ASSET CONTRIBUTION AGREEMENT
Agreement entered into on September 8, 1997, by and among Asset
Investors Operating Partnership, L.P., a Delaware limited partnership ("AIOP"),
Asset Investors Corporation, a Maryland corporation ("Parent"), and Financial
Asset Management LLC, a Colorado limited liability company ("FAM"). AIOP, Parent
and FAM are referred to individually in this Agreement as a "Party" and
collectively as the "Parties."
This Agreement contemplates a transaction in which FAM will contribute,
and AIOP will acquire, all of the membership interests in New FAM LLC, a
Delaware limited liability company ("NEW FAM") in return for AIOP Units, as
defined below.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AIOP" has the meaning set forth in the preface above.
"AIOP Units" means the units of limited partnership interest in AIOP
issued pursuant to AIOP's Agreement of Limited Partnership dated as of April 30,
1997, as amended from time to time.
"Auditors" has the meaning set forth in ss.2(d) below.
"Business Combination" means a transaction in which AIC and CAX have
combined their businesses through a merger, consolidation, plan of exchange or
securities purchase, sale of all or substantially all of their respective
assets, or otherwise.
"CAX" means Commercial Assets, Inc., a Maryland corporation.
"Closing" has the meaning set forth in ss.2(c) below.
"Closing Date" has the meaning set forth in ss.2(c) below.
"Closing Price" on any date means the last sale price, regular way, of
the Parent Shares or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, of the Parent Shares in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange, or if the Parent Shares are not then listed or admitted to trading on
the New York Stock Exchange, as reported in the principal national securities
exchange on which the Shares are listed or admitted to trading or, if the Parent
Shares are not then listed or admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average of the high
bid and low asked prices in the over the counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System for
the Parent Shares or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the Parent Shares are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker in the Parent Shares who is
selected from time to time by the Board of Directors of the Parent.
"Commission" has the meaning set forth in ss.4(i) below.
"Code" means the Internal Revenue Code of 1986, as amended or any
corresponding provisions of succeeding law.
"Confidential Information" means any information concerning the
businesses and affairs of FAM or NEW FAM that is not already generally available
to the public.
"Defense Counsel" has the meaning set forth in ss.8(b) below.
"Defense Notice" has the meaning set forth in ss.8(b) below.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Earnout" has the meaning given it in ss.2(d) below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single
employer with FAM for purposes of Code ss.414.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FAM" has the meaning set forth in the preface above.
"FAM's Cost of Acquiring the Advisory Business" means the amount
specified on Schedule 1.
"Financial Statement" has the meaning set forth in ss.3(h) below.
"Form 10-K" has the meaning set forth in ss.4(i) below.
"Form 10-Q" has the meaning set forth in ss.4(i) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Holders" has the meaning set forth in ss.6(e) below.
"Indemnified Party" has the meaning set forth in ss.8(b) below.
"Indemnifying Party" has the meaning set forth in ss.8(b) below.
"Interests" means all of the member's interests in NEW FAM.
"Knowledge" means actual knowledge after reasonable investigation,
which in the case of an entity shall mean the actual knowledge of its executive
officers after reasonable investigation. In the case of FAM, such persons shall
be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ for
purposes of this definition.
"Loss" or "Losses" means any loss, liability, damage or expense
(including reasonable attorneys' fees and expenses) that the subject Person may
suffer or sustain, including interest, fines and penalties, if any.
"Maryland Law" means the Maryland Business Corporation Act, as amended.
"Material Adverse Change" or "Material Adverse Effect" means any change
or effect that is materially adverse to the business, financial condition or
results of operations of NEW FAM taken as a whole, other than changes or effects
generally affecting the real estate industry or the economy generally.
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"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.3(h)
below.
"Most Recent Fiscal Quarter End" has the meaning set forth in ss.3(h)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.3(h)
below.
"Multi-employer Plan" has the meaning set forth in ERISA ss.3(37).
"NEW FAM" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parent" has the meaning set forth in the preface above.
"Parent Shares" means the shares of Common Stock, $.01 par value per
share of Parent, including, for all purposes other than ss.2(b), all Parent
Shares into which AIOP Units may be converted.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Proxy Statement" has the meaning set forth in ss.5(i) below.
"Purchase Price" has the meaning set forth in ss.2(b) below.
"Registration Rights Agreement" means the registration rights agreement
substantially in the form attached to this Agreement as Exhibit B.
"REIT Advisory Business" means all of the business activities of FAM as
heretofore conducted, including, but not limited to, the business of advising
Parent and Commercial Assets, Inc.
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"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller Group" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇.
"Special Committee" means the committee of Parent's Board of Directors
constituted on January 24, 1997 to evaluate the possible acquisition of FAM or
FAM's business by the Parent, as the composition of such committee may be
changed from time to time through the resignation or removal of members of the
committee and their subsequent replacement by duly appointed successors in
accordance with the by-laws of the Company.
"Tax" means any federal, state, local, or foreign tax, including any
interest, penalty, or addition thereto, whether disputed or not.
" Tax Return" means any return, declaration, report, and claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in ss.8(b) below.
2. Basic Transaction.
(a) Contribution. On and subject to the terms and conditions of this
Agreement, FAM agrees to contribute to AIOP and AIOP agrees to accept and
acquire from FAM the Interests at the Closing in exchange for the consideration
specified below in this ss.2.
(b) Purchase Price. AIOP agrees to issue and deliver to FAM for the
Interests the following: (i) 3,383,479 AIOP Units at the Closing which, when
valued at the book value per share of Parent Shares at June 30, 1997 ($3.455614
per share), AIOP, Parent, and FAM agree is an amount equal to FAM's Cost of
Acquiring the Advisory Business held by NEW FAM, as confirmed by the Auditors,
and (ii) subsequent to the Closing, any Earnout payments required pursuant to
ss.2(d) below (in the aggregate, the "Purchase Price").
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(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Parent in Denver,
Colorado, commencing at 9:00 a.m. local time on the second business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated by this Agreement (other
than conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date").
(d) Earnout(d) Earnout. Subsequent to the Closing, FAM or its
successors will be entitled to receive contingent consideration (the "Earnout")
in accordance with the provisions of this ss.2(d).
