1
EXHIBIT 2.4
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT is made and entered into this 30th day of
September, 1996, by and among DONALD L. SMITH ("Smith"), individually, a single
man, and S&K SMITH CO., a Michigan co-partnership ("S&K"; S&K and Smith are
sometimes hereinafter collectively referred to as the "Contributors"), and SUN
COMMUNITIES OPERATING LIMITED PARTNERSHIP ("Sun"), a Michigan limited
partnership having its principal office at 31700 Middlebelt, Suite 145,
Farmington Hills, Michigan 48334, or its designee or assignee.
R E C I T A L S:
A. The Contributors are the owners of parcels of real property
(the "Continental Land") located in the City of Davison, Genesee County,
Michigan, containing 386 developed manufactured home sites on approximately 60
acres, commonly known as Continental Estates Manufactured Home Community
("Continental Estates"), as more fully described in Exhibit "A" attached hereto
and made a part hereof, together with the buildings, structures, improvements
and manufactured home sites on, above or below the Continental Land, and all
fixtures attached to, a part of or used in connection with the improvements,
structures, buildings and manufactured home sites, and the parking, facilities,
walkways, ramps and other appurtenances relating to the Continental Land
(collectively the "Continental Improvements").
B. The Contributors are the owners of parcels of real property
(the "Continental North Land") located in the City of Davison, Genesee County,
Michigan, containing 334 developed manufactured home sites and 80 undeveloped
manufactured home sites on approximately 80 acres, commonly known as
Continental North Manufactured Home Community ("Continental North"), as more
fully described in Exhibit "B" attached hereto and made a part hereof, together
with the buildings, structures, improvements and manufactured home sites on,
above or below the Continental North Land, and all fixtures attached to, a part
of or used in connection with the improvements, structures, buildings and
manufactured home sites, and the parking, facilities, walkways, ramps and other
appurtenances relating to the Continental North Land (collectively the
"Continental North Improvements").
C. The Contributors are the owners of parcels of real property
(the "Davison East Land"; the Davison East Land, Continental Land, and
Continental North Land are sometimes hereinafter collectively referred to as
the "Land") located in the City of Davison, Genesee County, Michigan,
containing 190 developed manufactured home sites on approximately 24 acres,
commonly known as Davison East Manufactured Home Community ("Davison East"), as
more fully described in Exhibit "C" attached hereto and made a part hereof,
together with the buildings, structures, improvements and manufactured home
sites on, above or below the Davison East Land, and all fixtures attached to, a
part of or used in connection with the improvements, structures, buildings and
manufactured home sites, and the parking, facilities, walkways, ramps and other
appurtenances relating to the Davison East Land (collectively the "Davison East
Improvements"; the Davison East Improvements, Continental Improvements, and
Continental North Improvements are sometimes hereinafter collectively referred
to as the "Improvements").
D. The Contributors are the owners of all machinery, equipment,
goods, vehicles, manufactured homes and other personal property (collectively
the "Personal Property") described in Exhibits "D1", "D2" and "D3", attached
hereto and made a part hereof, which is located at or useable in connection
with the ownership or operation of the Continental Land and Continental
Improvements, Continental North Land and Continental North Improvements, and
the Davison East Land and Davison East Improvements, respectively. The
Personal Property does not include the Leased Homes (as defined in Section 18
below).
2
E. The Land, the Improvements, and the Personal Property,
together with all of the Contributors' right, title and interest in and to all
licenses, permits and franchises issued with respect to the use, occupancy,
maintenance or operation of the Land and Improvements, all right, title and
interest, if any, of the Contributors in and to any land lying in the bed of
any street, road or avenue, open or proposed, in front of or adjoining the Land
to the center line thereof, all easements appurtenant to the Land, including,
but not limited to, privileges or rights of way over adjoining premises inuring
to the benefit of the Land, or the fee owner thereof, and all rights of use,
air, mineral and subsurface rights, servitudes, licenses, tenements,
hereditaments and appurtenances now or hereafter belonging to the foregoing are
hereinafter sometimes collectively referred to as the "Projects". The Land,
Improvements, and Personal Property relating to one of manufactured housing
communities is sometimes individually referred to as a "Project".
F. The Contributors desire to contribute the Projects to Sun, and
Sun desires to accept the contribution of the Projects from the Contributors,
all upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises, and the
mutual promises hereinafter set forth, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
1. AGREEMENT TO CONTRIBUTE.
1.1 The Contributors agree to contribute the Projects to Sun, and
Sun agrees to accept the Projects from the Contributors, in accordance with the
terms and subject to the conditions hereinafter set forth.
2. CONSIDERATION.
2.1 The parties agree that the aggregate value (the "Agreed
Value") of the Projects, exclusive of the 80 undeveloped manufactured home
sites within Continental North, is Sixteen Million and 00/100 ($16,000,000.00)
Dollars less (i) the amount necessary to payoff in full the Mortgages (as
defined in Section 3.1(a), including all costs and prepayment fees related
thereto, anticipated to be approximately Two Million Eight Hundred Thousand and
00/100 Dollars ($2,800,000.00), (ii) the costs incurred by Sun for the policy
of title insurance and endorsements thereto to be issued pursuant to Section
19.2(e) hereof, the Surveys to be obtained pursuant to Section 4.2 and the
Environmental Audits to be obtained pursuant to Section 10.1(e), and (iii) the
sum of all transfer, documentary, intangible, sales, use and other taxes paid
by Sun pursuant to the terms hereof as a result of the transfer of the Projects
to Sun. In consideration for the contribution of the Projects (exclusive of
the 80 undeveloped manufactured home sites within Continental North) to Sun, on
the Contribution Date Sun shall issue to the Contributors the number of Common
OP Units (such term having the meaning assigned to it in Sun's Second Amended
and Restated Limited Partnership Agreement) equal to a fraction in which the
numerator is the Agreed Value and the denominator is the "Stock Price". The
Stock Price shall mean (i) $1.00 over the Base Price (as defined below) if such
Base Price is $27.50 per share or less; (ii) $28.50 if the Base Price is
greater than $27.50 and less than $28.50; and (iii) the Base Price if the Base
Price is $28.50 or more. The Base Price will equal the average closing stock
price per share of the common stock of Sun Communities, Inc. (the "REIT")
during the five (5) business days immediately prior to the Contribution Date.
-2-
3
2.2 If during the two (2) year period immediately following the
Contribution Date the highest average closing stock price of the REIT for any
five (5) consecutive business days (the "New Average Stock Price") does not, at
a minimum, equal the Stock Price used when determining the number of Common OP
Units issued pursuant to Section 2.1 and the Stock Price used in Section 2.1
was less than $28.50 per share, Sun will issue additional Common OP Units to
the Contributors (the "Additional Issuance") equal to the difference between
the number of Common OP Units issued to the Contributors at closing and (i) the
number of Common OP Units which would have been issued to the Contributors if
the New Average Stock Price had been used as the Stock Price in determining the
number of such Common OP Units to be issued pursuant to Section 2.1, or (ii)
the number of Common OP Units which would have been issued to the Contributors
if the Base Price had been used as the Stock Price in determining the number of
such Common OP Units to be issued pursuant to Section 2.1, whichever is less.
2.3 The Common OP Units issued pursuant to Section 2.1 shall be
issued effective as of one day after the REIT's dividend record date
immediately following the Contribution Date. The Common OP Units issued
pursuant to Section 2.2, if any, shall be issued effective as of one day after
the REIT's dividend record date immediately following the second anniversary of
the Contribution Date. With respect to the calendar quarter in which the
issuance of Common OP Units is effective, Sun will make a payment to the
Contributors per Common OP Unit equal to the product of (x) the distribution
per Common OP Unit for the REIT's record date immediately preceding the date
the issuance of such Common OP Units is effective and (y) a fraction in which
the numerator is the number of days from, but not including, the Contribution
Date (with respect to Common OP Units issued pursuant to Section 2.1) or the
second anniversary of the Contribution Date (with respect to any Common OP
Units that may be issued pursuant to Section 2.2) to the end of the calendar
quarter and the denominator is the number of days in the calendar quarter in
which falls the Contribution Date (with respect to Common OP Units issued
pursuant to Section 2.1) or the second anniversary of the Contribution Date
(with respect to any Common OP Units that may be issued pursuant to Section
2.2). Such payment shall be made on the date the REIT's dividend payment is
made for such calendar quarter.
