1
EXHIBIT 2.2
AGREEMENT OF SALE
This AGREEMENT OF SALE is made and entered into this 14th day of October,
1997, by and between R.D. LAMMY, R.D. LAMMY, II AND DEBORAH L. CAMPBELL (the
"Sellers"), whose address is c/o R.D. Lammy, II, G-3275 West Pasadena Avenue
Flint, Michigan 48504-2386 and MT. MORRIS MHC L.L.C., a Michigan limited
liability company (the "Purchaser"), a Michigan limited liability company,
whose address is 2328 Livernois, Suite B, Troy Michigan 48083.
R E C I T A L S:
A. Sellers are the owners of 100% of the ownership interests in WHITE OAK
ESTATES HOLDINGS L.L.C. ("Investment LLC"), a Michigan limited liability company
(the "Interests"), and Investment LLC is the owner of 100% of the ownership
interests in White Oaks Estates, L.L.C. ("Project LLC").
B. Project LLC is the owner of certain parcels of real property (the
"Land") located in Mt. Morris, Genesee County, Michigan, consisting of
approximately 40 acres of land, containing at the time of preparation of this
Agreement 376 licensed manufactured home sites of which 374 have pads and
utilities installed and are currently usable; there are 13 additional sites for
which construction of improvements, pads and utilities have been completed and
for which licensure has been applied for (collectively, "Developed Sites");
there are 363 sites reflected on the Project's rent roll as being occupied by
tenants; and land sufficient for approximately 75 additional manufactured home
sites ("Unbuilt Sites"), commonly known as White Oak 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 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
Land, excluding any and all manufactured or mobile homes (collectively the
"Improvements"). The portion of the Land consisting of the Unbuilt Sites
consists of three phases ("Phase 1", "Phase 2", and "Phase 3") as follows: (i)
Phase I contains 28 Unbuilt Sites located on the portion of the Land described
in Exhibit B-1 ("Phase 1 Land" and "Phase 1 Unbuilt Sites") and located as set
forth on the site plan for the Phase I which is Exhibit C-1 hereto ("Phase 1
Site Plan"), (ii) Phase 2 contains 23 Unbuilt Sites located on the portion of
the Land described in Exhibit B-2 ("Phase 2 Land" and "Phase 2 Unbuilt Sites")
and are located as set forth on the site plan for the Phase 2 which is Exhibit
C-2 hereto ("Phase 2 Site Plan"), and (iii) Phase 3 contains 24 Unbuilt Sites
located on the portion of the Land described in Exhibit B-3 ("Phase 3 Land" and
"Phase 3 Unbuilt Sites") and are located as set forth on the site plan for the
Phase 3 which is Exhibit C-3 hereto ("Phase 3 Site Plan").
C. Project LLC is the owner of all machinery, equipment, goods, vehicles,
and other personal property (collectively the "Personal Property") described in
Exhibit "D" attached hereto and made a part hereof, which is located at or
useable in connection with the ownership or operation of the Land and
Improvements.
D. The Land, the Improvements, and the Personal Property, together with all
of Project LLC's 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 Project
LLC in and to any land lying in the bed of any street, road or avenue,
-1-
2
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, but excluding
therefrom any interest in any adjoining land owned by Sellers, Project LLC or
their affiliates (hereinafter sometimes collectively referred to as the
"Project").
E. Sellers desires to sell the Interests to Purchaser, and Purchaser desires
to purchase the Interests from Sellers, 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 the purchase monies to be paid by Purchaser
to Sellers, IT IS HEREBY AGREED:
1. AGREEMENT TO SELL.
1.1 Sellers hereby agrees to sell the Interests to Purchaser, and Purchaser
hereby agrees to purchase the Interests from Seller, in accordance with the
terms and subject to the conditions hereinafter set forth.
2. PURCHASE PRICE AND PAYMENT THEREOF.
2.1 The aggregate purchase price (the "Purchase Price") for the Interests if
all Unbuilt Sites are completed pursuant to the requirements of Section 3 below
is the sum of Nine Million Four Hundred Seventy One Thousand Five Hundred
Seventy Five Dollars ($9,471,575.00) ("Maximum Purchase Price"). The Maximum
Purchase Price includes the Fixed Purchase Price set forth in Subsection 2.1(a)
below, and the Conditional Purchase Price set forth in Subsection 2.1(b) below.
(a) The Fixed Purchase Price (adjusted as provided in this Agreement)
is an amount equal to the sum of $7,821,450.00. The Fixed Purchase Price, as
adjusted, less the amount of the Road Escrow which will be deposited with
Escrow Agent pursuant to Section 3 below and the Road Escrow Agreement, is
payable by wire transfer of immediately available funds to Seller's
designated financial institution on the Closing Date (as herein defined).
(b) The Conditional Purchase Price is payable upon satisfaction of the
requirements of Section 3 below and pursuant to the terms of the Expansion
Completion Agreement (as defined below) as follows: $589,540 on September
15, 1998, $507,265 on September 15, 1999, and $553,320 on September 15,
2000, without interest. The Conditional Purchase Price shall be secured by a
letter of credit which shall be in form and content reasonably acceptable to
Sellers and Purchaser.
(c) Notwithstanding the foregoing provisions of this Section 2.1, in
the event the number of Unbuilt Sites completed in Phases 1, 2 and 3 are
more or less than 28, 23 and 24, respectively, the amounts payable pursuant
to Section 2.1(b) above will be adjusted upwards or downwards, as
applicable, by $21,055 per site in Phase 1, $22,055 per site in Phase 2, and
$23,055 per site in Phase 3.
-2-
3
3. SELLER'S CONTINUING OBLIGATIONS.
3.1 The Sellers shall complete development and construction of Phases 1, 2
and 3 of the Project and the Unbuilt Sites, according to the Phase 1, 2 and 3
Site Plans and the plans and specifications for each Phase identified in Exhibit
C-4 attached hereto ("Expansion Plans"), pursuant to the Expansion Completion
Agreement satisfactory in form and content to Purchaser and Sellers. Sellers
shall proceed in good faith and due diligence to complete such development and
construction so that (a) Phase 1 and all of the Phase I Unbuilt Sites are
completed and available for the installation of mobile homes and lease to
tenants by August 1, 1998, (b) Phase 2 and all of the Phase 2 Unbuilt Sites are
completed and available for the installation of mobile homes and lease to
tenants by August 1, 1999, and (c) Phase 3 and all of the Phase 3 Unbuilt Sites
are completed and available for the installation of mobile homes and lease to
tenants by August 1, 2000, subject only to Project LLC obtaining final
permission to occupy such sites pursuant to license; provided, however, that
Sellers shall complete the Unbuilt Sites so as to satisfy all applicable
requirements pertaining to the development and construction of the Unbuilt Sites
so that Project LLC can obtain such license. Purchaser agrees to cooperate with
Sellers in Sellers' efforts to complete the development and construction of
Phases 1, 2 and 3 and the Unbuilt Sites. The entire cost to develop and
construct the Unbuilt Sites shall be paid by Sellers, including, without
limitation, any permits, utility connection and other costs related to
construction, but excluding, without limitation, property taxes and special
assessments.
3.2 The parties acknowledge that the existing roadways in the Project
(together with the Project storm drains) as identified in Exhibit E must be
reconstructed ("Road Reconstruction"). Sellers shall have the obligation to
undertake and complete such road reconstruction and storm drain upgrade in
accordance with the requirements set forth in Exhibit F and plans and
specifications identified in Exhibit C-5 attached hereto ("Road Plans"). The
entire cost to complete the Road Reconstruction shall be paid by Sellers.
