EXHIBIT 2
AGREEMENT
OF
PURCHASE AND SALE
by and between
SOUTHEAST APARTMENTS MANAGEMENT, INC.,
PARTNERS IN COMMUNICATIONS, INC.,
JOHN C. HARMON, JEFFERY W. KENTNER, THOMAS J. WHITE, JR.
and
UNITED DOMINION REALTY TRUST, INC.
July 1, 1996
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS; RULES OF CONSTRUCTION
1.01 Definitions.......................................................... 2
1.02 Rules of Construction................................................ 7
ARTICLE II.
PURCHASE AND SALE; PURCHASE PRICE; DEPOSIT;
ASSIGNMENT AND ASSUMPTION
2.01 Acquisitions at Closing; Purchase Price;
Assumption of Liabilities............................................ 8
2.02 Deposit.............................................................. 9
2.03 Assumption of Liabilities............................................ 9
ARTICLE III.
DUE DILIGENCE PERIOD
3.01 Due Diligence Period................................................. 10
3.02 Access and Inspection................................................ 10
3.03 Assumed Loan Documents............................................... 11
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.01 Representations and Warranties of the Sellers........................ 11
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PIC AND THE PRINCIPALS
5.01 Representations and Warranties of PIC and the
Principals........................................................... 18
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF UNITED DOMINION
6.01 Representations and Warranties of United Dominion.................... 21
ARTICLE VII.
COVENANTS
7.01 Conduct of Business Prior to Closing................................. 26
7.02 Cooperative Action................................................... 29
7.03 Publicity............................................................ 29
7.04 Listing Application.................................................. 29
7.05 Further Action....................................................... 29
7.06 Reorganization....................................................... 30
7.07 Notice of Certain Events............................................. 30
7.08 No Trading; Confidentiality.......................................... 30
7.09 Second Rent Roll..................................................... 31
7.10 SAM Financial Statements............................................. 31
7.11 Allocation of Purchase Price......................................... 31
ARTICLE VIII.
CONDITIONS PRECEDENT TO CLOSING
8.01 Conditions to Each Party's Obligations............................... 31
8.02 Conditions Precedent to United Dominion's
Obligations.......................................................... 32
8.03 Conditions Precedent to Sellers' and PIC's
Obligations.......................................................... 34
ARTICLE IX.
CLOSING
9.01 Closing.............................................................. 35
9.02 Prorations and Post-Closing Adjustments.............................. 35
9.03 Deliveries of Sellers................................................ 36
9.04 United Dominion's Deliveries......................................... 38
9.05 Deliveries of PIC and the Principals................................. 41
9.06 Deposit.............................................................. 41
ARTICLE X.
CONDEMNATION AND CASUALTY;
TERMINATION RIGHTS
10.01 Condemnation and Casualty..................................... 41
10.02 Termination by United Dominion................................ 43
10.03 Termination by Sellers........................................ 44
10.04 Termination by Mutual Agreement or by
External Event................................................ 45
ARTICLE XI.
INDEMNITIES
11.01 United Dominion Indemnities................................... 45
11.02 Principals' Indemnities....................................... 46
11.03 Procedure; Set-Off............................................ 46
11.04 Waiver of Representations and Warranties...................... 48
11.05 Letters of Credit............................................. 48
ARTICLE XII.
EMPLOYEES
12.01 Property Employees............................................ 49
12.02 Indemnification............................................... 49
ARTICLE XIII.
MISCELLANEOUS
13.01 Notice........................................................ 51
13.02 Successors and Assigns........................................ 52
13.03 Severability.................................................. 52
13.04 Entire Agreement.............................................. 52
13.05 Modification.................................................. 52
13.06 Incorporation by Reference.................................... 52
13.07 Cooperation; Further Assurances............................... 52
13.08 Time is of the Essence........................................ 52
13.09 Days.......................................................... 52
13.10 Applicable Law................................................ 53
13.11 Like-Kind Exchange............................................ 53
13.12 Survival of Representations and Warranties.................... 53
13.13 Counterparts.................................................. 53
13.14 Sellers' Obligations.......................................... 53
13.15 Expenses...................................................... 53
13.16 Transfer Taxes and Fees....................................... 54
13.17 No Third Party Beneficiaries.................................. 54
EXHIBITS AND SCHEDULES
Exhibit Title
A Real Properties
B-1 Bill of Sale, Assignment and Assumption
(Cable)
B-2 Bill of Sale, Assignment and Assumption
(Real Properties)
C Warranty Deed
D Escrow Agreement
E Fixed Assets
F Loan Documents
G-1 Principals' Investment Agreement
G-2 Note Holders' Investment Agreement
H Lockup Agreement
I Management Contracts
J Mortgagee Estoppel Letter
K Permitted Exceptions
L-1 Existing Title Policies
L-2 Existing Surveys
L-3 United Dominion Title Policies and Surveys
M Service Contracts
N Form of United Dominion Promissory Note
O GAAP Allocation Schedule
P-1 Audit Affidavit
P-2 Audit Affidavit (PIC)
Q Covenants Not to Compete
R Cable Lease
S Letter of Credit
T Transfer Taxes
U Purchase Price Allocation
V First Rent Roll
W Taxes
Schedule Title
1 Legal Descriptions of Real Properties
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement"), dated as of July
1, 1996, by and between SOUTHEAST APARTMENTS MANAGEMENT, INC., a North Carolina
corporation ("SAM"), PARTNERS IN COMMUNICATIONS, INC., a North Carolina
corporation ("PIC"), JOHN C. HARMON, JEFFERY W. KENTNER and THOMAS L. WHITE, JR.
(the "Principals" and, together with SAM, the "Sellers") and UNITED DOMINION
REALTY TRUST, INC., a Virginia corporation ("United Dominion") recites and
provides:
RECITALS:
A. Each of the entities set forth on Exhibit A (the "Real Property
Owners") is the fee simple owner of the properties listed beside its name on
Exhibit A and more particularly described in Schedule 1 (the "Real Properties").
The Sellers, or one or more of them, have received consents from the owners of
each Real Property Owner for the conveyance of the Real Properties to United
Dominion pursuant to this Agreement.
B. SAM manages the Real Properties pursuant to certain management
contracts (the "Management Contracts").
C. The Principals are the owners of all of the issued and outstanding
shares of capital stock of SAM.
D. PIC owns and operates certain cable television systems serving
certain of the Real Properties (the "Cable Assets").
E. United Dominion desires to purchase, and the Sellers desire to sell
for the accounts of the respective Real Property Owners, the Real Properties on
the terms and conditions set forth hereinafter.
F. United Dominion desires to acquire and assume substantially all of
the assets of SAM, including the Management Contracts and certain other
liabilities as expressly provided herein, and SAM desires to transfer and assign
substantially all of the assets of SAM, including the Management Contracts and
such liabilities, to United Dominion on the terms and conditions set forth
hereinafter.
G. United Dominion desires to purchase, and PIC and the Principals
desire to sell, the Cable Assets on the terms and conditions set forth
hereinafter.
1
AGREEMENT:
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I.
DEFINITIONS; RULES OF CONSTRUCTION
1.011 Definitions. The following terms shall have the indicated
meanings:
An "Affiliate" of any person is a person controlling, controlled by or
under common control with such person, with "control" being determined in
accordance with concepts developed under the securities laws of the United
States.
"Assumed Contracts" shall mean the Assumed Loan Documents, the
Management Contracts, the Service Contracts and the Tenant Leases.
"Assumed Loan Documents" shall mean all Loan Documents in connection
with the Assumed Notes.
"Assumed Notes" shall have the meaning set forth in Section 2.01(a)(i).
"Assumption Component" shall have the meaning set forth in Section
2.01(a)(i).
"Authorizations" shall mean all material licenses, permits and approvals
required by any governmental body with jurisdiction over such Real Property
Owner for the ownership, operation and use by such Real Property Owner of such
Real Property as an apartment community.
"Average Sales Price" shall mean the average of the closing sales prices
of the United Common Stock on the NYSE (as reported by The Wall Street Journal
or, if not reported thereby, by another authoritative source) over the 10
trading days immediately preceding the Closing.
"Bill of Sale (Cable)" shall mean the Bill of Sale, Assignment and
Assumption in the form attached as Exhibit B-1.
"Bill of Sale (Real Property)" shall mean the Bill of Sale and
Assignment Agreement in the form attached as Exhibit B-2.
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"Cable Assets" shall mean all of the tangible personal property owned by
PIC and used in the operation and maintenance of the cable television systems
serving the Real Properties, all as identified in Exhibit B-1.
"Cable Authorizations" shall mean all material licenses, permits and
approvals required by any governmental body with jurisdiction over such Cable
Assets for the ownership, operation and use by PIC of such Cable Assets.
"Cable Purchase Price" shall have the meaning set forth in Section
2.01(c).
"Cash Component" shall have the meaning set forth in Section
2.01(a)(ii).
"Closing" shall mean the meeting described in Section 9.01.
"Closing Date" shall be August 15, 1996, or such other date as the
parties may agree upon or specify pursuant to Sections 9.01, 10.02 or 10.03.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Covenants Not to Compete" shall mean the covenants not to compete
referred to in Section 9.03(q).
"Deed" shall mean the warranty deed in the form attached as Exhibit C
(with such changes as are customary in the jurisdiction of the subject Real
Property) naming as grantee either United Dominion or an Affiliate of United
Dominion, as United Dominion shall specify.
"Deposit" shall have the meaning set forth in Section 2.02.
"Due Diligence Period" shall mean the period from the date hereof until
11:59 P.M. Richmond, Virginia, time on July 20, 1996.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, which together with SAM would be treated as a single employer
under Code Sections 414(b), (c), (m) or (o).
"Escrow Agent" shall mean Lawyers Title Insurance Corporation or other
escrow agent reasonably acceptable to United Dominion and SAM.
3
"Escrow Agreement" shall mean the Escrow Agreement to be entered into
among United Dominion, SAM and the Escrow Agent, in substantially the form of
Exhibit D.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"First Rent Roll" shall mean the rent rolls for the Real Properties
attached hereto as Exhibit V.
"Fixed Assets" shall mean all tangible personal property owned by each
Real Property Owner or SAM and used in the rental, operation and maintenance of
the Real Properties as of the Closing Date, including but not limited to all
fixed assets, chattels, machines, machinery, equipment, leasehold improvements,
computer hardware, computer software, fixtures, furniture, furnishings, pool
equipment, and implements (including related parts, tools and accessories of all
kinds), all as identified on Exhibit E.
"Former Owner" shall mean any predecessor to any Real Property Owner in
title to any Real Property that was, at the time such Real Property was owned by
it, an Affiliate of such Real Property Owner or any of the Sellers or with
respect to which any of the Sellers was a fiduciary.
"Interest Rate Swap Agreements" shall mean the interest rate swap
agreements more particularly described on Exhibit F. Exhibit F identifies all of
the Interest Rate Swap Agreements relating to the Real Properties.
"Investment Agreement" shall mean an Investment Agreement in
substantially the form of Exhibit G-1 (for the Principals) or Exhibit G-2 (for
the Note Holders).
"Investor" shall mean any current or former shareholder, partner, member
or other owner of an interest in any Real Property Owner or Former Owner.
"Knowledge of PIC" or words of similar import shall mean the actual
knowledge of one or more of the Principals after due inquiry. For purposes of
this definition, "due inquiry" shall mean inquiry of each other Principal.
"Knowledge of Sellers" or words of similar import shall mean the actual
knowledge of one or more of the Principals after due inquiry. For purposes of
this definition, "due inquiry" shall mean inquiry of each other Principal, Rick
Hopkins, Tiffany Gay and Jim Grdich.
"Knowledge of United Dominion" or words of similar import shall mean the
actual knowledge after due inquiry of one or more of John P. McCann, James
Dolphin, Milton A. Scott, Jr., Barry M. Kornblau, Richard B. Chess and Katheryn
E. Surface.
4
"Lender" shall mean any holder of a Note and the counterparty on any
transaction pursuant to the Interest Rate Swap Agreements.
"Loan" shall mean a mortgage loan secured by a Mortgage from a Lender to
a Real Property Owner or any other indebtedness, as more particularly described
on Exhibit F.
"Loan Documents" shall mean the Notes, the Mortgages, the Interest Rate
Swap Agreements, and all other documents evidencing or securing a Loan.
"Lockup Agreement" shall mean the Lockup Agreement between the
Principals and Smith Barney Inc. (or another securities broker-dealer selected
by the Principals and reasonably acceptable to United Dominion) in substantially
the form of Exhibit H.
"Management Contract" and "Management Contracts" shall mean the
management contracts relating to the Real Properties to which the Real Property
Owners and SAM are parties or by which the Real Property Owners and SAM are
bound and which are set forth on Exhibit I.
"Mortgage" shall mean each deed of trust or mortgage more particularly
described on Exhibit F.
"Mortgagee Estoppel Letter" shall mean an estoppel letter in
substantially the form of Exhibit J, executed and delivered by each Lender at
the Closing.
"NCBCA" shall mean the North Carolina Business Corporation Act, as
amended.
"Notes" shall mean the notes more particularly described on Exhibit F.
The outstanding principal balance of each Note as of the date hereof and the
amount of accrued but unpaid interest and other fees with respect to such Note
is approximately the amount set forth on Exhibit F. Exhibit F identifies the
Notes and related Mortgages and other Loan Documents to be assumed by United
Dominion at the Closing pursuant to Section 2.01(a)(i).
"Note Component" shall have the meaning set forth in Section
2.01(a)(iii).
"Note Holders" shall mean each proposed holder of the United Dominion
Notes to be issued pursuant to Section 2.01(a)(iii).
5
"NYSE" shall mean the New York Stock Exchange, Inc.
"Option" shall mean that certain Option Agreement of even date herewith
among United Dominion, the Principals and certain Real Property Owners.
"Permitted Exceptions" shall mean those easements, restrictions,
encumbrances, liens, pledges and security interests relating to the Real
Properties, the Fixed Assets and the Cable Assets (i) listed on Exhibit K, (ii)
described in the title policies listed on Exhibit L-1 and surveys listed on
Exhibit L-2 delivered by Sellers to United Dominion, (iii) described in the
title insurance policy commitments and surveys obtained by United Dominion
identified on Exhibit L-3 and delivered to Sellers, and (iv) listed in the
Seller Disclosure Letter.
"Purchase Price" shall have the meaning set forth in Section 2.01(a).
"Real Property" and "Real Properties" shall mean the property or
properties, together with all improvements thereon and appurtenances thereto
belonging, as more particularly described on Schedule 1 to be transferred to
United Dominion at the Closing pursuant to this Agreement.
"Real Property Owner" shall have the meaning set forth in Recital A.
"Rent Roll" shall mean the most recently delivered of the First Rent
Roll and the Second Rent Roll.
"S corporation" shall mean an "S corporation" as defined in Subchapter S
of Chapter 1 of the Code.
"SAM Financial Statements" shall have the meaning set forth in Section
7.10.
"Second Rent Roll" shall mean the rent rolls delivered by Sellers to
United Dominion pursuant to Section 7.09.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Disclosure Letter" shall mean the disclosure letter referring to
the relevant Sections of this Agreement and delivered by the Sellers and PIC to
United Dominion at least five business days prior to expiration of the Due
Diligence Period.
"Service Contracts" shall mean all agreements with respect to the
operation, use and maintenance of a Real Property (excluding any Tenant Leases
and including any laundry lease), all of which are listed on Exhibit M.
6
"Subsidiary," when used with respect to any party, shall mean any
corporation, partnership, joint venture, business trust or other entity, of
which such party directly or indirectly owns or controls at least a majority of
the securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization.
"Tenant Accounts" shall mean the bank accounts of Sellers or the Real
Property Owners to which the funds relating to the Real Properties and referred
to in Section 4.01(q) have been deposited.
"Tenant Leases" shall mean all of the leases between the Real Property
Owners and tenants at the Real Properties as set forth on the latest Rent Roll
delivered to United Dominion pursuant to this Agreement.
"Title Company" shall mean Lawyers Title Insurance Corporation or other
title insurance company acceptable to United Dominion.
"United Common Stock" shall mean the Common Stock, $1 par value, of
United Dominion.
"United Common Stock Consideration" shall have the meaning set forth in
Section 2.01(b)(i).
"United Disclosure Letter" shall mean the disclosure letter referring to
the relevant Sections of this Agreement and delivered by United Dominion to
Sellers at least five business days prior to expiration of the Due Diligence
Period.