2.4 If prior to the second anniversary of the Contribution Date,
the common stock of the REIT shall be effected by any recapitalization, merger,
consolidation, reorganization, stock dividend, stock split or other change in
capitalization affecting the common stock of the REIT, the formula for the
issuance of additional Common OP Units set forth above shall be appropriately
adjusted to prevent the dilution or enlargement of the rights and obligations
of Sun and the Contributors pursuant to Section 2.2 which may otherwise result
due to such event or transaction.
2.5 The Common OP Units to be issued to the Contributors pursuant
to the terms hereof shall be governed by Sun's Second Amended and Restated
Limited Partnership Agreement, dated as of April 30, 1996, as amended (the "Sun
Partnership Agreement"), a copy of which is attached hereto as Exhibit "2.5(a)"
and made a part hereof, as such Sun Partnership Agreement shall be amended on
the Contribution Date only to reflect the admission of the Contributors as
limited partners and the issuance of such Common OP Units to the Contributors.
In addition, effective as of the Contribution Date, the Contributors and the
REIT shall enter into a Registration Rights Agreement in the form attached
hereto as Exhibit "2.5(b)", and each Contributor shall execute and deliver such
investment and subscription documents as Sun shall reasonably require in
connection with the issuance of the Common OP Units and represent and warrant
that such Contributor and each equity owner of such Contributor which is a
corporation or partner is a Michigan resident and an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
2.6 In addition to the issuance of Common OP Units pursuant to
Sections 2.1 and 2.2, Sun shall also pay the Contributors an additional sum
(the "Cash Purchase Price") of Two Hundred
- 3 -
4
Forty Thousand and 00/100 Dollars ($240,000.00) for the 80 undeveloped
manufactured home sites within Continental North (the "Undeveloped Sites").
After the Contribution Date, Sun shall proceed in good faith and with due
diligence to complete the development of the Undeveloped Sites. The Cash
Purchase Price is payable from time to time, in accordance with the following
procedures.
(a) Sun shall pay to the Contributors the sum of Three
Thousand and 00/100 Dollars ($3,000.00) for each Undeveloped Site
which becomes an Occupied Site. "Occupied Sites" means those
Undeveloped Sites actually occupied by bona fide independent third
party tenants paying Market Rate Rent pursuant to leases written on
Sun's standard from lease for Continental North and who have delivered
to the landlord the security deposit required by their respective
leases. "Market Rate Rent" means the current rental rates in effect
at Continental North at the time the tenant entered into its lease,
excluding any discounts, free rent or other incentives offered to new
tenants. The payments under this Section 2.6(a) shall be due within
thirty (30) days after a total of ten (10) Undeveloped Sites become
Occupied Sites and shall cover all sites which became Occupied Sites
since the last such application, or if there was no previous
application, since the Contribution Date. Rent payable under leases
for the Occupied Sites prior to the payment of the Cash Purchase Price
therefor shall belong to Sun.
(b) If the entire Cash Purchase Price has not been paid by
the third anniversary of the Contribution Date, the difference,
without interest, between the Cash Purchase Price and all amounts
previously paid pursuant to this Section 2.6, shall be paid to the
Contributors on, or at Sun's option, before, the third anniversary of
the Contribution Date.
3. PERMITTED EXCEPTIONS.
3.1 The Projects shall be conveyed to Sun subject only to the
following matters (the "Permitted Exceptions"):
(a) Those certain Mortgages (collectively, the
"Mortgages"), encumbering the Projects, from the Contributors to NBD
Bank, N.A. (the "Lender"), which Mortgages secure payment of certain
promissory notes, identified, with their original and outstanding
principal balances, on the Schedule of Mortgages attached hereto as
Exhibit 3.1(a) and made a part hereof.
(b) Those liens, encumbrances, easements and other
matters set forth on Schedule B of the Commitment to be delivered
pursuant to Section 4.1 hereof which Sun does not designate as Title
Defects pursuant to Section 5.1 hereof;
(c) The rights of parties in occupancy of all or any
portion of the Continental Land and Continental Improvements,
Continental North Land and Continental North Improvements and Davison
East Land and Davison East Improvements, respectively, under leases,
subleases or other written agreements, to the extent set forth and
described in the current Rent Rolls (collectively, the "Rent Rolls"
and individually, a "Rent Roll") attached hereto as Exhibits
"3.1(c)-1", "3.1(2)-2" and 3.1(2)-3", respectively, as the same shall
be updated to the Contribution Date; and
(d) All presently existing and future liens for unpaid
real estate taxes, assessments for public improvements installed after
the Contribution Date, and water and sewer charges and rents, subject
to adjustment thereof as hereinafter provided.
4. EVIDENCE OF TITLE; SURVEY; LIEN SEARCHES.
-4-
5
4.1 Within thirty (30) days after the date hereof, the
Contributors shall furnish Sun with a commitment (the "Commitment") for an
A.L.T.A. Form B Owner's Policy of Title Insurance covering all of the Projects,
without standard exceptions, issued by a nationally recognized title insurance
company reasonably acceptable to Sun (the "Title Company"), along with copies
of all instruments described in Schedule B of the Commitment, in the amount of
Sixteen Million Two Hundred Forty Thousand and 00/100 Dollars ($16,240,000.00),
and showing marketable and insurable title in the Contributors subject only to:
(a) the Permitted Exceptions; and (b) such other title exceptions pertaining to
liens or encumbrances of a definite or ascertainable amount which may be
removed by the payment of money at the Closing, and which the Contributors have
the right to remove and shall cause to be removed at or prior to Closing (the
"Removable Liens"). At Closing, the Contributors shall cause to be provided to
Sun, at Sun's expense, a policy of title insurance issued pursuant to the
Commitment, insuring the interest in the Projects being acquired by Sun without
the "standard exceptions" and containing such additional endorsements as Sun
shall reasonably request.
4.2 Within thirty (30) days after the date hereof, the
Contributors shall furnish Sun with a current ALTA "as built" survey (the
"Surveys") for each of the Projects prepared by a licensed surveyor or engineer
approved by Sun, certified to Sun, the Title Company, and any other parties
designated by Sun, using the form attached as Exhibit "4.2" hereto, or such
other form of Survey and certificate as Sun may designate. Each of the Surveys
shall show the legal description of the Land to which such Survey relates, the
total acreage of each parcel comprising such Land, all structures and
improvements located thereon (other than manufactured homes), all boundaries,
courses and dimensions, set-back lines, easements and rights of way (including
any recording references), the location of all highways, streets and roads upon
or adjacent to such Land, and the location of all utility lines and connections
with such utility lines. Each of the Surveys shall be sufficient for removal
of the standard survey exception from the policy of title insurance to be
issued pursuant to the Commitment and shall not reveal any of the following:
(i) encroachments on a Project or any portion thereof from any adjacent
property, (ii) the encroachment of a Project, or any portion thereof, on any
adjacent property, or (iii) any violation by any portion of a Project of any
recorded building liens, restrictive covenants or easements affecting such
Project. Each of the Surveys shall be in form and content acceptable to Sun
and its lenders. The cost of the Surveys shall be borne by Sun, unless this
Agreement terminates for any reason other than the default of Sun, in which
case, the Contributors shall pay the cost of the Surveys.
4.3 Prior to the Contribution Date, the Contributors shall deliver
to Sun Uniform Commercial Code financing statement and tax lien searches with
respect to each of the Contributors from the State of Michigan, the County of
Genesee, Michigan, and the State of each Contributor's principal office, if not
Michigan, dated within ten (10) days prior to the Closing, showing no security
interests, pledges, liens, claims or encumbrances in or affecting the Projects
including the Personal Property, except for security interests of a definite or
ascertainable amount which may be removed by the payment of money at Closing
and which the Contributors have a right to, and do remove at Closing and
security interests relating to the Mortgages.