(i) FAM shall be entitled to receive an additional
600,000 or AIOP Units at such time as the Parent's independent
outside auditors (the "Auditors") confirm to the Special
Committee that substantially all of the proceeds of Parent's
1997 resecuritization of its portfolio of Non-Agency MBS Bonds
have been invested by Parent, AIOP or both in real estate and
related assets (of the same standard and quality as has been
the custom historically of Parent) during the 18 month period
(which may be extended up to an additional six months at the
discretion of the Special Committee) subsequent to June 17,
1997 that have achieved an annualized return over any six
month period of at least 9% during the 24 month period (which
may be extended up to an additional six months at the
discretion of the Special Committee) subsequent to June 17,
1997. For purposes of the preceding sentence, the "return"
shall be measured by (A) computing GAAP net income before
minority interest in AIOP for the period in question plus
non-cash charges for depreciation and goodwill associated with
acquisition of property management companies minus a provision
for capital replacements divided by (B) total investment cost.
(ii) FAM shall be entitled to receive an additional
600,000 AIOP Units if at any time during the 24 calendar month
period following June 17, 1997:
(A) the average Closing Price of Parent Shares over
any 90-day period exceeds $4.00 per share, and
one or more of the following events shall have
occurred:
(1) Parent has executed a plan for the
utilization of Parent's operating loss carryovers
that has been approved by Parent's Board of
Directors after receipt of advice from the
Auditors;
(2) Parent and CAX shall have completed a
Business Combination that has been approved by
the Board of Directors of Parent as being in the
best interests of the holders of Parent Shares;
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(3) Parent, AIOP or both shall have raised new
financing of debt or equity in the public or
private institutional markets in the aggregate
amount of at least $20,000,000 at prevailing
market rates and on terms approved by the Board
of Directors of Parent as being in the best
interests of Parent; or
(4) Parent shall have achieved an investment
grade rating on its debt from a nationally
recognized credit rating agency;
or
(B) management shall have executed another business
strategy not referred to in paragraphs (A) (1)
through (4) above that is approved by the Board of
Directors of Parent as being in the best interests of
Parent, and the average Closing Price of Parent
Shares over any 90-day period during the 24 calendar
month period following June 17, 1997 exceeds $4.25
per share.
(iii) If on or after the date of this Agreement, Parent should
split, combine or otherwise change the Parent Shares or its capitalization, the
number of AIOP Units or Parent Shares specified in paragraphs (i) and (ii)
above, and the Closing Price specified in paragraph (ii) above shall be adjusted
as appropriate to reflect such split, combination or other change.
(e) Deliveries at the Closing. At the Closing: (i) FAM will deliver to
AIOP the various certificates, instruments, and documents referred to in ss.7(a)
below; (ii) FAM will contribute to AIOP the Interests pursuant to duly executed
transfer documents; (iii) AIOP will deliver to FAM the consideration specified
in ss.2(b) above, (iii) AIOP and Parent will deliver or cause to be delivered to
FAM the various certificates, instruments, and documents referred to in ss.7(b)
below; (iv) FAM will execute, acknowledge (if appropriate), and deliver to AIOP
such other instruments of sale, transfer, conveyance, and assignment as AIOP
reasonably may request; and (v) AIOP will execute, acknowledge (if appropriate),
and deliver such other instruments of assumption as FAM reasonably may request.
3. Representations and Warranties of FAM. FAM represents and warrants
to AIOP and Parent that the statements contained in this ss.3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ss.3), except as set
forth in the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this ss.3. For the purposes
of all representations, warranties, covenants and other agreements of FAM, any
reference to NEW FAM (i) shall be deemed to give effect to the formation of NEW
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FAM, the contribution of FAM's assets to NEW FAM, and the assumption by NEW FAM
of certain of FAM's liabilities, despite the fact that as of the date of this
Agreement such formation, contribution and assumption have not yet taken place.
(a) Organization. Each of FAM and NEW FAM is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the jurisdiction of its organization.
(b) Authorization of Transaction. FAM has the power and authority to
execute and deliver this Agreement and, subject to the receipt of consent of its
members, to perform its obligations under this Agreement. Subject to the receipt
of the consent of the members of FAM and of FAM's members' members, the
Management Committee of FAM has duly authorized the execution, delivery and
performance of this Agreement by FAM. This Agreement constitutes the valid and
legally binding obligation of FAM, enforceable in accordance with its terms.
Each officer of the Parent who is also indirectly a holder of an interest in FAM
through FAM's members has agreed in his capacity as such to consent to the
transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which FAM or NEW FAM is subject or any
provision of the governing instruments of FAM or NEW FAM or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which FAM or NEW FAM is a party or by which it is bound
or to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets), except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, failure
to give notice, or Security Interest would not have a Material Adverse Effect on
FAM or NEW FAM or a material adverse effect on the ability of the Parties to
consummate the transactions contemplated by this Agreement. None of FAM or NEW
FAM needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a Material Adverse Effect on
FAM or NEW FAM or a material adverse effect on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
(d) Title to Interests. FAM owns beneficially and in its own name the
entire Interests and has good title to the Interests, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Security Interests, claims, and demands. FAM is not a
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party to any option, warrant, or purchase right, or other contract or commitment
that could require FAM to sell, transfer, or otherwise dispose of the Interests
(other than this Agreement). Except as provided in the governing instrument of
NEW FAM, FAM is not a party to or bound by any voting trusts, proxies, or other
agreements or understandings with respect to the voting of the Interests.
(e) Brokers' Fees. Neither FAM nor NEW FAM has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which NEW FAM,
AIOP or Parent could become liable or obligated. None of FAM or NEW FAM has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(f) Title to Assets. NEW FAM has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
their premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
(g) Equity Ownership. None of FAM or NEW FAM controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association, except that FAM
holds the Interests.