"United Dominion Note" shall mean the promissory note or notes of United
Dominion in the form of Exhibit N.
"United Material Adverse Effect" shall have the meaning set forth in
Section 6.01(a).
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
1.012 Rules of Construction. The following rules shall apply to
the construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and the
neuter.
(b) All references herein to particular articles, sections, subsections
or clauses are references to articles, sections, subsections or clauses of this
Agreement.
7
(c) The headings contained herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a particular
party shall not be applicable in the construction and interpretation of this
Agreement or any exhibits hereto or amendments hereof.
ARTICLE II.
PURCHASE AND SALE; PURCHASE PRICE; DEPOSIT;
ASSIGNMENT AND ASSUMPTION
2.01 Acquisitions at Closing; Purchase Price; Assumption of Liabilities.
(a) At the Closing, United Dominion agrees to purchase and assume, and Sellers
and PIC agree to sell and assign, the Real Properties, the Fixed Assets, the
Cable Assets and the Assumed Contracts relating to the Real Properties, other
than the assets of SAM, including the Management Contracts, for the sum of One
Hundred Fifty-Eight Million Nine Hundred Thirty Thousand Dollars ($158,930,000)
(the "Purchase Price"), consisting of (i) assumption or repayment by United
Dominion or an Affiliate of United Dominion at the Closing (the "Assumption
Component") of the indebtedness represented by the Notes relating to the Real
Properties indicated on Exhibit F (the "Assumed Notes"), the amount of the
Assumption Component equalling the aggregate principal amount of the Assumed
Notes (approximately One Hundred Ten Million Five Hundred Thirty Thousand
Dollars ($110,530,000) as of the date of this Agreement) and any accrued but
unpaid interest thereon and accrued but unpaid fees related to the applicable
borrower's nonperformance in connection therewith, outstanding at the Closing,
(ii) Twenty-Three Million Four Hundred Thousand Dollars ($23,400,000) in cash,
in immediately available funds (the "Cash Component"), and (iii) a United
Dominion Note or Notes in the aggregate original principal amount of Twenty-Five
Million Dollars ($25,000,000) (the "Note Component"). The United Dominion Notes
shall bear interest at the rate of 7.1% per annum and shall mature on December
31, 1996.
8
The United Dominion Notes may be divided and subdivided and will be negotiable
(subject to customary restrictions on transfer pursuant to applicable securities
laws). In addition, at the Closing, United Dominion shall pay to Sellers, in
immediately available funds, the amount of all sums being held in escrow by the
holders of the Assumed Notes (as confirmed in the Mortgagee Estoppel Letters
delivered at the Closing) and assigned and transferred to United Dominion. Other
adjustments of the Purchase Price are provided for elsewhere in this Agreement.
Unless otherwise expressly provided in this Agreement, all such adjustments
shall be effected through adjustment of the Cash Component exclusively.
(b) (i) At the Closing, United Dominion agrees to acquire and assume,
and SAM agrees to transfer and assign, substantially all of the assets of SAM,
including the Management Contracts, in exchange for shares of United Common
Stock issuable to the Principals, as shareholders of SAM, pursuant to this
Agreement, with such United Common Stock having an agreed value of TwentyFive
Million Dollars ($25,000,000) (the "United Common Stock Consideration"). The
parties recognize that the actual value at the Closing of the United Common
Stock Consideration may vary from its agreed value stated above and agree that
the adjustments provided for in Section 2.01(b)(ii) shall be the only
adjustments of the United Common Stock Consideration and the Purchase Price
required on account of any such variation. For federal income tax purposes,
United Dominion and Sellers shall allocate the Purchase Price to the Real
Properties and the United Common Stock Consideration to the Management
Contracts.
(ii) The United Common Stock Consideration shall consist of
1,639,344 shares of United Common Stock; provided, that if the Average Sales
Price is less than $14, the United Common Stock Consideration shall consist of
the number of whole shares of United Common Stock determined according to the
following formula:
N = $22,950,819.67
A
where A = the Average Sales Price; and
N = such number of shares of United Common Stock.
2.02 Deposit. Simultaneously with execution of this Agreement by all
parties hereto, United Dominion is depositing Five Hundred Thousand Dollars
($500,000) as a good faith deposit (together with any interest thereon and
additions thereto, the "Deposit") with the Escrow Agent which shall be held by
the Escrow Agent pursuant to the terms of this Agreement and the terms of the
Escrow Agreement to be executed simultaneously with the execution of this
9
Agreement. In the event this Agreement is not terminated pursuant to Section
3.01 or 3.03, United Dominion shall deposit with the Escrow Agent an additional
Nine Million Five Hundred Thousand Dollars ($9,500,000) on the first business
day following the expiration of the Due Diligence Period. In the event that the
Closing is extended beyond August 15, 1996 pursuant to Section 9.01 or Section
10.03, and as a condition precedent to any such extension, United Dominion shall
deposit with the Escrow Agent an additional Two Million Five Hundred
Thousand Dollars ($2,500,000) on the first day of each week of each such
extension. All such deposits shall constitute a portion of the Deposit for all
purposes of this Agreement.
2.03 Assumption of Liabilities. At the Closing, United Dominion will
assume, and Sellers will assign, the Assumed Contracts and the Tenant Accounts.
Except as specifically set forth herein with respect to the performance by
United Dominion of obligations arising under the Assumed Contracts and Tenant
Accounts from and after the Closing, as applicable, and except for the
assumption of expenses relating to the Real Properties as contemplated by
Section 9.02, United Dominion does not and will not assume any liability or
obligation of any kind of any of SAM, the Principals, the Real Property Owners
or PIC, or any obligation relating to the business of SAM, the Principals, the
Real Property Owners or PIC or the use of the Real Properties, Tenant Accounts,
the Fixed Assets or the Cable Assets or performance by SAM, the Principals or
the Real Property Owners under the Assumed Contracts prior to the Closing
whether absolute or contingent, accrued or unaccrued, asserted or unasserted,
known or unknown, or otherwise.
ARTICLE III.
DUE DILIGENCE PERIOD
3.01 Due Diligence Period. United Dominion shall have the Due Diligence
Period to make its various inspections of the Real Properties, the Fixed Assets
and the Cable Assets and review the books and records, title and all other
matters relating to the Real Properties, the Assumed Contracts, the Tenant
Accounts, the Fixed Assets, the Cable Assets, the Real Property Owners, SAM and
PIC. If during the Due Diligence Period either (i) United Dominion shall
determine, in its sole discretion, that for any reason it is not satisfied with
the Real Properties, the Assumed Contracts, the Tenant Accounts, the Fixed
Assets, the Cable Assets, SAM or PIC (or any of them) or the legal position with
respect to any matter of the Sellers (or any of them), any Real Property Owner
or PIC or any of their general partners or other controlling persons, or (ii)
the Sellers shall determine that the United Disclosure Letter discloses a
material change to United Dominion's representations and warranties pursuant to
Article VI, then United Dominion or Sellers, as the case may be, may terminate
10
this Agreement by written notice to Sellers or United Dominion, as the case may
be, and United Dominion shall receive a return of the Deposit, with no party to
this Agreement having any further liability to the others (other than with
respect to the indemnities set forth in Sections 3.02, 11.01, 11.02 and 11.03).
United Dominion or Sellers, as the case may be, shall give written notice of
exercise of the option to terminate this Agreement pursuant to this Section 3.01
on or prior to the expiration of the Due Diligence Period, or the right shall be
deemed to be waived.
3.02 Access and Inspection. SAM and PIC hereby grant to United Dominion
and its authorized agents a license to enter at its own risk and expense upon
the Real Properties and the premises of SAM and PIC at any reasonable time
during the Due Diligence Period subject to the rights of any tenants in the Real
Properties for the purpose of inspecting and testing the condition or status of
the Real Properties, the Fixed Assets and the Cable Assets and verifying the
representations, warranties and covenants set forth in this Agreement, provided
that (i) United Dominion shall not unreasonably interfere with the usual
operation of any Real Property, the Fixed Assets or the Cable Assets and shall
not unreasonably interfere with the occupancy of any tenant of such Real
Property and (ii) United Dominion shall exercise (and cause its agents to
exercise) due care and ordinary prudence in performing such inspections and
tests and United Dominion shall make reasonable efforts to minimize any damage
or injury to be done to the Real Property, the Fixed Assets or the Cable Assets.
The Sellers acknowledge and agree that such inspections and tests may result in
damage to the Real Properties, the Fixed Assets and the Cable Assets. United
Dominion hereby agrees to promptly repair such damage so as to restore each Real
Property, the Fixed Assets and the Cable Assets to such condition as existed
prior to such inspections and tests and to indemnify and defend the Sellers,
each Real Property Owner, PIC and their Affiliates and their respective
officers, directors, employees and agents and hold each such person harmless
against any liability, injury, loss or damage (including, without limitation,
any and all reasonable attorneys' fees or court costs incurred by any such
person in connection with any such claims or activities and mechanic's liens or
claims that may be filed against any Real Property, the Fixed Assets or the
Cable Assets by contractors, subcontractors or materialmen performing such work
for United Dominion) suffered as a result of or in any manner connected with
such inspections and testing, and against any damage to the respective Real
Property, the Fixed Assets or the Cable Assets caused by or in any manner
connected with such inspections and testing.
3.03 Assumed Loan Documents. During the Due Diligence Period, United
Dominion and SAM shall use their reasonable efforts to obtain all final
11
approvals, estoppels and releases upon such terms and conditions that such
parties reasonably shall deem necessary or appropriate for the assumption by
United Dominion or an Affiliate of United Dominion of the indebtedness
represented by the Assumed Notes (the terms of such assumption to be
satisfactory to United Dominion). If the Sellers do not receive the agreement of
the Lenders that hold the Assumed Notes to release the Principals and the Real
Property Owners from their obligations under the Assumed Notes and to permit
assumption thereof by United Dominion or an Affiliate, Sellers shall have the
option to terminate this Agreement, with the Deposit being returned to United
Dominion, with no party having any further liability to the other (other than
with respect to the indemnities set forth in Sections 3.02, 11.01, 11.02 and
11.03 of this Agreement). The Sellers shall give written notice to United
Dominion of exercise of their option to terminate this Agreement pursuant to
this Section 3.03 on or prior to the expiration of the Due Diligence Period, or
the right shall be deemed to be waived.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.01 Representations and Warranties of the Sellers. The Sellers
represent and warrant to United Dominion that (and United Dominion hereby
acknowledges that the Sellers shall have the right to amend or supplement such
representations and warranties by means of the Seller Disclosure Letter or any
other disclosure information provided pursuant to this Agreement no later than
five business days prior to the end of the Due Diligence Period and that,
subject to Section 10.02(ii)(A), United Dominion's sole right with respect to
such disclosure shall be to terminate this Agreement pursuant to Section 3.01):
(a) Existence; Good Standing; Authority; Compliance With Law. SAM is a
corporation duly incorporated, validly existing and in good standing under the
laws of North Carolina. SAM has all requisite power and authority to own,
operate, lease and encumber its properties and carry on its business as now
conducted.
(b) Authorization, Validity and Effect of Agreement. Sellers have the
requisite power and authority to enter into the transactions contemplated
hereby, to execute and deliver this Agreement and the other documents and
instruments required hereby to which any of the Sellers is a party and to
perform their obligations hereunder and thereunder and to consummate the
transactions contemplated hereby, including, without limitation, conveyance of
title to the Real Properties and the Fixed Assets and assignment of the Assumed
Contracts and the Tenant Accounts to United Dominion. Execution and delivery of
this Agreement and the other documents and instruments required hereby to which
12
any SAM is a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all requisite corporate action on the
part of SAM. This Agreement constitutes, and the other documents and instruments
required hereby to which any of the Sellers is a party will be, the valid and
legally binding obligations of the Sellers, enforceable against the Sellers in
accordance with their terms subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
(c) No Violation. Neither the execution and delivery by the Sellers of
this Agreement and all of the other documents and instruments contemplated
hereby nor the consummation by the Sellers of the transactions contemplated
hereby or thereby in accordance with the terms hereof, will (i) conflict with or
result in a breach of any provisions of the Articles of Incorporation or Bylaws
of SAM, (ii) assuming assumption by United Dominion or its Affiliate of the
Assumed Contracts as contemplated herein, 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 lien,
security interest, charge or encumbrance upon any of the Real Properties 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 Seller or
Real Property Owner is a party, or by which any Seller or Real Property Owner or
any Real Property is bound or affected, including, without limitation, the
Assumed Contracts, or (iii) require any consent of any other person or any
consent, approval or authorization of, or declaration, filing or registration
with, any domestic governmental or regulatory authority, other than the consents
required for the assignment of the Management Contracts, the Assumed Loan
Documents, the Tenant Accounts and the Service Contracts. Except as set forth in
Section 3.03, all such consents have been received by Sellers and delivered to
United Dominion as of the date hereof or will have been received by Sellers and
delivered to United Dominion as of the Closing Date. No representation is made
herein with respect to the assumability by United Dominion of the Assumed
Contracts without the consent of the other parties thereto.
(d) Litigation; Solvency. There are (i) no continuing orders,
injunctions or decrees of any court, arbitrator or government authority to which
SAM is a party or by which any of its properties or assets are bound or, to the
Knowledge of the Sellers, to which any of its directors, officers, employees or
13
agents is a party or by which any of their properties or assets are bound, (ii)
no actions, suits or proceedings pending against SAM or, to the Knowledge of the
Sellers, against any of its directors, officers, employees or agents or, to the
Knowledge of the Sellers, threatened against SAM or against any of its
directors, officers, employees, or agents, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or instrumentality,
(iii)(A) no continuing orders, injunctions or decrees of any court, arbitrator
or government authority to which any Real Property Owner is a party or by which
any Real Property is bound or, to the Knowledge of the Sellers, to which any of
the directors, officers, partners, employees or agents of any Real Property
Owner is a party or by which any of their properties or assets are bound, and
(B) no actions, suits or proceedings pending by or against any Real Property
Owner or affecting any Real Property or, to the Knowledge of the Sellers, by or
against any of the directors, officers, partners, employees or agents of any
Real Property Owner, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clauses (i), (ii) or (iii) above are reasonably likely to prevent or delay
consummation of this Agreement or prevent or interfere with operation of any
Real Property by United Dominion or any of its Affiliates as an apartment
community or the performance of any of the Assumed Contracts after the Closing,
including without limitation, condemnation or exercise of the right of eminent
domain against any Real Property or bankruptcy of any Real Property Owner, and
(iv) no actions, suits or proceedings pending against any Seller, Real Property
Owner or Former Owner or any Affiliate of any of the foregoing or, to the
knowledge of the Sellers, threatened against any Seller, Real Property Owner,
Former Owner or any such Affiliate, at law or in equity, or before or by any
federal or state commission, board, bureau, agency or instrumentality, arising
directly or indirectly out of or based in any manner upon the acquisition, by or
for the account of any Real Property Owner or Former Owner, any Seller or any
Affiliate of any of the foregoing, of an Investor's interest in such Real
Property Owner or Former Owner. No Real Property Owner is now insolvent nor will
any Real Property Owner become insolvent as a result of consummation of this
Agreement or the transactions contemplated hereby. To the knowledge of the
Sellers, there are no material pending or anticipated claims against or
otherwise involving any of the SAM Benefit Plans (other than claims for benefits
in the ordinary course) and no material suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of SAM Benefit
Plan activities) has been brought against or with respect to any such SAM
Benefit Plan.
(e) Taxes. SAM and each of the Real Property Owners (i) has timely filed
all federal, state, local and foreign tax returns (including, without
limitation, information returns and reports) required to be filed by any of them
14
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, and (ii) has paid all taxes shown to be due and payable on such
returns or which have become due and payable. No examination of any such tax
returns is pending and neither SAM nor any Real Property Owner has received
notice that any such examination will occur or has executed or has filed with
the Internal Revenue Service or any other taxing authority any agreement now in
effect extending the period for assessment or collection of any income or other
taxes. Neither SAM nor any of the Real Property Owners is a party to any pending
action or proceeding by any governmental authority for assessment or collection
of taxes, and no outstanding claim for assessment or collection of taxes has
been asserted against any of them, other than liens for property taxes which
have not yet become due. True, correct and complete copies of all federal, state
and local income or franchise tax returns for the last three (3) years filed by
SAM and any Real Property Owner and all communications relating thereto have
been or will be at least five business days prior to the expiration of the Due
Diligence Period delivered to United Dominion or made available to
representatives of United Dominion. For purposes of this subsection (i), "taxes"
includes any interest, penalty or additional amount payable with respect to any
tax.
