Exhibit 10.1
Execution Copy
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
CHARTERMAC,
CHARTER MAC CORPORATION,
CM ARCAP INVESTORS LLC,
THE COMMON MEMBERS LISTED ON SCHEDULE I HERETO,
THE PREFERRED MEMBERS LISTED ON SCHEDULE I HERETO,
ARCAP INVESTORS, L.L.C.
ARCAP REIT, INC.
AND
AI SELLERS REPRESENTATIVE, L.L.C.
August 15, 2006
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made this 15th
day of August, 2006, by and among the members of ARCap Investors, L.L.C., a
Delaware limited liability company ("ARCap"), listed as the Common Members on
Schedule I hereto (the "Common Members"), the members of ARCap listed as the
Preferred Members on Schedule I hereto (the "Preferred Members" and together
with the Common Members, collectively, "ARCap Sellers" and, each, an "ARCap
Seller"), ARCap REIT, Inc., a Delaware corporation ("ARCap REIT" and together
with ARCap Sellers, collectively, "Sellers" and, each, a "Seller"), as sellers,
AI Sellers Representative, L.L.C., a Delaware limited liability company
("AISR"), as sellers' representative (AISR acting in such capacity or such other
Person as may succeed AISR in such capacity being referred to herein as "Sellers
Representative"), ARCap, CharterMac, a Delaware statutory trust, ("CharterMac"),
Charter Mac Corporation, a Delaware corporation and a wholly owned subsidiary of
CharterMac ("Purchaser 1"), and CM ARCap Investors LLC, a Delaware limited
liability company and a wholly owned subsidiary of CharterMac ("Purchaser 2" and
together with Purchaser 1, collectively, "Purchasers" and, each a "Purchaser"),
as purchasers.
RECITALS
THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis of
the following facts, intentions and understandings:
A. ARCap Sellers own certain of the Common Units and Series A
Preferred Units of ARCap, in the respective amounts set forth in Schedule I
attached hereto (collectively, the "Seller Units");
B. CharterMac owns certain of the Common Units and Series A
Preferred Units of ARCap, in the amounts set forth in Schedule II attached
hereto (collectively, the "CharterMac Units");
C. Prior to the Closing Date (as defined below), CharterMac shall
transfer the CharterMac Units to Purchaser 2 in accordance with the terms and
conditions of the LLC Agreement;
D. ARCap owns all of the issued and outstanding class A common
stock of ARCap REIT, and ARCap REIT owns all of the issued and outstanding
capital stock of ARCap Servicing, Inc. ("ASI"), ARCap Finance Corporation
("AFC"), ARCap 2004-RR3 Resecuritization, Inc. ("RR3") and ARCap 2005-RR5
Resecuritization, Inc. ("RR5" and, together with RR3, ASI, AFC, ARCap and ARCap
REIT, the "Companies," individually, a "Company");
E. Upon the terms and subject to the conditions contained in this
Agreement, Purchaser 1 desires to acquire from ARCap REIT the ASI Stock, and
ARCap REIT desires to sell to Purchaser 1 the ASI Stock; and
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F. Upon the terms and subject to the conditions contained in this
Agreement, Purchaser 2 desires to acquire from ARCap Sellers the Seller Units,
and each ARCap Seller desires to sell to Purchaser 2 such ARCap Seller's Seller
Units.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS; INTERPRETATION
1.1 Certain defined terms.
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(a) For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "Advisory Committee" shall have meaning specified in
Section 7.15(a) of this Agreement.
(ii) "Affiliate" of a Person means a Person that
Controls, is Controlled by, or is under common Control with, the first mentioned
Person.
(iii) "AFC" shall have the meaning specified in the
recitals to this Agreement.
(iv) "Agreement" shall have the meaning specified in the
introductory paragraph to this Agreement.
(v) "AISR" shall have the meaning specified in the
introductory paragraph to this Agreement.
(vi) "AMAC" means American Mortgage Acceptance Company,
a Massachusetts business trust.
(vii) "Amended LLC Agreement" means the Second Amended
and Restated Limited Liability Agreement of ARCap, attached hereto as Exhibit M.
(viii) "ARCap" shall have the meaning specified in the
introductory paragraph to this Agreement.
(ix) "ARCap Closing Certificate" means a certificate
required to be provided by ARCap, ARCap REIT or ARCap Sellers pursuant to
Sections 2.3(a)(v), 2.3(a)(vi), 2.3(b)(i)(4), 2.3(c)(iii), 2.3(c)(iv),
2.3(d)(ii) or 2.3(d)(iii) of this Agreement.
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(x) "ARCap REIT" shall have the meaning specified in the
introductory paragraph to this Agreement.
(xi) "ARCap Sellers" shall have the meaning specified in
the introductory paragraph to this Agreement.
(xii) "ARCap Transaction Costs" means all costs and
expenses incurred by ARCap or any of its Subsidiaries or Affiliates in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement, including all legal, accounting, advisory and
banking fees, as evidenced by a certificate delivered by the chief financial
officer of ARCap to Purchaser 2.
(xiii) "ARESS" shall have the meaning specified in the
definition of "Fund Entities".
(xiv) "ASI" shall have the meaning specified in the
recitals to this Agreement.
(xv) "ASI Distribution" shall have meaning specified in
Section 2.1(a)(iii) of this Agreement.
(xvi) "ASI Stock" shall have the meaning specified in
Section 5.4 of this Agreement.
(xvii) "Audited Balance Sheets" shall have meaning
specified in Section 4.5(a) of this Agreement.
(xviii) "Audited Financial Statements" shall have the
meaning specified in Section 4.5(a) of this Agreement.
(xix) "Balance Sheets" shall have the meaning specified
in Section 4.5(d) of this Agreement.
(xx) "Basic Purchase Price" shall have the meaning
specified in Section 2.1(a) of this Agreement.
(xxi) "Bonus Plans" means the following bonus plans of
ARCap REIT: ARCap Annual Senior Management Incentive Bonus Compensation Plan and
ARCap Annual Incentive Bonus Compensation Plan.
(xxii) "Carryover Returns" shall have the meaning
specified in Section 9.1 of this Agreement.
(xxiii) "Cash Consideration" shall have the meaning
specified in Section 2.1(a)(v) of this Agreement.
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(xxiv) "Cash Units" means the Seller Units owned by
certain ARCap Sellers in the respective amounts for such ARCap Sellers as set
forth in Schedule III attached hereto.
(xxv) "CharterMac" shall have the meaning specified in
the introductory paragraph to this Agreement.
(xxvi) "CharterMac Balance Sheet" shall have the meaning
specified in Section 6.10 of this Agreement.
(xxvii) "CharterMac Balance Sheet Date" shall have the
meaning specified in Section 6.11 of this Agreement.
(xxviii) "CharterMac Closing Certificate" means a
certificate required to be provided by CharterMac or either Purchaser pursuant
to Sections 2.3(e)(i), 2.3(f)(i) or 2.3(g)(i) of this Agreement.
(xxix) "CharterMac Financial Statements" shall have the
meaning specified in Section 6.9(b) of this Agreement.
(xxx) "CharterMac SEC Documents" shall have the meaning
specified in Section 6.9(a) of this Agreement.
(xxxi) "CharterMac Units" shall have the meaning
specified in the recitals to this Agreement.
(xxxii) "Claim" means a claim for indemnity for Damages
made by any Sellers Indemnitee or Purchasers Indemnitee.
(xxxiii) "Closing" shall have the meaning specified in
Section 2.2 of this Agreement.
(xxxiv) "Closing Balance Sheet" shall have the meaning
specified in Section 2.4(a) of this Agreement.
(xxxv) "Closing Date" shall have the meaning specified
in Section 2.2 of this Agreement.
(xxxvi) "Closing Working Capital Amount" shall have the
meaning specified in Section 2.4(a) of this Agreement.
(xxxvii) "Code" means the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
(xxxviii) "Common Members" shall have the meaning
specified in the introductory paragraph to this Agreement.
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(xxxix) "Common Unit" means a "Common Unit" of ARCap as
defined in the LLC Agreement.
(xl) "Companies" shall have the meaning specified in the
recitals to this Agreement.
(xli) "Confidentiality Agreement" shall have the meaning
specified in Section 7.4 of this Agreement.
(xlii) "Continuing Employees" shall have the meaning
specified in Section 7.10(b) of this Agreement.
(xliii) "Contract" means any written, oral, implied or
other contract, agreement, mortgage, deed of trust, lease, sublease, offer to
lease, agreement to lease, sales order, purchase order, indenture, note, bond,
loan, instrument, license, permit, franchise, commitment or other, instrument,
arrangement or agreement that is binding on any Person or any part of its
property under applicable Law.
(xliv) "Control" (including the terms "Controlled by"
and "under common Control with") means the possession, direct or indirect,
through one or more intermediaries, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of stock, as trustee or executor, by contract or credit arrangement or
otherwise.
(xlv) "Cotton Promissory Note" means that certain
Revolving Credit Promissory Note, dated as of June 28, 2004, by and between
Leonard W. Cotton and ARCap REIT.
(xlvi) "Damages" shall include any actual loss, damage,
injury, liability, claim, demand, settlement, judgment, award, fine, penalty,
Tax, fee (including reasonable attorneys' fees), charge, cost (including costs
of investigation and defense) or expense of any nature.
(xlvii) "D&O/E&O Insurance" shall have the meaning
specified in Section 7.11(c) of this Agreement.
(xlviii) "Disclosure Schedule" means Schedule VII
attached hereto, dated as of the date hereof, and forming a part of this
Agreement, which Disclosure Schedule shall (i) consist of items of disclosure
categorized by sections, and (ii) provide information, or otherwise qualify, the
representations and warranties set forth in this Agreement.
(xlix) "Dispute" shall have the meaning specified in
Section 12.8(a) of this Agreement.
(l) "DOJ" shall have the meaning specified in Section
7.2(a) of this Agreement.
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(li) "Duggins Promissory Note" means that certain
Revolving Credit Promissory Note, dated as of June 28, 2004, by and between
James L. Duggins and ARCap REIT.
(lii) "Effective Time" shall have the meaning specified
in Section 2.2 of this Agreement.
(liii) "Employment Agreements" shall have the meaning
specified in Section 2.3(a)(ii) of this Agreement.
(liv) "Encumbrance" means any security interest, pledge,
mortgage, lien, charge, encumbrance, adverse claim, preferential arrangement,
option, right of first refusal, easement, encroachment, indenture, right of way,
deed of trust, lease, security agreement or restriction of any kind, excluding
licenses of Intellectual Property.
(lv) "Environmental Claims" means any claim, cause of
action, or notice by any Person alleging potential liability arising out of,
based on or resulting from (A) the presence, or release into the environment, of
any Materials of Environmental Concern at any location, or (B) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
(lvi) "Environmental Laws" means all federal,
interstate, state, local and foreign Laws relating to pollution or protection of
human health, safety, or the environment, including Laws relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern.
(lvii) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder.
(lviii) "ERISA Affiliate" means any Person that is (or
at any relevant time was) treated as a single employer with ARCap or any of its
Subsidiaries under Section 414 of the Code or Section 4001 of ERISA.
(lix) "Escrow Account" means the escrow account in which
the Escrow Amount shall be held by the Escrow Agent in accordance with the terms
of the Escrow Agreement.
(lx) "Escrow Agent" means LaSalle Bank National
Association.
(lxi) "Escrow Agreement" shall have the meaning
specified in Section 2.1(b) of this Agreement.
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(lxii) "Escrow Amount" shall have the meaning specified
in Section 2.1(b)(iii) of this Agreement.
(lxiii) "Escrow Shares" shall have the meaning specified
in Section 2.1(b)(iii) of this Agreement.
(lxiv) "Exchange Rights Agreement" means the Exchange
Rights Agreement substantially in the form attached hereto as Exhibit P.
(lxv) "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
(lxvi) "Exchange Units" means the Seller Units owned by
certain ARCap Sellers in the respective amounts for such ARCap Sellers as set
forth in Schedule IV attached hereto.
(lxvii) "Final Fund Documents" means, with respect to
each Fund Entity, the final, executed transaction documents related thereto as
identified with respect to such Fund Entity on Schedule VIII.
(lxviii) "Financial Statements" shall have the meaning
specified in Section 4.5(d) of this Agreement.
(lxix) "FTC" shall have the meaning specified in Section
7.2(a) of this Agreement.
(lxx) "Fund Entities" means, collectively, ARCap High
Yield CMBS Fund, L.L.C., ARCap Diversified Risk CMBS Fund, L.L.C., ARCap CMBS
Fund REIT, Inc., ARCap High Yield CMBS Fund II, L.L.C., ARCap Diversified Risk
CMBS Fund II, L.L.C., ARCap CMBS Fund II REIT, Inc. and ARCap Real Estate
Special Situations Mortgage Fund, L.L.C. ("ARESS").
(lxxi) "Fund Entity Reports" shall have the meaning
specified in Section 4.21(a) of this Agreement.
(lxxii) "Fund PPMs" means, collectively, ARCap High
Yield CMBS Fund, L.L.C. Private Placement Memorandum, ARCap High Yield CMBS Fund
II, L.L.C. Private Placement Memorandum, ARCap Diversified Risk CMBS Fund II,
L.L.C. Private Placement Memorandum and ARCap Real Estate Special Situations
Mortgage Fund, L.L.C. Private Placement Memorandum, together, in each case, with
any supplements thereto.
(lxxiii) "Fund Reporting Entities" means, collectively,
ARCap High Yield CMBS Fund, L.L.C., ARCap Diversified Risk CMBS Fund, L.L.C.,
ARCap High Yield CMBS Fund II, L.L.C. and ARCap Diversified Risk CMBS Fund II,
L.L.C.
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(lxxiv) "Fund Reporting Entities Audited Balance Sheets"
shall have the meaning specified in Section 4.5(c) of this Agreement.
(lxxv) "Fund Reporting Entities Audited Financial
Statements" shall have the meaning specified in Section 4.5(c) of this
Agreement.
(lxxvi) "Fund Reporting Entities Unaudited Balance
Sheets" shall have the meaning specified in Section 4.5(d) of this Agreement.
(lxxvii) "Fund Reporting Entities Unaudited Financial
Statements" shall have the meaning specified in Section 4.5(d) of this
Agreement.
(lxxviii) "GAAP" means United States generally accepted
accounting principles consistently applied.
(lxxix) "Governmental Authority" means any foreign or
United States federal, state or local governmental, regulatory or administrative
agency or any court or tribunal.
(lxxx) "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the rules and regulations promulgated thereunder.
(lxxxi) "Information Systems" shall have the meaning
specified in Section 4.8 of this Agreement.
(lxxxii) "Intellectual Property" means all (i) U.S. and
foreign patents and applications therefor and all divisionals, reissues,
renewals, registrations, confirmations, re-examinations, certificates of
inventorship, extensions, continuations and continuations-in-part thereof, (ii)
U.S. and foreign trademarks, trade dress, service marks, service names, trade
names, Internet domain names, brand names, logo or business symbols, whether
registered or unregistered, and pending applications to register the same,
including all extensions and renewals thereof and all goodwill associated
therewith, (iii) U.S. and foreign copyrights in writings, designs, software,
mask works or other works, whether registered or unregistered, and pending
applications to register the same, (iv) confidential or proprietary know-how,
trade secrets, methods, processes, practices, formulas and techniques, and (v)
computer software programs and software systems.
(lxxxiii) "Key Employees" means Leonard W. Cotton, James
L. Duggins, Paul Smyth, Steve R. Inman, Bryan Carr, Steven D. Carnes, John E.
D'Amico and Christopher Crouch.
(lxxxiv) "Knowledge" - an individual will be deemed to
have "Knowledge" of a particular fact or other matter if (i) such individual is
actually aware of such fact or other matter, or (ii) a prudent individual would
have been expected to discover or otherwise become aware of such fact or
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other matter in the course of conducting his or her duties. A Person (other than
an individual) will be deemed to have "Knowledge" of a particular fact or other
matter if (a) with respect to ARCap, its Subsidiaries or any Fund Entity, any
Key Employee has, or at any time had, Knowledge of such fact or other matter,
and (b) in all other cases, any individual who is serving, or who has at any
time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
(lxxxv) "Law" means any law, statute, ordinance, treaty,
code, rule or regulation of any Governmental Authority, or any binding agreement
with any Government Authority, or any principle of common law.
(lxxxvi) "Lease" shall have the meaning specified in
Section 4.25(a) of this Agreement.
(lxxxvii) "Leased Real Property" shall have the meaning
specified in Section 4.25(a) of this Agreement.
(lxxxviii) "LLC Agreement" means the First Amended and
Restated Limited Liability Agreement of ARCap, as amended to the date of Closing
prior to effectiveness of the Amended LLC Agreement.
(lxxxix) "Material Adverse Effect" means with respect to
any Person, any change affecting, or condition having an affect on, such Person
and its Subsidiaries, if any, taken as a whole (i) that is, or would reasonably
be expected to be, materially adverse to the business, assets, liabilities,
results of operations or condition (financial or otherwise) of such Person and
its Subsidiaries, if any, taken as a whole, (ii) that will, or would reasonably
be expected to, prevent or materially impair the ability of such Person to
fulfill its obligations under this Agreement at the Closing Date, (iii) that
would, or would reasonably be expected to, prevent or materially impair the
ability of such Person to operate its or any of its Subsidiaries' businesses
following the Effective Time, (iv) in the case of ARCap REIT, ARCap CMBS Fund
REIT, Inc. or ARCap CMBS Fund II REIT, Inc., that could reasonably be expected
to prevent or materially impair ARCap REIT, ARCap CMBS Fund REIT, Inc. or ARCap
CMBS Fund II REIT, Inc. from qualifying as a REIT prior to the Effective Time or
(v) that will, or would reasonably be expected to, prevent or materially impair
the ability of Purchaser 1 or Purchaser 2 to exercise ownership rights with
respect to the ASI Stock or the Seller Units, respectively; provided, however,
that any such change or effect having the results described in the foregoing (i)
through (v) that results from (A) a change in law, rule or regulation, or GAAP
or interpretations thereof that applies to such Person, (B) general economic or
market conditions, including, without limitation, changes in interest rates, or
(C) economic or market conditions in the commercial mortgage industry generally
shall not be considered when determining whether a Material Adverse Effect on
such Person or its Subsidiaries has occurred, except to the extent that such
change or effect disproportionately affects such Person or its Subsidiaries;
provided, further, that a decline in the market value of the securities of the
Person resulting from the
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public announcement of this Agreement and the proposed transactions contemplated
by this Agreement shall not be deemed a Material Adverse Effect on such Person.
(xc) "Materials of Environmental Concern" means
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, radioactive materials, asbestos, petroleum and petroleum products.
(xci) "Maximum Annual Premium" shall have the meaning
specified in Section 7.11(c) of this Agreement.
(xcii) "Mediation Request" shall have the meaning
specified in Section 12.8(b) of this Agreement.
(xciii) "Multiemployer Plan" means any "multiemployer
plan", as defined in Section 4001(a) of ERISA that ARCap or any of its
Subsidiaries or ERISA Affiliates maintains, sponsors, participates in or
contributes to, or has maintained, established, sponsored, participated in, or
contributed to, or under which such entity has or may incur any liability or
obligation.
(xciv) "New Shares" shall have the meaning specified in
Section 11.7(a) of this Agreement.
(xcv) "Non-Cash Consideration" shall have the meaning
specified in Section 2.1(a)(ix) of this Agreement.
(xcvi) "Non-Cash Consideration Dollar Amount" means the
Basic Purchase Price minus (i) the ARCap Transaction Costs and (ii) the Cash
Consideration.
(xcvii) "Objection Notice" shall have the meaning
specified in Section 2.4(b) of this Agreement.
(xcviii) "Order" means any order, writ, judgment,
injunction, decree, stipulation, determination, decision, ruling, award,
subpoena, or verdict entered, issued, made or rendered by any court,
administrative agency or any other Governmental Authority or by any arbitrator.
(xcix) "Pension Plan" means any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (other than a Multiemployer
Plan) that ARCap or any of its Subsidiaries or, solely with respect to any
Pension Plan that is subject to Title IV of ERISA, ERISA Affiliates maintains,
sponsors, participates in or contributes to, or has maintained, established,
sponsored, participated in, or contributed to, or under which any such entity
has or may or incur any liability or obligation.
(c) "Permit" means any permit, consent, franchise,
waiver, authorization, license or other approval issued, granted, given, or
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otherwise made available by or under any Governmental Authority or pursuant to
any Law.
(ci) "Person" means an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization, entity or group.
(cii) "Phantom Escrow Cash" shall have the meaning
specified in Section 2.1(b)(ii) of this Agreement.
(ciii) "Phantom Unit Amount" means an amount equal to
all amounts that will be accrued and payable as of the Closing Date (after
payment is made to the participants under the Phantom Unit Plans on account of
any supplemental distribution (other than in respect of the REIT Distribution),
if any, made by ARCap to holders of Common Units on the Closing Date) to the
participants under the Phantom Unit Plans, including any amounts payable in
connection with the termination of the Phantom Unit Plans and the extinguishment
of all rights of participants thereunder with respect to their interests
therein; provided, however, that solely for purposes of Section 2.1(b), the
Phantom Unit Amount shall exclude any amounts payable to participants under the
Phantom Unit Plans in respect of the REIT Distribution.
(civ) "Phantom Unit Plans" means the following plans of
ARCap REIT: ARCap Deferred Compensation Plan and ARCap Deferred Compensation
Plan II.