(h) Financial Statements. Attached to this Agreement as Exhibit A are
the following financial statements (collectively the "Financial Statements"):
(i) audited balance sheet and statements of income and members' equity and cash
flow as of and for the three months ended December 31, 1996 (the "Most Recent
Fiscal Year End") for FAM; (ii) unaudited consolidated balance sheets and
statements of income, changes in shareholders' equity, and cash flow (the "Most
Recent Financial Statements") as of and for the six months ended June 30, 1997
(the "Most Recent Fiscal Quarter End") for FAM; and (iii) an unaudited pro forma
schedule of assets and liabilities as of June 30, 1997 for NEW FAM (the "NEW FAM
Statement"). The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of FAM as of
such dates and the results of operations of FAM or NEW FAM for such periods;
provided, however, that the Most Recent Financial Statements and the NEW FAM
Statement are subject to normal year-end adjustments (which will not be material
individually or in the aggregate) and lack footnotes and other presentation
items.
(i) Events Subsequent to the Date of the NEW FAM Statement. Since the
date of the NEW FAM Statement, there has not been any material adverse change in
the business, financial condition, operations, or results of operations of NEW
FAM taken as a whole. Without limiting the generality of the foregoing, since
that date:
(i) NEW FAM has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the Ordinary Course of
Business;
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(ii) NEW FAM has not entered into any material agreement,
contract, lease, or license outside the Ordinary Course of Business;
(iii) no party (including NEW FAM) has accelerated,
terminated, made material modifications to, or cancelled any material
agreement, contract, lease, or license to which any of NEW FAM is a
party or by which any of them is bound outside the Ordinary Course of
Business;
(iv) NEW FAM has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) NEW FAM has not made any material capital expenditures
outside the Ordinary Course of Business;
(vi) NEW FAM has not made any material capital investment in,
or any material loan to, any other Person outside the Ordinary Course
of Business;
(vii) NEW FAM has not created, incurred, assumed, or
guaranteed any indebtedness for borrowed money and capitalized lease
obligations;
(viii) NEW FAM has not granted any license or sublicense of
any material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the
governing instruments of NEW FAM ;
(x) NEW FAM has not issued, sold, or otherwise disposed of any
of its membership interests, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its membership interests;
(xi) NEW FAM has not declared, set aside, or paid any dividend
or made any distribution with respect to its membership interests
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its membership interests;
(xii) NEW FAM has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(xiii) NEW FAM has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xiv) NEW FAM has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
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of any existing such contract or agreement;
(xv) NEW FAM has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvi) NEW FAM has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xvii) NEW FAM has not made any other material change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xviii) NEW FAM has not paid any amount to any third party
with respect to any liability or obligation (including any costs and
expenses NEW FAM has incurred or may incur in connection with this
Agreement and the transactions contemplated hereby); and
(xix) NEW FAM has not committed to any of the foregoing.
(j) Undisclosed Liabilities. NEW FAM has no material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except for
(i) liabilities set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto), (ii) liabilities, individually of no more than $
25,000 and in the aggregate of no more than $250,000, which have arisen after
the Most Recent Fiscal Quarter End in the Ordinary Course of Business, (iii)
executory liabilities under the agreements, contracts, leases, licenses and
other arrangements to which the NEW FAM is a party and which are listed on
ss.3(p) of the Disclosure Schedule, and (iv) liabilities reflected on the
Disclosure Schedule.
(k) Legal Compliance. NEW FAM has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply, except
where the failure to comply would not have a Material Adverse Effect on NEW FAM.
(l) Tax Matters. There is no material dispute or claim concerning any
Tax liability of any of FAM or NEW FAM (A) claimed or raised by any authority in
writing or (B) as to which FAM or NEW FAM has Knowledge based upon any inquiry
or communication received by either FAM or NEW FAM. NEW FAM was formed after
January 1, 1997. At all times since its formation, NEW FAM has had only one
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member. NEW FAM is not and has not been required to be treated as an association
taxable as a corporation for income tax purposes and NEW FAM has not elected to
be treated as an association for federal income tax purposes or under any
similar provisions of state or local law. Each of FAM and NEW FAM has prepared
and filed all Tax Returns required to be filed by them and all such Tax Returns
are true and correct and complete. Each of FAM and NEW FAM has paid all Taxes
shown as due on such Tax Returns.
(m) Real Property.
(i) NEW FAM owns no real property.
(ii) ss.3(m)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased to NEW
FAM. With respect to each material lease listed in
ss.3(m)(ii) of the Disclosure Schedule:
(A) the lease is legal, valid, binding, enforceable,
and in full force and effect in all material respects;
(B) no party to the lease is in material breach or
default, and no event has occurred which, with notice or lapse
of time, would constitute a material breach or default or
permit termination, modification, or acceleration thereunder;
(C) no party to the lease has repudiated any material
provision thereof;
(D) there are no material disputes, oral agreements,
or forbearance programs in effect as to the lease;
(E) NEW FAM has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold; and
(F) all facilities leased thereunder have received
all approvals of governmental authorities (including material
licenses and permits) required in connection with the
operation thereof, and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all
material respects.
(n) Tangible Assets. ss.3(n) of the Disclosure Schedule lists the
furniture, equipment, and other tangible assets that NEW FAM owns or leases. All
of the assets listed on ss.3(n) are free from material defects (patent and
latent), have been maintained in accordance with normal industry practice, and
are in good operating condition and repair (subject to normal wear and tear).
(o) NEW FAM Permits(j) Company Permits. NEW FAM holds all permits,
licenses, variances, exemptions, orders and approvals of all governmental
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authorities necessary for the lawful conduct of its business (the "NEW FAM
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals that would not reasonably be expected to have a
Material Adverse Effect. NEW FAM is in compliance with the terms of the NEW FAM
Permits, except where the failure so to comply would not reasonably be expected
to have a Material Adverse Effect.
(p) Contracts. ss.3(p) of the Disclosure Schedule lists all written
contracts and agreements to which NEW FAM is a party. FAM has delivered to AIOP
a correct and complete copy of each contract and agreement listed in ss.3(p) of
the Disclosure Schedule (as amended to date). With respect to each such
agreement: (A) the agreement is legal, valid, binding, enforceable, and in full
force and effect in all material respects; (B) to the Knowledge of FAM, no party
is in material breach or default, and no event has occurred which with notice or
lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under the agreement; and (C) to the
Knowledge of FAM, no party has repudiated any material provision of the
agreement.
(q) Notes and Accounts Receivable. 933404678All notes and accounts
receivable of NEW FAM are reflected properly on their books and records, are
valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of NEW FAM.