(f) Books and Records. Sellers have made or will at least five business
days prior to expiration of the Due Diligence period make available to United
Dominion (i) all books and records concerning the Real Properties, Fixed Assets,
Assumed Contracts and Tenant Accounts, and the books and records of the Real
Property Owners, in their possession or control, (ii) the books of account and
other financial records of SAM and (iii) the minute books and other records of
SAM. All such books and records are in all material respects true, complete and
correct, have been maintained in accordance with good business practices and, in
the case of the books and records described in clause (iii), contain in all
material respects accurate records of all meetings and accurately reflect in all
material respects all other corporate action of the shareholders and directors
and any committees of the Board of Directors of SAM. In addition, such books and
records disclose all of the assets of SAM.
(g) Employee Benefit Plans. All employee benefits plans (as defined in
ERISA Section 3(3)) and other benefit arrangements covering employees of SAM
(the "SAM Benefit Plans") will be listed in the Sellers Disclosure Letter. True,
correct and complete copies of the SAM Benefit Plans have been or will at least
five business days prior to expiration of the Due Diligence Period be made
available to United Dominion. Any SAM Benefit Plan intended to be qualified
under Section 401(a) of the Code has received a determination of qualification
15
from the Internal Revenue Service ("IRS"). There is no PBGC lien against the
assets of SAM which lien has been filed pursuant to Title IV of ERISA in
connection with the operation of any SAM Benefit Plan. Neither SAM nor any ERISA
Affiliate has incurred any liability for a complete or partial withdrawal from a
"multiemployer plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA).
(h) Labor Matters. SAM is not a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor union organization. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Sellers, threatened
against SAM relating to its business, except for any such proceeding which would
not be reasonably likely to prevent or delay consummation of this Agreement or
prevent or interfere with operation of any Real Property by United Dominion or
any of its Affiliates as an apartment community or the performance of any of the
Assumed Contracts after the Closing. To the knowledge of the Sellers, there are
no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of SAM.
(i) No Brokers. No Seller or Real Property Owner has entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of SAM or United Dominion to pay any finder's fees, brokerage
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. No Seller is aware of any claim for payment of any finder's
fees, brokerage 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.
(j) Contracts and Commitments. Each of the Assumed Contracts is in full
force and effect, has not been modified or supplemented (except as described in
Exhibit I with respect to the Management Contracts or Exhibit F with respect to
the Assumed Loan Documents or in the Seller Disclosure Letter) and is a valid
and binding obligation of SAM or one or more of the Real Property Owners
enforceable in accordance with its terms. SAM and the Real Property Owners have
performed each term, covenant and condition of each of the Assumed Contracts
that is to be performed by any of them at or before the date hereof, except (i)
to the extent any such non-performance has been waived, (ii) with respect to the
Service Contracts, to the extent any payment due thereunder has not been made in
connection with a bona fide dispute (the details of which dispute will be
disclosed in the Seller Disclosure Letter), and (iii) with respect to the Tenant
Leases, to the extent that such non-performance in the aggregate is not
16
material. For purposes of this subsection (j) with respect to the Tenant Leases,
"material" shall have the meaning given in Section 8.02(d)(iii). No event has
occurred that would, with the passage of time or compliance with any applicable
notice requirements, constitute a default by SAM or any of the Real Property
Owners or, to the Knowledge of Sellers, any other party under any of the Assumed
Contracts, and, to the Knowledge of Sellers, no party to any of the Assumed
Contracts intends to cancel, terminate or exercise any option under any of the
Assumed Contracts, except, with respect to the Tenant Leases, to the extent that
such non-performance in the aggregate is not material with respect to any Real
Property. Copies of the Assumed Contracts have been previously or will at least
five business days prior to expiration of the Due Diligence Period be delivered
or made available to United Dominion and are or will be true, correct and
complete. Neither SAM nor any of the Real Property Owners has received notice of
a default that has not been cured under any of the Assumed Contracts (except,
with respect to the Tenant Leases, notices of default that in the aggregate are
not material with respect to any Real Property) and neither SAM nor any of the
Real Property Owners is in default respecting any payment obligations thereunder
beyond any applicable grace periods or respecting any other obligations
thereunder which, individually or in the aggregate, are material. All documents
or instruments that evidence or secure the Loans and the Interest Rate Swap
Agreements are listed on Exhibit F. No transaction entered into pursuant to the
Interest Rate Swap Agreements as set forth on Exhibit F has been terminated.
This representation shall survive the Closing for a period of one (1) year.
(k) Title, Permits. (i) Each Real Property Owner is the sole owner of
good and marketable fee simple title to the Real Property set forth opposite its
name on Exhibit A, subject to the Permitted Exceptions. To the Knowledge of
Sellers, there are no other encumbrances on any of the Real Properties other
than those encumbrances included in Permitted Exceptions. Each Real Property
Owner possesses all material licenses, permits and approvals required by any
governmental body with jurisdiction over such Real Property Owner for the
ownership, operation and use by such Real Property Owner of such Real Property
as an apartment community (the "Authorizations"). The Sellers and the Real
Property Owners shall, at the request of United Dominion, cooperate with United
Dominion in United Dominion's attempts to obtain the Authorizations or to
challenge the current real or personal property tax assessment with respect to
each parcel of the Real Property. United Dominion agrees to pay the pre-approved
out-of-pocket expenses of the Sellers and the Real Property Owners in connection
with cooperation requested pursuant to the preceding sentence. This
representation shall survive the Closing for a period of one (1) year, except
for the first sentence hereof which shall not survive the Closing.
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(ii) The Real Property Owners and SAM, as the case may be, are
the sole owners of good and marketable title to all of the Fixed Assets, free
and clear of any and all mortgages, liens encumbrances, pledges or security
interests, subject to the Permitted Exceptions. Upon delivery of the Fixed
Assets relating to the Real Properties at the Closing and upon payment of the
Purchase Price, good and marketable title to all of the Fixed Assets, free and
clear of any and all mortgages, liens, encumbrances, pledges or security
interests will pass to United Dominion, subject to the Permitted Exceptions.
This representation shall survive the Closing for a period of one (1) year.
(l) Rent Strikes. No Seller or Real Property Owner has received any
written notice of, and Sellers have no knowledge of, any pending or threatened
rent strikes, tenant organization, tenant unions, or tenant interpleader actions
with respect to any of the Real Properties. This representation shall survive
the Closing for a period of one (1) year.
(m) Environmental Matters. Neither the Sellers nor, to the knowledge of
the Sellers, any other person has caused or permitted (a) the unlawful presence
of any hazardous substances, hazardous materials, toxic substances or waste
materials (collectively, "Hazardous Materials") on any of the Real Properties,
or (b) any unlawful spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the Real
Properties as a result of any construction on or operation and use of the Real
Properties, which presence or occurrence would, individually or in the
aggregate, prevent or interfere with operation of any Real Property by United
Dominion or any of its Affiliates as an apartment community or impose a
"clean-up" or other similar liability on the owner of any Real Property affected
thereby; and in connection with the construction on or operation and use of the
Real Properties, no Real Property Owner has failed to comply, in any material
respect, with all applicable local, state and federal environmental laws,
regulations, ordinances and administrative and judicial orders relating to the
generation, recycling, reuse, sale, storage, handling, transport and disposal of
any Hazardous Materials. This representation shall survive the Closing for a
period of one (1) year.
(n) Service Contracts. Exhibit M is a true, complete and correct list of
all Service Contracts in existence as of the date hereof. The Seller Disclosure
Letter shall disclose any additional Service Contracts existing as of the date
thereof. This representation shall survive the Closing for a period of one (1)
year.
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(o) Compliance with Existing Laws. Each Real Property Owner possesses
all material Authorizations, each of which is valid and in full force and
effect, and no material provision, condition or limitation of any of the
Authorizations has been breached or violated. Sellers have no knowledge, nor
have they, and to their knowledge no Real Property Owner has, received from any
governmental authority with jurisdiction written notice within the past three
years, of any unremedied violation of any provision of any applicable material
building, zoning, subdivision, environmental or other governmental ordinance,
resolution, statute, rule, order or regulation, including but not limited to
those of environmental agencies or insurance boards of underwriters, with
respect to the ownership, operation, use, maintenance or condition of the Real
Properties or any part thereof, or requiring any repairs or alterations other
than those that have been made prior to the date hereof. This representation
shall survive the Closing for a period of one (1) year.
(p) Status of Rent Roll and Leases. All of the information set forth on
the First Rent Roll is, and all information set forth on the Second Rent Roll
will be, true and correct in all material respects as of the date thereof. For
purposes of this subsection (p) a variation is "material" if, in respect of any
Real Property, the actual tabulation of rents is less than that represented by
the Rent Roll by 2% or more of the Rent Roll tabulation and, in respect of the
Real Properties as a whole, the actual aggregate tabulation of rents is less
than that represented by the aggregate Rent Roll tabulation by 3% or more of the
Rent Roll tabulation. At least 98% of the leases at each Real Property and at
least 97% of the leases at all of the Real Properties taken as a whole are valid
and in full force and effect, other than leases which have been breached by the
tenant or which have expired or been terminated in accordance with their terms,
and all of such leases are assignable to United Dominion without the consent of
the tenant thereunder. Except as is otherwise indicated on the Rent Roll, no
Real Property Owner has received written notice of any material claim for free
or reduced rent or for reduction, deduction or set-off against such Real
Property Owner of the rent due or to become due under any of the tenant leases.
The Real Property Owners have the sole right to collect the rent under the
tenant leases and, except as additional security for the indebtedness evidenced
by a Note, neither such right nor any of the tenant leases has been assigned,
pledged, hypothecated or otherwise encumbered by any Real Property Owner. Except
as is otherwise indicated on the Rent Roll, no Real Property Owner has received
payment of rent more than 30 days in advance of the due date therefor. This
representation shall survive the Closing for a period of one (1) year.
19
(q) Status of Tenant Accounts. The Tenant Accounts include all tenant
security deposits and accrued interest thereon received by the Sellers or the
Real Property Owners from tenants and which United Dominion may be required to
refund to such tenants by law or the terms of any lease or other agreement with
any tenant. Sellers or the Real Property Owners have not received from tenants
any other fees or deposits including, but not limited to, those for pets,
cleaning, redecorating, furniture and equipment, which United Dominion may be
required to so refund. The Tenant Accounts are not subject to any mortgage,
lien, encumbrance, pledge or security interest, other than those of the
individual tenants in funds which they may be entitled to receive from such
accounts. This representation shall survive the Closing for a period of one (1)
year.
(r) Flooding. With respect to all Real Properties located in the State
of Georgia, Sellers represent that, during the ownership of such Real Properties
by the applicable Real Property Owners, such Real Properties have not been
affected by flooding (as that term is defined in O.C.G.A. Section 44-7-20), and
such Real Property Owners have at all times during their ownership of such Real
Properties been in compliance with such section. All Real Properties located in
the State of Georgia are located in the 100-year flood hazard plain. This
representation shall survive the Closing for a period of one (1) year.
(s) No Liability to Investors. United Dominion will not have any
liability of any kind or description whatsoever to any Investor arising directly
or indirectly out of or based in any manner upon the acquisition, by or for the
account of any Real Property Owner or Former Owner, any Seller or any Affiliate
of any of the foregoing, of such Investor's interest in such Real Property Owner
or Former Owner.
(t) Accuracy of Information. Neither this Agreement nor any other
document provided by the Sellers or their employees or agents to United Dominion
in connection with the transactions contemplated herein contains an untrue
statement of a material fact. This representation shall survive the Closing for
a period of one (1) year.
(u) SAM Financial Statements. The financial statements of SAM referred
to in Section 7.10 will fairly present in all material respects the financial
position of SAM as of their respective dates and the results of operations,
retained earnings and cash flows of SAM for the periods set forth therein, in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved.
ARTICLE V.
20
REPRESENTATIONS AND WARRANTIES OF PIC AND THE PRINCIPALS
5.01 Representations and Warranties of PIC and the Principals. PIC and
the Principals represent and warrant to United Dominion that (and United
Dominion hereby acknowledges that PIC and the Principals shall have the right to
amend or supplement such representations and warranties by means of the Seller
Disclosure Letter or any other disclosure information provided pursuant to this
Agreement no later than five business days prior to the end of the Due Diligence
period and that United Dominion's sole right with respect to such disclosure
shall be to terminate this Agreement pursuant to Section 3.01):
(a) Existence; Good Standing; Authority; Compliance With Law. PIC is a
corporation duly organized, validly existing and in good standing under the laws
of North Carolina. PIC has all requisite power and authority to own, operate,
lease and encumber its properties and carry on its business as now conducted.
(b) Authorization, Validity and Effect of Agreement. PIC has the
requisite power and authority to enter into the transactions contemplated
hereby, to execute and deliver this Agreement and the other documents and
instruments required hereby to which PIC is a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby, including, without limitation, conveyance of
title to the Cable Assets to United Dominion. Execution and delivery of this
Agreement and the other documents and instruments required hereby to which PIC
is a party and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all requisite corporate action on the part
of PIC. This Agreement constitutes, and the other documents and instruments
required hereby to which PIC is a party will be, the valid and legally binding
obligations of PIC, enforceable against PIC in accordance with their terms
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
(c) No Violation. Assuming the assumption by United Dominion of the
Assumed Contracts, neither the execution and delivery by PIC of this Agreement
and all of the other documents and instruments contemplated hereby nor the
consummation by PIC of the transactions contemplated hereby in accordance with
the terms hereof, will (i) conflict with or result in a breach of any provisions
of the Articles of Incorporation or Bylaws of PIC, (ii) 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
lien, security interest, charge or encumbrance upon any of the Cable Assets
21
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 PIC is a party,
or by which PIC is bound or affected, or (iii) require any consent of any other
person or any consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority.
(d) Litigation; Solvency. There are (i) no continuing orders,
injunctions or decrees of any court, arbitrator or government authority to which
PIC is a party or by which any of its properties or assets are bound or, to the
Knowledge of PIC, to which any of its directors, officers, employees or agents
is a party or by which any of their properties or assets are bound and (ii) no
actions, suits or proceedings pending against PIC or, to the Knowledge of PIC,
against any of its directors, officers, employees or agents or, to the Knowledge
of PIC, threatened against PIC or against any of its directors, officers,
employees, or agents, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clauses (i) or (ii) above are reasonably likely to prevent or delay consummation
of this Agreement or prevent or interfere with leasing or operation of the Cable
Assets by United Dominion or any of its Affiliates after the Closing.
(e) Taxes. PIC (i) has timely filed all federal, state, local 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, and (ii) has paid all taxes
shown to be due and payable on such returns or which have become due and
payable. No examination of any such tax returns is pending and PIC has not
received notice that any such examination will occur and PIC has not executed or
filed with the Internal Revenue Service or any other taxing authority any
agreement now in effect extending the period for assessment or collection of any
income or other taxes. PIC is not a party to any pending action or proceeding by
any governmental authority for assessment or collection of taxes, and no
outstanding claim for assessment or collection of taxes has been asserted
against it. True, correct and complete copies of all federal, state and local
income or franchise tax returns for the last three (3) years filed by PIC and
all communications relating thereto have been or will be at least five business
days prior to the expiration of the Due Diligence Period delivered to United
Dominion or made available to representatives of United Dominion. For purposes
of this subsection (i), "taxes" includes any interest, penalty or additional
amount payable with respect to any tax.
22
(f) Books and Records. PIC and the Principals have made or will at least
five business days prior to expiration of the Due Diligence period make
available to United Dominion (i) all books and records concerning the Cable
Assets, (ii) the books of account and other financial records of PIC and (iii)
the minute books and other records of PIC. All such books and records are in all
material respects true, complete and correct, have been maintained in accordance
with good business practices and, in the case of the books and records described
in clause (iii), contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action of the shareholders and directors and any committees of the Board of
Directors of PIC.
(g) Title, Permits. PIC is the sole owner of good and marketable title
to all of the Cable Assets, free and clear of any and all mortgages, liens,
encumbrances, pledges, subject to the Permitted Exceptions. Upon delivery of the
Cable Assets to United Dominion at Closing, good and marketable title to all of
the Cable Assets will pass to United Dominion, subject to the Permitted
Exceptions. PIC possesses all material licenses, permits and approvals required
by any governmental body with jurisdiction over such Cable Assets for the
ownership, operation and use by PIC of such Cable Assets (the "Cable
Authorizations"). PIC and the Principals shall, at the request of United
Dominion, cooperate with United Dominion in United Dominion's attempts to obtain
the Cable Authorizations or to challenge the current real or personal property
tax assessment with respect to Cable Assets. United Dominion agrees to pay the
pre-approved out-of-pocket expenses of PIC and the Principals in connection with
cooperation requested pursuant to the preceding sentence. This representation
shall survive the Closing for a period of one (1) year.
