MASTER AGREEMENT
OF MERGER AND ACQUISITION
--------------------------
by and among
Highwoods Properties, Inc.,
Highwoods/Forsyth Limited Partnership,
Associated Capital Properties, Inc. and its
Shareholders
Dated August ___, 1997
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IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
DOCUMENT USED IN CONNECTION WITH THE OFFERING AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO THE REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
MASTER AGREEMENT OF
MERGER AND ACQUISITION
This MASTER AGREEMENT OF MERGER AND ACQUISITION (the "Master Agreement")
is made as of the 27th day of August, 1997, by and among HIGHWOODS PROPERTIES,
INC., a Maryland corporation ("HPI"), HIGHWOODS/FORSYTH LIMITED PARTNERSHIP, a
North Carolina limited partnership ("Highwoods"), ASSOCIATED CAPITAL PROPERTIES,
INC., a Florida corporation ("ACP") and the shareholders of ACP (the "ACP
Shareholders").
WHEREAS, Highwoods is a North Carolina limited partnership having HPI as
its sole general partner and HPI has elected to be qualified as a real estate
investment trust under the Code; and
WHEREAS, the partnership, listed on Schedule 1 attached hereto (the "ACP
Partnerships") own certain real properties located throughout Florida;
WHEREAS, ACP is engaged in certain real estate-related activities
throughout Florida including brokerage, leasing and management;
WHEREAS, Highwoods and the owners of the ACP Partnerships (the "ACP
Partners") have entered into or will enter into the Contribution Agreements (as
defined below), pursuant to which such ACP Partners, subject to the provisions
thereof, will irrevocably agree to sell, transfer and assign their interests in
the ACP Partnerships to Highwoods; and
WHEREAS, pursuant to the terms hereof and the terms of the Contribution
Agreements, Highwoods, ACP, the ACP Partnerships, the corporations listed at
Schedule 1-1 (the "ACP Corporations") and the ACP Shareholders desire to combine
their respective businesses subject to the terms, conditions, provisions and
limitations of this Master Agreement;
NOW, THEREFORE, in consideration of the premises herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms shall have the following meanings for
all purposes of this Master Agreement and such meanings are equally applicable
to the singular and plural forms of the terms defined. The terms "hereof",
"hereto", "herein", "hereunder" and comparable terms refer to the entire
agreement with respect to which
such terms are used and not to any particular section, subsection, paragraph or
other subdivision thereof.
"ACP Cash Recipients" means collectively those of the ACP Partners
receiving cash pursuant to the transactions contemplated by the Purchase
Option Agreements (as defined below).
"ACP Corporations" means those corporate general partners of certain of the
ACP Partnerships as listed on Schedule 1-1.
"ACP Financial Statements" means the periodic historical income statements
and balance sheets provided to Highwoods (including the schedules attached
thereto) for the ACP Partnerships, the ACP Corporations and ACP, and
specifically excludes any forecasts and projections.
"ACP Parties" means collectively ACP, the ACP Partnerships, ACP Partners,
the ACP Corporations and the ACP Shareholders, without duplication.
"ACP Partners" means collectively ACP, the ACP Cash Recipients and the ACP
Unit Recipients (as defined below) as listed on Schedule 3.2(a) attached
hereto.
"ACP Property Owners" means the ACP Partnerships, the ACP Corporations and
ACP.
"ACP Shareholders" means Messrs. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
"ACP Unit Recipients" means collectively those parties receiving Units (as
defined below) pursuant to the transactions contemplated by the Exchange
Option Agreements (as defined below).
"Actual Knowledge" for the purposes of this Master Agreement shall mean
information which is known to an individual or, as to any entity, to the
officers, general partners or managers of such entity without the
requirement of additional inquiry.
"Assumed ACP Debt Financing" means the indebtedness described on Schedule
1-2 attached hereto.
"Assumed ACP Mortgages" means the deeds to secure debt, mortgages or other
instruments that secure the Assumed ACP Debt Financing.
"Closing" means the consummation of the transactions contemplated by this
Master Agreement.
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"Closing Date" means the date upon which all the conditions for closing and
consummation of the transactions contemplated by this Master Agreement
shall have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contribution Agreements" means collectively the Purchase Option Agreements
and the Exchange Option Agreements.
"Environmental Law" means any and all federal, state and local laws,
regulations, ordinances and other requirements relating to pollution or
protection of the environment, including, without limitation, laws,
regulations and requirements relating to the ownership, possession, storage
and control of the Properties (as defined below) and to emissions,
discharges, releases or threatened releases of storm water, pollutants,
contaminants, toxic or hazardous substances, or solid or hazardous wastes
into the environment (including without limitation ambient air, surface
water, groundwater or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, toxic or hazardous substances, or
solid or hazardous wastes. The Environmental Laws include, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Option Agreements" means, collectively, those agreements in
substantially the form attached hereto as Schedule 1-3 to be entered into
by Highwoods, HPI and certain of the ACP Parties pursuant to which Units
are to be exchanged for certain ownership interests in the ACP
Partnerships.
"Future Acquisition Properties" shall have the meaning provided at Section
3.1(b).
"Highwoods Partnership Agreement" means the First Amended and Restated
Agreement of Limited Partnership of Highwoods/Forsyth Limited Partnership
dated as of June 14, 1994, as amended through the date of Closing.
"Improvements" means all buildings, structures, streets, furnishings,
parking lots, landscaping, walls, ponds, culverts, fixtures, utilities,
fences, driveways, loading docks, security systems and other physical
features constructed or assembled on, at, upon or beneath any of the
Properties (whether finished or unfinished) and owned by the respective ACP
Property Owner owning such Property.
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"Indebtedness" means, without duplication, any obligations for borrowed
money and all monetary obligations to trade creditors, whether heretofore,
now or hereafter owing, arising, due or payable to any person and howsoever
evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise and whether matured or
unmatured. Without in any way limiting the generality of the foregoing,
Indebtedness specifically includes the following: (a) all obligations or
liabilities of any person that are secured by any lien, claim, encumbrance
or security interest upon property; (b) all obligations or liabilities
created or arising under any capital lease of real or personal property, or
conditional sale or other title retention agreement with respect to
property, even though the rights and remedies of the lessor, seller or
lender thereunder are limited to repossession of such property; (c) all
unfunded pension fund, employee medical or welfare obligations and
liabilities; (d) deferred taxes; and (e) all obligations under any
indemnification agreements, guaranty agreements, letters of credit or other
documents creating such contingent liabilities.
"Investment Committee" shall mean the Investment Committee of the Board of
Directors of HPI (the "Board").
"Liability" means any liability, obligation or indebtedness of any and
every kind and nature, whether heretofore, now or hereafter owing, arising,
due, or payable by ACP, the ACP Partnerships or the ACP Corporations,
howsoever evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed, or otherwise, including obligations
of performance.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the lien or security interest arising from a deed to secure
debt, mortgage, encumbrance, pledge, security agreement, conditional sale
or trust receipt or a lease consignment or bailment for security purposes.
The term Lien shall include reservations, exceptions, defects of any kind
or nature, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
property.
"Owned Properties" means the real and personal property owned by the ACP
Partnership listed at Schedule 3.1(a)(A).
"Payable ACP Debt Financing" means the indebtedness described on Schedule
1-5 attached hereto.
"Pending Acquisition Properties" means the real and personal property
listed on Schedule 3.1(a)(B).
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"Permitted Lien" means (i) liens for 1997 ad valorem taxes not yet due and
payable; (ii) restrictions, easements, covenants, reservations and rights
of way of record that would be disclosed by a complete title examination;
(iii) zoning ordinances, restrictions and other requirements imposed by
governmental authority as do not materially interfere with the present use
of a parcel of property; (iv) such imperfections of title, liens and
encumbrances, if any, as do not detract materially from the value or
interfere with the present use of a parcel of property and which do not
secure obligations for borrowed money or the deferred purchase price of
property; and (v) the liens securing the Assumed ACP Debt Financing and the
liens securing the Payable ACP Debt Financing.
"Person" means any individual, joint venture, corporation, limited
liability company, voluntary association, partnership, trust, joint stock
company, unincorporated organization, association, government, or any
agency, instrumentality, or political subdivision thereof, or any other
form of entity.
"Property" or "Properties" shall mean, individually, the real property
together with any Improvements thereon and all personal property and
rights, privileges and interests appurtenant thereto owned by an ACP
Property Owner or, collectively, by all of the ACP Property Owners as more
particularly described on the Descriptive Property Exhibit attached hereto
at Schedule 1-6.
"Purchase Option Agreements" means, collectively, those agreements in
substantially the form attached hereto as Schedule 1-4 to be entered into
by Highwoods, HPI and certain of the ACP Parties pursuant to which cash is
to be paid for certain ownership interests in the ACP Partnerships.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Laws" means the Securities Act, the Exchange Act and the rules
and regulations promulgated thereunder.
"Shares" means the duly authorized common stock, par value $.01 per share,
of HPI.
"Unit" means an undivided limited partnership interest in Highwoods, which
is exchangeable by a Unit holder for either cash or Shares, whichever may
be elected by HPI, in accordance with the Highwoods Partnership Agreement
and the Registration Rights Agreement to be executed in conjunction with
the Contribution Agreements. "Units" refers to Class A Units as provided by
the Highwoods Partnership Agreement unless otherwise specified.
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ARTICLE II
THE TRANSACTIONS
2.1 General. Subject to the terms, conditions, provisions and
limitations in this Master Agreement, on the Closing Date the parties shall
cause the transactions contemplated hereby (the "Transactions") to be
consummated, including, but not limited to:
(a) The Closings under the Contribution Agreements, as described in
Section 2.2 below; and
(b) The merger of ACP and the ACP Corporations into HPI pursuant to
the terms and conditions hereof, as more particularly described in
Article IV below.
2.2 Contribution Agreements. Highwoods shall tender the consideration
required by each of the Contribution Agreements such that each "Final Closing",
as defined in the Contribution Agreements, occurs under the terms of each of the
respective Contribution Agreements.
2.3 Closing.
(a) The Closing of the Contribution Agreements for the Owned
Properties and the Pending Acquisition Properties shall take place at
the offices of Highwoods' attorneys (or as otherwise mutually agreed) on
September 15, 1997, unless otherwise mutually agreed; however, the
parties acknowledge that the consummation of the transactions with
respect to the Pending Acquisition Properties may not occur until on or
about September 22, 1997. The Closing of the contribution of each of the
Future Acquisition Properties shall occur as provided in the contracts
for such properties as approved by the Investment Committee. In the
event that the parties are proceeding to the Closing of the Contribution
Agreements but are unable to close by September 15, 1997 (or September
22, 1997 with respect to the consummation of the Pending Acquisition
Properties as discussed above) due to reasonable cause, the parties
agree that they will set a reasonable and mutually agreeable date for
Closing, which date shall not in any event be later than October 15,
1997. Unless such date is otherwise extended by agreement of the
parties, this Master Agreement shall terminate on September 15, 1997 or
October 16, 1997 (if extended in accordance with the provision of the
previous sentence) at which time all of its terms and provisions shall
be of no further force and effect except that Sections 13.5, 13.6 and
2.4(d) shall survive such termination.
(b) Highwoods may terminate this Master Agreement without liability
and without waiving any of its rights at law or in equity by giving
notice to ACP at any time prior to the Closing:
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(i) If the Closing shall not have occurred on or before the
Closing Date by reason of the failure of the ACP Parties to satisfy
any condition precedent to the performance of Highwoods (unless the
failure results from Highwoods itself breaching any representation,
warranty or covenant contained in this Master Agreement or
Highwoods' failure to satisfy any condition precedent to the
performance of the ACP Parties);
(ii) If any of the ACP Parties files any voluntary petition,
or has filed against it any involuntary petition, seeking
liquidation, reorganization, arrangement, readjustment of debts or
for any other relief under the United States Bankruptcy Code or
under any other statute, code or act, whether state, federal or
foreign, or becomes insolvent or otherwise becomes subject to any
reorganization or insolvency proceeding; or
(iii) Pursuant to the terms of Section 2.4 hereof.
(c) The ACP Parties may terminate this Master Agreement without
liability and without waiving any of their respective rights at law or
in equity by giving notice to Highwoods at any time prior to the
Closing:
(i) If the Closing shall not have occurred on or before the
Closing Date by reason of any condition precedent herein to the
performance by the ACP Parties not being fulfilled (unless the
failure results from any of the ACP Parties breaching any
representation, warranty, or covenant contained in this Master
Agreement); or
(ii) Pursuant to the terms of Section 2.5 hereof.