(cv) "Plan" means each Multiemployer Plan, Pension Plan,
Welfare Plan, Phantom Unit Plan, Promote Plan, and Bonus Plan, and each other
employment, bonus, deferred compensation, pension, collective bargaining, stock
option, stock appreciation right, equity-based compensation, profit-sharing or
retirement plan, arrangement, agreement, policy or practice, each medical,
vacation, severance pay plan, fringe benefit plan, and each other plan,
arrangement, agreement, policy or practice (including any severance, change in
control or similar agreement with any current or former employee, director or
consultant of ARCap or any of its Subsidiaries), whether or not subject to
ERISA, in each case that is sponsored or maintained by ARCap or any of its
Subsidiaries that affects or covers any current or former employee, director or
consultant of ARCap or any of its Subsidiaries, whether written or written,
funded or unfunded.
(cvi) "Preferred Members" shall have the meaning
specified in the introductory paragraph to this Agreement.
(cvii) "Procedure" shall have the meaning specified in
Section 12.8(b) of this Agreement.
(cviii) "Proceeding" means any claim, action,
proceeding, investigation, audit, hearing, arbitration, administrative or agency
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complaint or charge, litigation or suit (whether civil, criminal,
administrative, investigative or informal).
(cix) "Projections" shall have the meaning specified in
Section 4.5(h) of this Agreement.
(cx) "Promote Plans" means the following incentive plans
of ARCap REIT: ARCap Fund I Incentive Compensation Plan, ARCap Fund I Senior
Management Incentive Compensation Plan, ARCap Fund II Incentive Compensation
Plan, ARCap Fund II Senior Management Incentive Compensation Plan and ARCap Real
Estate Special Situations Mortgage Fund Incentive Compensation Plan.
(cxi) "Purchase Price" shall have the meaning specified
in Section 2.4(b) of this Agreement.
(cxii) "Purchaser 1" shall have the meaning specified in
the introductory paragraph to this Agreement.
(cxiii) "Purchaser 2" shall have the meaning specified
in the introductory paragraph to this Agreement.
(cxiv) "Purchaser 1 Cash Consideration" shall have the
meaning specified in Section 2.1(a)(i) of this Agreement.
(cxv) "Purchaser 2 Cash Consideration" means an amount
equal to (a) the Basic Purchase Price minus (1) the ARCap Transaction Costs, (2)
the Phantom Unit Amount and (3) the Purchaser 1 Cash Consideration, multiplied
by (b) a fraction, the numerator of which is the aggregate number of Cash Units
and the denominator of which is the sum of the aggregate number of Cash Units
and the aggregate number of Exchange Units.
(cxvi) "Purchaser 2 Escrow Cash" shall have the meaning
specified in Section 2.1(b)(i) of this Agreement.
(cxvii) "Purchasers" shall have the meaning specified in
the introductory paragraph to this Agreement.
(cxviii) "Purchasers Indemnitee" means CharterMac,
Purchasers, their respective current and future Affiliates and Subsidiaries
(including, after the Closing, ARCap, ARCap REIT, all of their respective
Subsidiaries and Affiliates, but excluding the Fund Entities, their Subsidiaries
and respective Affiliates, except to the extent that any Damages suffered from
any of the foregoing (including the Fund Entities) have been allocated to ARCap
or any of its Subsidiaries or are subject to a claim against ARCap or any of its
Subsidiaries for indemnification, in each case in accordance with the applicable
Final Fund Documents), and their respective stockholders, directors, trustees,
officers, employees, agents, successors and assigns of each of them.
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(cxix) "Registration Rights Agreement" means the
Registration Rights Agreement substantially in the form attached hereto as
Exhibit Q.
(cxx) "REIT Distribution" shall have the meaning
specified in Section 2.1(a)(iv) of this Agreement.
(cxxi) "Restricted Common Shares" means the restricted
common shares authorized for issuance pursuant to that certain CharterMac
Amended and Restated Incentive Share Plan, dated as of November 26, 2003,
awarded to the Continuing Employees at the Closing in the respective amounts and
according to the vesting schedule set forth in Schedule VI attached hereto.
(cxxii) "RR3" shall have the meaning specified in the
recitals to this Agreement.
(cxxiii) "RR5" shall have the meaning specified in the
recitals to this Agreement.
(cxxiv) "SEC" means the U.S. Securities and Exchange
Commission.
(cxxv) "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(cxxvi) "Seller Units" shall have the meaning specified
in the recitals to this Agreement.
(cxxvii) "Sellers" shall have the meaning specified in
the introductory paragraph to this Agreement.
(cxxviii) "Sellers' Assignments" shall have the meaning
specified in Section 2.3(c)(i) of this Agreement.
(cxxix) "Sellers Indemnitee" means Sellers
Representative and each ARCap Seller, their respective current and future
Affiliates and Subsidiaries, and the respective stockholders, directors,
trustees, officers, employees, agents, successors and assigns of each of them.
(cxxx) "Sellers' Portion" means, with respect to any
indemnification of Damages hereunder, 89.265%.
(cxxxi) "Sellers' Releases" shall have the meaning
specified in Section 2.3(c)(ii) of this Agreement.
(cxxxii) "Sellers Representative" shall have the meaning
specified in the introductory paragraph to this Agreement.
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(cxxxiii) "Series A Preferred Unit" means a "Series A
Preferred Unit" of ARCap as defined in the LLC Agreement.
(cxxxiv) "Serviced Loans" shall have the meaning
specified in the definition of Servicing Agreement.
(cxxxv) "Servicing Agreement" means any servicing
agreement, pooling and servicing agreement, mortgage selling and servicing
contract, indenture or other agreement or instrument, whether written or oral,
pursuant to which ARCap, the Fund Entities or any of their respective
Subsidiaries provide servicing for commercial mortgage loans and other mortgage
loans owned by others (such loans, collectively, the "Serviced Loans"), all of
which agreements are listed on Section 4.23(a) of the Disclosure Schedule (to
the extent identified as such).
(cxxxvi) "Special Common Interests" means the "Special
Common Interests" of ARCap as defined in the Amended LLC Agreement.
(cxxxvii) "Specially Serviced Loan" means any commercial
mortgage loan that is a "specially serviced loan" under any Servicing Agreement
under which ASI acts as special servicer.
(cxxxviii) "Statute of Limitations" means the expiration
of the time period for the assessment of a deficiency by any Taxing Authority.
(cxxxix) "Subsidiary" means, with reference to any
Person, any corporation or other legal entity of which such Person (either alone
or through or together with any other Subsidiary or Subsidiaries) is the general
partner or managing entity or of which at least a majority of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or others performing similar functions of
such corporation or other legal entity is directly or indirectly owned or
controlled by such Person (either alone or through or together with any other
Subsidiary or Subsidiaries); provided, however, that unless otherwise
specifically stated herein, "Subsidiary" shall exclude, with respect to ARCap
and its Subsidiaries, any Fund Entity and any entity that would be, but for the
application of this proviso, a Subsidiary of any Fund Entity. For the avoidance
of doubt, ARCap REIT is a Subsidiary of ARCap.
(cxl) "Survival Period" shall have the meaning specified
in Section 11.1 of this Agreement.
(cxli) "Tax" or "Taxes" means any and all domestic or
foreign, federal, state, local or other taxes, assessments, duties, charges,
fees, levies or required deposits of any kind (together with any and all
interest, penalties, additional to tax and additional amounts imposed with
respect thereto) imposed by any Taxing Authority, including taxes with respect
to income, franchises, windfall or other profits, gross receipts, transfer,
real, personal or
14
intangible property, sales, use, capital stock, employment, unemployment, social
security, workers' compensation or net worth, ad valorem, value added, single
business and taxes in the nature of excise, withholding, required deposits, ad
valorem or value added and any liability under Treasury Regulation ss.1.1502-6
or as a transferee or successor, or by contract or agreement.
(cxlii) "Taxing Authority" means the Internal Revenue
Service and any other domestic or foreign Governmental Authority responsible for
the administration or collection of any Taxes.
(cxliii) "Tax Return" means any report, return or
similar filing (including the attached schedules) required to be filed with
respect to Taxes, including any information return, claim for refund, amended
return, or declaration of estimated Taxes of ARCap, the Fund Entities and their
respective Subsidiaries.
(cxliv) "Third-Party Claim" means a claim for indemnity
for Damages made by any Person (other than any Sellers Indemnitee or Purchasers
Indemnitee).
(cxlv) "Threshold Amount" shall have the meaning
specified in Section 11.6(d) of this Agreement.
(cxlvi) "Unaudited Balance Sheets" shall have the
meaning specified in Section 4.5(b) of this Agreement.
(cxlvii) "Unaudited Financial Statements" shall have the
meaning specified in Section 4.5(b) of this Agreement.
(cxlviii) "Welfare Plan" means any "employee welfare
benefit plan," as defined in Section 3(1) of ERISA that ARCap or any of its
Subsidiaries maintains, sponsors, participates in or contributes to or under
which any such entity has or may incur any liability or obligation.
(cxlix) "Working Capital" means the amount equal to (i)
current assets of ARCap (as defined under GAAP) minus (ii) current liabilities
of ARCap (as defined under GAAP).
(cl) "Working Capital Certificate" shall have the
meaning specified in Section 2.4(a) of this Agreement.
1.2 Other Interpretive Provisions. When a reference is made in this
Agreement to Articles, Sections, or Disclosure Schedule, such reference is to an
Article or a Section of, or Disclosure Schedule to, this Agreement, unless
otherwise indicated. When a reference is made in this Agreement to a party or
parties, such reference is to parties to this Agreement, unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be understood to be followed by the words "without
limitation." The inclusion of any matter in the Disclosure Schedule in
connection with any representation, warranty, covenant or agreement that is
qualified as to materiality or "Material Adverse Effect" shall not be an
admission by the party delivering such Disclosure Schedule that such matter is
material or would reasonably be expected to result in a Material Adverse Effect.
ARTICLE 2
PURCHASE AND SALE OF ASI STOCK AND SELLER UNITS
2.1 Purchase and Sale of ASI Stock and Seller Units.
-----------------------------------------------
(a) Subject to the terms and conditions of this Agreement,
at the Closing (as defined below), the following transactions shall be
consummated upon the payment by Purchasers of cash and other
consideration with an aggregate value of Two Hundred Fifty Nine
Million Nine Hundred Fifty Thousand Dollars ($259,950,000) (as
adjusted pursuant to Section 2.1(c) below, the "Basic Purchase Price")
consisting of the Purchaser 1 Cash Consideration, the Purchaser 2 Cash
Consideration, the Phantom Unit Amount, the Non-Cash Consideration and
the ARCap Transaction Costs in the sequence and as set forth below:
(i) Purchaser 1 shall pay to ARCap REIT an amount equal
to Fourteen Million Five Hundred Thousand Dollars $14,500,000 in cash (the
"Purchaser 1 Cash Consideration");
(ii) ARCap REIT shall sell, assign, transfer, convey and
deliver or cause to be sold, assigned, transferred, conveyed and delivered to
Purchaser 1 the ASI Stock free and clear of all Encumbrances (other than
restrictions on transfer under applicable state and federal securities laws);
(iii) ARCap REIT shall declare and distribute to ARCap
and its other stockholders the entire Purchaser 1 Cash Consideration (the "ASI
Distribution") in accordance with its organizational documents;
(iv) ARCap shall declare and distribute to its members
the entire portion of the ASI Distribution received by it (the "REIT
Distribution") in accordance with its organizational documents;
(v) Purchaser 2 shall pay to Sellers Representative, and
Sellers Representative shall receive on behalf of (A) the holders of Cash Units,
an amount equal to the Purchaser 2 Cash Consideration less the portion thereof
to be deposited in the Escrow Account pursuant to Section 2.1(b), below, and (B)
the ARCap Sellers, an amount equal to the Phantom Unit Amount (together with the
Purchaser 1 Cash Consideration and the Purchaser 2 Cash Consideration, the "Cash
Consideration");
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(vi) Purchaser 2 shall pay to Sellers Representative a
cash amount equal to the ARCap Transaction Costs;
(vii) Sellers Representative shall deliver to each
holder of Cash Units their pro rata share of the Purchaser 2 Cash Consideration,
less the portion thereof to be deposited in the Escrow Account pursuant to
Section 2.1(b) below, such pro rata share to be calculated based on the ratio of
the number of Cash Units owned by each such holder against the aggregate number
of Cash Units owned by all such holders;
(viii) ARCap Sellers who are holders of Cash Units shall
sell, assign, transfer, convey and deliver or cause to be sold, assigned,
transferred, conveyed and delivered to Purchaser 2 the Cash Units free and clear
of all Encumbrances (other than restrictions on transfer under applicable state
and federal securities laws) and Purchaser 2 shall be admitted as a "Substitute
Member" of each such ARCap Seller in accordance with the terms and conditions of
the LLC Agreement;
(ix) Upon the effectiveness of the Amended LLC
Agreement, the Exchange Units of each ARCap Seller who is a holder thereof shall
be converted automatically into the number of Special Common Interests (and,
subject to Section 2.1(b) below, the right to receive physical certificates
evidencing such Special Common Interests) determined in accordance with the
allocation formula set forth on Schedule V attached hereto (such Special Common
Interests, the "Non-Cash Consideration");
(x) Sellers Representative, on behalf of the ARCap
Sellers, shall pay to ARCap an amount equal to the Phantom Unit Amount in
satisfaction of the ARCap Sellers' obligation under Section 7.10;
(xi) ARCap shall pay to ARCap REIT an amount equal to
the Phantom Unit Amount in satisfaction of ARCap's obligation under Section
7.10;
(xii) ARCap REIT shall pay to the participants under the
Phantom Unit Plans their respective entitlements to the Phantom Unit Amount, as
calculated and determined by ARCap REIT and less the portion thereof to be
deposited in the Escrow Account pursuant to Section 2.1(b) below; and
(xiii) Sellers Representative shall disburse the cash
paid to it by Purchaser 2 pursuant to Section 2.1(a)(vii) above to pay the ARCap
Transaction Costs.
(b) A portion of the Basic Purchase Price shall be paid
into escrow, with such funds and securities to be held on behalf of
the parties to the Escrow Agreement to be distributed to Purchaser 2,
the ARCap Sellers and the participants under the Phantom Unit Plans,
as applicable, in accordance with the terms and conditions of an
escrow agreement, in substantially the form attached hereto as Exhibit
A (the "Escrow Agreement") as follows:
(i) Purchaser 2 shall pay a portion of the Purchaser 2
Cash Consideration to the Escrow Agent in cash (such amount, the "Purchaser 2
Escrow Cash") which shall be an amount equal to (A) $22,500,000 multiplied by
(B) a fraction,
17
the numerator of which is the Purchaser 2 Cash Consideration and the denominator
of which is the sum of the Purchaser 2 Cash Consideration, the Phantom Unit
Amount and the Non-Cash Consideration Dollar Amount;
(ii) From the Phantom Unit Amount, ARCap REIT shall pay
to the Escrow Agent an amount of cash (such amount, the "Phantom Escrow Cash")
equal to (A) $22,500,000 multiplied by (B) a fraction, the numerator of which is
the Phantom Unit Amount and the denominator of which is the sum of the Purchaser
2 Cash Consideration, the Phantom Unit Amount and the Non-Cash Consideration
Dollar Amount; and
(iii) From the Non-Cash Consideration, Purchaser 2, on
behalf of the holders of the Exchange Units, shall cause ARCap to deliver to the
Sellers Representative and Sellers Representative shall deliver to the Escrow
Agent physical certificates representing a number of Special Common Interests
(such Special Common Interests, together with any New Shares, the "Escrow
Shares"; and, together with the Purchaser 2 Escrow Cash and the Phantom Escrow
Cash, the "Escrow Amount"), equal to (A) $22,500,000 multiplied by a fraction,
the numerator of which is the Non-Cash Consideration Dollar Amount and the
denominator of which is the sum of the Purchaser 2 Cash Consideration, the
Phantom Unit Amount and the Non-Cash Consideration Dollar Amount, divided by (B)
$18.146 (the average closing price of the underlying common shares of CharterMac
during the thirty trading days immediately prior to June 15, 2006). The Escrow
Shares shall be issued in the name of the holders of Exchange Units in pro rata
amounts based upon on the ratio of the number of Exchange Units owned by each
such holder against the aggregate number of Exchange Units owned by all such
holders, with fractional amounts disregarded. Each holder of Exchange Units
shall, at the Closing, deliver to Purchaser 2 an appropriate stock power
executed in blank with respect to such holder's Escrow Shares.
c) The Basic Purchase Price shall be increased or
decreased in accordance with Section 2.4 of this Agreement to the
extent the Closing Working Capital Amount exceeds or is less than
$1,000,000. If, based on the Closing Balance Sheet, an adjustment to
the Basic Purchase Price in accordance with the foregoing is required
as of the Closing, the Purchaser 2 Cash Consideration, the Phantom
Unit Amount and the Non-Cash Consideration Dollar Amount payable
pursuant to Sections 2.3(e) and 2.3(f) shall be recalculated in
accordance with Section 2.1(a) above, the definition of Purchaser 2
Cash Consideration and the definition of Non-Cash Consideration Dollar
Amount. If there is a dispute with respect to the Closing Working
Capital Amount initiated by Purchasers with an Objection Notice
delivered within seven (7) business days of the date of delivery by
Sellers Representative of the Working Capital Statement in accordance
with Section 2.4(b), then Closing shall not occur until such dispute
is resolved in accordance with the procedures set forth in Section
2.4(b) as the exclusive remedy for resolution of any such dispute.
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(d) The Basic Purchase Price shall be allocated in
accordance with this Section 2.1, and no party shall take a position
inconsistent with such allocation on any Tax Return (unless otherwise
required by a final, nonappealable determination of a court of
competent jurisdiction or a binding closing agreement entered into
with a Taxing Authority).
2.2 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m., (New York time), at
the offices of Paul, Hastings, Janofsky & Walker LLP, 75 East 55th Street, New
York, NY, two (2) business days following satisfaction or waiver of all
conditions to Closing set forth in Article 8 (other than those conditions that
by their nature have to be satisfied at Closing (but subject to the satisfaction
or waiver of those conditions)), or at such other place and time as the parties
may agree. The date on which the Closing will occur is referred to herein as the
"Closing Date." The transfer of the ASI Stock and the Cash Units pursuant to
Section 2.1 of this Agreement shall be deemed to have become effective at 12:01
a.m. on the Closing Date (the "Effective Time"), and the conversion of the
Exchange Units into Special Common Interests shall be deemed to have occurred
immediately thereafter.
2.3 Closing Obligations. At the Closing:
-------------------
(a) ARCap REIT shall:
(i) deliver to Purchaser 1 stock certificate(s)
representing the ASI Stock and the accompanying stock power(s) duly executed by
ARCap REIT, evidencing transfer of the ASI Stock to Purchaser 1;
(ii) deliver to Purchaser 2 amended employment
agreements by and between ARCap REIT and each of the Key Employees in the form
attached hereto as Exhibit B executed by the Key Employees and ARCap REIT
(collectively, the "Employment Agreements");
(iii) deliver to Sellers Representative, as agent for
ARCap Sellers, the Escrow Agreement executed by ARCap REIT;
(iv) deliver to Purchaser 2 evidence of termination of
the Phantom Unit Plans required pursuant to Section 7.10(a);
(v) deliver to Purchaser 1 a certificate executed by the
chief executive officer, president and chief financial officer of ARCap REIT,
dated as of the Closing Date, certifying as to the satisfaction of the
conditions set forth in Sections 8.2(a) and 8.2(b) as to ARCap REIT;
(vi) deliver to Purchaser 1 an executed FIRPTA
Certificate in the form attached hereto as Exhibit J;
(vii) deliver to Purchaser 2 a cross-receipt executed by
ARCap REIT evidencing repayment of all amounts outstanding under (A) the
19
Cotton Promissory Note and (B) the Duggins Promissory Note, together with copies
of the cancelled notes;
(viii) deliver to Purchaser 2 a certificate executed by
the chief financial officer of ARCap REIT, dated as of the Closing Date, setting
forth the Phantom Unit Amount;
(ix) pay the Phantom Unit Amount (less the Phantom
Escrow Cash) to the participants under the Phantom Unit Plans;
(x) pay to the Escrow Agent the Phantom Escrow Cash by
wire transfer of immediately available funds; and
(xi) pay the ASI Distribution.
(b) ARCap shall:
(i) deliver to Purchaser 2:
(1) evidence of the consent or approval of the Persons
whose consent or approval shall be required in connection with the
transactions contemplated under this Agreement under any Contract of ARCap,
the Fund Entities and their respective Subsidiaries;
(2) the Escrow Agreement executed by Sellers
Representative;
(3) opinions of (i) Orrick, Herrington & Sutcliffe,
LLP, and (ii) Updike, Kelly & Spellacy, P.C., each dated as of the Closing
Date, in the forms attached hereto as Exhibit E and Exhibit F;
(4) a certificate executed by the chief executive
officer, president and chief financial officer of ARCap, dated as of the
Closing Date, certifying as to the satisfaction of the conditions set forth
in Sections 8.2(a) and 8.2(b) as to ARCap and a certificate executed by the
Secretary or any Assistant Secretary of ARCap, dated as of the Closing Date,
substantially in the form and to the effect of Exhibit G hereto;
(5) a true, complete and accurate list of each
outstanding Specially Serviced Loan as of a date that is within five (5)
Business Days prior to the Closing Date;
(ii) immediately upon the effectiveness of the Amended
LLC Agreement, issue in the names of the holders of Exchange Units the physical
certificates representing the Non-Cash Consideration and deliver such physical
certificates (excluding the physical certificates representing the Escrow
Shares) to Sellers Representative, on behalf of such holders;
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(iii) immediately upon the effectiveness of the Amended
LLC Agreement, deliver the physical certificates representing the Escrow Shares
to Sellers Representative, on behalf of such holders;
(iv) pay the Phantom Unit Amount to ARCap REIT; and
(v) pay the REIT Distribution.