(h) Compliance with Existing Laws. PIC possesses all material Cable
Authorizations, each of which is valid and in full force and effect, and no
material provision, condition or limitation of any of the Cable Authorizations
has been breached or violated. Neither PIC nor the Principals has knowledge, nor
have they received from any governmental authority with jurisdiction written
notice within the past three years, of any unremedied violation of any provision
of any applicable material building, zoning, subdivision, environmental or other
governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of the Cable Assets or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date hereof. This
representation shall survive the Closing for a period of one (1) year.
23
(i) Accuracy of Information. Neither this Agreement nor any other
document provided by PIC or its employees or agents to United Dominion in
connection with the transactions contemplated herein contains an untrue
statement of a material fact. This representation shall survive the Closing for
a period of one (1) year.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF UNITED DOMINION
6.01 Representations and Warranties of United Dominion. United Dominion
represents to the Sellers that (and Sellers hereby acknowledge that United
Dominion shall have the right to amend or supplement such representations and
warranties by means of the United Disclosure Letter or any other disclosure
information provided pursuant to this Agreement no later than five business days
prior to the end of the Due Diligence Period and that Seller's sole right with
respect to any material change in such representations or warranties shall be to
terminate this Agreement pursuant to Section 3.01):
(a) Existence; Good Standing; Authority; Compliance With Law. United
Dominion is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. United Dominion is duly
licensed or qualified to do business as a foreign corporation 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 United Dominion and
its Subsidiaries taken as a whole (a "United Material Adverse Effect"). United
Dominion has all requisite corporate power and authority to own, operate, lease
and encumber its properties and carry on its business as now conducted. Each of
United Dominion's Subsidiaries is a corporation, limited partnership or limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has power and
authority to own its properties and to carry on its business as it is now being
conducted, and is now 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 United
Material Adverse Effect. To the knowledge of United Dominion, neither United
24
Dominion nor any United Dominion Subsidiary 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 United Dominion or any
United Dominion Subsidiary or any of their respective properties or assets is
subject, where such violation would have a United Material Adverse Effect. To
the knowledge of United Dominion, United Dominion 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 United Material Adverse Effect. Copies
of United Dominion's Articles of Incorporation and Bylaws have been previously
or will prior to expiration of the Due Diligence Period be delivered or made
available to Sellers and are or will when delivered or made available and will
at Closing be true, correct and complete.
(b) Authorization, Validity and Effect of Agreement. United Dominion has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and the other documents and
instruments required hereby to which it is a party. Execution by United Dominion
of this Agreement and the other documents and instruments required hereby to
which it is a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all requisite corporate action on the
part of United Dominion. This Agreement constitutes, and the other documents and
instruments required hereby to which it is a party will be, the valid and
legally binding obligation of United Dominion, enforceable against United
Dominion in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
(c) Capitalization. The authorized capital stock of United Dominion
consists of 100,000,000 shares of United Common Stock and 20,000,000 shares of
Preferred Stock, no par value ("United Preferred Stock"), issuable in series. As
of June 3, 1996, there were 56,747,007 shares of United Common Stock issued and
outstanding and 4,200,000 shares of 9 1/4% Series A Cumulative Redeemable
Preferred Stock of United Dominion issued and outstanding. United Dominion 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 shareholders of United Dominion on
any matter. All such issued and outstanding shares of United Common Stock and
United Preferred 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 United
Dominion or any of its Subsidiaries to issue, transfer or sell any shares of
capital stock or other equity interest of United Dominion or any of its
Subsidiaries, other than options to purchase shares of United Common Stock
granted pursuant to United Dominion's 1985 Stock Option Plan.
25
(d) Subsidiaries. United Dominion owns directly or indirectly, free and
clear of all liens, pledges, security interests, claims or other encumbrances
other than liens imposed by local law which are not material, each of the
outstanding shares of capital stock or all of the membership, partnership or
other equity interests of each of United Dominion's Subsidiaries. Each of the
outstanding shares of capital stock of, units of partnership interest in or
other equity interest in each of United Dominion's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable.
(e) No Violation. Neither the execution and delivery by United Dominion
of this Agreement nor the consummation by United Dominion of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict with
or result in a breach of any provisions of the Articles of Incorporation or the
Bylaws of United Dominion; (ii) 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, United Dominion's 1985 Stock Option Plan, or
any grant or award thereunder; (iii) 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 lien, security
interest, charge or encumbrance upon any of the properties of United Dominion or
its 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 United Dominion or any of its Subsidiaries is a party, or by which United
Dominion or any of its 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 United Material Adverse Effect; or (iv) require any
consent, approval or authorization of, or declaration, filing or registration
with, any domestic governmental or regulatory authority.
(f) SEC Documents. United Dominion has delivered or made available or
will at least five (5) business days prior to expiration of the Due Diligence
Period deliver or make available to Sellers each report and proxy statement and
all exhibits thereto filed with the SEC since June 1, 1995, and will deliver all
26
such additional reports, proxy statements and exhibits filed by United Dominion
with the SEC through the Closing Date, each in the form (including exhibits and
any amendments thereto) filed with the SEC (collectively, the "United Reports").
The United Reports filed prior to the date of this Agreement or to be filed
prior to the Closing Date, which were filed or will be filed with the SEC in a
timely manner, constitute all forms, reports and documents required to be filed
by United Dominion under the Exchange Act, on the dates and for the periods
covered thereby. As of their respective dates, the United Reports (i) complied
or will comply as to form in all material respects with the applicable
requirements of the Exchange Act and (ii) did not and will 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 United Dominion included in the United Reports
(including the related notes and schedules) fairly presents or will fairly
present the consolidated financial position of United Dominion and its
Subsidiaries as of its date and each of the consolidated statements of
operations, cash flows and shareholders' equity of United Dominion included in
or incorporated by reference into the United Reports (including any related
notes and schedules) fairly presents or will fairly present the results of
operations, retained earnings or cash flows, as the case may be, of United
Dominion and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
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 Form 10-Q of the SEC. Except as and to the extent
set forth on the consolidated balance sheet of United Dominion and its
Subsidiaries at December 31, 1995, including all notes thereto, or as set forth
in the United Reports, neither United Dominion nor any of the United Dominion
Subsidiaries has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of United Dominion or in
the notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date.
(g) Litigation. There are (i) no continuing orders, injunctions or
decrees of any court, arbitrator or government authority to which United
Dominion or any United Dominion Subsidiary is a party or by which any of its
properties or assets are bound or, to the knowledge of United Dominion, to which
any of its directors, officers, employees or agents is a party or by which any
of their properties or assets are bound, and (ii) no actions, suits or
27
proceedings pending against United Dominion or any United Dominion Subsidiary
or, to the knowledge of United Dominion, against any of its directors, officers,
employees or agents or, to the knowledge of United Dominion, threatened against
United Dominion or any United Dominion Subsidiary or against any of its
directors, officers, employees, or agents, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or instrumentality, that
in the case of clauses (i) or (ii) above are reasonably likely, individually or
in the aggregate, to have a United Material Adverse Effect.
(h) Absence of Certain Changes. Except as disclosed in the United
Reports filed with the SEC prior to the date hereof, since December 31, 1995,
United Dominion and its Subsidiaries have conducted their business only in the
ordinary course of such business (which shall include all acquisitions of real
estate properties and financing arrangements made in connection therewith) and
there has not been (i) any United Material Adverse Effect; (ii) as of the date
hereof, any declaration, setting aside or payment of any dividend or other
distribution with respect to the United Common Stock, except dividends of $0.24
per share declared on March 19, 1996, (iii) any material change in United
Dominion's accounting principles, practices or methods, or (iv) any occurrence
or event which is reasonably likely to cause a United Material Adverse Effect.
(i) REIT Qualification. United Dominion (i) has elected to be taxed as a
REIT within the meaning of the Code and has qualified as, and complied with all
applicable laws, rules and regulations, including the Code, relating to, a real
estate investment trust ("REIT"), for the years 1992 through 1995, inclusive,
(ii) has operated, and intends to continue to operate, in such manner as to
qualify as a REIT for 1996, and (iii) has not taken or omitted to take any
action the taking or omission of which could result in, and United Dominion has
no knowledge of, a challenge to its status as a REIT. Each Subsidiary of United
Dominion which is a corporation for federal income tax purposes is a "qualified
REIT subsidiary" as defined in Section 856(i) of the Code.
(j) No Brokers. United Dominion has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of any Seller, any Real Property Owner or United Dominion to pay any
finder's fees, brokerage 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. United Dominion is not aware of any
claim for payment of any finder's fees, brokerage 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.
28
(k) United Common Stock. The issuance and delivery by United Dominion of
United Common Stock in connection with this Agreement have been duly and validly
authorized by all necessary action on the part of United Dominion. The United
Common Stock to be issued in connection with this Agreement, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
(l) Convertible Securities. United Dominion has no outstanding
options, warrants or other securities exercisable for, or convertible into,
shares of United Common Stock, the terms of which would require any
anti-dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
(m) Accuracy of Information. Neither this Agreement nor any other
document provided by United Dominion or its employees or agents to Sellers in
connection with the transactions contemplated herein contains an untrue
statement of a material fact.
ARTICLE VII.
COVENANTS
7.01 Conduct of Business Prior to Closing.
(a) Prior to the Closing, except as contemplated by this
Agreement, unless the other parties have consented in writing thereto, each of
United Dominion, SAM and PIC shall:
(i) Use its reasonable efforts to preserve intact its
business organization and goodwill and keep available the services of their
respective officers and employees; and
(ii) Promptly notify the other of the breach in any
material respect of any representation, warranty or covenant contained herein.
(b) Prior to the Closing, unless United Dominion has consented
in writing thereto (such consent not to be unreasonably withheld),
(i) Except in the ordinary course of business consistent
with past practice and prevailing market conditions, SAM shall
not (i) permit modification of any Tenant Leases in any material
manner, (ii) accept any prepayments of rent under any of such
leases more than 30 days in advance of the due date therefor, or
(iii) acquire any assets;
29
(ii) Sellers shall not permit (A) the Assumed Contracts,
other than the Tenant Leases, to be amended or supplemented in
whole or in part, or (B) termination of any transaction entered
into pursuant to the Interest Rate Swap Agreements;
(iii) The Sellers and the Real Property Owners shall not
(A) willingly permit the creation of any new mortgages, liens,
encumbrances, pledges or security interests on any Real Property
or any of the Fixed Assets or (B) enter into new Service
Contracts that will survive Closing or modify, renew or extend
existing Service Contracts other than on substantially similar
terms;
(iv) Sellers shall make or shall cause the appropriate
Real Property Owner to pay or make, as and when due and payable,
all payments of principal, interest and other amounts required to
be paid or made under the Assumed Notes;
(v) Sellers shall maintain, and shall cause the Real
Property Owners to maintain, insurance policies providing for the
following coverages:
(A) Broad form property insurance against all risks of
physical loss to the Real Properties, including, without
limitation, fire, extended coverage, vandalism, malicious
mischief, and collapse, to the extent of the full replacement
cost of the Real Properties, without deduction for depreciation;
(B) Rent or business interruption insurance against loss
of income arising out of any hazard in an amount not less than
twelve (12) month's gross rental income from the Real Properties;
and
(C) Flood hazard insurance, if the Real Property is in an
area which is identified by the Secretary of Housing and Urban
Development as having special flood or mud slide hazards and in
which flood insurance has been made available under the National
Flood Insurance Act of 1968, as amended.
Such policies shall provide for deductibles not in excess of
$5,000. Sellers shall deliver evidence of the insurance required
by this subsection within five (5) business days of the execution
of this Agreement and, prior to the expiration of the Due
Diligence Period, will deliver evidence of the insurance required
by this subsection which shall name United Dominion as its
interests may appear. Upon execution of this Agreement, Sellers
shall promptly notify such insurers of this Agreement.
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(vi) SAM will, and will cause the Real Property Owners to
timely file all federal, state, local and foreign tax returns
(including, without limitation, information returns and reports)
required to be filed by them on or prior to the Closing Date and
will pay or cause the Real Property Owners to pay all taxes,
interest, penalty and additional amounts payable with respect to
any tax, shown to be due and payable on such returns or which
have become due and payable;
(vii) SAM shall perform in full each term, covenant and
condition of each of the Assumed Contracts, except (x) to the
extent any such non-performance has been waived, (y) with respect
to the Service Contracts, to the extent any payment due
thereunder has not been made in connection with a bona fide
dispute disclosed in the Seller Disclosure Letter, and (z) with
respect to the Tenant Leases, to the extent that such
non-performance in the aggregate is not material (for purposes of
this clause (z), "material" shall have the meaning given in
Section 8.02(d)(iii));
(viii) SAM shall cause each Real Property and the Fixed
Assets to be operated, repaired, and maintained in the same
manner as prior to the date of this Agreement, which shall be in
accordance with industry custom and to a standard substantially
similar to that of other like properties in the market in which
such Real Property is located; and
(ix) Representatives of SAM shall confer on a regular
basis with one or more representatives of United Dominion to
report material operational matters relating to SAM and the
Assumed Contracts or Real Properties and any proposals to engage
in material transactions by the Real Property Owners regarding
the Assumed Contracts or Real Properties.
(x) SAM and PIC shall promptly notify United Dominion of
any material emergency or other material change in the condition
(financial or otherwise), business, properties, assets,
liabilities or other normal course of their businesses or in the
operation of their properties (including, in the case of SAM, the
Real 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 or warranty contained herein.
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(c) Prior to the Closing, unless SAM has consented in writing
thereto (such consent not to be unreasonably withheld), United Dominion shall
use reasonable efforts to satisfy all conditions imposed by the Lender to the
assumption of the Loan Documents as contemplated herein.
(d) Prior to the Closing, unless United Dominion has consented
in writing thereto (such consent not to be unreasonably withheld),
(i) PIC shall not willingly permit the creation of any
new mortgages, liens, encumbrances, pledges or security interests
on any of the Cable Assets;
(ii) PIC shall maintain all insurance against risks of
physical loss to the Cable Assets, including, without limitation,
fire, extended coverage, vandalism, malicious mischief, and
collapse, currently maintained by PIC. PIC shall deliver evidence
of the insurance required by this subsection contemporaneously
with the execution of this Agreement and, prior to the expiration
of the Due Diligence Period, will deliver evidence of the
insurance required by this subsection which shall name United
Dominion as its interests may appear. Upon execution of this
Agreement, PIC shall promptly notify such insurers of this
Agreement.
(iii) PIC will timely file all federal, state, local and
foreign tax returns (including, without limitation, information
returns and reports) required to be filed by it on or prior to
the Closing Date and will pay all taxes, interest, penalty and
additional amounts payable with respect to any tax, shown to be
due and payable on such returns or which have become due and
payable;
(iv) PIC shall cause the Cable Assets to be operated,
repaired, and maintained in the same manner as prior to the date
of this Agreement; and
(v) Representatives of PIC and the Principals shall confer
on a regular basis with one or more representatives of United
Dominion to report material operational matters relating to the
Cable Assets and any proposals to engage in material transactions
by PIC regarding the Cable Assets.
32
7.02 Cooperative Action. Subject to the terms and conditions herein
provided Sellers, PIC and United Dominion shall: (a) use all reasonable efforts
to obtain in writing any consents required from third parties in form reasonably
satisfactory to Sellers, PIC and United Dominion necessary to effectuate this
Agreement and the transactions contemplated hereby; and (b) use all reasonable
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 this Agreement and such transactions. If, at any time after the
Closing any further action is necessary or desirable to carry out the purpose of
this Agreement, the proper officers and directors of United Dominion, Sellers
and PIC shall take all such necessary action. United Dominion and Sellers agree
to use all reasonable efforts to file by July 15, 1996, any notification
required in connection with the transactions contemplated hereby pursuant to the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976.
