorandum.
If, at any time prior to the meeting of the REIT's stockholders or the
Commitment Date, it shall be necessary to amend or supplement the REIT Proxy
Statement, the Transferor Proxy Statement or the Private Offering Memorandum to
correct any statement or omission with respect to the REIT, Winton, the
Transferors or their subsidiaries or assets, or in order to comply with any
applicable legal requirements, the REIT or the Transferors, as the case may be,
shall supply the necessary information to the other. To the extent necessary to
comply with applicable legal requirements, the REIT shall amend or supplement
the REIT Proxy Statement or the Private Offering Memorandum or the applicable
Transferor shall amend or supplement its Transferor Proxy Statement, as the case
may be, and take all steps necessary to cause documents as so corrected to be
disseminated to the REIT stockholders or the Transferor Partners, as
appropriate, as and to the extent required to comply with applicable federal and
state laws.
4.10 Transferor Partner Information. In connection with the Exchange
Offer and Asset Transfer, ▇▇▇▇▇▇ shall furnish the REIT with a list of the names
and addresses of the limited partners of the Transferors. ▇▇▇▇▇▇ shall cooperate
with the REIT to establish to the reasonable satisfaction of the REIT which of
the Transferor Partners are Accredited Investors and otherwise qualify under
applicable Blue Sky laws to receive REIT Stock or the LP Units in a private
placement. Subject to the requirements of law, and except for such steps as are
necessary to disseminate the Private Offering Memorandum and the Exchange Offer
Documents and any other documents necessary to consummate the Exchange Offer and
Asset Transfer, the REIT shall, and shall cause each of its Affiliates to, hold
the names and addresses of the limited partners in confidence, use such
information only in connection with the Exchange Offer and the Asset Transfer,
and, if this Combination Agreement is terminated, deliver to ▇▇▇▇▇▇ all copies
of such information or extracts therefrom then in its possession or under its
control.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Transferors' Representations and Warranties. As a material
inducement to the REIT Parties to execute this Combination Agreement and to the
REIT Parties to consummate the transactions contemplated hereunder, each
Transferor severally represents and warrants to the REIT Parties with respect to
itself and each of its Properties, that as of the date hereof and as of the
Closing Date:
(a) Transferors' Organizational Representations and
Warranties.
(i) Organization and Authority. Such Transferor has
been duly organized and is validly existing and in good standing under the laws
of its jurisdiction of organization and, if different, is qualified
16
to do business and in good standing in the state in which the Property that such
Transferor owns is located. Such Transferor has the full right and authority to
enter into this Combination Agreement. Subject to the receipt of consent by
Transferor Partners satisfying the Required Partner Approval, such Transferor
will have the full and right authority to transfer the Property to be conveyed
by such Transferor and to consummate or cause to be consummated the transactions
contemplated herein to be made by such Transferor. This Combination Agreement
has been duly authorized and properly executed by the Transferor and, assuming
the due authorization, execution and delivery hereof by the other parties
hereto, constitutes the valid and binding obligation of such Transferor,
enforceable against such Transferor in accordance with its terms.
(ii) Conflicts. The execution of and performance by
such Transferor of its obligations under this Combination Agreement does not and
will not conflict with the terms of such Transferor's constituent documents and
does not breach or violate any applicable law, rule or regulation of any
governmental authority. Subject to obtaining the required consents and approvals
by the Lender, there is no agreement to which such Transferor is a party or
binding on such Transferor, which will be breached by or which is in conflict
with the execution of or performance by such Transferor of its obligations under
this Combination Agreement or with the rights granted to such Transferor
hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending, or to such Transferor's knowledge, threatened against such
Transferors or its Properties which would, if adversely determined, have a
material adverse effect on the financial condition or results of operations of
such Transferor. There is no action or proceeding pending, or to the
Transferor's knowledge, threatened against such Transferor which challenges or
impairs such Transferor's ability to execute, deliver or perform under this
Combination Agreement, to transfer all of the Property to be conveyed by such
Transferor hereunder or to consummate the transactions contemplated herein.
(b) Transferors' Property Representations and Warranties.
(i) Contractors and Suppliers. All contractors,
subcontractors, suppliers, architects, engineers and others that have performed
services or labor or supplied material in connection with such Transferor's
acquisition, development, ownership or management of its Properties have been,
or will be in the ordinary course of business, paid in full prior to Closing and
all liens arising therefrom (or claims which with the passage of time or notice
or both, could mature into liens) have been, or will be in the ordinary course
of business, satisfied and released prior to Closing.
(ii) Leases and Rent Roll. Each Rent Roll delivered
by such Transferor hereunder for each of its Real Properties is true, accurate
and complete in all material respects. Except as set forth in the Rent Rolls or
applicable Permitted Exceptions, there are no leases or occupancy agreements or
rights of possession affecting the Real Properties of such Transferor. Except as
otherwise specifically and expressly set forth in the Rent Rolls for each of the
Real Properties of such Transferor: no presently effective rent concessions have
been given to any tenants; no rent has been paid in advance by any tenants
respecting a period subsequent to the Closing (except for the month in which the
Closing occurs); no tenants have any claim against such Transferor for any
deposits, other than pursuant to the terms of its Lease with respect to sums
specified as deposits in the Rent Roll; no tenants have any options or rights of
first refusal to extend or renew their Leases or to rent additional space or to
purchase any of its Properties; there are no tenant improvements which are
incomplete or which have not been fully paid for by such Transferor except as
otherwise specified in this Combination Agreement; and there are no leasing or
fees or commissions due, nor will any become due, in connection with any Lease
or any renewal or extension of any Lease. Except as set forth in the Rent Rolls,
no understanding or agreement with any party exists as to payment of any leasing
or other fees or commissions regarding future leases or as to procuring of
tenants for any of the Real Properties. To such Transferor's knowledge, no
default or breach exists on the part of any tenant. Such Transferor has not
received any notice of any material default or breach on the part of the
landlord under any Lease, nor does there exist any such material default or
breach on the part of the landlord.
17
(iii) Operating and Financial Statements. Each
Operating and Financial Statement for each of its Real Properties shows all
material items of income and expense (operating and capital) incurred in
connection with such Transferor's ownership, operation and management of such
Real Property for the periods indicated and are true, correct and complete in
all material respects.
(iv) Notice of Violations. To the Transferor's actual
knowledge, such Transferor has not received written notice that any of its
Properties or the use thereof violates any laws, rules and regulations of any
federal, state, city or county government or any agency, body or subdivision
thereof having any jurisdiction over any of its Properties that have not been
resolved to the satisfaction of the issuer of the notice.
(v) Zoning, Applicable Laws Governing Operation and
Restrictions. None of such Transferor's Properties or their current use or
operation fail to comply or are in violation, in any material respect, with
current applicable laws, regulations, ordinances, building codes and rules of
all applicable municipal, local, state and federal jurisdictions, including,
without limitation, zoning ordinances, parking requirements, building codes and
laws governing access for handicapped persons, and with restrictions, covenants
or similar agreements affecting such Properties. Any and all variances and other
exceptions granted by any governmental official, agency or body regarding the
compliance by such Transferor's Properties with all such laws, ordinances,
regulations, codes, restrictions, covenants or agreements have been validly
issued and shall inure to the benefit of Heritage LP after the Closing Date.
(vi) Utilities. All water, sewer, gas (to the extent
utilized), electric, telephone, drainage facilities and all other utilities
required by law for the operation of each of such Transferor's Real Properties
are installed to the boundaries of each of such Real Properties.
(vii) Taxes and Assessments. All taxes for the
current year and all prior years for each of the Properties of such Transferor
which are due and payable have been paid, except for installments due and not
yet delinquent and supplemental taxes not yet assessed, and no taxes are
delinquent. All impact fees or other assessments, fees or charges, however
denominated, which may constitute a lien or charge on any of the Properties of
such Transferor or which have been assessed or charged as a result of any
permit, license or approval obtained for any of the Properties of such
Transferor have been paid in full, and there is not presently pending any such
assessment, fees or charges of any nature with respect to any of the Properties
of such Transferor or any part thereof, nor has such Transferor received any
notice of any such assessments, fees or charges being contemplated. No areas
within any Real Property of such Transferor are subject to any existing
improvement districts, except as may be disclosed by the applicable Title Report
and any amendments thereto. All taxes with respect to such Transferor and the
ownership and operation of its Properties, including, without limitation,
income, gross receipts, net proceeds, ad valorem, turnover, personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income withholding and
Social Security taxes imposed by the United States or any foreign country or
18
by any state, municipality, subdivision or instrumentality of the United States
or of any foreign country or by any other tax authority, including all
applicable penalties and interest (the "Other Taxes"), have been properly
determined in accordance with applicable rules and regulations and have been
paid in full when due. Such Transferor has duly and timely filed all tax returns
of every nature required to be filed by it with respect to the Other Taxes, in
every jurisdiction in which the same may have been so required, and has paid all
Other Taxes disclosed on such returns to the extent due. All Other Taxes of
which notice has been received or which shall accrue on or prior to the Closing
Date have been paid to the extent due.
(viii) Hazardous Materials. The environmental reports
for the Properties of such Transferor delivered to the REIT by such Transferor
constitute true, accurate and complete copies of all of the environmental
reports prepared for Transferors for each of the Properties. To Transferor's
actual knowledge, none of the Real Properties of such Transferor are in
noncompliance or in violation of Environmental Laws nor does there exist or has
there been released, in either case, in violation of applicable Environmental
Laws, Hazardous
19
Materials on or from any of the Real Properties of such Transferor, except as
disclosed in any environmental reports in such Transferor's possession which
have been delivered to the REIT pursuant to Section 2.4(d) hereof.
(ix) Withholding Obligation. The conveyance to
Heritage LP of any of the Properties of such Transferor is not subject to any
Federal, state or local withholding obligation of Heritage LP under the tax laws
applicable to such Transferor or such of the Properties, including without
limitation, any "bulk sales" or other similar laws.
(x) Condemnation. No condemnation, claims, actions,
suits or proceedings relating to any of the Real Properties of such Transferor
are pending or, to Transferor's knowledge, threatened.
(xi) Insurance. Each Schedule of Insurance provided
by such Transferor is true, accurate and complete. Such Transferor has not
received any notice from any insurance company or board of fire underwriters of
any defects or inadequacies in, on or about any of the Real Properties of such
Transferor or any part of component thereof that would adversely affect the
insurability of any of such Real Properties or cause an increase in the premiums
for any of such Properties that have not been cured or repaired to the
satisfaction of the party issuing the notice. All insurance policies insuring
the Real Properties of such Transferor are in full force and effect.
(xii) Ownership. Such Transferor is the owner and has
title to its Real Properties free and clear of any and all claims, taxes,
assessments, reservations in patents, easements, rights-of-way, encumbrances,
liens, covenants, conditions, restrictions, obligations and liabilities other
than those specifically set forth herein or in its respective Title Report or
approved in writing as set forth above.
(xiii) Flood Area. Except as may be disclosed on the
survey respecting a Real Property of such Transferor, to Transferor's actual
knowledge, no portion of the Real Properties is within any flood plain area as
designated by the maps of the Federal Emergency Management Agency (FEMA maps) or
any other governmental or quasi-governmental flood control agency.
(xiv) Future Transfer Obligations. Except as
disclosed in the Title Reports for the Real Properties of such Transferor, there
are no agreements, commitments or understandings by or between such Transferor
and any third party pursuant to which such Transferor or its
successors-in-interest are required to dedicate any part of any Real Property or
to grant any easement, water rights, rights-of-way, road or license for ingress
and egress or other use in respect to any part of any Real Property of such
Transferor.
(xv) Creditors. There are no attachments, levies,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or
pursuant to any other debtor or relief laws contemplated by such Transferor or
pending in any current judicial or administrative proceedings against such
Transferor.
(xvi) Loan Documents. The Loan Documents delivered by
such Transferor to the REIT constitute true, accurate and complete copies of all
of the documents and instruments in effect with respect to the Mortgage Debts
applicable to such Transferors. The Schedule of Loan Documents delivered to the
REIT by such Transferor is true, accurate and complete. Such Transferor has not
received any notice that such Transferor is in default under such Loan
Documents, nor does any default or breach exist, nor any event or circumstance
which, with the giving of notice, or passage of time, or both, would constitute
a default or breach under such Loan Documents. The unpaid principal balance
under the Loan Documents delivered to the REIT by such Transferor as of
September 30, 1996 applicable to each Property of such Transferor is set forth
in Schedule III attached hereto.
(xvii) Solvency. Such Transferor is, and at all times
during the period beginning on the date hereof and ending on and including the
Closing Date will be, solvent. As used herein, solvent means with respect to an
entity that such entity (i) does not have debts greater than the fair value of
such entity's
20
assets; (ii) is paying and anticipates that it will continue to pay such
entity's debts as they become due; and (iii) has sufficient capital to run such
entity's business.
(xviii) Brokers' Fees. No real estate broker,
salesperson or finder has engaged by such Transferor in connection with the
transactions contemplated hereby that may result in claims for commissions or
fees in connection therewith except ▇▇▇▇▇▇ shall receive the real estate
commissions set forth in Schedule IV hereto.
