EXCHANGE AGREEMENT
among
▇▇▇▇▇▇ RESIDENTIAL PROPERTIES, INC.
▇▇▇▇▇▇/DREVER OPERATING PARTNERSHIP, L.P.,
DREVER PARTNERS, INC.,
AOF, INC. and
AOF II, INC.
May 21, 1997
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "Agreement"), dated as
of May 21, 1997, is entered into by and among ▇▇▇▇▇▇
RESIDENTIAL PROPERTIES, INC., a Maryland corporation
("▇▇▇▇▇▇"), ▇▇▇▇▇▇/▇▇▇▇▇▇ OPERATING PARTNERSHIP, a Delaware
limited partnership ("WDOP"), DREVER PARTNERS, INC., a
California corporation ("Drever"), AOF II, INC., a
California corporation ("AOFII"), and AOF, INC., a
California corporation ("AOF").
RECITALS
A. The Boards of Directors of each of (i) ▇▇▇▇▇▇,
the general partner of WDOP, (ii) Drever, the general
partner of each of the partnerships listed on Schedule 1.1
hereto (collectively, the "Drever Partnerships"), (iii)
AOFII, the general partner of Apartment Opportunity Fund
II, L.P., and (iv) AOF, the general partner of AOF Newgen,
L.P. (the general partner of Apartment Opportunity Fund,
L.P.) (AOF Newgen, L.P., collectively, with Apartment
Opportunity Fund, L.P., Apartment Opportunity Fund II, L.P.
and each of the Drever Partnerships, the "Partnerships")
have determined that a business combination between the
Partnerships and WDOP is in the best interests of the
partners of the Partnerships and the stockholders of ▇▇▇▇▇▇
and presents an opportunity for their respective entities
to achieve long-term strategic and financial benefits, and
accordingly have agreed to effect the Exchange Offer
(hereinafter defined) subject to the terms and conditions
set forth herein.
B. Concurrently with the execution and delivery of
this Agreement, WDOP, ▇▇▇▇▇▇, the shareholders of each of
Drever, AOFII and AOF (collectively, the "Shareholders"),
certain equity participants in Drever (collectively, the
"Equity Participants") and certain assignees of Drever
(collectively, the "Assignees") are entering into a
contribution agreement (the "Contribution Agreement"),
pursuant to which the Shareholders, the Equity Participants
and the Assignees have agreed, among other things, to
contribute the Shares, the Equity Rights and the General
Partner Rights (as such terms are defined in the
Contribution Agreement) to WDOP in exchange for cash and
Units (hereinafter defined).
▇. ▇▇▇▇▇▇, WDOP, Drever, AOFII and AOF desire to
make certain representations, warranties and agreements in
connection with the Exchange Offer.
NOW, THEREFORE, in consideration of the foregoing, of
the representations, warranties, covenants and agreements
contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound
hereby, ▇▇▇▇▇▇, WDOP, Drever, AOFII and AOF hereby agree as
follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall
have the meanings hereinafter set forth:
Accredited Investor: means an "accredited
investor," as such term is defined in Rule 501
under the Securities Act.
Acquisition Proposal: shall have the
meaning set forth in Section 6.1 hereof.
Agencies: means all governmental
authorities, agencies or bodies having
jurisdiction with respect to real property,
including the construction, zoning and operation
of real property.
Agreement of General Partnership of
▇▇▇▇▇▇-WDOP Partners: means the agreement of
general partnership between ▇▇▇▇▇▇ and WDOP, in
substantially the form of Exhibit A hereto.
AOF: shall have the meaning set forth in
the opening paragraph of this Agreement.
AOFII: shall have the meaning set forth in
the opening paragraph of this Agreement.
Applicable Environmental Laws: means any
and all applicable laws now in effect and
pertaining to health or the environment,
including, without limitation, the Superfund
Reauthorization and Amendments Act of 1986, the
Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976,
the Texas Water Code, the Texas Solid Waste
Disposal Act, and the Texas Toxic Substances
Control Act, as well as any and all other laws,
ordinances, rules and/or regulations created or
imposed by any governmental authority having
jurisdiction with respect to the Partnership
Properties or the ▇▇▇▇▇▇ Properties, as
applicable, whether local, state or federal,
pertaining to environmental regulation,
contamination, clean-up or disclosure, as now
existing.
Assignees: shall have the meaning set
forth in the Recitals to this Agreement.
Articles Supplementary: means the Articles
Supplementary establishing the rights and
preferences of the Redeemable Preferred Stock,
in substantially the form of Exhibit B hereto.
Cash Reserves: shall have the meaning set
forth in Section 2.10 hereof.
Closing: shall have the meaning set forth
in Section 2.9 hereof.
Closing Date: shall have the meaning set
forth in Section 2.9 hereof.
Code: means the Internal Revenue Code of
1986, as amended, and the Treasury regulations
promulgated thereunder.
Common Stock: means the common stock, par
value $.01 per share, of ▇▇▇▇▇▇.
Common Units: means common units of
beneficial interest in WDOP, which units are
exchangeable for shares of Common Stock in
accordance with the terms of the WDOP
Partnership Agreement.
Contribution Agreement: shall have the
meaning set forth in the Recitals to this
Agreement.
Direct Interestholders: means all
Interestholders other than the Indirect
Interestholders.
Drever: shall have the meaning set forth
in the opening paragraph of this Agreement.
Drever Partnerships: shall have the
meaning set forth in the Recitals to this
Agreement.
Drever Permitted Liens: shall have the
meaning set forth in Section 4.11 hereof.
Encumbrance: means any lien, security
interest, mortgage, charge or other encumbrance
on title.
Equity Participants: shall have the
meaning set forth in the Recitals to this
Agreement.
Exchange Act: means the Securities
Exchange Act of 1934, as amended.
Exchange Consideration: means the
aggregate amount of cash and Units offered by
WDOP to the Interestholders in exchange for
their Interests pursuant to the terms and
conditions of Article 2 hereof; provided, that
(i) the Exchange Consideration with respect to
each Interestholder who is not an Accredited
Investor shall consist of cash only, and (ii)
the aggregate amount of Exchange Consideration
paid by WDOP, when combined with the aggregate
amount of consideration paid by WDOP to the
Shareholders, the Equity Participants and the
Assignees pursuant to the Contribution
Agreement, shall not exceed the Maximum
Consideration.
Exchange Offers: shall have the meaning
set forth in Section 2.1 hereof.
Exchange Offer Documents: shall have the
meaning set forth in Section 2.6 hereof.
Expiration Date: shall have the meaning
set forth in Section 2.8 hereof.
Hazardous Materials: means any toxic
materials, hazardous waste or hazardous
substance (as regulated under Applicable
Environmental Laws) and including, without
limitation, any asbestos or asbestos-related
products or materials and any oils,
petroleum-derived compounds or pesticides
regulated under Applicable Environmental Laws,
excluding, however, any such materials, wastes
or substances in reasonable amounts that are
customarily used in the operation and
maintenance of an apartment complex.
Indirect Interestholders: means AOF
Investors, L.P., Houston Portfolio Joint
Venture II and Westfield Lakes Joint Venture.
Interest: means a limited partner interest
in a Partnership and a general partner interest
in Tassajara Partners.
Interestholder: means any holder of record
of an Interest.
Interim Balance Sheets: shall have the
meaning set forth in Section 4.4(b) hereof.
IRS: means the Internal Revenue Service.
Knowledge: means (i) in the case of ▇▇▇▇▇▇
or WDOP, the actual knowledge (without the
necessity of investigation) of ▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman of the Board and Chief Executive
Officer of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President and Chief Acquisitions Officer of
▇▇▇▇▇▇, or ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Executive Vice
President and Chief Financial Officer of ▇▇▇▇▇▇,
and (ii) in the case of Drever, AOFII and AOF,
the actual knowledge (without the necessity of
investigation) of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman of
the Board of Directors of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, President of Drever, or ▇▇▇▇▇ ▇.
▇▇▇▇, Chief Financial Officer of Drever.
Mailing Date: means the date on which the
Proxy Statement is first mailed to the ▇▇▇▇▇▇
Stockholders.
Maximum Consideration: means, in the
aggregate, 10,322,580 Common Units; 2,000,000
Preferred Units; and $85,000,000 in cash, except
as adjusted to accommodate fractional Units.
Owner Partnership: shall have the meaning
set forth in Section 3.1 hereof.
Partnership Agreements: means the
partnership agreements of the Partnerships.
Partnership Properties: shall have the
meaning set forth in Section 4.11 hereof.
Partnerships: shall have the meaning set
forth in the Recitals to this Agreement.
Person: means an individual, partnership,
joint venture, corporation, trust,
unincorporated organization or other legal
entity.
Preferred Stock: shall have the meaning
set forth in Section 5.3 hereof.
Preferred Units: means preferred units of
beneficial interest in WDOP, which units are
exchangeable for shares of Redeemable Preferred
Stock and Warrants in accordance with the terms
of the WDOP Partnership Agreement.
Property Material Breach: means the breach
of a representation or warranty contained in
Article 4 hereof requiring an expenditure of
funds to remedy and/or resulting in a diminution
in value of any one of the Partnership
Properties (where such breach cannot be
completely remedied through the expenditure of
funds) in excess of $250,000.
Property Restrictions: means rights of
way, written agreements, laws, ordinances and
regulations affecting building use or occupancy
or reservations of an interest in title.
Property Value: means, for each
Partnership Property, the equity value of such
Partnership Property as shown on Schedule 1.2
hereto.
Proration Mechanism: shall have the
meaning set forth in Section 2.2 hereof.
Proxy Statement: shall have the meaning
set forth in Section 6.7 hereof.
Redeemable Preferred Stock: means the
9.00% Redeemable Preferred Stock of ▇▇▇▇▇▇.
Regulatory Filings: means any filings
required under the Securities Laws.
REIT: shall have the meaning set forth in
Section 5.11 hereof.
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 under either of such acts, and any
applicable state securities laws.
Subsidiary: means any Person (a) more than
50% of whose outstanding securities representing
the right, other than as affected by events of
default, to vote for the election of directors
are owned by ▇▇▇▇▇▇ or any other Subsidiary, (b)
with respect to which ▇▇▇▇▇▇ or any other
Subsidiary has the power to elect or appoint a
general partner or (c) of which ▇▇▇▇▇▇ or any
Subsidiary is a general partner.
Superior Acquisition Proposal: shall have
the meaning set forth in Section 6.1 hereof.
Tenant Leases: means the lease agreements
relating to the Partnership Properties.
Units: means the Common Units and the
Preferred Units.
▇▇▇▇▇▇: shall have the meaning set forth
in the opening paragraph of this Agreement.
▇▇▇▇▇▇ Material Adverse Effect: shall have
the meaning set forth in Section 5.1 hereof.
▇▇▇▇▇▇ Operating: shall have the meaning
set forth in Section 5.3 hereof.
▇▇▇▇▇▇ Permitted Liens: shall have the
meaning set forth in Section 5.13 hereof.
▇▇▇▇▇▇ Properties: shall have the meaning
set forth in Section 5.13 hereof.
▇▇▇▇▇▇ Reports: shall have the meaning set
forth in Section 5.8 hereof.
▇▇▇▇▇▇ Stockholders: means the holders of
Common Stock.
Warrant Agreement: means the Warrant
Agreement between ▇▇▇▇▇▇ and The First National
Bank of Boston, as Warrant Agent, in
substantially the form of Exhibit C hereto.
Warrants: means warrants issued by ▇▇▇▇▇▇
pursuant to the Warrant Agreement.
WDOP: shall have the meaning set forth in
the opening paragraph of this Agreement.
WDOP Partnership Agreement: means the
amended and restated partnership agreement of
WDOP in substantially the form of Exhibit D
hereto.
ARTICLE 2
The Exchange Offer
1 Commencement of the Exchange Offer.
Simultaneously with the mailing of the Proxy Statement to
the ▇▇▇▇▇▇ Stockholders, WDOP shall commence an exchange
offer (the "Direct Exchange Offer") to the Direct
Interestholders and an exchange offer to the partners of
the Indirect Interestholders (the "Indirect Exchange Offer"
and, together with the Direct Exchange Offer, the "Exchange
Offers") pursuant to which it will, subject to the terms
and conditions set forth herein, offer to the
Interestholders the Exchange Consideration in exchange for
the Interests. Consummation of the Exchange Offer by
▇▇▇▇▇▇ and WDOP shall be subject only to those conditions
specified in Article 7 of this Agreement.
2 Allocation of Exchange Consideration; Election
Procedures. The Exchange Offers shall (i) apportion the
Exchange Consideration among the Direct Interestholders
based on the assumption that the Partnership Properties
were sold for cash in an amount equal to the Property
Values specified on Schedule 1.2 hereto on the Closing Date
and the net proceeds from such sales were immediately
distributed to the Direct Interestholders in accordance
with the provisions of the Partnership Agreements and (ii)
apportion the Exchange Consideration hereto among the
partners of the Indirect Interestholders based on the
assumption that the Partnership Properties were sold for
cash in an amount equal to the Property Values specified on
Schedule 1.2 hereto on the Closing Date and the net
proceeds from such sales were immediately distributed to
the Indirect Interestholders in accordance with the
provisions of the Partnership Agreements and redistributed
to the partners of the Indirect Interestholders pursuant to
the provisions of the partnership agreements of the
Indirect Interestholders. Drever shall provide to WDOP, on
or prior to June 30, 1997, an illustrative schedule
designating the amount of the Exchange Consideration
allocated to each Partnership hereto that would be payable
to each Interestholder, assuming the Exchange Offers close
on October 15, 1997. Additionally, Drever shall provide to
WDOP, on or prior to June 30, 1997, a document setting
forth a procedure (the "Proration Mechanism") pursuant to
which each Interestholder who is an Accredited Investor
shall be entitled to elect pursuant to a written notice
delivered to ▇▇▇▇▇▇ the portion of such Interestholder's
Interest which such Interestholder desires to have
exchanged for (a) Common Units, (b) Preferred Units, and
(c) cash and a procedure for allocating the various types
of Exchange Consideration among the Interestholders who are
Accredited Investors if the aggregate amount of any type of
consideration offered by WDOP pursuant to this Agreement
and the Contribution Agreement selected by such
Interestholders and the Shareholders, Equity Participants
and Assignees exceeds the Maximum Consideration amount of
such type of Consideration. Each Interestholder who is not
an Accredited Investor shall receive cash in exchange for
such Interestholder's Interest calculated as if the
Partnership Properties were sold for cash as described
above.
3 Fractional Units. No fractional Units shall be
issued with respect to the Exchange Offers. In lieu of a
fractional Unit, each holder of an Interest exchanged
pursuant to Section 2.1 hereof who would otherwise have
been entitled to receive a fraction of a Unit shall receive
cash (without interest) in an amount equal to the product
of (i) such fraction of a Unit, and (ii) in the case of a
Common Unit, $23.25 and, in the case of a Preferred Unit,
$27.50. The aggregate amount of cash elected to be
received by Interestholders may be increased by the
Proration Mechanism above the Maximum Consideration to be
paid in cash in order to provide for the payment of cash in
lieu of fractional Units, provided there is a corresponding
reduction in the other types of Exchange Consideration.
4 Conduct of the Exchange Offers. The Exchange
Offers shall be made in compliance with all applicable
provisions of the Securities Laws, including, without
limitation, Regulation D promulgated under the Securities
Act.