7.03 Publicity. United Dominion will provide to Sellers the text of any
written press release with respect to the transactions contemplated hereby
before it is issued and (i) prior to the Closing, no public disclosure will
mention any Real Properties by name, name any individual partner, stockholder,
member or Affiliate of SAM or any Real Property Owner (provided, that, upon
their individual request, United Dominion may disclose the names of the Real
Properties to securities analysts), (ii) after the Closing, no public disclosure
will name any individual partner, stockholder, member or Affiliate of SAM or any
Real Property Owner, and (iii) at no time will any written press release use the
words "State Street" when referring to the Sellers or any of the Real
Properties, unless, in each case, required by applicable law, rules or
regulations.
7.04 Listing Application. United Dominion shall promptly prepare and
submit to the NYSE a listing application covering the United Common Stock
issuable to the Principals pursuant to this Agreement, and shall use its
reasonable efforts to obtain, prior to the Closing, approval for the listing of
such United Common Stock, subject to the official notice of issuance.
7.05 Further Action. Each party hereto shall, subject to the fulfillment
at or before the Closing of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may reasonably be required to effect the transactions contemplated
hereby.
7.06 Reorganization. From and after the date hereof and until the
Closing, neither United Dominion, the Sellers nor any of their respective
Affiliates shall (i) knowingly take any action, or knowingly fail to take any
action the taking or omission of which would jeopardize qualification of the
acquisition and assumption of substantially all of the assets of SAM, including
33
the Management Contracts, pursuant to Section 2.01(b) as a reorganization within
the meaning of Section 368(a)(1)(C) of the Code; or (ii) enter into any
contract, agreement, commitment or arrangement with respect to the foregoing. As
of the date hereof, United Dominion has no plan or intention to fail to manage
the Real Properties.
7.07 Notice of Certain Events. The Sellers and PIC will promptly upon
obtaining knowledge thereof notify United Dominion of the occurrence of any
event or the existence of any condition which, if it had occurred or existed
before or at the date of this Agreement, would have made any of the
representations and warranties in Article IV or Article V untrue or misleading
in any material respect, and United Dominion will promptly upon obtaining
knowledge thereof notify the Sellers and PIC of the occurrence of any event or
the existence of any condition which, if it had occurred or existed before or at
the date of this Agreement, would have made any of the representations and
warranties in Article VI untrue or misleading in any material respect. Any party
may amend its representations and warranties herein and any materials delivered
to the other party or parties pursuant hereto to make such representations,
warranties and materials consistent with any such occurrence or condition.
Except as provided in Section 3.01 and Section 11.04, receipt, acceptance or
acknowledgment by any party of any such notice or amendment shall not constitute
a waiver by such party of any rights or remedies it may have hereunder as a
result of such event or occurrence unless such party shall otherwise expressly
agree in writing or shall so act as to make its conduct such a waiver as
expressly provided herein.
7.08 No Trading; Confidentiality. (a) Prior to the Closing, Sellers, PIC
and their Affiliates shall not purchase or sell or contract to purchase or sell
any United Common Stock or derivative security or take any other action which
would have the effect of manipulating or stabilizing the market price for any
such security.
(b) Prior to the Closing, Sellers and PIC, on the one hand, and United
Dominion on the other, agree not to disclose or use for any purpose other than
in connection with the transactions contemplated by this Agreement any material,
non-public information ("Confidential Information") conveyed by one of them to
the other, or any information regarding the status of the transactions
contemplated hereby, except as required by law, rule or regulation or pursuant
to judicial administrative order issued by a court or other body of competent
jurisdiction. Confidential Information shall not include information that (i) is
generally available to the public, (ii) is already of written record in the
applicable party's files on a non-confidential basis at the time of disclosure
to it, or (iii) is or becomes available to the applicable party on a
non-confidential basis from a third party.
7.09 Second Rent Roll. Not later than 5:00 p.m. July 20, 1996, Sellers
shall deliver to United Dominion an updated rent roll as of dates between July
13 and July 15, 1996, for each of the Real Properties in the form of the First
Rent Roll.
34
7.10 SAM Financial Statements. SAM shall prepare complete financial
statements of SAM at December 31, 1995, and for the period from commencement of
operations to that date, and at June 30, 1996 and for the six months' period
then ended the (the "SAM Financial Statements"), shall cause such financial
statements to be audited by Ernst & Young L.L.P. and shall deliver the audit
reports of such accountants to United Dominion promptly upon receipt thereof.
The Principals shall pay $3,000 of the costs and expenses relating to the audit
of the SAM Financial Statements and United Dominion shall pay all remaining
costs and expenses relating to the audit of such SAM Financial Statements.
7.11 Allocation of Purchase Price. For financial reporting purposes,
United Dominion shall allocate the Purchase Price (including the United Common
Stock Consideration) among the Real Properties (including the Fixed Assets
related to each of such Real Properties) and the Cable Assets as set forth on
Exhibit O, which allocation has been determined in accordance with generally
accepted accounting principles. Sellers agree that United Dominion may amend the
allocations on Exhibit O at any time in its discretion, provided, that no such
amendment may increase the allocation with respect to any Real Property
(including the related Fixed Assets) by more than $50,000. Other than with
respect to the United Common Stock Consideration as set forth in Section
2.01(b), Sellers and PIC shall not be bound by United Dominion's allocations of
the Purchase Price for financial reporting, tax or any other purposes.
ARTICLE VIII.
CONDITIONS PRECEDENT TO CLOSING
8.01 Conditions to Each Party's Obligations. The respective obligations
of the Sellers and PIC to sell and assign and United Dominion to purchase and
assume the Real Properties and the related Fixed Assets, Assumed Contracts and
Tenant Accounts, and the Cable Assets shall be subject to the satisfaction at or
prior to the Closing of the following conditions precedent:
(a) 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.
(b) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board other regulatory body
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for any documents required to
be filed after the Closing 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 United Dominion and its Subsidiaries, taken as a whole,
following the Closing.
(c) The Option Agreement shall not have been terminated in accordance
with its terms.
8.02 Conditions Precedent to United Dominion's Obligations. The
obligations of United Dominion to purchase the Real Properties, and the related
Fixed Assets, and the Cable Assets, to assume the Assumed Contracts and the
Tenant Accounts are subject to the satisfaction or waiver of the following
conditions precedent and the compliance in all material respects by Sellers at
the Closing with the following covenants:
(a) Sellers shall convey good and marketable fee simple title to each
Real Property, subject only to the Permitted Exceptions, by the Deed. The Deed
and the conveyance thereby will be insurable by the Title Company, subject to
only the Permitted Exceptions.
(b) Sellers shall assign to United Dominion or an Affiliate of United
Dominion, as United Dominion shall specify all of their respective rights, title
and interest in and to, and their obligations under, the Assumed Contracts and
the Tenant Accounts relating to the Real Properties.
(c) Sellers shall convey good and marketable title to the Fixed Assets
relating to the Real Properties to United Dominion pursuant to the Bill of Sale
(Real Property), subject only to the applicable Permitted Exceptions.
(d) Sellers shall have complied with the following during the period
from the date hereof through the Closing:
(i) Sellers, the Real Property Owners and PIC shall not have
permitted the creation of any new mortgages, liens, encumbrances,
pledges or security interests on any Real Property or any of the Fixed
Assets or the Cable Assets;
(ii) Sellers shall have caused the leasing and releasing of the
Real Properties using substantially the form of lease agreements now
being used and, subject to changes in local market conditions, at rental
rates now being quoted to new or renewal tenants, with leases being
written for terms not greater than one (1) year;
(iii) Sellers shall have caused performance of each term,
covenant and condition of each of the Assumed Contracts that is to be
performed by any of them at or before the Closing Date, except (x) to
the extent any such non-performance has been waived, (y) with respect to
the Service Contracts, to the extent that any payment due thereunder has
not been made in connection with a bona fide dispute disclosed in the
Seller Disclosure Letter and (z) with respect to the Tenant Leases, to
the extent that such performance in the aggregate is not material; for
purposes of this clause (iii) with respect to the Tenant Leases,
non-performance shall be "material" if the costs to cure such
non-compliance or the damages resulting from non-compliance exceed, with
respect to any Real Property, 2% of the amount applicable to such Real
Property as set forth on Exhibit O or, with respect to all Real
Properties in the aggregate, 3% of the aggregate amount applicable to
all of the Real Properties as set forth on Exhibit O;
(iv) Each Real Property and the Fixed Assets shall have been
operated, repaired, and maintained in the same manner as prior to the
date of this Agreement, which shall be in accordance with industry
custom and to a standard substantially similar to that of other like
properties in the market in which such Real Property is located and no
repairs, maintenance or other work required to make units in such Real
Property rent-ready shall be delayed or not performed in anticipation of
the Closing;
(v) The Cable Assets shall have been operated, repaired and
maintained in the same manner as prior to the date of this Agreement;
(vi) Sellers and PIC shall have provided to United Dominion
copies of any written notices which are received by Sellers, PIC or the
applicable Real Property Owner from any governmental agency having
jurisdiction over a Real Property or the Cable Assets during the period
from the date hereof to Closing, and shall have taken reasonable efforts
to cure any defects set forth in the notice; and
(vii) Sellers shall deliver the Real Properties to United
Dominion at the Closing with all vacant units in ready-to-rent
condition, which shall include, but not be limited to clean carpets,
freshly painted walls, working kitchen appliances, water heaters and
HVAC, and no damage (other than normal wear and tear) to doors, walls,
ceilings, floors or windows which has not been repaired. Representatives
of Sellers and United Dominion shall inspect the vacant units four
business days prior to Closing, and United Dominion shall receive a
credit to the Purchase Price in the amount of $350 for each non-rent
ready vacant unit which continues to be non-rent ready as of the Closing
Date which does not require extensive refurbishing. Representatives of
Sellers and United Dominion shall inspect any units vacated after such
inspection one day prior to the Closing and will receive a credit to the
Purchase Price in the amount of $350 for 75% of such non-rent ready
vacant units which do not require extensive refurbishing. United
Dominion will receive an additional credit to the Purchase Price in the
amount agreed to by Sellers and United Dominion as the reasonable cost
of making rent-ready any vacant unit that requires extensive
refurbishing. For the purposes hereof, the parties agree that extensive
refurbishing shall mean requiring one or more new appliances, new
carpet, new HVAC equipment or other improvement in excess of that
normally required in connection with making a vacant unit available for
rent.
(e) PIC and the Principals shall convey good and marketable title to the
Cable Assets, subject only to the Permitted Exceptions, to United Dominion
pursuant to the Bill of Sale (Cable).
(f) Sellers and PIC shall have performed their agreements contained in
this Agreement required to be performed on or prior to the Closing in all
material respects and the representations and warranties of the Sellers and PIC
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on the Closing Date, and United Dominion shall
have received a certificate or certificates of Sellers and PIC, dated the
Closing Date, certifying to such effect.
(g) Each of the deliveries set forth in Section 9.03, or provision
therefor reasonably satisfactory to United Dominion shall have been made.
8.03 Conditions Precedent to Sellers' and PIC's Obligations. The
obligations of the Sellers to sell the Real Properties and the related Fixed
Assets, to assign the related Assumed Contracts and Tenant Accounts and to
transfer and assign substantially all of the assets of SAM, including the
Management Contracts, and the obligations of PIC to sell the Cable Assets are
subject to the satisfaction or waiver of the following conditions precedent and
the compliance in all material respects by United Dominion at the Closing with
the following covenants:
(a) United Dominion shall have performed its agreements contained in
this Agreement required to be performed on or prior to the Closing in all
material respects and the representations and warranties of United Dominion
contained in this Agreement shall be true and correct in all material respects
as of the Closing as if made on the Closing, and Sellers shall have received a
certificate of the President or a Vice President of United Dominion, dated the
Closing, certifying to such effect.
(b) From the date of this Agreement through the Closing, there shall not
have occurred any change in the financial condition, business or operations of
United Dominion and its Subsidiaries, taken as a whole, that would have or would
be reasonably likely to have a United Material Adverse Effect other than any
such change that affects both SAM and United Dominion in a substantially similar
manner. A change in the rating of United Dominion's senior unsecured debt
obligations by any nationally recognized securities rating agency shall not be
deemed a United Material Adverse Effect for any purpose of this Agreement.
(c) Each of the deliveries set forth in Section 9.04, or provision
therefore reasonably satisfactory to Sellers, shall have been made.
(d) United Dominion shall have paid the consideration as
provided by the Option Agreement.
ARTICLE IX.
CLOSING
9.01 Closing. The Closing shall be held at the offices of counsel to
United Dominion on August 15, 1996, or such other date as United Dominion and
Sellers mutually agree. Subject to the conditions set forth in Section 2.03,
United Dominion may extend the Closing beyond August 15, 1996 at its sole
option, for three consecutive one-week periods. If the Closing shall not have
occurred by the last day of any extension period pursuant to the foregoing
sentence and United Dominion shall not have exercised any right it may have to
further extend the Closing, then Sellers may terminate this Agreement and retain
the Deposit, in which case all rights and obligations of Sellers and United
Dominion hereunder shall terminate immediately, with no party having any further
liability to any other party (other than with respect to the indemnities set
forth in Sections 3.02, 11.01, 11.02 and 11.03 of this Agreement).
9.02 Prorations and Post-Closing Adjustments. (a) Rents and other
income from the Real Properties and real estate and personal property ad valorem
taxes, and other operating expenses from the Real Properties shall be prorated
on the basis of a 365 day year through the day preceding the day of Closing. All
utility charges and amounts payable by SAM under the related Assumed Contracts
shall be determined to the day preceding Closing and appropriate prorations
shall be made. If Closing is expedited or extended by mutual agreement, all
adjustments shall be made as of the day prior to the expedited or extended date.
All prepaid rents relating to the Real Properties shall be paid to United
Dominion at Closing. All other collected rents and other income from the Real
Properties during the month of Closing shall first be applied to the month of
Closing for the purpose of prorations unless designated for a prior period. To
the extent United Dominion has received a credit from the Sellers pursuant to
this Section 9.02(a), United Dominion shall be deemed to have assumed the
Sellers' obligations to pay such amount in accordance with the terms of the
Sellers' agreement with the applicable party or as required by law and to have
succeeded to all of the Sellers' rights in connection therewith. Delinquent
rents shall not be credited to the Sellers at Closing, but United Dominion and
the Sellers agree that any delinquent rents relating to the Real Properties
collected by United Dominion after Closing shall be allocated to United Dominion
as current rents due under applicable tenant leases in the inverse order of
accrual, with any remainder payable to the Principals. Those items of income and
expenses which have been invoiced at Closing shall be prorated at Closing based
on the invoices therefor and those for which invoices are not available shall be
prorated based upon estimates. Real estate and personal property ad valorem
taxes shall be adjusted within sixty (60) days of receipt of invoices.
(b) The post-Closing rights and obligations of the parties set forth in
this Section 9.02 shall be separate from and in addition to the rights and
obligations set forth in Sections 3.02, 11.01, 11.02 and 11.03.