(r) Powers of Attorney. To the Knowledge of FAM, there are no material
outstanding powers of attorney executed on behalf of any of NEW FAM .
(s) Litigation. NEW FAM (i) is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is not a party
or, to the Knowledge of any of FAM, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator.
(t) Employees. ss.3(t) of the Disclosure Schedule lists all employees
of NEW FAM. To the Knowledge of FAM, no executive, key employee, or significant
group of employees plans to terminate employment with NEW FAM during the next 12
months. NEW FAM is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strike or material grievance, claim of
unfair labor practices, or other collective bargaining dispute. FAM has no
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of NEW FAM.
(u) Employee Benefits.
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(i) ss.3(u) of the Disclosure Schedule lists each Employee
Benefit Plan that NEW FAM maintains or to which NEW FAM contributes or
has any obligation to contribute.
(ii) With respect to each Employee Benefit Plan:
(A) each such Employee Benefit Plan (and each related
trust, insurance contract or fund) complies in form and, to
the Knowledge of FAM, in operation with the applicable
requirements of ERISA and the Code in all material respects;
(B) all contributions (including all employer
contributions and employee salary reduction contributions, if
any) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan or
accrued on the Financial Statements of NEW FAM, and there are
no accumulated funding deficiencies with respect to any such
Employee Pension Benefit Plan;
(C) each such Employee Benefit Plan that is an
Employee Pension Benefit Plan has received a favorable
determination letter from the IRS as to its qualification
under ss.401(a) of the Code;
(D) no "prohibited transaction" (as such term is
defined in ss.406 of ERISA or ss.4975 of the Code) has
occurred with respect to any such Employee Benefit Plan which
is an Employee Pension Benefit Plan (or its related trust)
which could subject NEW FAM or any officer, director or
employee of NEW FAM, to any Tax or penalty imposed under
ss.4975 of the Code or liability under ss.406 of ERISA which
would have a Material Adverse Effect;
(E) NEW FAM has delivered or made available to the
AIOP and Parent true and complete copies of the plan documents
and summary plan descriptions, the most recent determination
letter received from the IRS, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts
and other funding arrangements which implement each such
Employee Benefit Plan;
(F) no such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been completely or partially
terminated or has been the subject of a "reportable event" (as
defined in ss.4043 of ERISA) as to which notices would be
required to be filed with the PBGC which would have a material
adverse effect. To the Knowledge of NEW FAM, no proceeding by
the PBGC to terminate any such Employee Pension Benefit Plan
(other than a Multiemployer Plan) has been instituted;
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(G) NEW FAM has not incurred any liability to the
PBGC (except for required premium payments, if any) under
Title IV of ERISA (including any withdrawal liability) with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan; and
(H) no action, suit, proceeding, hearing or
investigation with respect to the administration or the
investment of assets of any such Employee Benefit Plan (other
than routine claims for benefits) is, to the Knowledge of NEW
FAM, pending or threatened.
(iii) NEW FAM does not contribute to any Multi-employer Plan
or have any liability (including withdrawal liability) under any
Multi-employer Plan.
(iv) NEW FAM does not have any obligation to provide health or
other welfare benefits to former, retired or terminated employees,
except as specifically required under ss.4980B of the Code. With
respect to all of its past and present employees, NEW FAM has complied
in all material respects with the notice and continuation requirements
of Part 6 of Subtitle B of Title I of ERISA and of ss.4980B of the
Code.
(v) Guaranties. NEW FAM is not a guarantor or otherwise responsible for
any liability or obligation (including indebtedness) of any other Person.
(w) Disclosure. The representations and warranties contained in this
ss.3 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this ss.3 not misleading.
(x) Investment Company Status. Neither FAM nor NEW FAM is an
"investment company" within the meaning of Section 721(b) of the Code and the
Treasury regulations thereunder.
(y) Investment. FAM (i) understands that the AIOP Units and Parent
Shares to be issued to it have not been, and will not be, registered under the
Securities Act or under any state securities laws except pursuant to the
procedures specified in ss.ss.6(e) and (f), and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering, (ii) is acquiring AIOP Units and Parent Shares solely for its
own account for investment purposes, and not with a view to the distribution
thereof (except to FAM's members), (iii) is a sophisticated investor with
knowledge and experience in business and financial matters, (iv) has received
certain information concerning AIOP and Parent and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and the
risks inherent in holding AIOP Units and Parent Shares, (v) is able to bear the
economic risk and lack of liquidity inherent in holding AIOP Units and Parent
Shares, and (vi) is an Accredited Investor. FAM shall not distribute the AIOP
Units or Parent Shares to FAM's members unless each such member is an
"accredited investor" as defined in Section 2(15) of the Securities Act, and
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each such member agrees to make the representations and warranties contained in
this Section 3(y).
(z) REIT Advisory Business.
(i) The assets (tangible and intangible) owned or leased by
NEW FAM or which it (x) otherwise has the right to use or (y)
will own, lease or otherwise have the right to use together
constitute all of the assets of FAM held for use or used
primarily in connection with the REIT Advisory Business and
constitutes all assets held by FAM that are necessary to
conduct the REIT Advisory Business in the manner conducted by
FAM prior to the date hereof and the Closing Date.
(ii) NEW FAM does not own any material assets (tangible or
intangible) other than those used primarily in, or held
primarily in connection with, the REIT Advisory Business.
(iii) Upon consummation of the transactions contemplated by
this Agreement, (x) AIOP will obtain, indirectly through
direct ownership of the Interests, all of the properties and
assets (tangible or intangible) that are used in and necessary
to the conduct of the REIT Advisory Business as conducted by
FAM, including necessary contractual rights, and (y) there
will be no significant properties, assets, services or
arrangements used in the operation of the REIT Advisory
Business acquired on such date and owned by any Person that
will not be leased or licensed or provided to NEW FAM under
current leases, licenses, contracts and other arrangements
that will be valid and legally binding and enforceable by NEW
FAM against the other parties in accordance with their terms.