(xix) Full Disclosure. Such Transferor has made
available to the REIT all material documents, files, written information, books
and records in such Transferor's possession or control and relating to the
Properties of such Transferor.
(xx) Tenant Options. The Schedule of Tenant Options
furnished by such Transferor to the REIT is true, accurate and complete and the
Tenant Options delivered by such Transferor to the REIT constitute true,
accurate and complete copies of all Tenant Options. Such Transferor has not
received any notice that such Transferor is in default under any of such Tenant
Options, nor does any default or breach exist, nor any event or circumstance
which, with the giving of notice, or passage of time, or both, would constitute
a default or breach under Tenant Options.
(c) Transferors' Securities Representations.
(i) Each Approving Transferor will acquire the LP
Units for the purpose of transferring such LP Units to its partners in
connection with the liquidation of the Transferor as contemplated by Section
2.2(d) and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act.
(ii) Each Approving Transferor has sufficient
knowledge and experience in financial and business matters to enable it to
evaluate the merits and risks of investment in the LP Units. Each Approving
Transferor has the ability to bear the economic risk of acquiring the LP Units.
(iii) Each Approving Transferor has been supplied
with, or had access to, information to which a reasonable investor would attach
significance in making investment decisions, including, but not limited to the
Private Offering Memorandum, all publicly available filings by the REIT under
the Securities Act and the Exchange Act, and the REIT's annual and quarterly
reports to stockholders, any information with respect to Heritage LP's financial
condition, business and prospects, and any other information such Approving
Transferor has requested, to answer all of its inquiries about Heritage LP and
the REIT, and to enable it to make its decision to acquire the LP Units.
(iv) Each Approving Transferor hereby acknowledges
that neither the LP Units nor the REIT Stock for which LP Units may be exchanged
are registered under the Securities Act or any state securities laws and cannot
be resold without registration thereunder or exemption therefrom. Each Approving
Transferor agrees that, other than the transfers contemplated by Section 2.2(d),
it will not transfer all or any portion of the LP Units or the underlying Shares
unless such transfer has been registered or is exempt from registration under
the Securities Act and any applicable state securities laws. The LP Units
contain a prominent legend with respect to the restrictions on transfer under
the Securities Act and under applicable state securities laws.
(d) Other Representations and Warranties.
(i) ERISA. Such Transferor holds no "plan assets,"
within the meaning of Department of Labor regulations at 29 C.F.R. section
2510.3-101, of any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the transactions
contemplated by
21
this Combination Agreement are not part of an agreement, arrangement or
understanding designed to benefit a party in interest with respect to any
employee benefit plan subject to ERISA that invests in such Transferor.
The term "to Transferors' knowledge" as it is used in this
Section 5.1 shall mean the actual knowledge of the applicable Transferor, after
making inquiry in accordance with the Transferors' general internal reporting
requirements. A breach of a representation set forth in this Section 5 by a
Transferor shall constitute a failure of the condition set forth in Section
6.1(a) hereof only as to such Transferor.
5.2 The REIT's Representations and Warranties. As a material inducement
to Transferors to execute this Combination Agreement and consummate the
transactions contemplated hereunder, the REIT represents and warrants to the
Approving Transferors that as of the date hereof and as of the Closing Date:
(a) REIT Organizational Representations and Warranties.
(i) Organization and Authority. The REIT has been
duly organized, is validly existing as a corporation under the laws of its state
of incorporation and is in good standing in such state and, if different, is
qualified to do business and in good standing in the jurisdictions in which the
property owned by the REIT or the business conducted by the REIT requires such
qualification. Each of the REIT's subsidiaries has been duly organized and is
validly existing under the laws of its organization and, if different, is
qualified to do business in the jurisdictions in which the property owned by
such subsidiary or the business conducted by such subsidiary requires such
qualification. The REIT has the full corporate right and authority and has
obtained any and all consents required therefor to enter into this Combination
Agreement and, upon the approval by a majority of the votes cast by the
stockholders of the REIT in person or by proxy to list the REIT Stock issued
pursuant to this Combination Agreement, the exchange of the LP Units for REIT
Stock under the Amended Partnership Agreement, the Pima Mortgage Merger, the
Pima Realty Merger and the Associates Merger, as contemplated by Section 712 of
the Rules and Policies of the American Stock Exchange, Inc. The persons signing
this Combination Agreement on behalf of the REIT are authorized to do so. This
Combination Agreement and all of the documents to be delivered by the REIT at
the Closing have been or will be authorized and properly executed and do or will
constitute the valid and binding obligations of the REIT, enforceable against
the REIT in accordance with their terms.
(ii) Conflicts. The execution of and performance by
the REIT under this Combination Agreement does not and will not conflict with
the Amended and Restated Articles of Incorporation or By-Laws of the REIT and
does not breach or violate any applicable law, rule or regulation of any
governmental authority. There is no agreement to which the REIT is a party or,
to the REIT's knowledge, binding on the REIT which will be breached by or which
is in conflict with its execution of or performance of its obligations under
this Combination Agreement or with the rights granted to the REIT hereunder.
(iii) Pending Actions. There is no action, suit or
proceeding pending or, to the REIT's knowledge, threatened against the REIT or
any of its properties, which would, if adversely determined, have a material
adverse effect on the financial condition or results of operations of the REIT.
There is no action or proceeding pending or, to the REIT's knowledge, threatened
against the REIT which challenges or impairs the REIT's ability to execute,
deliver and perform under this Combination Agreement.
(b) REIT Property Representations and Warranties.
(i) Notice of Violations. To the REIT's actual
knowledge, the REIT has not received written notice that any of its Properties
or the use thereof violates any laws, rules and regulations of any federal,
state, city or county government or any agency, body or subdivision thereof
having any jurisdiction over any of the REIT Properties that have not been
resolved to the satisfaction of the issuer of the notice.
(ii) Zoning, Applicable Laws Governing Operation and
Restrictions. None of the Properties of the REIT or its current use or operation
fail to comply or are in violation, in any material respect,
22
with current applicable laws, regulations, ordinances, building codes and rules
of all applicable municipal, local, state and federal jurisdictions, including,
without limitation, zoning ordinances, parking requirements, building codes and
laws governing access for handicapped persons and with restrictions, covenants
or similar agreements affecting such Properties. Any and all variances and other
exceptions granted by any governmental official, agency or body regarding the
Property's compliance with all such laws, ordinances, regulations, codes,
restrictions, covenants or agreements have been validly issued.
(iii) Utilities. All water, sewer, gas (to the extent
utilized), electric, telephone, drainage facilities and all other utilities
required by law for the operation of each of the Real Properties of the REIT are
installed to the boundaries of each of the Real Properties of the REIT.
(iv) Taxes and Assessments. All taxes for the current
year and all prior years for each of the Properties of the REIT which are due
and payable have been paid, except for installments due and not yet delinquent
and supplemental taxes not yet assessed, and no taxes are delinquent. All impact
fees or other assessments, fees or charges, however denominated, which may
constitute a lien or charge on any of the Properties of the REIT or which have
been assessed or charged as a result of any permit, license or approval obtained
for any of the Properties of the REIT have been paid in full, and there is not
presently pending any such assessment, fees or charges of any nature with
respect to any of the Properties of the REIT or any part thereof, nor has the
REIT received any notice of any such assessments, fees or charges being
contemplated. No areas within any Real Property of the REIT are subject to any
existing improvement districts, except as may be disclosed by the applicable
Title Report and any amendments thereto. All taxes with respect to the REIT and
the ownership and operation of its Properties, including, without limitation,
income, gross receipts, net proceeds, ad valorem, turnover, personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income withholding and
Social Security taxes imposed by the United States or any foreign country or by
any state, municipality, subdivision or instrumentality of the United States or
of any foreign country or by any other tax authority, including all applicable
penalties and interest (the "Other Taxes"), have been properly determined in
accordance with applicable rules and regulations and have been paid in full when
due. The REIT has duly and timely filed all tax returns of every nature required
to be filed by it with respect to the Other Taxes, in every jurisdiction in
which the same may have been so required, and has paid all Other Taxes disclosed
on such returns to the extent due. All Other Taxes of which notice has been
received or which shall accrue on or prior to the Closing Date have been paid to
the extent due.
(v) Hazardous Materials. To the REIT's actual
knowledge, none of the Real Properties of the REIT are in noncompliance or in
violation of Environmental Laws nor does there exist or has there been released,
in either case, in violation of applicable Environmental Laws, Hazardous
Materials on or from any of the Real Properties of the REIT.
(vi) Condemnation. No condemnation, claims, actions,
suits or proceedings relating to any of the Real Properties of the REIT are
pending or, to the REIT's knowledge, threatened.
(vii) Creditors. There are no attachments, levies,
executions, assignments for the benefit of creditors, receiverships,
conservatorships or voluntary or involuntary proceedings in bankruptcy or
pursuant to any other debtor or relief laws contemplated by the REIT or pending
in any current judicial or administrative proceedings against the REIT.
(viii) Solvency. The REIT is, and at all times during
the period beginning on the date hereof and ending on and including the Closing
Date will be, solvent. As used herein, solvent means with respect to an entity
that such entity (i) does not have debts greater than the fair value of such
entity's assets; (ii) is paying and anticipates that it will continue to pay
such entity's debts as they become due; and (iii) has sufficient capital to run
such entity's business.
23
(c) REIT Securities Representations and Warranties.
(i) Reserved Shares. From the authorized capital
stock of the REIT, a sufficient number of shares of REIT Stock shall have been
reserved by the REIT at Closing for issuance to Transferor Partners in the
Exchange Offer and to the Transferors upon exchange of the LP Units therefor in
accordance with the terms of the Amended Partnership Agreement.
(ii) REIT Common Stock. The REIT Stock to be issued
in accordance with the Exchange Offer and the exchange of LP Units to REIT Stock
will be duly authorized, validly issued, fully paid and nonassessable and will
not be subject to any preemptive or similar right and, subject to compliance
with the Securities Act and the Exchange Act, will be eligible for listing on
the American Stock Exchange.
The term "to the REIT's knowledge" as used in this Section 5.2
shall mean the actual knowledge of the REIT, after making inquiry in accordance
with the REIT's general internal reporting requirements.
5.3 Heritage LP's Representations and Warranties. As a material
inducement to the ▇▇▇▇▇▇ Parties to execute this Combination Agreement and
consummate the transactions contemplated hereunder, Heritage LP represents and
warrants to the ▇▇▇▇▇▇ Parties that as of the date hereof and as of the Closing
Date:
(a) Heritage LP's Organizational Representations and
Warranties.
(i) Partnership Organization and Authority. Heritage
LP has been, and at the Closing, each Subsidiary Partnership will be, duly
organized under the Delaware Revised Uniform Limited Partnership Act, is or will
be validly existing as a Delaware limited partnership, and is or will be in good
standing in the State of Delaware. Heritage LP is and, at the Closing each
Subsidiary Partnership will be, qualified to do business and in good standing
under the laws of each jurisdiction in which the Property owned or to be owned
by Heritage LP or such Subsidiary Partnership or the business conducted or to be
conducted by Heritage LP or such Subsidiary Partnership requires such
qualification. The REIT and Heritage SGP are the sole general partners of
Heritage LP and will be the sole general partners of each Subsidiary
Partnership, Grove is the sole limited partner of Heritage LP, and Heritage LP
will be the sole limited partner of each Subsidiary Partnership. Heritage LP has
the full right and authority and has obtained any and all consents required
therefor to enter into this Combination Agreement and to consummate or cause to
be consummated the transactions contemplated herein. The persons signing this
Combination Agreement on behalf of Heritage LP at the Closing has been
authorized to do so. This Combination Agreement and all of the documents to be
delivered by Heritage LP at the Closing have been or will be authorized and
properly executed and do or will constitute the valid and binding obligations of
Heritage LP, enforceable against Heritage LP in accordance with their terms.
(ii) Conflicts. The execution of and performance of
this Combination Agreement does not and will not conflict with the Amended
Partnership Agreement or the Certificate of Limited Partnership of Heritage LP.
There is no agreement to which Heritage LP is a party or, to Heritage LP's
knowledge, binding on Heritage LP which will be breached by or is in conflict
with its execution of or performance under this Combination Agreement.
(iii) Pending Actions. There is no action or
proceeding pending or, to Heritage LP's knowledge, threatened against Heritage
LP or any of Heritage LP's properties, which would, if adversely determined,
have a material adverse effect on the financial condition or results of
operations of Heritage LP. There is no action or proceeding pending or, to
Heritage LP's knowledge, threatened against Heritage LP which challenge or
impair Heritage LP's ability to execute, deliver and perform under this
Combination Agreement.
(iv) No Business. Prior to the Closing, none of
Heritage LP nor any Subsidiary Partnership shall engage in any business or other
activities, except for the formation of the Partnership and (in the case of
Heritage LP) the execution of this Combination Agreement.
24
The term "to Heritage LP's knowledge" as used in this Section
5.3 shall mean the actual knowledge of Heritage LP, after making inquiry in
accordance with Heritage LP's general internal reporting requirements.
(b) Heritage LP's Securities Representations and Warranties.