(c) Each ARCap Seller who is a holder of Cash Units
shall deliver to Purchaser 2:
(i) an assignment and assumption agreement with respect
to the assignment of such holder's Cash Units in the form attached hereto as
Exhibit C executed by such Seller (collectively, the "Sellers' Assignments");
(ii) a release in the form attached hereto as Exhibit D
executed by such Seller (collectively, the "Sellers' Releases");
(iii) a signature page to this Agreement executed by
such Seller (which signature page shall be deemed a certification as of the
Closing Date (unless written notice to the contrary is provided to Purchasers at
least five (5) business days prior to the Closing Date) on behalf of such Seller
(and solely with respect to such Seller) as to the satisfaction of the
conditions set forth in Sections 8.2(a) and 8.2(b)); and
(iv) executed FIRPTA Certificates in the forms attached
hereto as Exhibit K or Exhibit L.
(d) Each ARCap Seller who is a holder of Exchange Units
shall deliver to Purchaser 2:
(i) a consent to the amendment of the LLC Agreement and
the Amended LLC Agreement, executed by such holder of Exchange Units;
(ii) a signature page to this Agreement executed by
such Seller (which signature page shall be deemed a certification as of the
Closing Date (unless written notice to the contrary is provided to Purchasers at
least five (5) business days prior to the Closing Date) on behalf of such Seller
(and solely with respect to such Seller) as to the satisfaction of the
conditions set forth in Sections 8.2(a) and 8.2(b));
(iii) an executed FIRPTA Certificate in the form
attached hereto as Exhibit K;
(iv) a stock power, executed in blank, with respect to
such ARCap Seller's Escrow Shares;
21
(v) the Registration Rights Agreement executed by such
holder of Exchange Units; and
(vi) the Exchange Rights Agreement executed by such
holder of Exchange Units.
(e) Purchaser 1 shall:
(i) deliver to each of Sellers Representative, as agent
for ARCap Sellers, and ARCap REIT a certificate executed by the chief executive
officer, president and chief financial officer of Purchaser 1, dated as of the
Closing Date, certifying as to the satisfaction of the conditions set forth in
Sections 8.3(a) and 8.3(b) as to Purchaser 1; and
(ii) pay to ARCap REIT the Purchaser 1 Cash
Consideration by wire transfer of immediately available funds pursuant to the
wire transfer instructions provided by Sellers Representative prior to the
Closing Date.
(f) Purchaser 2 shall:
(i) deliver to Sellers Representative, as agent for
ARCap Sellers, a certificate executed by the chief executive officer, president
and chief financial officer of Purchaser 2, dated as of the Closing Date,
certifying as to the satisfaction of the conditions set forth in Sections 8.3(a)
and 8.3(b) as to Purchaser 2;
(ii) pay to Sellers Representative, as agent for ARCap
Sellers, the Purchaser 2 Cash Consideration less the Purchaser 2 Escrow Cash and
the Phantom Unit Amount by wire transfer of immediately available funds pursuant
to the wire transfer instructions provided by Sellers Representative prior to
the Closing Date;
(iii) pay to the Escrow Agent the Purchaser 2 Escrow
Cash by wire transfer of immediately available funds;
(iv) deliver to the holders of Exchange Units a consent
to the amendment of the LLC Agreement and the Amended LLC Agreement, executed by
Purchaser 2;
(v) immediately upon the effectiveness of the Amended
LLC Agreement, cause ARCap to take the actions described in Sections 2.3(b)(ii)
and (iii);
(vi) pay to Sellers Representative a cash amount equal
to the ARCap Transaction Costs;
(vii) deliver to Sellers Representative, as agent for
ARCap Sellers, the Escrow Agreement executed by Purchaser 2;
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(viii) deliver to Sellers Representative, as agent for
ARCap Sellers, the Sellers' Assignments, executed by Purchaser 2;
(ix) deliver to Sellers Representative, as agent for
ARCap Sellers, opinions of (i) Paul, Hastings, Janofsky & Walker LLP, and (ii)
Richards, Layton & Finger, P.A., each dated as of the Closing Date, in the form
attached hereto as Exhibit H and Exhibit I;
(x) deliver to each ARCap Seller who is a holder of
Exchange Units, the Exchange Rights Agreement executed by Purchaser 2; and
(xi) deliver to each ARCap Seller who is a holder of
Exchange Units, the Registration Rights Agreement executed by Purchaser 2.
(g) CharterMac shall deliver to:
(i) Sellers Representative, as agent for ARCap Sellers,
a certificate executed by the chief executive officer, president and chief
financial officer of CharterMac, dated as of the Closing Date, certifying as to
the satisfaction of the conditions set forth in Sections 8.3(a) and 8.3(b) as to
CharterMac;
(ii) each ARCap Seller who is a holder of Exchange
Units:
(1) an Exchange Rights Agreement executed by
CharterMac;
(2) a Registration Rights Agreement executed by
CharterMac; and
(iii) the Continuing Employees (i) a prospectus in
connection with the issuance of the Restricted Common Shares and (ii) award
agreements for the Restricted Common Shares executed by CharterMac.
(h) Sellers Representative, as agent for ARCap Sellers,
shall:
(i) pay to the holders of Cash Units the Purchaser 2
Cash Consideration (less the Purchaser 2 Escrow Cash) by wire transfer of
immediately available funds;
(ii) deliver to the holders of Exchange Units the
physical certificates representing the Non-Cash Consideration (less the Escrow
Shares);
(iii) pay to ARCap, on behalf of the ARCap Sellers,
the Phantom Unit Amount by wire transfer of immediately available funds;
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(iv) pay and deliver to the Escrow Agent, on behalf
ARCap Sellers the Escrow Shares by delivery of physical certificates
representing the Escrow Shares; and
(v) disburse the cash paid to it by Purchaser 2
pursuant to Section 2.1(a)(vii) to pay the ARCap Transaction Costs.
2.4 Working Capital Adjustment.
--------------------------
(a) At least ten (10) business days prior to the Closing
Date, Sellers Representative shall deliver to Purchaser 2 a
certificate (the "Working Capital Certificate"), which shall set forth
ARCap's good faith estimates of (i) the balance sheet of ARCap as of
the close of business on the Closing Date (the "Closing Balance
Sheet") and (ii) a statement of the Working Capital of ARCap reflected
on the Closing Balance Sheet (the "Closing Working Capital Amount")
(each of which shall include, among other things, any accrued current
liability for amounts not paid under the Bonus Plans as of the Closing
Date). The Closing Balance Sheet and the Closing Working Capital
Amount shall be prepared by ARCap and determined in accordance with
GAAP consistent with past practices.
(b) The Closing Balance Sheet and the Closing Working
Capital Amount included in the Working Capital Certificate shall be
binding and conclusive upon, and deemed accepted by, Purchaser 2
unless Purchaser 2 shall have delivered written notice to Sellers
Representative within seven (7) business days of the date of delivery
by Sellers Representative of the Working Capital Statement (the
"Objection Notice") that it disputes the accuracy thereof. The
Objection Notice shall specify in reasonable detail (i) the specific
items that Purchaser 2 disputes, (ii) the amounts of any adjustments
to the Closing Balance Sheet and the Closing Working Capital Amount
that are necessary in its good faith and reasonable judgment to
conform to the requirements of this Agreement, and (iii) Purchaser 2's
reasons for such disputes and adjustments, together with detailed
explanatory notes, supporting information and calculations. If
Purchaser 2 and Sellers Representative cannot agree on the final
Closing Balance Sheet and the Closing Working Capital Amount within
one (1) business day prior to Closing, the parties shall submit their
final calculations of the items in dispute to a nationally recognized
accounting firm selected upon mutual agreement of Sellers
Representative and Purchaser 2 (which shall not be the auditor or have
been a consultant to either party within the past five years), for
resolution within thirty (30) days or as soon thereafter as reasonably
practicable. Such accounting firm shall review such final calculations
and make a selection as to which of the final calculations presented
to it is, in the aggregate, more accurate (which amount, subject to
adjustment pursuant to this Section 2.4(b), shall be the "Closing
Working Capital Amount" for all purposes of this Agreement). The
decision by such accounting firm shall be final and binding on the
parties. Purchaser 2, on the one hand, and ARCap, on the other hand,
will each bear 50% of the costs and expenses of such
24
accounting firm (and in the case of ARCap, its share of expenses shall
be taken into account in determining the Closing Working Capital
Amount). Purchaser 2 and ARCap shall make available to such accounting
firm all relevant books and records relating to the calculations
submitted and all other information reasonably requested by such
accounting firm. Upon final determination of any adjustment to the
Closing Working Capital Amount in accordance with the foregoing, the
Basic Purchase Price shall be increased or decreased by the amount of
the adjustment (as so adjusted, the "Purchase Price").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ARCAP SELLERS RELATING
TO ARCAP SELLERS
Each of ARCap Sellers, severally and not jointly, as to himself,
herself or itself and not as to any other Seller, ARCap, Fund Entity or
Subsidiary of any of them, hereby represent and warrant to Purchaser 2 that:
3.1 Authority. Except as set forth in Section 3.1 of the Disclosure
Schedule, if such ARCap Seller is not an individual, such Seller has all
necessary power and authority, and if such Seller is an individual, such
Seller has full legal capacity, to enter into this Agreement, to carry out
such Seller's obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
such Seller, and (assuming due authorization, execution and delivery by
CharterMac, Purchasers, Sellers' Representative, ARCap and each other Seller
party hereto) this Agreement constitutes a legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, except as such enforceability may be subject to the laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors and rules of law governing specific performance, injunctive relief,
or other equitable remedies.
3.2 No Conflict; Government Authorizations.
--------------------------------------
(a) Except as set forth in Section 3.2(a) of the
Disclosure Schedule, assuming compliance by CharterMac, the
Purchasers, ARCap and ARCap REIT with the notification requirements of
the HSR Act, if applicable, and the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other
actions referred to in Section 3.2(b) of this Agreement, the
execution, delivery and performance of this Agreement by such Seller
and the consummation of the transactions contemplated hereby do not
and will not (with or without notice or lapse of time, or both) (i) if
such Seller is not an individual, violate, conflict with or result in
the breach of any provision of the certificate of incorporation or
formation, limited liability company agreement, by-laws, regulations
or other organizational or governing documents of such
25
Seller, (ii) contravene, conflict with or violate any Law or Order
applicable to such Seller or the Seller Units held thereby, or (iii)
result in the creation of any Encumbrance (other than restrictions on
transfer under applicable state and federal securities laws and under
the LLC Agreement) on any of the Seller Units held by such Seller
pursuant to any Contract to which such Seller is a party or by which
any of the Seller Units held by such Seller is bound or affected,
except in the case of clauses (ii) and (iii) above, for such
contraventions, conflicts, violations and creations which could not
reasonably be expected to materially impair the ability of Purchaser 2
to consummate the transactions contemplated by this Agreement.
(b) Excluding any consents required pursuant to the LLC
Agreement, no material consent of, or registration, declaration,
notice or filing with, any Governmental Authority or third party is
required to be obtained or made by such Seller, in connection with the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
3.3 Ownership.
---------
(a) The Seller Units listed as owned by such Seller on
the signature page executed and delivered by such Seller constitute
all of the issued and outstanding securities of ARCap held by such
Seller or in which such Seller has a beneficial interest.
(b) Such Seller is and will be on the Closing Date the
record and beneficial owner and holder of such Seller Units listed as
owned by such Seller on the signature page executed and delivered by
such Seller, free and clear of all Encumbrances (other than
restrictions on transfer under applicable state and federal securities
laws and under the LLC Agreement), and, with respect to holders of
Cash Units, upon the transfer of such Cash Units in accordance with
this Agreement, Purchaser 2 will receive good and valid title to such
Cash Units purchased hereby free and clear of all Encumbrances (other
than restrictions on transfer under applicable state and federal
securities laws and under the LLC Agreement).
3.4 Legal Proceedings; Orders.
-------------------------
(a) Except as set forth in Section 3.4 of the Disclosure
Schedule, there is no pending Proceeding commenced by or against, or
otherwise involving, or, to such Seller's Knowledge, threatened
against, such Seller or that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering
with, the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby by such Seller.
To such Seller's Knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time, or both) may
give rise to or serve as a basis for the commencement of any such
Proceeding described in this Section 3.4(a).
26
(b) Such Seller has delivered to Purchaser 2 copies of
all pleadings, correspondence, and other documents relating to each
such Proceeding listed in Section 3.4 of the Disclosure Schedule. Such
Proceeding, if any, listed in Section 3.4 of the Disclosure Schedule
will not materially adversely affect the ability of such Seller to
consummate the transactions contemplated by this Agreement.
3.5 Brokers or Finders. Such Seller and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finder's
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.6 Investment Intent. Each of the ARCap Sellers who will hold the
Special Common Interests as a consequence of the transactions contemplated
hereby has knowledge and experience in financial and business matters such
that it is capable of evaluating the risks and merits associated with the
ownership of such Special Common Interests and presently intends to hold such
Special Common Interests for its own account for investment, with no
intention of making a public distribution thereof. Each of the ARCap Sellers
who will hold the Special Common Interests is an "accredited investor" as
defined in Regulation D as promulgated under the Securities Act. Each of the
ARCap Sellers who will hold the Special Common Interests will not sell or
otherwise dispose of such Special Common Interests in violation of the
Securities Act or any state securities laws.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ARCAP
ARCap hereby represents and warrants to Purchasers that:
4.1 No Conflict; Government Authorizations.
--------------------------------------
(a) Except as set forth in Section 4.1(a) of the
Disclosure Schedule, assuming compliance by the Sellers, CharterMac
and the Purchasers with the notification requirements of the HSR Act,
if applicable, and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions
referred to in Section 4.1(b) of this Agreement, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (with or without
notice or lapse of time, or both) (i) violate, conflict with or result
in the breach of any provision of the certificate of incorporation or
formation, limited liability company agreement, by-laws, regulations
or other organizational or governing documents of ARCap, the Fund
Entities or any of their respective Subsidiaries, (ii) contravene,
conflict with or violate any Law or Order applicable to the ARCap, the
Fund Entities or any of their respective Subsidiaries, (iii) conflict
with or violate or breach any provision of, or give any third party
the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate or
modify, any Contract of ARCap, the Fund Entities or any of their
respective
27
Subsidiaries, or (iv) result in the creation of any Encumbrance (other
than restrictions on transfer under applicable state and federal
securities laws) on any of the properties or assets of ARCap, the Fund
Entities or any of their respective Subsidiaries pursuant to any
Contract to which such Person is a party or by which any of such
Person's properties or assets are bound or affected, except in the
case of clauses (ii), (iii) and (iv) above, for such contraventions,
conflicts, violations, breaches, defaults, exercises, accelerations,
cancellations, terminations, modifications and creations which could
not reasonably be expected to result in a Material Adverse Effect on
any such Person.
(b) Except as set forth in Section 4.1(b) of the
Disclosure Schedule and excluding any consents required pursuant to
the LLC Agreement, assuming compliance by the Sellers, CharterMac and
the Purchasers with the notification requirements of the HSR Act, if
applicable, no material consent of, or registration, declaration,
notice or filing with, any Governmental Authority or third party is
required to be obtained or made by ARCap, the Fund Entities or any of
their respective Subsidiaries in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
4.2 Corporate Status. Except as set forth in Section 4.2 of the
Disclosure Schedule, each of ARCap, the Fund Entities and their respective
Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and each
(a) has all requisite corporate or limited liability company power and
authority to carry on its business as it is now being conducted, and (b) is
duly qualified to do business and is in good standing in each of the
jurisdictions in which the ownership, operation or leasing of its properties
and assets and the conduct of its business requires it to be so qualified,
licensed or authorized, except where the failure to have such power and
authority or to be so qualified, licensed or authorized would not reasonably
be expected to result in a Material Adverse Effect on any such Person. ARCap
has made available to Purchaser a true, correct and complete copy of the
certificate of incorporation or formation, limited liability company
agreement, by-laws, regulations or other organizational or governing
documents of each of ARCap, the Fund Entities and their respective
Subsidiaries, each as in effect on the date hereof.
4.3 Authority; Binding Effect. ARCap has all necessary limited
liability company power and authority to enter into this Agreement, to carry
out ARCap's obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
ARCap, and (assuming due authorization and delivery by Sellers
Representative, each other Seller, CharterMac and each Purchaser) this
Agreement constitutes a legal, valid and binding obligation of ARCap,
enforceable against ARCap in accordance with its terms, except as
enforceability may be subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
28
4.4 Capitalization.
--------------
(a) Section 4.4(a) of the Disclosure Schedule sets forth
a list of the authorized and outstanding equity interests, name,
jurisdiction of organization and record owner of the equity interests
of ARCap, the Fund Entities and their respective Subsidiaries, all of
which are duly authorized, validly issued, fully paid and
nonassessable (except with respect to any capital commitments owed to
a Fund Entity and not yet paid) and free and clear of any and all
Encumbrances created by the issuer thereof, except for restrictions on
transfer imposed under federal and state securities laws or the
organizational documents of each such entity and Encumbrances incurred
in connection with the financing of the transactions contemplated
hereby or otherwise created by CharterMac or any Purchaser. The Seller
Units and the CharterMac Units constitute all of the issued and
outstanding equity interests issued by ARCap.
(b) Except as set forth in Section 4.4(b) of the
Disclosure Schedule, there are no existing options, warrants, calls,
rights, subscriptions, arrangements, claims, commitments (contingent
or otherwise) or other agreements of any character, except as
contemplated by this Agreement, to which any of ARCap, the Fund
Entities or any of their respective Subsidiaries is a party, or is
otherwise subject, requiring, and, except for the Series A Preferred
Units listed on Schedule I and Schedule II hereto, there are no
securities of any of ARCap, the Fund Entities or any of their
respective Subsidiaries outstanding which upon exercise, conversion or
exchange would require, the issuance, sale or transfer of any
additional equity interests, shares of capital stock or other
securities of any of ARCap, the Fund Entities or any of their
respective Subsidiaries or securities convertible into, exchangeable
for or evidencing the right to subscribe for or purchase capital stock
or any other securities of any of ARCap, the Fund Entities or any of
their respective Subsidiaries. Other than this Agreement, none of
ARCap, the Fund Entities or any of their respective Subsidiaries is a
party, or is otherwise subject, to any voting trust or other voting
agreement with respect to any securities of ARCap, the Fund Entities
or any of their respective Subsidiaries or to any agreement relating
to the issuance, sale, redemption, transfer, acquisition or other
disposition of the securities of ARCap, the Fund Entities or any of
their respective Subsidiaries.
(c) Other than as listed in Section 4.4(c) of the
Disclosure Schedule, there are no other joint ventures or other
Persons in which any of ARCap, the Fund Entities and their respective
Subsidiaries own, of record or beneficially, any direct or indirect
equity or other similar interest or any right (contingent or
otherwise) to acquire the same.
(d) Section 4.4(d) of the Disclosure Schedule sets forth
all outstanding grants and other interests issued pursuant to the
Phantom Plans.
29
4.5 Financial Statements; Projections.
---------------------------------
(a) ARCap has delivered or otherwise made available to
Purchaser copies of the audited consolidated balance sheets of ARCap
as of December 31st for the fiscal years 2002 through 2005, inclusive,
(the "Audited Balance Sheets") and the related audited consolidated
statements of operations and cash flows of ARCap for the fiscal years
2002 through 2005, inclusive, in each case accompanied by the audit
report of Ernst & Young LLP (the "Audited Financial Statements").
(b) ARCap has delivered or otherwise made available to
Purchaser copies of an unaudited consolidated balance sheet of ARCap
as of March 31, 2006 (the "Unaudited Balance Sheets") and the related
unaudited consolidated statements of operations and cash flows of
ARCap for the three (3) months then ended (the "Unaudited Financial
Statements").
(c) ARCap has delivered or otherwise made available to
Purchaser copies of the audited consolidated balance sheets of each
Fund Reporting Entity as of December 31, 2005 for all fiscal years
since inception, inclusive, (the "Fund Reporting Entities Audited
Balance Sheets") and the related audited consolidated statements of
operations and cash flows of each such Fund Reporting Entity for all
fiscal years since inception, inclusive, in each case accompanied by
the audit report of Ernst & Young LLP (the "Fund Reporting Entities
Audited Financial Statements").
(d) ARCap has delivered or otherwise made available to
Purchaser copies of the unaudited balance sheets of each Fund
Reporting Entity as of March 31, 2006 (the "Fund Reporting Entities
Unaudited Balance Sheets" and together with the Audited Balance
Sheets, the Unaudited Balance Sheets and the Fund Reporting Entities
Audited Balance Sheets, the "Balance Sheets") and the related
unaudited statements of operations and cash flows of each such Fund
Reporting Entity for the three (3) months then ended (the "Fund
Reporting Entities Unaudited Financial Statements", together with the
Audited Financial Statements, the Unaudited Financial Statements, the
Fund Reporting Entities Audited Financial Statements and the Balance
Sheets, the "Financial Statements").