(aa) Charter Documents and Corporate Records. FAM has heretofore
delivered to AIOP and Parent true and complete copies of the (i) certificate of
limited liability company (certified by the Secretary of State of the
jurisdiction of its organization) and (ii) limited liability company governing
agreements of FAM and NEW FAM (certified by the respective entity's secretary or
an assistant secretary or other equivalent officer), or comparable instruments,
of FAM and NEW FAM as in effect on the date hereof. The minute books, or
comparable records, of FAM and NEW FAM heretofore have been made available to
AIOP and Parent for their inspection and contain true and complete records of
all meetings and consents in lieu of meeting of the Board of Directors, or any
comparable corporate body, (and any committee thereof) and shareholders or
interest holders of FAM or NEW FAM since the time of such entity's organization
or any such Subsidiary's organization, as the case may be, and accurately
reflect all transactions referred to in such minutes and consents in lieu of
meeting. The stock books, or comparable records, of FAM and NEW FAM heretofore
have been made available to AIOP and Parent for its inspection and are true and
complete.
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(bb) Potential Conflicts of Interest. (a) No member of the Seller
Group, (b) no relative or spouse (or relative of such spouse) of any member of
the Seller Group and (c) no entity controlled by one or more of the foregoing:
(i) owns, directly or indirectly, any interest in
(excepting less than 1% stock holdings for investment purposes
in securities of publicly held and traded companies), or is an
officer, director, employee or consultant of, any person which
is, or is engaged in business as, a competitor, lessor,
lessee, supplier, distributor, sales agent or customer of FAM
or NEW FAM;
(ii) owns, directly or indirectly, in whole or in
part, any property that FAM or NEW FAM uses in the conduct of
its business; or
(iii) has any claim whatsoever against, or owes any
amount to, FAM or NEW FAM, except for claims in the ordinary
course of business such as for accrued vacation pay, accrued
benefits under Benefit Plans, and similar matters and
agreements existing on the date hereof.
4. Representations and Warranties of AIOP and Parent. AIOP and Parent
jointly and severally represent and warrant to FAM that the statements contained
in this ss.4 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this ss.4), except as set forth in the Disclosure Schedule. The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this ss.4.
(a) Organization. AIOP is a limited partnership and Parent is
a corporation, each duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization.
(b) Authority Relative to this Agreement. AIOP and Parent each
has the requisite power and authority to enter into this Agreement and
to perform its obligations under this Agreement. The execution and
delivery of this Agreement by AIOP and Parent and the consummation by
AIOP and Parent of the transactions contemplated by this Agreement have
been duly authorized by the general partners of AIOP and Board of
Directors of Parent, respectively, and, except for the approval of the
holders of the Parent Shares as set forth in ss.5(h), no other
proceedings on the part of AIOP or Parent are necessary to authorize
this Agreement and the transactions contemplated by this Agreement.
This Agreement has been duly executed and delivered by AIOP and Parent
and constitutes a valid and binding obligation of AIOP and Parent,
respectively, enforceable in accordance with its terms.
(c) Noncontravention. Neither AIOP or Parent is subject to or
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obligated under any provision of (a) its governing instruments, (b) any
contract, (c) any license, franchise or permit, or (d) any law,
regulation, order, judgment or decree, which would be breached or
violated or in respect of which a right of termination or acceleration
or any encumbrance on any of its assets could be created by its
execution, delivery and performance of this Agreement and the
consummation by it of the transactions contemplated by this Agreement,
other than any such breaches, violations, rights or encumbrances which
will not, individually or in the aggregate, have a Material Adverse
Effect on AIOP or Parent. Other than in connection with or in
compliance with the provisions of Maryland Law, or the Exchange Act, no
authorization, consent or approval of, or filing with, any public body,
court or authority is necessary for the consummation by AIOP or Parent
of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals and filings as to which the failure
to make or obtain would not, individually or in the aggregate, have a
Material Adverse Effect on AIOP or Parent.
(d) Brokers' Fees. Neither AIOP or Parent has any liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which FAM could become liable or obligated.
(e) Litigation. Neither AIOP nor Parent (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or, to the Knowledge of either AIOP or Parent, is
threatened to be made a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(f) Organizational Documents. AIOP and Parent have delivered
to FAM a complete and correct copy of (a) the Articles of Incorporation
and Bylaws of Parent and (b) the Agreement of Limited Partnership of
AIOP.
(g) AIOP Units and Parent Shares. The AIOP Units and Parent
Shares, if and when issued to FAM in accordance with this Agreement,
will be duly authorized and validly issued; and the Parent Shares will
be fully paid and non-assessable. Upon receiving AIOP Units, FAM will
be duly admitted on and as of the Closing Date as a limited partner of
AIOP with all the rights of limited partners of AIOP under the
Agreement of Limited Partnership of AIOP or otherwise.
(h) Capitalization. The authorized capital stock of Parent
consists of 50,000,000 Parent Shares. As of the date of this Agreement,
25,239,217 Parent Shares were issued and outstanding, and 93,214 Parent
Shares were reserved for issuance upon conversion of AIOP Units. As of
the date of this Agreement, 93,214 AIOP Units were issued and
outstanding. Except for issuance of AIOP Units and Parent Shares in
connection with acquisitions of properties, interests in properties and
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interests in entities that own properties, and pursuant to this
Agreement, there are no options, warrants or other rights, agreements
or commitments obligating Parent to issue shares of its capital stock
or obligating AIOP to issue AIOP Units.
(i) Commission Filings. Parent has delivered to FAM copies of
Parent 's (a) Annual Report on Form 10-K for the year ended December
31, 1996 (the "Form 10-K"), (b) Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 (the "Form 10-Q"), and (c) proxy statement
relating to Parent's annual meeting of shareholders during 1996, in
each case as filed with the Securities and Exchange Commission (the
"Commission"). Parent has made available to FAM all other reports,
registration statements and other documents filed by Parent with the
Commission under the Exchange Act since January 1, 1992. Parent has
filed all reports, registration statements and other documents required
to be filed with the Commission under the rules and regulations of the
Commission since January 1, 1992, and all such Commission filings
complied as to form with the requirements of the Exchange Act. As of
their respective dates, the Form 10-K and Form 10-Q (including in all
cases any exhibits or schedules or documents incorporated therein by
reference) did not contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(j) Financial Statements and Related Data. Parent's audited
consolidated financial statements included in the Form 10-K and the
Parent 's unaudited financial statements included in the Form 10-Q have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in
the notes to such statements) and fairly present Parent's financial
position as of the date of such statements and Parent 's results of
operations and changes in financial position for the period then ended
(except, in the case of the unaudited financial statements, for normal
year-end adjustments and for the condensation or omission of footnote
disclosures in accordance with the requirements of the Commission).