5. TITLE OBJECTIONS.
5.1 If the Commitment or any Survey discloses exceptions which are
not acceptable to Sun, in its sole discretion, other than the Removable Liens,
Sun shall notify the Contributors in writing of its objections to such
exceptions (the "Title Defects"), and the Contributors agree to use their best
efforts to cure any such Title Defects. If Sun objects to any exception
disclosed on the Commitment or a Survey, such exception shall not be treated as
a Permitted Exception hereunder. If the Contributors fail to have the Title
Defects deleted from the Commitment or Survey, as the case may be, or
discharged within ten (10) days after receipt of notice from Sun (or such
longer time period designated by Sun) or to remove the Removable Liens at or
prior to Closing as required herein, Sun may: (a) terminate this Agreement by
delivery of written notice to the Contributors,
- 5 -
6
whereupon neither the Contributors nor Sun shall have any further duties or
obligations under this Agreement other than the Contributors' obligation to pay
legal fees for the drafting of this Agreement as described in Section 20.1 and
reimburse Sun for certain expenses as set forth herein; (b) elect to take title
as it then is, and for purposes of determining the number of Common OP Units to
be issued to the Contributors pursuant to Section 2.1, reduce the Agreed Value
by the actual cost, up to a maximum sum of $50,000.00, incurred or to be
incurred by Sun to cure such Title Defects, and the actual amount paid to
remove the Removable Liens; or (c) extend for up to ninety (90) days the period
for the Contributors to cure such Title Defects, and if such Title Defects are
not deleted during the extended period, Sun may then exercise its rights under
subparagraphs (a) or (b) above. If the Contributors cause such Title Defects
to be deleted from the Commitment, the Closing shall be held within seven (7)
days after delivery of the revised Commitment and Survey or on the Closing Date
specified in Section 19 hereof, whichever is later.
6. INFORMATION AND ACCESS TO PROJECT.
6.1 Within five (5) days after the complete execution hereof, the
Contributors shall deliver to Sun, or make available at the office of the
Projects, and thereafter Sun shall have access to, the following:
(a) Copies of all leases, subleases, occupancy and
tenancy agreements, and written commitments to lease currently in
effect and covering any portion of the Projects (the "Tenant Leases");
all collection and credit reports pertaining to the Tenant Leases; the
monthly management and operating reports customarily prepared by or on
behalf of the Contributors for the last twelve (12) calendar months;
and each Project's operating budget for the current year;
(b) The prospectus for each of the Projects, if
applicable, and copies of all equipment leases, service, utility,
supply, maintenance, concession and employment contracts, agreements,
and other continuing contractual obligations (collectively the
"Project Contracts") affecting the ownership or operation of the
Projects;
(c) Annual statements of the results of the operation of
each of the Projects for each of the last three (3) full calendar
years, and copies of federal tax returns for the Contributors covering
the Contributors' last three (3) fiscal years;
(d) Architectural drawings, plans and specifications and
site plans for each of the Projects, to the extent available;
(e) Copies of all written notices of any zoning, safety,
building, fire, environmental, health code or other violation relating
to any of the Projects and not cured prior to the date hereof; and
(f) All other financial data, operating data, contracts,
leases, instruments, invoices and other writings relating to the
Projects which Sun may reasonably request, including, without
limitation, tax bills and correspondence with the tax assessor, rent
rolls for the past two years, information concerning capital
improvements installed by the Contributors, information concerning
historical rent increases imposed by the Contributors, a list of
recurring services not furnished to the Projects through the Project
Contracts, information concerning any pending or threatened
litigation, utility bills for the past two (2) years, insurance
policies and information regarding insurance claims, certificates of
occupancy, existing environmental reports, appraisals and market
studies, and the organizational documents of each Project's homeowners
association, if organized, and any agreements between the Contributors
and such homeowners association.
- 6 -
7
6.2 At all reasonable times from and after the date hereof, the
Contributors shall afford Sun and its representatives full and free access to
the Projects, including, but not limited to, the right to conduct
environmental, soil, engineering and other tests and to inspect the mechanical,
plumbing and utility systems located at the Projects, together with all other
aspects of the Projects; provided, however, if Sun or its representatives enter
upon a Project pursuant to the terms hereof, Sun agrees to indemnify and hold
the Contributors harmless from all damage caused to any person or such Project
as a result of such entry and the negligent acts or omissions of Sun or its
representatives. Further, Sun shall have the right, at its expense, to cause
its accountant to prepare audited financial statements of the operations at the
Projects for the calendar years ended December 31, 1993, December 31, 1994 and
December 31, 1995, and for the period from January 1, 1996 through the calendar
month preceding the Contribution Date, and the Contributors shall cooperate and
assist it in all respects with the preparation of the audited financial
statements. The Contributors shall furnish to Sun and its accountants all
financial and other information in its possession or control to enable such
accountants to prepare audited financial statements in conformity with
Regulation S-X promulgated by the Securities and Exchange Commission ("SEC")
and any registration statement, report or disclosure statement filed with, and
any rule issued by, the SEC. The Contributors also shall provide a signed
representation letter as prescribed by generally accepted auditing standards as
promulgated by the Auditing Standards Divisions of the American Institute of
Public Accountants which representation letter is required to enable an
independent public accountant to render an opinion on such financial
statements.
7. ASSIGNMENT OF LEASES, PROJECT CONTRACTS AND INTANGIBLES.
7.1 The Contributors shall assign to Sun on the Contribution Date
all of the Contributors' rights under all Tenant Leases covering any portion of
any Project and all security and other deposits furnished by tenants under the
Tenant Leases. The Contributors shall deliver to Sun all original Tenant
Leases and documents and records with respect thereto. The Contributors shall
indemnify, defend and hold harmless Sun from and against any loss or damage
suffered by Sun as the result of any breach of the lessor's obligations under
the Tenant Leases which occurred prior to the Contribution Date or as a result
of the Contributors' failure to deliver any tenant security or other deposits
to Sun. Sun shall indemnify, defend and hold harmless the Contributors from
and against any loss or damage suffered by Contributors as the result of any
breach of the lessor's obligations under the Tenant Leases which occurs
subsequent to the Contribution Date.
7.2 All Project Contracts which Sun, in its sole discretion, has
elected to accept an assignment of by notice to the Contributors on or prior to
the Contribution Date shall be assigned by the Contributors to Sun on the
Contribution Date. The Contributors shall indemnify, defend and hold harmless
Sun from and against any loss or damage suffered by Sun as a result of any
breach of the Contributors' obligations under the Project Contracts which
occurred prior to the Contribution Date, whether or not Sun has elected to take
an assignment of the Project Contract, or as a result of the Contributors'
termination of any Project Contract which is not assigned to Sun. Sun shall
indemnify, defend and hold harmless Contributors from and against any loss or
damage suffered by Contributors as a result of any breach of Sun's obligations
under the Project Contracts assigned to Sun at its request which may occur
subsequent to the Contribution Date.
7.3 On the Contribution Date, the Contributors shall assign to Sun
all of their right, title and interest in and to: (a) all licenses, permits
and franchises then held by the Contributors for the Projects which may be
lawfully assigned and which may be necessary or desirable, in Sun's opinion, to
operate the Projects; (b) any warranties and guaranties from manufacturers,
suppliers and installers pertaining to the Projects; (c) the names "Continental
Estates Manufactured Home Community", "Continental North Manufactured Home
Community", "Davison East Manufactured Home Community", and all variations
thereof; (d) the telephone number(s) for all of the Contributors' telephones
installed at the Projects; (e) all architectural drawings, plans and
- 7 -
8
specifications and other documents in the Contributors' possession relating to
the development of the Projects; (f) all business, operating and maintenance
records, reports, notices and other information concerning the Projects; and
(g) all other intangible property related to the Projects (collectively, the
"Intangible Property").
8. ADJUSTMENTS AND PRORATIONS.
8.1 The following adjustments and prorations shall be made at the
Closing between the Contributors and Sun computed to, but not including, the
Contribution Date.
(a) Real estate taxes and personal property taxes which
are a lien upon or levied against any portion of a Project on or prior
to the Contribution Date, and all special assessments levied prior to
the Contribution Date shall be paid by the Contributors. All current
real estate taxes and personal property taxes levied against any
portion of a Project shall be prorated and adjusted between the
parties in accordance with local custom and practice in Genesee
County, Michigan, as mutually agreed to by the Contributors and Sun
and shall be paid by the Contributors or Sun, as the case may be.