2.4 Examination by Highwoods.
(a) Highwoods, at its own expense and at any time from the date
hereof until September 12, 1997 (the "Review Period") (except with
respect to Section 2.4(a)(v)), shall have the right, but not the
obligation, to perform the following procedures:
(i) Inspect all physical aspects of the Properties, including
all systems, components and service contracts. ACP agrees to supply
HPI or Highwoods with "as-built" plans, specs and surveys with
respect to all Properties that are in its possession or under its
control;
(ii) Investigate all zoning, code and governmental
requirements;
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(iii) Review and perform Phase I and Phase II audits and other
environmental studies;
(iv) Review preliminary title reports and surveys;
(v) Review copies of leases, rental agreements and contracts,
together with any modifications or amendments therein pertaining to
the operation of the Properties, but it is acknowledged by
Highwoods that such review was completed on August 15, 1997 for
purposes of confirming the income analysis of the Properties except
as to final documentation of the Accustaff lease or modification in
Independent Square and the ProSource lease or modification in the
Atrium at Coral Gables, which documentation shall be provided by
ACP for Highwoods review as soon as practicable after the date
hereof;
(vi) For the purpose of assessing the financial information of
ACP, the ACP Partnerships, the ACP Corporations and the Properties,
other than the income stream of the Properties as described at
Section 2.4(a)(v) above, obtain audited financial statements,
verify financial information from all accounting books and records
since inception of the ACP Partnerships' ownership and review any
other information and documents in the ACP Partnerships' possession
or control that pertains to the ACP Partnerships' ownership and
operation of the Properties (collectively, the "Records"); and
(vii) Review all documentation required to be executed in
connection with the assumption by Highwoods of the Assumed ACP Debt
Financing (the "Assumption Documents").
ACP and the ACP Shareholders covenant and agree that they shall provide
Highwoods with access to, and copies of, all Records in their possession and
control. HPI and Highwoods shall conduct all of their property inspections in a
manner not disruptive to the ACP Parties, the tenants or the operation of the
Properties.
ACP and the ACP Shareholders shall cooperate with Highwoods before and
after the Closing in providing such information as is available or reasonably
obtainable and as Highwoods or HPI may reasonably require to prepare its Form
8-K filings and such other reports and filings as may be required by any
governmental authority or the NYSE.
(b) In the event that during the Review Period Highwoods, in its
reasonable judgment, determines that there are material structural or
environmental defects or title or other deficiencies existing at a Property or
Properties, Highwoods shall have the option to terminate this Master Agreement
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without incurring the "break-up" fee provided at Section 13.8 if the total costs
to repair, remedy or remove such deficiencies and/or defects from the Properties
exceeds $15,000,000 in the aggregate. The ACP Parties shall have no obligation
to cure any such defects or deficiencies and HPI's and Highwoods' only remedy
with respect thereto shall be to terminate this Master Agreement as provided in
this Section 2.4(b).
(c) In the event that during the Review Period Highwoods, in its
reasonable judgment, determines that any of the terms, conditions or provisions
of the Assumption Documents are unacceptable to Highwoods in any respect, then
Highwoods shall have the option to pay off the Assumed ACP Debt Financing to
which such documents relate at or immediately following the Closing, provided
that the prepayment of such Assumed ACP Debt Financing shall not result in any
adjustment to the Aggregate Consideration (as defined in Section 3.1) payable to
the ACP Parties and Highwoods shall pay any and all prepayment penalties, fees
and other expenses associated with such prepayment listed on Schedule 2.4(c),
except that ACP and the ACP Shareholders shall pay any such penalties or fees
associated with any debt owed to ▇▇▇▇▇▇ Brothers, Inc.
(d) HPI and Highwoods agree to indemnify and hold the ACP Parties
harmless from and against any and all claims, causes of action, damages, costs
(including reasonable attorney's fees), injuries and liabilities resulting from
the activities of HPI and Highwoods and/or HPI's or Highwoods' agents or
designees at or on the Properties. Notwithstanding anything to the contrary
contained elsewhere in this Master Agreement, the provisions of this Section
2.4(d) shall survive both Closing and termination of this Master Agreement.
2.5 Examination by ACP
Highwoods shall give the ACP Parties the opportunity to conduct a due
diligence review of the business and affairs of Highwoods and HPI, so long as
all such due diligence occurs prior to September 12, 1997 and does not
unreasonably disrupt the operations of Highwoods or its outside auditors or
securities counsel. After such due diligence (but prior to September 12, 1997),
if ACP or the ACP Parties determine that the transaction contemplated hereby is
undesirable due to a material adverse change in the business or financial
condition or the financial or business prospects of Highwoods or HPI since March
31, 1997, the ACP Parties may terminate this Master Agreement without incurring
the "break up" fee described in Section 13.8. A "material adverse change" for
purposes of this Section 2.5 shall include, but not be limited to, (i) any class
action claim under Rule 10b-5 of the Exchange Act against either HPI or
Highwoods which, if determined adverse to HPI or Highwoods, could
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reasonably be expected to have a materially adverse impact on HPI or Highwoods
and (ii) the loss by Highwoods or HPI of investment grade credit status by
either of the rating agencies, i.e., ▇▇▇▇▇'▇ Investors Services or Standard &
Poors Ratings Group.
ARTICLE III
CONSIDERATION
3.1 Purchase Price Generally. The total consideration to be transferred
or paid to the ACP Partners on the Closing Date (prior to the adjustments
required by Section 3.3 below) with respect to the Owned Properties and the
Pending Acquisition Properties (the "Aggregate Consideration") and the
consideration for the Future Acquisition Properties shall be based on the
following aggregate assigned values for the various ACP Partnerships that own
such Properties:
(a) The total consideration for the ACP Partnerships listed on
Schedule 3.1(a)A (the Owned Properties) and for the ACP Partnerships listed on
Schedule 3.1(a)B (the Pending Acquisition Properties) shall be based upon a
total value for such ACP Partnerships of $551,000,000 in a combination of cash,
Units, Shares and debt assumption. Each of the Units and Shares issued shall
have an agreed value equal to $32.50. In addition, Highwoods shall pay all
closing costs and expenses relating to the acquisition of the Pending
Acquisition Properties.
(b) Schedule 3.1(b) describes the current status of any future
transaction involving certain properties which have been approved by the
Investment Committee and which are under contract to ACP or its shareholders or
an affiliate thereof (the "Future Acquisition Properties"). The total
consideration for the Future Acquisition Properties shall be as set forth in
Section 3.2(e).
3.2 Agreed Upon Consideration. Subject to adjustment as provided below,
the Aggregate Consideration required by the Contribution Agreements and this
Master Agreement, to be paid by Highwoods or HPI, as the case may be, to or in
favor of the ACP Parties on the Closing Date shall be:
(a) the payment of cash to the ACP Cash Recipients pursuant to
the terms of the applicable Purchase Option Agreements and in accordance with
Schedule 3.2(a) attached hereto, which shall be completed prior to the Closing
Date;
(b) the issuance of Class A Units to the ACP Unit Recipients
pursuant to the terms of the applicable Exchange Option Agreements and in
accordance with
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Schedule 3.2(a) attached hereto, which shall be completed prior to the Closing
Date;
(c) the issuance of Shares to the shareholders of the ACP
Corporations pursuant to Section 4.6 and in accordance with Schedule 3.2(c)
attached hereto, which shall be completed prior to the Closing Date;
(d) the payment by Highwoods of the Payable ACP Debt Financing
and the assumption of the principal balance of the Assumed ACP Debt Financing
and the release of all the combined ACP Parties from any and all guaranties and
other liabilities arising out of the Payable ACP Debt Financing and the Assumed
ACP Debt Financing or any other liabilities assumed by HPI or Highwoods as
expressly provided herein. Additionally, Highwoods agrees to pay all fees, costs
and expenses (including prepayment penalties) associated with the assumption of
the Assumed ACP Debt Financing and the prepayment of the Payable ACP Debt
Financing except that the ACP Parties shall pay any penalties or fees associated
with the payment of any Payable ACP Debt Financing owed to ▇▇▇▇▇▇ Brothers,
Inc.; and
(e) for the Future Acquisition Properties, a combination of
cash, assumed debt and Units in an amount to be mutually agreed upon, but in no
event shall such amount exceed 102% of ACP's contract price for the purchase of
such properties, delivered to the ACP Shareholders or such other persons(s) as
appropriate upon their closing on the acquisition of such properties.
Notwithstanding the amounts set forth in Schedules 3.2(a) and 3.2(c) hereof, (i)
the allocation of the components comprising the Aggregate Consideration may be
adjusted upon the mutual agreement of the parties hereto and (ii) each ACP
Partner's consideration (in cash or Units) and the consideration (in Shares) of
each of the ACP Corporations' shareholders to be received shall be adjusted, as
applicable, pursuant to Paragraph 2 of each such ACP Partner's Contribution
Agreement and Section 3.3 below.
3.3 Closing Adjustments.
(a) Generally. All real estate taxes, charges and assessments
affecting a Property, all charges for water, sewer, electricity, gas and all
other utilities and operating expenses with respect to a Property, to the extent
not paid or payable by tenants under the Leases (as defined in Section 6.7 below
and as described on Schedule 6.7A attached hereto), shall be apportioned on a
per diem basis as of midnight on the date immediately preceding the Closing. All
such expenses for the period preceding the Closing shall be deemed expenses of
the ACP Shareholders and all such expenses commencing as of the Closing with
respect to such Property shall be deemed to be expenses of Highwoods. Amounts
owed under this paragraph shall be paid to the party to whom they are owed in
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cash at the Closing or in the Post-Closing Adjustment Period (as defined below)
in the same manner as if the underlying real property were being sold. If any
real estate taxes, charges or assessments have not been finally assessed as of
the Closing Date for a Property for the then current calendar tax year, they
shall be adjusted at the Closing based upon the most recently issued bills
therefor. The provisions of this Section 3.3(a) shall survive the Closing. With
respect to unpaid real estate taxes, charges and assessments, all apportionments
hereunder will be made on the assumption that Highwoods will pay such amounts
timely such that it will be entitled to receive the maximum discount available
under state and local laws.
(b) Rent. Except for delinquent rent, all rent under an ACP
Partnership's Leases and other income attributable to a Property shall be
apportioned on a per diem basis as of midnight on the date immediately preceding
the Closing. All such rent and other income, including commissions earned, for
the period preceding the Closing shall be deemed to be property of the ACP
Shareholders, and all rent and other income for any period commencing as of the
Closing and thereafter shall be the property of Highwoods for the purpose of
making the adjustments set forth herein. All security deposits held by ACP
Parties prior to the Closing Date shall be the property of the ACP Shareholders.
Amounts owed under this paragraph shall be paid to the party to whom they are
owed in cash at the Closing or during the Post-Closing Adjustment Period.
Delinquent rent shall not be prorated, but shall be deemed the property of the
ACP Shareholders. Payments received by Highwoods from tenants of an ACP
Partnership from and after the Closing with respect to a Property shall be
applied first to rents then due for the current period from such tenant and then
to such tenant's delinquent rent as of the time of apportionment. Highwoods
shall use reasonable efforts to collect delinquent rents for the benefit of the
ACP Shareholders but in no event shall be obligated to evict or ▇▇▇ any tenants
in order to collect such rents and shall cooperate with the ACP Shareholders in
the collection of any delinquent amounts; provided, however, that the ACP
Shareholders shall not have any rights to evict such tenants for such delinquent
amounts. Any amounts received by ACP Parties on account of rent or other income
for the period after the Closing with respect to the Property and the related
personal property shall be turned over to Highwoods for application in
accordance with the terms of this paragraph. All accounts receivable, notes,
cash and bank accounts of the ACP Partnerships existing as of the Closing Date
shall at Closing, for the purpose of making the adjustments set forth herein, be
transferred to or retained by the ACP Shareholders, other than the remaining
balance of any escrow accounts for tenant improvements and lease commissions
required by Section 10.8 hereof, security deposits and amounts which belong to
Highwoods after making the closing adjustments for rent, proration of taxes and
operating expenses. Payments received by Highwoods with respect to such accounts
receivable after the Closing shall be immediately forwarded to the appropriate
ACP Party designated by ▇▇. ▇▇▇▇▇▇▇▇. Except for the adjustments to be made in
the Post Closing Adjustment Period, the parties hereto agree that no
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adjustments to reimbursable income received from tenants for taxes, insurance or
common area maintenance expenses will be made because the estimated periodic
payments made by tenants of the Properties for 1997 were more or less than the
tenant actual prorated share of taxes, insurance and common area maintenance
expenses. Notwithstanding anything herein to the contrary, any tax payments
relating to a period prior to the Closing that are reimbursed or returned by the
applicable taxing authority shall be immediately forwarded to the appropriate
ACP Parties designated by ▇▇. ▇▇▇▇▇▇▇▇. The provisions of this Section 3.3(b)
shall survive the Closing.