Sellers agree to proceed with due diligence and use its best efforts to complete
the road reconstruction as soon as practical after the date hereof, and in no
event later than July 31, 1998. To assure Sellers' performance of the terms of
this Section 3.2, on the Closing Date, Sellers shall deposit in escrow with the
Title Company the sum of $800,000 multiplied by the percentage of the Road
Reconstruction uncompleted on the Closing Date, as certified by SSOE
Engineering, Inc., pursuant to an escrow agreement ("Road Escrow Agreement")
satisfactory in form and content to Purchaser and Sellers, that provides that
the escrow funds shall be held by Title Company to be disbursed on the terms set
forth in such escrow agreement.
3.3 In order to assure to Purchaser the value of the Interests and goodwill
being purchased hereunder, each of Sellers ("Restricted Parties") agree that,
for a period of three years after the Closing Date, Restricted Parties will not
engage in the development, ownership or operation of any manufactured housing or
mobile home community located within 25 miles of the Project, whether such
operation involves the lease or sale of sites or lots therein, and whether such
development, ownership or operation is direct or is indirect, through one or
more entities, contractual relationships or familial relationships, and whether
such development, ownership or operation is as owner, principal, agent, partner,
shareholder, officer, director, member, trustee, beneficiary, employer,
employee, consultant, manager, lessor, lessee or otherwise. Sellers recognize
that irreparable harm will result to Purchaser in the event of the violation of
any of the covenants contained in this Section 3.3, and agrees that in the event
of any such violation, the Purchaser shall be entitled, in addition to its other
legal and equitable remedies and damages, to temporary and permanent injunctive
relief to restrain the Restricted Parties from committing any such violations.
For purposes of this Section 3.3, the term "development" shall not include the
-3-
4
supplying of building and other materials to mobile home communities. The
provisions of this Section 3.3 shall survive the Closing.
4. PERMITTED EXCEPTIONS.
4.1 At Closing, the Project LLC's right, title and interest in the
Project shall be subject only to the following matters (the "Permitted
Exceptions"):
(a) Those liens, encumbrances, easements and other matters set forth on
Schedule B-2 of the Commitment to be delivered pursuant to Section 4.1
hereof which the Purchaser does not designate as Title Defects pursuant to
Section 5.1 hereof;
(b) The rights of parties in occupancy of all or any portion of the
Land and Improvements under leases, subleases or other written agreements,
to the extent set forth and described in the current Rent Roll (the "Rent
Roll") attached hereto as Exhibit "H", as the same shall be updated to the
Closing Date; and
(c) All presently existing and future liens for unpaid real estate
taxes, assessments for public improvements installed after the Closing Date,
and water and sewer charges and rents, subject to adjustment thereof as
hereinafter provided.
5. EVIDENCE OF TITLE; SURVEY; LIEN SEARCHES.
5.1 Within ten (10) days after the date hereof, Sellers shall furnish
Purchaser with a commitment (the "Commitment") for an A.L.T.A. Form B Owner's
Policy of Title Insurance, without standard exceptions, issued by a nationally
recognized title insurance company reasonably acceptable to Purchaser (the
"Title Company"), along with copies of all instruments described in Schedule B
of the Commitment, in the amount of the Purchase Price for the Interests, and
showing marketable and insurable title to the Project in Project LLC 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 Project LLC has
the right to remove and Sellers shall cause Project LLC to have removed at or
prior to Closing (the "Removable Liens"). At Closing, the Sellers shall cause to
be provided to Project LLC, at Sellers' expense, a policy of title insurance
issued pursuant to the Commitment, insuring Project LLC as owner of the Project,
without the "standard exceptions" and containing, at Purchaser's expense, such
additional endorsements as Purchaser shall reasonably request.
5.2 Within ten (10) days after the date hereof, Sellers shall furnish
Purchaser with a current ALTA "as built" survey (the "Survey") of the Project
prepared by SSOE Engineering, Inc. or such other licensed surveyor or engineer
approved by Purchaser, certified to Project LLC, the Purchaser, the Title
Company, and any other parties designated by Purchaser, using the form attached
as Exhibit "G" hereto. The Survey shall show the legal description of the Land,
the total acreage of each parcel comprising the Land, all structures and
improvements located thereon, 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 the Land, and
the location of all utility lines and connections with such utility lines. The
Survey 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 the Project or any portion
thereof from any adjacent property, (ii) the encroachment of the Project,
-4-
5
or any portion thereof, on any adjacent property, or (iii) any violation by any
portion of the Project of any recorded building liens, restrictive covenants or
easements affecting the Project.
5.3 Prior to the Closing Date, Purchaser shall obtain Uniform Commercial
Code financing statement and tax lien searches with respect to the Sellers,
Investment LLC and Project LLC, from the State of Michigan, their County of
residence or principal place of business (as applicable) (collectively, "UCC
Search") showing no security interests, pledges, liens, claims or encumbrances
in or affecting the Interests, Investment LLC, Project LLC or the Project,
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 Sellers, Investment LLC or Project LLC, as applicable, has a right to,
and does remove at Closing.
6. TITLE OBJECTIONS.
6.1 If the Commitment, Survey or UCC Search discloses exceptions
encumbering Investment LLC, Project LLC, the Project or the Interests which are
not reasonably acceptable to Purchaser other than the Removable Liens, Purchaser
shall notify Sellers in writing of its objections to such exceptions (the "Title
Defects"), and Sellers agree to use their best efforts to cure or to cause
Investment LLC or Project LLC to cure any such Title Defects. If Purchaser so
objects to any exception disclosed on the Commitment, Survey or UCC Search, such
exception shall not be treated as a Permitted Exception hereunder. If Sellers
fail to have the Title Defects deleted from the Commitment, Survey, or UCC
filings, as the case may be, or discharged within thirty (30) days after receipt
of notice from Purchaser (or such longer time period designated by Purchaser and
the date of Closing shall be extended by such thirty (30) day (or longer)
period) or to remove the Removable Liens at or prior to Closing as required
herein, Purchaser may: (a) terminate this Agreement by delivery of written
notice to Sellers, whereupon the Deposit, as herein defined, shall be returned
immediately to Purchaser, and neither Sellers nor Purchaser shall have any
further duties or obligations under this Agreement; (b) elect to accept title to
the Project as it then is; or (c) extend for up to ninety (90) days the period
for Sellers to cure such Title Defects, and if such Title Defects are not
deleted during the extended period, Purchaser may then exercise its rights under
subparagraphs (a) or (b) above. If Sellers cause such Title Defects to be
deleted from the Commitment, the Closing shall be held within ten (10) days
after delivery of the revised Commitment, Survey or UCC Search or on the Closing
Date specified in Section 18 hereof, whichever is later.
7. INFORMATION AND ACCESS TO PROJECT.
7.1 Immediately upon the complete execution hereof, Sellers shall cause the
Project LLC to deliver to Purchaser, or make available at the office of the
Project, and thereafter Purchaser 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 Project (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 Project LLC for
the last twelve (12) calendar months; and the Project's operating budget for
the current year;
(b) Copies of all equipment leases, service, utility, supply,
maintenance, concession and employment contracts, agreements, and other
continuing contractual
-5-
6
obligations (collectively the "Project Contracts") affecting the ownership
or operation of the Project;
(c) Annual statements of the results of the operation of the Project
for each of the last three (3) full calendar years, and copies of federal
tax returns for Project LLC covering Project LLC's last three (3) fiscal
years;
(d) Architectural drawings, plans and specifications and site plans for
the Project, to the extent available;
(e) Copies of all written notices of any zoning, safety, building,
fire, environmental, health code or other violation relating to the Project
and not cured prior to the date hereof;
(f) All plans, contracts, permits or other written information
pertaining to the Roadway Reconstruction and the development and
construction of Phases 1, 2 and 3 and the Unbuilt Sites; and
(g) All other financial data, operating data, contracts, leases,
instruments, invoices and other writings relating to the Project which
Purchaser 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 Project LLC,
information concerning historical rent increases imposed by Project LLC, a
list of recurring services not furnished to the Project 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 the Project's homeowners association, if organized, and any
agreements between Project LLC and such homeowners association.