(e) As of the date hereof, ARESS has not issued any
financial statement to any investor.
(f) The Financial Statements were prepared in accordance
with GAAP (except as disclosed in the footnotes thereto) and present
fairly, in all material respects, the financial position and results
of operations and cash flows of ARCap, the Fund Entities and their
respective Subsidiaries as of the date thereof and for the period
covered thereby.
30
(g) The Financial Statements were prepared from the
books and records of ARCap, the Fund Entities and their respective
Subsidiaries, as applicable, which books and records have been
maintained in accordance with sound business practices and all
applicable Laws and reflect all financial transactions of ARCap, the
Fund Entities and their respective Subsidiaries which are required to
be reflected in accordance with GAAP. Each of ARCap, the Fund Entities
and their respective Subsidiaries, as applicable, maintains accurate
books and records reflecting its assets and liabilities and maintains
proper and adequate internal accounting controls which provide
assurance that (i) transactions are executed with management's
authorization (including, with respect to the Fund Entities and their
respective Subsidiaries, the authorization of the managing member
thereof and required approval, if any, of any investment advisory or
similar oversight committee, whether for interested party transactions
or otherwise); (ii) transactions are recorded as necessary to permit
preparation of the consolidated financial statements of ARCap in
accordance with GAAP and to maintain accountability for ARCap's
consolidated assets; (iii) access to the assets of ARCap, the Fund
Entities and their respective Subsidiaries is permitted only in
accordance with management's authorization (including, with respect to
the Fund Entities and their respective Subsidiaries, the authorization
of the managing member thereof and required approval, if any, of any
investment advisory or similar oversight committee, whether for
interested party transactions or otherwise); (iv) the reporting of
ARCap's, the Fund Entities' and their respective Subsidiaries' assets
is compared with existing assets at regular intervals; and (v)
accounts, notes and other receivables and inventory are recorded
accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis. To
ARCap's Knowledge there are no significant deficiencies or material
weaknesses in the design or operation of the internal control
structure and procedures over financial reporting of ARCap, the Fund
Entities or any of their respective Subsidiaries.
(h) Section 4.5(h) of the Disclosure Schedule sets forth
a true, correct and complete copy of the projections relating to ARCap
(the "Projections"). The Projections have been prepared by ARCap in
good faith. Notwithstanding the foregoing, Purchaser expressly
acknowledges that the Projections constitute management's estimates
only, and are not and shall not constitute any guarantee or other
assurance relating to the future performance of ARCap, the Fund
Entities or any of their respective Subsidiaries.
4.6 Taxes.
-----
(a) Except to the extent set forth in Section 4.6 of the
Disclosure Schedule:
(i) Each of ARCap, the Fund Entities and their
respective Subsidiaries has (i) duly and timely filed (or there has been filed
on its behalf) all Tax Returns required to be filed by it (taking into account
all applicable extensions, except
31
with respect to the 2003 and 2004 taxable years with respect to ARCap CMBS Fund
REIT, Inc., the timely filing of which shall be determined without regard to any
available extensions) with the appropriate Taxing Authority and all such Tax
Returns are true, correct and complete in all material respects, and (ii) timely
paid all Taxes required to be paid whether or not shown as due on such Tax
Returns.
(ii) There are no Encumbrances for Taxes upon any
property or assets of ARCap, the Fund Entities or any of their respective
Subsidiaries, except for Encumbrances for Taxes not yet due and payable or for
which adequate reserves have been provided in accordance with GAAP in the latest
Financial Statement and the Closing Balance Sheet.
(iii) There is no audit, examination, deficiency,
assessment, refund litigations or proposed adjustment that have been received by
ARCap, the Fund Entities or any of their respective Subsidiaries in writing with
respect to any Taxes. As of the date hereof, none of ARCap, the Fund Entities or
any of their respective Subsidiaries has received notice in writing of any claim
made by a Taxing Authority in a jurisdiction where ARCap, such Fund Entity or
such Subsidiary does not file a Tax Return, that ARCap, such Fund Entity or such
Subsidiary is or may be subject to material taxation by that jurisdiction, where
such claim has not been resolved favorably to ARCap, such Fund Entity or such
Subsidiary.
(iv) There are no outstanding written requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment or collection of any income Taxes or income Tax
deficiencies against any of ARCap, the Fund Entities or any of their respective
Subsidiaries.
(v) Each of ARCap, the Fund Entities and their
respective Subsidiaries is in material compliance with all applicable
information reporting and Tax withholding requirements under U.S. federal, state
and local, and non-U.S. Tax laws and each has timely withheld, collected,
deposited, remitted and paid all required amounts with respect to all employee,
independent or dependent contractor, or service provider relationships.
(vi) None of ARCap, the Fund Entities or any of their
respective Subsidiaries has engaged in any transaction that could give rise to a
disclosure obligation as a reportable transaction under Code Section 6011 and
each are in material compliance with Code Sections 6111 and 6112 and the
Treasury Regulations thereunder related to tax shelter disclosure, registration,
list maintenance and record keeping. None of ARCap, the Fund Entities or any of
their respective Subsidiaries has at any time engaged in, entered into,
participated or sponsored a listed transaction within the meaning of Treasury
Regulation Sections 1.6011, 301.6111 or 301.6112.
(b) Section 4.6 of the Disclosure Schedule lists each
pass-through partnership or limited liability company or other entity
that is treated as a partnership, trust or disregarded entity for tax
purposes in which ARCap, the Fund Entities or any of their respective
Subsidiaries have an equity interest.
32
4.7 Intellectual Property.
---------------------
(a) Except as set forth in Section 4.7 of the Disclosure
Schedule, ARCap, the Fund Entities and their respective Subsidiaries
own or have a valid right to use all of the proprietary software
applications, domain names or registered service marks and/or
registered trademarks identified in Section 4.7 of the Disclosure
Schedule required for the operation of ARCap, the Fund Entities and
their respective Subsidiaries as currently conducted.
(b) Section 4.7 of the Disclosure Schedule sets forth
all of the following that are owned by ARCap, the Fund Entities and
their respective Subsidiaries or which ARCap, the Fund Entities and
their respective Subsidiaries have a valid right to use: (i)
registered service marks and/or registered trademarks; (ii) domain
names; and (iii) proprietary software applications (other than
shrink-wrap licenses available to businesses and/or consumers
generally). Section 4.7 of the Disclosure Schedule is a true and
complete list of all material patents, domain names, registered or
applied for trademarks, service marks, or copyrights or trade names
(reserved or registered with state authorities) or other similar
proprietary rights that are the subject of a registration or an
application for registration presently owned, held and/or used by
ARCap, the Fund Entities and their respective Subsidiaries.
(c) Except as set forth in Section 4.7 of the Disclosure
Schedule, no registered service marks and/or registered trademarks
identified in Section 4.7 of the Disclosure Schedule have been or are
now involved in any opposition or cancellation proceeding and no such
proceeding is or has been threatened with respect to any of such
service marks and/or registered trademarks.
(d) Except as set forth in Section 4.7 of the Disclosure
Schedule, no proprietary software application or registered service
marks and/or registered trademarks identified in Section 4.7 of the
Disclosure Schedule have been or are now involved in any infringement
or misappropriation proceeding and no such proceeding is or has been
threatened with respect to any of the proprietary software
applications or registered service marks and/or registered trademarks.
(e) Except as set forth in Section 4.7 of the Disclosure
Schedule, ARCap exclusively owns, free and clear of any and all
encumbrances all proprietary software applications, domain names and
registered service marks and/or registered trademarks identified in
Section 4.7 of the Disclosure Schedule. Except as set forth in Section
4.7 of the Disclosure Schedule, all items of Intellectual Property
owned by ARCap, the Fund Entities and their respective Subsidiaries,
to ARCap's Knowledge, are valid and subsisting and enforceable, except
where such invalidity, non substinance or unenforceability would not
have a Material Adverse Effect. Except as set forth in Section 4.7 of
the Disclosure Schedule, neither ARCap, the Fund Entities nor any of
their
33
respective Subsidiaries have received any notice or claim challenging
the validity, enforceability, or ownership by ARCap, the Fund Entities
or any of their respective Subsidiaries of any of the proprietary
software applications, domain names or registered service marks and/or
registered trademarks identified on Section 4.7 of the Disclosure
Schedule nor to the Knowledge of ARCap is there a reasonable basis for
any such claim. Neither ARCap, the Fund Entities nor any of their
respective Subsidiaries have taken any action or failed to take any
action that could reasonably be expected to result in the abandonment,
cancellation, forfeiture, relinquishment, invalidation or
unenforceability of any of the proprietary software applications,
domain names or registered service marks and/or registered trademarks
(including the failure to pay any filing, examination, issuance, post
registration and maintenance fees, annuities and the like), except for
such action that would not result in a Material Adverse Effect. Except
as set forth in Section 4.7 of the Disclosure Schedule, ARCap has
obtained an assignment of intellectual property agreement for any
employee, independent contractor and/or outside contractor that
contributed to the creation, development or improvement of the
proprietary software applications identified in Section 4.7 of the
Disclosure Schedule.
(f) Except as set forth in Section 4.7 of the Disclosure
Schedule, ARCap, the Fund Entities and their respective Subsidiaries
have taken reasonable steps in accordance with standard industry
practices to protect their rights in the proprietary software
applications identified in Section 4.7 of the Disclosure Schedule and
at all times have taken steps reasonably calculated to maintain the
confidentiality of all information that constitutes a trade secret
included therein.
(g) Except as set forth in Section 4.7 of the Disclosure
Schedule, to ARCap's Knowledge, the activities of ARCap, the Fund
Entities and their respective Subsidiaries, all as currently
conducted, do not infringe upon, misappropriate, violate, or
constitute the unauthorized use of, any Intellectual Property of any
third party, in a manner which would result in a Material Adverse
Effect and neither ARCap, the Fund Entities nor any of their
respective Subsidiaries have, within the last two years, received any
notice or claim asserting or suggesting that any such infringement,
misappropriation, violation, or unauthorized use is or may be
occurring or has or may have occurred.
4.8 Information Systems.
-------------------
(a) Section 4.8(a) of the Disclosure Schedule identifies
the principal information systems (including operating systems,
applications and databases) used by ARCap, the Fund Entities or any of
their respective Subsidiaries (the "Information Systems"). Except as
described in Section 4.8(a) to the Disclosure Schedule, the
Information Systems are, in all material respects, operational and
perform the functions for which they were intended to be used, except
where such failure would not result in a Material
34
Adverse Effect. ARCap, the Fund Entities and their respective
Subsidiaries own or have a valid and subsisting license for all of the
Information Systems currently used by them in their business, except
where the failure to have such a valid and subsisting license would
not have a Material Adverse Effect.
(b) Except as described in Section 4.8(b) of the
Disclosure Schedule, within the past twelve (12) months of the date
hereof, ARCap, the Fund Entities and their respective Subsidiaries
have not experienced any material disruption to, or material
interruption in, its conduct of its business and operations
attributable to a defect, bug, breakdown or other failure or
deficiency on the part of the Information Systems which has resulted
in a Material Adverse Effect. Except for scheduled or routine
maintenance which does cause any material disruption to, or material
interruption in, the conduct of the business and operations of ARCap,
the Fund Entities and their respective Subsidiaries, the Information
Systems are, taken as a whole, available for use during normal working
hours. Each of ARCap, the Fund Entities and their respective
Subsidiaries has taken commercially reasonable steps to provide for
the backup and recovery of the data and information critical to the
conduct of its business and operations.
4.9 Legal Proceedings.
-----------------
(a) Except as set forth in Section 4.9 of the Disclosure
Schedule, there is no pending Proceeding commenced by or against, or
otherwise involving, or, to ARCap's Knowledge, threatened against,
ARCap, the Fund Entities or any of their respective Subsidiaries or
that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, the execution, delivery
and performance of this Agreement or the consummation of the
transactions contemplated hereby by ARCap. To ARCap's Knowledge, no
event has occurred or circumstance exists that (with or without notice
or lapse of time, or both) may give rise to or serve as a basis for
the commencement of any such Proceeding by or against, or otherwise
involving, ARCap, the Fund Entities or their respective Subsidiaries.
(b) ARCap has delivered or otherwise made available to
Purchaser copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Section 4.9 of the Disclosure
Schedule. Such Proceeding, if any, listed in Section 4.9 of the
Disclosure Schedule will not have a Material Adverse Effect on any
such Person.
(c) Except as set forth in Section 4.9 of the Disclosure
Schedule:
(i) there is no Order to which any of ARCap, the Fund
Entities or any of their respective Subsidiaries or any of the assets owned or
used by any such entity, is subject;
35
(ii) to ARCap's Knowledge, no officer, director, agent
or employee of any of ARCap, the Fund Entities or any of their respective
Subsidiaries is subject to any Order that prohibits such officer, director,
agent or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of any of ARCap, the Fund Entities or any of
their respective Subsidiaries.
(d) Except as set forth in Section 4.9 of the Disclosure
Schedule:
(i) each of ARCap, the Fund Entities and their
respective Subsidiaries is, and at all times has been, in material compliance
with all of the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that
may constitute or result in (with or without notice or lapse of time, or both) a
material violation of or material failure to comply with any term or requirement
of any Order to which any of ARCap, the Fund Entities or any of their respective
Subsidiaries, or any of the assets owned or used by any such entity, is subject;
and
(iii) none of ARCap, the Fund Entities or any of their
respective Subsidiaries has received at any time any notice or other
communication (whether oral or written) from any Governmental Authority or any
other Person regarding any actual, alleged, possible or potential material
violation of, or material failure to comply with, any term or requirement of any
Order to which any of ARCap, the Fund Entities or any of their respective
Subsidiaries, is or has been subject.
4.10 Compliance with Laws; Permits.
-----------------------------
(a) Except as set forth in Section 4.10(a) of the
Disclosure Schedule, ARCap, the Fund Entities and their respective
Subsidiaries are, and since January 1, 2003, have been in material
compliance with, and have conducted their business in all material
respects so as to comply with, all Laws applicable to their respective
businesses.
(b) No event has occurred or circumstance exists that
(with or without notice or lapse of time, or both) may give rise to
any obligation on the part of any of ARCap, the Fund Entities or any
of their respective Subsidiaries to undertake, or to bear all or any
portion of the cost of, any material remedial action of any nature.
(c) Neither ARCap, the Fund Entities nor any of their
respective Subsidiaries has received, at any time since January 1,
2003, any notice or other communication (whether oral or written) from
any Governmental Authority or any other Person regarding (i) any
actual or alleged material violation of, or material failure to comply
with any Law, or (ii) any actual or alleged obligation on the part of
ARCap, the Fund Entities and their
36
respective Subsidiaries to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature, which in each case has
not been satisfied in all material respects.
(d) Section 4.10(d) of the Disclosure Schedule contains
a complete and accurate list of each Permit that is held by ARCap, the
Fund Entities or any of their respective Subsidiaries. Except as set
forth in Section 4.10(d) of the Disclosure Schedule, ARCap, the Fund
Entities and their respective Subsidiaries have obtained all material
Permits that are necessary to the conduct of their respective
businesses as presently being conducted. All material Permits are in
full force and effect. Except as set forth in Section 4.10(d) of the
Disclosure Schedule:
(i) each of ARCap, the Fund Entities and their
respective Subsidiaries is, and at all times since January 1, 2003 has been, in
material compliance with all of the terms and requirements of each Permit
identified or required to be identified in Section 4.10(d) of the Disclosure
Schedule;
(ii) no event has occurred or circumstance exists that
may (with or without notice or lapse of time, or both) (A) constitute or result
directly or indirectly in a material violation of or a material failure to
comply with any term or requirement of any Permit listed or required to be
listed in Section 4.10(d) of the Disclosure Schedule, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any material Permit listed or required
to be listed in Section 4.10(d) of the Disclosure Schedule;
(iii) none of ARCap, the Fund Entities or any of their
respective Subsidiaries has received, at any time since January 1, 2003, any
notice or other communication (whether oral or written) from any Governmental
Authority or any other Person regarding (A) any actual or alleged material
violation of or material failure to comply with any term or requirement of any
Permit, or (B) any actual, proposed possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
material Permit, which in each case has not been satisfied in all material
respects; and
(iv) all applications required to have been filed for
the renewal of all material Permits have been duly filed on a timely basis with
the appropriate Governmental Authority, and all other filings required to have
been made with respect to such material Permit have been duly made on a timely
basis with the appropriate Governmental Authority.
37
4.11 Environmental and Safety and Health Matters.
-------------------------------------------
Except for matters which would not reasonably be expected to result in
a Material Adverse Effect on any such Person or which are set forth in Section
4.11 of the Disclosure Schedule:
(a) ARCap, the Fund Entities and their respective
Subsidiaries are, and at all times have been, in compliance with all
Environmental Laws; and
(b) there is no Environmental Claim pending or
threatened against ARCap, the Fund Entities or any of their respective
Subsidiaries.
4.12 Employee Matters and Benefit Plans.
----------------------------------
(a) Section 4.12(a) of the Disclosure Schedule sets
forth a true and complete list of all Plans. True and complete copies
of each of the following documents have been made available by ARCap
to Purchaser:
(i) each Multiemployer Plan, Pension Plan and Welfare
Plan (and, if applicable, related trust agreements) and all amendments thereto,
all written interpretations thereof and written descriptions thereof (including
summary plan descriptions and summaries of material modifications) which have
been distributed to employees, or to participants or beneficiaries in such plan,
all insurance contracts or other funding instruments, and the three most recent
annual reports (Form Series 5500), including all schedules and financial
statements attached thereto, if any, required under ERISA and the Code;
(ii) each other Plan and all amendments thereto
(including a complete description of each Plan that is not in writing, if any);
and
(iii) the most recent determination letter or opinion
letter, if any, issued by the Internal Revenue Service with respect to each
Pension Plan.
(b) Each Pension Plan (i) has been established and
maintained in material compliance with its terms and with all
applicable Laws, including ERISA and the Code, (ii) is qualified and
tax exempt under the provisions of Code Sections 401(a) and 501(a) and
has been so qualified during the period from its adoption to date, and
no event has occurred since the date of the most recent determination
letter, opinion letter or application thereof that would adversely
affect its qualification.
(c) Each Plan has been operated in material compliance
with its terms and with all applicable Laws, including, to the extent
applicable, the provisions of Part 6 of Title I of ERISA and Section
4980B of the Code.
(d) Except as disclosed in Section 4.12(d) of the
Disclosure Schedule, (i) neither ARCap, nor any of its Subsidiaries,
nor, to the Knowledge
38
of ARCap, any Plan or any party in interest (as defined in Section
3(14) of ERISA) with respect to any such Plan has engaged in any
prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Code with respect to a Plan for which there is no
statutory exemption under Section 408 of ERISA or Section 4975 of the
Code, and (ii) there is no material litigation, lien, disputed claim,
governmental proceeding or investigation pending or, to the Knowledge
of ARCap, threatened or reasonably anticipated with respect to any of
such Plans, the assets of such Plans (other than routine claims for
benefits), any related trusts, or any fiduciary, trustee,
administrator or sponsor of such Plans.
(e) Except as disclosed in Section 4.12(e) of the
Disclosure Schedule, no Welfare Plan provides for post-retirement
medical, life insurance or disability benefits.
(f) Neither ARCap, nor any of its Subsidiaries, nor any
ERISA Affiliate has maintained, contributed to or otherwise had any
obligation with respect to (i) any Multiemployer Plan, (ii) any
Pension Plan subject to Title IV of ERISA or Section 412 of the Code,
or (iii) any "multiple employer welfare arrangement" as defined in
Section 3(40) of ERISA.
(g) With respect to each Plan, as of the Closing,
substantially all required payments, premiums, and contributions for
all periods ending prior to or as of the Closing shall have been made
or accrued on the books and records of ARCap and its Subsidiaries.
Neither ARCap, nor any of its Subsidiaries, nor any ERISA Affiliate,
nor any Plan or associated trust or funding vehicle has any assets
subject to liens or other encumbrances with respect to any Plan.
(h) Except as set forth in Section 4.12(h) of the
Disclosure Schedule, as of the Closing, neither ARCap nor any of its
Subsidiaries (i) is a party to any Contract or Plan that has resulted
or would result, individually or in the aggregate, in connection with
this Agreement or any change of control of any Company, in the payment
of any "excess parachute payments" within the meaning of Section 280G
of the Code or (ii) has made any payments, is obligated to make any
payments, or is a party to any Contract or Plan that would reasonably
be expected to obligate it to make any payments, or is a party to any
Contract or Plan that would reasonably be expected to obligate it to
make any payments that will not be deductible by reason of Sections
162, 280G or 404 of the Code.
(i) Except as set forth in Section 4.12(i) of the
Disclosure, no Plan or payment or benefit provided pursuant to any
Plan between ARCap or any of its Subsidiaries and any "service
provider" (within the meaning of Section 409A of the Code) will or may
provide for the deferral of compensation subject to Section 409A of
the Code, whether pursuant to the execution and delivery of this
Agreement or the consummation of the
39
transactions contemplated hereby (either alone or upon the occurrence
of any additional or subsequent events). Each Plan that is a
nonqualified deferred compensation plan subject to Section 409A of the
Code has been operated and administered in good faith compliance with
Section 409A from the period beginning January 1, 2005 through the
date hereof.