(i) Heritage LP Units. The Heritage LP Units to be
issued will be duly authorized, validly issued, fully paid and non-assessable
and will represent valid limited partnership interests in Heritage LP.
5.4 Heritage SGP's Representations and Warranties. As a material
inducement to ▇▇▇▇▇▇ Parties to execute this Combination Agreement and
consummate the transactions contemplated hereunder, Heritage SGP represents and
warrants to the ▇▇▇▇▇▇ Parties that as of the date hereof and as of the Closing
Date:
(a) Organization and Authority. Heritage SGP has been duly
organized, is validly existing as an Arizona corporation, and is in good
standing in the State of Arizona and each other jurisdiction in which the assets
owned or the business conducted by it requires such qualification. Heritage SGP
has the full right and authority and has obtained any and all consents required
to enter into this Combination Agreement and to consummate or cause to be
consummated the transactions contemplated herein. The persons signing this
Combination Agreement on behalf of Heritage SGP are authorized to do so. This
Combination Agreement and all of the documents to be delivered by Heritage SGP
at the Closing have been or will be authorized and properly executed and do or
will constitute the valid and binding obligations of Heritage SGP, enforceable
against Heritage SGP in accordance with their terms.
(b) Conflicts. The execution of and performance by Heritage
SGP under this Combination Agreement does not and will not conflict with the
Articles of Incorporation or ByLaws of Heritage SGP. There is no agreement to
which Heritage SGP is a party or, to Heritage SGP's knowledge, binding on
Heritage SGP which will be breached by or which is in conflict with its
execution of performance under this Combination Agreement.
(c) Pending Actions. There is no action or proceeding pending
or, to Heritage SGP's knowledge, threatened against Heritage SGP or any of its
properties, which would, if adversely determined, have a material adverse effect
on the financial condition or results of operations of Heritage SGP. There is no
action or proceeding pending or, to Heritage SGP's knowledge, threatened against
Heritage SGP which challenges or impairs Heritage SGP's ability to execute,
deliver and perform under this Combination Agreement.
The term "to Heritage SGP's knowledge" as it is used in this
Section 5.4 shall mean the actual knowledge of Heritage SGP, after making
inquiry in accordance with Heritage SGP's general internal reporting
requirements.
ARTICLE 6
COVENANTS
---------
6.1 Covenants of ▇▇▇▇▇▇ Parties. The ▇▇▇▇▇▇ Parties agree that, unless
the REIT otherwise agrees in writing, at all times prior to the Closing Date:
(a) Preservation of Business. The ▇▇▇▇▇▇ Parties shall,
consistent with the provisions of Section 2.4 hereof, use their best efforts to
(i) preserve intact the present business organization of each Transferor; (ii)
preserve the present goodwill and advantageous relationships of each Transferor
with all persons having business dealings with such Transferor; and (iii)
preserve and maintain in force all licenses, registrations, franchises, patents,
trademarks, copyrights, bonds and other similar rights of each Transferor. The
▇▇▇▇▇▇ Parties and its subsidiaries
25
shall maintain in force all property, casualty, crime, directors, and officers
and other forms of insurance which they are presently carrying.
(b) Books and Records. The Transferors shall maintain their
books, accounts and records in the usual, regular and ordinary manner, and on a
basis consistent with prior years, and shall comply with all laws applicable to
them or to the conduct of their business.
(c) No Organic Change. The Transferors shall not (i) amend
their partnership agreements or management agreements; or (ii) make any change
in their capital or otherwise.
(d) Compensation. The Transferors shall not (i) increase the
compensation payable to any employee or partner or the fees payable pursuant to
any management or consulting agreement from the amount payable as of the
Execution Date, or (ii) introduce or change any pension or profit sharing plan,
or any other employee benefit arrangement.
(e) Distributions. Except as provided in this Contribution
Agreement, the Transferors shall not declare, make or pay any distribution with
respect to its partnership interests.
(f) Consents and Approvals. The ▇▇▇▇▇▇ Parties shall use their
best efforts to obtain all necessary consents and approvals of other persons and
governmental authorities to the performance by the ▇▇▇▇▇▇ Parties of the
transactions contemplated by this Combination Agreement. The ▇▇▇▇▇▇ Parties
shall make or cause to be made all filings, applications, statements and reports
to all federal and state government agencies or entities which are required to
be made prior to the Closing Date by or on behalf of the ▇▇▇▇▇▇ Parties pursuant
to any statute, rule or regulation in connection with the transactions
contemplated by this Combination Agreement.
(g) Truth of Representations and Warranties. None of the
▇▇▇▇▇▇ Parties shall take any of the foregoing actions or any action which would
make any representation or warranty contained in Section 5.1 hereof to be untrue
or incorrect in any material respect.
6.2 Covenants of the REIT Parties. The REIT Parties agree that unless
▇▇▇▇▇▇ otherwise agrees in writing, at all times prior to the Closing Date:
(a) Preservation of Business. The REIT Parties shall use their
best efforts to (i) preserve intact the present business organization of the
REIT Parties; (ii) preserve the present goodwill and advantageous relationships
of the REIT Parties with all persons having business dealings with the REIT
Parties; and (iii) preserve and maintain in force all licenses, registrations,
franchises, patents, trademarks, copyrights, bonds and other similar rights of
the REIT Parties. The REIT Parties and their subsidiaries shall maintain in
force all property, casualty, crime, directors, and officers and other forms of
insurance which they are presently carrying.
(b) Ordinary Course. The REIT Parties shall operate their
business only in the usual, regular and ordinary course and manner.
(c) Books and Records. The REIT Parties shall maintain their
books, accounts and records in the usual, regular and ordinary manner, and on a
basis consistent with prior years, and shall comply with all laws applicable to
them or to the conduct of their business.
(d) No Organic Change. The REIT Parties shall not (i) amend
their Articles of Incorporation or bylaws, except for those amendments set
forth in the REIT Proxy Statement; (ii) make any change in their capital stock
by reclassification, subdivision, reorganization or otherwise; or (iii) change
the character of their business.
(e) Consents and Approvals. The REIT Parties shall use their
best efforts to obtain all necessary consents and approvals of other persons and
governmental authorities to the performance by them of the
26
transactions contemplated by this Combination Agreement. The REIT Parties shall
make or cause to be made all filings, applications, statements and reports to
all federal and state government agencies or entities which are required to be
made prior to the Closing Date by or on behalf of the REIT Parties pursuant to
any statute, rule or regulation in connection with the transactions contemplated
by this Combination Agreement.
(f) Truth of Representations and Warranties. None of the REIT
Parties shall take any of the foregoing actions or any action which would make
any representation or warranty contained in Section 5.2 hereof to be untrue or
incorrect in any material respect.
(g) Dividends. Without the prior written consent of ▇▇▇▇▇▇,
which consent shall not be unreasonably withheld, the REIT shall not, on or
after the Execution Date declare or pay any cash dividends or property dividends
with respect to REIT Stock, with the exception of customary periodic cash
dividends paid by the REIT to holders of REIT Stock at such intervals and in
such amounts as are in every case consistent with the amounts and intervals
characteristic of the REIT or such as may be required to comply with the
applicable REIT dividend requirements.
6.3 Acquisition Proposals. From and after the date hereof, no ▇▇▇▇▇▇
Party, without the prior written consent of the REIT, will, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information) or take any other action to facilitate knowingly any inquiries or
the making of any proposals which constitute or may reasonably be expected to
result in an Acquisition Proposal from any person, or engage in any discussions
or negotiations relating thereto or accept any Acquisition Proposal; provided
however, that notwithstanding any other provision hereof, a Transferor or other
▇▇▇▇▇▇ Party may (i) at any time prior to the Commencement Date engage in
discussions or negotiations with a third party who (without any solicitation,
initiation, encouragement, discussion or negotiation, directly or indirectly, by
or with the ▇▇▇▇▇▇ Parties after the date hereof) seeks to initiate such
discussions or negotiations and may furnish such third party information
concerning the ▇▇▇▇▇▇ Parties and its business, properties, and assets if, and
only to the extent that, the general partner of the Transferor determines based
on the advice of outside counsel, that such action is necessary for the general
partner of the Transferor to act in a manner consistent with his fiduciary
duties and/or (ii) provided the Transferor(s) terminate this Combination
Agreement under Section 9.3(h) hereof, accept an Acquisition Proposal from a
third party. In the event any of the ▇▇▇▇▇▇ Parties shall receive any
Acquisition Proposal or inquiry of the type referred to in this Section 6.3,
such ▇▇▇▇▇▇ Party shall promptly communicate to the REIT the terms of any such
offer or inquiry.
6.4 Best Efforts. Subject to the terms and conditions of this
Combination Agreement, and subject to fiduciary duties under applicable law, as
advised by counsel, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Combination Agreement, including, without
limitation, using its best efforts to make all necessary, proper or advisable
registrations and filings and obtain all necessary, proper or advisable permits,
consents, authorizations, requests and approvals of third parties and
governmental authorities. It at any time after the Closing Date, any further
action is necessary or desirable to carry out the purposes of this Combination
Agreement (including providing any information in any way related to the assets
to be purchased pursuant to this Combination Agreement), the proper partners,
officers and directors of each party to this Combination Agreement shall take
all such action.
6.5 Distribution of Net Working Capital. Immediately prior to the
Closing Date, each Approving Transferor shall distribute to its partners an
amount in cash equal to the Net Working Capital (less any payments of principal
made during such quarter) of such Approving Transferor as of the first day of
the full calendar quarter immediately preceding the Closing Date. As used
herein, the Net Working Capital of an Approving Transferor shall mean the
current assets minus the current liabilities (less any payments of principal
made during such quarter) of such Approving Transferor as of the date of
calculation, calculated in accordance with generally accepted accounting
principles as modified for tax basis accounting. Each Transferor shall deliver a
certificate to the REIT and Heritage LP setting forth the calculation of the Net
Working Capital of such Approving Transferor.
27
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Approving Transferor. Notwithstanding any other provision in this
Combination Agreement, the REIT shall not be required to accept for payment or
pay for any Transferor Partnership Interests tendered by a Partner of a
Transferor and Heritage LP shall not be required to consummate the Asset
Transfer with respect to such Transferor unless (i) all of the conditions to the
parties' obligations to close the transactions contemplated by this Combination
Agreement set forth in Section 7.3 have been satisfied or waived by the REIT
Parties and (ii) such Transferor is an Approving Transferor. As used herein, a
Transferor shall be deemed an Approving Transferor if each of the following
conditions with respect to the Transferor has been satisfied by such Transferor
at the Closing or waived by the REIT (with respect to the Exchange Offer) and
Heritage LP (with respect to the Asset Transfer) in their sole and absolute
discretion:
(a) The representations and warranties of such Transferor
contained herein shall be true and correct in all material respects at
Closing as if made as of the Closing Date (however, if a particular
representation or warranty shall be made only to a Transferor's
knowledge, then the condition under this Section 7.1(a) shall not be
deemed to be fulfilled with respect to such items unless the same would
be fulfilled if such limitation did not exist);
(b) Each of the obligations of the REIT or Heritage LP
required to be satisfied in Section 7.2 with respect to such Transferor
shall have been met with respect to the Transferor as of the Closing;
(c) No action or proceeding by any governmental agency shall
have been instituted or threatened which would enjoin, restrain or
prohibit, or which could reasonably be expected to result in
substantial damages in respect of the Property owned by such Transferor
which in the reasonable judgment of the REIT Parties make it
inadvisable to consummate such transaction, and no court order shall
have been issued in any action or proceeding instituted by any person
which enjoins, restrains or prohibits the consummation of the
transactions contemplated by this Combination Agreement with respect to
the Transferor and no proceeding for such an order shall have been
instituted which in the reasonable judgment of the REIT or Heritage LP
is likely to result in the issuance of such an order;
(d) Such Transferor shall have delivered, or caused to be
delivered, each of the items specified in Section 8.3 hereof which such
Transferor is required to deliver and such Transferor shall have
performed in all material respects each of the other obligations
required to be performed by it under this Combination Agreement;
(e) The aggregate percent interests of all Transferor Partners
executing written consents approving the Asset Transfer plus the
aggregate percent interests of all Transferor Partners who validly
tendered Transferor Partnership Interests in the Exchange Offer, shall
equal or exceed the percent interest in such Transfer or which is
required to approve the Asset Transfer, which percent interest is set
forth on Schedule V (the "Required Partner Approval");
(f) The Custodian shall have delivered, or caused to be
delivered to the REIT, a properly completed and executed Letter of
Transmittal for each Transferor Partner of such Transferor
participating in the Exchange Offer;
(g) No material default (other than a default in payment of
rent that is not more than 15 days past due) shall exist under any of
the Leases with any of the Major Tenants for such Transferor's Real
Property that was not disclosed in the Rent Roll for the respective
Real Property delivered to the REIT pursuant to Section 2.4(d) hereof,
and no Major Tenant or Required Additional Tenant shall have initiated
28
or had initiated against it any insolvency, bankruptcy, receivership,
or other comparable proceeding that was not disclosed in the Rent Roll
for such Transferor's Real Property delivered to the REIT pursuant to
Section 2.4(d) hereof;
(h) At the Closing, as a condition to the REIT Parties
obligation to close, the Title Company shall deliver to the REIT (i)
Owner Policies of Title Insurance (collectively "Texas Title Policies")
issued by the Title Company, covering each of the properties situated
within the State of Texas, in the form prescribed by the State Board of
Insurance for use in Texas, each of the Texas Title Policies to be
dated the date of the recording of the applicable deed covering the
Real Property covered thereby and to be in the amount of the Deemed
Value of the respective Real Property covered thereby (which allocation
shall be provided by the related Transferor), insuring Heritage LP as
owner of good and indefeasible title to the Survey legal description of
the Real Property covered thereby and subject only to the Permitted
Exceptions that are applicable to such Real Property and such
exceptions as are required by applicable Texas law to be included in
Schedule B to each such policy of title insurance, (ii) ALTA Owner's
Policies of Title Insurance (collectively the "Washington Title
Policies") issued by the Title Company with (to the extent permitted by
Washington law and insurance regulations) extended coverage providing
for deletion of general exceptions 1 through 5, access endorsements to
specified streets, contiguity endorsements as to Properties comprised
of multiple adjoining parcels and easement parcels, restriction
endorsements, endorsements deleting item number 4 (or the creditor's
right exception) of the "Exclusions From Coverage," dated the date and
time of the recording of the applicable deed and in the amount of the
Deemed Value of the respective Real Property covered thereby (which
allocation shall be provided by the related Transferor), insuring
Heritage LP as owner of good and indefeasible fee simple title to the
Survey legal description of the Real Property covered thereby, and
subject only to the Permitted Exceptions as are applicable to such Real
Property and required under applicable Washington law and containing
such other endorsements as may be reasonably required by the REIT; and
(iii) undated UCC searches from the State of Texas and the State of
Washington disclosing no security interests or liens affecting any of
the Properties other than those to be released at the Closing and other
than those created pursuant to the Transferred Debt. Each Transferor
shall execute at Closing such affidavits and indemnities as may be
appropriate under applicable facts and as reasonably required by the
Title Company in order for it to issue such above-referenced Texas
Title Policies and Washington Title Policies;
(i) The Lender of the Mortgage Debt of such Transferor shall
have consented to the transfer of the Property owned by such Transferor
subject to the Transferred Debt as contemplated by Section 2.3, or
Heritage LP shall have agreed to refinance or pay off such Mortgage
Debt; and
(j) There shall be no material adverse change in the business,
properties, net income or financial condition of such Transferor.