7.2 At all reasonable times from and after the date hereof and subject to
the rights of tenants, Sellers shall cause Project LLC to afford Purchaser and
its representatives full and free access to the Project, 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
Project, together with all other aspects of the Project; provided, however, if
Purchaser or its representatives enter upon the Project pursuant to the terms
hereof, Purchaser agrees to indemnify and hold Sellers and Project LLC harmless
from all damage caused to any person or the Project as a result of such entry
and the acts or omissions of Purchaser or its representatives.
7.3 Purchaser shall have the right, at its expense, to cause its accountant
to prepare audited financial statements of Project LLC (or its predecessor) as
to the operations at the Project for the calendar years ended December 31, 1994,
December 31, 1995 and December 31, 1996, and for the period from January 1, 1997
through the calendar month preceding the Closing Date, and Sellers shall cause
Project LLC (or its predecessor, if applicable) to reasonably cooperate and
assist it all respects with the preparation of the audited financial statements.
Sellers shall cause Project LLC (or its predecessor, if applicable) to furnish
to Purchaser and its accountants all financial and other information in its
possession or control to enable such accountants to prepare audited financial
statements in respect of the Project 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. Sellers shall also cause Project LLC (or its
-6-
7
predecessor, if applicable) on or before the Closing Date to 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. Purchaser shall reimburse Sellers for the reasonable expenses of
their accountants in assisting Sellers in connection with the foregoing.
8. ADJUSTMENTS AND PRORATIONS.
8.1 The following adjustments and prorations shall be made at the Closing
between Sellers, Project LLC and Purchaser computed to, but not including, the
Closing Date.
(a) Real estate taxes and personal property taxes which are a lien upon
or levied against any portion of the Project on or prior to the Closing
Date, and all special assessments levied on any portion of the Project prior
to the Closing Date, shall be paid by Project LLC. The parties acknowledge
that property taxes billed as of July 1, 1997 are for the period July 1,
1997 through June 30, 1998, and that property taxes billed on December 15,
1996 are for the period December 15, 1996 through December 14, 1997, thus
real estate taxes and personal property taxes levied against any portion of
the Project shall be prorated and adjusted between the parties accordingly.
(b) The amount of all unpaid water and other utility bills, and all
other expenses incurred with respect to the Project and Project LLC, and
relating to the period prior to the Closing Date, shall be paid by Project
LLC on or prior to the Closing Date or, if not paid, an amount equal to such
unpaid expenses shall be reserved in cash within Project LLC as of the
Closing Date, unless, in either case, the same are the direct responsibility
of any Tenant.
(c) Charges under Project Contracts shall be paid by Project LLC and
all charges due under Project Contracts terminated pursuant to Section 11.2
shall be paid by Project LLC on or prior to the Closing Date, or, if not
paid, the amount due shall be reserved in cash within Project LLC as of the
Closing Date.
(d) All rental and other revenues collected by Project LLC up to the
Closing Date which are allocable to the period prior to the Closing Date
shall be disbursed to the Sellers by Project LLC as provided in Section 8.2.
To the extent Project LLC collects, within one hundred twenty (120) days
after the Closing, any rental or revenues allocable to the period prior to
the Closing Date, Project LLC shall pay the same to the Sellers; provided,
however, Project LLC is assuming no obligation whatsoever for the collection
of such rentals or revenues and all rentals and revenues collected
subsequent to the Closing Date shall always, in the first instance, be
applied to the most current rentals and revenues, if any, then due under the
Tenant Leases or otherwise. Project LLC shall have no obligation to remit to
the Sellers any such delinquent rents collected later than one hundred
twenty (120) days after the Closing.
(e) An amount equal to all security and other deposits described in the
Rent Roll, together with any interest accrued thereon (to the extent
applicable law requires interest to be paid by the holder of such deposits)
shall be reserved in cash within Project LLC as of the Closing Date.
-7-
8
(f) An amount equal to all expenses (the "Prepaid Expenses") of the
Project which have been paid in advance of and from which Project LLC will
benefit after the Closing Date shall be disbursed to the Sellers by Project
LLC as provided in Section 8.2 below.
(g) Any contracts or agreements of Project LLC with any other party in
connection with Road Reconstruction or development and construction of the
Unbuilt Sites and Phases 1, 2 and 3 shall be assumed by Sellers, and Sellers
shall use their best efforts to obtain a release from liability of Project
LLC under such contracts.
(h) All compensation, fringe benefits and other amounts due Project
LLC's employees for the period prior to the Closing, whether as hourly pay,
salaries, overtime, bonus, vacation or sick pay, severance pay, pensions or
otherwise, and all amounts due for the payment of employment taxes with
respect thereto, shall be paid by Project LLC on or prior to the Closing
Date, or, if not paid, an amount equal to such entire unpaid liability shall
be reserved in cash within Project LLC as of the Closing Date.
(i) All costs and expenses incurred by Project LLC prior to the
Closing, or the Sellers in connection with the transactions contemplated
herein, including, without limitation, attorney and other professional fees
and the costs and expenses payable by Project LLC, Investment LLC or the
Sellers hereunder shall be paid by the Sellers and shall not be charged to,
or the responsibility of, Project LLC or Investment LLC, or, if not paid, an
amount equal to such unpaid expenses shall be reserved in cash within
Project LLC or Investment LLC as of the Closing Date. All amounts due any
lender in respect of any mortgage encumbering the Project shall be paid by
Project LLC on or prior to the Closing Date. All federal income tax and
Michigan Single Business Tax liability for the period to, through and
including the Closing shall be paid by Sellers pursuant to Section 8.4.
8.2 On the Closing Date, immediately prior to the Closing, the Sellers shall
certify to Project LLC and the Purchaser a list of all known liabilities of
Project LLC and Investment LLC and the amounts for which cash must be reserved
within Project LLC or Investment LLC pursuant to Section 8.1 (the "Reserved
Liabilities") and that the Reserved Liabilities constitute the only known
liabilities of Project LLC and Investment LLC as of the Closing Date. On the
Closing Date if (i) all of the cash and cash equivalent assets held by Project
LLC as of the Closing Date, after deduction for any costs and expenses payable
by Project LLC hereunder, plus the Sellers' share of all Prepaid Expenses as
provided in Section 7.1(f), exceed (ii) one hundred percent (100%) of the
Reserved Liabilities (the "Reserved Amount"), the Sellers shall be entitled to a
distribution from Project LLC in an amount equal to such excess. If the amount
described in clause (i) of the preceding sentence is less than the amount
described in clause (ii) thereof, the Sellers shall contribute the deficiency to
Project LLC. If the amount actually paid by Project LLC to satisfy the Reserved
Liabilities, any other obligations of the Sellers hereunder and any other
amounts which may become due Project LLC, the Purchaser pursuant to Section 17.2
hereof is less than the Reserved Amount (the "Excess Reserve"), Project LLC
shall distribute the Excess Reserve to the Purchaser within thirty (30) days of
determination thereof, and the Purchaser shall make a special distribution of
the Excess Reserve to the Sellers in proportion to their respective percentage
interests in Project LLC.
8.3 Sellers acknowledge that the sale of the Interests will cause a
termination of Investment LLC and Project LLC for federal income tax and
Michigan Single Business Tax purposes. Sellers shall cause Project LLC and
Investment LLC to timely file final tax returns for
-8-
9
the applicable period through and including the Closing, and Purchaser shall
cooperate and execute such returns on behalf of Project LLC and Investment LLC
for such period. Sellers represent, covenant and warrant that such tax returns
shall be complete and correct in all respects and Sellers shall pay all taxes,
interest and penalties due from Investment LLC and Project LLC in respect of
such period.
9. REPRESENTATIONS AND WARRANTIES.
9.1 The Sellers jointly and severally represent and warrant to the Purchaser
as of the date hereof, and as of the Closing Date, the following with the
understanding that each of the representations and warranties are material and
have been relied on by the Purchaser in connection herewith.