5 Restrictions on Amendment or Waiver of Exchange
Offers. Without the prior written consent of Drever, WDOP
shall not amend any material term or condition of the Ex-
change Offers in any manner adverse to the Interestholders.
6 Preparation of Exchange Offer Documents. As soon
as practicable following the date hereof, ▇▇▇▇▇▇ and WDOP
shall prepare or cause to be prepared, in cooperation with
Drever, AOFII, AOF and their counsel, appropriate
documentation to effect the Exchange Offers, including an
offer to exchange, a form of notice of election and a form
of letter of acceptance (collectively, together with any
amendments and supplements thereto, the "Exchange Offer
Documents"). The Exchange Offer Documents at all times
following their distribution to the Interestholders will
comply in all material respects with the applicable
provisions of the Securities Laws. Each of ▇▇▇▇▇▇ and
WDOP, on the one hand, and Drever, AOFII and AOF, on the
other hand, agrees to correct as promptly as practicable
any information provided by it for use in the Exchange
Offer Documents if and to the extent that such information
shall have become false or misleading in any material
respect.
7 Dissemination of Exchange Offer Documents. Upon
receipt of the final Exchange Offer Documents from WDOP and
the written request of ▇▇▇▇▇▇ to mail such documents,
Drever, AOF or AOFII, as applicable, will promptly mail or
otherwise deliver such documents or cause such documents to
be mailed or otherwise delivered to the Interestholders of
record. Drever, AOF and AOFII, as applicable, agree to
mail or otherwise deliver to the Interestholders any
appropriate amendment or supplement to the Exchange Offer
Documents delivered to them by ▇▇▇▇▇▇.
8 Expiration of Exchange Offers. The Exchange
Offers shall expire on the date (the "Expiration Date") of
the meeting of the ▇▇▇▇▇▇ Stockholders held in accordance
with the provisions of Section 6.3 hereof, provided that,
at the reasonable request of Drever, Walden shall postpone
the Expiration Date for an additional period of time, not
to exceed 30 calendar days, beyond the date of such
meeting.
9 The Closing. Subject to the terms and conditions
of this Agreement, the closing of the Exchange Offers (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, at 9:00 a.m., local time, on the first
business day following the Expiration Date, or at such
other time, date or place as ▇▇▇▇▇▇ and Drever may agree.
The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
10 Cash Reserves. At Closing, a cash reserve
account in respect of each Partnership shall be
established, in such amounts as are set forth on Schedule
2.10 hereto (collectively, the "Cash Reserves"), to account
for the payment of certain liabilities of each Partnership
existing as of the Closing Date as provided below. Each
Partnership's cash on hand as of the Closing Date shall be
allocated to the respective Cash Reserve, and if any
Partnership shall have insufficient cash available to fund
such Cash Reserve, the Exchange Consideration payable at
Closing allocated to the Interestholders of such
Partnership shall be reduced by an amount equal to such
shortfall.
The following provisions shall govern the allocation
of liabilities of each Partnership and the treatment of
certain items of income of each Partnership:
(a) Rentals, revenues and other income, if any,
from the Partnership Properties of the Partnership, as
well as taxes, assessments, improvement bonds, license
and permit fees, service and other contract fees,
utility costs (other than those charged by utility
companies directly to tenants of the Partnership
Properties) and other expenses affecting the
Partnership Properties shall be prorated between
▇▇▇▇▇▇ and the Interestholders of the Partnership as
of the Closing Date based on a 365-day year. For purposes
of calculating prorations, ▇▇▇▇▇▇ shall be
deemed to become title holder of the Partnership Properties,
and therefore become entitled to the income
from, and become responsible for the expenses of, the
Partnership Properties, as of 12:01 a.m. on the
Closing Date. On the Closing Date, there shall be deducted
from the Cash Reserve an amount equal to the
sum of: (i) all unrefunded, unapplied and
nonrefundable security deposits paid by tenants of the
Partnership Properties owned by the Partnership prior
to the Closing Date and (ii) all rentals received from
tenants of the Partnership Properties owned by the
Partnership prior to the Closing Date that are
attributable to periods after the Closing Date. All
non-delinquent real estate taxes or assessments on the
Partnership Properties shall be prorated based on the
actual current tax ▇▇▇▇, but if such tax ▇▇▇▇ has not
been received by the Partnership by the Closing Date
or if supplemental taxes are assessed after the
Closing for the periods prior to the Closing, the
parties hereto shall make any necessary adjustment to
the Cash Reserve after the Closing so that the
Interestholders of the Partnership shall have borne
all real property taxes, including all supplemental
taxes, allocable to the periods prior to the Closing,
and ▇▇▇▇▇▇ shall bear all real property taxes,
including all supplemental taxes, allocable to the periods
from and after the Closing. If any expenses attributable
to the Partnership Properties and allocable to
the periods prior to the Closing are discovered or
billed after the Closing, the parties hereto shall
make any necessary adjustment to the Cash Reserve
after the Closing so that the Interestholders shall
have borne all expenses allocable to the periods prior
to the Closing and ▇▇▇▇▇▇ shall bear all expenses
allocable to the periods from and after the Closing,
provided that no further adjustments shall be made
after 120 days following the Closing Date, except
adjustments relating to tax appeals and protests, as
specified in subsection (c) below.
(b) All delinquent rentals and other revenues as
of the Closing Date shall not be prorated at the
Closing, but shall, when collected, after deducting
▇▇▇▇▇▇'▇ reasonable costs of collection thereof, be
applied in the order of delinquency, oldest first, and
any portion thereof, as so collected and applied,
attributable to any period prior to the Closing Date
shall be added to the Cash Reserve. After the Closing,
▇▇▇▇▇▇ shall use commercially reasonable efforts
to collect such delinquent rentals and other revenues
on behalf of the Interestholders of the Partnership,
and the Interestholders shall not have the right to
seek collection of any delinquent rentals due in
connection with any Partnership Property.
(c) The Interestholders of the Partnership shall
be entitled to receive as soon as practicable
following receipt by the Partnership or WDOP, as the
case may be, of the proceeds from any tax appeals or
protests initiated on behalf of the Partnership prior
to the Closing Date for tax fiscal years prior to the
tax fiscal year in which the Closing Date occurs. If
an application to reduce real estate taxes is filed
and such application includes any period extending
from any time before 12:01 a.m. on the Closing Date
until any time after 12:01 a.m. on the Closing Date,
then any reduction realized as a result of such
application (after payment of reasonable attorneys'
fees, appraisal expenses and other direct costs) shall
be prorated between ▇▇▇▇▇▇ and the Interestholders of
the Partnership, when received, as of the Closing
Date.
(d) Each Interestholder of the Partnership who
has elected to participate in the Exchange Offer shall
be entitled to receive, on the 120th day following the
Closing Date, an amount of cash from WDOP equal to the
additional amount it would have received if the
balance in the Cash Reserve (after making the
adjustments described in Section 2.10(a)) were added
to the Property Value of the Partnership Properties
held by the Partnership.
(e) The provisions of this Section 2.10 shall
survive the Closing.
ARTICLE 3
Exclusion of Properties
1 Environmental Issues. In the event any party
hereto discovers, at any time prior to the forty-fifth
(45th) calendar day following the date hereof, that any of
the Partnership Properties is in violation of any Applica-
ble Environmental Laws or contains or has otherwise been
contaminated by Hazardous Materials, such party shall
notify the other parties hereto in writing of any such
violation or contamination within two (2) business days of
such discovery; provided, however, the terms "violation"
and "contamination" as used herein shall not include
asbestos or asbestos-containing materials or lead-based
paints or furnishings that are in good condition and that
do not, at the time of discovery within such 45-day period,
require immediate abatement, encapsulation or removal
pursuant to Applicable Environmental Laws. If, after
reviewing the extent of such violation or contamination,
the parties hereto in good faith determine that such ▇▇▇▇▇-
tion or contamination is material and is not curable or, if
curable, is not cured within 30 days after such written
notice thereof is given by ▇▇▇▇▇▇ to Drever, Drever shall
cause the Partnership that owns such property (the "Owner
Partnership") to transfer ownership thereof on or prior to
the Closing Date to a new entity, which entity shall not be
a Partnership, and the Exchange Consideration payable
pursuant to Article 2 hereof to the Interestholders of the
Owner Partnership shall be reduced by an amount equal to
the Property Value of the transferred Partnership Property;
provided, however, if such property is the only Partnership
Property owned by the Owner Partnership, WDOP shall be
entitled to terminate the Exchange Offer with respect to
the Interestholders of the Owner Partnership. The remedy
provided by this Section 3.1 shall be the sole remedy of
▇▇▇▇▇▇ and WDOP with respect to any environmental violation
or contamination liability discovered on any Partnership
Property, provided that such limitation shall not apply to
any breach of the notification obligations of Drever, AOF
and AOFII contained in this Section 3.1.
2 Breach. In the event any party hereto discovers,
at any time prior to the forty-fifth (45th) calendar day
following the date hereof, the existence of a Property
Material Breach, such party shall notify all other parties
hereto as soon as practicable and the Owner Partnership
shall, at its discretion within five business days of
delivery of such notice to the general partner thereof (or
within five business days of such discovery, if discovered
by such general partner), (i) cure the breach, (ii) reduce
the purchase price payable by ▇▇▇▇▇▇ for the applicable
Partnership Property owned by such Owner Partnership by the
amount equal to the cost of repairs and/or diminution in
value of such Partnership Property, as agreed to in good
faith by the parties hereto (the "Repair Cost"), or (iii)
if the Repair Cost for any Partnership Property exceeds
$1,000,000, the Owner Partnership shall transfer ownership
of such Partnership Property (the "Transferred Property")
on or prior to the Closing Date to a new entity, which
entity shall not be a Partnership, and the Exchange
Consideration payable pursuant to Article 2 hereof to the
Interestholders of the Owner Partnership shall be reduced
by an amount equal to the Repair Cost, if an Owner
Partnership elects to reduce the purchase price pursuant to
clause (ii) above, or by an amount equal to the Property
Value of the Transferred Partnership Property if an Owner
Partnership elects to transfer the Partnership Property
pursuant to clause (iii) above; provided, however, if any
Transferred Property is the only Partnership Property owned
by the Owner Partnership, WDOP shall be entitled to
terminate the Exchange Offer with respect to the
Interestholders of the Owner Partnership. If the Owner
Partnership has failed to cure the breach prior to the
Closing Date or has not otherwise agreed to reduce the
purchase price payable by ▇▇▇▇▇▇ for the applicable
Partnership Property or transferred such Partnership
Property on or prior to the Closing Date, ▇▇▇▇▇▇ shall be
entitled to require, by written notice to the Owner
Partnership, that the Owner Partnership(s) transfer owner-
ship of such Partnership Property on or prior to the
Closing Date to a new entity, which entity shall not be a
Partnership, and the Exchange Consideration payable
pursuant to Article 2 hereof to the Interestholders of the
Owner Partnership shall be reduced by an amount equal to
the Property Value of the transferred Partnership Property;
provided, however, if any such transferred Partnership
Property is the only Partnership Property owned by the
Owner Partnership, WDOP shall be entitled to terminate the
Exchange Offer with respect to the Interestholders of the
Owner Partnership. The remedy provided by this Section 3.2
shall be the sole remedy of ▇▇▇▇▇▇ and WDOP with respect to
any defect discovered, or discoverable pursuant to a
property inspection conducted in accordance with customary
industry practice, as to any Partnership Property, provided
that such limitation shall not apply to any breach of the
notification obligations of Drever, AOF and AOFII contained
in this Section 3.2.
3 Casualty and Condemnation Loss.
(a) In the event that any Partnership
Property is damaged by any casualty occurring
after the date hereof and prior to the Closing
Date, all insurance proceeds received by the
Owner Partnership as a result of such damage,
together with cash in an amount equal to any
deductible paid by the Owner Partnership, shall
be retained by the Owner Partnership and not
distributed to the Interestholders of such Owner
Partnership, except as provided below. If the
uninsured Repair Cost as a result of such
casualty exceeds $250,000, then ▇▇▇▇▇▇ shall be
entitled, at its election, to require the Owner
Partnership to transfer ownership of the
affected Partnership Property and any insurance
proceeds received by the Owner Partnership with
respect to such Partnership Property to a new
entity, which entity shall not be a Partnership,
and the Exchange Consideration payable pursuant
to Article 2 hereof to the Interestholders of
the Owner Partnership shall be reduced by an
amount equal to the Property Value of the
transferred Partnership Property; provided,
however, that if such transferred Partnership
Property is the only Partnership Property owned
by Owner Partnership, WDOP shall be entitled to
terminate the Exchange Offer with respect to
Interestholders of the Owner Partnership.
(b) In the event of a taking by
condemnation or similar proceedings or actions
of any portion of any Partnership Property, the
Owner Partnership shall retain any condemnation
awards or proceeds from any such proceedings or
actions in lieu thereof and not distribute such
amounts to the Interestholders of such Owner
Partnership.
ARTICLE 4
Representations and Warranties of Drever, AOFII and AOF
Drever, AOFII and AOF represent and warrant to ▇▇▇▇▇▇
and WDOP as follows, except that all representations and
warranties made by AOFII apply solely to information
derived from the books and records of AOFII and Apartment
Opportunity Fund II, L.P.:
1 Existence; Good Standing; Authority; Compliance
with Law. Each of the Partnerships is a partnership duly
organized, validly existing and in good standing under the
laws of the State of California. Each of the Partnerships
is duly licensed or qualified to do business as a foreign
partnership and is in good standing under the laws of any
other state of the United States in which the character of
the properties owned or leased by it therein or in which
the transaction of its business makes such qualification
necessary, except where the failure to be so qualified
would not result in a Property Material Breach. Each
Partnership has all requisite partnership power and
authority to own, operate, lease and encumber its
properties and carry on its business as now conducted.
None of the Partnerships is in violation of any order
of any court, governmental authority or arbitration board
or tribunal, or any law, ordinance, governmental rule or
regulation to which such Partnership or any of its
properties or assets is subject, where such violation would
result in a Property Material Breach. Each Partnership has
obtained all licenses, permits and other authorizations and
has taken all actions required by applicable law or
governmental regulations in connection with its business as
now conducted, where the failure to obtain any such item or
to take any such action would result in a Property Material
Breach. A copy of each Partnership Agreement (together
with all amendments, exhibits and attachments thereto) has
been delivered or made available to ▇▇▇▇▇▇ and its counsel,
was complete and correct when delivered or made available
and, as delivered or made available, is in full force and
effect as of the date hereof.
2 Authorization, Validity and Effect of Agreement.
Subject to Article V of the Articles of Incorporation of
each of AOF and AOFII, each of Drever, AOFII and AOF has
the requisite corporate power and authority to execute and
deliver this Agreement and consummate the transactions
contemplated hereby. The consummation by each of Drever,
AOFII and AOF of this Agreement and the transactions
contemplated hereby has been duly authorized by all
requisite action on the part of each of Drever, AOFII and
AOF. Assuming the due and valid authorization, execution
and delivery of this Agreement by ▇▇▇▇▇▇ and WDOP, this
Agreement constitutes the valid and legally binding
obligation of each of Drever, AOFII and AOF, enforceable
against each of Drever, AOFII and AOF in accordance with
its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors'
rights and general principles of equity.