7.2 Conditions to Approving Transferors' Obligations to Close.
Notwithstanding anything to the contrary herein, an Approving Transferor's
obligations at the Closing to consummate the transactions contemplated hereunder
shall be contingent upon the following:
(a) The REIT's representations and warranties contained herein
shall be true and correct in all material respects at Closing as if made as of
the Closing Date; and
(b) The REIT shall have delivered, or caused to be delivered,
each of the items specified in Section 8.5 hereof and shall have performed each
of the other obligations required to be performed hereunder.
7.3 Conditions Applicable to All Parties. Notwithstanding anything to
the contrary herein, the obligation of each party to this Combination Agreement
at the Closing to consummate the transactions contemplated by this Combination
Agreement shall be contingent on the satisfaction of each of the following
conditions:
29
(a) The stockholders of the REIT shall have voted to approve
the listing of the REIT Stock to be issued in the Exchange Offer, upon
conversion of the LP Units, in the Associates Merger, in the Pima Realty Merger,
and in the Pima Mortgage Merger, as contemplated by Section 4.2;
(b) All of the conditions for the closing and consummation of
the transactions contemplated by the Management Merger Agreements shall have
been satisfied or waived prior to the Closing, and the mergers contemplated by
the Management Merger Agreements shall close at the same time as the other
transactions contemplated hereby;
(c) The REIT Fairness Opinion has not been withdrawn as of the
Closing Date;
(d) The Minimum Condition shall have been satisfied;
(e) No action or proceeding by any governmental agency shall
have been instituted or threatened which would enjoin, restrain or prohibit, or
might result in substantial damages in respect of this Combination Agreement or
the consummation of the transactions contemplated by this Combination Agreement,
and would in the reasonable judgment of the REIT Parties make it inadvisable to
consummate such transactions, and no court order shall have been entered in any
action or proceeding instituted by any other party which enjoins, restrains or
prohibits this Combination Agreement or consummation of the transactions
contemplated by this Combination Agreement; and
(f) Heritage LP shall not be required to pay more than $1.5
million in cash to the Transferors under Section 2.2(d).
ARTICLE 8
CLOSING
-------
8.1 Closing Date. The consummation of the transactions contemplated
hereby with respect to all Properties, Approving Transferors and Selling
Transferor Partners except First Appian Way Associates, L.P. ("First Appian
Way"), First Greenwood Creek Associates, L.P. ("Greenwood Creek") and First
Springfield Associates, L.P. ("Springfield") (the "Initial Closing") shall occur
at the offices of ▇'▇▇▇▇▇▇, Cavanagh, Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
("▇'▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇") in Phoenix, Arizona or such other place to which the
parties may agree on the date (the "Initial Closing Date") that shall be the
date selected by the REIT prior to thirty (30) days after the vote by the
stockholders of the REIT contemplated by Section 4.2. A pre-closing conference
shall commence at least three (3) business days prior to the Initial Closing
Date, during which all deliveries (other than the REIT Initial Capital
Contribution and other than deliveries by or respecting Greenwood Creek,
Springfield and First Appian Way) shall be made into an escrow between the
parties. All deliveries made during this pre-closing period shall be deemed
deliveries made at the Initial Closing. Notwithstanding the foregoing, the
consummation of the transactions contemplated hereby respecting Greenwood Creek,
Springfield and First Appian Way (the "Subsequent Closings") shall occur at the
offices of ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in Phoenix, Arizona or such other place to which
the parties may agree on the date which is mutually agreed upon by ▇▇▇▇▇▇ and
the REIT but in no event earlier than March 1, 1997 (the "Subsequent Closing
Date"); provided, however, that in the event that the Initial Closing shall not
have occurred prior to the Subsequent Closing, then such Subsequent Closing
shall occur simultaneously with the Initial Closing. All references in this
Combination Agreement to "Closing" or "Closing Date" shall refer to the Initial
Closing if pertaining to any Property other than Greenwood Creek, Springfield or
First Appian Way and shall refer to the Subsequent Closing if pertaining to
Greenwood Creek, Springfield or First Appian Way. The REIT's obligation to
consummate the transactions contemplated with respect to each of Greenwood
Creek, Springfield and First Appian Way are contingent upon each of Greenwood
Creek, Springfield and First Appian Way realizing net operating income of
$192,000, $203,500 and $132,500, respectively, for the three months prior to the
Subsequent Closing Date.
30
8.2 Sequence of Closings. Deliveries of all documents to effect each of
the transactions contemplated by this Combination Agreement shall be deemed to
be made simultaneously and in escrow except with respect to the Properties and
the related Transferors subject to the Subsequent Closing. The Closing of each
of the transactions contemplated by this Combination Agreement shall be
contingent on the satisfaction of conditions for each other transaction
contemplated by this Combination Agreement except that the Initial Closing shall
not be contingent upon the satisfaction of conditions with respect to First
Appian Way, Greenwood Creek or Springfield. The transactions shall be deemed to
occur in the following order:
first, the Exchange Offer shall be deemed to close with
respect to all Approving Transferors transferring Properties in the Initial
Closing, and the REIT shall be substituted as a limited partner of such
Approving Transferors;
second, the Asset Transfer shall be deemed to close with
respect to each Property transferred in the Initial Closing, and each such
Property owned by an Approving Transferor shall be sold to Heritage LP in
exchange for LP Units;
third, the Pima Realty Merger shall be closed as contemplated
by the Pima Realty/Pima Mortgage Merger Agreement;
fourth, the Pima Mortgage Merger shall be closed as
contemplated by the Pima Realty/Pima Mortgage Merger Agreement;
fifth, the Associates Merger Agreement shall be closed as
contemplated by the Associates Merger Agreement;
sixth, each of ▇▇▇▇▇▇, Grove, Parise, and Chan shall enter
into the Employment Agreements;
seventh, the Exchange Offer shall be deemed to close with
respect to all Approving Transferors transferring Properties in the Subsequent
Closing (in the event such Subsequent Closing does not occur simultaneous with
the Initial Closing), and the REIT shall be substituted as a limited partner of
such Approving Transferors; and
eighth, the Asset Transfer shall be deemed to close with
respect to each Property transferred in the Subsequent Closing, and each such
Property owned by an Approving Transferor shall be sold to Heritage LP in
exchange for LP Units.
8.3 Transferor Partners' Deliveries to Close the Exchange Offer. At the
Closing, each Transferor Partner who has tendered a Transferor Partner Interest
in an Approving Transferor pursuant to the Exchange Offer shall cause the
Custodian to deliver to the REIT the following pursuant to the Custody
Agreement:
(a) A Letter of Transmittal, completed and duly executed by
such Transferor Partner, in the form of Exhibit A hereto;
(b) All right, title and interest in and to the Transferor
Partner Interests owned by Transferor Partner;
(c) A duly executed counterpart of the Registration Agreement;
and
(d) Any other documents called for by the Letter of
Transmittal.
8.4 Custodian's Deliveries to Close the Exchange Offer. At the Closing,
the Custodian shall deliver to the REIT a copy of the Custody Agreement, which
was executed by the Custodian and each Transferor Partner
31
of an Approving Transferor who tendered Transferor Partner Interests in the
Exchange Offer and which were accepted for purchase by the REIT.
8.5 REIT's Deliveries to Close the Exchange Offer. At the Closing, the
REIT shall deliver to each Transferor Partner of an Approving Transferor who
tendered Transferor Partner Interests in the Exchange Offer by delivery to the
Custodian pursuant to the Custody Agreement, the following:
(a) A certificate representing the number of validly issued,
fully paid, and non-assessable shares of REIT Stock equal to the Exchange Value
attributable to all Transferor Partner Interests in Approving Transferors
tendered by such Transferor Partner divided by the REIT Stock Price, registered
in the name of each Transferor Partner;
(b) A certificate executed by a duly authorized officer of the
REIT setting forth the calculation of the Exchange Value attributable to the
Transferor Partnership Interests in Approving Transferors tendered by such
Transferor Partner and accepted for purchase by the REIT;
(c) A counterpart of the Registration Agreement duly executed
by the REIT;
(d) A certificate signed by a duly authorized officer of the
REIT stating that the REIT's representations and warranties contained herein are
true and correct on and as of the Closing Date with the same force and effect as
if made on the Closing Date and that all covenants and agreements required to be
performed by the REIT under this Combination Agreement prior to the Closing have
been performed in accordance with the terms of this Combination Agreement;
(e) A copy of the opinion of counsel addressed to such
Transferor Partner as to the matters set forth in Exhibit J attached hereto,
subject to customary qualifications.