(k) Absence of Material Adverse Changes. Since the filing of
the Form 10-Q with the Commission, neither Parent nor AIOP has
undergone or suffered any Materially Adverse Change.
(l) Partnership Status. AIOP is treated as a partnership, and
not as an association taxable as a corporation, for federal income tax
purposes.
(m) Investment Company Status. AIOP is not an "investment
company" within the meaning of Section 721(b) of the Code and the
Treasury regulations thereunder.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
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the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver,
of the closing conditions set forth in ss.7 below).
(b) Notices and Consents. FAM will give any notices to third
parties, and FAM will use its reasonable best efforts to obtain any
third party consents, that AIOP reasonably may request in connection
with the matters referred to in ss.3(c) above. Each of the Parties will
give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters
referred to in ss.3(c) and ss.4(c) above.
(c) Operation of Business. FAM will not cause or permit NEW
FAM to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing, FAM will not cause or permit NEW FAM
to (i) declare, set aside, or make any distribution with respect to the
Interests or redeem, purchase, or otherwise acquire any of the
Interests, or (ii) otherwise engage in any practice, take any action,
or enter into any transaction of the sort described in ss.3(i) above.
(d) Preservation of Business. FAM will, and will cause NEW FAM
to, keep its business and properties substantially intact, including
its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and
employees.
(e) Full Access. FAM will, and will cause NEW FAM to, permit
representatives of AIOP and Parent to have full access at all
reasonable times, and in a manner so as not to interfere with the
normal business operations of FAM and NEW FAM, to all premises,
properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to FAM and NEW FAM. AIOP and
Parent will treat and hold as such any Confidential Information it
receives from FAM or NEW FAM in the course of the reviews contemplated
by this ss.5(e); will not use any of the Confidential Information
except in connection with this Agreement; and, if this Agreement is
terminated for any reason whatsoever, will return to FAM or NEW FAM all
tangible embodiments (and all copies) of the Confidential Information
which are in its possession.
(f) Notice of Developments. Each Party will give prompt
written notice to the other Party of any material adverse development
causing a breach of any of its own representations and warranties in
ss.3 and ss.4 above. No disclosure by any Party pursuant to this
ss.5(f), however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of
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warranty, or breach of covenant.
(g) No Additional Representations and Warranties. AIOP, Parent
and FAM acknowledges that none of them nor any other Person has made
any representation or warranty, express or implied, as to the accuracy
or completeness of any information regarding AIOP, Parent or NEW FAM,
except as expressly set forth in this Agreement or the Disclosure
Schedule. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN ss.ss.3 and 4, NEITHER AIOP, PARENT NOR FAM MAKES ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN
RESPECT OF AIOP, PARENT OR NEW FAM, RESPECTIVELY OR ANY OF THE ASSETS,
LIABILITIES OR OPERATIONS OF ANY OF THEM, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND
EACH EXPRESSLY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY.
(h) Action of Shareholders. The Parties shall take all action
necessary in accordance with Maryland Law and Parent's governing
instruments to convene a meeting of Parent's shareholders as soon as
practicable following the execution of this Agreement to consider and
vote the transactions contemplated by this Agreement. Subject to the
exercise of applicable fiduciary duties upon the advice of counsel, the
Special Committee and Parent's Board of Directors shall recommend that
the Parent's shareholders vote to approve the transactions contemplated
by this Agreement. Parent shall use reasonable efforts to solicit
proxies from Parent's shareholders with respect to such approval.
(i) Proxy Statement. The Parties shall, as soon as practicable
after the execution of this Agreement, file with the Commission under
the Exchange Act, and use all reasonable efforts to have processed by
the Commission, a proxy statement (the "Proxy Statement") with respect
to the approval of the transactions contemplated by this Agreement by
Parent's shareholders. The Proxy Statement shall be in form and
substance reasonably satisfactory to FAM, AIOP and Parent. The Parties
agree to cause the Proxy Statement to be mailed to Parent's
shareholders as soon as practicable after the Commission processes it.
Each of Parent, AIOP and FAM agrees that the information it provides
for use in the Proxy Statement shall be true and correct in all
material respects and shall not omit to state any material fact
necessary in order to make such information and the Proxy Statement not
misleading as of its date. FAM agrees promptly to seek the written
consent of its members to consummate the transactions contemplated by
this Agreement.
(j) Action by FAM's Members. FAM will use its best efforts to
obtain the approval of its members and its members' members to the
contemplated transaction.
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6. Post-Closing Covenants.
(a) GeneralGeneral. In the event that at any time after the
Closing any further action is necessary to carry out the purposes of
this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other Party may reasonably request, all at the sole
cost and expense of the requesting Party.
(b) Public Information. Parent will file all reports required
to be filed by it pursuant to the requirements of the Exchange Act and
the rules and regulations adopted by the Commission under such Act, and
will take such further action as necessary to enable FAM to sell the
Parent Shares pursuant to (a) Rule 144 adopted by the Commission under
the Securities Act (as such rule may be amended from time to time) or
any similar rule or regulation hereafter adopted by the Commission or
(b) the Registration Rights Agreement. Upon written request, Parent
will deliver to FAM a written statement as to whether it has complied
with these requirements.
(c) Litigation Support(d) Litigation Support. In the event and
for so long as any Party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand in connection with (i) any transaction
contemplated by this Agreement, or (ii) any fact, situation,
circumstance, status, condition, activity, practice, occurrence, event,
incident, action, failure to act, or transaction on or prior to the
Closing Date involving NEW FAM, each of the Parties will cooperate with
the contesting or defending Party and its counsel in the contest or
defense, all at the sole cost and expense of the contesting or
defending Party, except to the extent that the contesting or defending
party is entitled to indemnification therefor under this Agreement.