(b) The amount of all unpaid water and other utility
bills, and of all other expenses incurred with respect to the
Projects, relating to the period prior to the Contribution Date, shall
be paid by the Contributors.
(c) Charges under Project Contracts which are assigned to
Sun at Sun's request shall be paid by the Contributors, to the extent
attributable to the period prior to the Contribution Date, and shall
be paid by Sun, to the extent attributable to the period after the
Contribution Date, and all charges due under Project Contracts not
assigned to Sun shall be paid by the Contributors.
(d) All rental and other revenues collected by the
Contributors up to the Contribution Date which are allocable to the
period subsequent to the Contribution Date shall be paid by the
Contributors to Sun. To the extent Sun collects, within ninety (90)
days after the Closing, any rental or revenues allocable to the period
prior to the Contribution Date, Sun shall pay the same to the
Contributors; provided, however, Sun is assuming no obligation
whatsoever for the collection of such rentals or revenues and all
rentals and revenues collected subsequent to the Contribution Date
shall always, in the first instance, be applied first to the most
current rentals and revenues, if any, then due under the Tenant Leases
or otherwise. Sun shall have no obligation to remit to the
Contributors any such delinquent rents collected later than ninety
(90) days after the Closing.
(e) All security and other deposits held under the Tenant
Leases, together with any interest accrued thereon (to the extent
applicable law requires interest to be paid by the holder of such
deposits), shall be paid by the Contributors to Sun in accordance with
the laws of the State of Michigan or Sun shall receive an appropriate
credit on the closing statement.
(f) Any real estate transfer tax, intangible tax,
documentary tax, sales taxes, vehicle transfer, sales and use taxes
and other taxes or charges levied on the transfer and conveyance of
the Projects, whether levied on the Land, Improvements, Personal
Property or otherwise, shall be paid by Sun.
8.2 If after the closing either the Contributors or Sun discovers
any inaccuracies or errors in the prorations or adjustments done at Closing,
the Contributors and Sun shall take all action and pay all sums necessary so
that the said prorations and adjustments shall be in accordance with the terms
of this Agreement, and the obligations of either party to pay any such amount
shall
- 8 -
9
survive the Contribution Date.
9. CONTRIBUTORS' WARRANTIES.
9.1 The Contributors, jointly and severally, represent and warrant
to Sun as of the date hereof, and as of the Contribution Date, the following
with the understanding that each of the representations and warranties are
material and have been relied on by Sun in connection herewith.
(a) True, correct and complete copies of the Tenant
Leases, including all amendments and documents relating thereto, have
been or will be delivered to Sun pursuant to Section 6.1(a) hereof;
the Rent Rolls attached hereto as Exhibits "3.1(c)-1", "3.1(c)-2" and
"3.1(c)-3", as updated to the Contribution Date, are and will be an
accurate and complete rent roll describing each of the Tenant Leases,
including the name of the tenant, the home site occupied by the
tenant, the lease term, monthly rent, delinquencies in rent, deposits
paid and any prepaid rent or credits due any tenant; except as set
forth in the Rent Rolls, each Tenant Lease is in full force and effect
and not in default and no events have occurred which, with notice or
the passage of time, or both, would constitute such a default; the
lessor has performed all of its obligations under each Tenant Lease;
and the Tenant Leases have not been modified nor have any concessions
been made with respect thereto unless expressly described in the Rent
Rolls.
(b) Each Project and its operation as a manufactured home
community complies in all respects with all Permitted Exceptions
applicable thereto and all applicable laws, ordinances, codes, rules
and regulations, including those pertaining to zoning, access to
disabled persons, building, health, safety and environmental matters.
Except as otherwise disclosed in Exhibit "9.1(b)" attached hereto, the
Contributors have not received any notices of, and the Contributors,
after due inquiry, have no knowledge of any existing facts or
conditions which may result in the issuance of, any violations of any
building, zoning, safety, fire, environmental, health or other codes,
laws, ordinances or regulations with respect to a Project, the
appurtenances thereto or the maintenance, repair or operation thereof,
which will not be cured by the Contribution Date, at the Contributors'
expense.
(c) Except as otherwise disclosed in Exhibit "9.1(c)"
attached hereto, the Contributors have not received notice of and,
after due inquiry, have no knowledge of any existing, pending or
threatened litigation or condemnation proceedings or other court,
administrative or extra judicial proceedings with respect to or
affecting a Project or any part thereof.
(d) Except as otherwise disclosed in Exhibit "9.1(d)"
attached hereto, the Contributors have no knowledge of any
assessments, charges, paybacks, or obligations requiring payment of
any nature or description against a Project which remain unpaid,
including, but not limited to, those for sewer, water or other utility
lines or mains, sidewalks, streets or curbs. The Contributors, after
due inquiry, have no knowledge of any public improvements having been
ordered, threatened, announced or contemplated with respect to a
Project which have not heretofore been completed, assessed and paid
for.
(e) True and complete copies of all Project Contracts and
the prospectus for each Project, if applicable, and all amendments
thereto have been delivered to Sun pursuant to Section 6.1 above; all
Project Contracts are in full force and effect and not in default; all
Project Contracts are listed in Exhibit "9.1(e)" attached hereto; and
except as described in Exhibit "9.1(e)", there are no Project
Contracts in force with respect to a Project which are not subject to
cancellation upon not more than thirty (30) days notice without
premium or penalty.
- 9 -
10
(f) The Contributors are the lawful owners of the
Projects and hold insurable and marketable title to the Projects, free
and clear of all liens and encumbrances other than the Permitted
Exceptions and Removable Liens. The Contributors have and will have
on the Contribution Date the power and authority to sell the Projects
to Sun and perform their obligations in accordance with the terms and
conditions of this Agreement, and each person who executes this
Agreement and all other instruments and documents in connection
herewith, has or will have due power and authority to so act. On or
before the Contribution Date, the Contributors will have complied with
all applicable statutes, laws, ordinances and regulations of every
kind or nature, in order to effectively convey and transfer all of the
Contributors' right, title and interest in and to the Projects to Sun
in the condition herein required.
(g) Since the date on which the Contributors commenced
doing business at each of the Projects, they have been insured with
respect to risks normally insured against, and in amounts adequate to
safeguard each Project. Exhibit "9.1(g)" attached hereto lists all
insurance currently maintained for or with respect to each Project,
including types of coverage, policy numbers, insurers, premiums,
deductibles and limits of coverage.
(h) Neither this Agreement nor anything provided to be
done herein by the Contributors, including, without limitation, the
conveyance of all of the Contributors' right, title and interest in
and to the Projects as herein contemplated, violates or will violate
the Contributors' governing documents or any contract, agreement or
instrument to which the Contributors are a party or bound and which
affects the Projects.
(i) The Contributors have not contracted for the
furnishing of labor or materials to a Project which will not be paid
for in full prior to the Contribution Date, and if any claim is made
by any party for the payment of any amount due for the furnishing of
labor and/or materials to a Project or the Contributors prior to the
Contribution Date and a lien is filed against a Project as a result of
furnishing such materials and/or labor, the Contributors will
immediately pay the said claim and discharge the lien.
(j) All utility services, including water, sanitary
sewer, gas, electric, telephone and cable television facilities, are
available to each Project and each home site therein in sufficient
quantities to adequately service the Projects at full occupancy; and
to the Contributors' knowledge, after due inquiry, there are no
existing, pending or threatened plans, proposals or conditions which
could cause the curtailment of any such utility service.
(k) Each Project was constructed in conformity with all
governmental rules, regulations, laws and ordinances applicable at the
time such Project was constructed, all Permitted Exceptions, and all
development orders and other requirements imposed by governmental
authorities. Except as disclosed in Exhibit "9.1(k)" attached hereto,
to the Contributors' knowledge, obtained after due inquiry: (i) there
are no existing maintenance problems with respect to mechanical,
electrical, plumbing, utility and other systems necessary for the
operation of the Projects, including, without limitation, all
underground utility lines, water wells and roads; (ii) all such
systems are in good working condition and are suitable for the
operation of the Projects; and (iii) there are no structural or
physical defects in and to the Projects, and there are no conditions
currently existing on, in, under or around property adjacent to or
surrounding a Project, which materially adversely affects, or could
materially adversely affect, such Project or the operation thereof.