(c) Preclosing Expenses and Liabilities. The parties acknowledge
that not all invoices for expenses incurred with respect to the Properties prior
to the Closing will be received by the Closing and that a mechanism needs to be
in place so that such invoices can be paid as received. All of the prorations
referred to above will be done on an interim basis at the Closing and will be
subject to final adjustment in accordance with the provisions hereof within
sixty days or such other agreed upon period of time following Closing (the
"Post-Closing Adjustment Period"). Upon receipt by Highwoods after Closing of an
invoice for a Property's operating expenses which are attributable in whole or
in part to a period prior to the Closing and which were not apportioned (or, if
apportioned, not correctly apportioned) at Closing, Highwoods shall submit to
the ACP Shareholders a copy of such invoice with such additional supporting
information as the ACP Shareholders shall reasonably request. Within ten (10)
days of receipt of such copy, the ACP Shareholders shall pay to Highwoods an
amount equal to the portion of such invoice attributable to the period ending as
of midnight on the date immediately preceding the Closing apportioned on a per
diem basis.
3.4 Fluctuation. EACH OF THE ACP PARTIES AND HIGHWOODS ACKNOWLEDGES AND
AGREES THAT AFTER THE EXECUTION OF THE CONTRIBUTION AGREEMENTS, THE MARKET VALUE
OF THE SHARES WHICH IS CURRENTLY OUTSTANDING MAY INCREASE OR DECREASE IN VALUE
AS THE RESULT OF MARKET FLUCTUATIONS, AND THAT ANY SUCH FLUCTUATIONS MAY AFFECT
THE VALUE OF THE UNITS. NOTWITHSTANDING THESE FLUCTUATIONS, HIGHWOODS WILL NOT
BE REQUIRED TO INCREASE THE NUMBER OF UNITS TO BE ISSUED TO ANY ACP UNIT
RECIPIENT (WHOSE PURCHASE PRICE IS PAID IN UNITS) IN THE EVENT OF A DECREASE IN
THE MARKET VALUE OF SHARES PRIOR TO THE CLOSING. LIKEWISE, EACH ACP UNIT
RECIPIENT WHOSE PURCHASE PRICE IS BEING PAID IN UNITS WILL BE ENTITLED TO THAT
NUMBER OF UNITS SET FORTH ON SCHEDULE 3.2(a) HEREOF NOTWITHSTANDING ANY INCREASE
IN VALUE OF SHARES PRIOR TO THE CLOSING, AS SUCH INCREASE MAY INURE TO THE
BENEFIT OF SUCH ACP UNIT RECIPIENT. NOTWITHSTANDING THE FOREGOING, THIS SECTION
3.4 SHALL NOT PREVENT THE ACP PARTIES FROM BEING ABLE TO TERMINATE THIS MASTER
AGREEMENT IN ACCORDANCE WITH SECTION 2.5 IN THE EVENT OF A MATERIAL CHANGE IN
THE BUSINESS, FINANCIAL CONDITION OR THE FINANCIAL OR BUSINESS PROSPECTS OF HPI
OR HIGHWOODS SINCE MARCH 31, 1997.
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3.5 Partnership Distribution Adjustment. For the first fiscal quarter of
Highwoods ending after the Closing Date, partnership distributions attributable
to such quarter payable by Highwoods to the ACP Unit Recipients pursuant to
Section 12.2C of the Highwoods Partnership Agreement shall be prorated to take
into account the period of time during such quarter that the ACP Unit Recipients
were limited partners in Highwoods. Each ACP Unit Recipient shall receive that
portion of a full quarterly distribution otherwise attributable to his Units
determined by multiplying the amount of such full distribution by a fraction the
numerator of which is the number of days during such quarter that the ACP Unit
Recipient was a limited partner in Highwoods and the denominator of which is the
number of days in such quarter.
3.6 Non-Acquired Partnership Interests. Except with respect to the
Starwood Partnerships (as defined below), in the event an ACP Partner fails to
agree to contribute or sell its interests (a "Non-acquired Interest") in an ACP
Partnership and either (i) such Non-acquired Interest has an assigned value of
at least $5,000,000 or (ii) such Non-acquired Interest together with all other
Non-acquired Interests have an aggregate assigned value of at least five percent
(5%) of the Aggregate Consideration (prior to any other adjustment), Highwoods
shall have the right to exclude the Property or Properties subject to such
Non-acquired Interest from this Master Agreement and the transactions
contemplated hereby, and an appropriate adjustment will be made to the Aggregate
Consideration payable with respect to the Properties to be acquired. The parties
agree to use their best efforts to restructure any acquisition of an ACP
Partnership which could result in a Non-acquired Interest to allow Highwoods to
acquire 100% of the ownership interests in such ACP Partnership, or
alternatively, in the Property owned by such ACP Partnership.
3.7 Adjustment for Starwood Partnerships. In the event that the
ownership interests of Starwood Opportunity Fund II, LP in ACP-Venture I,
Limited Partnership or in SCG-ACP Master Limited Partnership, or of Starwood
Opportunity Fund IV, L.P. in SOFI-IV Tampa Limited Partnership or SOFI-IV
Tallahassee Limited Partnership (collectively the "Starwood Partnerships")
cannot be acquired because of a failure of the Starwood entities to agree to the
acquisition of those partnerships within the terms contemplated by this Master
Agreement, the parties hereto agree that all of the other Properties and assets
included herein will remain subject to this Master Agreement and the Closing
will occur as provided herein, subject to (a) structuring the Transactions in a
manner that complies with any applicable agreements with the Starwood entities
and (b) the parties mutually agreeing on an adjustment to the Aggregate
Consideration payable with respect to the Properties to be acquired. The
Aggregate Consideration will be adjusted to reflect the exclusion of the
Starwood Partnerships from the ACP Partnerships and the valuation principles
otherwise used by Highwoods in valuing the Properties will be applied to revalue
the remaining Properties and assets, subject to agreement by ACP. Highwoods and
the ACP Shareholders additionally agree that to the extent allowed by any
partnership agreement, management agreement or leasing agreement to which the
properties owned by ACP-Venture I, Limited Partnership, SCG- ACPI, Limited
Partnership, SOFI-IV Tampa Limited Partnership or SOFI-IV Tallahassee
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Limited Partnership are subject, any rights which ACP or its affiliates own
therein shall be transferred to Highwoods for consideration to be determined by
the mutual agreement of the parties hereto, if an adjustment in consideration is
appropriate.
3.8 "Lockup" Agreement. The Units and Shares received at Closing will be
subject to a Registration Rights and Lockup Agreement substantially in the form
of Exhibit 3.8 (the "Registration Rights Agreement"). Subject to the terms and
conditions of the Registration Rights Agreement, any or all Units and Shares
received may be fully pledged as collateral for one or more bona fide loans at
any time and from time to time after the Closing. The Registration Rights and
Lockup Agreement will allow an accelerated release of the "lockup" term in the
event of a change in control of or a material adverse change in the financial
condition of either HPI or Highwoods or if ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is not appointed to
the Board or nominated by management and elected to the Board within twelve
months of the date of Closing.
ARTICLE IV
MERGER WITH ACP
4.1 Merger. Subject to the Maryland General Corporation Law and the
Florida General Corporation Act and on the terms and subject to the conditions
of this Master Agreement, the Articles of Merger of ACP with HPI (the "Articles
of Merger") and the Agreement and Plan of Merger, the form of which shall be
mutually acceptable to the parties, shall be executed and filed, as appropriate,
with the States of Maryland and Florida on the Closing Date. The Merger shall be
consummated and shall become effective upon the filing of the Articles of Merger
(the "Effective Time"). ACP shall merge with and into HPI (the "Merger") in
accordance with the Agreement and Plan of Merger and the terms hereof, and the
separate existence of ACP shall cease and HPI shall be the surviving corporation
(the "Surviving Corporation").
4.2 Articles of Incorporation. The articles of incorporation of HPI in
effect at the Effective Time shall be the articles of incorporation of the
Surviving Corporation.
4.3 Fiscal Year. The bylaws of HPI in effect at the Effective Time shall
be the bylaws of the Surviving Corporation. The fiscal year of the Surviving
Corporation shall end on the last day of December of each year.
4.4 Directors and Officers. From and after the Effective Time, until
successors or additional officers and/or directors are duly elected or appointed
in accordance with applicable law, the directors of HPI at the Effective Time
shall be the directors of the Surviving Corporation and the officers of HPI at
the Effective Time, together with the officers appointed pursuant to Section
5.3, shall be the officers of the Surviving Corporation.
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4.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any party hereto or any holder of the
Shares:
(a) Each Share issued and outstanding immediately prior to the
Effective Time shall remain outstanding as one validly issued, fully
paid and nonassessable share of common stock, par value $.01 per share,
of the Surviving Corporation; and
(b) Each share of common stock, no par value, of ACP issued and
outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted automatically into the right to receive a pro rata share (in
whole shares only) of 307,693 Shares and HPI's transfer agent,
immediately after Closing, shall issue HPI stock certificates to the
holders of the ACP stock certificates representing each such holder's
pro rata share of such Shares.
(c) At Closing, HPI shall issue a total of 1,479,290 freely
transferable warrants exercisable at any time after the fifth
anniversary of the date of the issuance in a form to be established by
mutual agreement of the parties hereto (the "Warrants"), whereby the
persons on Schedule 4.5(c), which shall be completed prior to the
Closing Date, shall be granted the right to purchase the number of
Shares indicated on Schedule 4.5(c) at a purchase price equal to $32.50
as more particularly described in the Warrants.
The pro rata portion of the merger consideration payable to each holder
of ACP shares provided above shall be equal to a fraction, the numerator
of which is the number of ACP shares held by such holder immediately
prior to the effective time and the denominator of which is the total of
all the shares of ACP common stock issued and outstanding immediately
prior to the Effective Time. Schedule 4.5 hereto sets forth the
proportionate interest of each of the ACP Shareholders (the "ACP
Percentage Interests").
4.6. The ACP Corporations shall each be merged into HPI under the
general provisions provided above for the merger of ACP into HPI except that the
conversion provisions at Section 4.5 shall be determined upon valuation of each
such ACP Corporation. No warrants shall be issued in the merger of the ACP
Corporations into HPI. The consideration to be received by the shareholders of
the ACP Corporations (other than ACP) is as set forth in Section 3.2(c) hereof.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Operation of Business. After making adequate provisions for all
prorations contemplated herein, specifically by Section 3.3, and by the
Contribution Agreements, the ACP Partnerships and the ACP Corporations may make
cash
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distributions of all cash on hand immediately prior to the Closing and may
otherwise distribute all claims or other evidences of money owed to them.
Highwoods and the ACP Parties agree to use their reasonable efforts to reconcile
prorations and other closing adjustments within the Post-Closing Adjustment
Period. In the event any party receives any payments to which any other party
is, pursuant to the proration provisions hereof, entitled, such payment shall
promptly be delivered to the party so entitled.
5.2 Brokers. Each of the ACP and ACP Shareholders covenants, represents
and warrants to Highwoods and HPI, and Highwoods and HPI covenant, represent and
warrant to each of the ACP Parties that, except as indicated on Schedule 5.2
attached hereto which sets forth any and all broker's fees to be paid by HPI and
Highwoods, no broker or finder or agent has been involved or engaged by it in
connection with the transactions contemplated hereby. Each party hereby agrees
to indemnify and hold harmless the other, and Highwoods and HPI agree
specifically as related to the persons identified on Schedule 5.2 to hold
harmless and indemnify the ACP Parties, from and against any and all broker's or
finder's fees, commissions or similar charges incurred or alleged to have been
incurred by the indemnified party in connection with the transactions
contemplated hereby and any and all loss, liability, cost or expense (including
without limitation reasonable attorneys' fees) arising out of any claim that the
indemnifying party incurred or created any such fees, commissions or charges.