3 No Violation. Neither the execution and delivery
by any of Drever, AOFII or AOF of this Agreement nor the
consummation by any of Drever, AOFII or AOF of the
transactions contemplated hereby in accordance with the
terms hereof, will: (a) conflict with or result in a breach
of any provisions of the articles of incorporation or
bylaws of Drever, AOFII or AOF or the Partnership Agreement
of any Partnership, except for the provisions of Article V
of the Articles of Incorporation of each of AOF and AOFII;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right
of termination or cancellation of, or accelerate the
performance required by, or result in the creation of an
Encumbrance upon any of the properties or assets of Drever,
AOFII, AOF or any Partnership under, or result in being
declared void, voidable or without further binding effect,
any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which any of
Drever, AOFII or AOF is a party, or by which Drever, AOFII,
AOF or any Partnership or any of their respective
properties or assets are bound or affected, except for any
of the foregoing matters which, individually or in the
aggregate with respect to any Partnership Property, would
not result in a Property Material Breach; or (c) require
any consent, approval or authorization of, or declaration,
filing or registration with, any domestic governmental or
regulatory authority, except where the failure to obtain
any such consent, approval or authorization of, or
declaration, filing or registration with, any governmental
or regulatory authority would not result in a Property
Material Breach.
4 Financial Statements; Undisclosed Liabilities.
(a) Drever, AOFII or AOF, as appropriate, has
delivered to ▇▇▇▇▇▇ true, correct and complete copies
of the audited balance sheets and related statements
of income, partners' capital and cash flows for each
of the years in the three-year period ended December
31, 1996 for each of Apartment Opportunity Fund, L.P.
and Apartment Opportunity Fund II, L.P. and the
unaudited balance sheets and related statements of
income, partners' capital and cash flows for each of
the years in the three-year period ended December 31,
1996 for each of the other Partnerships. Such audited
financial statements, and any notes thereto, fairly
present the financial condition and results of
operations, partners' capital and cash flows of the
applicable Partnership as at the respective dates and
for the periods referred to in such financial
statements in accordance with generally accepted
accounting principles consistently applied through the
periods involved, except as disclosed in the report
accompanying or in the notes to such audited financial
statements. The unaudited financial statements were
prepared from the books and records of the applicable
Partnership in accordance with procedures and policies
consistently applied throughout the periods involved.
(b) The unaudited balance sheet of each Partnership,
as of March 31, 1997 (collectively, the "Interim
Balance Sheets"), and the related statements of
income, partners' capital and cash flows for the
period then ended are attached hereto as Schedule
4.4(b) and were prepared from the books and records of
such Partnership in accordance with procedures and
policies consistently applied throughout the periods
involved. At the date hereof, there are no material
debts, liabilities or obligations of any nature of any
Partnership, whether absolute, accrued, matured,
contingent or otherwise, including, without
limitation, any contingent liabilities or losses for
unasserted claims which are probable of assertion,
except for those (i) reflected or reserved against in
the Interim Balance Sheets, (ii) otherwise set forth
on Schedule 4.4(b) hereto, or (iii) incurred in the
ordinary course of business since the date of the
Interim Balance Sheets.
5 Partnership Interests. All of the existing
Interests have been duly authorized and are validly issued,
fully paid and nonassessable. Except as disclosed on
Schedule 4.5 hereto, there are no outstanding or authorized
options, rights, warrants, calls, convertible securities,
rights to subscribe, conversion rights or other agreements
or commitments to which any Partnership is a party or which
are binding on any Partnership providing for the issuance
or transfer by any Partnership of additional Interests.
6 Litigation. Except as disclosed on Schedule 4.6
hereto, there are (a) no continuing orders, injunctions or
decrees of any court, arbitrator or governmental authority
to which any Partnership is a party or by which any
properties or assets of any Partnership are bound, and
(b) no actions, suits or proceedings pending against any
Partnership or, to the Knowledge of Drever, AOFII and AOF,
threatened against any Partnership, at law or in equity, or
before or by any federal or state commission, board,
bureau, agency or instrumentality.
7 Absence of Certain Changes. Except as disclosed
on Schedule 4.7 hereto, since the date of the Interim
Balance Sheets, (a) each Partnership has conducted its
business only in the ordinary course of such business (for
purposes of this Section 4.7 only, the term "ordinary
course of business" includes all acquisitions of real
estate properties and financing arrangements made in
connection therewith); (b) to the Knowledge of Drever,
AOFII and AOF, there has not been any Property Material
Breach; (c) none of the Partnerships has incurred any
liabilities, whether or not accrued, contingent or
otherwise, or suffered any events or occurrences that,
individually or in the aggregate, would reasonably be
likely to result in a Property Material Breach; and
(d) there has not been any material change in any
Partnership's accounting principles, practices or methods.
8 Taxes. Except as disclosed on Schedule 4.8
hereto:
(a) Each of the Partnerships (a) has timely
filed all federal, state and foreign tax returns
including, without limitation, information returns and
reports required to be filed by it for tax periods
ended prior to the date of this Agreement or requests
for extensions have been timely filed and any such
request has been granted and has not expired and all
such returns are accurate and complete in all material
respects, (b) has paid or accrued all taxes shown to
be due and payable on such returns or which have
become due and payable pursuant to any assessment,
deficiency notice, 30-day letter or other notice
received by it, and (c) has properly accrued all
taxes for such periods and periods subsequent to the
periods covered by such returns. None of the
Partnerships has received any notice that the federal,
state and local income and franchise tax returns of
any Partnership have been or will be examined by any
taxing authority. None of the Partnerships has
executed or filed with the IRS or any other taxing
authority any agreement now in effect extending the
period for assessment or collection of any income or
other taxes.
(b) None of the Partnerships is party to any
pending action or proceeding by any governmental
authority for assessment or collection of taxes and no
claim for assessment or collection of taxes has been
asserted against any Partnership. True, correct and
complete copies of all 1996 federal, state and local
income or franchise tax returns filed by each
Partnership and all material communications relating
thereto have been delivered to ▇▇▇▇▇▇ or made
available to representatives of ▇▇▇▇▇▇.
(c) Each Partnership has properly and timely
made all tax elections which it is required to make
pursuant to the terms of the partnership agreement of
such Partnership, including, but not limited to,
elections under Section 754 of the Code.
(d) None of the Partnerships has received any
notice from any partner that such partner intends to
treat any item of income, deduction, loss or credit in
a manner that is inconsistent with the manner in which
such item has been treated by such Partnership on the
tax or information returns filed by such Partnership.
(e) None of the Partnerships is taxable as a
corporation for federal income tax purposes.
(f) None of the Partnerships owns real property
which is held primarily for sale to customers in the
ordinary course of its trade or business or which
would otherwise be classified as "inventory."
(g) None of the Partnerships owns any stock in
any corporation or any partnership interests or
securities.
(h) None of the Partnerships owns any assets or
property other than the Partnership Properties owned
by it, personalty related to the Partnership
Properties and cash or cash equivalents.
(i) None of the rent received with respect to
Tenant Leases is determined, in whole or in part, by
reference to the profits derived by any Person from
the Partnership Properties.
(j) To the Knowledge of Drever, none of the
tenants or lessees of the Partnership Properties are
directly or indirectly related to any Partnership or
the partners of any Partnership.
(k) To the Knowledge of Drever, AOFII and AOF,
all services provided to the tenants of the Partnership
Properties are services usually or customarily
rendered in connection with the rental of comparable
multifamily residential properties for occupancy only.
9 Books and Records.
(a) The books of account and other financial
records of each Partnership, and all soil tests and
construction inspection reports, all of which have
been made available to ▇▇▇▇▇▇, are, to the Knowledge
of Drever, AOFII and AOF, in all material respects
true and correct.
(b) To the Knowledge of Drever, AOFII and AOF,
the records of each Partnership contain in all
material respects accurate records of all meetings and
accurately reflect in all material respects all
actions of the Interestholders with respect to such
Partnership.
10 No Brokers. Except the fee that is to be paid to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, none of Drever, AOFII, AOF
or any Partnership has entered into any contract,
arrangement or understanding with any Person which may
result in the obligation of Drever, AOFII, AOF, any
Partnership, ▇▇▇▇▇▇ or WDOP to pay any finder's fees,
broker's or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement
or the consummation of the transactions contemplated
hereby. Except for the fees to be paid to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. Incorporated, to the
Knowledge of Drever, AOFII or AOF, there is no claim for
payment of any finder's fees, broker's or agent's commis-
sions or other like payments in connection with the
negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
11 Properties. Each Partnership owns fee simple
title or leasehold estates to each of the real properties
reflected on Schedule 1.2 hereto as owned by such
Partnership (collectively, the "Partnership Properties"),
which are all of the real estate properties owned by such
Partnership, and no Person has any contract, option, right
of first refusal or other agreement to purchase any
Partnership Property or any material fixture or item of
personalty thereof. Each of the Partnership Properties is
owned by the Partnership shown on Schedule 4.11 hereto as
owning such Partnership Property, free and clear of Encum-
brances, or any claim in favor of any Person that could
become an Encumbrance, and Property Restrictions, except
for (a) Encumbrances and Property Restrictions that are
disclosed on Schedule 4.11 hereto, (b) Encumbrances and
Property Restrictions that would not be reasonably likely,
individually or in the aggregate with respect to any
Partnership Property, to result in a Property Material
Breach, (c) Property Restrictions imposed or promulgated by
law or any Agency, including zoning regulations,
(d) Encumbrances and Property Restrictions disclosed on
existing title reports, title policies or surveys, (e) to
the Knowledge of Drever, AOF and AOFII, mechanics',
carriers', workmen's or repairmen's liens and other
Encumbrances, Property Restrictions and other limitations
of any kind, if any, which have heretofore been bonded or
which, individually or in the aggregate with respect to any
Partnership Property, do not exceed $25,000, do not
materially detract from the value of or materially
interfere with the present use of any of the Partnership
Properties subject thereto or affected thereby, and do not
otherwise materially impair business operations conducted
by any Partnership, and (f) taxes that are not yet
delinquent (such Encumbrances, Property Restrictions,
liens, limitations and taxes set forth in clauses (a)
through (e) and this clause (f), collectively, "Drever
Permitted Liens").
Valid policies of title insurance have been issued
insuring each Partnership's fee simple title to, or
leasehold estate in, the Partnership Properties owned by
it, subject only to the matters disclosed above and as
disclosed on Schedule 4.11 hereto and such policies are, at
the date hereof, in full force and effect and no material
claim has been made against any such policy. Except as
disclosed on Schedule 4.11 hereto or as otherwise set forth
in such Partnership's 1997 capital expenditures budget,
(i) there is no certificate, permit or license from any
Agency having jurisdiction over any of the Partnership
Properties and there is no agreement, easement or other
right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the
Partnership Properties or which is necessary to permit the
lawful use and operation of all driveways, roads and other
means of egress and ingress to and from any of the
Partnership Properties that has not been obtained and is
not in full force and effect, or of any pending threat of
modification or cancellation of any of same, except where
the failure to obtain the same would not be reasonably
likely to result in a Property Material Breach; (ii) none
of the Partnerships has received written notice of any
violation of any federal, state or municipal law,
ordinance, order, regulation or requirement issued by any
Agency affecting any portion of any of the Partnership
Properties; (iii) to the Knowledge of Drever, AOF and AOFII
as of the date hereof, there are no structural defects
relating to the Partnership Properties and no Partnership
Properties whose building systems are not in working order
in any respect, except for such defects that, individually
or in the aggregate with respect to any Partnership
Property, would not be reasonably likely to result in a
Property Material Breach; and (iv) there is (A) no current
renovation to any single Partnership Property the cost of
which exceeds $250,000, and (B) no current restoration of
any single Partnership Property the cost of which exceeds
$250,000.
Except as disclosed on Schedule 4.11 hereto, none of
the Partnerships has received notice to the effect that and
there are no (x) condemnation or rezoning proceedings that
are pending or to the Knowledge of Drever, AOFII or AOF
threatened with respect to any of the Partnership
Properties that would be reasonably likely to result in a
Property Material Breach or (y) any zoning, building or
similar laws, codes, ordinances, orders or regulations that
are or will be violated by the continued maintenance,
operation or use of any buildings or other improvements on
any of the Partnership Properties or by the continued
maintenance, operation or use of the parking areas where
such violation would be reasonably likely to result in a
Property Material Breach. To the Knowledge of each of
Drever, AOFII and AOF, all work to be performed, payments
to be made and actions to be taken by each Partnership
prior to the date hereof pursuant to any agreement entered
into with an Agency in connection with a site approval,
zoning reclassification or other similar action relating to
any Partnership Property (e.g., Local Improvement District,
Road Improvement District, Environmental Mitigation) has
been performed, paid or taken, as the case may be, and
neither Drever, AOFII nor AOF has any Knowledge of any
planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements.
12 Compliance with Applicable Regulations.
(a) Except as disclosed on Schedule 4.12 hereto,
all Partnership Properties and the operation thereof
(including the handling of tenant security and other
deposits) currently are in substantial compliance with
the requirements of all Agencies having jurisdiction
over the Partnerships and the Partnership Properties,
except where the failure to so comply would not be
reasonably likely to result in a Property Material
Breach; and to the Knowledge of Drever, AOF and AOFII,
there are no material commitments or agreements with
any of the Agencies affecting any Partnership Property
which have not been fully disclosed to ▇▇▇▇▇▇ in
writing.
(b) Except as disclosed on Schedule 4.12 hereto,
none of the Partnerships has received any written
notice of uncured violations at any of the Partnership
Properties of zoning, building, fire, rent control,
tenant security or other deposits or any other
applicable statute, ordinance or regulation, relating
to any of the Partnership Properties, its construction
or any occupancy thereof except for violations that,
individually or in the aggregate with respect to any
Partnership Property, would not be reasonably likely
to result in a Property Material Breach, nor are there
presently pending against any Partnership or against
any of the Partnership Properties any judgments
relating to any of the above matters, any judicial
proceedings or administrative actions or any state of
facts which, to the Knowledge of Drever, AOF and
AOFII, with notice or lapse of time, could reasonably
be expected to give rise to any such proceedings or
actions, in either case that would be reasonably
likely to result in a Property Material Breach.
(c) Except as disclosed on Schedule 4.12 hereto
and except as would not be reasonably likely to result
in a Property Material Breach, none of the
Partnerships has received any written notice that any
of the Partnership Properties is currently subject to
(i) any existing, pending or, to the Knowledge of
Drever, AOF and AOFII, threatened investigation or
inquiry by any Agency or (ii) any remedial obligations
under any Applicable Environmental Laws; and none of
the Partnerships has obtained any permits, licenses or
similar authorizations to occupy, renovate, operate or
use any portion of any of the Partnership Properties
by reason of any Applicable Environmental Laws.
(d) Except as disclosed on Schedule 4.12 hereto
and except as would not be reasonably likely to result
in a Property Material Breach, to the Knowledge of
Drever, AOFII and AOF as of the date hereof, no
Hazardous Materials are located on or about any of the
Partnership Properties. To the Knowledge of each of
Drever, AOFII and AOF as of the date hereof and except
as would not be reasonably likely to result in a
Property Material Breach, no Partnership Property
contains any underground tanks for the storage or
disposal of Hazardous Materials. Further, to the
Knowledge of each of Drever, AOFII and AOF as of the
date hereof and except as would not be reasonably
likely to result in a Property Material Breach, (i) no
Partnership Property previously has been used for the
storage, manufacture or disposal of Hazardous
Materials, (ii) no written complaint, order, citation
or notice with regard to air emissions, water
discharges, noise emissions and Hazardous Materials,
if any, or any other Applicable Environmental Laws
from any Person or Agency has been received by any
Partnership, and (iii) each Partnership is in compliance
with all Applicable Environmental Laws.