9.03 Deliveries of Sellers. Sellers shall deliver or cause to be
delivered to United Dominion at the Closing the following, in addition to
deliveries made to satisfy the conditions precedent set forth in Section 8.02:
(a) Current information as of the most recent date available in the
ordinary course of business on the condition of the Real Properties as of the
Closing, including, but not limited to a current operating statement, a current
rent roll, and a current reconciliation statement showing apartment number,
tenant, beginning lease date, current lease ending date, monthly lease rent, the
rent paid for the current month, and the date paid, any delinquent rent owed,
and the status of collection proceedings associated therewith, lease termination
notices received for current leases, a detailed list of scheduled move-ins and
pertinent information, and all outstanding work orders, all prepared by Sellers
in good faith, provided that any inaccuracy of such information shall not result
in a failure of a condition to the Closing;
(b) The original of each of the tenant leases in effect at the Real
Properties as of the day of the Closing and all tenant files in their possession
or control;
(c) A current schedule dated as of the most recent date available in the
ordinary course of business of all tenant fees and deposits, including but not
limited to those for security, pet, cleaning, redecorating and furniture,
showing apartment number, tenant name, tenant deposit and accrued interest, if
any, on the tenant deposit in the jurisdiction in which each Real Property is
located, prepared by Sellers in good faith, provided that any inaccuracy of such
information shall not result in a failure of a condition to Closing;
(d) An audit affidavit in the form attached as Exhibit P-1;
(e) A Deed to each Real Property which shall include, if
applicable, assumption of the related Loan Documents;
(f) A Bill of Sale (Real Property);
(g) An affidavit in form acceptable to the Title Company sufficient to
remove any exception for broker's liens, mechanics' and materialmen's liens and
parties in possession and any other customary documents required by the Title
Company;
(h) An opinion of counsel satisfactory in form and substance to United
Dominion and its counsel to the effect that the Deeds, Bills of Sale and other
instruments of conveyance and transfer required to be delivered at the Closing
by Sellers pursuant to this Agreement have been duly and validly executed and
delivered and comply as to form with all requirements of applicable law, that
the persons executing the Deeds, Bills of Sale and such instruments are duly
authorized to do so, and that the Deeds, Bills of Sale and such other
instruments are valid and binding upon the Real Property Owners; provided that
counsel shall not opine as to matters relating to the approval by the Investors
of the terms of the sale of the Real Properties by the Real Property Owners;
(i) An affidavit certifying that no Seller is a foreign
person under the Foreign Investment in Real Property Act;
(j) IRS Form W-9 executed by each person to whom United
Common Stock or Notes are to be issued;
(k) A Mortgagee Estoppel Letter with respect to each of the
Assumed Notes;
(l) An Investment Agreement in the form of Exhibit G-1
executed by each of the Principals;
(m) An Investment Agreement in the form of Exhibit G-2
executed by each of the Note Holders;
(n) The opinion of Gibson, Dunn & Crutcher LLP (or other counsel
reasonably satisfactory to United Dominion) in form and substance reasonably
satisfactory to United Dominion and its counsel to the effect that:
(i) SAM and PIC are duly incorporated and validly existing
corporations in good standing under the laws of the State of North
Carolina, and each has full corporate power and authority to carry on
its business as it is presently conducted, and has the corporate power
and authority to consummate the transactions contemplated by the
Agreement as provided here;
(ii) this Agreement and the other documents and instruments
required hereby to which SAM and PIC are parties and the transactions
contemplated hereby and thereby have been duly approved by the Board of
Directors and shareholders of each of SAM and PIC; this Agreement, the
Lockup Agreement, the Escrow Agreement, the Investment Agreements, the
Cable Lease and all other instruments delivered hereunder by the Sellers
and PIC, as the case may be, other than those referred to in Section
9.03(h) have been duly and validly executed and delivered by each of the
Sellers and PIC, respectively, and are the valid and binding obligations
of each of the Sellers and PIC, as the case may be; all corporate and
other proceedings required under the NCBCA or otherwise to be taken by
or on behalf of SAM and PIC to authorize the execution and delivery of
this Agreement and the other documents and instruments required hereby
have been duly taken;
(iii) neither the execution and delivery of this Agreement and
the other documents and instruments required hereby nor the consummation
of the transactions contemplated thereby, nor compliance with or
fulfillment of the terms and provisions hereof or thereof conflicts with
or results in the breach of the terms, conditions or provisions of, or
constitutes a default under, the Articles of Incorporation or the
By-laws of SAM or PIC or any agreement or instrument known to such
counsel to which any Seller, PIC or any Real Property Owner is a party
or by which it is bound;
(iv) such counsel do not know and have no reason to believe that
any action, suit, proceeding or investigation is pending or threatened
against any Seller or PIC which questions the legality, validity or
propriety of this Agreement or of any action taken or to be taken by the
parties pursuant to this Agreement or in connection herewith;
(v) no approval, consent, order, authorization, designation,
declaration or filing by or with any federal regulatory or
administrative body is required of any Seller or PIC in connection with
the execution and delivery of this Agreement and the other documents and
instruments required hereby and the consummation of the transactions
contemplated hereby and thereby; and
(vi) to such further effect with respect to legal matters
relating to this Agreement and the related documents as United Dominion
may reasonably request.
(o) The Lockup Agreement, together with evidence satisfactory to United
Dominion of deposit pursuant thereto of the United Common Stock issued pursuant
to this Agreement;
(p) Covenants not to compete from each of John C. Harmon and Thomas
I. White, Jr. in substantially the form attached hereto as Exhibit Q (the
"Covenants Not to Compete");
(q) Consents of each of the Real Property Owners to the assignment by
SAM of the Management Contracts to United Dominion; and
(r) All such other documents as are normally delivered by a seller at
closing in the respective jurisdictions in which the Real Properties are located
or as are reasonably requested by United Dominion or its counsel.
9.04 United Dominion's Deliveries. United Dominion shall deliver at
the Closing the following, in addition to deliveries made to satisfy the
conditions precedent set forth in Section 8.03:
(a) Assumption agreements for each of the Assumed Contracts and the
Tenant Accounts, which in the case of the Loan Documents may be contained in the
Deeds if agreed by the Lenders, and any other related documents reasonably
requested by a Lender in connection with the assumption of the Loan Documents by
United Dominion;
(b) A United Dominion Note or Notes, payable to such order or orders and
in such original principal amounts as Sellers shall specify, in an aggregate
original principal amount of Twenty-Five Million Dollars ($25,000,000); plus or
minus, as the case may be, the net amount of all prorations and adjustments made
pursuant to this Agreement with respect to the Closing;
(c) Twenty-Three Million Four Hundred Thousand Dollars ($23,400,000),
plus or minus, as the case may be, the net amount of all prorations and
adjustments made pursuant to this Agreement with respect to the Closing, in
cash, in immediately available funds;
(d) Certificates representing the United Common Stock Consideration,
registered in such names as the Principals shall specify;
(e) The escrowed amounts contemplated by Section 2.01(a),
if any, by wire transfer in immediately available funds;
(f) Evidence satisfactory to Sellers of assumption (or repayment, in the
case of the Assumed Notes) by United Dominion of the obligations of the
contracting party with respect to the Assumed Contracts and the Tenant Accounts;
(g) The opinion of Hunton & Williams in form and substance reasonably
satisfactory to Sellers and their counsel to the effect that:
(i) United Dominion is a duly incorporated and validly existing
corporation in good standing under the laws of the Commonwealth of
Virginia, has full corporate power and authority to carry on its
business as it is presently conducted, and has the corporate power and
authority to consummate transactions contemplated by the Agreement;
(ii) the authorized capital stock of United Dominion consists of
100,000,000 shares of Common Stock, $1.00 par value, of which 56,747,007
were issued and outstanding at June 3, 1996 and 20,000,000 shares of
Preferred Stock, no par value, of which 4,200,000 shares were issued and
outstanding at June 3, 1996; to such counsel's knowledge, no options,
warrants or other rights to obtain shares of United Common Stock,
whether on conversion of other securities or otherwise, have been
granted except pursuant to United Dominion's 1985 stock option plan; no
holder of shares of United Common Stock or United Preferred Stock has
any preemptive rights to acquire any such shares or any securities
convertible into such shares; and all of the issued and outstanding
shares of United Common Stock and United Preferred Stock at the Closing
are validly issued, fully paid and nonassessable with no liability
attaching to the ownership thereof;
(iii) this Agreement, the Investment Agreements with the
Principals referred to in Section 9.03(l) and the other documents and
instruments required hereby to which United Dominion is a party and the
transactions contemplated hereby and thereby have been duly approved by
the Board of Directors of United Dominion; this Agreement, the Lockup
Agreement, the United Dominion Notes, the Escrow Agreement, the Cable
Lease, the Investment Agreements with the Principals and all other
documents and instruments delivered hereunder by United Dominion have
been duly and validly executed and delivered by United Dominion, and are
the valid and binding obligations of United Dominion; all corporate and
other proceedings required under the VSCA or otherwise to be taken by or
on behalf of United Dominion to authorize the execution and delivery of
this Agreement and the other documents and instruments required hereby
have been duly taken;
(iv) neither the execution and delivery of this Agreement and the
other documents and instruments required hereby nor the consummation of
the transactions contemplated hereby or thereby, nor compliance with the
terms and provisions hereof or thereof conflicts with or results in the
breach of the terms, conditions or provisions of, or constitutes a
default under, the Articles of Incorporation or the By-laws of United
Dominion or any agreement or instrument known to such counsel to which
United Dominion is a party or by which it is bound;
(v) such counsel do not know and have no reason to believe that
any action, suit, proceeding or investigation is pending or threatened
against United Dominion which might result in a United Material Adverse
Effect or which questions the legality, validity or propriety of this
Agreement or of any action taken or to be taken by the parties pursuant
to this Agreement or in connection herewith;
(vi) the Registration Statement (as defined in the Investment
Agreements with the Principals) has become effective under the
Securities Act and, to such counsel's knowledge, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Securities Act and the issuance of United Common
Stock pursuant to this Agreement does not conflict with the registration
requirements of the Securities Act and the Virginia Securities Act and
the North Carolina Securities Act;
(vii) no approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is required of United Dominion in connection with the
execution and delivery of this Agreement, the Investment Agreements with
the Principals and the other documents and instruments required hereby
and the consummation of the transactions contemplated hereby and thereby
except for the order of the Securities and Exchange Commission declaring
the Registration Statement effective and approval by the NYSE of listing
of the United Common Stock on the NYSE upon official notice of issuance,
both of which have been obtained; and
(viii) to such further effect with respect to legal matters
relating to this Agreement and the related documents as the Sellers may
reasonably request;
(h) The Cable Lease in the form attached hereto as Exhibit R; and
(i) All such other documents as are normally delivered by a purchaser at
closing in the respective jurisdictions in which the Real Properties are located
or as are reasonably requested by Sellers or their counsel, the Title Company or
the Lenders.
9.05 Deliveries of PIC and the Principals. PIC and the Principals shall
deliver or cause to be delivered to United Dominion at the Closing the
following, in addition to deliveries made to satisfy the conditions precedent
set forth in Section 8.02:
(a) The Bill of Sale (Cable);
(b) The Cable Lease in the form attached hereto as Exhibit R; and
(c) An audit affidavit in the form attached as Exhibit P-2.
9.06 Deposit. At the Closing and after the consummation of the sale of
the Real Properties, the Deposit shall be returned to United Dominion or, at
United Dominion's option, all or part credited to the Purchase Price and paid to
Sellers in immediately available funds.
ARTICLE X.
CONDEMNATION AND CASUALTY;
TERMINATION RIGHTS
10.01 Condemnation and Casualty. All risk of any loss or damage to all
or any part of any of the Real Properties, including loss resulting from
exercise of the power of eminent domain, shall be and remain on SAM and the Real
Property Owners until the consummation of the acquisition thereof by United
Dominion pursuant to this Agreement.
(a) Condemnation. (i) In the event of any actual or threatened
taking, pursuant to the power of eminent domain, of all or any portion of any
Real Property, or any proposed sale in lieu thereof, on or prior to the Closing
Date, SAM shall give written notice thereof to United Dominion promptly after
the learning or receiving notice thereof. In the event of any actual or
threatened taking, or proposed sale in lieu thereof, on or prior to the Closing
Date, in which the estimate of the loss is greater than Fifty Thousand Dollars
($50,000) with respect to any one Real Property, then within five (5) calendar
days after receipt of Seller's written notice, United Dominion, at its option by
written notice to the Sellers, may elect to exclude such Real Property from this
Agreement, with a reduction of the Purchase Price by an amount equal to the
allocation for such Real Property set forth on Exhibit O. In the event of an
actual or threatened taking pursuant to the power of eminent domain, or any
proposed sale in lieu thereof, on or prior to the Closing Date in which the
estimate of the loss is greater than One Hundred Fifty Thousand Dollars
($150,000) with respect to any two or more Real Properties (including, for
purposes of this clause (a) only, the properties subject to the Option), then
within five (5) calendar days after receipt of Sellers' written notice, United
Dominion, at its option by written notice to Sellers, may elect to terminate
this Agreement, in which event the Deposit shall be promptly returned to United
Dominion, with none of the parties having any further liability to the others
hereunder (other than with respect to the indemnities set forth in Sections
3.02, 11.01, 11.02 and 11.03 of this Agreement).
(ii) In the event that United Dominion does not elect to exclude an
affected Real Property from this Agreement or to terminate this Agreement, as
the case may be, Sellers shall assign or cause the Real Property Owners to
assign to United Dominion all of the right, title and interest of the applicable
Real Property Owner or Owners to the condemnation award covering such loss or
damage at the Closing or, if the award is delivered to such Real Property Owner
or Owners prior to the Closing, United Dominion shall receive a credit towards
the Purchase Price in the amount of such award.
(b) Casualty. (i) In the event of any damage to any Real Property or
Real Properties (including, for purposes of this Section 10.01(b)(i) only, the
properties subject to the Option) by fire or other casualty on or prior to the
Closing Date, Sellers shall give written notice thereof to United Dominion
promptly after learning or receiving notice thereof. In the event of any damage
resulting in a partial loss or a total loss or constructive total loss as to one
or two of the Real Properties, United Dominion shall proceed to the Closing, in
which event (A) the right to all insurance proceeds payable in respect of such
damage shall be paid or assigned to United Dominion at the Closing, and (B)
United Dominion shall receive a credit against the Purchase Price (or, in the
case of the properties subject to the Option, the Purchase Price thereunder) in
the amount of any insurance deductible. In the event there is (A) a total loss
or constructive total loss as to more than two Real Properties, or (B) partial
losses to three or more Real Properties aggregating $5,600,000 or more on or
prior to the Closing Date, then within five (5) calendar days after receipt of
Sellers' written notice, United Dominion, at its option by written notice to
Sellers, may elect to terminate this Agreement, with none of the parties having
any further liability to the others hereunder (other than with respect to the
indemnities set forth in Sections 3.02, 11.01, 11.02 and 11.03 of this
Agreement), in which event the Deposit shall be promptly returned to United
Dominion.
(ii) In the event that United Dominion does not elect to exclude an
affected Real Property from this Agreement or to terminate this Agreement, as
the case may be, Sellers shall assign or cause the Real Property Owners to
assign to United Dominion all of the right, title and interest of the applicable
Real Property Owner or Owners to the insurance proceeds covering such loss or
damage at the Closing or if the insurance proceeds are delivered to such Real
Property Owner or Owners prior to such Closing, United Dominion shall receive a
credit towards the Purchase Price in the amount of such proceeds.
10.02 Termination by United Dominion. If (i) there has been a material
breach by Sellers or PIC or the Principals of any representation or warranty
contained in this Agreement or a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Sellers, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by United Dominion to Sellers, or (ii) any condition set
forth in this Agreement as a condition to United Dominion's obligation to
purchase the Real Properties and consummate the other transactions contemplated
herein is not satisfied at Closing United Dominion may elect one of the
following alternatives:
(A) terminate this Agreement, in which event the Deposit shall be
promptly returned to United Dominion and all rights and obligations of the
Sellers and United Dominion hereunder shall terminate immediately, with no party
having any further liability to any other party (other than with respect to the
indemnities set forth in Sections 3.02, 11.01, 11.02 and 11.03 of this
Agreement) except (1) insofar as such liability may be attributable to the
willful breach hereof or thereof in which event United Dominion shall be
entitled to all remedies at law or equity including but not limited to the
remedies set forth in (B) through (D) below and (2) insofar as such liability
may be attributable to (y) any breach, determined only as of the date of this
Agreement without regard to the contents of the Seller Disclosure Letter or any
additional disclosure made to United Dominion, of the representations and
warranties contained in Section 4.01(a) and Section 4.01(b) or Section 5.01(a)
and Section 5.01(b), or (z) any knowing breach (determined in the same manner)
by Sellers of the representations and warranties contained in Section 4.01(c),
Section 4.01(d) and the first sentence of Section 4.01(k)(i) or Section 5.01(c),
Section 5.01(d) and the first sentence of Section 5.01(g), in which event the
Principals shall pay to United Dominion the full amount of its costs and
expenses incurred in connection with the negotiation of this Agreement and the
related transactions and its due diligence investigation in connection with such
transactions, including attorneys fees and expenses, not to exceed Five Hundred
Thousand Dollars ($500,000).