5.3 Employment Agreements. At Closing, either HPI or Highwoods and the
individuals listed on Schedule 5.3 shall have entered into an Employment
Agreement substantially in the form of Exhibit 5.3 attached hereto with such
terms as are mutually acceptable to either HPI or Highwoods, as the case may be,
and such individuals.
5.4 Termination of Contracts. Unless otherwise specified by Highwoods in
writing, all contracts for the management, development, or leasing of the
Properties entered into by the ACP Partnerships with other ACP Parties, if any,
must be terminated as of the effective date of Closing so that Highwoods or its
designee shall have the exclusive right to manage and lease the Properties.
5.5. Employees; Benefit Plans. At Closing, either HPI or Highwoods, at
their discretion, except as may be provided by the Employment Agreements, shall
offer to hire all of the employees (in addition to the employees entering into
the Employment Agreements pursuant to Section 5.3) of ACP at their current level
of compensation and benefits or their equivalent economic values as such
employees were compensated by ACP. With respect to employee benefits plans,
employees hired by HPI or Highwoods shall receive credit for years served with
ACP.
5.6 Contribution of the ACP Assets. All personal property listed on
Schedule 5.6 (the "Personal Property"), including the tradenames "Associated
Capital Properties" and the associated goodwill, used by ACP in the operation
and management of the Properties shall be transferred to Highwoods or HPI in
conjunction
17
with the Closing and as partial consideration for the transactions otherwise
contemplated by this Master Agreement.
5.7 The Future Acquisition Properties. The Future Acquisition Properties
which have received approval of the Investment Committee are described on
Schedule 5.7 attached hereto. Schedule 5.7 shall be changed from time to time
prior to Closing to reflect the approval of other properties submitted by ACP to
the Investment Committee, which such approval shall be made within seven days of
submission to Highwoods of an investment package satisfactory and complete to
Highwoods' business standards. The consideration for the contribution of the
Future Acquisition Properties is described at Section 3.2(e).
5.8 Future Funding Reserve. ACP and the ACP Shareholders covenant that
included in the assets to be acquired at Closing will be a cash fund or
available reserve in the amount of no less than $3,500,000 subject to reduction
prior to Closing for mutually acceptable capital and tenant improvements
relating to the Properties. Schedule 5.8 attached hereto lists all such mutually
acceptable capital and tenant improvement expenses incurred to date which shall
result in a reduction in the reserve. Any additional cost of mutually acceptable
improvements will be added to Schedule 5.8 prior to Closing as such expenses are
paid. Any amount remaining in the reserve shall be used after Closing solely to
pay capital and tenant improvements and leasing commissions on the Properties
subject to this Master Agreement.
5.9 Exclusive Dealing. Neither ACP nor the ACP Shareholders will
directly or indirectly, through any officer, partner, agent, or otherwise, (i)
solicit or initiate, directly or indirectly, or encourage submission of
inquires, proposals, or offers from any potential buyer (other than Highwoods)
relating to the disposition of the Properties or ownership interests of any of
the ACP Partnerships or the ACP Partners, or any part thereof, or (ii) subject
to fiduciary obligations under applicable law as advised by counsel at ▇▇▇▇▇▇▇,
Procter and ▇▇▇▇ LLP, participate in any discussions or negotiations regarding,
or furnish to any person any information with respect to, the disposition of the
assets or any ownership interests in ACP, the ACP Partnerships or the Properties
or any part thereof, until the first to occur of (a) mutual written termination
of this Master Agreement by both Highwoods and the ACP Parties; (b) termination
of this Master Agreement by any party in accordance with the provisions hereof,
or (c) September 15, 1997 or, if the date for the Closing is extended pursuant
to Section 2.3(a), October 16, 1997.
5.10 Appointment of ▇▇▇▇▇▇▇▇ to Board. HPI covenants that (i)
immediately after Closing, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ will be appointed as an advisor
(not having any voting right) to the Investment Committee of the Board and (ii)
within twelve (12) months of the Closing Date, ▇▇. ▇▇▇▇▇▇▇▇ will be appointed to
the Board or nominated by management to the Board and elected at the next annual
shareholders' meeting of HPI.
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Upon such appointment or election, ▇▇. ▇▇▇▇▇▇▇▇ will become a voting member of
the Investment Committee.
5.11 Restrictions on Taxable Property Sales. For a period of three (3)
years commencing on the Closing Date, Highwoods will not sell, exchange or
otherwise enter into a taxable disposition of any Property listed on Schedule
1-6; provided, however, that Highwoods may exchange any Property in a
transaction that is treated as a wholly tax-deferred exchange with no boot under
Code Section 1031. Highwoods will use its best efforts to have any disposition
of a Property occurring at any time prior to the seventh anniversary hereof
qualify as a wholly tax-deferred exchange with no boot under Code Section 1031.
5.12 Option to Repurchase Pending Acquisition Properties. In the event
that Highwoods acquires a Pending Acquisition Property or a Future Acquisition
Property prior to the Closing and this Master Agreement then terminates and the
Closing does not occur, ACP or its designee shall have the option, exercisable
at any time prior to the end of the period ending on the 183rd day following
such termination, to purchase such Property from Highwoods at Highwoods' fully
loaded cost basis in such Property plus an imputed simple interest cost of such
cost basis at an annual rate of 8%.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
ACP AND THE ACP SHAREHOLDERS
To induce Highwoods and HPI to enter into this Master Agreement and the
transactions contemplated hereby, unless otherwise indicated, the ACP
Shareholders represent and warrant that the statements contained in this Article
VI are true, correct and complete on the date hereof. Pursuant to Section 9.1
hereof, the ACP Shareholders shall deliver to Highwoods at closing a certificate
certifying that all such representations and warranties are still true, correct
and complete as of the Closing Date, or to the extent that any representation
and warranty is not then true, correct and complete, stating the fact or facts
which render such representation and warranty untrue. It is the express
intention and agreement of the parties that their representations and warranties
set forth in this Article VI shall, except to the extent specified herein to the
contrary, survive the Closing for a period of 365 days after the Closing Date.
The representations and warranties found in Sections 6.2, 6.4, 6.7, 6.9, 6.14,
6.15, 6.16, 6.19, 6.23, and 6.24 shall not survive the Closing except that any
representation and warranties in Sections 6.14, 6.16 and 6.23 provided to the
Actual Knowledge of a party hereto shall survive the Closing as limited above.
6.1 Consents. Except as disclosed on Schedule 6.1 which shall be
completed and attached hereto prior to the Closing Date, (i) no consents,
approvals, waivers, notifications, acknowledgments or permissions which have not
been obtained are required in order for the ACP Shareholders, the ACP
Corporations or the ACP Partnerships to fully perform its respective obligations
under this Master Agreement and
19
(ii) the execution and delivery of this Master Agreement by the ACP Shareholders
and ACP and the consummation of the transactions contemplated hereby by the ACP
Shareholders, the ACP Corporations or the ACP Partnerships, including without
limitation the execution of any related agreements, will not require the consent
of, or any prior filing with or notice to or payment to, any governmental
authority or other Person (other than normal and customary transfer taxes,
recording and other transactional costs and expenses).
6.2 Operation of Business. Except as set forth on Schedule 6.2 which
shall be completed and attached hereto prior to the Closing Date, from June 30,
1997 through the Closing Date, ACP has conducted its business only in the
ordinary course and has not granted any substantial general or uniform increase
in the rate of pay of any employees or any substantial increase in salaries to
any employees or officers (by means of bonus, pension plan or other contract or
otherwise).
6.3 Absence of Conflicts. Except as set forth on Schedule 6.1 and
Schedule 6.3 which shall be completed and attached hereto prior to the Closing
Date, the execution, delivery and performance of this Master Agreement by the
ACP Shareholders and ACP and the consummation of the transactions contemplated
hereby by the ACP Shareholders, the ACP Corporations and the ACP Partnerships,
including without limitation, the execution and delivery of any documents,
instruments or agreements contemplated hereby, will not (after a lapse of time,
due notice or otherwise) (a) conflict with, violate or result in any breach or
default under (i) any provision of any partnership agreement, operating
agreement or certificate of any of the ACP Partnerships; (ii) any provision of
the articles of incorporation or bylaws of ACP or the ACP Corporations, or (iii)
to the ACP Shareholders' Actual Knowledge, any indenture, agreement, instrument
or other contract to which the ACP Shareholders, the ACP Corporations and the
ACP Partnerships may be bound or relating to or affecting their assets (except
for the documents and instruments evidencing and/or securing the Assumed ACP
Debt Financing and the Payable ACP Debt Financing); or (b) to the ACP
Shareholders' Actual Knowledge, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under or result in the creation or imposition of any Lien on the
Properties or related assets in accordance with the terms of this Master
Agreement under any indenture, mortgage, contract, agreement, lease, sublease,
license, sublicenses, franchise, permit, instrument of indebtedness, security
agreement or other undertaking or instrument to which the ACP Shareholders, the
ACP Corporations or the ACP Partnerships may be bound or affected.
6.4 Certification of ACP Financial Statements. The ACP Financial
Statements are true, correct and complete in all material respects, are prepared
in accordance either with generally acceptable accounting principles or federal
income tax principles, consistently applied, and fairly present the financial
condition of each of the ACP and ACP Partnerships.
20
6.5 Power and Authority of ACP Partnerships. Each of the ACP
Partnerships is a partnership, duly formed and validly existing under the laws
of the State of Florida. Each partner of the ACP Partnerships which is
controlled directly or indirectly by ACP and/or the ACP Shareholders which is
not an individual has been duly formed and is validly existing. All partnership
interests in each ACP Partnership have been validly issued and fully paid. True,
correct and complete copies of each of the partnership agreements and operating
agreements, as applicable, of the ACP Partnerships and all amendments thereto
and the minutes of any meetings of the partners of the ACP Partnerships have
been or will be submitted or made available to Highwoods prior to the Closing
Date. Each of the ACP Partnerships has full power and authority to own and
operate its properties and the documents and instruments contemplated hereby to
which they will be a party, will have been duly authorized by all requisite
partnership or company actions on the part of each of the ACP Partnerships. This
Master Agreement constitutes, and the documents and instruments contemplated
hereby to be executed and delivered by the ACP Shareholders or the ACP
Partnerships, as applicable, will, when executed and delivered, constitute the
legal, valid and binding obligations of the ACP Shareholders and the ACP
Partnerships executing and delivering such instruments and documents,
enforceable against them in accordance with their respective terms, subject to
bankruptcy and similar laws affecting the remedies or recourse of creditors
generally.
6.6 Power and Authority of ACP and the ACP Corporations. Each of ACP and
the ACP Corporations is a corporation duly incorporated, validly existing and
authorized to transact business under the laws of the state of its organization
with full corporate power and authority to conduct its business as it has been
conducted in the past and enter into and perform its obligations under this
Master Agreement and each of the documents and instruments contemplated by this
Master Agreement to be executed and delivered by ACP and the ACP Corporations.
The execution, delivery and performance of this Master Agreement, the
consummation of the transactions contemplated hereby and the execution of the
documents and instruments contemplated hereby to be executed and delivered by
ACP and the ACP Corporations have been duly authorized by all requisite
corporate action on the part of ACP and the ACP Corporations and this Master
Agreement constitutes, and each of the other instruments and documents to be
executed and delivered by ACP and the ACP Corporations hereunder will, when
executed by ACP and the ACP Corporations, constitute the legal, valid and
binding obligations of ACP and the ACP Corporations, enforceable against them in
accordance with their respective terms, subject to bankruptcy and similar laws
affecting the remedies or recourse of creditors generally. True, correct and
complete copies of each of the charters and bylaws of ACP and the ACP
Corporations and all amendments thereto, the minutes of all meetings of the
directors or shareholders of each of ACP and the ACP Corporations and the stock
ledgers of each of ACP and the ACP Corporations have been submitted or will be
made available to Highwoods prior to the Closing Date.