(j) Except to the extent required by this Agreement,
none of ARCap or any of its Subsidiaries has any formal plan or
commitment (whether or not legally binding) either to create any plan
or arrangement that would constitute a Plan, or to make any
contributions, modifications, or changes to any Plan, other than in
the ordinary course of business and consistent with past practice with
regard to amounts.
(k) There are no collective bargaining agreements,
memoranda of understanding, side letters or other written agreements
with any union or labor organization applicable to the employees of
ARCap or any of its Subsidiaries or to which any of ARCap or any of
its Subsidiaries is a party, a signatory, or otherwise bound.
(l) There are no pending, threatened or reasonably
anticipated labor disputes, strikes, work stoppages, representation
proceedings or attempted union organizing campaigns between any of
ARCap or any of its Subsidiaries and any union representing the
employees of ARCap or any of its Subsidiaries or any other collective
bargaining representative of such employees.
(m) Section 4.12(m) of the Disclosure Schedule
identifies all written material employment, consulting or independent
contractor agreements to which ARCap or any of its Subsidiaries is a
party with respect to any employee of ARCap or any of its Subsidiaries
that are in effect currently or under which any of ARCap or any of its
Subsidiaries have any liability.
(n) ARCap has provided Purchaser with (i) a true and
complete list, dated as of June 30, 2006, of all employees of ARCap,
the Fund Entities and their respective Subsidiaries, including their
names, date of hire, current rate of compensation, employment status
(i.e., active, inactive, on authorized leave and reason therefor),
department, title, exempt or non-exempt status, and full-time or
part-time status; (ii) a copy of all employee handbooks, supervisory
handbooks, employment procedures manuals, and written employment
policies that are in effect currently; and (iii) a copy of all EEO-1
or similar reports and of all affirmative action plans prepared or
submitted to any Governmental Authority by or on behalf of any of
ARCap, the Fund Entities or any of their respective Subsidiaries since
two years prior to the Closing Date.
(o) Except as set forth in Section 4.12(o) of the
Disclosure Schedule, the consummation of the transactions contemplated
hereby (and not,
40
for the avoidance of doubt, any acts taken by Purchaser, ARCap or any
of their respective Subsidiaries on or after Closing) will not cause
Purchaser, ARCap or any of their respective Subsidiaries to incur or
suffer any liability relating to, or obligation to pay, severance,
termination, acceleration of vesting or payment, or other payments to
any Person under any Contract to which ARCap or any of its
Subsidiaries is a party.
4.13 Affiliate Arrangements.
----------------------
Except as set forth in Section 4.13 of the Disclosure Schedule and
excluding this Agreement, none of the ARCap Sellers and (to ARCap's Knowledge)
their Affiliates (other than any of ARCap, the Fund Entities or any of their
respective Subsidiaries), on the one hand, and ARCap, the Fund Entities or any
of their respective Subsidiaries, on the other hand, have any interest in or are
a party to any Contract with, or relating to, ARCap, the Fund Entities or any of
their respective Subsidiaries or their respective businesses, that was not
negotiated and executed on an arms-length basis.
4.14 Finder's Fee.
------------
Except for Bear, Stearns & Co. Inc., neither ARCap, any Fund Entity nor
any of their respective Subsidiaries has incurred or will incur any obligation
or liability to any party for any brokerage or finder's fee or agent's
commission, or the like, in connection with the transactions contemplated by
this Agreement.
4.15 Books and Records. The books of account, minute books, stock
record books, and other records of ARCap, the Fund Entities and their
respective Subsidiaries, all of which have been made available to Purchaser,
are complete and correct in all material respects and have been maintained
in accordance with sound business practices applicable to companies
comparable in size and nature to ARCap, including the maintenance of an
adequate system of internal controls. The minute books of ARCap, the Fund
Entities and their respective Subsidiaries contain accurate and complete
records, in all material respects, of all duly-called and held meetings held
of, and action taken by, the stockholders, the members, the boards of
directors, and committees of the boards of directors of ARCap, the Fund
Entities and their respective Subsidiaries, and no duly-called meeting of
any such stockholders, members, boards of directors or committees has been
held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of such books and records will be in the
possession of ARCap.
4.16 Other Agreements. To ARCap's Knowledge, there are no agreements
between and among the members of ARCap with respect to the management or
operation of ARCap other than the LLC Agreement and this Agreement.
4.17 No Undisclosed Liabilities. Except as set forth on the Unaudited
Balance Sheets, or as otherwise disclosed herein or in the Disclosure
Schedule, ARCap, the Fund Entities and their respective Subsidiaries have no
material
41
liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for (i)
liabilities or obligations reflected or reserved against in the Financial
Statements, (ii) current liabilities incurred in the ordinary course of
business since the respective dates thereof and (iii) liabilities and
obligations incurred in connection with the execution of this Agreement.
4.18 Fund Entities.
-------------
(a) Since each of the Fund Entities' respective date of
organization, and assuming the truth and accuracy of the investment
representations made to the Fund Entities by their respective
investors, none of the Fund Entities has been required to register as
an investment company under the Investment Company Act of 1940.
(b) Since each of the Fund Entities' respective date of
organization, none of the Fund Entities have sponsored or participated
in the distribution by public or private offering of any interests in
any of the Fund Entities or other entities or Persons other than
pursuant to, and as described in, the Fund PPMs, in each case when
read together with the related Final Fund Documents in their entirety.
4.19 Investment Company; Investment Advisor. Assuming the truth and
accuracy of the investment representations made to ARCap and the Fund
Entities by their respective investors, none of ARCap, the Fund Entities nor
any of their respective Subsidiaries has been required to register as an
investment company under the Investment Company Act of 1940. Assuming the
truth and accuracy of the investment representations made to ARCap and the
Fund Entities by their respective investors, neither ARCap, ARCap REIT nor
ARCap Fund Management, L.L.C. is or has been required to register as an
investment adviser under the Investment Advisers Act of 1940.
4.20 Offering Memoranda. Each of the Fund PPMs, ARCap 2003-1
Resecuritization Trust Offering Memorandum, ARCap 2004-1 Resecuritization
Trust Offering Memorandum, ARCap 2005-1 Resecuritization Trust Offering
Memorandum, ARCap 2004-RR3 Resecuritization Trust Offering Memorandum, ARCap
2005-RR5 Resecuritization Trust Offering Memorandum and ARCap 2006-RR7
Resecuritization Trust Offering Memorandum, together, in each case, with any
supplements thereto, in each case when read together with the related Final
Fund Documents in their entirety, did not, as of their respective dates,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
42
4.21 Fund Reports.
------------
(a) ARCap has previously made available to Purchaser (or
with respect to reports furnished after the date hereof and prior to
the Closing Date, will simultaneously with its delivery to the members
or stockholders of each of the Fund Reporting Entities furnish to
Purchaser) true, complete and correct copies of the last annual and
periodic reports furnished by the managing member or the corporation
to the members and stockholders, respectively, of the Fund Reporting
Entity (collectively, the "Fund Entity Reports"). Each of the Fund
Reporting Entities has furnished in all material respects all reports
to its members or stockholders which are required to be furnished by
it under the respective certificate of incorporation or formation,
limited liability company agreement, by-laws, regulations or other
organizational or governing documents of the Fund Reporting Entities.
All financial statements contained in the Fund Entity Reports fairly
present in accordance with GAAP the financial position and results of
operations of the respective Fund Reporting Entity at the date and for
the periods indicated and, if required under the respective
certificate of incorporation or formation, limited liability company
agreement, by-laws, regulations or other organizational or governing
documents of the Fund Reporting Entity, have been prepared in
conformity with GAAP. The accountants who expressed an opinion on such
financial statements are, with respect to the respective Fund
Reporting Entity, reasonably believed by ARCap to be independent
public accountants.
(b) Since the respective dates as of which information
is given in any of the Fund Entity Reports and the Fund PPMs
(whichever is most recently distributed) to the date hereof, except as
may otherwise be stated in or contemplated by such document or on
Section 4.21(b) of the Disclosure Schedule: (i) there has not been any
material adverse change in the condition (financial or otherwise) of
the respective Fund Reporting Entity, or any material properties or
assets of the Fund Reporting Entity whether or not arising in the
ordinary course of business; and (ii) there has not been any material
transaction entered into by the Fund Reporting Entity (except as
otherwise in conformity with the investment objective of such Fund
Reporting Entity), other than in the ordinary course of business.
4.22 REIT. Except as set forth in Section 4.22 of the Disclosure
Schedule, ARCap REIT, ARCap CMBS Fund REIT, Inc. and ARCap CMBS Fund II
REIT, Inc. each have been organized and each of their operations have been
conducted and maintained at all times in conformity with the requirements
for qualification as a real estate investment trust under the Code,
including the making of timely and valid REIT elections and the satisfaction
of the income and asset tests of Code Section 856(c) and the distribution
tests of Code Section 857. ASI and ARCap REIT have made a valid election to
treat ASI as a taxable REIT subsidiary under Section 856(l) of the Code at
all times since the formation of ASI. RR3, RR5 and AFC are properly treated
as qualified REIT subsidiaries of ARCap REIT under Section 856(i) of the
Code. ARCap 2003-1 Resecuritization, Inc., ARCap 2004-1 Resecuritization,
Inc. and ARCap
43
2006-RR7 Resecuritization, Inc. are properly treated as qualified REIT
subsidiaries of ARCap CMBS Fund REIT, Inc. under Section 856(i) of the Code.
ARCap 2005-1 Resecuritization, Inc. is properly treated as a qualified REIT
subsidiary of ARCap CMBS Fund II REIT, Inc. under Section 856(i) of the
Code.
4.23 Contracts; No Defaults.
----------------------
(a) Section 4.23(a) of the Disclosure Schedule contains
a complete and accurate list, and ARCap has delivered to Purchaser
true and correct copies, of all limited liability company agreements,
employment Contracts, lines of credit Contracts, master repurchase
Contracts, Contracts related to Intellectual Property and any other
Contract involving payments in an aggregate amount equal to or in
excess of $50,000, which are not terminable in 30 days or less to
which ARCap, the Fund Entities and their respective Subsidiaries are a
party.
(b) Except as set forth in Section 4.23(b) of the
Disclosure Schedule, no Contract identified or required to be
identified in Section 4.23(a) of the Disclosure Schedule is in default
by its terms as a result of any act or omission by ARCap, the Fund
Entities or any of their respective Subsidiaries or has been canceled
by any counterparty thereto, and none of ARCap, the Fund Entities or
any of their respective Subsidiaries are in receipt of any claim of
default under any such agreement.
(c) Except as set forth in Section 4.23(c) of the
Disclosure Schedule:
(i) each of ARCap, the Fund Entities and their
respective Subsidiaries has been in material compliance with all applicable
terms and requirements of each material Contract under which such entity has or
had any obligation or liability or by which such entity or any of the assets
owned or used by such entity is or was bound;
(ii) to ARCap's Knowledge, each other Person that has
or had any obligation or liability under any material Contract under which
ARCap, the Fund Entities or any of their respective Subsidiaries has or had any
rights is in material compliance with all applicable terms and requirements of
such Contract;
(iii) to ARCap's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time, or both) may
contravene, conflict with, or result in a violation or breach of, or give either
ARCap, the Fund Entities or any of their respective Subsidiaries or any other
Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any material Contract; and
(iv) neither ARCap, any Fund Entity nor any of their
respective Subsidiaries have given to or received from any Person any notice or
44
other communication (whether oral or written) regarding any actual or alleged
violation or breach of, or default under, any material Contract.
(d) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to either ARCap, the Fund Entities or any of their
respective Subsidiaries under current or completed Contracts with any
Person and no such Person has made written demand for such
renegotiation.
4.24 Insurance. Section 4.24 of the Disclosure Schedule identifies all
of the policies of insurance and bonds of ARCap, the Fund Entities and each
of their respective Subsidiaries. ARCap, the Fund Entities and each of their
respective Subsidiaries have policies of insurance and bonds of the type and
in the amounts customarily carried by persons conducting businesses or
owning assets similar to those of ARCap, the Fund Entities and each of their
respective Subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and ARCap, the Fund
Entities and each of their respective Subsidiaries are otherwise in material
compliance with the terms of such policies and bonds. ARCap has no Knowledge
of any threatened termination of, or material premium increase with respect
to, any of such policies.
4.25 Leases.
------
(a) Section 4.25 of the Disclosure Schedule identifies
all of the real property presently leased by ARCap, the Fund Entities
and their respective Subsidiaries which is used in connection with the
business of such entities (collectively, the "Leased Real Property")
and contains a complete and accurate list of each of the leases,
including all amendments thereto, with respect to the Leased Real
Property (each a "Lease" and collectively, the "Leases"). ARCap has
made available to Purchaser true and complete copies of the Leases,
including all schedules, amendments and modifications thereto. ARCap,
the Fund Entities and their respective Subsidiaries do not own any
real property. Other than the Leases, to ARCap's Knowledge, the Leased
Real Property is not subject to any other leases or occupancy
agreements, rights of first refusal, options to purchase or other
rights of occupancy.
(b) Each Lease remains unmodified and is in full force
and effect, and ARCap, the Fund Entities and their respective
Subsidiaries hold a valid and existing leasehold interest under each
of the Leases to which it is a party for the term(s) set forth
therein. There are no other written or oral agreements amending or in
connection with the Leases. ARCap, the Fund Entities and their
respective Subsidiaries are not in material default or material breach
of any Lease nor, to ARCap's Knowledge, is any other party thereto. To
ARCap's Knowledge, no events have occurred and no circumstances exist
45
which, if not remedied, and whether with or without notice or the
passage of time or both, would result in such a material default.
(c) ARCap, the Fund Entities or any of their respective
Subsidiaries have not received written notice of any pending or
threatened condemnations, planned public improvements, annexation,
special assessments, zoning or subdivision changes, or other claims
affecting the Leased Real Property.
(d) To ARCap's Knowledge, there is no private
restrictive covenant or governmental use restriction (including
zoning) on all or any portion of the Leased Real Property that
prohibits the current use of the same.
4.26 Partnership Treatment. Each of ARCap High Yield CMBS Fund,
L.L.C., ARCap Diversified Risk CMBS Fund, L.L.C., ARCap High Yield CMBS Fund
II, L.L.C., ARCap Diversified Risk CMBS Fund II, L.L.C. and ARCap Real
Estate Special Situations Mortgage Fund, L.L.C. at all times has been
properly treated as a partnership under the Code for federal income tax
purposes and for all state and local tax purposes, and no election has been
made to treat any such entity as a corporation or disregarded entity for Tax
purposes. None of ARCap High Yield CMBS Fund, L.L.C., ARCap Diversified Risk
CMBS Fund, L.L.C., ARCap High Yield CMBS Fund II, L.L.C., ARCap Diversified
Risk CMBS Fund II, L.L.C. or ARCap Real Estate Special Situations Mortgage
Fund, L.L.C. is or at any time has been or under applicable Law properly
should be or should have been treated as a "publicly traded partnership"
within the meaning of Section 7704(b) of the Code.
4.27 Registration. The offer and sale of securities by each of ARCap,
the Fund Entities or any of their respective Subsidiaries, did not require
the registration of such securities under the Securities Act or applicable
state securities laws. The issuance of such securities has been conducted in
accordance with exemptions from registration under the Securities Act and
applicable state securities laws.
4.28 Servicing. ARCap, the Fund Entities and their respective
Subsidiaries have complied in all material respects with (i) all applicable
Laws and rating agency servicing standards with respect to all outstanding
Serviced Loans as to which any of them acts as a servicer, whether as a
master servicer, special servicer, subservicer or otherwise, and (ii) the
material terms of the applicable Servicing Agreement and mortgage loan
documents relating to such Serviced Loans. As of the date of this Agreement,
ASI has a special servicer rating of "Strong" by Standard & Poor's and ASI
has not received any notice of any ratings downgrade; provided, that no
representation or warranty is made by ARCap with respect to any effect that
the transactions contemplated hereby may have on such rating.
46
4.29 Serviced Loan Schedule. A true, complete and accurate copy of
ARCap's watchlist policy has been provided to Purchaser. Section 4.29 of the
Disclosure Schedule sets forth a true, complete and accurate list of each
outstanding Specially Serviced Loan as of June 30, 2006. 4.30 ERISA. Except
as set forth in Section 4.30 of the Disclosure Schedule, none of the Fund
Entities are parties to, or have any liability or obligation with respect
to, any Plan. With respect to each Fund Entity, based upon the truth of the
representations made to ARCap and each Fund Entity by their respective
investors, either of the following is true:
(a) such Fund Entity (A) is not (a) an "employee benefit
plan" within the meaning of Section 3(3) of ERISA, (b) a "plan"
defined in Section 4975 of the Code, (c) a governmental plan within
the meaning of Section 3(32) of ERISA, or (d) a collective investment
vehicle made up of two or more of such plans; and (B) no portion of
the assets of any such Fund Entity constitutes "plan assets" within
the meaning of the plan asset regulations promulgated by the U.S.
Department of Labor at 29 C.F.R. 2510.3-101 et. seq. (1986); or
(b) neither ARCap, nor any of its Subsidiaries, nor any
Fund Entity nor, to ARCap's Knowledge, any party in interest (as
defined in Section 3(14) of ERISA) with respect to any Fund Entity has
engaged in any non-exempt prohibited transaction as defined in Section
406 of ERISA or Section 4975 of the Code with respect to a Fund Entity
that would reasonably be expected to result in any material liability
to ARCap, any of its Subsidiaries, any Fund Entity or Purchaser.
4.31 Disclosure. No representation or warranty of ARCap in this
Agreement and no statement of ARCap in the Disclosure Schedule, when all
such representations, warranties and statements are read together in their
entirety, omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances under which they were made,
not misleading.
4.32 No Material Adverse Change. Since December 31, 2005, except as
set forth on Section 4.32 of the Disclosure Schedule, no material adverse
change has occurred with respect to ARCap, the Fund Entities or their
respective Subsidiaries or circumstance exists that may result in a material
adverse change with respect to ARCap, the Fund Entities or their respective
Subsidiaries. An event, fact, violation, breach, inaccuracy, circumstance or
other matter will be deemed to have caused a "material adverse change" with
respect to ARCap, the Fund Entities and their respective Subsidiaries if
such event, fact, violation, breach, inaccuracy, circumstance or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
but for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) had or may be expected to have or give rise to a material
adverse effect
47
on (i) the business, financial condition, capitalization, assets,
liabilities, operations, financial performance of any of ARCap, the Fund
Entities or their respective Subsidiaries, taken as a whole, (ii) the
ability of ARCap to consummate the transactions contemplated by this
Agreement or to perform any of its obligations under this Agreement or (iii)
Purchaser's ability to exercise ownership rights with respect to the Cash
Units.
4.33 Intercompany Accounts. Section 4.33 of the Disclosure Schedule
sets forth all intercompany accounts between any of ARCap Sellers or (to
ARCap's Knowledge) their Subsidiaries (other than any of ARCap, the Fund
Entities and their respective Subsidiaries), on the one hand, and any of
ARCap, the Fund Entities and their respective Subsidiaries, on the other
hand.
4.34 Disclaimer of Other Representations and Warranties. Except as
expressly set forth in Article 3 and Article 4 of this Agreement, neither
Sellers Representative, ARCap, nor any of the Sellers makes any
representation or warranty, express or implied, at law or in equity, with
respect to ARCap, the Fund Entities, any of their respective Subsidiaries,
their respective businesses or financial condition or any of their assets,
liabilities or operations, and any such other representations or warranties
are hereby expressly disclaimed.
4.35 Disclosure Schedule. Any information provided in writing to
ARCap by any ARCap Seller for inclusion in the Disclosure Schedule with
respect to matters covered by Article 3 of this Agreement has been included
in the Disclosure Schedule.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ARCAP REIT
ARCap REIT hereby represents and warrants to Purchasers:
5.1 No Conflict; Government Authorizations.
--------------------------------------
(a) Except as set forth in Section 5.1(a) of the
Disclosure Schedule, assuming compliance by the ARCap Sellers, ARCap,
CharterMac and the Purchasers with the notification requirements of
the HSR Act, if applicable, and the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other
actions referred to in Section 5.1(b) of this Agreement, the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will
not (with or without notice or lapse of time, or both) (i) violate,
conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws of ARCap REIT or ASI, (ii)
contravene, conflict with or violate any Law or Order applicable to
ARCap REIT or ASI, (iii) conflict with or violate or breach any
provision of, or give any third party the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or
48
to cancel, terminate or modify, any Contract of ARCap REIT or ASI, or
(iv) result in the creation of any Encumbrance (other than
restrictions on transfer under applicable state and federal securities
laws) on any of the properties or assets of ARCap REIT or ASI pursuant
to any Contract to which such Person is a party or by which any of
such Person's properties or assets are bound or affected, except in
the case of clauses (ii), (iii) and (iv) above, for such
contraventions, conflicts, violations, breaches, defaults, exercises,
accelerations, cancellations, terminations, modifications and
creations which could not reasonably be expected to result in a
Material Adverse Effect on any such Person.
(b) Except as set forth in Section 5.1(b) of the
Disclosure Schedule, assuming compliance by the ARCap Sellers, ARCap,
CharterMac and the Purchasers with the notification requirements of
the HSR Act, if applicable, no material consent of, or registration,
declaration, notice or filing with, any Governmental Authority or
third party is required to be obtained or made by ARCap REIT or ASI in
connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
5.2 Corporate Status. Each of ARCap REIT and ASI is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and each (a) has all requisite corporate power and
authority to carry on its business as it is now being conducted, and (b) is
duly qualified to do business and is in good standing in each of the
jurisdictions in which the ownership, operation or leasing of its properties
and assets and the conduct of its business requires it to be so qualified,
licensed or authorized, except where the failure to have such power and
authority or to be so qualified, licensed or authorized would not reasonably
be expected to result in a Material Adverse Effect on either such Person.