(d) Registration Rights. Parent shall provide FAM registration
rights pursuant to the Registration Rights Agreement attached as
Exhibit B. In addition, if at any time within the two-year period
following the Closing Date, Parent shall file with the Commission a
registration statement for the purpose of sale or resale of Parent
Shares held by any person on a delayed or continuous basis, Parent
shall include in such registration statement all Parent Shares held by
FAM or which it has the right to acquire in connection with the Earnout
or the conversion of AIOP Units into Parent Shares. If FAM sells or
otherwise transfers any of the Parent Shares in a sale or other
transfer that is not registered under the Securities Act, FAM may
assign along with such Parent Shares its rights under this paragraph
(d) with respect to such Parent Shares to the purchaser or other
transferee of such Parent Shares. Upon executing and delivering to
Parent a document assuming FAM's obligations under this Agreement, such
purchaser or other transferee of Parent Shares shall be entitled to
such rights. No subsequent purchasers or transferees of any Parent
Shares shall be entitled to such rights.
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(e) Non-competition. Each member of the Seller Group
(severally and not jointly) agrees that for a period of two years from
and after the Closing Date, such Person will not engage in or have any
material interest in any sole proprietorship, partnership, corporation,
limited liability company or business or any other Person (other than
Parent and AIOP), whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise, that
directly or indirectly is engaged in the ownership, management and
operation of manufactured housing communities in the United States of
America; provided, however, that nothing herein shall be deemed to
prevent any member of the Seller Group from acquiring through market
purchases and owning, solely as an investment, less than five percent
in the aggregate of the equity or debt securities of any class of any
issuer whose shares are registered under ss.12(b) or 12(g) of the
Exchange Act, and are listed or admitted for trading on any United
States national securities exchange or are quoted on the National
Association of Securities Dealers Automated Quotations System, or any
similar system of automated dissemination of quotations of securities
prices in common use, so long as neither of them is a member of any
"control group" (within the meaning of the rules and regulations of the
Commission) of any such issuer. To the extent that the covenant
provided for in this ss.6(e) may later be deemed by a court to be too
broad to be enforced with respect to its duration or with respect to
any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope of
the provision, and to add or delete specific words or phrases to or
from the provision. The provision as modified shall then be enforced.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of AIOP and Parent. The obligations of
AIOP and Parent to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in ss.3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) FAM shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) FAM shall have procured all of the material third party
consents specified in ss.5(b) above;
(iv) no action, suit, or proceeding shall be pending before
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any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect
adversely the right of AIOP to own the Interests or to operate the
business of NEW FAM;
(v) FAM shall have delivered to AIOP a certificate from an
executive officer of FAM to the effect that each of the conditions
specified above in ss.ss.7(a)(i)-(iv) and 7(b)(viii) is satisfied in
all respects;
(vi) FAM, AIOP and Parent shall have received all other
material authorizations, consents, and approvals of governments and
governmental agencies referred to in ss.3(c) and ss.4(c) above;
(vii) the Auditors shall have provided to Parent written
confirmation of the amounts of FAM's Cost of Acquiring the Advisory
Business;
(viii) prior to the date on which the Proxy Statement is first
mailed to the holders of Parent Shares, the Special Committee shall
have received the a written opinion from Jefferies & Co., Inc. to the
effect that the transactions contemplated by this Agreement are fair to
the holders of the Parent Shares from a financial point of view, and
such opinion shall not have been withdrawn;
(ix) the transactions contemplated by this Agreement shall
have been approved and adopted by the vote of Parent's shareholders at
the 1997 annual meeting of shareholders;
(x) all actions to be taken by FAM in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to AIOP;
(xi) FAM shall have furnished AIOP with a certificate that FAM
is not a foreign person within the meaning of Section 1445 of the Code,
which certificate shall meet the requirements of, and be executed in
accordance with, Treasury Regulation Section 1.1445-2(b); and
(xii) Parent and AIOP shall have received the written opinion
of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ to the effect that the
transactions contemplated by 2 of this Agreement will be tax
free to Parent and AIOP.
AIOP and Parent may waive any condition specified in this ss.6(a) if it executes
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a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of FAM. The obligation of FAM to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.4 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) AIOP and Parent shall have performed and complied with
all of their covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) AIOP and Parent shall have delivered to FAM certificates
to the effect that each of the conditions specified above in
ss.ss.7(b)(i)-(iii) and 7(a)(ix) is satisfied in all respects;
(v) FAM, AIOP and Parent shall have received all other
material authorizations, consents, and approvals of governments and
governmental agencies referred to in ss.3(c) and ss.4(c) above;
(vi) FAM and Parent shall have executed the Registration
Rights Agreement; and
(vii) all actions to be taken by AIOP and Parent in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to FAM; and
(viii) FAM will have obtained the written consent of FAM's
members to consummate the transactions contemplated in this Agreement.
FAM may waive any condition specified in this ss.6(b) if it executes a writing
so stating at or prior to the Closing.
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8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. The representations and
warranties of FAM contained in ss.3, and of AIOP and Parent contained in ss.4
shall survive the Closing and continue in full force and effect for a period of
the later of 24 months thereafter and the expiration of the Earnout; provided,
however that the representations and warranties contained in ss.3(l) shall
survive until the expiration of the applicable statute of limitations. Any claim
for which any Party shall have given proper notice in accordance with the terms
of this Agreement on or prior to the expiration of the applicable survival
period shall survive until such claim is resolved pursuant to the terms of this
Agreement. To preserve any claim for breach of any such representation or
warranty, the Party claiming a breach shall be obligated to notify the Party
claimed to be in breach in writing of any such breach, or facts that can
reasonably be expected to give rise to such breach, before termination of the
applicable survival period in respect of such representation or warranty;
otherwise, such party's claim for breach or indemnity shall be forever barred.
(b) Indemnification.