(B) waive its right to terminate this Agreement and proceed to
the Closing;
(C) seek specific performance of this Agreement;
(D) in the event the failure of a condition precedent set forth
in Section 8.02(d)(iii) as it relates to the Sellers' obligations under the
Assumed Notes and the Tenant Leases, or Section 8.02(f), as such Section 8.02(f)
relates to the covenants set forth in (i) the first sentence of Section
7.01(b)(iii), (ii) Section 7.01(b)(viii) and (iii) Section 7.01(d)(i), is with
respect to one or more Real Properties or the Cable Assets, as applicable,
exclude such Real Property or Properties or the Cable Assets, as the case may
be, from this Agreement and proceed to the Closing with respect to the remaining
Real Properties, with reduction of the Purchase Price by an amount equal to the
allocation for such Real Property set forth on Exhibit O or the book value of
any excluded Cable Assets, as the case may be; or
(E) in the event of a failure of the condition precedent set
forth in the first sentence of Section 8.02(a), at its option (1) postpone
Closing for up to 30 days and (a) Sellers, within seven days following such
postponement, shall propose to United Dominion in good faith a plan to cure such
failure, (b) United Dominion shall accept such plan within three days from
receipt or terminate this Agreement in accordance with clause (2) below, (c) if
such plan is accepted by United Dominion, Sellers shall use their best efforts
to cure such failure in accordance with such plan (Sellers' best efforts to
include expenditure of not more than an aggregate of Five Hundred Thousand
Dollars ($500,000)), and (d) if such failure has not been cured by the last day
of such postponement, United Dominion may terminate this Agreement as set forth
in clause (2) below, or proceed to Closing and receive a credit to the Purchase
Price of $50,000 for each Real Property to which such failure relates, provided,
that the aggregate of all amounts expended to cure such failure and all such
credits to the Purchase Price shall not exceed Five Hundred Thousand Dollars
($500,000), or (2) terminate this Agreement in which event the Principals shall
pay to United Dominion the full amount of its costs and expenses incurred in
connection with the negotiation of this Agreement and the related transactions
and its due diligence investigation in connection with such transactions,
including attorneys' fees and expenses, not to exceed Five Hundred Thousand
Dollars ($500,000).
10.03 Termination by Sellers. If (i) there has been a material breach by
United Dominion of any representation or warranty contained in this Agreement or
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of United Dominion, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Sellers to United Dominion, or (ii) any condition set forth in this
Agreement as a condition to the Sellers' obligation to sell the Real Properties
and consummate the other transactions contemplated herein is not satisfied at
the Closing in all material respects, the Sellers may elect one of the following
alternatives:
(A) terminate this Agreement, in which event the Deposit shall be
retained by Sellers and all rights and obligations of Sellers and United
Dominion hereunder shall terminate immediately, with no party having any further
liability to any other party (other than with respect to the indemnities set
forth in Sections 3.02, 11.01, 11.02 and 11.03 of this Agreement);
(B) waive their right to terminate and proceed to the Closing;
or
(C) seek specific performance of this Agreement; provided that if
specific performance is not awarded to Sellers, Sellers shall retain the Deposit
as contemplated in (A) above.
10.04 Termination by Mutual Agreement or by External Event. This
Agreement may be terminated at any time prior to the Closing by the mutual
written consent of United Dominion and SAM, or by either United Dominion or SAM
if (a) the Closing shall not have occurred by December 31, 1996, provided that
the terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner or failed to satisfy a condition
to the Closing that shall have proximately contributed to failure of the Closing
by such date, or (b) 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 (b) shall have used all reasonable efforts to remove such order, decree,
ruling or injunction. In the event of any such termination (other than as a
result of the failure by United Dominion to assume the Loan Documents) the
Deposit shall be promptly returned to United Dominion and all rights and
obligations of the Sellers and United Dominion hereunder shall terminate
immediately, with no party having any further liability to any other party
(other than with respect to the indemnities set forth in Sections 3.02, 11.01,
11.02 and 11.03 of this Agreement).
ARTICLE XI.
INDEMNITIES
11.01 United Dominion Indemnities. United Dominion will indemnify,
defend, protect and hold Sellers, PIC and their Affiliates and their respective
officers, directors, partners, members, stockholders and employees harmless from
and against all actions, claims, penalties, damages and expense, including
without limitation reasonable attorneys' fees, based upon or arising out of
(i)(A) all matters relating to the ownership and operation of any Real Property
and the related Fixed Assets after the Closing Date, and (B) any claim for
personal injury or property damage based on any event occurring on or about any
Real Property after the Closing Date, (ii) the assumption by United Dominion of
the Assumed Contracts and the Tenant Accounts related to the Real Properties,
and (iii) the inaccuracy, breach or default of any representation, warranty,
covenant or agreement which is made by United Dominion in this Agreement;
provided, however that no such indemnity arising from the inaccuracy or claimed
inaccuracy of any representation or warranty shall be sought from or charged
against United Dominion until, and only to the extent that, the aggregate
claims, penalties, damages and expenses resulting from such inaccuracy or
claimed inaccuracy and any inaccuracy or claimed inaccuracy for which United
Dominion is liable for indemnification pursuant to this Agreement and the Option
exceed $100,000 and provided, further, that such indemnified party makes a
written claim for indemnification with the applicable survival period referred
to in Section 13.12. The monetary obligations of United Dominion to indemnify
and hold harmless pursuant to this Section 11.01 and the Option shall be limited
to an aggregate of $25,000,000. This Section 11.01 shall survive termination of
this Agreement for any reason whatsoever.
11.02 Principals' Indemnities. The Principals, jointly and severally,
will indemnify, defend, protect and hold United Dominion and its Affiliates and
their respective officers, directors, stockholders, employees harmless from and
against all actions, claims, penalties, damages and expense, including, without
limitation, reasonable attorneys' fees, based upon or arising out of: (i) all
matters relating to the ownership and operation of any Real Property, the Fixed
Assets or the Cable Assets and the affairs of any of SAM, PIC, the Principals,
the Real Property Owners and the Investors prior to the Closing Date, (ii) any
claim for personal injury or property damage based on any event occurring on or
about any Real Property prior to the Closing Date, (iii) all matters arising out
of any contract or agreement relating to any Real Property existing prior to the
Closing Date, other than as relates to the performance of the Assumed Contracts
and in connection with the Tenant Accounts after the Closing Date, (iv) any
claims or causes of action relating to the Assumed Contracts and Tenant Accounts
and based on events occurring prior to the Closing Date, (v) all liabilities of
SAM and PIC other than as relates to the performance of the Assumed Contracts
and in connection with the Tenant Accounts after Closing, and (vi) the
inaccuracy, breach or default of any representation, warranty, covenant or
agreement which is made by Sellers or PIC or any one of them, in this Agreement;
provided, that such indemnified party makes a written claim for indemnification
within the applicable survival period referred to in Section 13.12.
Notwithstanding the foregoing, the Principals shall not be required to indemnify
United Dominion for the inaccuracy or claimed inaccuracy of any representation
or warranty regarding the status or condition of a Real Property unless and
until the aggregate claims, penalties, damages and expenses resulting from such
inaccuracy or claimed inaccuracy and any inaccuracy or claimed inaccuracy for
which the Principals are liable for indemnification pursuant to this Agreement
and the Option shall exceed $100,000. The monetary obligations of the Principals
to indemnify and hold harmless pursuant to this Section 11.02 and the Option
shall be limited to an aggregate of $25,000,000. This Section 11.02 shall
survive termination of this Agreement for any reason whatsoever.
11.03 Procedure; Set-Off. (a) Promptly after receipt by an indemnified
party under Section 11.01 or 11.02 above of notice of the commencement of any
action against such indemnified party, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under either
such Section, notify the indemnifying party or parties in writing of the
commencement thereof; and the omission so to notify the indemnifying party or
parties, if materially prejudicial to the indemnifying party or parties, shall
relieve it or them from any liability which it or they may have to any
indemnified party under such Section. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party or
indemnifying parties of the commencement thereof, the indemnifying party or
parties shall assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party or parties
and the indemnified party shall have been advised by counsel that representation
of such indemnified party and the indemnifying party or parties by the same
counsel may be inappropriate under applicable standards of professional conduct
due to actual or potential differing interests between them, the indemnified
party shall have the right to select alternative separate counsel reasonably
satisfactory to the indemnifying party to defend such action on behalf of such
indemnified party. It is understood that the indemnifying party or parties
shall, in connection with any such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
only one separate firm of attorneys and the fees and expenses of local counsel,
if appropriate. The indemnifying party or parties will not be liable for any
settlement of such action entered into without its or their consent and will not
be liable to an indemnified party under this Section 11.03 for any legal or
other expenses incurred by such indemnified party in connection with the defense
thereof unless (i) such indemnified party shall have employed separate counsel
in accordance with the provision to the next preceding sentence, (ii) the
indemnifying party or parties shall not have employed counsel reasonably
satisfactory to such indemnified party to represent such indemnified party
within a reasonable time after notice of commencement of the action or (iii) the
indemnifying party or parties have authorized the employment of counsel for such
indemnified party at the expense of the indemnifying party or parties; and
except that, if clause (i) or (iii) is applicable, such liability shall be only
in respect of the counsel referred to in such clause (i) or (iii).
(b) United Dominion and the Principals shall attempt in good faith to
resolve their disputes with respect to requests for indemnification pursuant to
Article XI and, if they so agree, United Dominion or the Principals, as the case
may be, shall pay such request or consent to a draw against the Letter of
Credit, in each case in such amount as is agreed upon. If such efforts are
unsuccessful entirely or in part, United Dominion and the Principals shall
submit such dispute to non-binding mediation, which shall be conducted pursuant
to the model procedures for mediating business disputes of the Center for Public
Resources then in effect. If such mediation is unsuccessful entirely or in part,
any party may file a petition with the federal district court for the Eastern
District of Virginia, with venue in Richmond, Virginia or, if such court does
not have jurisdiction of the matter, to the Circuit Court for the City of
Richmond Virginia, requesting that such court finally determine the issue and,
to the extent it determines appropriate, order United Dominion or the
Principals, as the case may be, to pay the other party's request for
indemnification or consent to a draw against the Letter of Credit. The parties
submit to jurisdiction of such courts and waive any defense of inconvenient
forum in connection with any such action brought therein. United Dominion, on
the one hand, and the Principals, on the other, will share the expenses of any
mediation equally, but shall bear their own expenses in connection with the
submission of any dispute to a court hereunder.
(c) Notwithstanding any provision of the United Dominion Notes to the
contrary, to the extent United Dominion and the Principals have agreed, or it
has been determined pursuant to Section 11.03(b), that United Dominion is
entitled to indemnification from the Principals pursuant to Section 11.02 United
Dominion may set off all or any part of such indemnification obligation against
its obligations pursuant to any United Dominion Notes held by the Principals or
their respective affiliates.
11.04 Waiver of Representations and Warranties. If any party having
knowledge at Closing of the breach of a representation, warranty, covenant or
agreement made for its benefit herein or in any other document delivered
herewith elects not to terminate this Agreement but to proceed to Closing, it
shall be deemed to have waived the breach of such representation, warranty,
covenant or agreement and the party making such representation, warranty,
covenant or agreement shall have no liability with respect thereto, whether
pursuant to Section 11.01, 11.02 or otherwise.
11.05 Letters of Credit. (a) To secure their obligations under Section
11.02, at Closing the Principals will deliver to United Dominion one or more
one-year letters of credit payable to United Dominion in the aggregate amount of
$2,250,000, which shall be renewed on the first anniversary of the Closing Date
for one year, which shall be renewed for one year and reduced to an aggregate of
$1,000,000 on the second anniversary of the Closing Date and which shall be
renewed for one year on the third anniversary of the Closing Date, issued by a
bank or banks reasonably satisfactory to United Dominion and including
substantially the terms set forth in Exhibit S hereto. The Principals shall
notify United Dominion at least five (5) business days prior to the expiration
of each such letter of credit whether the issuing bank (or other bank reasonably
satisfactory to United Dominion) has issued its binding commitment to renew or
replace such letter of credit as set forth above. If any such issuing bank has
not issued such a binding commitment and Principals have not received a binding
commitment of another bank, reasonably satisfactory to United Dominion, to issue
a replacement letter of credit, then United Dominion shall be entitled to draw
the full undrawn amount under the expiring letter of credit, the proceeds of
such draw to be held by United Dominion in place of the letter of credit as
security for the Principals' obligations under Section 11.02.
(b) United Dominion shall give the Principals 10 days' advance notice of
its intent to draw under the Letter of Credit in connection with any unsatisfied
request by it for indemnification pursuant to Section 11.02 (other than a
request for indemnification relating to any penalties, damages and expenses
incurred by United Dominion in connection with any action or claim brought
against it by any person other than one or more of the Principals, SAM, PIC or
any of their Affiliates). Such notice will specify the date on which the
proposed draw will be made and the circumstances justifying the proposed draw.
If the Principals believe in good faith that United Dominion is not entitled to
draw under the Letter of Credit in connection with such request for
indemnification, (other than a request for indemnification relating to any
penalties, damages and expenses incurred by United Dominion in connection with
any action or claim brought against it by any person other than one or more of
the Principals, SAM, PIC or any of their Affiliates) then, not later than the
business day preceding the day on which the proposed draw is to be made, the
Principals shall give written notice to United Dominion of the reasons for such
belief and United Dominion shall defer the proposed draw until such dispute is
resolved as provided in Section 11.03(b).
ARTICLE XII.
EMPLOYEES
12.01 Property Employees. United Dominion and or an Affiliate of United
Dominion (collectively, the "Post-Closing Employer") shall offer employment to
all persons employed by SAM "on-site" at a Real Property (or any property
subject to the Option) ("Property Employees"), such employment to be offered at
such base salary as is paid to Property Employees as of the Closing Date (such
base salaries not to be increased materially following the date of this
Agreement), such employment to commence at Closing, provided however that the
Post-Closing Employer shall not be obligated to assume or be responsible for any
obligations of Sellers or the Real Property Owners (or the owners of any
property subject to the Option) prior to Closing, including without limitation
obligations to or in respect to such persons, and any other obligations for any
claims for salary or pursuant to any SAM Benefit Plan. Prior to the Closing,
Sellers may terminate any SAM Benefit Plan. SAM agrees to make adequate
disclosure and give any notice required by law to Property Employees before
Closing with respect to the transactions contemplated hereby and the effects on
benefits and severance of all Property Employees engaged in the operation of the
Real Properties, and to pay on behalf of itself (or cause to be paid) any and
all vacation, severance pay and other claims for periods of service prior to
Closing of any or all of Property Employees. Nothing in this Agreement shall
limit the Post-Closing Employer from taking any action at any time after Closing
in respect of its employees or the terms and conditions of employment. Nothing
in this Agreement is intended to give any Property Employees any right to
continued employment after Closing. As of the Closing Date, the Property
Employees are all employees of SAM.
The rights of any Property Employees who may be hired by the
Post-Closing Employer in respect of employee benefits on or after Closing shall
be governed by the terms of the employee plans or programs (if any) maintained,
established or contributed to by United Dominion or an Affiliate of United
Dominion, and such employees will have no rights or claims against United
Dominion, any Affiliate of United Dominion or any of United Dominion's or an
Affiliate of United Dominion's employee benefit plans or program except as they
may be entitled to benefits accrued thereunder as a result of their employment
by the PostClosing Employer on or after Closing. Property Employees will not be
third party beneficiaries of this Agreement. Neither Sellers nor any Real
Property Owner shall have any liability for any matter concerning any such plan.
12.02 Indemnification. (a) Sellers will remain fully responsible for
and will defend, indemnify and hold United Dominion and its Affiliates and their
respective officers, directors, shareholders and employees harmless from and
against any and all liabilities and obligations arising prior to Closing out of
Sellers' relationship with Property Employees and any termination, layoff, or
other alteration by Sellers of Property Employees' status, compensation or
benefits, including without limitation any such liabilities or obligations for:
(i) vacation pay and severance pay arising prior to Closing; (ii) any claims
arising prior to Closing under any federal or state law, statute, executive
order, or regulation, governing wages, hours, fair employment practices, or
other terms and conditions of employment, including but not limited to Title VII
of the Civil Rights Act of 1964, 42 U.S.C. Section 1981, the Age Discrimination
in Employment Act of 1967, the National Labor Relations Act, the Fair Labor
Standards Act, the Equal Pay Act, the Rehabilitation Act, the Americans with
Disabilities Act, the Worker Adjustment and Retraining Notification Act and
ERISA relating to the operations of SAM or the SAM Benefit Plans; (iii) any
claims arising prior to Closing for breach of an employment contract, whether
brought under the common law or pursuant to statute, for wrongful discharge, or
for any causes of action arising from the termination of employment by SAM; (iv)
all employee benefit plans or programs, including the SAM Benefit Plans and any
other welfare, pension, retirement, savings and profit sharing plan; and (v) all
of Property Employees' vested or owned benefits and rights with respect to SAM,
if any, and all expenses attributable thereto. Sellers agree to be financially
responsible for all worker's compensation claims having any accident date prior
to Closing, even if such claims are brought against United Dominion after
Closing.