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6.7 Rent Roll and Leases. The schedule of leases which shall be
completed and attached hereto prior to the Closing Date as Schedule 6.7A (the
"Schedule of Leases") is a true, correct and complete schedule of all leases,
subleases and rights of occupancy (claiming directly by, through, under or with
the Actual Knowledge of the ACP Shareholders) in effect with respect to each of
the Properties, (respectively, the "Leases"). Except as set forth on the
Schedule of Leases, there are no other leases, subleases, tenancies or other
rights of occupancy (claiming directly by, through, under or with the Actual
Knowledge of the ACP Shareholders) in effect with respect to the Properties
other than the Leases. True, correct and complete copies of the Leases, together
with all amendments and supplements thereto and all other documents and
correspondence relating thereto, have been delivered or made available to
Highwoods or its agents. Schedule 6.7A includes the rent roll information and
is, as of the date shown thereon, true and correct in all material respects. The
Schedule of Leases sets forth, as of such date, (i) a list of all tenants under
the Leases and the space occupied by each such tenant, (ii) all arrearages owing
from such tenants under such Leases (listed on delinquency and default reports
attached to the Schedule of Leases and made a part thereof), (iii) the
expiration date of the term of such Leases, (iv) the base rent and the rent the
tenant under such Lease is currently obligated to pay, (v) the current
outstanding balances of any security deposits held pursuant to any Leases, (vi)
any prepayments of rent by any tenant under any Lease of more than one (1) month
in advance (excluding security deposits which are delineated on the list
attached to the Schedule of Leases and made a part thereof) and (vii) whether or
not there are rental concessions or abatements under a Lease applicable to any
period subsequent to the Closing. Except as set forth on the Schedule of Leases,
all such Leases are valid and enforceable and presently in full force and
effect, and none of the Leases have been assigned and all brokerage commissions
payable under any of the Leases have been paid or will be paid by the ACP
Partnerships prior to the Closing Date, except as provided in Schedule 6.7B
which shall be completed and attached hereto prior to the Closing Date. All
tenant upfit obligations provided for in any of the Leases not set forth on
Schedule 6.7C which shall be completed and attached hereto prior to the Closing
Date will be completed or paid for in full prior to the Closing or will be paid
from escrow funds established for such purposes. Except as set forth on Schedule
6.7D which shall be completed and attached hereto prior to the Closing Date or
the tenant estoppel certificates, none of the ACP Partnerships or any lessee
under any Lease, is in default under such Lease, and to the Actual Knowledge of
the ACP Shareholders, there is no event which, but for the passage of time or
the giving of notice, or both, would constitute a default under such Leases,
except such defaults that would not have a material adverse effect on the
condition, financial or otherwise or on the earnings, business affairs or
business prospects of any of the ACP Partnerships or the Properties. Except as
set forth on the Schedule of Leases, no tenant under any of the Leases has an
option or right of first refusal to purchase the premises demised under such
Leases. The consummation of the transactions contemplated by this Master
Agreement will not give rise to any breach, default or event of default under
any of the Leases. Each of the Leases is assignable by the applicable ACP
Partnership and, except as disclosed on Schedule 6.7E which shall be completed
and attached
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hereto prior to the Closing Date, none of the Leases requires the consent or
approval of any party in connection with the transactions contemplated by this
Master Agreement.
6.8 No Contracts. To the Actual Knowledge of the ACP Shareholders, no
agreement, undertaking or contract affecting ACP, the Properties or the ACP
Partnerships, written or oral, which requires the payment of $50,000 or more
will be in existence as of the Closing, except as set forth on Schedule 1-2,
Schedule 6.7A, Schedule 1-5 and Schedule 6.8 which shall be completed and
attached hereto prior to the Closing Date (collectively, the "Scheduled
Contracts"). Except as specifically set forth on Schedule 6.8 attached hereto,
to the ACP Shareholders' Actual Knowledge no party to any Scheduled Contract has
breached or defaulted under the terms of such contract, except for such breaches
or defaults that would not have a material adverse effect on the business or
operations of any of the Properties or any of the ACP Partnerships, as
applicable. Except as set forth on Schedule 6.8, none of the Scheduled Contracts
requires the consent or approval of any party in connection with the
transactions contemplated by this Master Agreement.
6.9 Title to Property and ACP Partnership Interests. The Descriptive
Property Exhibit attached hereto as Schedule 1-6 represents a true, correct and
complete description of all ownership interests in the Properties, and to the
ACP Shareholders' Actual Knowledge there exist no other ownership interests in
the Properties except as disclosed thereon. Either the ACP Partnerships or the
ACP Corporations own and will own at the Closing good, valid and marketable fee
simple title to the Properties, in such forms and in such percentages as are
shown on the Descriptive Property Exhibit hereof; the ACP Partnerships or ACP,
respectively, own good, valid and marketable title to all personal property
listed on Schedule 6.9 which shall be completed and attached hereto prior to the
Closing Date (the "Personal Property").
6.10 Liabilities; Indebtedness. Except for the Assumed ACP Debt
Financing and the Payable ACP Debt Financing, the Leases, the leasing
commissions listed on Schedule 6.7B, the Scheduled Contracts and those
liabilities disclosed to Highwoods in writing on Schedule 6.10 which shall be
completed and attached hereto prior to the Closing Date, no Indebtedness related
to the ACP Partnerships, ACP or the ACP Corporations is outstanding in excess of
$10,000 and the aggregate amount of such Indebtedness, except as shown in the
ACP Financial Statements, of all of such ACP Parties is not in excess of
$150,000, except in each instance for trade payables and any other customary and
ordinary expenses in the ordinary course of business. At Closing and after
giving effect to the transactions contemplated by this Master Agreement, there
will exist no default or event which with the passage of time or giving of
notice or both would constitute a default with respect to the Assumed ACP Debt
Financing. The Payable ACP Debt Financing is unconditionally prepayable in full,
without penalty, premium or charges, except as disclosed in Schedule 1-5
attached hereto. Except as shown on the ACP Financial Statements, none of the
ACP Partnerships, ACP or the ACP Corporations is subject to or obligated or
liable under
23
any Liability in excess of $10,000 and the aggregate amount of such Liabilities,
except as shown in the ACP Financial Statements, of all of such ACP Parties is
not in excess of $150,000, except for ordinary and customary expenses incurred
in the ordinary course of business.
6.11 Intentionally deleted.
6.12 Personal Property. All equipment, fixtures and personal property
located at or on any of the Properties or at the place(s) of business of ACP,
respectively, which is owned or leased by the ACP Partnerships or ACP, as
applicable, shall remain at the Properties or at the place(s) of business of ACP
and shall not be removed prior to the Closing, except for equipment that becomes
obsolete or unusable, which may be disposed of or replaced in the ordinary
course of business. The personal property of the ACP Partnerships and of ACP is
not subject to any liens except for Permitted Liens.
6.13 Claims or Litigation. Except as set forth on Schedule 6.13 which
shall be completed and attached hereto prior to the Closing Date, neither ACP,
any ACP Corporations, any ACP Partnerships nor any of the Properties are subject
to any claim, demand, suit or unfiled lien, proceeding or litigation of any
kind, pending or outstanding, before any court or administrative, governmental
or regulatory authority, agency or body, domestic or foreign, or to any order,
judgment, injunction or decree of any court, tribunal or other governmental
authority, or, to the Actual Knowledge of the ACP Shareholders, threatened,
which would have a materially adverse effect on the business or financial
condition of ACP, any ACP Partnership or any of the Properties or in any way be
binding upon Highwoods or affect or limit Highwoods' full use and enjoyment of
any of the Properties or which would limit or restrict in any way the right or
ability of ACP or the ACP Shareholders to enter into this Master Agreement and
consummate the assignments, transfers, conveyances and any other transaction
contemplated hereby.
6.14 Hazardous Substances. Except as set forth in the environmental
audit reports provided to Highwoods by the ACP Parties and in the environmental
assessments of the Properties conducted on behalf of Highwoods (the
"Environmental Assessments"), neither ACP nor the ACP Partnerships have
generated, stored, released, discharged or disposed of hazardous substances or
hazardous wastes at, upon or from any of the Properties in violation of any
Environmental Law, order, judgment or decree or permit, or in connection with
which remedial action would be required under any Environmental Law, order,
judgment, decree or permit. Except as set forth in the environmental audit
reports provided to Highwoods by the ACP Parties or in the Environmental
Assessments, to the Actual Knowledge of the ACP Shareholders no hazardous
substances or hazardous wastes have otherwise been generated, stored, released,
discharged or disposed of from, at or upon any of the Properties in violation of
any Environmental Law. Except as set forth in the environmental audit reports
provided to Highwoods by the ACP Parties or in the
24
Environmental Assessments, no underground storage tanks are to the ACP
Shareholders' Actual Knowledge located on any of the Properties. As used in this
Master Agreement, the terms "hazardous substances" and "hazardous wastes" shall
have the meanings set forth in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and the regulations thereunder, the
Resource Conservation and Recovery Act, as amended, and the regulations
thereunder, and the Federal Clean Water Act, as amended, and the regulations
thereunder, and such terms shall also include asbestos, petroleum products,
radioactive materials and any regulated substances under any Environmental Law,
regulation or ordinance.
6.15 Financial Condition of the Properties, ACP and the ACP
Partnerships. Except as set forth in Schedule 6.15 attached hereto, there has
been no material adverse change, financial or otherwise, in ACP, any of the ACP
Partnerships or any of the Properties as previously disclosed in the ACP
Financial Statements.
6.16 Compliance with Laws. The ACP Partnerships possess such
certificates, authorities or permits issued by the appropriate state or federal
regulatory agencies or bodies necessary to conduct the business currently
conducted by them and, to the ACP Shareholders' Actual Knowledge, there are no
proceedings relating to the revocation or modification of any such certificate,
authority or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of any of the ACP Partnerships, or any of the Properties, as
applicable. To the ACP Shareholders' Actual Knowledge, there is no material
violation of any applicable zoning, building or safety code, rule, regulation or
ordinance, or of any employment, environmental, wetlands or other regulatory
law, order, regulation or other requirement, including without limitation the
Americans With Disabilities Act ("ADA"), or any restrictive covenants or other
easements, encumbrances or agreements, relating to any of the Properties, which
remains uncured. To the ACP Shareholders' Actual Knowledge: (i) each of the
Properties, has been constructed and is operated in accordance with all
applicable laws, ordinances, rules and regulations, (ii) all approvals regarding
zoning, land use, subdivision, environmental and building and construction laws,
ordinances, rules and regulations have been obtained, and (iii) such approvals
will not be invalidated by the consummation of the transactions contemplated by
this Master Agreement.
6.17 Employees. None of the ACP Partnerships presently has any
employees nor have any of the ACP Partnerships ever had any such employees.
6.18 Condemnation and Moratoria. There are to the ACP Shareholders'
Actual Knowledge (i) no pending or threatened condemnation or eminent domain
proceedings, or negotiations for purchase in lieu of condemnation, which affect
or would affect any portion of any of the Properties; (ii) no pending or
threatened moratoria on utility or public sewer hook-ups or the issuance of
permits, licenses or other
25
inspections or approvals necessary in connection with the construction or
reconstruction of improvements, including without limitation tenant
improvements, which affect or would affect any portion of any of the Properties;
and (iii) no pending or threatened proceeding to change adversely the existing
zoning classification as to any portion of any of the Properties. To the ACP
Shareholders' Actual Knowledge, (x) no portion of any of the Properties is a
designated historic property or located within a designated historic area or
district, and (y) there are no graveyards or burial grounds located within any
of the Properties.
6.19 Condition of Improvements. Except as disclosed or made known to
Highwoods in the course of its inspection activities or except as described on
Schedule 6.19 which shall be completed and attached hereto prior to the Closing
Date, there is to the ACP Shareholders' Actual Knowledge no material defect in
the condition of (i) any of the Properties, (ii) the improvements thereon, (iii)
the roof, foundation, load-bearing walls or other structural elements thereof,
or (iv) the mechanical, electrical, plumbing and safety systems therein, nor any
material damage from casualty or other cause, nor any soil condition of any
nature that will not support all of the Improvements currently thereon without
the need for unusual or new subsurface excavations, fill, footings, caissons or
other installations.
6.20 Taxes. Except as set forth on Schedule 6.20 which shall be
completed and attached hereto prior to the Closing Date, (i) all tax or
information returns required to be filed on or before the date hereof by or on
behalf of ACP, the ACP Partnerships or the ACP Corporations have been filed and
all such tax or information returns required to be filed hereafter will be filed
on or before the date due in accordance with all applicable laws prior to the
incurrence of any penalties or interest thereon and all taxes shown to be due on
any returns have been paid or will be paid when due; and (ii) to the Actual
Knowledge of the ACP Shareholders, there is no action, suit or proceeding
pending against or threatened with respect to ACP, the ACP Partnerships or the
ACP Corporations or any of the Properties in respect of any tax, nor is any
claim for additional tax asserted by any taxing authority. None of ACP, the ACP
Partnerships or the ACP Corporations nor to the ACP Shareholders' Actual
Knowledge any of their respective federal, state and local income or franchise
tax returns are the subject of any audit or examination by any taxing authority.