(a) To Sellers' best knowledge, true, correct and complete copies of
the Tenant Leases, including all amendments and documents relating thereto,
have been or will be delivered to Purchaser pursuant to Section 7.1(a)
hereof; the Rent Roll attached hereto as Exhibit "H", as updated to the
Closing Date, is 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 Roll, 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 material obligations under each Tenant Lease; and the Tenant
Leases have not been modified unless expressly described in the Rent Roll.
(b) To Sellers' knowledge, the Project complies with applicable laws,
ordinances, codes, rules and regulations. Subject to obtaining building and
other required permits, the development of the Phase I Land, Phase 2 Land,
and Phase 3 Land, the construction of the Unbuilt Sites thereon, and the
lease of such sites to tenants and the placement of manufactured homes on
such sites is permitted under applicable zoning laws, ordinances, codes and
rules. Except as otherwise disclosed in Exhibit "I" attached hereto, Sellers
and Project LLC have not received any notices of, and Sellers and Project
LLC 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 the Project, the appurtenances thereto or the maintenance, repair
or operation thereof.
(c) Except as otherwise disclosed in Exhibit "J" attached hereto,
Sellers and Project LLC have not received notice of and 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 the Project or any part thereof.
(d) Except as otherwise disclosed in Exhibit "K" attached hereto,
Sellers and Project LLC have no knowledge of any assessments, charges,
paybacks, or obligations requiring payment of any nature or description
against the Project which remain unpaid, including, but not limited to,
those for sewer, water or other utility lines or mains, sidewalks, streets
or curbs. Sellers and Project LLC have no knowledge of any public
improvements having been ordered, threatened, announced or contemplated with
respect to the Project which have not heretofore been completed, assessed
and paid for.
-9-
10
(e) To Sellers' best knowledge, true and complete of all Project
Contracts and all amendments thereto have been delivered to Purchaser
pursuant to Section 7.1 above; all Project Contracts are in full force and
effect and not in default; all Project Contracts are listed in Exhibit "L"
attached hereto; and except as described in Exhibit "L", there are no
Project Contracts in force with respect to the Project which are not subject
to cancellation upon not more than thirty (30) days notice without premium
or penalty.
(f) Exhibit "M" attached hereto lists all insurance currently
maintained for or with respect to the Project, including types of coverage,
policy numbers, insurers, premiums, deductibles and limits of coverage.
(g) Intentionally deleted.
(h) Neither this Agreement nor the performance of Sellers' obligations
hereunder, including, without limitation, the conveyance of the Interests as
herein contemplated, violates or will violate (i) Project LLC's governing
documents and agreements, (ii) any contract, agreement or instrument to
which any Sellers or Project LLC is a party or bound or which affects the
Project or the Interests, or (iii) any applicable law, regulation,
ordinance, order or decree.
(i) Project LLC has not contracted for the furnishing of labor or
materials to the Project which will not be paid for in full prior to the
Closing Date or has not been assumed by Sellers pursuant to Section 8.1(g),
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 the Project or Project LLC prior
to the Closing Date and a lien is filed against the Project as a result of
furnishing such materials and/or labor, Sellers will immediately pay the
said claim or bond over such claim and discharge the lien.
(j) To Sellers' best knowledge, all utility services, including water,
sanitary sewer, gas, electric, telephone and cable television facilities,
are available to the Project and each Developed Site (and will be available
to the Unbuilt Sites when completed) in sufficient quantities to adequately
service the Project at full occupancy (including Unbuilt Sites, once
completed); and to the Sellers' best knowledge, there are no existing,
pending or threatened plans, proposals or conditions which could cause the
curtailment of any such utility service.
(k) Except as disclosed in Exhibit "N" attached hereto, to the Sellers'
and Project LLC's knowledge: (i) other than the roads to be reconstructed as
set forth in Section 3, there are no existing material maintenance problems
with respect to mechanical, electrical, plumbing, utility and other systems
necessary for the operation of the Project; (ii) all such systems are in
good working condition and are suitable for the operation of the Project;
and (iii) there are no material structural or physical defects in and to the
Project.
(l) Attached hereto as Exhibit "O" is a true and complete list of all
persons employed by the Project LLC or the manager of the Project in
connection with the operation and maintenance of the Project as of the date
hereof, including name, job description, term of employment, average hours
worked per week, current pay rate, description of all benefits provided such
employees and the annual cost thereof. All such employees are terminable at
will. To Sellers' best knowledge, Project LLC is and has been in compliance
with all laws and regulations governing wages and hours of employees. All
accrued obligations relating
-10-
11
to employees as of the Closing, whether arising by operation of law,
under contract, by past service, or otherwise, shall be paid or provided for
by Project LLC on or before the Closing Date. Investment LLC has no
employees.
(m) The Project includes the improvements, amenities and recreational
facilities listed in Exhibit "Q" attached hereto and made a part hereof. As
of the date hereof, 363 Developed Sites within the Project are occupied.
Except as set forth in Exhibit "Q", all unoccupied Developed Sites which
exist at the date of Closing, if any, will be in leaseable 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 Project LLC's standard form lease and the rules and
regulations applicable to the Project.
(n) To Sellers' best knowledge, Project LLC has, and Exhibit "R"
attached hereto contains a complete and accurate list of, and copies of, all
licenses, certificates, permits and authorizations from any governmental
authority of which Sellers are aware which are required to develop, operate,
use and maintain the Project as a manufactured home park; and all such
licenses, certificates, permits and authorizations have been issued and are
in full force and effect and on the Closing Date shall remain in full force
and effect notwithstanding the transfer of the Interests.
(o) Exhibit "D" attached hereto contains a true and complete list of
all Personal Property used in the operation of the Project and owned by
Project LLC as of the date hereof; and the Sellers will not permit Project
LLC to sell, transfer, remove or dispose of any item of Personal Property
listed on Exhibit D from the Project on or prior to the Closing Date, unless
such item is replaced with a similar item of no lesser quality or value.
Project LLC owns all of its real and personal property free and clear of all
liens and encumbrances other than the Removable Liens, the Removable
Security Interests, and the Permitted Exceptions, and, except for
replacement in the ordinary course of business, will not distribute, sell,
convey, assign or dispose of any of its property. Project LLC does not own
any manufactured or mobile homes, and does not provide the project manager
with a manufactured or mobile home at the Project.
(p) Sellers have not discharged, released, generated, treated, stored,
disposed of or deposited in, on or under the Project, and to the best of the
Sellers' knowledge, the 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").
The Sellers have no knowledge of any suit, action or other legal proceeding
arising out of or related to any Environmental Laws with respect to the
Project which is pending or threatened before any court, agency or
government authority, and neither Sellers nor Project LLC has received any
notice that the Project is in violation of the Environmental Laws.
(q) Attached hereto as Exhibit "S" are the operating statements for the
Project for the periods ending December 31, 1994, December 31, 1995, and
December 31, 1996, and profit and loss statements for the Project for the
12-month periods ending December 31,
-11-
12
1994, December 31, 1995, and December 31, 1996 and the eight (8) month
period ending August 31, 1997, and the current balance sheet of Project LLC
(collectively, the "Project Financial Statements"). To Sellers' best
knowledge, the Project Financial Statements are true, correct and complete
in all material respects, present fairly and accurately the financial
position of Project LLC and the operation of the Project as at such dates
and the results of its operations and earnings for the periods indicated
thereon, and have been prepared in accordance with generally accepted
accounting principals consistently applied throughout the periods indicated.