8.6 Approving Transferors' Deliveries to Close the Asset Transfer. At
the Closing, each Approving Transferor shall deliver or cause to be delivered to
Heritage LP the following:
(a) Amended Partnership Agreement. The Amended Partnership
Agreement, executed by such Approving Transferor;
(b) Deeds. Special Warranty Deeds for each of the Real
Properties situated in the State of Texas, executed and acknowledged by each of
the respective Approving Transferors, conveying to Heritage LP indefeasible, fee
simple title to the Real Properties owned by each such Approving Transferor with
appropriate provisions reflecting that the conveyance made by each such Special
Warranty Deed is made and accepted subject to the Permitted Exceptions
applicable to the Real Property covered thereby and any title exceptions insured
over by the Title Company, containing provisions reflecting that the conveyance
made by each of such Special Warranty Deeds is made and accepted on an "As Is,
Where Is" basis in its present condition and subject to all defects or
deficiencies, known or unknown, without any express or implied warranty or
representation of any kind or nature with respect to any aspect of the physical
condition of the Real Property conveyed thereby, and otherwise in such form and
containing such terms and provisions as shall be satisfactory to and approved by
the parties to each of such Special Warranty Deeds. With respect to the Real
Properties situated in the State of Washington, Grant Deeds in statutory form
for each of the Real Properties situated in the State of Washington, executed
and acknowledged by each such Approving Transferors conveying to Heritage LP
indefeasible, fee simple title to each of the Real Properties of such Approving
Transferor and containing a limited or special warranty of title (warranting
title by, through or under grantor) and a warranty by each such Approving
Transferor that the Real Property covered by such Deed is free and clear of all
liens other than the Permitted Exceptions and expressly providing that each such
Grant Deed is made and accepted on an "As Is, Where Is" basis in its present
condition and subject to all defects or deficiencies, known or unknown, without
any express or implied warranty or representation of any kind or nature with
respect to any aspect of the physical condition of the Real Property conveyed
thereby;
32
(c) Assignment of Leases. Assignments and Assumptions of
Leases, executed and acknowledged by such Transferor and Heritage LP, vesting in
Heritage LP all right, title and interest of the landlord under the Leases,
containing a warranty by such Transferor that the right, title and interest
assigned by it is free and clear of liens and charges and is not subject to any
other assignment, transfer or hypothecation, other than those existing pursuant
to the Transferred Debt, if applicable, and containing an assumption by Heritage
LP of all obligations of Transferors, as lessors, under the Leases arising after
Closing;
(d) Bills of Sale. Bills of sale, executed and acknowledged by
such Approving Transferor, transferring and assigning to Heritage LP all of the
Tangible Personal Property and containing a limited or special warranty of title
and a warranty by each Transferor that such property conveyed by it is free and
clear of liens and charges and is not subject to any other assignment, transfer
or hypothecation, other than those existing pursuant to the Transferred Debt, if
applicable, and containing provisions reflecting that the assignment and
transfer made thereby is made and accepted on an "As Is, Where Is" basis, in its
present condition and subject to all defects and deficiencies, known or unknown,
without any express or implied warranty or representation as to the fitness or
merchantability of any of the property transferred thereby or as to any other
matters, and otherwise in such form and containing such terms and provisions as
shall be satisfactory to and approved by the parties to each of such Bills of
Sale;
(e) Assignment of Intangible Personal Property. Assignments of
Intangible Personal Property, executed and acknowledged by the respective
Transferors, transferring and assigning, without recourse, warranty or
representation except as otherwise expressly provided herein, to Heritage LP
each Transferor's right, title and interest in and to all of the Intangible
Personal Property and containing a warranty by such Transferor that such right,
title and interest is free and clear of liens or charges and is not subject to
any other assignment, transfer or hypothecation, other than those existing
pursuant to the Transferred Debt, if applicable;
(f) FIRPTA. A Foreign Investment in Real Property Tax Act
affidavit executed by each Transferor;
(g) Tenant Notification and Estoppel Letters. Notification
letters to be delivered to all tenants at the Real Properties, executed by the
respective Transferors, providing notice that the interest of Transferor in
Lease has been assigned to Heritage LP, and providing notice of the address for
the future payment of rents and other charges and fees; and a Tenant Estoppel is
required with respect to any Real Property, the Transferor of such Real Property
shall have caused to have been delivered to the REIT the appropriate Estoppel
Certificates dated no earlier than 20 days prior to the Closing Date (or the
Subsequent Closing Date, if applicable) from each tenant listed on Schedule VI
attached hereto (the "Major Tenants") and tenants (the "Required Additional
Tenants") occupying at least the percentage of the balance of the square footage
in the buildings on all such Real Properties as such percentage is set forth in
Schedule VI attached hereto, disclosing no material inconsistencies with the
Rent Roll for the respective Real Property delivered pursuant to Section 2.5
hereof and, in the event there are any material changes in such estoppel
certificates, Transferors shall deliver an update of such estoppel certificates
reflecting such material changes to the REIT prior to Closing;
(h) Updated Rent Roll, Schedule of Service Contracts, Schedule
of Tenant Improvement Agreements and Operating Statements. For each of the Real
Properties, an updated Rent Roll, Schedule of Service Contracts, Schedule of
Tenant Improvement Agreements and Operating Statement, certified by the
respective Transferors as true, accurate and complete as of the Closing Date;
(i) Title Policies and UCC Searches. For each of the Related
Properties, the Title Policies delivered within a reasonable time after the
Closing if that is the custom for the locality, provided that the Title Company
at the Closing issues duly executed "marked-up" Title Commitments, effective the
time and date of the recording of the deeds of the Real Properties into Heritage
LP and irrevocably commits in writing to issue each of the Title Policies in the
form of the respective "marked-up" Title Commitments within no more than sixty
(60) days after the Closing Date, together with updated UCC Searches;
33
(j) Certificate. A certificate signed by the general partner
of each Approving Transferor on behalf of each Approving Transferor, stating
that Transferors' representations and warranties contained herein are true and
correct on and as of the Closing Date with the same force and effect as if made
on the Closing Date;
(k) Authority. Evidence of organization, existence and
authority of each Approving Transferor and the authority of the person executing
documents on behalf of each Transferor reasonably satisfactory to the REIT;
(l) Opinions. An opinion of counsel of each Transferor in the
form attached hereto as Exhibit K and subject to such customary qualifications
as may be reasonably acceptable to the REIT;
(m) Tax Reporting Documents. Any and all document stamps,
transfer taxes, affidavits of property value, and other documents required by
states in connection with the transfer of real property;
(n) Exchange Registration Agreement. The Exchange Registration
Agreement, executed by the Approving Transferor;
(o) State Law Disclosures. Such disclosures and reports,
including any applicable certificate of residence or exemption with respect to
withholding requirements required by applicable state and local law in
connection with the conveyance of real property;
(p) Loan Documents. All instruments and agreements required by
the Lenders in connection with the transfer of the Transferred Debt to Heritage
LP; including (i) the consents and estoppels of the applicable Lenders ("Lender
Consents") to the transfer of the Properties subject to the Transferred Debt, on
such terms as are acceptable to the REIT, without change in any of the material
terms of the Loan Documents governing the Transferred Debt, including, without
limitation, amortization, interest rate and maturity date provisions;
(q) Quitclaim Deeds. To the extent the beneficial title owners
(all of whom are Transferors hereunder) of any of the Real Properties differ
from the record title owners (all of whom are Transferors hereunder) of such
Real Properties, quitclaim deeds in statutory form for each of such Real
Properties, executed and acknowledged by the Transferors holding such beneficial
title and conveying to Heritage LP all of such Transferors' right, title and
interest in and to such Real Property; provided however, the parties agree not
to record such quitclaim deeds unless required by the Title Company; and
(r) Additional Documents. Any additional documents that the
Lenders or the Title Company may reasonably require for the proper consummation
of the transactions contemplated by this Combination Agreement.
8.7 The REIT's and Heritage SGP's Deliveries to Close the Asset
Transfer. At the Closing, the REIT and Heritage SGP shall deliver to Heritage
LP, or cause to be delivered, the following:
(a) Amended Partnership Agreement. The Amended Partnership
Agreement, executed by the REIT and Heritage SGP, together with all filings with
any governmental authority or agency required to be made by or on behalf of
Heritage LP;
(b) REIT Initial Capital Contribution. Payment of the REIT
Initial Capital Contribution by the REIT and Heritage SGP to Heritage LP in
immediately available funds;
(c) Officers' Certificate. A certificate of the Chairman and
Chief Financial Officer of the REIT stating that the REIT's representations and
warranties contained herein are true and correct on and as of the Closing Date
with the same force and effect as if made on the Closing Date;
34
(d) Authority. Evidence of organization, existence and
authority of the REIT and the authority of any person executing documents on
behalf of the REIT; and
(e) Additional Documents. Any additional documents that the
Lenders or the Title Company may reasonable require for the proper consummation
of the transactions contemplated by this Combination Agreement.
8.8 Heritage LP's Delivery to Close the Asset Transfer. At the Closing,
Heritage LP shall deliver, or cause to be delivered, to each Approving
Transferor, the following:
(a) GP and LP Units. That number of GP and LP Units calculated
in accordance with Section 2.2(c);
(b) Conveyance Documents. All acceptances and assumptions set
forth in the conveyance and assignment documents for the Properties, executed
and acknowledged by Heritage LP;
(c) Loan Documents. All instruments and agreements reasonably
required by the Lenders in connection with the transfer of the Transferred Debt
to Heritage LP, executed Heritage LP, if required; and the disbursements by
Heritage LP of the REIT Initial Capital Contribution to the Lenders on behalf of
Heritage LP in accordance with Section 2.3 hereof in order to repay in full such
portion of the Mortgage Debt that is not Transferred Debt;
(d) Opinion. An opinion of counsel of ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as to
the matters set forth in Exhibit K attached hereto and subject to such customary
qualifications as may be reasonably acceptable to the general partner of the
Approving Transferors;
(e) Exchange Registration Agreement. The Exchange Registration
Agreement duly executed by the REIT;
(f) State Law Disclosures. Such disclosures and reports
required by applicable state and local law in connection with the conveyance of
real property; and
(g) General Partner's Certificate. A certificate of an
authorized officer of the REIT, as general partner of Heritage LP, stating that
the representations and warranties of Heritage LP set forth herein are true and
correct as of the Closing Date with the same force and effect as if made at the
Closing Date.
8.9 Mergers. At the Closing, the parties to the Pima Realty Mortgage,
Pima Mortgage Merger, and Associates Merger shall make all deliveries to each
other required by the Pima Realty/Mortgage Merger Agreement and Associates
Merger Agreement. At the Closing, the parties to the Pima Realty/Mortgage
Agreement shall deliver to ▇▇▇▇▇▇, individually, and as Custodian for each
Transferor Partner in an Approving Transferor that participates in the Exchange
Offer, and as general partner of each Transferor, a certificate stating that the
Pima Mortgage Merger and Pima Realty Merger were consummated in accordance with
the terms of the Pima Realty/Pima Mortgage Merger Agreement without any material
condition to such merger being waived by the parties thereto, which certificate
shall certify as to the accuracy of copies of each document executed in
connection with the closing of the Pima Realty Merger and Pima Mortgage Merger
which shall be attached thereto.
8.10 Deliveries of Winton, Grove, ▇▇▇▇▇▇ and ▇▇▇▇. At the Closing, each
of Winton, Grove, ▇▇▇▇▇▇ and Chan shall deliver, or cause to be delivered the
Employment Agreements for each of Winton, Grove, ▇▇▇▇▇▇ and ▇▇▇▇, executed by
Winton, Grove, ▇▇▇▇▇▇ and Chan, respectively.
8.11 Properties Closing Costs. All transfer fees or stamp taxes and
recording fees required to be paid to record the deeds and any loan assignment
documents with respect to the Properties together with any commissions
35
set forth in Schedule IV shall be paid by the Approving Transferor that owned
such Property. The costs of the Title Reports, the Surveys and the UCC Searches
and the costs of recording any documents required to satisfy or release Title
Objections shall be paid one-half by the REIT on behalf of Heritage LP and
one-half by the Transferor owned the Property subject to the Title Report,
Survey, or UCC search; provided however, in the event the Closing fails to
occur, the REIT shall promptly pay all costs and expenses of the Surveys, the
Title Reports and the UCC Searches. The premiums for the standard Title Policies
shall be paid one hundred percent (100%) by the Transferors that owned the
Property insured by the Title Policy immediately prior to the Closing. The cost
of any additional endorsement or upgrades to the Title Policies shall be paid
one hundred percent (100%) by the REIT. Any prepayment fees or premiums or
assumption fees or costs in connection with the assumption or repayment of any
Mortgage Debt by Heritage LP shall be paid by the REIT. All costs and expenses
described in this Section 8.11 are herein called the "Properties Closing Costs."
All Properties Closing Costs will be paid by Heritage LP through the REIT
Initial Capital Contribution. Properties Closing Costs required by this Section
8.11 to be paid by the Transferors shall be paid by Heritage LP (in proportion
to the relative Values of the Properties transferred to Heritage LP) and the
amount of such Properties Closing Costs so paid by Heritage LP shall be deducted
from the Deemed Value of each Property; provided however, that the amount of
Properties Closing Costs paid by Heritage LP and deducted from the Deemed Value
of the applicable Property, as provided in this sentence, shall not exceed the
amount set forth for such Property in Schedule VI. The parties acknowledge that
certain Properties Closing Costs may not be paid at Closing but will be paid in
ordinary course following the Closing.
ARTICLE 9
WAIVER; MODIFICATION; TERMINATION; REMEDIES
-------------------------------------------
9.1 Waivers. The failure of the ▇▇▇▇▇▇ Parties to comply with any of
their respective obligations, agreements or conditions as set forth herein may
be waived expressly in writing by the REIT, by action of its Board of Directors.
The failure of the REIT Parties to comply with any of its obligations,
agreements or conditions as set forth herein may be waived expressly in writing
by the ▇▇▇▇▇▇ Parties by action of ▇▇▇▇▇▇ as general partner.
9.2 Modification. This Combination Agreement may be modified at any
time in any respect by the mutual consent of all of the parties, notwithstanding
prior approval by the Transferor Partners or the stockholders of the REIT. Any
such modification may be approved for the REIT by its Board of Directors or for
a Transferor by its general partner.