None of ACP, the ACP Partnerships or the ACP Corporations has executed or filed
with the Internal Revenue Service or any other taxing authority any agreement
now in effect extending the period for assessment or collection of any income or
other taxes.
6.21 Intentionally deleted.
6.22 ERISA; Employee Benefit Plans. Except as disclosed on Schedule 6.22
which shall be completed and attached hereto prior to the Closing Date, no ACP
Corporation, ACP Partnership nor any Person which, in conjunction with any of
the ACP Corporations or Partnerships, is treated as a single employer under
Section 414 of the Code (referred to as an "ERISA Affiliate") has any officer or
employee bonus, incentive
26
compensation, profit-sharing, pension, stock ownership, medical expense
reimbursement plan, group insurance or employee welfare or benefit plan of any
nature whatsoever (an "Employee Benefit Plan"), including, without limitation,
any "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or any
"multiemployer plan" within the meaning of ERISA. To the extent, if any, that
there has heretofore been any such Employee Benefit Plan in effect, such plan
has been terminated, required notice, if any, has been given to the Pension
Benefit Guaranty Corporation and received from such ACP Corporation, ACP
Partnership or ERISA Affiliate and all liabilities, if any, of any ACP
Corporation or ACP Partnership with respect thereto have been fully and finally
discharged and released in writing. No ACP Corporation, ACP Partnership or any
ERISA Affiliate has any obligation, liability or commitment to any Person with
respect to any Employee Benefit Plan that will be the obligation of, or will
affect the property or assets of HPI or Highwoods.
6.23 Absence of Certain Changes. Since June 30, 1997, except as
otherwise set forth in this Master Agreement or as disclosed in writing to
Highwoods by an ACP Party or as otherwise known to Highwoods, there has not been
with respect to ACP or any of the ACP Partnerships:
(a) any material adverse change in the financial condition of any
of such ACP Partnerships;
(b) any change in the condition of the property, business or
liabilities of any of the ACP Partnerships or ACP except normal and
usual changes in the ordinary course of business which have not been
materially adverse;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business
of any of the ACP Partnerships or ACP;
(d) any sale, abandonment or other disposition by any of the ACP
Partnerships or ACP or of any interest in the Properties, or of any
personal property other than in the ordinary course of such ACP
Partnerships or ACP's business;
(e) any change in the accounting methods or practices by any of the
ACP Partnerships or ACP or in depreciation or amortization policies
theretofore used or adopted;
(f) any material contractual liability incurred by any of the ACP
Partnerships or ACP contingent or otherwise, other than for operating
expenses, obligations under executory contracts incurred for fair
consideration and taxes accrued with respect to operations during such
period, all incurred in the ordinary course of business; or
27
(g) any other material change in the business of any of the ACP
Partnerships or ACP, or any of the Properties.
6.24 Tradename. ACP owns all right, title and interest in and to the
tradename "ASSOCIATED CAPITAL PROPERTIES " and all variations and derivatives
thereof and goodwill associated therewith arising out of the use of such
tradename (collectively, the "Tradename") free and clear of any Liens or pending
or, to the ACP Shareholders' Actual Knowledge, threatened third party claims for
infringement or unlawful use thereof, and ACP has the right to sell, transfer,
assign and convey the Tradename to HPI. ACP will at Closing, transfer to HPI all
of the right, title and interest in the Tradename, including the goodwill
associated therewith and the rights to all the variations to the Tradename.
6.25 Title of ACP Shareholders. The ACP Shareholders own good, valid and
marketable title to all of the shares of capital stock in ACP, free and clear of
any Lien. The ACP Shareholders' own good, valid and marketable title to their
interests in the ACP Partnerships and the ACP Corporations as are being conveyed
to Highwoods hereunder and under the Contribution Agreements free and clear of
any lien, encumbrance, security interest, option, restriction, subscription or
other similar right or interest, and such owner has, to the ACP Shareholders'
Actual Knowledge, the absolute and unconditional right, power and authority to
perform under the respective Contribution Agreements. Upon the consummation of
the Transactions, Highwoods will receive good and marketable title to all such
interests of the ACP Shareholders and, to the Actual Knowledge of the ACP
Shareholders, all of the ownership interests in all of the ACP Partnerships, ACP
and the ACP Corporations which are acquired at Closing, free and clear of any
Liens (other than Permitted Liens).
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
OF HIGHWOODS
To induce the ACP Parties to enter into this Master Agreement and the
transactions contemplated hereby, Highwoods hereby represents and warrants to
the ACP Parties that the statements contained in this Article VII are true,
correct and complete as of the date hereof. Highwoods shall deliver to the ACP
Parties, as applicable, at Closing a certificate certifying that all such
representations and warranties are still true, complete and correct as of the
Closing Date, or to the extent that any such representations and warranties are
not true, correct and complete, stating the fact or facts which render such
representation and warranty untrue. It is the express intention and agreement of
Highwoods that the foregoing representations and warranties shall survive the
consummation of the transactions contemplated in this Master Agreement, but only
to the extent expressly provided in Section 12.4 hereof.
28
7.1 Organization and Authority. Highwoods has been duly formed and is
validly existing as a North Carolina limited partnership and is duly qualified
to do business in all jurisdictions where such qualification is necessary to
carry on its business as now conducted and is duly qualified or in the process
of becoming duly qualified in all jurisdictions where the ownership of its
property would necessitate such qualification. Highwoods has all partnership
power and authority under the Highwoods Partnership Agreement and its
certificate of limited partnership to enter into this Master Agreement and the
Contribution Agreements and to enter into and deliver all of the documents and
instruments required to be executed and delivered by Highwoods and to perform
its obligations hereunder and thereunder.
7.2 Binding Obligation. The execution and delivery of this Master
Agreement, the Contribution Agreements and the documents required to be executed
by Highwoods hereunder and thereunder, and the performance of its obligations
under this Master Agreement and the Contribution Agreements, have been duly
authorized by all requisite partnership action, and this Master Agreement and
the Contribution Agreements have been, and such documents will on the Closing
date have been, duly executed and delivered by Highwoods. This Master Agreement
and the Contribution Agreements do and will, and the documents executed by
Highwoods will, constitute the valid and binding obligation of Highwoods
enforceable in accordance with their terms, subject to bankruptcy and similar
laws affecting the remedies or recourse of creditors generally.
7.3 Partnership Agreement. The Partnership Agreement and amendments
previously delivered to ACP or its attorneys is a true, complete and correct
copy of the limited partnership agreement of Highwoods, as amended. The
Partnership Agreement is in full force and effect and has not been further
amended, modified or terminated except as disclosed to ACP or the ACP Parties.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF HPI
HPI hereby represents and warrants to each ACP Party as follows:
8.1 Organization and Authority. HPI has been duly formed and is validly
existing as a Maryland corporation and has elected under the Code to be treated
as a real estate investment trust, and is duly qualified to do business in all
jurisdictions where such qualification is necessary to carry on its business as
now conducted and is duly qualified or in the process of becoming duly qualified
in all jurisdictions in which its properties or Highwoods' properties are
located. HPI has all power and authority under its organizational documents to
enter into this Master Agreement and such other documents as are required hereby
and by the Contribution Agreements to be executed by it.
29
8.2 Binding Obligations. The execution and delivery of this Master
Agreement, the Contribution Agreements and the documents required to be executed
by HPI by the terms hereof and thereof, and the performance of its obligations
under this Master Agreement, the Contribution Agreements and the documents
executed by it, have been duly authorized by all requisite action and this
Master Agreement, the Contribution Agreements, and the documents required to be
executed by it have been and will on the Closing Date have been, duly executed
and delivered by HPI. To the Actual Knowledge of HPI, none of the foregoing
requires any action by or in respect of, or filing with, any governmental body,
agency or official or contravenes or constitutes a default under any provision
of applicable law or regulation, any organizational document of HPI or any
agreement, judgment, injunction, order, decree or other instrument binding upon
HPI. This Master Agreement does and will, and the documents required to be
executed by it will, constitute the valid and binding obligations of HPI
enforceable in accordance with their respective terms, subject to bankruptcy and
similar laws affecting the remedies or recourse of creditors generally.
8.3 Securities Filings. HPI has delivered or made available to ACP the
registration statement of HPI filed with the SEC in connection with HPI's
initial public offering of Shares of HPI common stock, and all exhibits,
amendments and supplements thereto (the "Initial Registration Statement"), and
each report, proxy statement or information statement and all exhibits thereto
prepared by it or Highwoods or relating to the properties of either since the
effective date of the Initial Registration Statement each in the form (including
exhibits and any amendments thereto) filed with the SEC (collectively, the
"Highwoods Reports"). The Highwoods Reports, which were filed with the SEC in a
timely manner, constitute all forms, reports and documents required to be filed
by either HPI or Highwoods under the Securities Laws. As of their respective
dates, the Highwoods Reports (i) complied as to form in all material respects
with the applicable requirements of the Securities Laws and (ii) did 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 made therein,
in the light of circumstances under which they were made, not misleading. No
material adverse change in the financial condition, business operations or
properties of either HPI or Highwoods has occurred that would render any
material statement made in any of the Highwoods Reports materially untrue or
misleading.
8.4 REIT Status of HPI. HPI is organized and operates and will continue
to operate in a manner so as to qualify as a "real estate investment trust"
under Section 856 thorough 860 of the Code. HPI has elected, and will continue
to elect, to be taxed as a "real estate investment trust" under the Code.
ARTICLE IX
CLOSING DELIVERIES
9.1 ACP Closing Deliveries. At Closing or at such earlier date if
otherwise provided in this Master Agreement or if otherwise expressly agreed by
Highwoods, ACP
30
shall deliver or cause to be delivered to Highwoods the following documents,
instruments, opinions, certificates and statements:
(a) The documents, instruments, deeds, assignments, affidavits,
forms, contracts and agreements required to be delivered under the
Contribution Agreements;
(b) A tenant estoppel certificate in the form attached hereto as
Exhibit 9.1(b) from each tenant under the Leases; provided, however,
this Section 9.1(b) shall be deemed satisfied if such tenant estoppel
certificates are delivered from tenants the leases of which provide 75%
of the aggregate net operating income of the improved Properties (the
"Tenant Estoppel Coverage Requirement"). ACP agrees to send tenant
estoppel certificates to all tenants of the Properties and request that
such tenant estoppel certificates be completed and returned for delivery
to Highwoods. To the extent that ACP and the ACP Shareholders shall not
have satisfied the Tenant Estoppel Coverage Requirement by Closing,
Highwoods and HPI shall have the option at their sole discretion to
either (i) terminate this Master Agreement in which case the provisions
of Section 2.3(a) shall apply to such termination or (ii) extend the
Closing Date for up to thirty days during which time ACP and the ACP
Shareholders shall continue to diligently solicit and obtain additional
tenant estoppel certificates in order to satisfy the Tenant Estoppel
Requirement Coverage by the extended Closing Date. In the event,
however, that, notwithstanding the diligence of ACP and the ACP
Shareholders, the Tenant Estoppel Coverage Requirement has not been
satisfied by the extended Closing Date, then Highwoods and HPI at their
sole discretion shall have the option to either waive the requirements
of this Section 9.1(b) or terminate the Master Agreement under the
provisions of Section 2.3(a) hereof. Highwoods shall indicate its choice
of options hereunder by delivery of a written notice as provided by
Section 13.1 hereof to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ on or before the Closing Date
or the extended Closing Date, as applicable. Notwithstanding the above
to the contrary, the ACP Shareholders shall, at any time prior to
Highwoods electing to terminate this Master Agreement pursuant to this
Section 9.1(b), be deemed to have satisfied the Tenant Estoppel Coverage
Requirement by executing a sufficient number of certificates (certifying
the same matters set forth in the tenant estoppel certificates submitted
to tenants which were not received) (the "Owner Estoppel Certificates")
related to tenants which when added to the tenant estoppel certificates
that have been received, will equal 75% or more of the aggregate net
operating income of the improved Properties. ACP will agree to indemnify
Highwoods from any and all loss or damage incurred by Highwoods
resulting from the inaccuracy of any matter contained in such
certificates executed by ACP. Notwithstanding the representations and
warranties of ACP to its Actual Knowledge related to the Leases as set
forth in Section 6.7 above, the Owner Estoppel Certificates shall not be
limited to ACP's Actual Knowledge, but rather shall contain
unconditional representations; provided, further, that ACP will be
released from liability under the
31
above referenced indemnifications pari passu with the receipt of
executed tenant estoppels subsequent to Closing.