(e) None of the Partnerships has received any
written notice that any material permits, licenses or
consents not already obtained are required by the
Agencies in connection with the use and occupancy of
any of the Partnership Properties or any material
improvements thereto.
13 Encumbrances on Properties. No action has been
taken by any Partnership, nor has any Partnership failed to
act, with respect to work performed or delivery of material
which action or failure to act would give rise to an Encum-
brance, other than a Drever Permitted Lien, on any of the
Partnership Properties or any improvements thereto. As of
the Closing, there will be no claim in favor of any Person
(including the present management) for any unpaid
commissions or fees for leasing of any of the Partnership
Properties arising out of the acts of or through any
Partnership otherwise than as payable in the ordinary
course of business consistent with past practice.
14 Insurance. The insurance policies listed and
described on Schedule 4.14 hereto are currently in force,
and all such policies or their equivalent will be
maintained in force until the Closing. None of the
Partnerships has received any notice from any insurer of
any of the Partnership Properties or any part thereof
requesting any improvements, alterations, additions,
corrections or other work in, on or about the improvements
thereto, whether related to any of the Partnership
Properties or to the operation of any occupant thereof,
which have not been cured or satisfied.
15 Non-foreign Status. To the Knowledge of Drever,
AOF and AOFII, except as disclosed on Schedule 4.15 hereto,
none of the Partnerships nor any of the Interestholders is
a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate (as those
terms are defined in Sections 1445 and 7701 of the Code).
16 Information. None of the information to be
supplied by Drever, AOFII or AOF in writing specifically
for inclusion or incorporation by reference in the Exchange
Offer Documents, the Proxy Statement or any other document
filed or to be filed by or on behalf of ▇▇▇▇▇▇ with the SEC
or any other governmental entity, or otherwise prepared in
connection with the transactions contemplated hereby, will
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements made therein, in
the light of the circumstances under which they were made,
not misleading.
ARTICLE 5
Representations and Warranties of ▇▇▇▇▇▇ and WDOP
▇▇▇▇▇▇ and WDOP represent and warrant to Drever,
AOFII, AOF, each of the Partnerships and each of the
Interestholders as follows:
1 Existence; Good Standing; Authority; Compliance
with Law. ▇▇▇▇▇▇ is a corporation duly organized,
incorporated, validly existing and in good standing under
the laws of the State of Maryland. ▇▇▇▇▇▇ is duly licensed
or qualified to do business and is in good standing under
the laws of any other state of the United States in which
the character of the properties owned or leased by it
therein or in which the transaction of its business makes
such qualification necessary, except where the failure to
be so qualified would not have a material adverse effect on
the business, results of operations or financial condition
of ▇▇▇▇▇▇ and the Subsidiaries (as defined below) taken as
a whole (a "▇▇▇▇▇▇ Material Adverse Effect"). ▇▇▇▇▇▇ has
all requisite power and authority to own, operate, lease
and encumber its properties and carry on its business as
now conducted. WDOP is a partnership duly organized,
validly existing and in good standing under the laws of the
State of Delaware, has the requisite partnership power and
authority to own its properties and to carry on its
business as it is now being conducted and as contemplated
by this Agreement and is duly qualified to do business and
is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business
requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good
standing would not have a ▇▇▇▇▇▇ Material Adverse Effect.
Neither ▇▇▇▇▇▇ nor any of the Subsidiaries is in
violation of any order of any court, governmental authority
or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation to which ▇▇▇▇▇▇ or any of
its Subsidiaries or any of their respective properties or
assets is subject, where such violation would have a ▇▇▇▇▇▇
Material Adverse Effect. ▇▇▇▇▇▇ and its Subsidiaries have
obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or
governmental regulations in connection with their business
as now conducted, where the failure to obtain any such item
or to take any such action would have a ▇▇▇▇▇▇ Material
Adverse Effect. Copies of the articles of incorporation
and bylaws of ▇▇▇▇▇▇ and the partnership agreement of WDOP
have been delivered or made available to Drever and its
counsel, are complete and correct and are in full force and
effect as of the date hereof.
2 Authorization, Validity and Effect of Agreements.
▇▇▇▇▇▇ and WDOP have the requisite corporate and
partnership power and authority, respectively, to execute
and deliver this Agreement and consummate the transactions
contemplated hereby. Subject only to the approval of the
issuance of the shares of Common Stock to be issued by
▇▇▇▇▇▇ upon exchange of the Common Units and the exercise
of the Warrants by the ▇▇▇▇▇▇ Stockholders, the
consummation by each of ▇▇▇▇▇▇ and WDOP of this Agreement
and the transactions contemplated hereby have been duly
authorized by all requisite corporate and partnership
action on the part of ▇▇▇▇▇▇ and WDOP, respectively.
Assuming the due and valid authorization, execution and
delivery of this Agreement by Drever, AOF and AOFII, this
Agreement constitutes the valid and legally binding
obligation of each of ▇▇▇▇▇▇ and WDOP, enforceable against
each of ▇▇▇▇▇▇ and WDOP in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and
general principles of equity.
3 Capitalization. The authorized capital stock of
▇▇▇▇▇▇ consists of 50,000,000 shares of Common Stock and
10,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock"). As of March 31, 1997, there
were 17,388,208 shares of Common Stock issued and
outstanding and 5,768,200 shares of Preferred Stock issued
and outstanding, constituting the series designated as (a)
the 9.16% Series A Cumulative Redeemable Preferred Stock,
(b) the 9.16% Series B Cumulative Redeemable Preferred
Stock, and (c) the 9.20% Senior Preferred Stock. In
addition, there are 810,128 limited partnership interests
issued and outstanding in ▇▇▇▇▇▇ Residential Operating
Partnership, L.P., a Subsidiary ("▇▇▇▇▇▇ Operating").
Except as described above, ▇▇▇▇▇▇ has no outstanding bonds,
debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with
the ▇▇▇▇▇▇ Stockholders on any matter. All such issued and
outstanding shares of Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of
preemptive rights. There are not at the date of this
Agreement any existing options, warrants, calls,
subscriptions, convertible securities or other rights,
agreements or commitments which obligate ▇▇▇▇▇▇ or any of
the Subsidiaries to issue, transfer or sell any shares of
stock or other equity interest of ▇▇▇▇▇▇ or any of the
Subsidiaries, other than the issuance by ▇▇▇▇▇▇ of up to
1,664,500 shares of Common Stock upon the exercise of stock
options issued to employees and directors. There are no
agreements or understandings to which ▇▇▇▇▇▇ is a party
with respect to the voting of any shares of Common Stock or
which restrict the transfer of any such shares, except in
order to protect its REIT status.
4 Partnership Interests. ▇▇▇▇▇▇ is the sole
general partner and WDN Properties, Inc., a wholly-owned
Subsidiary, is the sole limited partner, of WDOP. All of
the interests issued to such entities by WDOP have been
duly authorized and are validly issued, fully paid and
nonassessable. Other than this Agreement and the
Contribution Agreement, there are no outstanding or
authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other
agreements or commitments to which WDOP is a party or which
are binding on WDOP providing for the issuance or transfer
by WDOP of additional interests.
5 Subsidiaries. Except as in the next sentence
provided, ▇▇▇▇▇▇ owns directly or indirectly each of the
outstanding shares of capital stock or all of the
partnership or other equity interests of each of the
Subsidiaries free and clear of all liens, pledges, security
interests, claims or other encumbrances other than liens
imposed by local law which are not material. There are
currently outstanding 810,128 limited partnership interests
in ▇▇▇▇▇▇ Operating owned by Persons other than ▇▇▇▇▇▇ and
the Subsidiaries. Each of the outstanding shares of
capital stock of or other equity interest in each of the
Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable.
6 Other Interests. Except for interests in the
Subsidiaries, neither ▇▇▇▇▇▇ nor any of the Subsidiaries
owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership,
joint venture, business, trust or entity (other than
investments in short-term investment securities).
7 No Violation. Neither the execution and delivery
by ▇▇▇▇▇▇ of this Agreement nor the consummation by ▇▇▇▇▇▇
and WDOP of the transactions contemplated hereby in
accordance with the terms hereof, will: (a) conflict with
or result in a breach of any provisions of the articles of
incorporation or bylaws of ▇▇▇▇▇▇ or the partnership
agreement of WDOP; (b) result in a breach or violation of,
a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting
under, any of ▇▇▇▇▇▇'▇ stock option plans, or any grant or
award made under any of the foregoing; (c) violate, or
conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination
or cancellation of, or accelerate the performance required
by, or result in the creation of any Encumbrance upon any
of the properties of ▇▇▇▇▇▇ or the Subsidiaries under, or
result in being declared void, voidable or without further
binding effect, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust or
any license, franchise, permit, lease, contract, agreement
or other instrument, commitment or obligation to which
▇▇▇▇▇▇ or any of the Subsidiaries is a party, or by which
▇▇▇▇▇▇ or any of the Subsidiaries or any of their
properties is bound or affected, except for any of the
foregoing matters which, individually or in the aggregate,
would not have a ▇▇▇▇▇▇ Material Adverse Effect; or
(d) other than the Regulatory Filings, require any consent,
approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory
authority, except where the failure to obtain such consent,
approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority
would not have a ▇▇▇▇▇▇ Material Adverse Effect.
8 SEC Documents. ▇▇▇▇▇▇ has delivered or made
available to Drever its Form 10-K for the fiscal year ended
December 31, 1996 and the proxy statement relating to the
annual meeting of the ▇▇▇▇▇▇ Stockholders to be held on
June 5, 1997, each in the form (including exhibits and any
amendments thereto) filed with the SEC (collectively, the
"1996 Fiscal Year Reports"). The 1996 Fiscal Year Reports,
together with all other registration statements,
prospectuses, Forms 8-K, 10-Q and 10-K, information
statements, schedules and proxy statements filed by ▇▇▇▇▇▇
with the SEC since January 1, 1994, each of which is listed
on Schedule 5.8 hereto (collectively, the "▇▇▇▇▇▇
Reports"), were filed with the SEC in a timely manner and
constitute all forms, reports and documents required to be
filed by ▇▇▇▇▇▇ under the Securities Laws.
As of their respective dates, the ▇▇▇▇▇▇ Reports
(a) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (b) 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 the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of
▇▇▇▇▇▇ included in or incorporated by reference into the
▇▇▇▇▇▇ Reports (including the related notes and schedules)
fairly presents the consolidated financial position of
▇▇▇▇▇▇ and the Subsidiaries as of its date, and each of the
consolidated statements of income, stockholders' equity and
cash flows of ▇▇▇▇▇▇ included in or incorporated by
reference into the ▇▇▇▇▇▇ Reports (including any related
notes and schedules) fairly presents the consolidated
results of operations, stockholders' equity or cash flows,
as the case may be, of ▇▇▇▇▇▇ and the Subsidiaries for the
periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments
which will not be material in amount or effect), in each
case in accordance with generally accepted accounting
principles consistently applied during the periods
involved, except as may be noted therein and except, in the
case of the unaudited statements, as permitted by the
Securities Laws.
Except as and to the extent set forth on the
consolidated balance sheet of ▇▇▇▇▇▇ and the Subsidiaries
at December 31, 1996, including all notes thereto, or as
set forth in the ▇▇▇▇▇▇ Reports, neither ▇▇▇▇▇▇ nor any of
the Subsidiaries has any material debts, liabilities or
obligations of any nature, whether absolute, accrued,
matured, contingent or otherwise, including, without
limitation, any contingent liabilities or losses for
unasserted claims which are probable of assertion, except
for those (i) reflected on any interim balance sheet filed
with the SEC subsequent to such date, (ii) otherwise
disclosed on Schedule 5.8 hereto, (iii) incurred in the
ordinary course of business since such date, and
(iv) liabilities related to the acquisition by ▇▇▇▇▇▇ of
six properties on April 21, 1997.
9 Litigation. Except as disclosed on Schedule 5.9
hereto, there are (a) no continuing orders, injunctions or
decrees of any court, arbitrator or governmental authority
to which ▇▇▇▇▇▇ or any of the Subsidiaries is a party or by
which any of its properties or assets are bound, and (b) no
actions, suits or proceedings pending against ▇▇▇▇▇▇ or any
of the Subsidiaries or, to the Knowledge of ▇▇▇▇▇▇,
threatened against ▇▇▇▇▇▇ or any of the Subsidiaries, at
law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality.
10 Absence of Certain Changes. Except and as to the
extent disclosed in the ▇▇▇▇▇▇ Reports filed with the SEC
as of the date hereof, (a) ▇▇▇▇▇▇ and the Subsidiaries have
conducted their business only in the ordinary course of
such business (which, for purposes of this Section 5.10
only, shall include all acquisitions of real estate
properties and financing arrangements made in connection
therewith); (b) to the Knowledge of ▇▇▇▇▇▇, there has not
been any ▇▇▇▇▇▇ Material Adverse Effect; (c) as of the date
hereof, there has not been any declaration, setting aside
or payment of any dividend or other distribution with
respect to the Common Stock; (d) ▇▇▇▇▇▇ and the
Subsidiaries have not incurred any liabilities or
obligations of any nature, whether or not accrued,
contingent or otherwise, or suffered any events or
occurrences that would be required by generally accepted
accounting principles to be reflected on a consolidated
balance sheet of ▇▇▇▇▇▇ or that, individually or in the
aggregate, would reasonably be likely to have a ▇▇▇▇▇▇
Material Adverse Effect; and (e) there has not been any
material change in ▇▇▇▇▇▇'▇ accounting principles,
practices or methods.
11 Taxes. Except as set forth on Schedule 5.11
hereto, ▇▇▇▇▇▇ and each of the Subsidiaries (a) has timely
filed all federal, state and foreign tax returns including,
without limitation, information returns and reports
required to be filed by any of them for tax periods ended
prior to the date of this Agreement or requests for
extensions have been timely filed and any such request has
been granted and has not expired and all such returns are
accurate and complete in all material respects, (b) has
paid or accrued all taxes shown to be due and payable on
such returns or which have become due and payable pursuant
to any assessment, deficiency notice, 30-day letter or
other notice received by it, and (c) has properly accrued
all taxes for such periods subsequent to the periods
covered by such returns. Neither ▇▇▇▇▇▇ nor any of the
Subsidiaries has received any notice that the federal,
state and local income and franchise tax returns of ▇▇▇▇▇▇
or any such Subsidiary have been or will be examined by any
taxing authority. Neither ▇▇▇▇▇▇ nor any of the
Subsidiaries has executed or filed with the IRS or any
other taxing authority any agreement now in effect
extending the period for assessment or collection of any
income or other taxes.