(r) To Sellers' best knowledge, Project LLC and Investment LLC are duly
organized and validly existing as limited liability companies under the laws
of the State of Michigan and are duly qualified to do business in and in
good standing under the laws of the State of Michigan and both Project LLC
and Investment LLC have full power and authority to own, lease and operate
their respective properties and assets, including, without limitation, the
Project, and to carry on their business as presently conducted. Attached as
Exhibit "T" are true and complete copies of Project LLC's and Investment
LLC's Operating Agreements, Articles of Organization, and a schedule of
minutes of meetings and consent resolutions and any additional documents,
relating to Project LLC's and Investment LLC's existence and the Seller's
rights and obligations with respect to the Interests, and all amendments to
any of the foregoing (collectively, the "Organizational Documents"). As of
the date hereof, the Organizational 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 Organizational Documents will not be
modified or amended without the consent of Purchaser.
(s) The Sellers constitute all of the members of Investment LLC as of
the date hereof, and hold one hundred percent (100%) of the membership
interests in Investment LLC. Each Seller holds the percentage interest in
Investment LLC set forth opposite his name on Exhibit "U" attached hereto.
Investment LLC constitutes the only member of Project LLC as of the date
hereof, and hold one hundred percent (100%) of the membership interests in
Project LLC. To Sellers' knowledge, all Interests were issued without
violating any state or federal laws applicable to the issuance of securities
or otherwise, and there are no outstanding agreements, commitments, rights,
options, warrants or plans of any nature whatsoever for the issuance, sale
or purchase of the Interests or any other interests in Investment LLC.
(t) This Agreement is the legal, valid and binding obligation of each
of the Sellers, enforceable against each in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
enforcement of creditors' rights generally or by general equity principles.
The Sellers are the legal and beneficial owners of the Interests and
Investment LLC is the legal and beneficial owner of all ownership interests
in Project LLC; such ownership consists of good, valid and indefeasible
title thereto, free of all liens and encumbrances of any kind or nature
whatsoever; and upon consummation of the transfer of the Interests pursuant
to the terms hereof, Purchaser will acquire valid and marketable title to
the Interests and, through its ownership of the Interests, to all of the
ownership interests in Project LLC, free and clear of all liens and
encumbrances whatsoever and will own, in the aggregate, one hundred percent
(100%) of the interests in Investment LLC and Project LLC. As of the
Closing, there shall not exist any condition, event or circumstance, other
than Permitted Exceptions, which constitutes a defect in Project LLC's title
to the Project
-12-
13
which (i) is not insured against by the policy of title insurance
issued pursuant to Section 10.1(a) and (ii) has not been disclosed in
writing to Purchaser. Sellers have the power and authority to sell the
Interests 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 for or on
behalf of Project LLC or Sellers, has or will have due power and authority
to so act. On or before the Closing Date, the Sellers will have complied
with (and have given all notices required under) the organizational
documents of Investment LLC and Project LLC to effectively convey and
transfer all of their respective rights, title and interest in and to the
Interests to Purchaser in the condition herein required.
(u) To Sellers' best knowledge, since December 31, 1996, there has been
no material adverse change, which in the aggregate would exceed $25,000, in
the financial condition, properties, assets, liabilities, operations or
business of Project LLC, nor has any other event, fact, condition or claim
occurred or been threatened which has or may have a Material Adverse Effect
on the financial condition, properties, assets, liabilities, business,
operations or prospects of Project LLC or Investment LLC. "Material Adverse
Effect" means, for purposes of this Agreement, any condition, liability,
expense or other matter which could result in economic loss of $25,000 or
more.
(v) Project LLC and Sellers shall continue to conduct Project LLC's
business in the ordinary course and will not incur any extraordinary capital
expenditures (other than in connection with the Road Reconstruction).
(w) To Sellers' best knowledge, all federal, state and local income,
excise, sales, property and other tax returns required to be filed by
Project LLC and Investment LLC have been timely filed and are correct and
complete in all respects. All known taxes, assessments, penalties and
interest due in respect of any such tax returns or the Project and any
assessments thereon have been paid in full, and there are no known pending
or threatened claims, assessments, deficiencies, audits or notices with
respect to any such taxes (including but not limited to the Michigan Single
Business Tax for all periods to and including the Closing Date).
(x) To Sellers' best knowledge, neither Project LLC nor Investment LLC
is a party or otherwise subject, and the Project is not subject, to any
judgment, order, writ, injunction or decree of any court, governmental or
any administrative agency or the tribunal having jurisdiction over the
Interests, Project LLC, Investment LLC or the Project. Neither Project LLC
nor Investment LLC has or will have as of the Closing Date, any outstanding
powers of attorney.
(y) Except as set forth on Exhibit "V," neither Project LLC nor
Investment LLC maintains, sponsors, participates in or contributes to, or in
the past has maintained, sponsored, participated in or contributed to, any
employee health or benefit plan (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), any employee
pension benefit plan (as defined in Section 3(2)(A) of ERISA), or any bonus,
severance, deferred compensation, retirement option or any other plans or
amendments providing for any benefits to employees of Project LLC or
Investment LLC, and Project LLC and Investment LLC are not, and have not
been a member of any controlled group of entities, a group of trades or
businesses under common control, or an
-13-
14
affiliated service group, as defined in ERISA and the Internal Revenue
Code of 1986, as amended.
(z) To Sellers' best knowledge, Project LLC owns the right to use the
name "White Oak Estates" in connection with the operation of the Project,
and Project LLC does not have any liability for infringement for its use of
such name and there is not pending or threatened any challenge or claim
against Project LLC for its use of the name.
(aa) On the Closing Date Investment LLC shall have no assets other than
its interest in Project LLC and shall have no liabilities other than those
which are discharged by Sellers at or prior to the Closing.
(bb) All of Project LLC's and Investment LLC's bank accounts, including
the name and address of each bank and account numbers, are listed in Exhibit
"W" attached hereto.
(cc) Sellers or Project LLC have delivered or will deliver to Purchaser
true, correct and complete copies of the information and material referred
to Section 6.1 hereof. To Sellers' best knowledge, Project LLC, Investment
LLC and Sellers have not received any written notice of any fact which would
have a Material Adverse Effect on Project LLC, Investment LLC, the
Interests, the Project, or the operation thereof which is not set forth in
this Agreement, the Exhibits and Schedules hereto, and has not otherwise
been disclosed to Purchaser in writing. Nothing contained in any
representations of Sellers set forth in this Agreement, in the Exhibits
prepared by Seller or its representatives attached hereto, or the
information and material delivered or to be delivered to Purchaser pursuant
to the terms hereof, include any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
herein or therein not misleading.
9.2 The provisions of Section 9.1 and all representations and warranties
contained therein shall be true as of the Closing Date and shall survive the
closing of the transaction contemplated herein and the conveyance of the
Interests to Purchaser.
9.3 Purchaser hereby represents and warrants to Sellers as of the date
hereof, and as of the Closing Date, the following with the understanding that
each of the representations and warranties are material and have been relied on
by Sellers in connection herewith.
(a) Purchaser has been duly formed and is validly existing as a limited
liability company, in good standing under the laws of the State of Michigan,
and has, and will have at closing, the power and authority to own, lease and
operate its properties and to conduct its business and to enter into and
perform its obligations under this Agreement.
(b) This Agreement has been duly authorized, executed and delivered by
Purchaser and constitutes the valid and legally binding obligation of
Purchaser, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting enforcement of creditors' rights generally or by general equity
principles.
(c) Neither this Agreement nor the performance of Purchaser's
obligations hereunder, violates or will violate Purchaser's governing
documents and agreements, or any
-14-
15
contract, agreement or instrument to which the Purchaser is a party or bound
and in any respect which prohibits or restricts such performance.
(d) No consent, approval, authorization, order or decree of any court
or governmental agency or body is required for the consummation by Purchaser
of the transactions contemplated by this Agreement, except such as have been
obtained or rendered, as the case may be.
(e) Members of Purchaser are and have been engaged in the business of
buying, selling and operating manufactured housing communities, and are
knowledgeable and aware of the business operations of manufactured housing
communities; Purchaser is entering into this Agreement without any
representation, warranty or guarantee by Sellers as to the operations and
profitability of the Project for any time period (i) prior to the Closing,
except for those representations and warranties explicitly set forth in this
Agreement, or (ii) after the Closing.