9.3 Termination. This Combination Agreement may be terminated at any
time before the Closing Date, by the Board of Directors of the REIT or by the
Transferors (by action of their respective general partner or partners), before
or after approval of the REIT stockholders and the partners of the Transferors
as follows:
(a) by either the Transferors or the REIT if the Commitment
Date shall not have occurred on or before February 27, 1997;
(b) By either the Transferors or the REIT if the Closing Date
shall not have occurred on or before April 30, 1997 ("Expiration Date");
provided, however, that the Transferor's right to terminate this Combination
Agreement under this Section 9.3(b) shall not be available if one of the ▇▇▇▇▇▇
Parties' failure to fulfill any obligation under this Combination Agreement has
been the cause of, or resulted in, the failure of the Closing Date to occur
before the Expiration Date and the REIT's right to terminate this Combination
Agreement under this Section 9.3(b) shall not be available if one of the REIT
Parties' failure to fulfill any obligation under this Combination Agreement has
been the cause of, or resulted in, the failure of the Closing Date to occur
prior to the Expiration Date;
(c) By either the Transferors or the REIT if a court of
competent jurisdiction or governmental regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties shall use their commercially
reasonably efforts to lift), in each case
36
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Combination Agreement, and such order, decree, ruling or
other action shall have become final and non-appealable; provided, however, that
if such order, decree, ruling or other action shall restrain, enjoin or
otherwise prohibit the transactions contemplated by this Combination Agreement
by Transferors owning Properties constituting less than 30% of the Exchange
Value, then the termination right pursuant to this provision shall only pertain
with respect to such Transferors and such Properties;
(d) By the Transferors if a REIT Party shall have breached, or
failed to comply with, in any material respect any of its obligations under this
Combination Agreement or any Related Agreement, and such breach or failure is
not cured within 30 days following written notice thereof by Transferors;
(e) By the REIT if a ▇▇▇▇▇▇ Party shall have breached, or
failed to comply with, in any material respect any of the obligations under this
Combination Agreement or any Related Agreement, and such breach or failure is
not cured within 30 days following written notice thereof by the REIT;
(f) By the Transferors if a representation or warranty of a
REIT Party made in this Combination Agreement or a Related Agreement is not true
and correct in any material respect;
(g) By the REIT if a representation or warranty of a ▇▇▇▇▇▇
Party made in this Combination Agreement or a Related Agreement is not true and
correct in any material respect;
(h) By the Transferors prior to the Commitment Date, if as a
result of an Acquisition Proposal received by some or all of the Transferors,
the general partner of the Transferors determines in good faith and based upon
written advise of counsel, that his or its fiduciary obligations under
applicable law require that such Acquisition Proposal be accepted;
(i) By the REIT or the Transferors if the REIT stockholders do
not vote to approve the matters described in Section 4.2;
(j) By the REIT in its sole and absolute discretion prior to
the expiration of the Due Diligence Period, by delivery to the Transferors of
notice of termination pursuant to this Section 9.3(j); or
(k) By mutual written consent of the Transferors and the REIT.
9.4 Effect of Termination. In the event of termination of this
Combination Agreement as provided in Section 9.3 hereof, this Combination
Agreement shall forthwith become void and there shall be no liability on the
parties hereto, except as provided in this Section 9.4, and except for Sections
12.12:
(a) Breach by REIT Parties. If this Combination Agreement is
terminated by the Transferors under Section 9.3(d), the ▇▇▇▇▇▇ Parties shall be
entitled to the prompt reimbursement from the REIT of all out-of-pocket costs
(including, without limitation, attorney's fees and disbursements) incurred by
the ▇▇▇▇▇▇ Parties in connection with the transactions contemplated by this
Combination Agreement and the ▇▇▇▇▇▇ Parties, jointly and severally, shall have
all rights and remedies to which they may be entitled by law, in equity and
under this Combination Agreement, including, without limitation, specific
performance.
(b) Breach by ▇▇▇▇▇▇ Parties. If this Combination Agreement is
terminated by the REIT under Section 9.3(e), the REIT Parties shall be entitled
to the prompt reimbursement from the Transferors of all out-of-pocket costs
(including, without limitation, attorney's fees and disbursements) incurred by
the REIT Parties in connection with the transactions contemplated by this
Combination Agreement and the REIT Parties, jointly and severally, shall have
all rights and remedies to which they may be entitled by law, in equity and
under this Combination Agreement, including, without limitation, specific
performance.
37
(c) Termination Following Acquisition Proposal. If either
(i) The REIT or the Transferors shall terminate this
Combination Agreement pursuant to Section 9.3(a) and prior to such termination
an Acquisition Proposal shall have been made, or
(ii) Some or all of the Transferors shall terminate
this Combination Agreement pursuant to Section 9.3(h),
and, in either case, a definitive agreement to effect an Acquisition Proposal is
entered into by any of the Transferors within 18 months following the date of
termination, the Transferors party to the Acquisition Proposal shall pay (pro
rata based on the Exchange Values attributed to such Transferors or as otherwise
agreed among themselves) to the REIT on the date and only if such Acquisition
Proposal is consummated, $1,000,000 in cash plus the reimbursement of all
out-of- pocket fees and expenses incurred by the REIT Parties in connection with
the transactions contemplated by this Combination Agreement up to a maximum of
$1,000,000.
(d) Termination Following REIT Change in Control. If, prior to
the earlier of the Closing Date or the termination of this Combination Agreement
pursuant to Section 9.3, either
(i) a person, alone or together with its affiliates
and associates, becomes the beneficial owner of 50% or more of the REIT Stock,
the REIT enters into or publicly approves of a definitive agreement pursuant to
which a person, alone or together with its affiliates and associates proposes to
acquire 50% or more of the outstanding REIT Stock, or the REIT enters into or
publicly approves of an agreement to merge or consolidate with another person or
transfer all or substantially all of the REIT's assets to another person;
(ii) a person, alone or together with its affiliates
and associates, makes a tender offer or other offer to purchase shares of REIT
Stock pursuant to which the person (and its affiliates and associates) may
become the beneficial owner of 50% or more of the outstanding REIT Stock, or
(iii) any person shall propose a merger,
consolidation, purchase of all or substantially all of the assets of the REIT or
similar transaction;
and the REIT stockholders do not vote to approve the matters described in
Section 4.2, then in the event of (i) above promptly following vote of the REIT
stockholders the REIT shall pay to the Transferors the REIT Termination Payment
and in the event of (ii) or (iii) if within 18 months following the termination
of this Combination Agreement any person and its affiliates and associates
becomes the beneficial owner of 50% or more of the outstanding REIT Stock,
acquires all or substantially all of the assets of the REIT, or merger or
consolidates with the REIT then upon the consummation of such transaction, the
REIT shall pay the REIT Termination Payment to the Transferors. As used herein,
the REIT Termination Payment shall equal $1,000,000 plus the amount of the
▇▇▇▇▇▇ Parties' out of pocket expenses in connection with the transactions
contemplated by this Combination Agreement up to a maximum of $1,000,000. For
purposes of this Section, beneficial ownership shall have the meaning set forth
in the regulations promulgated by the Securities and Exchange Commission under
Section 13(d) of the Exchange Act, and affiliate and associate shall have the
meaning set forth in Rule 12b-2 under the Exchange Act.
ARTICLE 10
INDEMNIFICATION
---------------
10.1 Obligations to Indemnify. Heritage LP shall defend and hold
harmless ▇▇▇▇▇▇ in the event that the Indemnified Party becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Claim (as hereinafter defined) by reason of
or arising out of the Indemnified
38
Party having been the general partner of an Approving Transferor as soon as
practicable but in any event no later than 30 days after written demand is
presented to Heritage LP against any and all Expenses (as hereinafter defined),
judgments, fines, penalties and amounts paid in settlement (including any
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses, judgments, fines, penalties and amounts paid in
settlement) of such Claim. If so requested by the Indemnified Party, Heritage LP
shall advance, within 10 business days of such request, any and all reasonable
Expenses to the Indemnified Party.
10.2 Amount of Indemnification. The maximum amount of the
indemnification provided for in Section 10.1 above shall be equal to the
aggregate value of the Properties transferred pursuant to the Asset Transfer on
the Closing Date.
10.3 Defined Terms. For purposes of this Section 10, the following
terms shall have the meanings set forth below:
(a) "Claim" shall mean any threatened, pending or completed
action, suit, investigation or proceeding, and any appeal thereof, whether
civil, criminal, administrative or investigative and/or an inquiry or
investigation.
(b) "Expenses" shall mean all costs, expenses and obligations
(including attorneys' fees) paid or incurred in connection with investigating
defending, being a witness in or participating in, including an appeal, or
preparing to defend, be a witness in or participate in any Claim relating to an
Indemnifiable Event.
ARTICLE 11
DEFINITIONS
-----------
"Acquisition Proposal" shall mean a bona fide offer by a person or group of
related persons (other than the REIT Parties and their Affiliates) to acquire
the Properties owned by all or any number of the Transferors in a transaction or
series of related transactions in which the Properties proposed to be purchased
constitute more than 70% of the Deemed Value of all the Properties owned by the
Transferors.
"Accredited Investor" shall mean an accredited investor as defined under
Regulation D of the Securities Act.
"Amended Partnership Agreement" has the meaning set forth in the recitals
hereof.
"Approving Transferor" shall have the meaning set forth in Section 7.1.
"Asset Transfer" has the meaning set forth in the preamble hereof.
"Associates" has the meaning set forth in the preamble hereof.
"CAM Charges" has the meaning set forth in Section 2.8 hereof.
"CERCLA" has the meaning set forth in the definition of Environmental Laws
hereof.
"Chan" has the meaning set forth in the preamble hereof.
"Closing Date" has the meaning set forth in Section 8.1 hereof.
"Commitment Date" has the meaning set forth in Section 1.1(f) hereof.
"Condemnation Proceeding" has the meaning set forth in Section 2.7 hereof.
39
"Custodian" has the meaning set forth in Section 1.1 hereof.
"Deemed Value" with respect to a Property shall be equal to the value allocated
to such Property in Schedule VIII attached hereto.
"Distributees" has the meaning set forth in Section 2.2(d) hereof.
"Due Diligence Period" has the meaning set forth in Section 2.2 hereof.
"Employment Agreements" has the meaning set forth in the recitals hereof.
"Environmental Laws" shall include, without limitation, the Clean Air Act; the
Clean Water Act and the Water Quality Act of 1987; the Federal Insecticide
Fungicide, and Rodenticide Act; the Marine Protection, Research, and Sanctuaries
Act; the National Environmental Policy Act; the Noise Control Act; the
Occupational Safety and Health Act; the Resource Conservation and Recovery Act,
as amended by the Hazardous and Solid Waste Amendments of 1984, the Safe
Drinking Water Act; the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
and the Emergency Planning and Community Right-to-Know Act; the Toxic Substance
Control Act ("TSCA"); and the Atomic Energy Act, all as may have been amended as
of the date of this Combination Agreement, together with their implementing
regulations and guidelines as of the date of this Combination Agreement.
"Environmental Laws" shall also include all state, regional, county, municipal
and other local laws, regulations, and ordinances that are equivalent or similar
to the federal laws recited above or that purport to regulate Hazardous
Materials.
"Estoppel Certificate" has the meaning set forth in Section 2.5(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exchange Value" shall mean with respect to each Transferor, the Value of the
Property; and with respect to any partner of a Transferor shall mean the
Exchange Value of such Transferor multiplied times the percentage interest of
such partner in such Transferor.
"Exchange Registration Agreement" shall have the meaning set forth in the
recitals hereof.
"Execution Date" shall mean the date of execution of this Combination Agreement.
"Expiration Date" has the meaning set forth in Section 9.3(b) hereof.
"FIFRA" has the meaning set forth in the definition of Environmental Laws
hereof.
"GP Unit" has the meaning set forth in the recitals hereof.
"Grove" has the meaning set forth in the preamble hereof.
"Hazardous Materials" shall include, without limitation: any hazardous
substance, pollutant, or contaminant regulated under CERCLA; oil and petroleum
products and natural gas, natural gas liquids, liquefied natural gas, and
synthetic gas usable for fuel; pesticides regulated under FIFRA; asbestos,
polychlorinated biphenyls, and other substances regulated under TSCA; source
material, special nuclear material, and by-product materials regulated under the
Atomic Energy Act; and industrial process and pollution control wastes to the
extent regulated under applicable Environmental Laws.
"Heritage LP" has the meaning set forth in the preamble hereof.
40
"Heritage SGP" has the meaning set forth in the preamble hereof.
"Improvements" shall mean with respect to a Real Property, all improvements
located thereon, including, without limitation, all heating, ventilation,
electrical, plumbing and other mechanical or operational systems.
"Initial Closing Date" has the meaning set forth in Section 8.1 hereof.
"Intangible Personal Property" shall be a collective reference to all intangible
personal property related to the Real Properties, including, without limitation:
all trade names and trade marks associated with each of the Real Properties,
together with the goodwill related thereto, including each Transferor's rights
and interests in the respective names of each of the Properties set forth in
Schedule II attached hereto and the names (unless the same include proper names)
of the Transferors; all rights to the plans and specifications and other
architectural and engineering drawings for the Improvements; contract rights
related to the construction, operation, ownership or management of each of the
Real Properties (but excluding the obligations of any of Transferors thereunder,
except those expressly assumed pursuant to this Combination Agreement);
warranties, zoning approvals, building permits and licenses (to the extent
assignable); tenant lists, correspondence with tenants and records (including,
but not limited to, those relating to taxes, insurance, maintenance, repairs,
capital improvements and services), booklets, manuals, advertising and
promotional materials, including, without limitation, photographs and negatives,
correspondence with suppliers, and telephone exchange numbers (if available);
excluding, however, cash or accounts receivable, except to the extent
specifically provided herein with respect to prorations and adjustments and
Rehabilitation Reserves (when the term "Intangible Personal Property" is used in
connection with a single Real Property, such term shall only be a collective
reference to the Intangible Personal Property applicable to such Real Property).
"Leases" shall be a collective reference to all leases of space within the
Improvements, including leases that may be made by Transferors after the date
hereof and prior to the Closing (as defined herein); provided, however, when
such term is used in connection with a single Real Property, the term "Leases"
shall only be a collective reference to the Leases applicable to the
Improvements located on such Real Property.