Except as disclosed on Schedule 5.11 hereto, neither
▇▇▇▇▇▇ nor any of the Subsidiaries is a party to any
pending action or proceeding by any governmental authority
for assessment or collection of taxes, and no claim for
assessment or collection of taxes has been asserted against
it. ▇▇▇▇▇▇ (i) has qualified to be taxed as a real estate
investment trust ("REIT") pursuant to Sections 856 through
859 of the Code for its taxable years ended December 31,
1994 through 1996, inclusive (ii) has operated, and intends
to continue to operate, in such a manner as to qualify to
be taxed as a REIT pursuant to Sections 856 through 859 of
the Code for its taxable year ending on December 31, 1997,
and (iii) has not taken or omitted to take any action which
could result in, a challenge to its status as a REIT. For
purposes of this Section 5.11, "taxes" includes any
interest, penalty or additional amount payable with respect
to any tax.
12 Books and Records.
(a) The books of account and other financial
records of ▇▇▇▇▇▇ and the Subsidiaries, all reports
(including, without limitation, soil tests and
construction inspection reports), Tenant Leases and
other documents related to the construction,
ownership, management and operation of their
properties and assets that are in the possession and
control of ▇▇▇▇▇▇, all of which have been made
available to Drever are, to the Knowledge of ▇▇▇▇▇▇,
in all material respects true and correct.
(b) The records of ▇▇▇▇▇▇ contain in all
material respects accurate records of all meetings and
accurately reflect in all material respects all other
corporate action of the ▇▇▇▇▇▇ Stockholders and
directors and any committees of the Board of Directors
of ▇▇▇▇▇▇ with respect to ▇▇▇▇▇▇.
13 Properties. ▇▇▇▇▇▇ and the Subsidiaries own fee
simple title or leasehold estates to each of the real
properties reflected on the most recent balance sheet of
▇▇▇▇▇▇ included in the ▇▇▇▇▇▇ Reports (the "▇▇▇▇▇▇
Properties"), which are all of the real estate properties
owned by them, and no Person has any contract, option,
right of first refusal or other agreement to purchase any
▇▇▇▇▇▇ Property or any part thereof. Each of the ▇▇▇▇▇▇
Properties is owned by ▇▇▇▇▇▇ or its Subsidiaries free and
clear of Encumbrances, or any claim in favor of any Person
that could become an Encumbrance, and Property
Restrictions, except for (a) Encumbrances and Property
Restrictions that are disclosed on Schedule 5.13 hereto,
(b) Encumbrances and Property Restrictions that would not
be reasonably likely, individually or in the aggregate, to
have a ▇▇▇▇▇▇ Material Adverse Effect, (c) Property
Restrictions imposed or promulgated by law or any Agency,
including zoning regulations, (d) Encumbrances and Property
Restrictions disclosed on existing title reports, title
policies or surveys, (e) to the Knowledge of ▇▇▇▇▇▇,
mechanics', carriers', workmen's or repairmen's liens and
other Encumbrances, Property Restrictions and other
limitations of any kind, if any, which have heretofore been
bonded or which individually or in the aggregate, do not
exceed $100,000, do not materially detract from the value
of or materially interfere with the present use of any of
the ▇▇▇▇▇▇ Properties subject thereto or affected thereby,
and do not otherwise materially impair business operations
conducted by ▇▇▇▇▇▇ and the Subsidiaries, and (f) taxes
that are not yet delinquent (such Encumbrances, Property
Restrictions, liens, limitations and taxes set forth in
clauses (a) through (e) and this clause (f), collectively,
the "▇▇▇▇▇▇ Permitted Liens").
Valid policies of title insurance have been issued
insuring ▇▇▇▇▇▇'▇ and each of its Subsidiaries' fee simple
title to, or leasehold estate in, the ▇▇▇▇▇▇ Properties,
subject only to the matters disclosed above and as
disclosed on Schedule 5.13 hereto, and such policies are,
at the date hereof, in full force and effect and no
material claim has been made against any such policy.
Except as disclosed on Schedule 5.13 hereto or as otherwise
set forth in ▇▇▇▇▇▇'▇ 1997 capital expenditures budget,
(i) there is no certificate, permit or license from any
Agency having jurisdiction over any of the ▇▇▇▇▇▇
Properties and there is no agreement, easement or other
right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the
▇▇▇▇▇▇ Properties or which is necessary to permit the
lawful use and operation of all driveways, roads and other
means of egress and ingress to and from any of the ▇▇▇▇▇▇
Properties that has not been obtained and is not in full
force and effect, or of any pending threat of modification
or cancellation of any of same where the failure to obtain
the same would not be reasonably likely to have a ▇▇▇▇▇▇
Material Adverse Effect; (ii) neither ▇▇▇▇▇▇ nor any of the
Subsidiaries has received written notice of any violation
of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any of
the ▇▇▇▇▇▇ Properties issued by any Agency; (iii) there are
no structural defects relating to the ▇▇▇▇▇▇ Properties and
no ▇▇▇▇▇▇ Properties whose building systems are not in
working order in any respect, except for such defects that,
individually or in the aggregate, would not be reasonably
likely to have a ▇▇▇▇▇▇ Material Adverse Effect; and
(iv) there is (A) no physical damage to any single ▇▇▇▇▇▇
Property in excess of $250,000 for which there is no
insurance in effect covering the cost of the restoration,
(B) no current renovation to any single ▇▇▇▇▇▇ Property the
cost of which exceeds $250,000, and (C) no current
restoration of any single ▇▇▇▇▇▇ Property the cost of which
exceeds $250,000.
Except as disclosed on Schedule 5.13 hereto, ▇▇▇▇▇▇
and the Subsidiaries have received no notice to the effect
that and there are no (x) condemnation or rezoning
proceedings that are pending or, to the Knowledge of
▇▇▇▇▇▇, threatened with respect to any of the ▇▇▇▇▇▇
Properties that would be reasonably likely to have a ▇▇▇▇▇▇
Material Adverse Effect or (y) any zoning, building or
similar laws, codes, ordinances, orders or regulations that
are or will be violated by the continued maintenance,
operation or use of any buildings or other improvements on
any of the ▇▇▇▇▇▇ Properties or by the continued
maintenance, operation or use of the parking areas where
such violation would be reasonably likely to have a ▇▇▇▇▇▇
Material Adverse Effect. To the Knowledge of ▇▇▇▇▇▇, all
work to be performed, payments to be made and actions to be
taken by ▇▇▇▇▇▇ or the Subsidiaries prior to the date
hereof pursuant to any agreement entered into with an
Agency in connection with a site approval, zoning
reclassification or other similar action relating to the
▇▇▇▇▇▇ Properties (e.g., Local Improvement District, Road
Improvement District, Environmental Mitigation) has been
performed, paid or taken, as the case may be, and ▇▇▇▇▇▇ is
not aware of any planned or proposed work, payments or
actions that may be required after the date hereof pursuant
to such agreements.
14 Compliance with Applicable Regulations.
(a) Except as disclosed on Schedule 5.14 hereto,
all ▇▇▇▇▇▇ Properties and the operation thereof
(including the handling of tenant security and other
deposits) currently are in substantial compliance with
the requirements of all Agencies having jurisdiction
over ▇▇▇▇▇▇, the Subsidiaries and the ▇▇▇▇▇▇
Properties, except where the failure to so comply
would not be reasonably likely to have a ▇▇▇▇▇▇
Material Adverse Effect; and to ▇▇▇▇▇▇'▇ Knowledge,
there are no material commitments or agreements with
any of the Agencies affecting the ▇▇▇▇▇▇ Properties
which have not been fully disclosed to Drever in
writing.
(b) Except as disclosed on Schedule 5.14 hereto,
neither ▇▇▇▇▇▇ nor any of the Subsidiaries has
received no notices of uncured violations at any of
the ▇▇▇▇▇▇ Properties of zoning, building, fire, rent
control, tenant security or other deposits or any
other applicable statute, ordinance or regulation,
relating to any of the ▇▇▇▇▇▇ Properties, its
construction, or any occupancy thereof except for
violations that, individually or in the aggregate,
would not be reasonably likely to have a ▇▇▇▇▇▇
Material Adverse Effect, nor are there presently
pending against ▇▇▇▇▇▇, any of the Subsidiaries or
against any of the ▇▇▇▇▇▇ Properties any judgments
relating to any of the above matters, any judicial
proceedings or administrative actions or any state of
facts which, to ▇▇▇▇▇▇'▇ Knowledge, with notice or
lapse of time, could reasonably be expected to give
rise to any such proceedings or action, in either case
that could be reasonably likely to have a ▇▇▇▇▇▇
Material Adverse Effect.
(c) Except as disclosed on Schedule 5.14 hereto
and except as would not be reasonably likely to have
a ▇▇▇▇▇▇ Material Adverse Effect, neither ▇▇▇▇▇▇ nor
any of the Subsidiaries has received written notice
that any of the ▇▇▇▇▇▇ Properties is currently subject
to (i) any existing, pending or, to the Knowledge of
▇▇▇▇▇▇, threatened investigation or inquiry by any
Agency or (ii) any remedial obligations under any
Applicable Environmental Laws; and neither ▇▇▇▇▇▇ nor
any of the Subsidiaries has obtained any permits,
licenses or similar authorizations to occupy,
renovate, operate or use any portion of any of the
▇▇▇▇▇▇ Properties by reason of any Applicable
Environmental Laws.
(d) Except as disclosed on Schedule 5.14 hereto
and except as would not be reasonably likely to have
a ▇▇▇▇▇▇ Material Adverse Effect, to the Knowledge of
▇▇▇▇▇▇, no Hazardous Materials are located on or about
any of the ▇▇▇▇▇▇ Properties. To the Knowledge of
▇▇▇▇▇▇, and except as would not be reasonably likely
to have a ▇▇▇▇▇▇ Material Adverse Effect, no ▇▇▇▇▇▇
Property contains any underground tanks for the
storage or disposal of Hazardous Materials. Further,
to the Knowledge of ▇▇▇▇▇▇, and except as would not be
reasonably likely to have a ▇▇▇▇▇▇ Material Adverse
Effect, (i) no ▇▇▇▇▇▇ Property previously has been
used for the storage, manufacture or disposal of
Hazardous Materials, (ii) no written complaint, order,
citation or notice with regard to air emissions, water
discharges, noise emissions and Hazardous Materials,
if any, or any other Applicable Environmental Laws
from any Person or Agency has been received by ▇▇▇▇▇▇
or any of the Subsidiaries, and (iii) to ▇▇▇▇▇▇'▇
Knowledge, ▇▇▇▇▇▇ and the Subsidiaries are in compliance
with all Applicable Environmental Laws.
(e) Neither ▇▇▇▇▇▇ nor any of the Subsidiaries
has received written notice that any material permits,
licenses or consents not already obtained are required
by the Agencies in connection with the use and
occupancy of any of the ▇▇▇▇▇▇ Properties or any
material improvements thereto.
15 No Brokers. Except the fee that is to be paid to
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. Incorporated by Walden, Walden has not
entered into any contract, arrangement or understanding
with any Person or firm which may result in the obligation
of ▇▇▇▇▇▇, WDOP, Drever, AOF or AOFII to pay any finder's
fees, broker's or agent's commissions or other like
payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby. Except for the fees payable to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
Incorporated, to the Knowledge of ▇▇▇▇▇▇, there is no claim
for payment of any finder's fees, broker's or agent's
commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
16 Units. The issuance and delivery by WDOP of
Units in connection with the Exchange Offer and the
Contribution Agreement have been duly and validly autho-
rized by all necessary partnership action on the part of
WDOP. The Units to be issued in connection with the
Exchange Offer and the Contribution Agreement when issued
in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable.
17 Encumbrances on Properties. No action has been
taken by ▇▇▇▇▇▇ or any of the Subsidiaries, nor has ▇▇▇▇▇▇
or any of the Subsidiaries failed to act, with respect to
work performed or delivery of material which would give
rise to an Encumbrance, other than a ▇▇▇▇▇▇ Permitted Lien,
on any of the ▇▇▇▇▇▇ Properties or any improvements
thereto. As of the Closing, there will be no unpaid
assessments against any of the ▇▇▇▇▇▇ Properties except for
property taxes assessed but not due and payable at the time
of Closing; and there will be no claim in favor of any
Person (including the present management) for any unpaid
commissions or fees for leasing of any of the ▇▇▇▇▇▇
Properties arising out of the acts of or through ▇▇▇▇▇▇ or
any of the Subsidiaries otherwise than as payable in the
ordinary course of business consistent with past practice.
18 Insurance. The insurance policies listed and
described on Schedule 5.18 hereto are currently in force,
and all such policies or their equivalent will be
maintained in force until the Closing. Neither ▇▇▇▇▇▇ nor
any of the Subsidiaries has received any notice from any
insurer of any of the ▇▇▇▇▇▇ Properties or any part thereof
requesting any improvements, alterations, additions,
correction or other work in, on or about the improvements
thereto, whether related to any of the ▇▇▇▇▇▇ Properties or
to the operation of any occupant thereof, which have not
been cured or satisfied.
19 Non-foreign Status. Neither ▇▇▇▇▇▇ nor WDOP is
a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate (as those
terms are defined in Sections 1445 and 7701 of the Code).
20 Information. None of the Proxy Statement or any
other document filed or to be filed by or on behalf of
▇▇▇▇▇▇ with the SEC or any other governmental entity or any
other document required to be prepared and distributed in
connection with the transactions contemplated hereby,
including, without limitation, the Exchange Offer
Documents, will contain when filed, or shall contain at the
respective times filed with the SEC or other Agency, and,
in addition, in the case of the Proxy Statement and the
Exchange Offer Documents at the date it or any amendment or
supplement thereto is mailed (i) to the ▇▇▇▇▇▇ Stockholders
to solicit the vote of such stockholders on the issuance of
shares of Common Stock to be issued by ▇▇▇▇▇▇ upon the
exchange of Common Units and upon the exercise of the
Warrants, or (ii) the Interestholders, any untrue statement
of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make
the statements made therein, in the light of the
circumstances under which they were made, not misleading;
provided that the foregoing shall not apply to information
supplied by Drever, AOFII or AOF in writing specifically
for inclusion or incorporation by reference in any such
document. The Proxy Statement shall comply as to form in
all material respects with the applicable provisions of the
Exchange Act and the rules and regulations thereunder.