(f) Purchaser shall execute at Closing a certificate in the form
attached hereto as Exhibit 9.2(f), stating that Purchaser has requested of
Sellers and Sellers have cooperated with and allowed Purchaser to (i) review
all of the books and records of the Project, (ii) inspect all of the
personal and real property of the Project, (iii) interview any and all
persons associated with the Project as Purchaser requested, and (iv) engage
engineers, accountants, attorneys and other consultants or professionals as
Purchaser deemed necessary to conduct the due diligence in respect of the
Project.
(g) Purchaser has not received notice of and has no knowledge of any
existing, pending or threatened litigation, or other court administrative or
extrajudicial proceedings with respect to or affecting this Agreement or
Purchaser's obligations under this Agreement.
(h) Nothing contained in any representations of Purchaser set forth in
this Agreement, in the Exhibits prepared by Purchaser or its representatives
attached hereto, or the information and material delivered or to be
delivered to Sellers pursuant to the terms hereof, include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
9.4 The provisions of Section 9.3 and all representations and warranties
contained therein shall be true as of the Closing Date and shall survive the
closing of the transaction contemplated herein and the conveyance of the
Interests.
10. CONDITIONS.
10.1 Purchaser's obligation to consummate the purchase of the Interests is
expressly conditioned upon the following, each of which constitutes a condition
precedent to Purchaser's obligations hereunder which, if not performed or
determined to be acceptable to Purchaser on or before the Closing Date (unless a
different time for performance is expressly provided herein), shall permit
Purchaser, at its sole option, to declare this Agreement null and void and of no
further force and effect by written notice to Sellers, whereupon the Deposit
shall be returned immediately to Purchaser, and neither Sellers nor the
Purchaser shall have any further obligations hereunder to the other (provided
that Purchaser shall have the right to waive any one or all of said conditions).
-15-
16
(a) On the Closing Date, Sellers' title to the Interests, Investment
LLC's title to the ownership interests in Project LLC , and Project LLC's
title to the Project 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) Sellers shall have complied with and performed all covenants,
agreements and conditions on its part to be performed under this Agreement
within the time herein provided for such performance.
(c) Sellers' representations, warranties and agreements contained
herein are and shall be true and correct as of the date hereof and as of the
Closing Date in all material respects.
(d) From and after the date hereof to the Closing Date there shall have
been no change that could have a Material Adverse Effect on the Project,
Project LLC, Investment LLC or the business conducted at the Project or by
Project LLC or Investment LLC.
(e) Purchaser shall have obtained, at its sole cost and expense, within
thirty (30) days after the date hereof, a "Phase 1" environmental audit (the
"Environmental Audit") of the Project, including the Land and Improvements,
addressed to the Purchaser, conducted by an independent environmental
investigation and testing firm, reflecting that the Project is free of and
does not contain any Hazardous Materials in excess of amounts permitted
under applicable federal, state or local laws, regulations, rules or
ordinances, including, but not limited to, standards adopted by the Michigan
Department of Environmental Quality for unrestricted residential use, and
otherwise in form and content acceptable to Purchaser, in its sole
discretion. If the Environmental Audit discloses any condition which
requires further review or investigation, the Purchaser at its option may
obtain a "Phase 2" environmental audit of the Project in form and content
acceptable to the Purchaser, in its sole discretion, and the Closing Date
shall be extended for up to sixty days to provide Purchaser with sufficient
time to receive, review and approve the Phase 2 environmental audit.
11. PERIOD FOR INVESTIGATION.
11.1 Purchaser shall have until October 1, 1997 (the "Investigation
Period") to inspect and investigate all aspects of the Project, Project LLC and
Investment LLC, including, without limitation, the physical condition of the
Project, all items of income and expense arising from Seller's ownership and
operation of the Project, and all documents relating thereto. In the event
Sellers have failed to deliver or make available to Purchaser the information
and material required by Section 7.1 on 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, Purchaser may, at its option and in its
sole and absolute discretion, terminate this Agreement, whereupon the deposit
shall be returned to Purchaser, and Purchaser and Sellers shall have no further
obligation to the other hereunder.
11.2 Purchaser and Sellers shall use their best efforts to agree on the
form and content of the Expansion Completion Agreement, Road Escrow Agreement
and Letter of Credit on or before October 15, 1997. If the parties have not
agreed on the form and content of such documents by
-16-
17
such date, either party hereto may terminate this Agreement by written
notice to the other party within two (2) business days of the expiration of the
Investigation Period, whereupon the deposit shall be returned to Purchaser, and
Purchaser and Sellers shall have no further obligation to the other hereunder.
11.3 If Purchaser fails to notify Sellers in writing prior to the expiration
of the Investigation Period, as the same may be extended, that it is terminating
this Agreement as provided in Section 11.1 above (the "Termination Notice"), its
right under Section 11.1 to terminate this Agreement shall expire.
12. OPERATION OF PROJECT.
12.1 From and after the date hereof to the Closing Date, Sellers shall cause
Project LCC to: (a) continue to maintain, operate and conduct business at the
Project in substantially the same manner as prior to the date hereof; (b)
perform all regular and emergency maintenance and repairs with respect to the
Project; (c) will maintain in effect all insurance policies now maintained in
respect of the Project; (d) not sell, assign or convey any right, title or
interest in any part of the Project; and (e) not change the operation or status
of the Project in any manner reasonably expected to impair or diminish its
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 the
Project; and (iii) Sellers shall at or prior to the Closing Date furnish
Purchaser with a copy of each new or renewal lease.
12.2 Effective as of the Closing Date, Project LLC shall terminate those
Project Contracts designated by Purchaser at least five (5) days prior to the
Closing Date, and all payments of any nature whatsoever payable or claimed as a
result of the termination of such Project Contracts and all costs associated
therewith shall be paid by Project LLC prior to the Closing Date or shall become
Reserved Liabilities hereunder.
12.3 Effective as of the Closing, Project LLC shall terminate the employees
of Project LLC; provided, however, that immediately following the Closing,
Purchaser shall cause Project LLC to offer new employment to such employees on
Purchaser's and its affiliates' standard employment at will basis, at the same
hourly wage as they received prior to the Closing, and, in the case of Gale
Priuer and Francis Coggins with medical insurance and other benefits available
on the same basis as such benefits are provided to employees of Purchaser and
its affiliates who are employed in similar positions. All compensation and
payments of any nature payable or claimed as a result of the employment of the
employees prior to Closing and the termination of such employees at Closing
shall be paid by Project LLC prior to the Closing, or shall become Reserved
Liabilities hereunder.
13. DESTRUCTION OF PROJECT.
13.1 In the event any part of the Project shall be damaged or destroyed
prior to the Closing Date, Sellers shall notify Purchaser thereof, which notice
shall include a description of the damage and all pertinent insurance
information. If the use or occupancy of the Project is materially affected by
such damage or destruction or the cost to repair such damage or destruction
exceeds Fifty Thousand Dollars ($50,000.00), Purchaser shall have the right to
terminate this Agreement by notifying Sellers within thirty (30) days following
the date Purchaser receives notice of such occurrence, whereupon the Deposit
shall be returned immediately to Purchaser, and Sellers and Purchaser shall not
have any further obligation hereunder to the other. If Purchaser does not elect
to
-17-
18
terminate this Agreement, or shall fail to notify Sellers within the said
thirty (30) day period, on the Closing Date Sellers shall assign to Purchaser
all of Sellers' right, title and interest in and to the proceeds of the fire and
extended coverage insurance presently carried by or payable to Sellers.