(i) Subject to ss.8(a) above and the conditions set forth in
this ss.8(b), subsequent to the Closing Date FAM shall indemnify,
defend and hold harmless Parent (as assignee of AIOP and NEW FAM
pursuant to ss.8(e) hereof), and AIOP and NEW FAM shall jointly and
severally indemnify, defend and hold harmless FAM from, against and in
respect of any Losses which AIOP or Parent, on the one hand, and FAM,
on the other hand, shall suffer, sustain or become subject to by virtue
of or which arise out of, or result from, any breach of the respective
covenants, representations and warranties set forth in this Agreement;
provided, however, that: (A) any Person or Persons entitled to
indemnification under this ss.8(b) (the "Indemnified Party or Parties")
shall not be entitled to indemnification with respect to any Losses
under this ss.8(b)(i) until all such Losses exceed, in the aggregate,
$100,000 in which case the Indemnified Party shall be entitled to
indemnification as to all Losses, and (B) the indemnification
obligations of the Indemnifying Party to the Indemnified Party under
this ss.8(b) shall not exceed $3,500,000 in the aggregate.
(ii) Promptly after the assertion by any third party of any
claim, demand or notice (a "Third Party Claim") against any Indemnified
Party that results or may result in the incurrence by such Indemnified
Parties of any Losses for which such Indemnified Parties would be
entitled to indemnification pursuant to this Agreement, such
Indemnified Parties shall promptly notify the Indemnifying Parties of
such Third Party Claim. Thereupon, the Indemnifying Parties shall have
the right, upon written notice (the "Defense Notice") to the
Indemnified Parties within 30 days after receipt by the Indemnifying
Parties of notice of the Third Party Claim (or sooner if such claim so
requires) to conduct, at their own expense, the defense against the
Third Party Claim in their own names or, if necessary, in the names of
the Indemnified Parties. The Defense Notice shall specify the counsel
the Indemnifying Parties shall appoint to defend such Third Party Claim
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(the "Defense Counsel") and the Indemnified Parties shall have the
right to approve the Defense Counsel, which approval shall not be
unreasonably withheld. In the event the Indemnified Parties and the
Indemnifying Parties cannot agree on such counsel within 10 days after
the Defense Notice is given, then the Indemnifying Parties shall
propose an alternate Defense Counsel, which shall be subject again to
the Indemnified Parties' approval which approval shall not be
unreasonably withheld. Any Indemnified Party shall have the right to
employ separate counsel in any such Third Party Claim and/or to
participate in the defense thereof, but the fees and expenses of such
counsel shall not be included as part of any Losses incurred by the
Indemnified Party unless (A) the Indemnifying Parties shall have failed
to give the Defense Notice within the prescribed period, (B) such
Indemnified Party shall have received an opinion of counsel, reasonably
acceptable to the Indemnifying Parties, to the effect that the
interests of the Indemnified Party and the Indemnifying Parties with
respect to the Third Party Claim are sufficiently adverse to prohibit
the representation by the same counsel of both parties under applicable
ethical rules, or (C) the employment of such counsel at the expense of
the Indemnifying Parties has been specifically authorized by the
Indemnifying Parties. The party or parties conducting the defense of
any Third Party Claim shall keep the other parties apprised of all
significant developments and shall not enter into any settlement,
compromise or consent to judgment with respect to such Third Party
Claim unless the party not conducting the defense consents, such
consent not to be unreasonably withheld.
(c) Determination of Losses. The Parties shall make appropriate
adjustments for tax benefits and insurance coverage and proceeds and take into
account the time cost of money (using any annual interest rate of 8.0%) in
determining Losses for purposes of ss.8. Except as otherwise required by law,
all indemnification payments under this ss.8 shall be deemed adjustments to the
Purchase Price.
(d) Exclusive Remedy. The Parties acknowledge and agree that the
foregoing indemnification provisions in this ss.8 shall be the exclusive
remedies of AIOP, Parent, NEW FAM and FAM with respect to transactions
contemplated by this Agreement.
(e) Assignment by AIOP. Provided that the Closing shall occur, AIOP and
NEW FAM hereby assign and transfer to Parent, effective as of the Closing, all
benefits and rights of AIOP and NEW FAM pursuant to this ss.8, and AIOP and NEW
FAM shall retain no residual rights to enforce or recover under either of such
sections.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
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Agreement as provided below:
(i) AIOP, Parent (by action of the Special Committee) and FAM
may terminate this Agreement by mutual written consent at any time
prior to the Closing;
(ii) AIOP and Parent (by action of the Special Committee) may
terminate this Agreement by giving written notice to FAM at any time
prior to the Closing (A) in the event FAM has breached any material
representation, warranty, or covenant contained in this Agreement in
any material respect, AIOP has notified FAM of the breach, and the
breach has continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred on or
before December 31, 1997, by reason of the failure of any condition
precedent under ss.7(a) hereof (unless the failure results primarily
from AIOP or Parent itself breaching any representation, warranty, or
covenant contained in this Agreement); and
(iii) FAM may terminate this Agreement by giving written
notice to AIOP and Parent at any time prior to the Closing (A) in the
event AIOP has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, FAM has
notified AIOP of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before December 31, 1997, by
reason of the failure of any condition precedent under ss.7(b) hereof
(unless the failure results primarily from FAM itself breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.9(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in ss.5(e) above shall survive termination.
10. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior approval of all other Parties; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its best
efforts to advise the other Party prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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(c) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Except as otherwise provided in this Agreement, no Party
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party; provided,
however, that (A) AIOP may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
AIOP nonetheless shall remain responsible for the performance of all of its
obligations hereunder) and (B) FAM may distribute to its members, and such
members may distribute to their members, the right to receive the Earnout when
and if payable by notice to AIOP and Parent.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to FAM:
Financial Asset Management LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Bartlit ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to AIOP:
Asset Investors Operating Partnership, L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Parent:
Asset Investors Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇, Chairman of Special Committee
Appointed by the Board of Directors
c/o Asset Investors Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
And:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
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notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Colorado without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Colorado or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in a writing referring to this
Agreement signed by AIOP, Parent and FAM. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Parent will bear all costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that (i) FAM shall bear all
of its costs and expenses in excess of $100,000.00 and (ii) all sales,
recording, transfer, use or similar Taxes or fees shall be borne by FAM.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
ASSET INVESTORS OPERATING PARTNERSHIP, L.P.
By: Asset Investors Corporation,
its General Partner
By:____________________________________________
Title:_________________________________________
FINANCIAL ASSET MANAGEMENT, LLC
By: The Management Committee
_______________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_______________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇
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