ARTICLE 6
Covenants
1 Acquisition Proposals. Prior to the Closing
Date, Drever, AOFII and AOF each agree (a) that none of
them nor any of their affiliates shall, and each of them
shall direct and use its best efforts to cause its
respective officers, directors, employees, agents,
affiliates and representatives (including, without
limitation, any investment banker, attorney or accountant
retained by it or any of its affiliates) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any proposal or offer
with respect to a merger, acquisition, tender offer,
exchange offer, consolidation or similar transaction
involving, or any purchase of all or any significant
portion (which, for purposes of this Section 6.1 shall mean
Partnership Properties having an aggregate Property Value
of 20% or more of the aggregate Property Value of all
Partnership Properties) of the assets or any equity
securities of, such entity, any Partnership or any of their
affiliates, other than the transactions contemplated by
this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any
confidential information or data to, or have any
discussions with, any Person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal; (b) that it will
immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing
and each will take the necessary steps to inform the
individuals or entities referred to above of the
obligations undertaken in this Section 6.1; and (c) that it
will notify ▇▇▇▇▇▇ immediately if any such inquiries or
proposals are received by, any such information is
requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided,
however, that nothing contained in this Section 6.1 shall
prohibit Drever from furnishing information to or entering
into discussions or negotiations with, any Person that
makes an unsolicited bona fide Superior Acquisition
Proposal (as defined below), if, and only to the extent
that, (i) the Boards of Directors of Drever, AOFII and/or
AOF determine in good faith that such action is required
for Drever, AOFII or AOF, as applicable, to comply with its
fiduciary duties to the partners of the Partnerships under,
or otherwise violate, applicable law as advised by counsel,
(ii) prior to furnishing such information to, or entering
into discussions or negotiations with, such Person, Drever
provides written notice to ▇▇▇▇▇▇ to the effect that
Drever, AOFII and/or AOF are furnishing information to, or
entering into discussions with, such Person except to the
extent that the Boards of Directors of Drever, AOFII and/or
AOF, as applicable, determine in good faith that any such
action would violate such Boards' fiduciary duties under,
or otherwise violate, applicable law, and (iii) subject to
any confidentiality agreement with such Person (which
Drever determined in good faith was required to be executed
in order for Drever, AOFII and/or AOF to comply with its
fiduciary duties to the partners of the Partnership imposed
by law as advised by counsel), Drever keeps ▇▇▇▇▇▇
reasonably informed of the status (but not the terms) of
any such discussions or negotiations except to the extent
that the Boards of Directors of Drever, AOFII and/or AOF,
as applicable, determine in good faith that any such action
would violate such Boards' fiduciary duties under, or
otherwise violate, applicable law. A "Superior Acquisition
Proposal" means a bona fide Acquisition Proposal made by a
third party and which a majority of the members of the
Board of Directors of Drever, AOFII and/or AOF, as
applicable, determines in good faith (a) to be more
favorable to the Interestholders than the Exchange Offer
and (b) is reasonably capable of being consummated.
Nothing in this Section 6.1 shall (x) permit any party
to terminate this Agreement (except as specifically
provided for in Article 8 hereof), (y) permit any party to
enter into any agreement with respect to an Acquisition
Proposal during the term of this Agreement (it being agreed
that during the term of this Agreement, no party shall
enter into any agreement with any Person that provides for,
or in any way facilitates, an Acquisition Proposal (other
than a confidentiality agreement in customary form)), or
(z) affect any other obligation of any party under this
Agreement.
2 Conduct of Business.
(a) Prior to the Closing Date, except as contem-
plated by this Agreement, unless ▇▇▇▇▇▇ or ▇▇▇▇▇▇, as
appropriate, has consented in writing thereto, WDOP,
on the one hand, and Drever, AOFII or AOF, as general
partners of the Partnerships, on the other hand:
(i) Shall use their reasonable efforts to
preserve intact, in all material respects, their
business operations and goodwill and the
business operations and goodwill of the
Partnerships;
(ii) Shall confer on a regular basis with
one or more representatives of the other to
report operational matters of materiality and,
subject to Section 6.1 hereof, any proposals to
engage in material transactions; and
(iii) Shall promptly notify the other
of any material emergency or other material
change in the condition (financial or
otherwise), business, properties, assets,
liabilities, prospects or the normal course of
their businesses or in the operation of their
properties, any material governmental
complaints, investigations or hearings (or
communications indicating that the same may be
contemplated), or the breach in any material
respect of any representation, warranty,
covenant or agreement contained herein.
(b) Prior to the Closing Date, unless ▇▇▇▇▇▇ has
consented (such consent not to be unreasonably
withheld or delayed) in writing thereto, each of
Drever, AOF and AOFII, as general partners of the
Partnerships, agrees to cause each of the Partnerships
to:
(i) Conduct its operations according to
its usual, regular and ordinary course in
substantially the same manner as heretofore
conducted;
(ii) Not amend its partnership agreement or
other charter documents;
(iii) Not issue any additional Inter-
ests, provided that the foregoing shall not
prohibit the transfer of Interests outstanding
on the date hereof or the fulfillment of the
obligations disclosed on Schedule 4.5 hereto;
(iv) Not declare, set aside or pay any
distribution or payment with respect to, or
directly or indirectly redeem, purchase or
otherwise acquire, any Interests or make any
commitment for any such action, except in the
ordinary course of business and pursuant to the
terms of its partnership agreement;
(v) Not sell or otherwise dispose of (A)
any Partnership Properties or (B) any of its
other assets which are material, individually or
in the aggregate;
(vi) Not make any loans, advances or
capital contributions to, or investments in, any
other Person other than in the ordinary course
of business consistent with past practice;
(vii) Not pay, discharge or satisfy any
claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business
consistent with past practice or in accordance
with their terms, of liabilities reflected or
reserved against in, or contemplated by, the
most recent financial statements (or the notes
thereto) of such Partnership or incurred in the
ordinary course of business consistent with past
practice;
(viii) Not enter into any commitment
which individually may result in total payments
or liability by or to it in excess of $25,000 in
the case of any one commitment or in excess of
$100,000 for all commitments other than
commitments entered into in the ordinary course
of business;
(ix) (A) Until the Closing, continue the
operation of the Partnership Properties owned by
it in the normal and usual manner consistent
with past practice, not remove any material
fixtures, furnishings, equipment or personalty
therefrom, except for repair or replacement or
otherwise in the ordinary course of business
consistent with past practice, and manage,
operate, maintain, repair and redecorate the
Partnership Properties owned by it in the
ordinary course of business consistent with past
practice and in accordance with such
Partnership's 1997 capital expenditures budget,
as previously provided to ▇▇▇▇▇▇, in such manner
as to maintain such Partnership Properties in no
less satisfactory condition than the same exists
as of the date hereof; and
(B) Maintain all rental units (other
than "models") included in the Partnership
Properties owned by it in "market ready"
rentable condition as of the Closing Date;
provided, however, that ▇▇▇▇▇▇ and WDOP acknowledge
that rental units that are vacated within
five (5) business days prior to the Closing Date
will be in varying conditions of make-ready for
leasing, as is ordinary in the Partnership's
course of business; and
(x) Within forty-five (45) days following
the end of any fiscal quarter ending prior to
the Closing Date, deliver to ▇▇▇▇▇▇ the
unaudited balance sheet of each of the
Partnerships for such quarter and the related
statements of operations, partners' capital and
cash flows for such period.
(c) Prior to the Closing Date, unless Drever has
consented (such consent not to be unreasonably
withheld or delayed) in writing thereto, each of
▇▇▇▇▇▇ and WDOP:
(i) Shall, and shall cause each of its
affiliates to, conduct their operations
according to its usual, regular and ordinary
course in substantially the same manner as
heretofore conducted;
(ii) Shall not amend its articles of
incorporation, bylaws, partnership agreement or
other charter document, as the case may be;
(iii) Shall not (A) except pursuant to
the exercise of options, warrants, conversion
rights and other contractual rights (including
▇▇▇▇▇▇'▇ existing dividend reinvestment plan and
stock option plans) existing on the date hereof,
or as otherwise required by this Agreement or
the Contribution Agreement), issue any shares of
its capital stock, effect any stock split,
reverse stock split, stock dividend,
recapitalization or other similar transaction,
(B) amend any employment agreement with any of
its present or future officers or directors, or
(C) adopt any new employee benefit plan
(including any stock option, stock benefit or
stock purchase plan);
(iv) Shall not (A) declare, set aside or
pay any dividend or make any other distribution
or payment with respect to any shares of its
capital stock, except that ▇▇▇▇▇▇ may pay a
dividend not to exceed $.4825 per share of
Common Stock, $.5725 per share of ▇▇▇▇▇▇'▇ 9.16%
Series A Cumulative Redeemable Preferred Stock
and 9.16% Series B Cumulative Redeemable
Preferred Stock and $.575 per share of ▇▇▇▇▇▇'▇
9.20% Senior Preferred Stock for the second and
third calendar quarters of 1997 and any other
dividend or distribution necessary for ▇▇▇▇▇▇ to
maintain its ability to qualify to be taxed as a
REIT under the Code, or (B) except in connection
with the use of shares of capital stock to pay
the exercise price or tax withholding in
connection with stock-based employee benefit
plans of ▇▇▇▇▇▇, directly or indirectly redeem,
purchase or otherwise acquire any shares of its
capital stock or partnership interests, as the
case may be, or capital stock or partnership
interests, as the case may be, of any of its
affiliates, or make any commitment for any such
action;
(v) Shall not, and shall not permit any of
its affiliates to, sell or otherwise dispose of
any of its assets which are material,
individually or in the aggregate;
(vi) Shall not, and shall not permit any of
its respective affiliates to, make any loans,
advances or capital contributions to, or
investments in, any unaffiliated third party
other than in connection with the sale of
properties;
(vii) Shall not, and shall not permit
any of its affiliates to, pay, discharge or
satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the
payment, discharge or satisfaction in the
ordinary course of business consistent with past
practice or in accordance with their terms, of
liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated
financial statements (or the notes thereto) of
▇▇▇▇▇▇ included in ▇▇▇▇▇▇'▇ Form 10-K for the
fiscal year ended December 31, 1996 or incurred
in the ordinary course of business consistent
with past practice;
(viii) Shall not, and shall not permit
any of its respective affiliates to, enter into
any commitment which, individually or in the
aggregate, may result in total payments or
liabilities by or to it in excess of $1,000,000
other than in the ordinary course of business;
and
(ix) Shall not, and shall not permit any of
its respective affiliates to, enter into any
commitment with any officer, director or
affiliate of ▇▇▇▇▇▇, except in the ordinary
course of business.
3 Approval of Stockholders and Acceptance by
Interestholders.
(a) In connection with the issuance of shares of
Common Stock by ▇▇▇▇▇▇ upon exchange of the Common
Units and upon the exercise of the Warrants, ▇▇▇▇▇▇,
acting through its Board of Directors, shall, in
accordance with applicable law, its articles of
incorporation and bylaws and the rules and regulations
of the New York Stock Exchange, duly call, give notice
of, convene and hold a special meeting of the ▇▇▇▇▇▇
Stockholders as soon as practicable, for the purpose
of voting upon the approval of such share issuances.
▇▇▇▇▇▇ shall include in the Proxy Statement the
recommendation of its Board of Directors that the
▇▇▇▇▇▇ Stockholders vote in favor of the approval of
such share issuances, unless the Board of Directors of
▇▇▇▇▇▇ determines in good faith that any such action
would violate such Board's fiduciary duties under
applicable law.
(b) Each of Drever, AOF and AOFII shall take all
necessary action, in accordance with applicable law,
its articles of incorporation and bylaws to recommend
that the Interestholders accept the Exchange Offer and
tender their Interests to WDOP pursuant to the
Exchange Offer, unless the Boards of Directors of
Drever, AOFII and/or AOF, as applicable, determine in
good faith that any such action would violate such
Boards' fiduciary duties under, or otherwise violate,
applicable law.
4 Filings; Other Action. Subject to the terms and
conditions herein provided, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall:
(a) use all their best efforts to cooperate with one
another in (i) determining which filings are required to be
made prior to the Closing Date with, and which consents,
approvals, permits or authorizations are required to be
obtained prior to the Closing Date from, governmental or
regulatory authorities of the United States, the several
states, third party secured and unsecured lenders and
rating agencies in connection with the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents,
approvals, permits or authorizations; (b) use their best
efforts to obtain in writing any consents required from
third parties in form reasonably satisfactory to ▇▇▇▇▇▇ and
Drever necessary to effectuate the Exchange Offer; and
(c) use their best efforts to take, or cause to be taken,
all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this
Agreement. If, at any time after the Closing Date, any
further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and
directors of Walden, Drever, AOFII and AOF shall take all
such necessary action.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall promptly provide the other (or
its counsel) copies of (x) all filings in connection with
the Exchange Offer, (y) all filings under the Exchange Act
after the date hereof and prior to the Closing Date, and
(z) all other regulatory filings in connection with this
Agreement and the transactions contemplated hereby, in each
case, made by ▇▇▇▇▇▇ or WDOP, on the one hand, or Drever,
AOFII or AOF, on the other hand.
5 Inspection of Records. From the date hereof to
the Closing Date, each of Walden, Drever, AOFII and AOF
shall, upon reasonable notice. allow all designated
officers, attorneys, accountants and other representatives
of the other access at all reasonable times to the records
and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to
the business and affairs of ▇▇▇▇▇▇, WDOP, Drever, AOFII,
AOF and their respective affiliates.
6 Publicity. The initial press release relating to
this Agreement shall be a joint release and thereafter
Walden, Drever, AOFII and AOF shall, subject to their
respective legal obligations (including requirements of
stock exchanges and other similar regulatory bodies),
consult with each other, and use reasonable efforts to
agree upon the text of any press release, before issuing
any such press release or otherwise making public
statements with respect to the transactions contemplated
hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national
securities exchange with respect thereto.
7 Proxy Statement. ▇▇▇▇▇▇ shall file with the SEC
as soon as practicable a proxy statement (the "Proxy
Statement") under the Exchange Act, with respect to the
meeting of the ▇▇▇▇▇▇ Stockholders in connection with the
Exchange Offer. ▇▇▇▇▇▇ will cause the Proxy Statement to
comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and
regulations promulgated thereunder. ▇▇▇▇▇▇ shall use its
best efforts to obtain, prior to the Closing Date, all
necessary permits or approvals required under the
Securities Laws to carry out the transactions contemplated
by this Agreement and will pay all expenses incident
thereto. Drever, AOFII and AOF hereby agree to cooperate
with ▇▇▇▇▇▇ in the preparation of the Proxy Statement and
to provide ▇▇▇▇▇▇ with such information as ▇▇▇▇▇▇ may
reasonably request. ▇▇▇▇▇▇, after consultation with
Drever, shall respond as promptly as practicable to any
comments made by the SEC with respect to the Proxy
Statement and shall cause a definitive Proxy Statement to
be mailed to the ▇▇▇▇▇▇ Stockholders at the earliest
practicable date. Each of Drever, AOFII, AOF, ▇▇▇▇▇▇ and
WDOP agrees to correct as promptly as practicable any
information provided by it for use in the Proxy Statement
if and to the extent that it shall have become false or
misleading in any material respect, and ▇▇▇▇▇▇ agrees to
take all steps necessary to file with the SEC and have
cleared thereby any amendment or supplement to the Proxy
Statement so as to correct the same and to cause the Proxy
Statement as so corrected to be disseminated to the ▇▇▇▇▇▇
Stockholders to the extent required by applicable law.
8 Post-Closing Conduct of Business. For the
period commencing with the Closing Date and ending on and
including the 15th business day following the Closing Date,
▇▇▇▇▇▇ (either directly or indirectly through a relevant
affiliate) and WDOP (a) shall endeavor to cause each of the
Partnerships to continue to exist and engage in the conduct
of its business and (b) shall not permit any Partnership to
undertake any action or enter into any arrangement in
connection with or related to a merger of, liquidation of,
termination of, winding-up of, or similar transaction that
involves, such Partnership in which, as a result of such
transaction, such Partnership would no longer continue to
exist or remain in business for Federal income tax
purposes.
9 Further Action. Each party hereto shall, subject
to the fulfillment at or before the Closing Date of each of
the conditions of performances set forth herein or the
waiver thereof, perform such further acts and execute such
documents as may reasonably be required to effect the
Exchange Offer.
10 Expenses. Except as otherwise provided in
Article 8 hereof, all costs and expenses incurred in
connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring
such expenses.
11 Third Party Consents. WDOP, Walden, Drever, AOF
and AOFII each shall take all necessary corporate and other
action and will use its commercially reasonable efforts to
obtain the consents and applicable approvals from third
parties that may be required to enable it to carry out the
transactions contemplated by this Agreement.