14. CONDEMNATION.
14.1 If, prior to the Closing Date, either Sellers or Purchaser receives or
obtains notice that any governmental authority having jurisdiction intends to
commence or has commenced proceedings for the taking of any portion of the
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, Purchaser shall have the option to terminate this
Agreement by notifying Sellers within thirty (30) days following Purchaser's
receipt of such notice, in which event the Deposit shall be returned immediately
to Purchaser, and Sellers and Purchaser shall not have any other or further
liability or responsibility hereunder to the other. If Purchaser does not elect
to terminate this Agreement or shall fail to notify Sellers within the thirty
(30) day period, Purchaser 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 the Purchaser.
15. DEFAULT BY SELLERS OR PURCHASER.
15.1 In the event Sellers shall fail to perform any of their obligations
hereunder, Purchaser may, at Purchaser's option and in addition to all other
rights available at law or in equity: (i) terminate this Agreement by written
notice delivered to Sellers at or prior to the Closing Date and receive a full
refund of the Deposit; (ii) obtain specific performance of the terms and
conditions hereof; or (iii) waive Seller's default and proceed to consummate the
transactions with Sellers.
15.2 In the event Purchaser does not elect to terminate this Agreement as
permitted herein and the conditions precedent to Purchaser's obligation to
purchase the Interests have been satisfied or waived by Purchaser, and
thereafter Purchaser fails to purchase the Interests on the Closing Date in
accordance with the terms of this Agreement, Sellers may, at their option, (i)
terminate this Agreement and have delivered to Seller, as liquidated damages,
the Deposit, and Purchaser shall have no further or other liability hereunder or
(ii) obtain specific performance of the terms and conditions hereof. Sellers and
Purchaser agree that in the event of a default by Purchaser under this
Agreement, Seller's damages would be difficult or impossible to ascertain, and
the amount of the Deposit represents a reasonable estimate of such damages.
16. DEPOSIT.
16.1 On the date of the complete execution of this Agreement, Purchaser
shall deliver the sum of One Hundred Thousand and 00/100 ($100,000.00) Dollars
(the "Deposit") to the Title Company (the "Escrow Agent"), to be held and
disbursed pursuant to the terms of an Escrow Agreement in the form of Exhibit
"X" attached hereto and made a part hereof, which shall be executed and
delivered by the Sellers, Purchaser and Escrow Agent. All interest earned on the
Deposit shall belong to Purchaser.
17. LIABILITY AND INDEMNIFICATION.
17.1 Purchaser 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 Closing Date with respect
-18-
19
to the Project, and except for the liability of Project LLC in respect of
the Reserved Liabilities for which cash has been reserved by Project LLC or
Investment LLC on the Closing Date pursuant to Section 8 above, all accounts
payable, obligations, taxes, and liabilities of Project LLC and Investment LLC,
accrued or unaccrued, foreseen or unforeseen, contingent or liquidated, incurred
as of the Closing Date or arising out of events or occurrences or attributable
to operations arising on or prior to the Closing Date (collectively, the
"Pre-Closing Liabilities") shall be the responsibility of, and shall be paid by,
Sellers. .
17.2 The Sellers, jointly and severally, agree to indemnify and hold
harmless Project LLC, Investment LLC, Purchaser, and their respective
successors, assigns, constituent members and partners, employees, agents and
representatives from and against any and all claims, penalties, damages,
liabilities, actions, causes of action, costs and expenses (including reasonable
attorneys' fees and costs) arising out of, as a result of or as a consequence
of: (i) the Pre-Closing Liabilities, which include, without limitation, (A) any
property damage or injuries to persons, including death, caused by any
occurrence at the Project or in connection with Project LLC's use, possession,
operation, repair and maintenance of the Project prior to the Closing Date; (B)
any liabilities of Project LLC in respect of Project Contracts not specifically
assumed by Purchaser; and (C) any claims of employees of Project LLC arising in
connection with their employment prior to Closing or termination of their
employment at Closing; (ii) any contracts or agreements between Project LLC and
any other party relating to the Road Reconstruction or development and
construction of Phases 1, 2 and 3 and the Unbuilt Sites entered into before the
Closing Date; (iii) the imposition of any transfer tax by any governmental
authority arising directly or indirectly from the transfer of the Interests to
Purchaser (including real estate transfer tax imposed in respect of the
Project); (iv) any breach by Sellers of any of their representations,
warranties, or obligations set forth herein or in any other document or
instrument delivered by the Sellers or Project LLC in connection with the
consummation of the transactions contemplated herein; (v) liability of the
Project LLC or Investment LLC for federal income or Michigan Single Business
Tax, and any interest or penalties in connection therewith, for the period prior
to, through and including the Closing; and (vi) any liabilities of Investment
LLC as of the Closing Date. The Purchaser shall have the right to offset against
the Conditional Purchase Price which otherwise would have been payable to
Sellers the amounts Sellers are liable for pursuant to the preceding sentence.
17.3 From and after the Closing Date, Purchaser agrees to indemnify and hold
harmless Sellers from and against any and all claims, penalties, damages,
liabilities, actions, causes of action, costs and expenses (including reasonable
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 the Project or in
connection with the Purchaser's use, ownership, possession, operation, repair
and maintenance of the Project from and after the Closing; (ii) any breach by
Purchaser of any of their representations or warranties set forth herein; (iii)
any liability, cost, expense or damages of Sellers (other than liability for
transfer tax (if any) in respect of the Property) arising in respect of any
obligation (if any) of Purchaser or Project LLC to file any notice with respect
to the transfer of the Interests with the State of Michigan, Genesee County
recorder of deeds or the local assessor's office.
18. CLOSING.
18.1 Subject to the provisions of Sections 6.1 and 10, the closing
("Closing") of the transaction contemplated herein shall take place within
thirty (30) days after the expiration of the Investigation Period (the "Closing
Date"); provided, however, that if the items to be delivered to Purchaser by
Sellers pursuant to Section 5, 7 and 10(e) are not delivered by the dates set
forth
-19-
20
therein, the Closing Date 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 delivery of all such items. The Closing Date shall be mutually agreed
upon by Purchaser and Sellers and shall be held at the office of Sellers'
attorney or the Title Company, or on or at such other time or place as Purchaser
and Sellers shall agree upon.
18.2 At Closing:
(a) Each Seller shall execute and deliver an Assignment of LLC
Interest, transferring all of such Seller's Interest to Purchaser, free and
clear of all liens and encumbrances whatsoever, in form and content
acceptable to Purchaser and Sellers.
(b) The Purchaser shall enter into an amended and restated operating
agreement of Investment LLC and an amendment to and restatement of
Investment LLC's Articles of Organization, providing for the withdrawal of
the Sellers and the admission of Purchaser as the sole member of Investment
LLC in place of the Sellers, such Investment LLC documents to be in form and
content provided by Purchaser.
(c) Sellers shall deliver to Purchaser the certificate of Reserved
Liabilities contemplated by Section 8.2 hereof.
(d) Sellers shall cause the Commitment referred to in paragraph 5.1
hereof to be recertified and updated to the Closing Date, and shall cause
the policy of title insurance to be issued to Project LLC pursuant to such
updated Commitment together with such endorsements thereto as Purchaser
shall request, at Seller's sole cost (except for the cost of additional
endorsements requested by Purchaser).
(e) Purchaser shall deliver to Sellers the Fixed Purchase Price,
adjusted as provided in this Agreement, by certified or cashier's check or
wire transfer of immediately available funds to Seller's designated
financial institution.
(f) Purchaser, Sellers and Title Company shall execute and deliver the
Road Escrow Agreement, and the amount set forth in Section 3.2 of the Fixed
Purchase Price shall be deposited with the Title Company pursuant to the
Road Escrow Agreement.
(g) Purchaser shall deliver the letter of credit in the amount of the
Conditional Purchase Price to Sellers, in form and substance acceptable to
Sellers and Purchaser.
(h) Sellers shall have delivered evidence to Purchaser that any
contracts or agreements entered into by Project LLC in connection with the
Roadway Reconstruction or development of Phases 1, 2 and 3 has been assumed
by Sellers and that Project LLC has been released therefrom.