5.3 Authority; Binding Effect. ARCap REIT has all necessary power and
authority to enter into this Agreement, to carry out ARCap REIT's
obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by ARCap REIT,
and (assuming due authorization and delivery by Sellers Representative,
ARCap, each other Seller, CharterMac and each Purchaser) this Agreement
constitutes a legal, valid and binding obligation of ARCap REIT, enforceable
against ARCap REIT in accordance with its terms, except as enforceability
may be subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
5.4 Ownership.
---------
(a) The authorized capital stock of ASI consists solely
of 3000 shares of common stock, of which 3000 shares have been issued
and are
49
outstanding (the "ASI Stock"). The ASI Stock is authorized, validly
issued, fully paid and nonassessable. ARCap REIT owns the ASI Stock
free and clear of all Encumbrances (other than restrictions on
transfer under applicable state and federal securities laws), and upon
the transfer of such ASI Stock in accordance with this Agreement,
Purchaser 1 will receive good and valid title to the ASI Stock
purchased hereby free and clear of all Encumbrances (other than
restrictions on transfer under applicable state and federal securities
laws). Except as set forth in Section 5.4 of the Disclosure Schedule
and except for this Agreement, there are no existing options,
warrants, calls, rights, subscriptions, arrangements, claims,
commitments (contingent or otherwise) or other agreements of any
character to which either of ARCap REIT or ASI is a party, or is
otherwise subject, requiring, and there are no securities of either of
ARCap REIT or ASI outstanding which upon exercise, conversion or
exchange would require, the issuance, sale or transfer of any
additional shares of ASI Stock or securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase
ASI Stock. Neither ARCap REIT or ASI is a party, or is otherwise
subject, to any voting trust or other voting agreement with respect to
ASI Stock or to any agreement relating to the issuance, sale,
redemption, transfer, acquisition or other disposition of ASI Stock.
5.5 Legal Proceedings; Orders.
-------------------------
(a) Except as set forth in Section 5.5 of the Disclosure
Schedule, there is no pending Proceeding commenced by or against, or
otherwise involving, or, to ARCap REIT's Knowledge, threatened
against, ARCap REIT or that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby by ARCap REIT. To
ARCap REIT's Knowledge, no event has occurred or circumstance exists
that (with or without notice or lapse of time, or both) may give rise
to or serve as a basis for the commencement of any such Proceeding
described in this Section 5.5(a).
(b) ARCap REIT has delivered to Purchasers copies of all
pleadings, correspondence, and other documents relating to each such
Proceeding listed in Section 5.5 of the Disclosure Schedule. Such
Proceeding, if any, listed in Section 5.5 of the Disclosure Schedule
will not have a Material Adverse Effect on any such Person.
5.6 Brokers or Finders. Except with respect to Bear, Stearns & Co.
Inc., ARCap REIT and its agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finder's fees or agents'
commissions or other similar payment in connection with this Agreement.
5.7 Disclosure. No representation or warranty of ARCap REIT in this
Agreement and no statement of ARCap REIT in the Disclosure Schedule omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
50
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CHARTERMAC AND PURCHASERS
CharterMac and Purchasers jointly and severally hereby represent and
warrant to ARCap and each Seller as follows:
6.1 Corporate Status. Each of CharterMac and Purchasers is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and each of CharterMac and
Purchasers (a) has all requisite power and authority to carry on its
business as it is now being conducted, and (b) is duly qualified to do
business and is in good standing in each of the jurisdictions in which the
ownership, operation or leasing of its properties and assets and the conduct
of its business requires it to be so qualified, licensed or authorized,
except where the failure to have such power and authority or to be so
qualified, licensed or authorized would not reasonably be expected to result
in a Material Adverse Effect on CharterMac.
6.2 Authority. Each of CharterMac and Purchasers has all necessary
power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of
CharterMac and Purchasers, and (assuming due authorization and delivery by
Sellers Representative, Sellers and ARCap) this Agreement constitutes a
legal, valid and binding obligation of each of CharterMac and Purchasers,
enforceable against CharterMac and Purchasers in accordance with its terms,
except as enforceability may be subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of
law governing specific performance, injunctive relief or other equitable
remedies.
6.3 No Conflict; Required Filings.
-----------------------------
(a) Assuming compliance by the Sellers and ARCap with
the notification requirements of the HSR Act, if applicable, and the
making and obtaining of all filings, notifications, consents,
approvals, authorizations and other actions referred to in Section 6.3
(b) of this Agreement, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not and will not (with or without notice or lapse of time, or both)
(i) violate, conflict with or result in the breach of any provision of
the certificate of incorporation or formation, limited liability
company agreement, by-laws, regulations or other organizational or
governing documents of CharterMac or Purchasers, (ii) conflict with or
violate any Law or Order applicable to CharterMac or Purchasers, or
(iii) result in the creation of any Encumbrance (other than
restrictions on transfer under applicable state and federal securities
laws) on any of the properties or assets of CharterMac or Purchasers
pursuant to any Contract to which CharterMac or Purchasers is a
51
party or by which any of CharterMac's or Purchasers' properties or
assets are bound or affected, except in each case for such violations,
conflicts, breaches and creations which could not reasonably be
expected to result in a Material Adverse Effect on CharterMac.
(b) Assuming compliance by the Sellers and ARCap with
the notification requirements of the HSR Act, if applicable, no
material consent of, or registration, declaration, notice or filing
with, any Governmental Authority is required to be obtained or made by
CharterMac or Purchasers in connection with the execution, delivery
and performance of this Agreement or the consummation of the
transactions contemplated hereby, other than those that, if not made
or obtained, individually or in the aggregate, would not materially
hinder or materially delay the Closing or would not reasonably be
expected to result in a Material Adverse Effect on CharterMac.
6.4 Legal Proceedings. There are no Proceedings pending or, to the
Knowledge of CharterMac or Purchasers, threatened against CharterMac or
Purchasers or any of their Affiliates or any of their respective properties
that could reasonably be expected to have a Material Adverse Effect on
CharterMac, or that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby by Purchasers.
6.5 Finder's Fee. None of CharterMac nor either Purchaser has
incurred any obligation or liability to any party, other than UBS Securities
LLC (whose fees Purchasers acknowledges are their sole responsibility), for
any brokerage or finder's fee or agent's commission or the like, in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Purchasers.
6.6 No Reliance. Purchasers acknowledge and agree that none of
Sellers Representative, Sellers, ARCap, the Fund Entities, their respective
Subsidiaries, nor any other Person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any information
regarding ARCap, the Fund Entities, their respective Subsidiaries, their
real property or their business or other matters that is not included in
this Agreement, the Disclosure Schedule attached hereto, or in any ARCap
Closing Certificate. Without limiting the generality of the foregoing, none
of Sellers Representative, Sellers, ARCap, the Fund Entities, their
respective Subsidiaries nor any other Person has made a representation or
warranty to CharterMac or Purchasers with respect to (a) any projections,
estimates or budgets for the businesses of any of ARCap, the Fund Entities
or their respective Subsidiaries, or (b) any material, documents or
information relating to any of ARCap, the Fund Entities or their respective
Subsidiaries made available to CharterMac, Purchasers, or their counsel,
accountants or advisors in any data room or otherwise, except as expressly
covered
52
by this Agreement, the Disclosure Schedule attached hereto, or in any
ARCap Closing Certificate.
6.7 Special Common Interests. Each of the Special Common Interests
held by holders of Exchange Units electing to receive Non-Cash Consideration
pursuant to this Agreement will be, as of the Closing, duly authorized,
validly issued, fully paid and nonassessable and, assuming the truth of the
representations and warranties of such holders set forth in Section 3.6
hereof, the conversion of Exchange Units into Special Common Interests will
be exempt from registration under the Securities Act. Each of the CharterMac
Common Shares (as defined in the Exchange Rights Agreement) issued to
holders of Special Common Interests pursuant to the Exchange Rights
Agreement will be, when so issued, duly authorized, validly issued, fully
paid and nonassessable and, assuming the truth of the representations and
warranties of such holders set forth in Section 3.2 of the Exchange Rights
Agreement at the time of issuance, such issuance will be exempt from
registration under the Securities Act.
6.8 Restricted Common Shares. Each of the Restricted Common Shares
issued to the Continuing Employees in the amounts set forth in Schedule VI
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable. Each of the Restricted Common Shares, when issued to the
Continuing Employees, will have been issued under a registration statement
on Form S-8 filed with the SEC, which registration statement is effective
and for which no stop order has been issued.
6.9 SEC Documents; Financial Statements.
-----------------------------------
(a) CharterMac has filed all forms, reports and
documents required to be filed by CharterMac with the SEC since
January 1, 2003 and heretofore has made available to ARCap copies, in
the form filed with the SEC, of (i) its Annual Report on Form 10-K for
the fiscal years ended December 31, 2003, December 31, 2004 and
December 31, 2005, (ii) its Quarterly Report on Form 10-Q for the
period ended March 31, 2006, (iii) all definitive proxy statements
relating to CharterMac's meetings of stockholders (whether annual or
special) held since January 1, 2003 and (iv) all other forms, reports
and registration statements (other than Quarterly Reports on Form 10-Q
not referred to in clause (ii) above and excluding exhibits to
registration statements and materials relating to stock option and
compensation plans) filed with the SEC by CharterMac since January 1,
2003 and prior to the date hereof, and CharterMac will have made
available to ARCap true and complete copies of any additional
documents filed with the SEC by CharterMac after the date hereof and
prior to the Closing Date (collectively, the "CharterMac SEC
Documents"). As of their respective filing dates, the CharterMac SEC
Documents complied in all material respects with the requirements of
the Exchange Act and the Securities Act, as the case may be, and none
of the CharterMac SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in
53
order to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the
extent corrected by a subsequently filed CharterMac SEC Document.
(b) The financial statements of CharterMac, including
the notes thereto, included in the CharterMac SEC Documents (the
"CharterMac Financial Statements") were complete and correct in all
material respects as of their respective filing dates, complied as to
form in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect
thereto as of their respective dates, and have been prepared in
accordance with GAAP applied on a basis consistent throughout the
periods indicated (except as may be indicated in the notes thereto or,
in the case of unaudited statements, included in Quarterly Reports on
Forms 10-Q). The CharterMac Financial Statements fairly present in all
material respects the consolidated financial condition and operating
results of CharterMac and its consolidated subsidiaries at the dates
and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments).
There has been no change in CharterMac accounting policies except as
described in the notes to the CharterMac Financial Statements.
6.10 Absence of Undisclosed Liabilities. CharterMac has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
balance sheet included in CharterMac's Quarterly Report on Form 10-Q
heretofore provided to ARCap for the period ended March 31, 2006 (the
"CharterMac Balance Sheet"), (ii) those incurred in the ordinary course of
business and not required to be set forth in the CharterMac Balance Sheet
under GAAP, and (iii) those incurred in the ordinary course of business
since the CharterMac Balance Sheet Date and consistent with past practice.
6.11 Absence of Certain Changes. Since March 31, 2006 (the
"CharterMac Balance Sheet Date"), other than with respect to any action
taken by CharterMac and Purchasers in connection with the transactions
contemplated by this Agreement and the financing of the Purchase Price, each
of CharterMac and Purchasers has conducted its business in the ordinary
course in a manner consistent with past practice and there has not occurred:
(i) any change, event or condition (whether or not covered by insurance)
that has resulted in, or would reasonably be expected to result in, a
Material Adverse Effect on CharterMac; (ii) any declaration, setting aside,
or payment of a dividend or other distribution with respect to the shares of
CharterMac, or any direct or indirect redemption, purchase or other
acquisition by CharterMac of any of its shares of capital stock; (iii) any
material amendment or change to CharterMac's certificate of incorporation or
by-laws; or (iv) any negotiation or agreement by CharterMac to do any of the
things described in the preceding clauses (i) through (iii).
54
6.12 Investment Intent. Each of Purchasers has knowledge and
experience in financial and business matters such that it is capable of
evaluating the risks and merits associated with the acquisition of the Cash
Units and ASI Stock, as applicable, is an "accredited investor" as defined
in Regulation D as promulgated under the Securities Act and is acquiring the
Cash Units and ASI Stock, as applicable, for its own account for investment,
with no present intention of making a public distribution thereof.
Purchasers will not sell or otherwise dispose of the Cash Units or ASI Stock
in violation of the Securities Act or any state securities laws.
ARTICLE 7
COVENANTS
7.1 Interim Operations of the Companies. Except as permitted,
required or contemplated by this Agreement, including those actions
contemplated in Section 7.1 of the Disclosure Schedule, during the period
commencing on the date hereof and ending on the Closing Date, ARCap shall,
and shall cause its Subsidiaries, the Fund Entities and the Fund Entities'
respective Subsidiaries to, conduct their respective businesses in the
ordinary course substantially consistent with past practice and seek to
preserve intact the assets of and the business organizations and
relationships with employees, suppliers, agents, landlords and third parties
having material business dealings with ARCap, the Fund Entities and their
respective Subsidiaries. Without limiting the generality of the foregoing,
except: (1) as otherwise expressly contemplated by, or required to
consummate the transactions contemplated by, this Agreement; (2) for actions
approved in advance by Purchasers in writing (which approval shall not be
unreasonably withheld or delayed); (3) as required to comply with applicable
Law (provided that prompt written notice of such compliance is given to
Purchasers); and (4) as set forth in Section 7.1 of the Disclosure Schedule,
from and after the date hereof and ending on the Closing Date, ARCap shall
not, and shall cause its Subsidiaries, the Fund Entities and the Fund
Entities' respective Subsidiaries not to, take any of the following actions:
(a) adopt any change in their respective certificate of
incorporation or formation, limited liability company agreement,
by-laws, regulations or other organizational or governing documents of
such Person;
(b) adopt a plan or agreement of complete or partial
liquidation, dissolution, restructuring, merger, consolidation,
restructuring, recapitalization or other reorganization of any of
ARCap, the Fund Entities or any of their respective Subsidiaries;
(c) (A) issue, sell, transfer, pledge, dispose of or
encumber any securities issued by ARCap, the Fund Entities or any of
their respective Subsidiaries, (B) split, combine, subdivide or
reclassify any securities of ARCap, the Fund Entities or any of their
respective Subsidiaries, (C) declare,
55
set aside or pay any dividend or other distribution, other than
dividends or other distributions payable in cash, with respect to the
Seller Units or any securities issued by ARCap, the Fund Entities or
any of their respective Subsidiaries; or (D) redeem, purchase or
otherwise acquire directly or indirectly the Seller Units or any
securities of ARCap, the Fund Entities or any of their respective
Subsidiaries;
(d) increase the benefits under any Plans or modify any
Plan where such modification has a cost impact on ARCap, the Fund
Entities or any of their respective Subsidiaries or increase the
compensation payable to any employee, director or consultant of ARCap,
the Fund Entities or any of their respective Subsidiaries;
(e) create any new arrangement, agreement, policy or
practice that would constitute a Plan, including, without limitation,
any employment agreements or severance agreements with new employees,
directors or consultants;
(f) enter into any Contract or consummate any
transaction involving the acquisition of the business, stock, assets
or other properties of any other Person (other than purchases in the
ordinary course of business consistent with past practice);
(g) sell, lease, license or otherwise dispose of any
assets or property, including Intellectual Property, except pursuant
to existing Contracts (other than transactions in the ordinary course
of business consistent with past practice);
(h) (A) make or rescind any material tax election with
respect to any of ARCap, the Fund Entities or any of their respective
Subsidiaries, (B) change any of its material methods of reporting
income or deductions for Tax purposes, (C) compromise any Tax
liability of any of ARCap, the Fund Entities or any of their
respective Subsidiaries that is material to ARCap, the Fund Entities
or any of their respective Subsidiaries or (D) issue a waiver to
extend the period of limitations for the payment or assessment of any
Tax;
(i) (A) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other Person, except for obligations of
ARCap, the Fund Entities and their respective Subsidiaries incurred in
the ordinary course of business and consistent with past practice; (B)
make any loans, advances or capital contributions to or investments in
any other Person (other than to ARCap, the Fund Entities or any of
their respective Subsidiaries pursuant to existing contracts or in
connection with any servicing activity or business conducted in the
ordinary course); (C) pledge or otherwise encumber the equity
interests of any of ARCap REIT, the Fund Entities or any of their
respective
56
Subsidiaries; or (D) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material
Encumbrance thereupon, except in the ordinary course of business
consistent with past practice;
(j) except as may be required as a result of a change in
Law or in GAAP, change any of the accounting principles or practices
used by ARCap, the Fund Entities or any of their respective
Subsidiaries;
(k) pay accounts payable or collect accounts receivable
other than in the ordinary course of business consistent with past
practice;
(l) fail to meet all capital calls with respect to any
commitment it has made to its Subsidiaries; or
(m) fail to confer with Marc D. Schnitzer concerning
operational matters that are outside the ordinary course of business.
7.2 Filings with Governmental Authorities.
-------------------------------------
(a) ARCap and Purchasers shall, if required, promptly
cause to be filed (i) with the United States Federal Trade Commission
(the "FTC") and the United States Department of Justice (the "DOJ")
the notification and report form pursuant to the HSR Act, required for
the transactions contemplated hereby. ARCap and Purchasers shall, as
promptly as practicable, use its reasonable best efforts to comply
with any request for additional information and documents pursuant to
the HSR Act. ARCap, on the one hand, and Purchasers, on the other
hand, shall notify the other as promptly as practicable of any
communication made by or on behalf of such party to, or received from,
the FTC or the DOJ and shall furnish to the other such information and
assistance as the other may reasonably request in connection with its
preparation of any filing, submission or other act that is necessary
or advisable under the HSR Act. ARCap, on the one hand, and
Purchasers, on the other hand, shall keep each other timely apprised
of the status of any communications with, and any inquiries or
requests for additional information from, the FTC or the DOJ, and
shall, as promptly as practicable, use its reasonable best efforts to
comply with any such inquiry or request. Each of ARCap and Purchasers
shall give prior notice and consult prior to any meeting such party
has with the FTC or the DOJ with respect to the filings of such party
under the HSR Act or any review by any of the foregoing agencies, and
shall give the other party the opportunity to attend and participate
in such meetings.
(b) The parties hereto shall cooperate with one another
in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or
any action, consent, approval or waiver from any party to any material
Contract is required or reasonably appropriate, in connection with the
consummation of the transactions contemplated by this Agreement.
Subject to the terms and
57
conditions of this Agreement and the Confidentiality Agreement (as
defined in Section 7.4 of this Agreement), in taking such actions or
making any such filings, the parties hereto shall furnish information
required in connection therewith and timely seek to obtain any such
actions, consents, approvals or waivers.
7.3 Consents. Except as contemplated in Section 7.2 of this
Agreement, CharterMac and Purchasers, on the one hand, and ARCap and ARCap
REIT, on the other hand, shall each use their reasonable efforts to obtain
all consents and authorizations required to consummate the transactions
contemplated by this Agreement, including obtaining the consents and
authorizations and making the filings referred to in Sections 4.1, 5.1 and
6.3 of this Agreement; provided, however, that neither CharterMac and
Purchasers, on the one hand, nor ARCap and ARCap REIT, on the other hand,
will be obligated to pay any consideration therefor to any Person from whom
consent or authorization is requested, except as otherwise required under
existing Contracts.
7.4 Confidentiality. Each of CharterMac, Purchasers and ARCap
acknowledge that the information being provided or made available to it by
the other party and their respective Subsidiaries or Affiliates (or their
respective agents or representatives) is subject to the terms of a
confidentiality agreement dated April 11, 2006, between ARCap and CharterMac
(the "Confidentiality Agreement"), attached hereto as Exhibit N and the
terms of which are incorporated herein by reference. Sellers Representative
and each Seller severally, but not jointly, acknowledge that information
being provided or made available to it by CharterMac and Purchasers (or its
respective agents or representatives) is subject to the terms of the
Confidentiality Agreement.
7.5 Publicity. Any public announcement or similar publicity with
respect to this Agreement or the transactions contemplated by this Agreement
will be issued, if at all, at such time and in such manner as ARCap and
CharterMac jointly determine. Unless consented to by CharterMac in advance
or (subject to reasonable prior notice to, and consultation with,
CharterMac) required by Law, prior to the Closing, Sellers and ARCap shall
keep this Agreement strictly confidential and may not make any disclosure of
this Agreement to any Person, other than to their respective directors,
officers, employees, agents and advisors. Unless consented to by ARCap in
advance or (subject in each case to reasonable prior notice to, and
consultation with, ARCap) required by Law or any listing agreement with a
securities exchange, prior to the Closing, CharterMac and Purchasers shall
keep this Agreement strictly confidential and may not make any disclosure of
this Agreement to any Person, other than to their respective directors,
officers, employees, agents and advisors. ARCap and CharterMac will use
reasonable efforts to consult with each other concerning the means by which
the employees, customers, and suppliers and others having dealings with
ARCap will be informed of the transactions contemplated by this Agreement,
and CharterMac will have the right to be present for any such communication.