(l) Attached hereto as Exhibit "9.1(l)" is a true and
complete list of all persons employed by the Contributors or the
manager(s) of the Projects in connection with the operation and
maintenance of the Projects as of the date hereof, including name, job
description, term of employment, average hours worked per week,
current pay rate,
- 10 -
11
description of all benefits provided such employees and the annual
cost thereof. Except as provided in any employment contract furnished
to Sun, all such employees are terminable at will.
(m) Continental Estates consists of 386 developed
manufactured home sites, approximately 60 acres of Land, and the
improvements, amenities and recreational facilities listed in Exhibit
"9.1(m)" attached hereto and made a part hereof. As of the date
hereof, nine (9) manufactured home sites within Continental Estates
are vacant, and for the calendar years 1994 and 1995, the average
occupancy rates at Continental Estates were 99% and 98%, respectively.
All unoccupied manufactured home sites within Continental Estates
which exist at the date of Closing, if any, will be in leasable
condition without it being necessary to make any further improvements
to permit a tenant to take possession of, and install a manufactured
home on, such home site in accordance with the Contributors' standard
form lease and the rules and regulations applicable to Continental
Estates.
(n) Continental North consists of 334 developed
manufactured home sites, 80 undeveloped manufactured home sites,
approximately 80 acres of Land, and the improvements, amenities and
recreational facilities listed in Exhibit "9.1(n)" attached hereto and
made a part hereof. As of the date hereof, twelve (12) manufactured
home sites within Continental North are vacant, and for the calendar
years 1994 and 1995, the average occupancy rates (with respect to
developed manufactured home sites) at Continental North were 94% and
94%, respectively. All unoccupied developed manufactured home sites
within Continental North which exist at the date of Closing, if any,
will be in leasable condition without it being necessary to make any
further improvements to permit a tenant to take possession of, and
install a manufactured home on, such home site in accordance with the
Contributors' standard form lease and the rules and regulations
applicable to Continental North. The development and leasing of the
80 undeveloped manufactured home sites within Continental North will
not violate any building, zoning, safety, fire, environmental, health
or other codes, laws or regulations applicable therein.
(o) Davison East consists of 190 developed manufactured
home sites, approximately 24 acres of Land, and the improvements,
amenities and recreational facilities listed in Exhibit "9.1(o)"
attached hereto and made a part hereof. As of the date hereof, zero
manufactured home sites within Davison East are vacant, and for the
calendar years 1994 and 1995, the average occupancy rates at Davison
East were 98% and 98%, respectively. All unoccupied manufactured home
sites within Davison East which exist at the date of Closing, if any,
will be in leasable condition without it being necessary to make any
further improvements to permit a tenant to take possession of, and
install a manufactured home on, such home site in accordance with the
Contributors' standard form lease and the rules and regulations
applicable to Davison East.
(p) To the Contributors' knowledge, obtained after due
inquiry, Exhibit "9.1(p)" attached hereto contains a complete and
accurate list of, and copies of, all licenses, certificates, permits
and authorizations from any governmental authority of any kind which
is required to develop, operate, use and maintain each of the Projects
as a manufactured home community; and all such licenses, certificates,
permits and authorizations have been issued and are in full force and
effect and on the Contribution Date shall, to the extent legally
assignable or transferable, be transferred or assigned to Sun. The
Contributors shall take all steps and execute all applications and
instruments reasonably necessary to achieve such transfer or
assignment.
(q) Exhibits "D1", "D2" and "D3" attached hereto contain
a true and complete list of all Personal Property used in the
operation of each of the Projects; such Personal Property is in good
working condition and adequate for the operation of each such Project
at
- 11 -
12
full occupancy; and the Contributors will not sell, transfer, remove
or dispose of any item of Personal Property from the Projects on or
prior to the Contribution Date, unless such item is replaced with a
similar item of no lesser quality or value.
(r) There has not been, and prior to the Contribution
Date will not be, discharged, released, generated, treated, stored,
disposed of or deposited in, on or under any Project, and to the best
of the Contributors' knowledge, each Project is free of and does not
contain, any "toxic or hazardous substance", asbestos, urea
formaldehyde insulation, PCBs, radioactive material, flammable
explosives, underground storage tanks, or any other hazardous or
contaminated substance (collectively, the "Hazardous Materials")
prohibited, limited or regulated under the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and
Recovery Act, the Hazardous Materials Transportation Act, the Toxic
Substance Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, or under any other applicable federal, state or local
statutes, regulations or ordinances (collectively the "Environmental
Laws"), and there are no substances or conditions in or on any Project
which may support a claim or cause of action under any of the
Environmental Laws. The Contributors have no knowledge of any suit,
action or other legal proceeding arising out of or related to any
Environmental Laws with respect to a Project which is pending or
threatened before any court, agency or government authority, and the
Contributors have not received any notice that a Project is in
violation of the Environmental Laws.
(s) Attached hereto as Exhibit "9.1(s)" are profit and
loss statements for each of the Projects for the 12-month periods
ending December 31, 1993, December 31, 1994, and December 31, 1995 and
the eight (8) month period ending August 31, 1996 (collectively, the
"Financial Statements"). The Financial Statements are true, correct
and complete in all respects, present fairly and accurately the
financial position of each Project and the operation of each Project
as at such dates and the results of their operations and earnings for
the periods indicated thereon, and have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods indicated.
(t) S&K is duly organized and validly existing as a
co-partnership under the laws of the State of Michigan, and S&K has
full power and authority to own, lease and operate its properties and
assets, including, without limitation, the Projects, and to carry on
its business as presently conducted. Attached hereto as Exhibit
"9.1(t)" and made a part hereof by this reference are true and
complete copies of the Partnership Agreement and Certificate of
Co-Partnership of S&K and any additional documents, instruments or
certificates relating to the existence of S&K and all amendments to
any of the foregoing (collectively, the "S&K Documents"). As of the
date hereof, the S&K Documents are in full force and effect and only
are amended or modified as reflected therein, and from the date hereof
to the Closing Date, the S&K Documents will not be modified or amended
without the consent of Sun.
(u) The Contributors own the right to use the names
"Continental Estates Manufactured Home Community", "Continental North
Manufactured Home Community", and "Davison East Manufactured Home
Community" in connection with the operation of the Projects. The
Contributors have not received notice of or are aware that the
Contributors' use of any such name infringes on or violates the rights
of any third party.
(v) Each of the Contributors and each of the partners of
S&K are Michigan residents and "accredited investors" as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.
(w) The Contributors have delivered or will deliver to
Sun true, correct and
- 12 -
13
complete copies of the information and material referenced in Section
6.1 hereof. Nothing contained in this Agreement, the Exhibits
attached hereto or the information and material delivered or to be
delivered to Sun pursuant to the terms hereof, includes any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein
not misleading. The Contributors have not received any written notice
of any fact which would materially adversely affect any of the
Projects or the operation thereof which is not set forth in this
Agreement, the Exhibits hereto, or has not otherwise been disclosed to
Sun in writing.
9.2 The provisions of Section 9.1 and all representations and
warranties contained therein shall be true as of the Contribution Date and
shall survive the closing of the transaction contemplated herein and the
conveyance of the Projects to Sun. The investigation by Sun and its employees,
agents and representatives, of the financial, physical and other aspects of the
Projects shall not negate or diminish the representations and warranties of the
Contributors contained herein.
10. CONDITIONS.
10.1 Sun's obligation to consummate the acquisition of the Projects
is expressly conditioned upon the following, each of which constitutes a
condition precedent to Sun's obligations hereunder which, if not performed or
determined to be acceptable to Sun on or before the Contribution Date (unless a
different time for performance is expressly provided herein), shall permit Sun,
at its sole option, to declare this Agreement null and void and of no further
force and effect by written notice to the Contributors, whereupon neither the
Contributors nor Sun shall have any further obligations hereunder to the other
except for the Contributors' obligation to pay legal fees for the drafting of
this Agreement as described in Section 20.1 and reimburse Sun for certain
expenses as set forth herein (provided that Sun shall have the right to waive
any one or all of said conditions).