(i) Sellers shall deliver to Purchaser a certificate confirming the
truth and accuracy of Sellers' representations and warranties hereunder, and
the Rent Roll, updated to the Closing Date, shall be certified as true and
correct in all respects.
(j) Sellers shall deliver to Project LLC originals of: (i) the Tenant
Leases, including all amendments thereto and modifications thereof; (ii) all
Project Contracts assigned to Purchaser; (iii) all architectural plans and
specifications and other documents in
-20-
21
Seller's possession pertaining to the development of the Project; and
(iv) all collection, expense and business records and such other
documentation reasonably necessary for Purchaser to continue the
uninterrupted operation of the Project.
(k) Each Seller (if any) which is a corporation, limited liability
company, or partnership shall deliver to Purchaser evidence of the power and
authority of such entity to enter into the transactions contemplated hereby,
and authorizing and directing the execution and delivery of this Agreement
and all documents and instruments to be executed and delivered by such
Sellers pursuant to the terms hereof.
(l) Sellers shall deliver to Purchaser an affidavit, in form acceptable
to Purchaser, executed by the Sellers, certifying that the Sellers and all
persons or entities holding an interest in the Sellers are not non-resident
aliens or foreign entities, as the case may be, such that the Sellers and
such interest holders are not subject to tax under the Foreign Investment
and Real Property Tax Act of 1980.
(m) Purchaser shall deliver to Sellers 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
Purchaser hereunder, have been authorized by Purchaser and that all persons
or entities who have executed documents on behalf of Purchaser in connection
with the transaction have due authority to act on behalf of the Purchaser.
(n) The Sellers and Purchaser 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.
19. COSTS.
19.1 Purchaser and Sellers shall each be responsible for their own counsel
fees and travel expenses. Sellers shall pay transfer taxes due on the conveyance
of the Interests to Purchaser (including any transfer tax (if any) imposed with
respect to the Project), sales taxes due on the transfer of any vehicles to
Purchaser, title insurance premiums for the Purchaser's policy of title
insurance, the cost of the Survey and all recording and filing fees. Escrow fees
shall be borne by Purchaser.
20. BROKERS.
20.1 Sellers and Purchaser represent and warrant to each other that the
party or parties making the representation have not dealt with any brokers or
finders or created or incurred any obligation for a commission, finder's fee or
similar remuneration in connection with this transaction and jointly and
severally agree to indemnify, warrant and defend each other against and from all
liability, loss, damages, claims or expenses, including reasonable attorney
fees, arising from the breach or asserted breach of such representation. The
provisions of this Section shall survive termination of this Agreement for any
reason.
-21-
22
21. ASSIGNMENT.
21.1 Purchaser hereby reserves the right, on or before the Closing Date, to
assign all of its right, title and interest in and to this Agreement or to
transfer its interest in the Project to any other person or entity, and upon
notice of such assignment to Seller, all terms and conditions hereof shall apply
equally to such assignee as if the assignee was the original party hereto.
22. CONTROLLING LAW.
22.1 This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of Michigan.
23. ENTIRE AGREEMENT.
23.1 This Agreement, the Escrow 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.
24. NOTICES.
24.1 Any notice, writing, or other matter or copy of any of the foregoing
(collectively, "document") to be delivered hereunder shall be deemed delivered
(i) upon hand delivery to or actual receipt by the intended recipient, or (ii)
upon the occurrence of any of the following if the same occurs on a business
day, or the first business day after the occurrence of any of the following if
the same occurs on a day which is not a business day: (A) hand delivery to any
adult residing or employed at the applicable address indicated below, (B)
facsimile transmission to the address indicated below and receipt by the
transmitting party of printed confirmation that the transmission was received,
provided that if the transmission occurs after 4:30 P.M. E.S.T or E.D.T. (as
appropriate), it shall be deemed to have occurred on the first business day
thereafter, or (C) one (1) business day after the document is deposited with an
overnight courier service, or three (3) days after the document is deposited in
the United States mail, with postage or delivery fees prepaid and addressed as
specified below, provided that the document is subsequently delivered by the
postal or courier service to the required address in the ordinary course of
business. A document shall be addressed as follows:
If to Sellers:
c/o R.D. Lammy, II
G-3275 West Pasadena Avenue
Flint, Michigan 48504-2386
Fax No. ________________
Telephone:______________
-22-
23
With a copy to: William Shedd/Damion Frasier
Winegarden, Shedd, Haley, Lindholm &
Robertson, P.L.C.
501 Citizens Bank Building
Flint, Michigan 48502-1983
Fax No. (810) 767-8776
Telephone: (810) 767-3600
If to Purchaser: Mt. Morris MHC, L.L.C.
c/o Parkbridge Investment Group,Inc.
2328 Livernois, Suite B
Troy, Michigan 48083
Attn: Steven Ureel
Fax No. (810) 740-9295
Telephone: (810) 680-1903
With a contemporaneous
required copy to: Arthur A. Weiss/Gail A. Anderson
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Fax No. (313) 961-8358
Telephone: (313) 961-8380
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.
25. ARBITRATION. All disputes between the parties arising under this
Agreement shall be resolved by arbitration in Flint, Michigan, by a single
arbitrator pursuant to the rules of the American Arbitration Association. The
award of the arbitrator shall be final and binding upon the parties, and a
judgment may be rendered thereon in any court of record.
26. BINDING.
26.1 The terms hereof shall be binding upon and shall inure to the benefit
of the parties hereto, their successors, transferees and assigns.
27. PARAGRAPH HEADINGS.
27.1 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.
28. DAYS AND DEADLINES.
28.1 As used in this Agreement, "days" shall mean and refer to calendar
days, and "business days" shall mean and refer to days which are not a Saturday,
Sunday or legal banking holiday in the State of Michigan. However, if a deadline
falls or notice is required on a Saturday, Sunday, or a legal banking holiday in
the State of Michigan, then the deadline or notice shall be extended to the next
calendar day which is not a Saturday, Sunday, or a legal banking holiday.
-23-
24
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 Closing 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.
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.
SELLERS:
IN THE PRESENCE OF:
- ------------------------- ------------------------------------------
R.D. LAMMY
- -------------------------
------------------------------------------
R.D. LAMMY, II
------------------------------------------
DEBORAH L. CAMPBELL
PURCHASER:
MT. MORRIS MHC L.L.C.
By:
- ------------------------- ---------------------------------------
Steven Ureel, Manager
- -------------------------
-24-
25
LIST OF EXHIBITS
----------------
EXHIBIT DESCRIPTION
------- -----------
A Legal Description of Land
B-1 Phase 1 Land
B-2 Phase 2 Land
B-3 Phase 3 Land
C-1 Phase 1 Site Plan
C-2 Phase 2 Site Plan
C-3 Phase 3 Site Plan
C-4 Expansion Plans
C-5 Road Plans
D Schedule of Personal Property
E Road Reconstruction
F Road Reconstruction Requirements
G Survey Certificate
H Rent Roll
I Violations (Section 9.1(b))
J Litigation and Condemnation Proceedings
(Section 9.1(c))
K Assessments and Other Charges (Section 9.1(d))
L Project Contracts (Section 9.1(e))
M Summary of Insurance (Section 9.1(g))
N Maintenance Problems (Section 9.1(k))
O List of Employees (Section 9.1(l))
P List of Facilities (Section 9.1(m))
-25-
26
Q Developed Sites Not in Leaseable Condition
(Section 9.1(m))
R Licenses, Authorizations and Permits
(Section 9.1(n))
S Seller's Financial Statements (Section 9.1(q))
T Organizational Documents (Section 9.1(r))
U Ownership Interests in Investment LLC
(Section 9.1(s))
V ERISA Plans
W Bank Accounts (Section 9.1(bb))
X Form of Escrow Agreement (Deposit)
9.2(f) Form of Purchaser's Certificate
-26-