(b) United Dominion will remain fully responsible for and will defend,
indemnify and hold Sellers and their Affiliates and their respective officers,
directors, shareholders and employees harmless from and against any and all
liabilities and obligations arising after the Closing Date out of United
Dominion's relationship with Property Employees for: (i) vacation pay and
severance pay arising after Closing; (ii) any claims arising after Closing under
any federal or state law, statute, executive order, or regulation, governing
wages, hours, fair employment practices, or other terms and conditions of
employment, including but not limited to Title VII of the Civil Rights Act of
1964, 42 U.S.C. Section 1981, the Age Discrimination in Employment Act of 1967,
the National Labor Relations Act, the Fair Labor Standards Act, the Equal Pay
Act, the Rehabilitation Act, the Americans with Disabilities Act, the Worker
Adjustment and Retraining Notification Act and ERISA relating to the operations
of United Dominion or any of its affiliates or the benefit plans of United
Dominion; (iii) any claims arising after Closing for breach of an employment
contract, whether brought under the common law or pursuant to statute, for
wrongful discharge, or for any causes of action arising from the termination of
employment by United Dominion or any of its Affiliates; (iv) all employee
benefit plans or programs and any welfare, pension, retirement, savings and
profit sharing plan ; and (v) all of Property Employees' vested or owned
benefits and rights with respect to United Dominion or any of its Affiliates, if
any; and all expenses attributable thereto. United Dominion agrees to be
financially responsible for all worker's compensation claims having any accident
date after Closing.
ARTICLE XIII.
MISCELLANEOUS
13.01 Notice. Whenever any notice may be given or is required to be
given under the terms of this Agreement, the same shall be given in writing and
either sent by certified mail, return receipt requested, postage pre-paid or by
a national overnight delivery service, delivery pre-paid or delivered by hand
with written receipt acknowledged, or by telecopy followed by another permitted
means of delivery. For purposes of giving notice hereunder the addresses of the
respective parties are:
If to United Dominion:
Mr. Richard B. Chess
United Dominion Realty Trust, Inc.
10 South 6th Street, Suite 203
Richmond, Virginia 23219-3802
Facsimile: (804) 343-1912
With copies to James Dolphin and Katheryn E. Surface, Esq., at
the above address.
If to any Seller or to PIC:
c/o Mr. Jeffery W. Kentner
Southeast Apartments Management, Inc.
211 State Street
Greensboro, North Carolina 27408
Facsimile: (910) 272-9730
With a copy to:
Charles M. Schwartz, Esq.
Gibson, Dunn & Crutcher LLP
1717 Main Street, Suite 5400
Dallas, Texas 75201-7390
Facsimile: (214) 698-3400
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.
Any notice required or given hereunder shall be deemed received when
received if sent by telecopy, hand or overnight delivery service, or seven (7)
days after posting if sent by certified mail, return receipt requested. Further,
all notices given pursuant to this Agreement from Sellers to United Dominion or
from United Dominion to Sellers will be effective if executed and sent by
counsel to the respective party.
13.02 Successors and Assigns. All rights and obligations of the parties
hereto under this Agreement shall inure to and be binding on their respective
successors and assigns.
13.03 Severability. If any provision of this Agreement shall be in
violation of any applicable law or unenforceable for any reason, the invalidity
or unenforceability of any provision shall not invalidate or render
unenforceable any other provision hereof, which other provisions shall remain in
full force and effect.
13.04 Entire Agreement. This Agreement and the other documents
contemplated hereby and thereby constitute the entire agreement between the
parties hereto and thereto with respect to the transactions contemplated hereby
and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto.
13.05 Modification. This Agreement may be modified only by a written
instrument duly executed by the parties hereto.
13.06 Incorporation by Reference. All of the Exhibits and Schedules
attached hereto are by this reference incorporated herein and made a part
hereof.
13.07 Cooperation; Further Assurances. Sellers agree to cause each Real
Property Owner, at United Dominion's cost and expense, to cooperate with United
Dominion after Closing, and to assist United Dominion after Closing in order for
there to be an orderly transition of ownership of the Real Properties. Sellers
further covenant and agree to cause each Real Property Owner, and PIC covenants
and agrees to sign, execute and deliver or cause to be signed, executed and
delivered and to do or make, or to cause to be done or made, upon the written
request of United Dominion and at United Dominion's cost and expense, any and
all agreements, instruments, papers, deed, acts or things, supplemental,
confirming or otherwise, as may be reasonably required by United Dominion for
the purpose of or in connection with the transactions contemplated hereby.
13.08 Time is of the Essence. Time is of the essence with respect to
every provision of this Agreement.
13.09 Days. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
13.10 Applicable Law. This Agreement shall be construed, performed and
enforced in accordance with the laws of the Commonwealth of Virginia, except to
the extent that the laws of the jurisdiction in which any Real Property is
located are mandatorily applicable to a provision of this Agreement.
13.11 Like-Kind Exchange. United Dominion reserves the right to assign
its rights under this Agreement to purchase any Real Property (but without
release of its obligations hereunder or under any other agreement relating to
such Real Property) to a third party who may purchase or sell and thereafter
exchange such Real Property in accordance with the provisions of Section 1031 of
the Code. Such exchange shall be accomplished at no additional expense or delay
to Sellers or their Affiliates and United Dominion agrees to indemnify Sellers
and their Affiliates against any claims or liabilities resulting from
structuring the transaction involving such Real Property as an exchange, rather
than a direct purchase.
13.12 Survival of Representations and Warranties. Except as otherwise
set forth in this Agreement, the representations and warranties contained herein
shall survive the Closing for four years from the date of Closing, provided,
however, that the tax representations and warranties shall survive until 60 days
after the expiration of the applicable statute of limitations (including any
extensions thereof) with respect to any tax liability in question.
13.13 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signatures on behalf of all parties appear on each counterpart hereof.
All counterparts hereof shall collectively constitute a single agreement.
13.14 Sellers' Obligations. All agreements, covenants and other
obligations of Sellers or PIC under this Agreement, including any representation
and warranty made by Sellers or PIC herein, and Sellers' or PIC's liability
resulting from any breach of any such agreement, covenant or obligation, shall
be joint and several.
13.15 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, except that (i) the Purchase Price shall be reduced by
an amount bearing the same proportion to the aggregate amount of the first
dividends payable to the Principals as holders of record of the United Common
Stock issued pursuant to this Agreement that the number of days between the
Closing and the record date for such payment of such dividends bears to the
number of days between such record date and the immediately preceding record
date and (ii) United Dominion shall pay all premiums in connection with the
title insurance policies contemplated by Section 8.02(a). Costs and expenses of
SAM incurred in connection with this Agreement and the transactions contemplated
hereby shall be deemed costs and expenses of the Sellers and shall be paid by
the Sellers.
13.16 Transfer Taxes and Fees. All fees, taxes or assessments charged to
grantors, transferors or assignors under the applicable law in connection with
the transactions contemplated herein, together with all other transfer, sales,
recording and filing fees resulting from the transfer of the Real Property to
United Dominion shall be paid by United Dominion or Sellers, as the case may be,
as set forth on Exhibit T in accordance with the Purchase Price Allocation
attached as Exhibit U.
13.17 No Third Party Beneficiaries. There are no third-party
beneficiaries of this Agreement, express or implied, and no party who is not a
signatory to this Agreement shall have any rights or remedies hereunder. The
parties acknowledge that the Principals rights and remedies under this Agreement
shall not be limited by reference to their ownership interest in any Real
Property Owner and that the Principals may enforce the provisions of this
Agreement in full in the place of any Real Property Owner.
[Signatures appear on next page]
8
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the parties hereto as of the date first above
written.
SAM
SOUTHEAST APARTMENTS MANAGEMENT, INC.,
a North Carolina corporation
By: __________________________________
Its: ___________________________________
PARTNERS IN COMMUNICATIONS, INC.,
a North Carolina corporation
By: __________________________________
Its: ___________________________________
United Dominion:
UNITED DOMINION REALTY TRUST, INC.,
a Virginia corporation
By: ___________________________________
Its: ___________________________________
The Principals:
- -----------------------------
John C. Harmon
- -----------------------------
Jeffery W. Kentner
- -----------------------------
Thomas L. White, Jr.
9
July 29, 1996
BY FACSIMILE (910) 272-9730
Mr. Jeffery W. Kentner
Southeast Apartments Management, Inc.
211 State Street
Greensboro, North Carolina 27415
Re: Reinstatement and Amendment of Agreement of Purchase and Sale
dated July 1, 1996 (the "Purchase Agreement")
Dear Jeff:
This letter is to set forth the terms upon which we will agree to reinstate the
Purchase Agreement with the following amended or additional terms and
conditions.
1. COBRA. SAM agrees to cooperate with United Dominion prior to Closing with
respect to the potential post-closing administration and sponsorship by United
Dominion of the health plan of SAM. It is acknowledged by United Dominion that
United Dominion does not expect any costs to be incurred by SAM in connection
with potential post-closing administration and sponsorship by United Dominion of
such health plan.
2. Exhibits U and W. Exhibit U is amended as set forth on the attached revised
Exhibit U. With respect to property in Georgia, Exhibit W is amended to delete
the next to last sentence in paragraph 1. In the event of a United Dominion
breach of the covenant contained in paragraph 1(b), the Sellers shall be paid
liquidated damages of $50,000.
3. Cape Harbor. United Dominion will prepare a punch list of items to be
completed with respect to Cape Harbor by August 5, 1996, which punch list shall
be satisfactory to SAM. The completion of the punch list items will be a
condition precedent to United Dominion=s obligation to close.
4. Northwinds II. United Dominion acknowledges that the easement reserved for
the benefit of Phase II at Northwinds in the Seller Disclosure Letter is a
Permitted Exception with the following additional terms. The easement shall
require that the Seller shall pay its reasonable prorata share for the use of
the clubhouse and other amenities beginning January 1, 1998. If the Seller does
not pay such amount, the right to use the clubhouse and amenities shall
automatically terminate. The easement shall also require that the Seller
indemnify United Dominion and its successors and assigns (and carry public
liability insurance in commercially reasonable amounts) for its use of the Phase
I property pursuant to the easement.
5. Title and Survey. The Fleet Deeds of Trust shall not be a Permitted
Encumbrance and shall be released at Closing. The Sellers will use their
commercially reasonable efforts under the circumstances to complete the other
items you have mentioned in your recent correspondence with Katheryn.
6. Waiver. United Dominion will waive its right to terminate the Purchase
Agreement pursuant to Section 3.01 and the Sellers waive their right to
terminate pursuant to Section 3.03. United Dominion agrees to assume the Assumed
Notes and Assumed Loan Documents, and (i) with respect to the Assumed Notes held
by First Union National Bank and Wachovia, to cause the release of the
Principals and the Real Property Owners from their respective obligations under
the Assumed Notes, and (ii) with respect to the Assumed Notes held by FNMA, to
cause the release of the Principals and the Real Property Owners from their
obligations under the respective Assumed Notes, other than certain environmental
obligations required by FNMA. Failure of United Dominion or its Affiliate to
assume the Assumed Notes and the Assumed Loan Documents and cause the releases
described in (i) and (ii) of the preceding sentence by September 5, 1996 shall
be a material breach of the Purchase Agreement.
7. Operation of Assets. The Seller shall use their commercially reasonable
efforts under the circumstances to comply with Section 8.02 (d) (iv) of the
Purchase Agreement.
8. Closing. Closing shall take place as contemplated pursuant to Section 9.01 of
the Purchase Agreement, with all parties using their best efforts to close by
such date. In the event Closing does not occur by August 20, 1996, except as a
result of willful or negligent acts of the Sellers, the Sellers shall be paid
$20,000 per day (the "Closing Penalty") as damages until the earlier to occur of
(i) Closing, or (ii) the date either party has the right to terminate the
Purchase Agreement. In the event United Dominion exercises its right to extend
Closing as contemplated by Section 2.02 of the Purchase Agreement, the Closing
Penalty shall accrue notwithstanding the extension.
9. Escrow Agreement. The Escrow Agreement shall be reinstated and United
Dominion shall promptly deposit Nine Million Five Hundred Thousands Dollars
($9,500,000) with the Escrow Agent to be held with the Five Hundred Thousand
Dollars ($500,000) currently deposited with the Escrow Agent and disbursed
pursuant to the Escrow Agreement.
If you agree with these terms, please execute a copy of this letter and return
it to me by 5:00 p.m. July 30, 1996, in which case the Purchase Agreement and
the Escrow Agreement shall be reinstated, subject to the foregoing amended or
additional terms and conditions. The terms of this letter are subject to
contemporaneous acceptance of the letter agreement with respect to the Option,
as defined in the Purchase Agreement (the "Option Letter"). If we do not receive
a fully executed copy of this letter and the Option Letter by 5:00 p.m. July 30,
1996, this offer shall automatically terminate.
Sincerely,
Richard B. Chess
Director of Acquisitions
cc: James W. Featherstone, III, Esquire
Randall S. Parks, Esquire
Charles M. Schwartz, Esquire (By fax: (508) 325-6086)
Ms. Katheryn E. Surface
SEEN AND AGREED:
SOUTHEAST APARTMENTS MANAGEMENT, INC.,
a North Carolina corporation
By:
Its:
PARTNERS IN COMMUNICATIONS, INC.,
a North Carolina corporation
By:
Its:
PRINCIPALS:
John C. Harmon
Jeffery W. Kentner
Thomas J. White, Jr.
ESCROW AGENT:
LAWYERS TITLE INSURANCE CORPORATION,
a Virginia corporation
By:
Its:
10
August 5, 1996
BY FACSIMILE (910) 272-9730
AND OVERNIGHT COURIER
Mr. Jeffery W. Kentner
Southeast Apartments Management, Inc.
211 State Street
Greensboro, North Carolina 27415
Re: Amendment of Agreement of Purchase and Sale dated July 1, 1996, as amended
by Letter Agreement dated July 29, 1996 (the "Purchase Agreement")
Dear Jeff:
This letter sets forth certain amendments to the Purchase Agreement relating to
United Dominion's obligation to deliver registered shares of United Dominion
Common Stock at Closing. Unless otherwise defined, capitalized terms used in
this letter have the meanings assigned to them in the Purchase Agreement.
1. Section 7.04, Listing Application. Notwithstanding the provisions of Section
7.04 of the Purchase Agreement, not later than the date on which United Dominion
files the Registration Statement referred to in the amended and restated
Investment Agreement referred to in paragraph 2, below (the "Registration
Statement"), United Dominion shall prepare and submit to the NYSE a listing
application covering the Common Stock to be issued to the Principals pursuant to
the Agreement and shall use its best efforts to obtain approval for the listing
of such Common Stock on the NYSE as soon as possible, but in no event later than
the seventy-fifth day following Closing.
2. Investment Agreement. The Investment Agreement (Exhibit G-1) to be delivered
by each Principal to United Dominion at Closing pursuant to Section 9.03(l) of
the Purchase Agreement is amended and restated in the form attached hereto. All
references in the Purchase Agreement and any related documents to the Investment
Agreement shall be deemed to refer to the attached form of the Investment
Agreement.
3. Section 9.04(g). (a) Section 9.04(g)(vi) of the Purchase Agreement is
deleted and the following is substituted therefor:
(vi) The issuance of United Common Stock pursuant to this
Agreement does not conflict with the registration requirements of the
Securities Act and the Virginia Securities Act and the North Carolina
Securities Act.
(b) Section 9.04(g)(vii) of the Purchase Agreement is amended by
deleting the words ", both of which have been obtained" at the end of such
subparagraph.
If the foregoing is satisfactory to you, please so indicate by executing a copy
of this letter and returning it to me by facsimile by 5:00 p.m. Thursday, August
8, 1996, with the original following by first class mail.
Sincerely,
Katheryn E. Surface
Vice President and General Counsel
cc: Mr. Richard B. Chess
James W. Featherstone, III, Esquire
Randall S. Parks, Esquire
Charles M. Schwartz, Esquire
11
SEEN AND AGREED:
SOUTHEAST APARTMENTS MANAGEMENT, INC.,
a North Carolina corporation
By:__________________________
Name:
Title:
PARTNERS IN COMMUNICATIONS, INC.,
a North Carolina Corporation
By:__________________________
Name:
Title:
PRINCIPALS:
- -----------------------------
John C. Harmon
- -----------------------------
Jeffery W. Kentner
- -----------------------------
Thomas J. White, Jr.
12
This exhibit omits the exhibits and schedules (the "Omitted Schedules") the
contents of which are briefly identified under "Exhibits and Schedules" in the
Table of Contents. The registrant agrees to furnish supplementally a copy of any
such omitted schedule to the Commission upon request.
13