58
7.6 Books and Records.
-----------------
(a) As soon as is reasonably practicable after the
Closing, ARCap will make available to Purchasers all properties,
books, records, Contracts, information and any other documents
relating to the business of ARCap, the Fund Entities and their
respective Subsidiaries that are not already in the possession or
control of ARCap, the Fund Entities or any of their respective
Subsidiaries.
(b) ARCap and Purchasers agree that each of them will
preserve and keep the records held by it relating to the business of
ARCap, the Fund Entities and their respective Subsidiaries for the
longer of (i) a period of five (5) years from the Closing Date or (ii)
such period as is required under any Final Fund Documents or related
side letters; provided, however, that prior to disposing of any such
records in accordance with such policies, the applicable party shall
provide written notice to the other party of its intent to dispose of
such records and shall provide such other party the opportunity to
take ownership and possession of such records (at such other party's
sole expense) within 30 days after such notice is delivered. If such
other party does not confirm its intention in writing to take
ownership and possession of such records within such 30-day period,
the party who possesses the records may proceed with the disposition
of such records. ARCap and Purchasers shall make such records
available to the other as may be reasonably required by such party in
connection with, among other things, any insurance claims by, legal
proceedings against, or governmental investigations of ARCap or
Purchasers or any of their respective Affiliates or in order to enable
ARCap or Purchasers to comply with their respective obligations under
this Agreement and each other agreement, document or instrument
contemplated hereby or thereby.
7.7 Further Action. Sellers (to the extent required of each of them
hereunder), ARCap, CharterMac and Purchasers shall use their respective best
efforts to (i) take, or cause to be taken, all actions (within their
respective control) necessary or appropriate to consummate the transactions
contemplated by this Agreement, and (ii) cause the fulfillment at the
earliest practicable date of all of the conditions to their respective
obligations to consummate the transactions contemplated by this Agreement
including, but not limited to, the conditions set forth in Article 8.
7.8 Expenses. Whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party hereto incurring such expenses except as otherwise expressly provided
herein and subject to any rights of any party arising from a breach of this
Agreement by another party.
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7.9 Notification of Certain Matters. Each party shall give prompt
notice to the other of the following:
(a) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which is reasonably expected to cause
or constitute an inaccuracy in or a breach of any of each party's
representations and warranties as of the date of this Agreement, or if
such party becomes aware of the occurrence or nonoccurrence after the
date of this Agreement of any event that would reasonably be expected
to cause or constitute an inaccuracy in or a breach of any such
representation or warranty had such representation or warranty been
made as of the time of occurrence, nonoccurrence or discovery of such
event, then the occurrence or nonoccurrence of any such event;
(b) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which is reasonably expected to cause
any inaccuracy in or breach of any covenant in this Article 7 or of
the occurrence or nonoccurrence of any event that may make the
satisfaction of the conditions in Article 8 impossible or unlikely;
and
(c) the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the
other with copies of notices or other communications received by any
party or any of its respective Subsidiaries from any Governmental
Authority or other third party with respect to this Agreement or the
transactions contemplated hereby.
7.10 Employee Matters and Employee Benefit Plans.
-------------------------------------------
(a) Purchaser 2 acknowledges and agrees that the
Companies and their ERISA Affiliates shall be solely responsible for
all liabilities arising out of or related to any Plans (including,
without limitation, liabilities attributable to periods prior to the
Closing); provided, however, that ARCap shall be solely responsible to
pay the Phantom Unit Amount, and in connection therewith (i) ARCap
Sellers jointly, but not severally, hereby assume the obligation of
ARCap set forth in the foregoing clause (i), jointly agree to pay to
ARCap, at the Closing, the Phantom Unit Amount in satisfaction of such
assumption and direct Sellers Representative to pay to ARCap REIT,
upon receipt of such funds from Purchaser 2, the full Phantom Unit
Amount, (ii) ARCap and ARCap REIT represent, warrant and agree that
payment of the Phantom Unit Amount to the participants under the
Phantom Unit Plans shall be satisfied by payment by ARCap REIT at
Closing of (Y) the Phantom Unit Amount (less the Phantom Escrow Cash)
to such participants and (Z) the Phantom Escrow Cash to the Escrow
Agent, in accordance with Sections 2.3(a)(vii) and 2.3(a)(viii),
respectively, and (iii) ARCap REIT shall terminate, as of the Closing
Date, the Phantom Unit Plans so that after payment by ARCap REIT of
the Phantom Unit Amount, the Phantom Unit Plans and the interests of
the participants thereunder have no further legal force and effect
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from and after the Closing (other than with respect to such
participants' residual interest in the Phantom Escrow Cash).
(b) Section 7.10(b) of the Disclosure Schedule lists all
employees of ARCap REIT whose employment shall continue following the
Closing, and all such employees shall hereinafter be referred to as
"Continuing Employees." Except as otherwise provided in this
Agreement, from and after the Closing, CharterMac shall cause
Purchaser 2 and/or ARCap REIT to provide to the Continuing Employees
employee benefits, substantially the same, in the aggregate, as those,
if any, provided to similarly situated employees of CharterMac and its
Subsidiaries. From and after the Closing, Continuing Employees shall,
to the extent permitted under the terms of such plans and by
applicable Law, receive full credit for all purposes under any
employee benefit plan (which, in CharterMac's discretion, may be a
continuation of the Plans set forth in Section 4.12(a) of the
Disclosure Schedule) maintained by CharterMac, including, without
limitation, for purposes of determining eligibility and vesting
levels, but not for the actual accrual of benefits, for their service
prior to the Closing with ARCap REIT, full credit for deductibles and
co-payments, annual limits and lifetime limits under the welfare plans
of CharterMac, in all cases to the extent such Continuing Employees
would have received such credit under a corresponding Plan (and in all
cases except to the extent that such credit would result in the
duplication of benefits), and all preexisting conditions, limitations
and waiting periods to which any such Continuing Employees are subject
shall be waived under the welfare plans of CharterMac; provided,
however, that, except as required under applicable Law, CharterMac
shall not be obligated to extend the foregoing benefits to any
Continuing Employee who is a party to (i) any employment agreement
with any of ARCap, the Fund Entities or their respective Subsidiaries
that continues in effect after the Closing, to the extent that such
employment agreement already provides for such foregoing benefits, or
(ii) any agreement with CharterMac for the provision of compensation
or benefits to the employee from and after the Closing. Except as
expressly provided in this Agreement, nothing in this Section 7.10 or
elsewhere in this Agreement will require CharterMac, Purchaser 2 or
ARCap REIT to provide any particular form of employee benefit or to
establish or maintain any particular type or form of employee benefit
plan, or preclude CharterMac, Purchaser 2 or ARCap REIT from amending
or terminating in its discretion any Plan or, following the Closing,
terminate the employment of any Continuing Employee.
(c) In accordance with ARCap REIT's regular payroll
schedule, ARCap REIT has paid and will continue to pay all
compensation and benefits due to each employee and former employee of
ARCap, the Fund Entities or any of their respective Subsidiaries
through the Closing Date.
7.11 Insurance Matters.
-----------------
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(a) ARCap shall use reasonable efforts to keep, or cause
to be kept, all insurance policies presently maintained relating to
the businesses of ARCap, the Fund Entities and their respective
Subsidiaries and their properties, or replacements therefor, in full
force and effect through the Closing Date. Following the Closing,
Purchasers shall, or shall cause ARCap, the Fund Entities or any of
their respective Subsidiaries (as applicable), to pursue, at the
request and on behalf of Sellers and their respective Subsidiaries
(other than ARCap, the Fund Entities and their respective
Subsidiaries), any claims made by Sellers or their respective
Subsidiaries (other than ARCap, the Fund Entities and their respective
Subsidiaries) prior to the Closing under any such policies retained by
ARCap, the Fund Entities or any of their respective Subsidiaries
following the Closing.
(b) From and after the Effective Time, subject to
applicable Law, CharterMac shall, or shall cause ARCap or ARCap REIT
to indemnify and hold harmless all past and present officers and
directors of ARCap and all of its Subsidiaries to the same extent and
in the same manner such persons are entitled to be indemnified as of
the date of this Agreement by ARCap or any of its Subsidiaries
pursuant to any limited liability company operating agreement and
by-laws of ARCap or any of its Subsidiaries, for acts or omissions
occurring at or prior to the Effective Time.
(c) From and after the Effective Time, CharterMac shall,
or shall cause ARCap or ARCap REIT to provide, at the sole cost and
expense of CharterMac, for an aggregate period of not less than six
(6) years from the Effective Time, the current directors and officers
of ARCap and its Subsidiaries an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective
Time (the "D&O/E&O Insurance") that is substantially similar to
ARCap's existing directors and officers and errors and omissions
policies. In addition, ARCap may, with the consent of CharterMac and
at the sole cost and expense of CharterMac (or, if at the cost or
expense of ARCap or ARCap REIT, such cost or expense to be credited to
ARCap in calculating the Closing Working Capital Amount), purchase a
six (6)-year "tail" prepaid policy of D&O/E&O Insurance prior to the
Effective Time on terms and conditions substantially similar to the
ARCap's existing policy.
7.12 Access and Information. Between the date of this Agreement and
the Closing Date, upon reasonable notice from CharterMac, ARCap will, and
will cause ARCap, the Fund Entities and their respective Subsidiaries to (a)
afford CharterMac and its representatives reasonable access during normal
business hours (to the extent such access does not unduly interfere with
normal operations of ARCap and its Subsidiaries) to each of ARCap, the Fund
Entities and their respective Subsidiaries' personnel, properties,
Contracts, books and records, and other documents and data (b) furnish or
make available to CharterMac and its representatives with copies of all such
Contracts, books and records, and other existing documents and data as
CharterMac may reasonably request, and (c) furnish or make available to
CharterMac and its representatives with such
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additional financial, operating and other data and information as CharterMac
may reasonably request.
7.13 CharterMac Appointments. CharterMac shall take such action as is
necessary to appoint, effective immediately following the Closing, (i)
Leonard W. Cotton to CharterMac's Board of Trustees (ii) Leonard W. Cotton
to the office of Vice Chairman of CharterMac's Board of Trustees and (iii)
Leonard W. Cotton and James L. Duggins to CharterMac's Strategic Planning
Committee.
7.14 AMAC Appointments. CharterMac shall recommend to the board of
trustees of AMAC that AMAC take such action as is necessary to, effective
immediately following the Closing:
(a) increase the size of the Board of Trustees of AMAC
to nine members; and
(b) appoint (i) James L. Duggins to the office of Chief
Executive Officer of AMAC, (ii) Harry Levine, Marc D. Schnitzer and
James L. Duggins to AMAC's Board of Trustees and (iii) Marc D.
Schnitzer to the office of Chairman of AMAC's Board of Trustees.
7.15 ARCap REIT Advisory Committee; ARCap REIT Appointments. ARCap
REIT shall take such action as is necessary to, effective immediately
following the Closing:
(a) constitute an executive committee (the "Advisory
Committee");
(b) appoint (i) Leonard W. Cotton to the office of
Chairman of ARCap REIT's Board of Directors and (ii) James L. Duggins
to the office of Chief Executive Officer of ARCap REIT;
(c) appoint Leonard W. Cotton, James L. Duggins, Paul
Smyth, Steve R. Inman, Marc D. Schnitzer, Alan P. Hirmes, Daryl J.
Carter, Donald Meyer and Robert Levy to ARCap REIT's Board of
Directors; and
(d) appoint Leonard W. Cotton, James L. Duggins, Marc D.
Schnitzer, Daryl J. Carter, Harry Levine, George Jahn and Tim
Riddiough to ARCap REIT's Advisory Committee.
7.16 Preparation of Financial Statements. Between the date of this
Agreement and the Closing Date, ARCap will, and will cause the Fund Entities
and their respective Subsidiaries to, cooperate and use their reasonable
efforts to prepare, at the sole cost and expense of CharterMac, any audited
and unaudited financial statements of ARCap, the Fund Entities and their
respective Subsidiaries that CharterMac notifies ARCap are required to be
filed by CharterMac with the Securities and Exchange Commission in
connection with the transactions contemplated by this Agreement and to
obtain from ARCap's certified public
63
accountants any required consent to the inclusion of their certifying audit
report in any such filings.
7.17 Balance Sheet Assets. Between the date of this Agreement and the
Closing Date, ARCap will not, and will cause the Fund Entities and their
respective Subsidiaries not to, take any action which alters in any material
respect the composition of the assets of ARCap reflected on the balance
sheet (attached hereto as Exhibit O) in such a manner so as to require the
filing of a notification and report form pursuant to the HSR Act; provided,
however, that Section 7.1 of the Disclosure Schedule sets forth the actions
expected to be taken by ARCap, the Fund Entities and their respective
Subsidiaries prior to the Closing Date which will alter the composition of
the assets of ARCap reflected on such balance sheet and CharterMac and
Purchasers hereby consent to the actions set forth on Section 7.1 of the
Disclosure Schedule and agree that such actions shall not alter in any
material respect the composition of the assets of ARCap reflected on the
balance sheet (attached hereto as Exhibit O) in such a manner so as to
require the filing of a notification and report form pursuant to the HSR
Act.
7.18 Specially Serviced Loan Schedule. Between the date of this
Agreement and the Closing Date, ARCap shall promptly notify CharterMac of
any material change to the list of Specially Serviced Loans set forth in
Section 4.29 of the Disclosure Schedule.
ARTICLE 8
CLOSING CONDITIONS
8.1 Conditions to Obligations of Sellers and Purchasers. The
respective obligations of each Seller, on the one hand, and Purchasers, on
the other hand, to consummate the transactions contemplated by this
Agreement are subject to the fulfillment or waiver (in the sole discretion
of each Seller, on the one hand, and Purchasers, on the other hand), on or
prior to the Closing Date, of each of the following conditions:
(a) there shall not be in effect any Order restraining,
enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby;
(b) any required waiting periods (including any
extension thereof) applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have terminated
or expired and any required clearances, approvals or confirmations of
the transactions contemplated by this Agreement shall have been
obtained pursuant to any other foreign merger control or foreign
investment clearances required by Law to be obtained before Closing
shall have been received; and
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(c) the Closing Working Capital Amount shall have been
agreed upon between ARCap and CharterMac or otherwise determined in
accordance with the procedures set forth in Section 2.4(b).
8.2 Additional Conditions to Obligations of Purchasers. The
obligation of Purchasers to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by
Purchasers in whole or in part in their sole discretion):
(a) Except for the representations and warranties set
forth in Section 8.2(b) below, all of the representations and
warranties of Sellers and ARCap contained in this Agreement
(considered collectively), and each of such representations and
warranties (considered individually) shall be true and accurate in all
material respects (provided that any representation or warranty of
Sellers or ARCap contained herein that is subject to a materiality,
Material Adverse Effect or similar qualification shall be true and
accurate in all respects after giving effect to any such
qualification) both as of the date of this Agreement and as of the
Closing Date (except to the extent such representations and warranties
shall have been expressly made as of an earlier date, in which case
such representations and warranties shall have been true and correct
as of such earlier date) with the same force and effect as if made on
and as of the Closing Date.
(b) Each of Sellers' and ARCap's representations and
warranties in Sections 3.3 (Ownership), 4.4 (Capitalization), 4.5
(Financial Statements; Projections), 4.6 (Taxes), 4.19 (Investment
Company; Investment Advisor), 4.20 (Offering Memoranda), 4.21 (Fund
Reports), 4.22 (REIT), 4.26 (Partnership Treatment), 4.27
(Registration), 4.29 (Serviced Loan Schedule), 4.30 (ERISA), 4.31
(Disclosure) and 5.4 (Ownership) shall be true and accurate in all
respects both as of the date of this Agreement and as of the Closing
Date (except to the extent such representations and warranties shall
have been expressly made as of an earlier date, in which case such
representations and warranties shall have been true and correct as of
such earlier date), with the same force and effect as if made on and
as of the Closing Date.
(c) All of the covenants and obligations that Sellers
and ARCap are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing Date (considered collectively),
and each of such covenants and obligations (considered individually),
must have been duly performed and complied with in all material
respects.
(d) There must not have been made or threatened any
claim by any Person (other than an ARCap Seller with respect to a
Seller Unit to be sold or exchanged pursuant to this Agreement)
asserting that such Person (a) is the holder or the beneficial owner
of, or has the right to acquire or to obtain beneficial ownership of,
any stock of, or any other voting, equity, or ownership
65
interest in, (X) any of the Companies or (Y) any of the Fund Entities
or any of their respective Subsidiaries which is held or beneficially
owned by any of the Companies, or (b) is entitled to all or any
portion of the Purchase Price payable for the Seller Units or ASI.
(e) The consent or approval of the Persons whose consent
or approval shall be required in connection with the transactions
contemplated under this Agreement under any Contract of ARCap, the
Fund Entities and their respective Subsidiaries (as set forth in
Section 4.1(b) of the Disclosure Schedule) shall have been obtained.
(f) Each document required to be delivered pursuant to
Sections 2.3(a) through 2.3(d) must have been delivered.
(g) Sellers Representative shall have executed and
delivered the Escrow Agreement and the Escrow Agreement shall be in
full force and effect.
(h) The holders of Exchange Units shall have executed
and delivered the Amended LLC Agreement.
(i) The holders of Exchange Units shall have executed
and delivered the Registration Rights Agreement.
(j) The holders of Exchange Units shall have executed
and delivered the Exchange Rights Agreement.
(k) The form and substance of all instruments and
documents required to be delivered pursuant to this Agreement by
Sellers shall be reasonably satisfactory in all respects to
Purchasers.
8.3 Additional Conditions to Obligations of Sellers. The obligations
of Sellers to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions (any or all of which may be waived by Sellers in whole
or in part in their sole discretion):
(a) (i) Except for the representations and warranties
set forth in the following clause (ii), all of the representations and
warranties of CharterMac and Purchasers contained in this Agreement
(considered collectively) and each of such representations and
warranties (considered individually) shall be true and accurate in all
material respects (provided that any representation or warranty of
CharterMac and Purchasers contained herein that is subject to a
materiality, Material Adverse Effect or similar qualification shall be
true and accurate in all respects after giving effect to any such
qualification), and (ii) each of the representations and warranties of
CharterMac and Purchasers set forth in Section 6.8 (Restricted Common
Shares), and 6.9 (SEC Documents; Financial Statements) shall be true
and accurate in all
66
respects, in each case of clauses (i) and (ii) both as of the date of
this Agreement and as of the Closing Date (except to the extent such
representations and warranties shall have been expressly made as of an
earlier date, in which case such representations and warranties shall
have been true and correct as of such earlier date) with the same
force and effect as if made on and as of the Closing Date.
(b) All of the covenants and obligations that CharterMac
and Purchasers are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing Date (considered
collectively), and each of these covenants and obligations (considered
individually), must have been performed and complied with in all
material respects.
(c) The consent or approval of the Persons whose consent
or approval shall be required in connection with the transactions
contemplated under this Agreement under any Contract of CharterMac,
the Purchasers, ARCap, the Fund Entities and their respective
Subsidiaries shall have been obtained.
(d) Each of the documents required to be delivered
pursuant to Sections 2.3(e) through 2.3(g) must have been delivered.
(e) Purchasers must have paid the Basic Purchase Price
and the ARCap Transaction Costs required to be paid pursuant to
Sections 2.3(e) and 2.3(f)
(f) CharterMac must have delivered to the Continuing
Employees the Restricted Common Shares in the amounts set forth in
Schedule VI pursuant to Section 2.3(g).
(g) Purchasers shall have executed and delivered the
Escrow Agreement and the Escrow Agreement shall be in full force and
effect.
(h) Purchaser 2 shall have executed and delivered the
Amended LLC Agreement.
(i) Purchaser 2 and CharterMac shall have executed and
delivered the Registration Rights Agreement.
(j) Purchaser 2 and CharterMac shall have executed and
delivered the Exchange Rights Agreement.
(k) CharterMac shall have delivered evidence
satisfactory to ARCap of its compliance with Sections 7.11(b) and (c).
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ARTICLE 9
CERTAIN TAX MATTERS
9.1 Tax Returns. Except as otherwise provided in Section 9.2 of this
Agreement:
(a) ARCap shall prepare and file or cause to be prepared
and filed when due all Tax Returns that are required to be filed by or
with respect to ARCap, the Fund Entities and their respective
Subsidiaries on or before the Closing Date, and ARCap shall remit or
cause to be remitted all Taxes shown due on such Tax Returns; and
(b) Purchasers shall prepare and file or cause to be
prepared and filed when due all Tax Returns that are required to be
filed by or with respect to ARCap, the Fund Entities and their
respective Subsidiaries after the Closing Date (other than Tax Returns
with respect to periods for which a consolidated, unitary or combined
Tax Return of Sellers (or any Subsidiary of any Seller other than
ARCap, the Fund Entities or any of their respective Subsidiaries) will
include any of ARCap, the Fund Entities or their respective
Subsidiaries), and Purchasers shall remit or cause to be remitted any
Taxes due in respect of such Tax Returns except those Tax Returns for
which the due date for filing (without regard to extensions) is after
the Closing Date but which covers a period prior to the Closing Date
("Carryover Returns"). With respect to such Carryover Returns,
Purchasers shall prepare or cause to be prepared draft Tax Returns and
submit such drafts to Sellers Representative no later than fifteen
(15) days prior to the due date of such Carryover Returns. If the
parties agree with such proposed Tax Returns, Purchasers shall cause
any of ARCap, the Fund Entities or any of their respective
Subsidiaries, as applicable, to timely file, with extensions, such Tax
Returns, with the date of such filings to be determined by Purchasers
in good faith, with no intent to delay the expiration of the Survival
Period. If the parties disagree, after good faith diligent
negotiation, Purchasers shall timely file, with extensions, such Tax
Return as proposed by Purchasers and immediately following such
filing, the parties will engage a nationally recognized independent
accounting firm to mediate the dispute, with costs being shared
equally. Sellers shall pay to the Purchasers the Sellers' Portion of
the Taxes due with respect to the Carryover Returns attributable to
the portion of the period up to and including the Closing Date no
later than three (3) days prior to the due date of such payment,
determined pursuant to the last two sentences of Section 9.2;
provided, that Sellers shall not be responsible for, and shall not be
required to pay, any Taxes to the extent that such Taxes do not exceed
the accrued liability for Taxes taken into account in determining the
Working Capital Amount under Section 2.4.