(c) A lender's estoppel certificate and assumption agreement from
each of the holders of the Assumed ACP Debt Financing ;
(d) A certified payoff letter, effective through the Closing Date,
from each of the holders of the Payable ACP Debt Financing, and such
evidence of cancellation of documents or instruments as Highwoods
reasonably may require;
(e) If requested by Highwoods, quit claim deeds or articles of
merger and dissolution and bills of sales to facilitate the dissolution
of the ACP Partnerships hereto in form and substance satisfactory to
Highwoods and its counsel;
(f) An assignment of the Tradename and all derivatives or
variations thereof used prior to the Closing Date in form and substance
satisfactory to Highwoods and its counsel;
(g) A certificate confirming that representations and warranties
are still true, correct and complete as of the Closing Date.
9.2 Additional Deliveries. ACP and each of the ACP Shareholders agrees
to execute and deliver to Highwoods or cause to be executed and delivered to
Highwoods such further documents, instruments, statements, opinions,
certificates, deeds, waivers and agreements as Highwoods reasonably may deem
necessary or appropriate to carry out the terms and provisions of this Master
Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO
HIGHWOODS'S PERFORMANCE
The obligations of Highwoods to consummate the transactions provided for
herein on the Closing Date are subject to the fulfillment on or before the
Closing Date of each of the conditions in this Article X, except to the extent
that Highwoods may, in its absolute discretion, waive one or more thereof in
writing in whole or in part, unless expressly provided otherwise herein.
10.1 Representations, Warranties and Covenants. The representations and
warranties of ACP and the ACP Shareholders contained herein shall be true in all
material respects on and as of the Closing Date with the same force and effect
as if made on and as of such date and the covenants and agreements of the ACP
Parties set forth herein shall have been complied with through the Closing Date
in all material
32
respects, and a certificate of such effect shall be executed and delivered to
Highwoods by ACP and the ACP Shareholders on and as of the Closing Date.
10.2 Consents. The consents described in Schedules 6.1 and 6.7E, other
than required consents of the Starwood Partnerships and other ACP Partner
consents, shall have been obtained in form reasonably satisfactory to Highwoods.
10.3 Document Deliveries. ACP and the ACP Shareholders shall have
delivered or caused to be delivered to Highwoods the documents, instruments and
other items referred to in Article IX above.
10.4 No Adverse Proceedings. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced, no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any governmental or regulatory
authority shall have been threatened, against any of the parties to this Master
Agreement, or any of the shareholders, members, officers or directors of any of
them, or any of the assets of any of the ACP Corporations, or any of the ACP
Partnerships wherein an unfavorable judgment, order, decree, stipulation,
injunction or charge would cause a material adverse effect on the right of
Highwoods to own, operate or control the ACP Partnerships (and no such judgment,
order, decree, stipulation, injunction or charge shall be in effect) or own the
assets of ACP, the ACP Partnerships or the ACP Corporations. "Material adverse
effect" for purposes of this Section 10.4 shall mean that the transactions
contemplated by this Master Agreement cannot be consummated due to any adverse
proceeding contemplated hereby.
10.5 Intentionally deleted.
10.6 Legal Opinion. There shall have been delivered to Highwoods the
written legal opinion of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel for the ACP
Partnerships and ACP, dated as of the Closing Date, in form reasonably
acceptable to Highwoods and its counsel.
10.7 Other Assurances. The ACP Parties shall have delivered to Highwoods
such other and further certificates, assurances and documents as Highwoods may
reasonably request to evidence the accuracy of the representations and
warranties made pursuant to Article VI, the performance of covenants and
agreements to be performed pursuant to Article V at or prior to the Closing, and
the fulfillment of the conditions to Highwoods's obligations hereunder.
10.8 Funded Reserve - Independent Square. Schedule 10.8 hereto sets
forth the transactional expenses incurred by the ACP Partnership owning
Independent Square in connection with the Accustaff and the Prudential leases at
such Property. Schedule 10.8 shall be adjusted from time to time prior to
Closing to add any other transactional expenses incurred in connection with such
leases with the approval of
33
Highwoods, which approval shall not be unreasonably withheld. As of Closing, the
ACP Partnership owning Independent Square shall have established a funded
reserve for an amount equal to the difference between $7,000,000 and the total
amount listed on Schedule 10.8 at the time of Closing.
10.9 Distribution of Earnings and Profits. ACP and the ACP Shareholders
prior to the Closing Date shall cause its accountants to determine and to allow
Ernst & Young LLP to review and calculate the accumulated earnings and profits
of ACP and each of the ACP Corporations. ACP and each of the ACP Corporations
shall distribute 100% of such accumulated earnings and profits as calculated by
its accountants and approved by Ernst & Young LLP to the shareholders of the
respective corporations prior to the Closing Date.
ARTICLE XI
CONDITIONS PRECEDENT
TO ACP PARTIES' PERFORMANCE
The obligations of ACP and the ACP Shareholders to consummate the
transactions provided for herein and the obligations of the ACP Parties under
the Contribution Agreements are subject to the fulfillment on or before the
Closing Date of each of the conditions in this Article XI, except to the extent
that the ACP Shareholders may, in their absolute discretion, waive in writing
one or more thereof in whole or in part.
11.1 Representations and Warranties. The representations and warranties
of Highwoods and HPI contained herein shall be true in all respects on and as of
the Closing Date with the same force and effect as if made on and as of such
date, and the covenants of Highwoods and HPI set forth herein shall have been
complied with in all material respects through the Closing Date, and a
certificate to such effect shall be executed and delivered to the ACP Parties by
HPI and Highwoods on and as of the Closing Date.
11.2 Payment of Purchase Price. Highwoods and HPI shall have paid the
Aggregate Consideration in the manner described in Articles III and IV.
11.3 No Adverse Proceedings. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced, no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any governmental or regulatory
authority shall have been threatened, against any of the parties to this Master
Agreement, or any of the shareholders, officers or directors of any of them, or
any of the assets of Highwoods or HPI wherein an unfavorable judgment, order,
decree, stipulation, injunction or charge would (i) prevent consummation of any
of the transactions contemplated by this ▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇, (▇▇) cause any of the transactions contemplated by this Master
Agreement to be rescinded following consummation or (iii) cause a material
adverse effect on the right of Highwoods or HPI to own, operate or control the
Properties (and no such judgment, order, decree, stipulation, injunction or
charge shall be in effect).
11.4 Legal Opinion. There shall have been delivered to the ACP Parties
the written opinion of Highwoods special counsel, ▇▇▇▇▇ ▇▇▇▇▇ Mulliss & ▇▇▇▇▇,
L.L.P., dated the Closing Date, in form reasonably acceptable to the ACP
Parties.
11.5 Consents of ACP Partners and Third Parties. Except as provided in
Section 3.7, to the extent that the lack of a required consent by an ACP Partner
or any third party would create an impossibility otherwise for an ACP Party to
perform hereunder, such consent shall be a condition precedent to the
performance of the ACP Parties or to the specific act for which such consent is
required.
11.6. No Adverse Change. There shall have occurred no material adverse
change in the business, financial condition or the financial or the business
prospects of Highwoods or HPI since March 31, 1997. A "material adverse change"
for purposes of this Section shall include, but not be limited to, (i) any class
action claim under Rule 10b-5 of the Exchange Act against either Highwoods or
HPI which, if determined adverse to Highwoods or HPI, could reasonably be
expected to have a materially adverse impact on Highwoods or HPI or (ii) the
loss by HPI of investment grade credit status by either of the rating agencies,
i.e., ▇▇▇▇▇'▇ or Standard and Poors.
ARTICLE XII
INDEMNITY
12.1 Representations and Warranties of ACP Shareholders. The ACP
Shareholders hereby agree, for themselves and their successors and assigns,
jointly and severally, to indemnify, defend and hold both Highwoods and HPI
harmless from and against any and all damage, cause of action, proceeding,
expense (including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and expenses), loss, cost, claim or liability (each a
"Claim") suffered or incurred by either Highwoods or HPI as a result of any
material untruth or inaccuracy in the representations and warranties made in
Sections 6.1, 6.3, 6.5, 6.6, 6.8, 6.10, 6.12, 6.13, 6.17, 6.18, 6.20, 6.22 or
6.25 of this Master Agreement, and, to the extent of a representation or
warranty made to the Actual Knowledge of a party hereto, those made in Sections
6.14, 6.16 and 6.23.
12.2 Scope of ACP Indemnity. Notwithstanding anything to the contrary
otherwise provided in this Master Agreement, the indemnification set forth in
Section 12.1 and the ACP Shareholders' liability for a Claim shall only extend
to (i) any Claim arising under Section 6.10 hereof of which written notice has
been given to the ACP Shareholders within thirty-six months following the
Closing, (ii) any Claim arising under Section 6.20 (a "Tax Claim") of which
written notice has been given to the ACP
35
Shareholders at any time within the applicable statute of limitations for such
Tax Claim to be asserted by the IRS and (iii) any other Claim of which written
notice has been given to the ACP Shareholders within twelve months following the
Closing. For purposes of the foregoing, such written notice shall include the
specific facts and circumstances giving rise to the Claim for indemnification.
12.3 ACP Dealings with ACP Parties. The ACP Shareholders agree to
indemnify and hold harmless Highwoods, its affiliates, its officers and
directors against claims made or threatened within three years following the
Closing, including reasonable attorneys fees defending such claims, arising from
the conduct or actions of the ACP Shareholders in obtaining agreements and
consents from the ACP Parties and their partners, shareholders, or affiliates
relating to the transactions contemplated herein. Such indemnification shall
not, however, extend to any claim filed by such ACP Party or affiliate thereof
against Highwoods or HPI relating to information concerning either of them
(other than any information provided to Highwoods or HPI by ACP or its
shareholders).
12.4 Representations and Warranties of Highwoods. Highwoods hereby
agrees, for itself and its successors and assigns, to indemnify, defend and hold
ACP, the ACP Shareholders and the ACP Partners harmless from and against any
Claim suffered or incurred by them as a result of any of the following:
(a) any untruth or inaccuracy in any representations or warranties
herein; or
(b) to the extent as of the Closing Date that any of the ACP
Parties or ACP Partners have not been released from any liability under
or guaranty of the Assumed ACP Debt Financing or to the extent any
recourse is sought against such party under the Payable ACP Debt
Financing after the Closing Date.
Except as provided in Section 12.5 below, it is the express intention and
agreement of the parties that the foregoing indemnity shall survive the
consummation of the transactions contemplated in this Master Agreement;
provided, however, that Highwoods shall not have any liability for expenses,
damages, losses, costs or liability incurred by ACP with respect to any Claim
other than principal and interest or collection costs or other similar expenses
related thereto under any Payable ACP Debt Financing or Assumed ACP Debt
Financing, which arises or is asserted more than twelve (12) calendar months
after the Closing Date.
12.5 Highwoods Indemnity Regarding SEC Filings. HPI and Highwoods shall
indemnify and hold harmless ACP, its affiliates, its officers and directors, the
ACP Shareholders and the ACP Partners against any loss or claim, including
reasonable
36
attorneys fees defending such claims, arising in connection with any claim made
or threatened within three years following the Closing based on any
misstatements or omissions contained in any reports or filings made by Highwoods
or HPI with the SEC (other than any information provided to Highwoods or HPI by
ACP or the ACP Shareholders). Notwithstanding any other provision of this Master
Agreement, the ACP Parties shall not be deemed to have waived any rights they
may have under the federal securities laws in connection with the transactions
contemplated hereby.