12 Efforts to Fulfill Conditions. WDOP, Walden,
Drever, AOF and AOFII each shall use its best efforts to
insure that all conditions precedent to its obligations
hereunder are fulfilled at or prior to the Closing.
13 Representations, Warranties and Conditions Prior
to Closing. ▇▇▇▇▇▇, WDOP, AOF and Drever each shall use
its best efforts to cause its representations and
warranties contained in this Agreement to be true and
correct on and as of the Closing Date in all material
respects (except for those representations and warranties
that address matters only as of a particular date and time
which need only be true and correct as of such date or with
respect to such period). Prior to Closing, ▇▇▇▇▇▇ and
Drever each shall promptly notify the other in writing
(a) if any representation or warranty contained in this
Agreement is discovered to be or becomes materially untrue
or (b) if any of WDOP, ▇▇▇▇▇▇, AOF, AOFII or Drever fails
to perform or comply, in all material respects, with any of
its covenants or agreements contained in this Agreement or
it is reasonably expected that it will be unable to perform
or comply, in all material respects, with any of its
covenants or agreements contained in this Agreement.
14 Partnership Agreements. On or prior to the
Mailing Date, ▇▇▇▇▇▇ shall execute, and cause WDN
Properties, Inc. to execute, the WDOP Partnership Agreement
and deliver such agreement to WDOP. On or prior to the
Mailing Date, ▇▇▇▇▇▇ and WDOP shall execute the Agreement
of General Partnership of ▇▇▇▇▇▇-WDOP Partners. ▇▇▇▇▇▇
shall not take, or permit to be taken, with respect to any
Partnership Property owned by a Partnership the general
partner of which ▇▇▇▇▇▇ acquires control following the
Closing Date, any action with respect to such Partnership
or with respect to such Partnership Properties that would
be prohibited by the terms of the WDOP Partnership
Agreement if such Partnership Properties were owned by
WDOP, provided that nothing contained herein shall prohibit
▇▇▇▇▇▇ from causing any such Partnership to transfer such
Partnership Properties to WDOP.
15 Other Documents. On or prior to the Closing
Date, ▇▇▇▇▇▇ shall execute and deliver the Warrant
Agreement to Drever, AOF and AOFII. In addition, on or
prior to the Closing Date, ▇▇▇▇▇▇ shall execute the
Articles Supplementary and file such document with the
Department of Assessments and Taxation of the State of
Maryland.
16 Cooperation of the Parties. ▇▇▇▇▇▇ and Drever
each will cooperate with the other in supplying such
information as may be reasonably requested by the other in
connection with the consummation of the transactions
contemplated by this Agreement, including, without
limitation, seeking any necessary consents or approvals.
17 Stock Exchange Listing. ▇▇▇▇▇▇ shall, as
promptly as practicable following the date hereof, prepare
and submit to the New York Stock Exchange a listing
application covering the shares of Common Stock and
Preferred Stock to be issued by ▇▇▇▇▇▇ upon exchange of the
Common Units and Preferred Units, respectively, and shall
use its best efforts to obtain, prior to the Closing Date,
approval of the listing of such shares, subject to official
notice of issuance.
ARTICLE 7
Conditions
1 Conditions to the Interestholders', ▇▇▇▇▇▇'▇ and
WDOP's Obligations to Consummate the Exchange Offer. The
respective obligation of each party to consummate the
Exchange Offer shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions:
(a) The issuance of the Common Stock issuable
upon exchange of the Common Units and upon the
exercise of the Warrants shall have been approved by
the ▇▇▇▇▇▇ Stockholders as provided herein.
(b) None of the parties hereto shall be subject
to any order or injunction of a court of competent
jurisdiction which prohibits the consummation of the
transactions contemplated by this Agreement. In the
event any such order or injunction shall have been
issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(c) The Proxy Statement shall have been cleared
by the SEC and no stop order with respect to the Proxy
Statement shall be in effect.
(d) All consents, authorizations, orders and
approvals of (or filings or registrations with) any
governmental commission, board, other regulatory body
or third parties required in connection with the
execution, delivery and performance of this Agreement
shall have been obtained or made, except for filings
in connection with the Exchange Offer and any other
documents required to be filed after the Closing Date
and except where the failure to have obtained or made
any such consent, authorization, order, approval,
filing or registration would not have a material
adverse effect on the business, results of operations
or financial condition of ▇▇▇▇▇▇ and each of the
Partnerships (and their respective affiliates), taken
as a whole, following the Closing Date.
2 Conditions to Obligations of the Interestholders
to Consummate the Exchange Offer. The obligations of each
Interestholder to consummate the Exchange Offer shall be
subject to the fulfillment at or prior to the Closing Date
of the following conditions, unless waived by such
Interestholder:
(a) WDOP and ▇▇▇▇▇▇ shall have performed, in all
material respects, their respective agreements
contained in this Agreement required to be performed
on or prior to the Closing Date and the representations
and warranties of ▇▇▇▇▇▇ and WDOP contained in
this Agreement shall be true and correct as of the
Closing Date in all material respects (except for
those representations and warranties that address
matters only as of a particular date and time which
need only be true and correct as of such date or with
respect to such period), and Drever shall have
received a certificate from an executive officer of
▇▇▇▇▇▇ dated the Closing Date certifying to such
effect.
(b) The opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
that the aggregate Exchange Consideration to be
received by the Interestholders is fair, from a
financial point of view, as of the Closing Date shall
have been delivered to Drever.
(c) Drever shall have received the opinion of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C. ("WSM"), dated the
Closing Date, in substantially the form attached
hereto as Schedule 7.2.
(d) The shares of Common Stock and Preferred
Stock issuable upon the exchange of the Common Units
and Preferred Units, respectively, and upon the
exercise of the Warrants shall have been approved for
listing on the New York Stock Exchange subject to
official notice of issuance.
3 Conditions to Obligation of WDOP to Consummate
the Exchange Offer. The obligation of WDOP to consummate
the Exchange Offer shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions,
unless waived by WDOP:
(a) Drever, AOF and AOFII shall have performed,
in all material respects, their agreements contained
in this Agreement required to be performed on or prior
to the Closing Date and the representations and
warranties of Drever, AOF and AOFII contained in the
Agreement shall be true and correct in all material
respects as of the Closing Date (except for those
representations and warranties that address matters
only as of a particular date and time which need only
be true and correct as of such date or with respect to
such period), and ▇▇▇▇▇▇ shall have received a
certificate of an executive officer of Drever dated
the Closing Date certifying to such effect.
(b) Interestholders representing 50.1% or more
of the Interests of Apartment Opportunity Fund, L.P.
and Interestholders representing 50.1% or more of the
Interests of Apartment Opportunity Fund II, L.P. shall
have accepted the Exchange Offer.
(c) Partnership Properties representing no more
than 25% of the aggregate Property Values of the
Partnership Properties held by Apartment Opportunity
Fund, L.P. and Partnership Properties representing no
more than 25% of the aggregate Property Values of the
Partnership Properties held by Apartment Opportunity
Fund II, L.P. shall have been excluded, pursuant to
the provisions of Article 3 hereof, from the Partnership
Properties held by the Partnerships on the
Closing Date.
(d) The opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
Incorporated addressed to the Board of Directors of
▇▇▇▇▇▇ that the aggregate Exchange Consideration,
payable under this Agreement is fair, from a financial
point of view, to the ▇▇▇▇▇▇ Stockholders, shall not
have been withdrawn or materially modified.
(e) ▇▇▇▇▇▇ shall have received the opinions of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., General Counsel of Drever,
and Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, dated
the Closing Date, in substantially the forms attached
hereto as Schedule 7.3(a) and Schedule 7.3(b),
respectively.
ARTICLE 8
Termination
1 Termination by Mutual Consent. This Agreement
may be terminated and the Exchange Offer may be abandoned
at any time prior to the Closing Date by the mutual written
consent of Drever and ▇▇▇▇▇▇, with the prior approval of
the respective Boards of Directors of Drever and ▇▇▇▇▇▇.
2 Termination by Either Drever or ▇▇▇▇▇▇. This
Agreement may be terminated and the Exchange Offer may be
abandoned by either Drever or ▇▇▇▇▇▇ if (a) the Exchange
Offer shall not have been consummated by December 31, 1997,
provided that a party that has willfully and materially
breached a representation, warranty or covenant of such
party set forth in this Agreement shall not be entitled to
exercise its right to terminate under this Section 8.2(a),
(b) a meeting of the ▇▇▇▇▇▇ Stockholders shall have been
duly convened and held and the approval of the ▇▇▇▇▇▇
Stockholders required by Section 7.1(a) hereof shall not
have been obtained at such meeting or at any adjournment or
postponement thereof, unless ▇▇▇▇▇▇ is in breach of its
obligations under Section 6.3, hereof, (c) a United States
federal or state court of competent jurisdiction or United
States federal or state governmental, regulatory or
administrative agency or commission shall have issued an
order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become
final and non-appealable, provided that the party seeking
to terminate this Agreement pursuant to this clause (c)
shall have used its best efforts to remove such order,
decree, ruling or injunction, or (d) any of the conditions
set forth in Article 7 hereof shall not have been
satisfied; and provided, in the case of a termination
pursuant to clause (a) or (d) above, that the terminating
party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the
failure referred to in said clause.
3 Termination by Drever, AOF and AOFII. This
Agreement may be terminated and the Exchange Offer may be
abandoned at any time prior to the Closing Date by action
of the Boards of Directors of Drever, AOF and AOFII if
(a) in the exercise of its good faith judgment as to its
fiduciary duties to the Interestholders imposed by law, as
advised by counsel, the Boards of Directors of Drever, AOF
and AOFII determine that such termination is required by
reason of a Superior Acquisition Proposal being made,
(b) the Board of Directors of ▇▇▇▇▇▇ withdraws, materially
modifies or changes in a manner materially adverse to the
Interestholders its recommendation to the ▇▇▇▇▇▇
Stockholders to approve the issuance of Common Stock
issuable upon exchange of the Common Units and upon the
exercise of the Warrants, (c) except with the written
consent of Drever, the Board of Directors of ▇▇▇▇▇▇
postpones the date scheduled for the meeting of the ▇▇▇▇▇▇
Stockholders to approve the issuance of Common Stock
issuable upon exchange of the Common Units and upon the
exercise of the Warrants beyond December 31, 1997 or fails
to set a date for such meeting by such date, (d) there has
been a breach by ▇▇▇▇▇▇ or WDOP of any representation or
warranty contained in this Agreement which would have or
would be reasonably likely to have a ▇▇▇▇▇▇ Material
Adverse Effect and which breach is not curable by December
31, 1997, or (e) there has been a material breach of any of
the covenants or agreements set forth in this Agreement on
the part of ▇▇▇▇▇▇ or WDOP, which breach is not curable or,
if curable, is not cured within 30 days after written
notice of such breach is given by Drever to ▇▇▇▇▇▇.
4 Termination by ▇▇▇▇▇▇. This Agreement may be
terminated and the Exchange Offer may be abandoned at any
time prior to the Closing Date by action of the Board of
Directors of ▇▇▇▇▇▇, if (a) the Boards of Directors of
Drever, AOF and/or AOFII withdraw, materially modify or
change in a manner materially adverse to WDOP their
recommendation to the Interestholders to accept the
Exchange Offer, other than as a result of the occurrence of
an event that in the good faith judgment of the Boards of
Directors of Drever, AOF and/or AOFII has or is reasonably
likely to have a ▇▇▇▇▇▇ Material Adverse Effect or
(b) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the
part of Drever, AOF or AOFII, which breach is not curable
or, if curable, is not cured within 30 days after written
notice of such breach is given by ▇▇▇▇▇▇ to ▇▇▇▇▇▇, AOF or
AOFII, as applicable.
5 Effect of Termination and Abandonment. In the
event of termination of this Agreement and the abandonment
of the Exchange Offer pursuant to this Article 8, written
notice thereof shall forthwith be given to the other
parties specifying the provisions hereof pursuant to which
such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no
liability on the part of the parties hereof, or their
respective directors, officers, employees, partners,
shareholders, representatives, agents or advisors, except
the obligations of the parties pursuant to this Section 8.5
and Section 6.10 hereof and except for the provisions of
Sections 9.1, 9.2, 9.3, 9.5, 9.7, 9.13 and 9.15 hereof.
Nothing contained in this Section 8.5 shall relieve any of
the parties hereto from liability for willful breach of
this Agreement. If Drever, AOF and AOFII elect to
terminate this Agreement pursuant to Section 8.3(a) hereof
and, within one year from the date of such termination,
Drever, AOF and/or AOFII consummates a Superior Acquisition
Proposal or enters into an agreement to consummate a
Superior Acquisition Proposal which is subsequently
consummated, Drever, AOF and/or AOFII shall pay to ▇▇▇▇▇▇,
provided that ▇▇▇▇▇▇ and/or WDOP was not in material breach
of its obligations hereunder at the time of such
termination, as liquidated damages and not as a penalty or
forfeiture an amount equal to the least of (a) $10,000,000,
(b) an amount equal to 50% of the excess of the value of
the consideration received by the Interestholders pursuant
to the Superior Acquisition Proposal over $642,000,000 (the
"Liquidated Damages Amount") and (c) the sum of (x) the
maximum amount that can be paid to ▇▇▇▇▇▇ without causing
▇▇▇▇▇▇ to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute income described
in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the
Code ("Qualifying Income"), as determined by ▇▇▇▇▇▇'▇
certified public accountants, plus (y) an amount equal to
the Liquidated Damages Amount less the amount payable under
clause (x) above in the event ▇▇▇▇▇▇ receives a letter from
▇▇▇▇▇▇'▇ counsel indicating that ▇▇▇▇▇▇ has received a
ruling from the IRS to the effect that Liquidated Damages
Amount payments constitute Qualifying Income. The payments
to which ▇▇▇▇▇▇ is entitled under this Section 8.5 shall be
its sole remedy with respect to the termination of this
Agreement under the circumstances contemplated in this
Section 8.5.
6 Extension; Waiver. At any time prior to the
Closing Date, either ▇▇▇▇▇▇ or Drever may, to the extent
legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations
and warranties made to such party contained herein or in
any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 9
General Provisions
1 Nonsurvival of Representations and Warranties.
No representation or warranty in this Agreement or in any
instrument delivered pursuant to this Agreement shall
survive the Closing Date or the termination of this
Agreement. This Section 9.1 shall not limit any covenant
or agreement set forth herein that, by its terms,
contemplates performance after the Closing Date.
2 Notices. Any notice or other communication
required to be given hereunder to any of the parties hereto
shall be in writing and shall be sent by facsimile
transmission (confirmed by any of the methods that follow),
courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and
first-class postage prepaid) and addressed as follows:
If to ▇▇▇▇▇▇ or WDOP:
c/o Walden Residential Properties, Inc.
One Lincoln Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Drever, or AOF or AOFII:
c/o Drever Partners, Inc.
Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party shall specify by written
notice so given, and such notice shall be deemed to have been
delivered as of the date so delivered.