(a) On the Contribution Date, title to the Projects shall
be in the condition required herein, and the Title Company shall be in
a position to issue the requisite policy of title insurance pursuant
to the Commitment.
(b) The Contributors shall have complied with and
performed all covenants, agreements and conditions on their part to be
performed under this Agreement within the time herein provided for
such performance.
(c) The Contributors' representations, warranties and
agreements contained herein are and shall be true and correct as of
the date hereof and as of the Contribution Date in all material
respects.
(d) From and after the date hereof to the Contribution
Date there shall have been no material adverse change in or to any of
the Projects or the business conducted thereon.
(e) Sun shall have obtained, at its sole cost and
expense, prior to the expiration of the Investigation Period, a "Phase
1" environmental audit (the "Environmental Audit") of each of the
Projects, including the Land and Improvements included within each
such Project, addressed to Sun and its designated lenders, conducted
by an independent environmental investigation and testing firm
approved by Sun in its sole discretion, reflecting that each Project
is free of and does not contain any Hazardous Materials, and otherwise
in form and content acceptable to Sun, in its sole discretion. If any
Environmental Audit discloses any condition which requires further
review or investigation, Sun may obtain, at its sole expense, a "Phase
2" environmental audit of such Project in form and content acceptable
to Sun, in its sole discretion, and the Contribution Date shall be
extended to provide Sun with sufficient time to receive, review and
approve such Phase 2
- 13 -
14
environmental audit. If this Agreement terminates for any reason
other than the default of Sun, the Contributors shall reimburse Sun
for the cost of the Environmental Audits, including any Phase 2
environmental audits.
11. PERIOD FOR INVESTIGATION.
11.1 Commencing on the date hereof, Sun shall have a period of
sixty (60) days (the "Investigation Period") to inspect and investigate all
aspects of the Projects, including, without limitation, the physical condition
of the Projects, all items of income and expense arising from the Contributors'
ownership and operation of the Projects, and all documents relating thereto.
In the event the Contributors have failed to deliver or make available to Sun
the information and material required by Section 6.1 within five (5) days of
the date hereof, the Investigation Period shall be extended for a period of
time equal to the number of days from the required delivery date of each such
item to the actual date of delivery of all such items. At any time prior to
the expiration of the Investigation Period, as the same may have been extended
pursuant to the provisions of this Section 11.1, and for any reason whatsoever,
Sun may, at its option and in its sole and absolute discretion, terminate this
Agreement.
11.2 If Sun notifies the Contributors in writing prior to the
expiration of the Investigation Period, as the same may be extended, that it
waives its right to terminate this Agreement as provided in Section 11.1 above
(the "Investigation Notice"), its right under Section 11.1 to terminate this
Agreement shall expire. If Sun does not send the Investigation Notice to the
Contributors prior to the expiration of the Investigation Period, as the same
may be extended, Sun, without further action, shall be deemed to have elected
to terminate this Agreement, and Sun and the Contributors shall have no further
obligation to the other hereunder other than the Contributors' obligation to
pay legal fees for the drafting of this Agreement as described in Section 20.1
and reimburse Sun for certain expenses as set forth herein.
12. OPERATION OF PROJECT.
12.1 From and after the date hereof to the Contribution Date, the
Contributors shall: (a) continue to maintain, operate and conduct business at
the Projects in substantially the same manner as prior to the date hereof; (b)
perform all regular and emergency maintenance and repairs with respect to the
Projects; (c) keep the Projects insured against all usual risks and maintain in
effect all insurance policies now maintained on the same; (d) not sell, assign
or convey any right, title or interest in any part of the Projects; and (e) not
change the operation or status of the Projects in any manner reasonably
expected to impair or diminish their value; provided, however: (i) no Tenant
Lease shall be executed or extended for a term in excess of one year; (ii) no
Tenant Lease shall be executed or extended at a rental rate that is less than
the present rental for such space within such Project; and (iii) the
Contributors shall at or prior to the Contribution Date furnish Sun with a copy
of each new or renewal lease.
12.2 Sun shall have the right, but not the obligation, to hire
those employees of the Contributors and the Projects' management agent(s) who
worked at or provided services to the Projects, effective as of the
Contribution Date. Upon the consummation of the transactions contemplated
herein, such employees will remain employees of the Contributors or the manager
unless expressly retained by Sun, and all compensation and fees due such
employees, including any amount payable or that becomes payable as a result of
the termination of the employees, and all costs and taxes attributable to such
employment, shall be paid by the Contributors or the manager, as the case may
be. Effective as of the Contribution Date, the Contributors shall terminate
the existing manager(s) of the Projects and any Project Contracts not assigned
to Sun.
13. DESTRUCTION OF PROJECT.
- 14 -
15
13.1 In the event any part of any Project shall be damaged or
destroyed prior to the Contribution Date, the Contributors shall notify Sun
thereof, which notice shall include a description of the damage and all
pertinent insurance information. If the use or occupancy of such Project is
materially affected by such damage or destruction or the cost to repair such
damage or destruction exceeds Fifty Thousand and 00/100 Dollars ($50,000.00),
Sun shall have the right to terminate this Agreement by notifying the
Contributors within thirty (30) days following the date Sun receives notice of
such occurrence, whereupon the Contributors and Sun shall not have any further
obligation to the other hereunder other than the Contributors' obligation to
pay legal fees for the drafting of this Agreement as described in Section 20.1
and reimburse Sun for certain expenses as set forth herein. If Sun does not
elect to terminate this Agreement, or shall fail to notify the Contributors
within the said thirty (30) day period, on the Contribution Date the
Contributors shall assign to Sun all of the Contributors' right, title and
interest in and to the proceeds of the fire and extended coverage insurance
presently carried by or payable to the Contributors.
14. CONDEMNATION.
14.1 If, prior to the Contribution Date, either the Contributors or
Sun receives or obtains notice that any governmental authority having
jurisdiction intends to commence or has commenced proceedings for the taking of
any portion of any Project by the exercise of any power of condemnation or
eminent domain, or notice of any such taking is recorded among the public
records of the State of Michigan or Genesee County, Sun shall have the option
to terminate this Agreement by notifying the Contributors within thirty (30)
days following Sun's receipt of such notice, in which event the Contributors
and Sun shall not have any other or further liability or responsibility
hereunder to the other, except the Contributors' obligation to pay legal fees
for the drafting of this Agreement as described in Section 20.1 and reimburse
Sun for certain expenses as set forth herein. If Sun does not elect to
terminate this Agreement or shall fail to notify the Contributors within the
thirty (30) day period, Sun shall close the transaction as if no such notice
had been received, obtained or recorded or proceedings commenced, and in such
event, any proceeds or awards made in connection with such taking shall be the
sole property of Sun.
15. DEFAULT BY THE CONTRIBUTORS OR SUN.
15.1 In the event the Contributors shall fail to perform any of
their obligations hereunder, Sun may, at Sun's option and in addition to all
other rights available at law or in equity: (i) terminate this Agreement by
written notice delivered to the Contributors at or prior to the Contribution
Date; (ii) obtain specific performance of the terms and conditions hereof; or
(iii) waive the Contributors' default and proceed to consummate the
transactions with the Contributors, and for purposes of determining the number
of Common OP Units to be issued to the Contributors pursuant to Section 2.1,
reduce the Agreed Value by an amount equal to the costs incurred by Sun to cure
any default of the Contributors hereunder, up to a maximum reduction of
$50,000.00.
15.2 In the event Sun does not elect to terminate this Agreement as
permitted herein and the conditions precedent to Sun's obligation to purchase
the Projects have been satisfied or waived by Sun, and thereafter Sun fails to
purchase the Projects on the Contribution Date in accordance with the terms of
this Agreement, the Contributors shall be entitled to terminate this Agreement
and recover from Sun, as liquidated damages, the sum of FIFTY THOUSAND and
00/100 ($50,000.00) Dollars plus all third party out-of-pocket costs incurred
by Contributors with respect to the transaction contemplated herein (the
"Recovery"), the same being the Contributors' sole remedy, and Sun shall have
no further or other liability hereunder. The Contributors and Sun agree that
in the event of a default by Sun under this Agreement, the Contributors'
damages would be difficult or impossible to ascertain, and the amount of the
Recovery represents a reasonable estimate of such damages. Neither Sun, nor
any designee, transferee or assignee of Sun, nor any officers, directors,
shareholders or partners, general or limited, of such designee, transferee or
assignee, shall be personally or individually liable with respect to any
obligation under this Agreement, all such
- 15 -
16
personal and individual liability, if any, being hereby waived by the
Contributors on their behalf and on behalf of all persons claiming by, through
or under the Contributors.