"Lenders" shall mean the holders of the Notes as set forth in Schedule III
hereof.
"Loan Documents" shall mean a collective reference to the mortgages, bonds,
deeds of trusts and other security instruments that create liens on the
respective Real Properties to secure the payment of the respective loans and
related Notes.
"LP Units" shall mean the limited partnership units of Heritage LP.
"Management Merger Agreements" has the meaning set forth in the recitals hereof.
"Management Parties" has the meaning set forth in the preamble hereof.
"Material Condemnation" has the meaning set forth in Section 2.7 hereof.
"Material Damage" has the meaning set forth in Section 8.1 hereof.
"Minimum Condition" shall be deemed satisfied if the aggregate Value
attributable to the Properties of Approving Transferors that have not been
excluded from the transactions contemplated by this Combination Agreement by
Sections 2.3(b), 2.4(e), 2.6, 2.7, or 9.3(c) hereof is greater than or equal to
70% of the Value of all Properties; provided that for purposes of this
definition, Greenwood Creek, Springfield and First Appian Way shall be
considered Approving Transferors.
41
"Mortgage Debt" shall mean the debt evidenced by a Note secured by a lien on
such Real Property, the Mortgage Debt evidenced by such Note and the Lender
which is the holder of such Note.
"Net Working Capital" has the meaning set forth in Section 6.6 hereof.
"Notes" and "Note" shall mean the promissory notes and bonds evidencing the
Mortgage Debt.
"Other Taxes" has the meaning set forth in Section 5.1(b)(viii) hereof.
"Operating and Financial Statements" has the meaning set forth in Section 2.4(c)
hereof.
"▇▇▇▇▇▇" has the meaning set forth in the preamble hereof.
"Permitted Exceptions" has the meaning set forth in Section 2.4(e)(vi) hereof.
"Pima Mortgage" has the meaning set forth in the preamble hereof.
"Pima Realty" has the meaning set forth in the preamble hereof.
"Properties" and "Property" shall mean, respectively, a collective reference to
all of the Real Properties, the Tangible Personal Property and the interests in
the Leases and the Intangible Personal Property, and an individual reference to
a single Real Property and the Tangible Personal Property and the applicable
Transferor's interests in the Leases and the Intangible Personal Property
associated with such Real Property.
"Properties Closing Costs" has the meaning set forth in Section 8.11 hereof.
"Prorations" has the meaning set forth in Section 2.8 hereof.
"Real Properties" shall be a collective reference to the real properties
described in Schedule II attached hereto, together with (i) all Improvements
located thereon, (ii) all the rights, benefits, privileges, easements,
tenements, hereditaments and appurtenances thereon or in any way appertaining to
such real properties, and (iii) all right, title and interest of Transferors in
and to all strips and gores and any land lying in the bed of any street, road or
alley, open or proposed, adjoining any of such real properties. When the Surveys
are issued, the descriptions in the respective Surveys shall be accepted by the
parties as the correct descriptions of the Real Properties, even if they should
differ from Schedule II.
"Registration Agreement" has the meaning set forth in the recitals hereof.
"REIT" has the meaning set forth in the preamble hereof.
"REIT Initial Capital Contribution" has the meaning set forth in the recitals
hereof.
"REIT Parties" has the meaning set forth in the preamble hereof.
"REIT Stock Price" shall mean $18.10.
"Related Agreements" has the meaning set forth in the recitals hereof.
"Rent Roll" has the meaning set forth in Section 2.4(d) hereof.
"Required Partner Approval" has the meaning set forth in Section 7.1(e) hereof.
42
"Resale" has the meaning set forth in Section 8.3(c) hereof.
"Schedule of Environmental Reports" has the meaning set forth in Section 2.4(d)
hereof.
"Schedule of Insurance" has the meaning set forth in Section 2.4(d) hereof.
"Schedule of Loan Documents" has the meaning set forth in Section 2.4(d) hereof.
"Schedule of Tenant Options" has the meaning set forth in Section 2.4(d) hereof.
"Schedule of Service Contracts" has the meaning set forth in Section 2.4(d)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Service Contracts" has the meaning set forth in Section 2.4(c) hereof.
"Subsequent Closings" has the meaning set forth in Section 7.1 hereof.
"Subsidiary Partnership" shall mean each of the wholly owned subsidiaries of
Heritage LP [and Heritage SGP] formed for the purpose of acquiring one or more
Properties.
"Surveys" shall mean surveys (including field notes) made by survey civil
engineers approved by the REIT and duly licensed in the States where the Real
Properties are located in accordance with and containing the certification set
forth in Exhibit L attached hereto and addressed to such parties as the REIT may
designate.
"Tangible Personal Property" shall be a collective reference to all equipment,
machinery, furniture, furnishings, supplies and other tangible personal property
owned by Transferors and any interest of Transferors in any such property leased
by Transferors, now or hereafter located in and used in connection with the
operation, ownership or management of any of the Real Properties; provided,
however, when such term is used in connection with a single Real Property, the
term "Tangible Personal Property" shall only be a collective reference to the
Tangible Personal Property applicable to such Real Property.
"Taxes" has the meaning set forth in Section 2.8(a) hereof.
"Tenant Options" has the meaning set forth in Section 5.1(b)(xxiii) hereof.
"Title Company" shall mean ▇▇▇▇▇▇▇ Title.
"Title Policies" has the meaning set forth in Section 6.1(e) hereof.
"Title Reports" shall mean currently dated preliminary title commitments issued
by the Title Company for the Real Properties.
"Transferred Debt" has the meaning set forth in Section 2.3(b) hereof.
"Transferor" has the meaning set forth in the preamble hereof.
"Transferor Partnership Interest" has the meaning set forth in the recitals
hereof.
"TSCA" has the meaning set forth in the definition of Environmental Laws hereof.
43
"UCC Searches" shall mean copies of current Uniform Commercial Code searches
issued by the Title Company or a search company acceptable to the REIT.
"Value" of each Property shall be equal to (i) the Deemed Value allocated to
such Property minus (ii) the Mortgage Debt applicable to such Property as of the
Closing Date and immediately prior to any repayment, purchase, refinancing,
replacement or reduction thereof by Heritage LP or the REIT in accordance with
Section 2.3 (without taking into consideration any discount of such Mortgage
Debt), minus (iii) the monetary liens applicable to such Property as of the
Closing Date and immediately prior to the satisfaction thereof by the
application of a portion of the REIT Initial Capital Contribution as permitted
by Section 2.6(d), minus (iv) Properties Closing Costs payable on behalf of the
Transferor of the Property allocated to each of the Properties pro rata based
upon their respective Deemed Values, and, plus or minus, as appropriate, (v) the
Prorations relating to such Property determined in accordance with Section 2.8.
"▇▇▇▇▇▇" has the meaning set forth in the preamble hereof.
"▇▇▇▇▇▇ Parties" has the meaning set forth in the preamble hereof.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Subsidiaries. The parties acknowledge and agree that, if required
by any Lender as a condition to its consent to the transfer of a Property
subject to the related Mortgage Debt as contemplated hereby, such Property may
be transferred to a limited purpose entity owned by Heritage LP and any
reference herein to Heritage LP shall mean, with respect to such Property, such
limited purpose entity.
12.2 Parties Bound. Prior to the Closing, except as provided in Section
12.1 hereof, no party may assign its rights or obligations under this
Combination Agreement without the prior written consent of the other parties
hereto, and any such prohibited assignment shall be void. This Combination
Agreement and all provisions hereof, including, without limitation, all
representations and warranties made hereunder, shall inure to the benefit of and
be binding upon the respective heirs, devisees, legal representatives,
successors, assigns and beneficiaries of the parties hereto; provided, however,
that no assignment shall relieve the assignor of any obligation under this
Combination Agreement whether arising before or after such assignment.
12.3 Headings. The article and paragraph headings of this Combination
Agreement are for convenience only and shall in no way limit or enlarge the
scope or meaning of the language hereof.
12.4 Invalidity. If any portion of this Combination Agreement is held
invalid or inoperative, then so far as is reasonable and possible the remainder
of this Combination Agreement shall be deemed valid and operative and effect
shall be given to the intent manifested by the portion held invalid or
inoperative. The failure by either party to enforce against the other any term
or provision of this Combination Agreement shall be deemed not to be a waiver of
such party's right to enforce against the other party the same or any other such
term or provision.
12.5 Governing Law. Except where the laws of another jurisdiction are
mandatorily applicable, this Combination Agreement shall, in all respects, be
governed, construed, applied and enforced in accordance with the internal laws
(and not the choice of law rules) of the State of Arizona.
12.6 Independent Review. Each Transferor acknowledges and agrees that
neither the REIT nor Heritage LP has made any representation or warranty with
respect to the tax or accounting consequences of the transactions contemplated
by this Combination Agreement except as set forth in the Private Offering
Memorandum, and that such Transferor has been represented by counsel or received
advice in connection with entering into this Combination
44
Agreement and has received such tax and accounting information as such
Transferor deems necessary to knowledgeably consummate the transactions
contemplated by this Combination Agreement.
12.7 No Third Party Beneficiary. This Combination Agreement is not
intended to give or confer any benefits, rights, privileges, claims, actions or
remedies to any person or entity as a third party beneficiary, including without
limitation, any Lender.
12.8 Entirety and Amendments. This Combination Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the Properties. This Combination Agreement may be
amended or supplemented only by an instrument in writing executed by the party
against whom enforcement is sought.
12.9 Execution in Counterparts. This Combination Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of such counterparts shall constitute one Agreement. To
facilitate execution and delivery of this Combination Agreement, the parties may
execute and exchange counterparts of the signature pages by telefax. The
signature of any party to any counterparts may be appended to any other
counterpart. The Title Company shall be entitled to accept and treat such fax
signatures as original signatures.
12.10 Further Assurances. To the extent that any Schedule to be
attached to this Combination Agreement or to any of the Exhibits attached hereto
is not completed or prepared on the date hereof, the party responsible for
completing or preparing such Schedule shall deliver such Schedule to the other
parties hereto as soon as possible after the date hereof and, in any event,
prior to the Closing. In addition to the acts and deeds recited herein and
contemplated to be performed, executed and/or delivered by Transferors at the
Closing, Transferors agree to perform, execute and/or deliver or cause to be
executed and/or delivered, on or after the Closing, any and all further acts,
deeds and assurances as may be reasonably necessary to consummate the
transactions contemplated hereby and/or to further perfect and deliver to
Heritage LP the conveyance, transfer and assignment of the Properties and all
rights related thereto.
12.11 Time. Time is of the essence in the performance of each and every
term, condition and covenant contained in this Combination Agreement.
12.12 Confidentiality. The REIT and Transferors, for the benefit of
each other, hereby agree that until the Closing Date, they will not release or
cause or permit to be released, any press notices, publicity (oral or written)
or advertising promotion relating to, or otherwise announce or disclose or cause
or permit to be announced or disclosed, in any manner whatsoever, the terms,
conditions or substance of this Combination Agreement or any of the Related
Agreements, or the transactions contemplated herein or therein, without first
obtaining the written consent of the other parties hereto. It is understood that
the foregoing shall not preclude either party from discussing the substance or
any relevant details of such transactions with any of its attorneys,
accountants, professional consultants or potential lenders, as the case may be,
or prevent either party hereto from seeking to obtain any and all approvals or
consents necessary in connection with the transactions contemplated hereby,
making all filings with governmental authorities required in connection with the
transactions contemplated hereby and complying with laws, rules, regulations and
court orders, including without limitation, governmental regulatory, disclosure,
tax and reporting requirements. After the Closing Date, Transferors agree that
the REIT may release any press notices, publicity (oral or written) or
advertising promotion relating to, or otherwise announce or disclose, in any
manner whatsoever, the terms, conditions and substances of this Combination
Agreement or any of the Related Agreements, or the transactions contemplated
herein or therein, without first obtaining the written consent of the other
parties hereto.
12.13 Attorneys' Fees. Should either party employ attorneys to enforce
any of the provisions hereof, the party losing in any final judgment agrees to
pay the prevailing party all reasonable costs, charges and expenses,
45
including attorneys' fees and disbursements, expended or incurred in connection
therewith whether at trial, on appeal or on petition for review.
12.14 Use of Pronouns. The use of the neuter singular pronoun to refer
to a party shall be deemed a proper reference, even though such party may be an
individual, partnership or a group of two or more individuals. The necessary
grammatical changes required to make the provisions of this Combination
Agreement apply in the plural sense where there is more than one seller or
purchaser and to either partnerships or individuals (male or female) shall in
all instances be assumed as though in each case fully expressed.
12.15 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the following address:
If to Transferors, c/o Winton & Associates, Inc.
▇▇▇▇▇▇ or Associates: ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇, Esq.
If to the REIT, Heritage SGP, Heritage c/o ASR Investments Corporation
LP, Pima Mortgage, Grove, ▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Chan: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇
With a copy to: ▇'▇▇▇▇▇▇, Cavanagh, Anderson,
▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
46
If to Pima Realty: c/o Pima Realty Advisors, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
With a copy to: ▇'▇▇▇▇▇▇, Cavanagh, Anderson,
▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Any such notices shall be either (a) sent by certified mail, return
receipt requested in which case notice shall be deemed delivered three (3)
business days after deposit, postage prepaid in the U.S. Mail, (b) sent by
overnight delivery using a nationally recognized overnight courier, in which
case it shall be deemed delivered one business day after deposit with such
courier, (c) sent by telefax, in which case notice shall be deemed delivered
upon confirmed transmission of such notice, or (d) sent by personal delivery.