3 Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any Person, other than the parties hereto or
their respective heirs, successors, executors, administrators and
assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
4 Entire Agreement. This Agreement, the Schedules and any
documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, written and oral, among the parties with respect
thereto, including, without limitation, the letters of intent dated
March 12, 1997 and May 8, 1997. No addition to or modification of
any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
5 Interference. Each party hereto further agrees that if
this Agreement is terminated in accordance with its terms, until
December 31, 1997 (a) it will not offer to hire or hire any Person
currently or formerly employed by the other party or any of its
affiliates with whom such party has had contact prior hereto other
than Persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and
(b) neither it nor its affiliates shall directly or indirectly,
(i) (A) solicit, seek or offer to effect or effect, (B) negotiate
with or provide any information to the Board of Directors of any of
Walden, Drever, AOF or AOFII, as applicable, any director or
officer of any of Walden, Drever, AOF or AOFII, as applicable, or
any stockholder of any of Walden, Drever, AOF or AOFII, as
applicable, with respect to, (C) make any statement or proposal,
whether written or oral, either alone or in concert with others, to
the Board of Directors of any of Walden, Drever, AOF or AOFII, as
applicable, any director or officer of any of Walden, Drever, AOF
or AOFII, as applicable, or any stockholder of any of Walden,
Drever, AOF or AOFII, as applicable, or any other Person with
respect to, or (D) make any public announcement (except as required
by law in respect of actions permitted hereby) or proposal or offer
whatsoever (including, without limitation, any "solicitation" of
"proxies" as such terms are defined or used in Regulation 14A of
the Exchange Act) with respect to, (1) any form of business
combination or similar or other extraordinary transaction involving
the other party or any affiliate thereof, including, without
limitation, a merger, tender or exchange offer or liquidation of
the other party's assets, (2) any form of restructuring,
recapitalization or similar transaction with respect to the other
party or any affiliate thereto, (3) any purchase of any securities
or assets, or rights or options to acquire any securities or assets
(through purchase, exchange, conversion or otherwise), of the other
party or any affiliate thereof, (4) any proposal to seek
representation on the Board of Directors of any of Walden, Drever,
AOF or AOFII, as applicable, or otherwise to seek to control or
influence the management, Board of Directors or policies of any of
Walden, Drever, AOF or AOFII, as applicable, or any affiliate
thereof, (5) any request or proposal to waive, terminate or amend
the provisions of this Section 9.5, or (6) any proposal or other
statement inconsistent with the terms of this Section 9.5 or
(ii) instigate, encourage, join, act in concert with or assist
(including, but not limited to, providing or assisting in any way
in the obtaining of financing for, or acting as a joint or
co-bidder for the other party with) any third party to do any of the
foregoing, unless and until such party has received the prior
written invitation or approval of a majority of the Board of
Directors of any of Walden, Drever, AOF or AOFII, as applicable, to
do any of the foregoing; provided that without such invitation or
approval, either party may at any time, on a confidential
non-public basis, submit to the chief executive officer or, if none,
the president of any of Walden, Drever, AOF or AOFII, as
applicable, a proposal to (x) amend any of the provisions of this
Section 9.5 or (y) effect a business combination or other
extraordinary transaction with the other party providing for the
acquisition of all or substantially all of the assets or the
securities of the other party, including, without limitation, a
merger, tender offer or exchange offer. Each party hereto agrees
that it will not agree with any third party to waive its rights
under this Section 9.5.
6 Amendment. This Agreement may be amended by the parties
hereto, by action taken by the Board of Directors of Walden,
Drever, AOF or AOFII, as applicable, at any time before or after
approval of this Agreement or any other matter presented in
connection with the Exchange Offer by the ▇▇▇▇▇▇ Stockholders, but
after any such approval, no amendment shall be made which by law
requires the further approval of the ▇▇▇▇▇▇ Stockholders without
obtaining such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the
parties hereto.
7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
without regard to the rules of conflicts of laws thereof or of any
other jurisdiction. Each of ▇▇▇▇▇▇, WDOP, Drever, AOF and AOFII
hereby irrevocably and unconditionally (a) consents to submit to
the exclusive jurisdiction of the courts of the State of Delaware
and of the appropriate federal courts located in the State of
Delaware (the "Delaware Courts") for any litigation, brought by any
of the parties hereto, arising out of or relating to this Agreement
or any of the transactions contemplated hereby, (b) waives any
objection to the laying of venue of any such litigation in the
Delaware Courts and agrees not to plead or claim in any Delaware
Court that such litigation brought therein has been brought in an
inconvenient forum, and (c) agrees that it will not bring any
action against any of the parties hereto, arising out or relating
to this Agreement and the transactions contemplated hereby, in any
court other than a Delaware Court.
8 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument.
9 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be
given no substantive or interpretive effect whatsoever.
10 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall
include the plural and vice versa, and words denoting any gender
shall include all genders.
11 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation,
any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
12 Incorporation. The Schedules attached hereto and
referred to herein are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
13 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement in that
jurisdiction or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
14 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement was not performed in all material
respects and monetary damages would not be an adequate remedy
therefor. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent material
breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any Delaware Court, this being in addition
to any other remedy to which they are entitled at law or in
equity.
15 Non-Recourse. Neither the officers, directors nor
stockholders of ▇▇▇▇▇▇ shall be personally bound or have any
personal liability hereunder. Drever, AOF and AOFII shall look
solely to the assets of ▇▇▇▇▇▇ for satisfaction of any liability of
▇▇▇▇▇▇ with respect to this Agreement. None of Drever, AOF or
AOFII will seek recourse or commence any action against any of the
stockholders of ▇▇▇▇▇▇ or any of their personal assets, and will
not commence any action for money judgments against any of the
directors or officers of ▇▇▇▇▇▇ or seek recourse against any of
their personal assets, for the performance or payment of any
obligation of ▇▇▇▇▇▇ hereunder. Neither the directors, officers
nor stockholders of Drever, AOF nor AOFII nor the Interestholders
(other than Drever) shall be personally bound or have any personal
liability hereunder. ▇▇▇▇▇▇ and WDOP shall look solely to the
assets of Drever, AOF and AOFII for satisfaction of any liability
of Drever, AOF and AOFII with respect to this Agreement. ▇▇▇▇▇▇
and WDOP will not seek recourse or commence any action against any
of the stockholders of Drever, AOF or AOFII or the Interestholders
(other than Drever) or any of their personal assets, and will not
commence any action for money judgments against any of the
directors or officers of Drever, AOF or AOFII or seek recourse
against any of their personal assets, for the performance or
payment of any obligation of Drever, AOF or AOFII hereunder.
16 Schedules.
(a) To the extent that the Schedules include items or
information which are not required to be disclosed under this
Agreement, disclosure of such items or information shall not
affect (directly or indirectly) the interpretation of this
Agreement or the scope of any disclosure obligation under the
Agreement. Inclusion of information in the Schedules shall
not be construed as an admission that such information is
material to the business, assets, liabilities, financial
position, operations or results of operations of the
disclosing party.
(b) Any matter disclosed in any Schedule to this
Agreement shall be deemed disclosed for all purposes under
this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement and caused the same to be duly delivered on their behalf
on the day and year first written above.
▇▇▇▇▇▇ RESIDENTIAL PROPERTIES, INC.
By:
Name:
Title:
▇▇▇▇▇▇/DREVER OPERATING PARTNERSHIP
By: ▇▇▇▇▇▇ Residential Properties, Inc.,
its general partner
By:
Name:
Title:
DREVER PARTNERS, INC.
By:
Name:
Title:
AOF II, INC.
By:
Name:
Title:
AOF, INC.
By:
Name:
Title:
TABLE OF CONTENTS
ARTICLE 1 - Definitions. . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 - The Exchange Offer . . . . . . . . . . . . . . . . 9
2.1. Commencement of the Exchange Offer. . . . . . . 9
2.4. Conduct of the Exchange Offers. . . . . . . . . 10
2.5. Restrictions on Amendment or Waiver of
Exchange Offers. . . . . . . . . . . . . . . . . . . 10
2.6. Preparation of Exchange Offer Documents . . . . 10
2.7. Dissemination of Exchange Offer Documents . . . 11
2.8. Expiration of Exchange Offers . . . . . . . . . 11
2.9. The Closing . . . . . . . . . . . . . . . . . . 11
ARTICLE 3 - Exclusion of Properties. . . . . . . . . . . . . . 13
ARTICLE 4 - Representations and Warranties of Drever, AOFII
and AOF . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1. Existence; Good Standing; Authority;
Compliance with Law. . . . . . . . . . . . . . . . . 16
4.2. Authorization, Validity and Effect of
Agreement. . . . . . . . . . . . . . . . . . . . . . 17
4.3. No Violation. . . . . . . . . . . . . . . . . . 17
4.4. Financial Statements; Undisclosed Liabilities . 18
4.5. Partnership Interests . . . . . . . . . . . . . 19
4.6. Litigation. . . . . . . . . . . . . . . . . . . 19
4.7. Absence of Certain Changes. . . . . . . . . . . 19
4.8. Taxes . . . . . . . . . . . . . . . . . . . . . 19
4.9. Books and Records . . . . . . . . . . . . . . . 21
4.10. No Brokers . . . . . . . . . . . . . . . . 21
4.11. Properties . . . . . . . . . . . . . . . . 22
4.12. Compliance with Applicable Regulations . . 24
4.13. Encumbrances on Properties . . . . . . . . 25
4.14. Insurance. . . . . . . . . . . . . . . . . 25
4.15. Non-foreign Status . . . . . . . . . . . . 26
4.16. Information. . . . . . . . . . . . . . . . 26
ARTICLE 5 - Representations and Warranties of ▇▇▇▇▇▇ and WDOP. 26
5.1. Existence; Good Standing; Authority;
Compliance with Law. . . . . . . . . . . . . . . . . 26
5.2. Authorization, Validity and Effect of
Agreements . . . . . . . . . . . . . . . . . . . . . 27
5.3. Capitalization. . . . . . . . . . . . . . . . . 28
5.4. Partnership Interests . . . . . . . . . . . . . 28
5.5. Subsidiaries. . . . . . . . . . . . . . . . . . 28
5.6. Other Interests . . . . . . . . . . . . . . . . 29
5.7. No Violation. . . . . . . . . . . . . . . . . . 29
5.8. SEC Documents . . . . . . . . . . . . . . . . . 30
5.9. Litigation. . . . . . . . . . . . . . . . . . . 31
5.10. Absence of Certain Changes . . . . . . . . 31
5.11. Taxes. . . . . . . . . . . . . . . . . . . 31
5.12. Books and Records. . . . . . . . . . . . . 32
5.13. Properties . . . . . . . . . . . . . . . . 32
5.14. Compliance with Applicable Regulations . . 34
5.15. No Brokers . . . . . . . . . . . . . . . . 36
5.16. Units. . . . . . . . . . . . . . . . . . . 36
5.17. Encumbrances on Properties . . . . . . . . 36
5.18. Insurance. . . . . . . . . . . . . . . . . 37
5.19. Non-foreign Status . . . . . . . . . . . . 37
5.20. Information. . . . . . . . . . . . . . . . 37
ARTICLE 6 - Covenants. . . . . . . . . . . . . . . . . . . . . 38
6.1. Acquisition Proposals . . . . . . . . . . . . . 38
6.2. Conduct of Business . . . . . . . . . . . . . . 39
6.3. Approval of Stockholders and Acceptance by
Interestholders . . . . . . . . . . . . . . . . 44
6.4. Filings; Other Action.. . . . . . . . . . . . . 44
6.5. Inspection of Records.. . . . . . . . . . . . . 45
6.6. Publicity . . . . . . . . . . . . . . . . . . . 45
6.7. Proxy Statement . . . . . . . . . . . . . . . . 45
6.8. Post-Closing Conduct of Business. . . . . . . . 46
6.9. Further Action. . . . . . . . . . . . . . . . . 46
6.10. Expenses . . . . . . . . . . . . . . . . . 46
6.11. Third Party Consents . . . . . . . . . . . 46
6.12. Efforts to Fulfill Conditions. . . . . . . 47
6.13. Representations, Warranties and
Conditions Prior to Closing. . . . . . . . . . . . . 47
6.15. Other Documents. . . . . . . . . . . . . . 47
6.16. Cooperation of the Parties . . . . . . . . 48
6.17. Stock Exchange Listing . . . . . 48
ARTICLE 7 - Conditions . . . . . . . . . . . . . . . . . . . . 48
7.1. Conditions to the Interestholders', ▇▇▇▇▇▇'▇
and WDOP's Obligations to Consummate the
Exchange Offer. . . . . . . . . . . . . . . . . 48
7.2. Conditions to Obligations of the
Interestholders to Consummate the Exchange
Offer . . . . . . . . . . . . . . . . . . . . . 49
7.3. Conditions to Obligation of WDOP to Consummate
the Exchange Offer. . . . . . . . . . . . . . . 50
ARTICLE 8 - Termination. . . . . . . . . . . . . . . . . . . . 51
8.1. Termination by Mutual Consent . . . . . . . . . 51
8.2. Termination by Either Drever or ▇▇▇▇▇▇. . . . . 51
8.3. Termination by Drever, AOF and AOFII. . . . . . 51
8.4. Termination by ▇▇▇▇▇▇ . . . . . . . . . . . . . 52
8.5. Effect of Termination and Abandonment . . . . . 52
8.6. Extension; Waiver . . . . . . . . . . . . . . . 53
ARTICLE 9 - General Provisions . . . . . . . . . . . . . . . . 54
9.1. Nonsurvival of Representations and Warranties . 54
9.2. Notices . . . . . . . . . . . . . . . . . . . . 54
9.3. Assignment; Binding Effect; Benefit . . . . . . 55
9.4. Entire Agreement. . . . . . . . . . . . . . . . 55
9.5. Interference. . . . . . . . . . . . . . . . . . 56
9.6. Amendment . . . . . . . . . . . . . . . . . . . 57
9.7. Governing Law . . . . . . . . . . . . . . . . . 57
9.8. Counterparts. . . . . . . . . . . . . . . . . . 57
9.9. Headings. . . . . . . . . . . . . . . . . . . . 57
9.10. Interpretation . . . . . . . . . . . . . . 57
9.11. Waivers. . . . . . . . . . . . . . . . . . 57
9.12. Incorporation. . . . . . . . . . . . . . . 58
9.13. Severability . . . . . . . . . . . . . . . 58
9.14. Enforcement of Agreement . . . . . . . . . 58
9.15. Non-Recourse . . . . . . . . . . . . . . . 58
9.16. Schedules. . . . . . . . . . . . . . . . . 59
INDEX OF SCHEDULES
Schedules
1.1 List of Drever Partnerships
1.2 List of Partnership Properties, including Partnership
Property
Values
2.10 Cash Reserves
4.5 Partnership Interests
4.6 Litigation (Drever)
4.7 Material Changes (Drever)
4.8 Tax Matters (Drever)
4.11 Property Matters (Drever)
4.12 Compliance with Regulations (Drever)
4.14 Insurance (Drever)
4.15 Foreign Status
5.8 ▇▇▇▇▇▇ Reports; Material Changes
5.9 Litigation (▇▇▇▇▇▇)
5.11 Tax Matters (▇▇▇▇▇▇)
5.13 Property Matters (▇▇▇▇▇▇)
5.14 Compliance with Regulations (▇▇▇▇▇▇)
5.18 Insurance (▇▇▇▇▇▇)
7.2 Opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
7.3a Opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
7.3b Opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
Exhibits
A Form of Agreement of General Partnership
of ▇▇▇▇▇▇ - WDOP Partners
B Form of Articles Supplementary
C Form of Warrant Agreement
D Form of WDOP Partnership Agreement
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