16. LIABILITY AND INDEMNIFICATION.
16.1 Sun does not and shall not assume any liability for any claims
arising out of the occurrence of any event or the existence of any condition
prior to the Contribution Date with respect to the Projects.
16.2 From and after the Contribution Date, the Contributors,
jointly and severally, agree to indemnify, defend and hold harmless Sun, and
Sun's successors and assigns, from and against any and all claims, penalties,
damages, liabilities, actions, causes of action, costs and expenses (including
attorneys' fees), arising out of, as a result of or as a consequence of: (i)
any property damage or injuries to persons, including death, caused by the
occurrence of any event or the existence of any condition at a Project prior to
the Contribution Date or in connection with the Contributors' use, possession,
operation, repair and maintenance of the Projects prior to the Contribution
Date; (ii) any breach by the Contributors of any of their representations,
warranties, or obligations set forth herein or in any other document or
instrument delivered by the Contributors in connection with the consummation of
the transactions contemplated herein; or (iii) clean up costs and future
response costs incurred by Sun under the Environmental Laws arising with
respect to or in connection with a condition which existed or any event which
occurred prior to the Contribution Date.
17. COVENANT NOT TO COMPETE; EASEMENTS.
17.1 At Closing, the Contributors shall enter into the Restrictive
Covenant Agreement and Option and Right of First Refusal Agreement attached
hereto as Exhibits "17.1(a)" and "17.1(b)" respectively, with respect to the
frontage at Continental North along M-15 (State Road), consisting of
approximately ten (10) acres, as more fully described in Exhibit "17.1(c)"
attached hereto and made a part hereof (the "Frontage Land"). The Contributors
will also grant Sun such access and utility easements across the Frontage Land
for the benefit of Continental North as may be necessary to continue operating
Continental North in the ordinary course of business by executing and
delivering an instrument granting such easements in form for recording by the
Genesee County Register of Deeds (the "Easement Agreement").
18. EXISTING HOMES.
18.1 Sun and the Contributors acknowledge and agree that (i) the
Contributors own approximately ninety-nine (99) manufactured homes located at
the Projects which are leased or available for lease to residents (the "Leased
Homes"), (ii) the Contributors will be responsible for payment of the site rent
for all home sites on which such Leases Homes are installed until such Leased
Homes are sold to third parties who enter into new leases for home sites within
the Project, (iii) such Leased Homes will not be removed from the Project by
Contributors or any successor owner, and (iv) during the Investigation Period,
Sun and the Contributors shall establish, and after the Contribution Date, Sun
and the Contributors will cooperate in the implementation of, a plan to phase
out such Leased Homes owned by the Contributors so that all mobile homes at the
Projects become owner/occupied homes. If requested, Contributors will enter
into new leases for the home sites on which the Leased Homes are located using
Sun's standard form of lease.
19. CLOSING.
19.1 Subject to the provisions of Section 5.1, the closing
("Closing") of the transaction contemplated herein shall take place within
thirty (30) days after the expiration of the Investigation Period (the
"Contribution Date"). The Contribution Date shall be designated by Sun on not
less
- 16 -
17
than five (5) days prior written notice to the Contributors. The Closing shall
be held at the offices of Sun's attorneys, Jaffe, Raitt, Heuer & Weiss,
Professional Corporation, One Woodward Avenue, Suite 2400, Detroit, Michigan
48226, or on or at such other time or place as Sun and the Contributors shall
agree upon.
19.2 At Closing:
(a) The Contributors shall execute and deliver Warranty
Deeds in recordable form conveying to Sun marketable and insurable
title to the Land and Improvements, subject only to the Permitted
Exceptions.
(b) The Contributors shall execute and deliver Warranty
Bills of Sale conveying the Personal Property to Sun, free and clear
of any liens or encumbrances other than the Permitted Exceptions, and
the Contributors shall execute and deliver to Sun, in proper form for
transfer, the Certificates of Title pertaining to all vehicles and
manufactured homes, if any, being conveyed to Sun hereunder.
(c) The Contributors shall execute and deliver to Sun, in
form and content satisfactory to Sun and pursuant to Sections 7.1, 7.2
and 7.3 hereof, Assignments transferring to Sun all of the
Contributors' right, title and interest in and to: (i) the Tenant
Leases and all deposits relating thereto; (ii) the Project Contracts
which Sun has elected to have assigned; and (iii) the Intangible
Property.
(d) The Contributors shall deliver to Sun payoff letters
from the Lender that are sufficient to cause the Title Company to
remove the exceptions for the Mortgages from the Commitment upon
payment of the amount set forth in such payoff letters.
(e) The Contributors shall cause the Commitment referred
to in paragraph 4.1 hereof to be recertified and updated to the
Contribution Date, and shall cause the policy of title insurance to be
issued to Sun pursuant to such updated Commitment together with such
endorsements thereto as Sun shall request, at Sun's sole cost.
(f) The Contributors and Sun shall execute and deliver to
the Title Company for recording the Restrictive Covenant Agreement and
Option and Right of First Refusal Agreement attached hereto as
Exhibits "17.1(a)" and "17.1(b)", respectively.
(g) The Contributors and Sun shall execute and deliver
the Easement Agreement to the Title Company for recording.
(h) The REIT and the Contributors shall execute and
deliver amendments to the Sun Partnership Agreement and Sun's Restated
Certificate of Limited Partnership admitting the Contributors as
limited partners of Sun and issuing the Common OP Units to the
Contributors, upon the terms and subject to the conditions contained
herein.
(i) The Contributors and the REIT shall enter into the
Registration Rights Agreement in the form of Exhibit "2.5(b)" attached
hereto, and each Contributor, and the partners of the Contributors
which are partnerships, shall execute and deliver such investment and
subscription documents as Sun shall reasonably require in connection
with the issuance of the Common OP Units and reaffirm the
representations and warranties contained in Section 9.1(v) hereof.
(j) The Contributors shall deliver to Sun a certificate
confirming the truth and accuracy of the Contributors' representations
and warranties hereunder, and the Rent Rolls, updated to the
Contribution Date, and each prospectus for any Project then in effect,
shall be
- 17 -
18
certified as true and correct in all respects.
(k) The Contributors and Sun shall execute and cause to
be delivered to tenants under the Tenant Leases and all other
interested parties written notice of the transfer of the Projects to
Sun together with such other information or instructions as Sun shall
deem appropriate.
(l) The Contributors shall deliver to Sun originals of:
(i) the Tenant Leases, including all amendments thereto and
modifications thereof; (ii) all Project Contracts assigned to Sun;
(iii) all architectural plans and specifications and other documents
in the Contributors' possession pertaining to the development of the
Projects; and (iv) all collection, expense and business records and
such other documentation reasonably necessary for Sun to continue the
operation of the Projects.
(m) Each Contributor which is a partnership shall deliver
to Sun certified copies of resolutions of the partners of such
partnership authorizing and approving the transaction contemplated by
this Agreement, and authorizing and directing the execution and
delivery of this Agreement and all documents and instruments to be
executed and delivered by such Contributor pursuant to the terms
hereof, certified by an authorized partner of such Partner as being
true and correct, together with an incumbency certificate from the
partner, certifying as to the partners of such Contributor who have
executed documents in connection with the transactions contemplated
herein.
(n) The Contributors shall deliver to Sun an affidavit,
in form acceptable to Sun, executed by the Contributors, certifying
that the Contributors and all persons or entities holding an interest
in the Contributors are not non-resident aliens or foreign entities,
as the case may be, such that the Contributors and such interest
holders are not subject to tax under the Foreign Investment and Real
Property Tax Act of 1980.