The above addresses may be changed by written notice to the other party;
provided, however, that no notice of a change of address shall be effective
until actual receipt of such notice. Copies of notices are for informational
purposes only, and a failure to give or receive copies of any notice shall not
be deemed a failure to give notice.
12.16 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Combination Agreement and that the normal
rule 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
Combination Agreement or any exhibits or amendments hereto.
12.17 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designed period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday, in which event the period shall run until the
end of the next day which is neither a Saturday, Sunday, or legal holiday.
12.18 Information and Audit Cooperation. Each Transferor agrees to
provide to Heritage LP's designated independent auditor (a) access to the books
and records of such Transferor's Properties and all related information
regarding the period for which Heritage LP is required to have such Properties
audited under the regulations of the Securities and Exchange Commission, and (b)
any representation letters regarding the books and records of such Transferor's
Properties as such auditor shall reasonably request in connection with the
normal course of auditing such Properties in accordance with generally accepted
auditing standards.
12.19 No Assumption. Except as otherwise expressly assumed by Heritage
LP or the REIT pursuant to the terms of this Combination Agreement, neither
Heritage LP nor the REIT shall assume or be deemed to have assumed any
obligations or liabilities whatsoever of the Transferors with respect to the
Properties or otherwise.
12.20 Survival. The representations and warranties contained in this
Combination Agreement shall not survive the Closing and shall be deemed to be
merged into and waived by the instruments of such Closing. The provisions of
this Combination Agreement that contemplate performance after Closing shall
survive the Closing and shall not be deemed to be merged into or waived by the
instruments of Closing.
47
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Combination Agreement on the day and year first above written.
▇▇▇▇▇▇:
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
THE REIT:
ASR INVESTMENTS CORPORATION, a
Maryland corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇, Chairman of the Board and
President
PIMA MORTGAGE:
PIMA MORTGAGE LIMITED PARTNERSHIP,
an Arizona limited partnership
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Its: Authorized Representative
--------------------------------------------
PIMA REALTY:
PIMA REALTY ADVISORS, INC., an Arizona
corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Its: Authorized Representative
--------------------------------------------
ASSOCIATES:
▇▇▇▇▇▇ & ASSOCIATES, INC., a Washington
corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇, President
HERITAGE LP:
HERITAGE COMMUNITIES, L.P., a Delaware
limited partnership
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Its: Authorized Representative
--------------------------------------------
HERITAGE SGP:
HERITAGE SGP CORPORATION, an Arizona
corporation wholly owned by the REIT
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Its: President
--------------------------------------------
HERITAGE RESIDENTIAL:
HERITAGE RESIDENTIAL GROUP, INC., an
Arizona corporation wholly owned by the REIT
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Its: President
--------------------------------------------
GROVE:
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
CHAN:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
TRANSFERORS:
FIRST ASPEN COURT ASSOCIATES, L.P.
FIRST BRIAR PARK ASSOCIATES
FIRST CHELSEA PARK ASSOCIATES, L.P.
FIRST APPIAN WAY ASSOCIATES, L.P.
FIRST GREENWOOD CREEK ASSOCIATES, L.P.
FIRST HIGHLANDS ASSOCIATES, L.P.
FIRST MARYMONT ASSOCIATES, L.P.
FIRST MONTFORT ASSOCIATES, L.P.
FIRST RIVERWAY ASSOCIATES, L.P.
FIRST SPRINGFIELD ASSOCIATES, L.P.
FIRST TIMBERCREEK LANDING ASSOCIATES, L.P.
CAMPUS DEVELOPMENT ASSOCIATES LIMITED PARTNERSHIP
CAMPUS COMMONS ASSOCIATES - LIMITED PARTNERSHIP
FIRST PACIFIC SOUTH CENTER ASSOCIATES, L.P.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇, general partner
of each of the Transferors listed
above
SCHEDULE I
TRANSFEROR
First Aspen Court Associates, L.P.
First Briar Park Associates, a Washington Limited Partnership
First Chelsea Park Associates, L.P.
First Appian Way Associates, L.P.
First Greenwood Creek Associates, L.P.
First Highlands Associates, L.P.
First Marymont Associates, L.P.
First Montfort Associates, L.P.
First Riverway Associates, L.P.
First Springfield Associates, L.P.
First Timbercreek Landing Associates, L.P.
Campus Development Associates Limited Partnership
Campus Commons Associates - Limited Partnership
First Pacific South Center Associates, L.P.
SCHEDULE II
PROPERTIES
PROPERTY PARTNERSHIP
-------- -----------
Texas Apartments
----------------
Aspen Court Apartment First Aspen Court Associates, L.P.
Briar Park Apartments First Briar Park Associates, a Washington
Limited Partnership
Chelsea Park Apartments First Chelsea Park Associates, L.P.
Country Club Apartments First Appian Way Associates, ▇.▇.
▇▇▇▇▇▇▇▇▇ Creek Apartments First Greenwood Creek Associates, L.P.
Highlands of Preston First Highlands Associates, ▇.▇.
▇▇▇▇▇▇▇▇ Apartments First Marymont Associates, L.P.
14400 Montfort Townhomes First Montfort Associates, L.P.
Riverway Apartments First Riverway Associates, L.P.
Springfield Apartments First Springfield Associates, L.P.
Timbercreek Landing Apartments First Timbercreek Landing Associates, ▇.▇.
▇▇▇▇▇▇▇▇▇▇ Apartments
---------------------
Campus Commons North Apartments Campus Development Associates Limited
Partnership
Campus Commons South Apartments Campus Commons Associates - Limited
Partnership
Washington Office Building
--------------------------
First Pacific South Center First Pacific South Center
Associates, L.P.
SCHEDULE III
MORTGAGE DEBT
LENDERS AND PRINCIPAL BALANCE
Mortgage
Project Transferor Lenders Debt (A)
------- ---------- ------- --------
Initial Closings
----------------
Aspen Court Apartments First Aspen Court Associates, L.P. $2,051,401
Briar Park Apartments First Briar Park Associates, a Washington Limited Partnership 1,400,000
Campus Commons North Apartments Campus Development Associates Limited Partnership 6,719,802
Campus Commons South Apartments Campus Commons Associates - Limited Partnership 2,750,000
Chelsea Park Apartments First Chelsea Park Associates, L.P. 2,887,967
Highlands of Preston Apartments First Highlands Associates, L.P. 4,889,390
14400 Montfort Townhomes First Montfort Associates, L.P. 4,120,010
Marymont Apartments First Marymont Associates, L.P. 2,546,076
Riverway Apartments First Riverway Associates, L.P. 1,186,061
Timbercreek Landings Apartments First Timbercreek Landing Associates, L.P. 3,390,933
Pacific South Center Office Building First Pacific South Center Associates, L.P. 3,225,000
----------
35,166,640
----------
Subsequent Closings
-------------------
Country Club Place Apartments First Appian Way Associates, L.P. 3,580,819
Greenwood Creek Apartments First Greenwood Creek Associates, L.P. 5,052,311
Springfield Apartments First Springfield Associates, L.P. 5,510,673
----------
14,143,803
----------
49,310,443
==========
(A) Principal balances as of September 30, 1996
SCHEDULE IV
REAL ESTATE COMMISSIONS
Commissions Payable to
Affiliated Entities
--------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ &
Project Transferor Realty, Inc. Associates, Inc.
------- ---------- ------------ ----------------
Initial Closings
----------------
Aspen Court Apartments First Aspen Court Associates, L.P. $ 66,000
Briar Park Apartments First Briar Park Associates, a Washington
Limited Partnership
Campus Commons North Apartments Campus Development Associates Limited
Partnership 272,500
Campus Commons South Apartments Campus Commons Associates - Limited
Partnership 61,500
Chelsea Park Apartments First Chelsea Park Associates, L.P. 57,000
Highlands of Preston Apartments First Highlands Associates, L.P. 88,300
14400 Montfort Townhomes First Montfort Associates, ▇.▇.
▇▇▇▇▇▇▇▇ Apartments First Marymont Associates, L.P. 21,750
Riverway Apartments First Riverway Associates, L.P.
Timbercreek Landings Apartments First Timbercreek Landing Associates, L.P.
Pacific South Center Office Building First Pacific South Center Associates, L.P. 67,500 160,000
-------- --------
634,550 160,000
-------- --------
Subsequent Closings
-------------------
Country Club Place Apartments First Appian Way Associates, ▇.▇.
▇▇▇▇▇▇▇▇▇ Creek Apartments First Greenwood Creek Associates, L.P. 38,500
Springfield Apartments First Springfield Associates, L.P. 84,200
-------- --------
122,700 0
-------- --------
$757,250 $160,000
======== ========
SCHEDULE V
REQUIRED PARTNER APPROVAL
Required Partner Approval
Project Transferor Percentage
------- ---------- ---------------------
Initial Closings
----------------
Aspen Court Apartments First Aspen Court Associates, L.P. 51%
Briar Park Apartments First Briar Park Associates, a Washington
Limited Partnership 51%
Campus Commons North Apartments Campus Development Associates Limited
Partnership 51%
Campus Commons South Apartments Campus Commons Associates - Limited
Partnership 51%
Chelsea Park Apartments First Chelsea Park Associates, L.P. 51%
Highlands of Preston Apartments First Highlands Associates, L.P. 51%
14400 Montfort Townhomes First Montfort Associates, L.P. 51%
Marymont Apartments First Marymont Associates, L.P. 51%
Riverway Apartments First Riverway Associates, L.P. 51%
Timbercreek Landings Apartments First Timbercreek Landing Associates, L.P. 51%
Pacific South Center Office Building First Pacific South Center Associates, L.P. 51%
Subsequent Closings
-------------------
Country Club Place Apartments First Appian Way Associates, L.P. 51%
Greenwood Creek Apartments First Greenwood Creek Associates, L.P. 51%
Springfield Apartments First Springfield Associates, L.P. 51%
SCHEDULE VI
MAJOR TENANTS
1. TCI
2. C.T. Mac's Sports Bar
REQUIRED ADDITIONAL TENANTS
None
SCHEDULE VII
MAXIMUM PROPERTIES CLOSING COSTS
Maximum
Properties
Closing
Project Transferor Costs
------- ---------- -----
Initial Closings
----------------
Aspen Court Apartments First Aspen Court Associates, L.P. $ 110,000
Briar Park Apartments First Briar Park Associates, a Washington
Limited Partnership 30,000
Campus Commons North Apartments Campus Development Associates Limited Partnership 220,000
Campus Commons South Apartments Campus Commons Associates - Limited Partnership 150,000
Chelsea Park Apartments First Chelsea Park Associates, L.P. 110,000
Highlands of Preston Apartments First Highlands Associates, L.P. 130,000
14400 Montfort Townhomes First Montfort Associates, L.P. 60,000
Marymont Apartments First Marymont Associates, L.P. 70,000
Riverway Apartments First Riverway Associates, L.P. 40,000
Timbercreek Landings Apartments First Timbercreek Landing Associates, L.P. 90,000
Pacific South Center Office Building First Pacific South Center Associates, L.P. 330,000
----------
1,340,000
----------
Subsequent Closings
-------------------
Country Club Place Apartments First Appian Way Associates, L.P. 50,000
Greenwood Creek Apartments First Greenwood Creek Associates, L.P. 80,000
Springfield Apartments First Springfield Associates, L.P. 130,000
----------
260,000
----------
$1,600,000
==========
SCHEDULE VIII
DEEMED VALUE
Deemed
Project Transferor Value
------- ---------- ---------
Initial Closings
----------------
Aspen Court Apartments First Aspen Court Associates, L.P. $ 4,400,000
Briar Park Apartments First Briar Park Associates, a Washington
Limited Partnership 2,200,000
Campus Commons North Apartments Campus Development Associates Limited Partnership 10,900,000
Campus Commons South Apartments Campus Commons Associates - Limited Partnership 4,100,000
Chelsea Park Apartments First Chelsea Park Associates, L.P. 5,600,000
Highlands of Preston Apartments First Highlands Associates, L.P. 8,800,000
14400 Montfort Townhomes First Montfort Associates, L.P. 5,650,000
Marymont Apartments First Marymont Associates, L.P. 4,350,000
Riverway Apartments First Riverway Associates, L.P. 1,900,000
Timbercreek Landings Apartments First Timbercreek Landing Associates, L.P. 5,500,000
Pacific South Center Office Building First Pacific South Center Associates, L.P. 5,400,000
-----------
58,800,000
-----------
Subsequent Closings
-------------------
Country Club Place Apartments First Appian Way Associates, L.P. 5,350,000
Greenwood Creek Apartments First Greenwood Creek Associates, L.P. 7,700,000
Springfield Apartments First Springfield Associates, L.P. 8,420,000
-----------
21,470,000
-----------
$80,270,000
===========