12.6 Notice to Indemnitors. Any party entitled to indemnification under
this Master Agreement (the "Indemnified Party") shall give prompt written notice
to the party against whom indemnity is sought pursuant to this Master Agreement
(the "Indemnifying Party") as to the assertion of any claim, or the commencement
of any suit, action or proceeding in respect of which indemnity may be sought
under this Master Agreement. Except as otherwise provided in Sections 12.2,
12.3, 12.4 and 12.5, the omission of the Indemnified Party to notify the
Indemnifying Party of any such claim shall not relieve the Indemnifying Party
from any liability in respect of such claim which it may have to the Indemnified
Party on account of this Master Agreement, except, however, the Indemnifying
Party shall be relieved of liability to the extent that the failure so to notify
(a) shall have caused prejudice to the defense of such claim, or (b) shall have
increased the costs or liability of the Indemnifying Party by reason of the
inability or failure of the Indemnifying Party (because of the lack of prompt
notice from the Indemnified Party) to be involved in any investigations or
negotiations regarding any such claim, nor shall it relieve the Indemnifying
Party from any other liability which it may have to the Indemnified Party. In
case any such claim shall be asserted or commenced against an Indemnified Party
and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall
be entitled to participate in the negotiation or administration thereof and, to
the extent it may wish, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party, and, after notice from the Indemnifying
Party to the Indemnified Party of its election so to assume the defense thereof,
which notice shall be given within thirty (30) days of its receipt of such
notice from such Indemnified Party, the Indemnifying Party will not be liable to
the Indemnified Party hereunder for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation. In the event that the Indemnifying Party
does not wish to assume the defense, conduct or settlement of any claim, the
Indemnified Party shall not settle such claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
12.7 Effect of Indemnity. Nothing in this Article XII shall be construed
to mean that either Highwoods or the ACP Parties shall be responsible for any
obligations, acts or omissions of the other prior to Closing except for such
obligations and liabilities expressly assumed pursuant to this Master Agreement.
37
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices and demands which either party is required or
desires to give to the other shall be given in writing by personal delivery,
express courier service, certified mail, return receipt requested, or by
telecopy to the address or telecopy number set forth below for the respective
parties. All notices and demands so given shall be effective upon the delivery
of the same to the party to whom notice or a demand is given, if personally
delivered, or if sent by telecopy. If notice is by deposit with an express
courier service, it shall be effective on the next business day (if sent for
next business day delivery) following such deposit or, if notice is sent by
certified mail, return receipt requested, it shall be effective upon receipt.
NOTICES TO THE ACP PARTIES:
To the ACP Parties, to the addressee at the address indicated on
Schedule 13.1 attached hereto.
with copies to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
NOTICES TO HIGHWOODS:
HIGHWOODS PROPERTIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
HIGHWOODS PROPERTIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
38
No notice required or permitted under this Master Agreement need be sent to any
ACP Party in more than one legal capacity unless such notice relates to such ACP
Party in that legal capacity.
13.2 Counterparts. This Master Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.3 Severability. Any provision of this Master Agreement which is
prohibited or unenforceable in any jurisdiction shall as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision on any other jurisdiction.
13.4 Assigns. This Master Agreement shall be binding upon and inure to
the benefit of any and all successors, assigns, or other successors in interest
of HPI and Highwoods. This Master Agreement shall be binding upon and inure to
the benefit of any and all respective successors, assigns, personal
representatives, executors, or other successors in interest of ACP or the ACP
Shareholders; provided, however, that neither ACP nor the ACP Shareholders shall
assign its rights or delegate its obligations hereunder without the prior
written consent of Highwoods, which may be withheld for any reason. Neither
Highwoods nor HPI shall assign its rights or delegate its obligations hereunder
without the prior written consent of the ACP Shareholders which may be withheld
for any reason. This Master Agreement shall not confer any rights or remedies
upon, or establish any obligations of, any person or entity other than
Highwoods, HPI, ACP, the ACP Shareholders and their respective successors and
permitted assigns.
13.5 Confidentiality.
A. Each party shall ensure that all confidential information
which such party or any of its respective officers,
directors, employees, counsel, agents or accountants may now
possess or may hereafter create or obtain relating to the
financial condition, results of operations, business,
properties, assets, liabilities or future prospects of the
other party, any affiliate or subsidiary of the other party
or any tenant, customer or supplier of such other party, or
any such affiliate or subsidiary, shall not be published,
disclosed or made accessible by any of them to any other
person or entity at any time or used by any of them, in each
case without the prior written consent of the other party;
provided, however, that the restrictions of this sentence
shall not apply: (i) to the extent that disclosure may
otherwise be required by law; (ii) to the extent such
information shall have otherwise become publicly available;
or (iii) to disclosure by or on its behalf to its lender(s)
for the purpose of
39
obtaining financing in connection with the proposed
acquisition of the Properties.
B. In the event of termination of the Master Agreement, each
party promptly will deliver or certify destruction to the
other party of all documents, work papers and other material
(and any reproductions thereof) obtained by each party or on
its behalf from such other party or its affiliates or
subsidiaries in connection with the subject transaction,
whether so obtained before or after the execution hereof,
and will itself not use any information so obtained and will
use its good faith and diligent efforts to have any
information so obtained kept confidential and not used in
any way detrimental to such other party, subject to the
limitations in the preceding paragraph.
13.6 Public Disclosure. Before the Closing, except as otherwise agreed,
neither Highwoods nor ACP shall make any public release of information regarding
the matters contemplated herein except (i) that a joint press release in agreed
form shall be issued by Highwoods and ACP as promptly as is practicable after
the execution of the Master Agreement, (ii) that Highwoods and ACP may each
continue such communications with employees, tenants, suppliers, lenders,
partners, and other particular groups as may be legally required or necessary or
appropriate and not inconsistent with the best interests of the other party or
the prompt consummation of the transactions contemplated by this letter, and
(iii) as required by law. In the event disclosure is required by law, the party
so required to disclose shall immediately notify the other and the parties agree
to cooperate in good faith to make such required disclosure on a mutually agreed
basis.
13.7 Remedies. In the event that any party defaults or fails to perform
any of the conditions or obligations of such party under this Master Agreement
or any other agreement, document or instrument executed in connection with this
Master Agreement, or in the event that any such party's representations or
warranties contained herein or in any such other agreement, document or
instrument are not true and correct as of the date hereof and as of the Closing
Date, any other party shall be entitled to exercise any and all rights and
remedies available to it by or pursuant to this Master Agreement, documents or
instruments contemplated hereby or at law (statutory or common) or in equity
including specific performance; provided, however, that in the event of a
Closing of the transactions contemplated by this Master Agreement, the rights
and remedies of each party shall be limited to the rights contained in Article
XII and in Section 3.3 relating solely to those closing adjustments allowed to
be made in the Post-Closing Adjustment Period of this Master Agreement.
13.8 Break-Up Fee. In the event ACP or the ACP Shareholders for any
reason elect not to proceed with the transactions contemplated hereby, other
than as a result of (i) failure of the conditions precedent to Closing, or (ii)
the termination of this
40
Master Agreement as described at Sections 2.3(a) or 2.5, ACP and the ACP
Shareholders agree to pay to Highwoods a sum equal to Highwoods' actual
out-of-pocket expenses incurred in connection with the transactions contemplated
hereby up to a maximum amount of $1.0 million plus a "break-up" fee of
$15,000,000. In the event, Highwoods for any reason elects not to proceed with
the transactions contemplated hereby, other than as a result of (i) failure of
the conditions precedent to Closing, (ii) its election in its sole discretion to
terminate this Master Agreement under Section 2.4(b) hereof during its Review
Period, or (iii) the failure of the ACP Parties to deliver the required
marketable title under Section 6.9 hereof, or (iv) the termination of this
Master Agreement as described at Section 2.3(b), Highwoods agrees to pay to ACP
and the ACP Shareholders a sum equal to the ACP Parties' actual out-of-pocket
expenses incurred in connection with the transactions contemplated hereby up to
a maximum amount of $1.0 million plus a "break-up" fee of $15,000,000. The
payment of any sums due under this paragraph shall be made within two (2)
business days of such termination. Each party acknowledges to the other that
each has incurred and will incur substantial expenses in performing their
respective preliminary underwriting and investigations concerning this
transaction, that substantial action and activity will occur in reliance on the
commitments made hereunder and that adequate consideration exists for the
foregoing agreements. It is not the intention of any party hereto that this
Master Agreement may be terminated solely by the payment of the "break up" fees
provided by this section and that the remedy for specific performance is
available to either party notwithstanding anything in this section to the
contrary.
13.9 Captions. The captions and headings set forth in this Master
Agreement are for convenience of reference only and shall not be construed as a
part of this Master Agreement.
13.10 Exhibits and Schedules. All exhibits and schedules referred to in
this Master Agreement and attached hereto shall be deemed and construed as part
of this Master Agreement and for all purposes all such exhibits and schedules
are hereby specifically incorporated herein by reference. Any disclosure on one
exhibit or schedule shall be deemed to also constitute disclosure on all other
exhibits and schedules to the extent applicable.
13.11 Merger Clause. This Master Agreement and the Contribution
Agreements, including the exhibits and schedules incorporated herein and
therein, contain the final, complete and exclusive statement of the agreement
among the parties with respect to the transactions contemplated herein, and all
prior or contemporaneous oral and all prior written agreements, including the
letter of intent between the parties dated August 14, 1997, with respect to the
subject matter hereof are terminated and of no force and effect.
13.12 Amendments and Waiver. No change, amendment, qualification,
cancellation or termination hereof shall be effective unless in writing and duly
executed by each of the parties hereto. No failure of any party to enforce any
provisions hereof
41
or to resort to any remedy or to exercise any one or more of alternate remedies
and no delay in enforcing, resorting to or exercising any remedy shall
constitute a waiver by that party of its right subsequently to enforce the same
or any other provision hereof or to resort to any one or more of such rights or
remedies on account of any such ground then existing or which may subsequently
occur.
13.13 Governing Laws. This Master Agreement shall be governed by and
construed in accordance with the internal laws of the State of North Carolina
and of the United States of America.
13.14 Best Efforts. Highwoods, ACP and the ACP Shareholders acknowledge
that this Master Agreement and the undertakings therein are time critical and
sensitive. Each of the parties hereto therefore agree to use their individual
and collective best efforts in good faith to effect the Closing and to proceed
with the transactions contemplated by this Master Agreement as promptly as is
reasonably practicable.
42
IN WITNESS WHEREOF, the parties have duly executed this Master Agreement
by their hands and under seal affixed hereto as of the date and year first above
written.
HIGHWOODS PROPERTIES, INC.
ATTEST:
By: ___________________________________
President and Chief Executive Officer
----------------------
_____ Secretary
[CORPORATE SEAL]
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
By: Highwoods Properties, Inc.,
General Partner
By: ___________________________________
Title: _________________________________
ASSOCIATED CAPITAL PROPERTIES, INC.
ATTEST:
By: ___________________________________
_____ President
----------------------
_____ Secretary
[CORPORATE SEAL]
ACP SHAREHOLDERS
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
43
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 ACP Partnerships
Schedule 1-1 ACP Corporations
Schedule 1-2 Assumed ACP Debt Financing
Schedule 1-3 Exchange Option Agreements
Schedule 1-4 Purchase Option Agreements
Schedule 1-5 Payable ACP Debt Financing
Schedule 1-6 Descriptive Property Exhibit of Owned Properties and
Ownership Interests
Schedule 2.4(c) Prepayment Penalties
Schedule 3.1(a)(A) Owned Properties
Schedule 3.1(a)(B) Pending Acquisition Properties
Schedule 3.1(b) Future Acquisition Properties
Schedule 3.2(a) Aggregate Consideration/Unit Recipients and Cash
Recipients
Schedule 3.2(c) Aggregate Consideration/Shares for ACP
Corporations
Schedule 4.5 List of ACP Shareholders and their Stock Ownership
Schedule 4.5(c) Warrant Recipients
Schedule 5.2 Brokers
Schedule 5.3 ACP Employees Subject to Employment Agreements
Schedule 5.6 Personal Property of ACP
Schedule 5.7 Future Acquisition Properties - Property Description
44
Schedule 5.8 Capital and Tenant Improvements and Leasing
Commissions
Schedule 6.1 Required Consents
Schedule 6.2 Operation of Business - Exceptions
Schedule 6.3 Conflicts
Schedule 6.7A Schedule of Leases
Schedule 6.7B Lease Commissions Assumed
Schedule 6.7C Tenant Upfit Obligations
Schedule 6.7D Lease Defaults
Schedule 6.7E Lease Consents
Schedule 6.8 Scheduled Contracts
Schedule 6.9 Personal Property of ACP Partnerships
Schedule 6.10 Assumed Liabilities - Disclosed
Schedule 6.11 Insurance
Schedule 6.13 Claims or Litigation
Schedule 6.15 Exceptions to Financial Condition
Schedule 6.19 Condition of Improvements
Schedule 6.20 Taxes
Schedule 6.22 Employee Benefit Plans
Schedule 10.8 Independent Square Transaction Expenses
Schedule 13.1 Names and Addresses of ACP Parties
Exhibit 3.1(d) Form of Right of First Refusa
Exhibit 3.8 Form of Registration Rights Agreement
45
Exhibit 5.3 Form of ACP Employment Agreement
Exhibit 9.1(b) Tenant Estoppel Certificate
46