(o) Sun shall deliver to the Contributors certificates or
such other instruments reasonably necessary to evidence that the
execution and delivery of this Agreement and all documents to be
executed and delivered by Sun hereunder, have been authorized by Sun
and that all persons or entities who have executed documents on behalf
of Sun in connection with the transaction have due authority to act on
behalf of Sun.
(p) The Contributors shall execute and deliver to Sun a
discontinuation of any assumed name certificate whereby the
Contributors have reserved the right to conduct business under the
names "Continental Estates Manufactured Home Community", "Continental
North Manufactured Home Community", "Davison East Manufactured Home
Community", and all variations thereof.
(q) The Contributors and Sun shall each deliver to the
other such other documents or instruments as shall reasonably be
required by such party, its counsel or the Title Company to consummate
the transaction contemplated herein and/or to cause the issuance of
the policy of title insurance which, in all events, shall not increase
such party's liability hereunder or decrease such party's rights
hereunder.
20. COSTS.
20.1 Sun and the Contributors shall each be responsible for their
own counsel fees and travel expenses; provided, however that the Contributors,
as a whole, shall pay the lesser of (i) one half of the legal fees incurred by
Sun's attorneys, Jaffe, Raitt, Heuer & Weiss, Professional Corporation, in
preparing the initial draft of this Agreement and all Exhibits hereto or (ii)
Two Thousand and 00/100 Dollars ($2,000.00). Except as otherwise set forth in
this Section 20.1, and
- 18 -
19
subject to reimbursement upon the termination of this Agreement as elsewhere
provided herein, Sun shall pay all documentary, intangible and transfer taxes
due on the conveyance of the Projects to Sun, sales, transfer and other taxes
due on the transfer of any vehicles and manufactured homes to Sun, title
insurance premiums for Sun's policy of title insurance, the cost of the
Surveys, Environmental Audits and any necessary financial audits, its due
diligence costs, and all recording fees for the deeds. Escrow fees, if any,
shall be borne equally by the Contributors and Sun.
21. BROKERS.
21.1 Sun and the Contributors represent and warrant to the other
that they have not had any direct or indirect dealings with any real estate
brokers, salesmen or agents in connection with the Projects, or the
transactions contemplated herein, except James Devine (the "Broker"), whose
commission, if any, shall be paid by Sun. In consideration of said warranty,
Sun agrees with the Contributors that it will pay, and will defend and hold the
Contributors harmless from and against any and all finder's and/or broker's
commissions due or claimed to be due on account of the transactions
contemplated herein and arising out of contracts made by Sun, including,
without limitation, contracts with or claims of the Broker, and the
Contributors agree with Sun that they will pay, and will defend and hold Sun
harmless from and against any and all finder's and/or broker's commissions due
or claimed to be due on account of the transactions contemplated herein and
arising out of contracts made by the Contributors.
22. PAYMENTS TO CONTRIBUTORS.
22.1 With respect to the payments of cash and issuance of Common OP
Units required to be made by Sun to the Contributors pursuant to this
Agreement, 50% of such amounts shall be delivered to S&K and 50% of such
amounts shall be delivered to Smith.
23. ASSIGNMENT.
23.1 Sun hereby reserves the right, on or before the Contribution
Date, to assign all of its right, title and interest in and to this Agreement
or to transfer its interest in the Projects to any other person or entity, and
upon notice of such assignment to the Contributors, all terms and conditions
hereof shall apply equally to such assignee as if the assignee was the original
party hereto.
24. CONTROLLING LAW.
24.1 This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of Michigan.
25. ENTIRE AGREEMENT.
25.1 This Agreement and the Exhibits attached hereto constitute the
entire agreement between the parties hereto with respect to the transactions
herein contemplated, and supersedes all prior agreements, written or oral,
between the parties relating to the subject matter hereof. Any modification or
amendment to this Agreement shall be effective only if in writing and executed
by each of the parties hereto.
26. NOTICES.
26.1 Any notice from the Contributors to Sun or from Sun to the
Contributors shall be deemed duly served upon receipt or refusal if (i)
personally served, (ii) deposited in the U.S. certified mail, return receipt
requested, (iii) sent by telephone facsimile with fax acceptance sheet
verifying receipt, or (iv) sent via "overnight" courier service, addressed to
such party as follows:
- 19 -
20
If to the Contributors: Ms. Susan Smith
13015 Sandehurst Ct.
Grand Blanc, Michigan 48439
Fax No. (810) 695-4020
With a copy to: John Wolf, Esq.
Joseph, Wolf, Endean & Stahle
3876 Fortune Blvd.
Saginaw, MI 48603
Fax No. (517) 799-8692
If to Sun: Sun Communities, Inc.
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Attn: Mr. Gary A. Shiffman
Fax No. (810) 932-3072
With a copy to: Richard A. Zussman
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Fax No. (313) 961-8358
Either party hereto may change the name and address of the designee to which
notice shall be sent by giving written notice of such change to the other party
hereto as hereinbefore provided.
27. BINDING.
27.1 The terms hereof shall be binding upon and shall inure to the
benefit of the parties hereto, their successors, transferees and assigns.
28. PARAGRAPH HEADINGS.
28.1 The captions in this Agreement are inserted for convenience of
reference and in no way define, describe or limit the scope or intent of this
Agreement or any of the provisions hereof.
29. SURVIVAL AND BENEFIT.
29.1 Except as otherwise expressly provided herein, each agreement,
representation or warranty made in this Agreement by or on behalf of either
party, or in any instruments delivered pursuant hereto or in connection
herewith, shall survive the Contribution Date and the consummation of the
transactions provided for herein.
29.2 The covenants, agreements and undertakings of each of the
parties hereto are made solely for the benefit of, and may be relied on only
by, the other party hereto, their transferees and assigns, and are not made for
the benefit of, nor may they be relied upon, by any other person whatsoever.
29.3 This Agreement shall not be construed more strictly against
one party then against the other, merely by virtue of the fact that it may have
been prepared by counsel for one of the parties, it being recognized that both
Sun and the Contributors have contributed substantially and materially to the
preparation of this Agreement.
- 20 -
21
30. COUNTERPARTS.
30.1 This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all of which together shall be
deemed one in the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
CONTRIBUTORS:
IN THE PRESENCE OF: S&K Smith Co., a Michigan
co-partnership
___________________________________________ /s/ Susan Kay Smith
By:___________________________
Susan Kay Smith, Partner
___________________________________________ /s/ Keith D. Smith
By:___________________________
Keith D. Smith, Partner
___________________________________________
By: /s/ Donald L. Smith
___________________________
Donald L. Smith,
individually, a single man
"SUN"
SUN COMMUNITIES OPERATING
LIMITED PARTNERSHIP, a
Michigan limited partnership
By: Sun Communities, Inc.,
its General Partner
/s/ Jonathan M. Colman
By:__________________________
Jonathan M. Colman,
Vice President
__________________________________
- 21 -
22
LIST OF EXHIBITS
EXHIBIT DESCRIPTION
1. Legal Description of Continental Estates Land
B Legal Description of Continental North Land
C Legal Description of Davison East Land
D1 Schedule of Personal Property - Continental Estates
D2 Schedule of Personal Property - Continental North
D3 Schedule of Personal Property - Davison East
2.5(a) Sun Partnership Agreement
2.5(b) Registration Rights Agreement
3.1(a) Schedule of Mortgages
3.1(c)-1 Rent Roll - Continental Estates
3.1(c)-2 Rent Roll - Continental North
3.1(c)-2 Rent Roll - Davison East
4.2 Surveyor's Certification
9.1(b) Violations
9.1(c) Litigation and Condemnation Proceedings
9.1(d) Assessments and Other Charges
9.1(e) Project Contracts
9.1(g) Summary of Insurance
9.1(k) Maintenance Problems
9.1(l) List of Employees
9.1(m) List of Continental Estates Facilities
9.1(n) List of Continental North Facilities
9.1(o) List of Davison East Facilities
9.1(p) Licenses, Authorizations and Permits
9.1(s) Project Financial Statements
9.1(t) S&K Documents
17.1(a) Restrictive Covenant Agreement
17.1(b) Option and Right of First Refusal Agreement
17.1(c) Legal Description of Frontage Land
- 22 -