(c) The parties agree and acknowledge that for income
tax purposes ARCap shall be treated as technically terminating under
Section 708(b)(1)(B) of the Code. Subject and pursuant to the last two
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sentences of Section 9.2, all items of income, gain, loss, deduction
or other tax items of ARCap for periods ending on or prior to the
Closing Date shall be allocated pursuant to the LLC Agreement and all
items of income, gain, loss, deduction or other tax items of ARCap for
periods beginning after the Closing Date shall be allocated to
Purchaser 2 and the holders of the Special Common Interests in
accordance with the Amended LLC Agreement.
(d) For purposes of reporting compensation income and
calculating the applicable income and employment tax withholding with
respect to the Phantom Unit Amount deposited pursuant to the Escrow
Agreement, such amount shall be treated as paid or received by the
participants under the Phantom Unit Plans at the time such amounts, if
any, are actually paid to such participants by ARCap REIT with
proceeds received by the Escrow Agent from the Escrow Agreement. In
addition, ARCap, Purchaser 2 and the holders of the Exchange Units
shall not treat the conversion of the Exchange Units into Special
Common Interests, with the corresponding exchange rights, as a taxable
event for income tax purposes.
9.2 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other similar Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any
corporate-level gains Tax triggered by the sale of the Seller Units and any
other Tax imposed in other states or subdivisions), shall be paid by the
applicable Seller when due, and such Seller will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees. With respect to other taxes imposed with respect to a taxable period
that starts before and ends after the Closing Date, an allocation shall be
made of such tax liabilities between Sellers and Purchaser. In making such
allocation, taxes related to income of any of ARCap, the Fund Entities or
any of their respective Subsidiaries shall be allocated based in a
closing-of-the-books method, property and similar taxes shall be allocated
based on a proration of time in the taxable period elapsed prior to the
Closing Date, and transaction and similar taxes shall be allocated based on
when the particular taxable transaction occurs in relation to the Closing
Date.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated at any time before
the Effective Time as follows:
(a) by mutual written consent of Sellers Representative
and Purchasers;
(b) by Sellers Representative or Purchasers on or after
September 30, 2006 if the Closing shall not have occurred by the close
of
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business on such date, provided that the terminating party is not
then in default in any material respect of any of its covenants or
other obligations hereunder;
(c) by Sellers Representative or Purchasers if there
shall be in effect a final nonappealable Order restraining, enjoining
or otherwise prohibiting the consummation of the transactions
contemplated hereby (but only if such terminating party shall have
complied with its obligations under this Agreement);
(d) by Purchasers if there shall have been a breach in
any material respect of any of the covenants, obligations or
agreements on the part of ARCap or Sellers set forth in this Agreement
or a breach of any of the representations and warranties of ARCap or
Sellers that would cause the conditions precedent set forth in Section
8.2 of this Agreement not to be satisfied, in each case which has not
been cured within 30 days after receipt of notice of such breach; and
(e) by Sellers Representative if there shall have been a
breach in any material respect of any of the covenants, obligations or
agreements on the part of CharterMac or Purchasers set forth in this
Agreement or a breach of any of the representations and warranties of
CharterMac or Purchasers that would cause the conditions precedent set
forth in Section 8.3 of this Agreement not to be satisfied, in each
case which has not been cured within 30 days after receipt of notice
of such breach.
10.2 Effect of Termination and Abandonment. In the event of
termination of this Agreement pursuant to this Article 10, this Agreement
(other than as set forth in Section 7.4, Section 7.8 and Article 12 of this
Agreement) shall become void and of no effect with no liability on the part
of any party hereto (or any of its Affiliates or representatives); provided,
however, no such termination shall relieve any party hereto from any
liability for damages resulting from any willful or intentional breach of
this Agreement; provided further, that if this Agreement is terminated by
Purchasers pursuant to Section 10.1(d), or by Sellers Representative
pursuant to Section 10.1(e), CharterMac and the Purchasers, on the one hand,
or Sellers Representative and each Seller, on the other hand, as applicable,
shall be entitled to receive from ARCap (in the case of a termination by the
Purchasers) or CharterMac (in the case of a termination by Sellers
Representative), as applicable, reimbursement of the reasonable fees and
expenses of the terminating party's financial advisors and attorneys
incurred by the terminating party in connection with the negotiation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, provided that in no event shall the
aggregate amount of the fees and expenses of CharterMac and the Purchasers,
on the one hand, or Sellers Representative and each Seller, on the other
hand, as applicable, paid by ARCap or CharterMac, as applicable, under this
Section 10.2 exceed $750,000.
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ARTICLE 11
SURVIVAL; ESCROW; INDEMNIFICATION
11.1 Survival Limitation. All of the representations and warranties
in this Agreement, the Disclosure Schedule, any ARCap Closing Certificate or
any CharterMac Closing Certificate, and all covenants, agreements and
obligations relating to taxes, shall survive the Closing and shall expire,
and thereafter no longer be of legal force and effect, at the earlier of (a)
11:59 p.m. EDT on October 15, 2007 and (b) the date upon which the latest
income Tax Return including any part of fiscal year 2006 is filed by, or
caused to be filed by CharterMac with respect to, ARCap, the Fund Entities
or any of their respective Subsidiaries (the "Survival Period"); provided,
however, that all such representations, warranties, covenants, agreements
and obligations regarding Taxes of ARCap, the Fund Entities or any of their
respective Subsidiaries with respect to matters arising from or related to
ARCap CMBS Fund REIT, Inc. shall survive until (i) with respect to the 2003
Taxable year, April 15, 2007, unless the Statute of Limitations with respect
to ARCap CMBS Fund REIT, Inc. is extended by agreement with a Taxing
Authority prior to such date, and (ii) with respect to the 2004 Taxable
year, April 15, 2008, unless the Statute of Limitations with respect to
ARCap CMBS Fund REIT, Inc. is extended by agreement with a Taxing Authority
prior to such date, and in the case of such an extension of the Statute of
Limitations with respect to either 2003 or 2004, such Survival Period shall
extend until the closing of such taxable year by final resolution with all
Taxing Authorities with respect to such entity; and, provided further, that
if, at any time prior to such expiration of the representations and
warranties, any indemnified party delivers to any indemnifying party a
written notice alleging the existence of an inaccuracy in or a breach of any
of the representations and warranties made by any indemnifying party (and
setting forth in reasonable detail the basis for such indemnified party's
belief that such an inaccuracy or breach may exist) and asserting a Claim
for recovery under Sections 11.2 or 11.3 based on such alleged inaccuracy or
breach, then the representation or warranty underlying the Claim asserted in
such notice shall continue to survive (solely with respect to the alleged
inaccuracy or breach and to no other fact, event, occurrence, circumstance
or condition) until such time as such Claim is fully and finally resolved.
All of the covenants, agreements and obligations (other than those related
to taxes, which are addressed above) of the parties contained in this
Agreement, the Disclosure Schedule, any ARCap Closing Certificate or any
CharterMac Closing Certificate to the extent performed as of the Closing
shall survive until the Closing, and all other covenants, agreements and
obligations shall survive until they have been fully performed.
11.2 Indemnification by ARCap Sellers.
--------------------------------
(a) From and after the Effective Time (but subject to
Sections 11.1 and 11.6), each ARCap Seller, jointly and severally,
will indemnify and hold harmless each Purchasers Indemnitee from and
against, and shall compensate, reimburse and pay for, Sellers' Portion
of any Damages
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(excluding Damages arising out of liabilities reflected as such on the
Closing Balance Sheet or otherwise taken into account when calculating
the Working Capital Amount) which are directly or indirectly suffered
or incurred by any Purchasers Indemnitee or to which any Purchasers
Indemnitee may otherwise become subject (regardless of whether or not
such Damages relate to any Third-Party Claim) and which arise from or
as a result of, or are directly or indirectly connected with:
(i) any inaccuracy in, breach or alleged breach of any
representation or warranty set forth in Articles 4 and 5 of this Agreement, or,
to the extent they relate to the subject matter of the representations and
warranties contained in Articles 4 and 5, the Disclosure Schedule, or any ARCap
Closing Certificate delivered by ARCap or ARCap REIT; provided that any
inaccuracy in, breach or alleged breach of any such representation or warranty
shall be determined without regard as to any materiality qualifier therein
(provided that any Claim attributable to any such inaccuracy or breach must
exceed $50,000); and provided further that any inaccuracy or breach of the
representations and warranties contained in Sections 4.5(g), 4.6, 4.21(b) and
4.22 shall be determined without regard to any statements or information set
forth on Sections 4.5(g), 4.6, 4.21(b) or 4.22 of the Disclosure Schedule;
(ii) any breach or alleged breach of any covenant or
obligation of ARCap (including the covenants set forth in Article 7 other than
Section 7.2);
(iii) (A) any Tax due by any of ARCap or any of its
Subsidiaries attributable to a period or portion thereof prior to or ending on
the Closing Date pursuant to Article 9, and (B) with respect to the Fund
Entities or their respective Subsidiaries, the proportionate share of Tax of any
such entity allocated to ARCap REIT or its Subsidiaries or any claim by a Fund
Entity against ARCap or any of its Subsidiaries for indemnification arising out
of or related to a Tax issue attributable to a period prior to or ending on the
Closing Date; and
(iv) any claim by any Person for any brokerage or
finder's fee or agent's commission, or the like, alleged to have been made by
such Person with any of ARCap Sellers or ARCap, the Fund Entities or any of
their respective Subsidiaries (or any Person acting on their behalf) in
connection with the transaction contemplated by this Agreement.
(b) From and after the Effective Time (but subject to
Sections 11.1 and 11.6), each ARCap Seller, severally and not jointly,
will indemnify and hold harmless each Purchasers Indemnitee from and
against, and shall compensate, reimburse and pay for any Damages which
are directly or indirectly suffered or incurred by any Purchasers
Indemnitee or to which any Purchasers Indemnitee may otherwise become
subject (regardless of whether or not such Damages relate to any
Third-Party Claim) and which arise from or as a result of, or are
directly or indirectly connected with:
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(i) any inaccuracy in, breach or alleged breach of any
representation or warranty of such ARCap Seller set forth in Article 3 of this
Agreement, or, to the extent they relate to the subject of the representations
and warranties contained in Article 3, such portions of the Disclosure Schedule
provided in writing to ARCap by such ARCap Seller for inclusion in the
Disclosure Schedule with respect to matters covered by Article 3 of this
Agreement, or any ARCap Closing Certificate delivered by such ARCap Seller;
provided that any inaccuracy in, breach or alleged breach of any such
representation or warranty shall be determined without regard as to any
materiality qualifier therein; and
(ii) any breach or alleged breach of any covenant or
obligation of Sellers (including the covenants set forth in Article 7).
11.3 Indemnification by Purchasers. From and after the Effective Time
(but subject to Section 11.1(a)), CharterMac and Purchasers, severally and
jointly, will indemnify and hold harmless each Sellers Indemnitee from and
against, and shall compensate, reimburse and pay for, any Damages which are
directly or indirectly suffered or incurred by any Sellers Indemnitee or to
which any Sellers Indemnitee may otherwise become subject (regardless of
whether or not such Damages relate to any Third-Party Claim) and which arise
from or as a result of, or are directly or indirectly connected with:
(a) any inaccuracy in, breach or alleged breach of any
representation or warranty set forth in Article 6 of this Agreement,
or any other document, certificate, schedule or instrument delivered
or executed by CharterMac or Purchasers in connection with this
Agreement; provided that any inaccuracy in, breach or alleged breach
of any such representation or warranty shall be determined without
regard as to any materiality qualifier therein;
(b) any breach or alleged breach of any covenant or
obligation of CharterMac or Purchasers (including the covenants set
forth in Article 7);
(c) any claim by any Person for any brokerage or
finder's fee or agent's commission, or the like, alleged to have been
made by such Person with any of CharterMac or the Purchasers (or any
Person acting on their behalf) in connection with the transaction
contemplated by this Agreement; and
(d) for the ownership and operation of ARCap, the Fund
Entities or any of their respective Subsidiaries on and after the
Closing Date.
11.4 Defense of Third-Party Claims.
-----------------------------
(a) In the event of the assertion or commencement of any
Third-Party Claim with respect to which any indemnified party may be
entitled to indemnification or any other remedy pursuant to this
Article 11, such indemnified party shall promptly give Purchasers or
Sellers Representative, as
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applicable, written notice of such Third-Party Claim; provided,
however, that any failure on the part of such indemnified party to so
notify Purchasers or Sellers Representative, as applicable, shall not
limit any of such indemnified party's rights to indemnification under
this Article 11 (except to the extent such failure materially
prejudices the defense of such Third-Party Claim).
(b) Within ten days of delivery of such written notice,
Purchasers or Sellers Representative, as applicable, may elect (by
written notice delivered to the other), at the sole cost and expense
of CharterMac or Sellers, as applicable, to take all necessary steps
properly to contest any Third-Party Claim or to prosecute such
Third-Party Claim to conclusion or, subject to Section 11.4(c), settle
such Third-Party Claim. If Purchasers or Sellers Representative, as
applicable, makes the foregoing election, an indemnified party will
have the right to participate at its own expense in all proceedings.
If Purchasers or Sellers Representative, as applicable, does not make
such election within such period or fails to diligently contest such
Third-Party Claim after such election, then the indemnified party
shall be free to handle the prosecution or defense of any such
Third-Party Claim, and will take all necessary steps to contest the
Third-Party Claim or to prosecute such Third-Party Claim to conclusion
or settlement, and will notify Purchasers or Sellers Representative,
as applicable, of the progress of any such Third-Party Claim, will
permit Purchasers or Sellers Representative, as applicable, at the
sole cost and expense of CharterMac or Sellers, as applicable, to
participate in such prosecution or defense and will provide Purchasers
or Sellers Representative, as applicable, with reasonable access to
all relevant information and documentation relating to the Third-Party
Claim and the prosecution or defense thereof. Notwithstanding the
foregoing, Purchasers shall control the defense and settlement of any
Third-Party Claim with respect to Taxes.
(c) Neither Purchasers nor Sellers Representative will
compromise or settle any such Third-Party Claim without the written
consent of either Purchasers (if Sellers Representative defends the
Third-Party Claim) or Sellers Representative (if Purchasers or any
Purchasers Indemnitee defends the Third-Party Claim). Notwithstanding
anything in this Agreement to the contrary, any indemnified party may
withhold its consent to any settlement that does not include a full
general release of all the claims against such indemnified party from
all parties to the litigation or that requires such indemnified party
or any of its Affiliates to perform any covenant or refrain from
engaging in any activity.
(d) If Sellers Representative elects, by written notice
delivered to CharterMac within ten days following the delivery of
written notice of any Third-Party Claim, to assume the defense of such
Third-Party Claim, Sellers Representative shall be entitled to direct
the Escrow Agent to release from the Escrow Amount the reasonable
costs and expenses of such defense incurred by Sellers Representative.
Such reimbursements shall occur in accordance with the terms of the
Escrow Agreement.
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11.5 Exercise of Remedies; Tax Treatment.
-----------------------------------
(a) No Purchasers Indemnitee (other than Purchasers or
any successor thereto or assign thereof) shall be permitted to assert
any Claim or exercise any other remedy under this Agreement unless
Purchasers (or any successor thereto or assign thereof) shall have
consented to the assertion of such Claim or the exercise of such other
remedy.
(b) The parties shall report any indemnification payment
made pursuant to this Article 11 as a purchase price adjustment unless
otherwise required by applicable Law.
11.6 Exclusive Remedy; Limitations; Threshold Amount.
-----------------------------------------------
(a) Purchasers, ARCap and Sellers each acknowledge that
Sellers' Portion of Damages suffered by Purchasers Indemnitees, if
any, would relate to unresolved contingencies existing at the Closing
Date, which if resolved at the Closing Date would have led to a
reduction in the total consideration Purchasers would have agreed to
pay in connection with the purchase of the Seller Units and the ASI
Stock. Resort to the Escrow Amount shall be the sole and exclusive
remedy of CharterMac, Purchasers and each Purchasers Indemnitee for
any Damages under this Agreement; provided, however, nothing in this
Agreement shall limit the indemnification obligations of any
indemnifying party with respect to Damages which arise from the fraud,
willful or criminal misconduct of such indemnifying party.
(b) The maximum liability of an individual ARCap Seller
for Damages shall be only that portion of the Purchaser 2 Escrow Cash
and/or the Escrow Shares which would otherwise become distributable to
such ARCap Seller if no Claim were made by a Purchaser Indemnitee and
that are held pursuant to the Escrow Agreement, and no other amounts
shall be available to Purchasers for reimbursement of any Damages
payable from such ARCap Seller, other than the Phantom Escrow Cash.
(c) With respect to Damages arising solely out of a
Claim made pursuant to Section 11.2(b), resort to the Escrow Amount
shall be made solely against the applicable ARCap Seller's portion of
the Escrow Amount. With respect to all other Damages, resort to the
Escrow Amount shall be made against the entire Escrow Amount.
(d) ARCap Sellers and Purchasers acknowledge and agree
that an indemnifying party will have no liability (for indemnification
or otherwise) until (i) in the case of Damages to ARCap Sellers, the
total of all such Damages, and (ii) in the case of Damages to
Purchasers, the total of Sellers' Portion of all Damages, in each case
with respect to such matters exceeds $1,000,000 (the "Threshold
Amount"), and then such indemnifying party will be liable only to the
extent such Damages (or, as applicable, Sellers'
75
Portion thereof) exceed the initial $1,000,000; provided, however,
that the Threshold Amount shall not apply to any Claim (i) made
against any ARCap Seller pursuant to Section 11.2(b), (ii) arising
from the fraud, willful or criminal misconduct of any indemnifying
party and (iii) regarding Taxes with respect to matters arising from
or related to ARCap CMBS Fund REIT, Inc., and further provided, that
the amount of any such Claim shall not be included in the
determination as to whether the Threshold Amount has been met.
11.7 Distributions; Voting.
---------------------
(a) Any Special Common Interests or other equity
securities issued or distributed by CharterMac or Purchasers
(including shares issued upon a stock split) ("New Shares") in respect
of the Escrow Shares that have not been released from the Escrow
Amount shall be added to the Escrow Amount and become a part thereof.
When and if cash dividends on Escrow Shares in the Escrow Amount shall
be declared and paid, they shall not be retained in escrow and shall
be immediately paid to the record owners of the Escrow Shares. Such
dividends will not become part of the Escrow Amount and will not be
available to satisfy Damages. The record owners of the Escrow Shares
shall pay any taxes on such dividends.
(b) Each record holder of Escrow Shares contributed to
the Escrow Amount on behalf of such holder (and on any voting
securities added to the Escrow Amount in respect of such Escrow
Shares) shall have voting rights with respect to such Escrow Shares
and voting securities so long as such Escrow Shares or other voting
securities are held in the Escrow Amount. ARCap shall show the Special
Common Interests contributed to the Escrow Amount as issued and
outstanding on its balance sheet.
11.8 Indemnification Claim. A Claim may be asserted by any Purchasers
Indemnitee in accordance with the terms, conditions and procedures set forth
in the Escrow Agreement. A Claim may be asserted by any Sellers Indemnitee
by delivery to CharterMac and Purchasers of a written notice of such Claim
setting forth (i) the name of such Sellers Indemnitee, (ii) the specific
representation, warranty or agreement alleged to have been breached by such
Sellers Indemnitee, (iii) a reasonably detailed description of the facts and
circumstances giving rise to the alleged breach and (iv) a calculation
setting forth the amount of such Claim (or if not ascertainable, a
reasonable good faith estimate of the maximum amount thereof).
11.9 Release of Escrow Amount. The Escrow Amount shall be released in
accordance with the terms, conditions and procedures set forth in the Escrow
Agreement.
11.10 Contribution. In no event shall any ARCap Seller have any right
to contribution from ARCap, the Fund Entities or any of their respective
Subsidiaries with respect to any Claim or Third-Party Claim.
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11.11 Adjustment for Insurance. Any indemnification amount payable
pursuant to this Article 11 shall be net of any amounts actually recovered
(after deducting related costs and expenses) by the indemnified party for
the Damages for which such indemnification payment is made, under any
insurance policy, warranty or indemnity from any third party. CharterMac and
Purchasers shall use commercially reasonable efforts to recover maximum
amounts available under any insurance policy, warranty or indemnity from any
third party prior to making any Claim against the Escrow Amount; provided,
however, that the parties acknowledge that if any insurance recovery is
insufficient to cover the Damages in full as of the applicable date the
Escrow Amount is scheduled to be released in accordance with the terms and
conditions of the Escrow Agreement, then Purchasers Indemnitees shall be
entitled to be indemnified pursuant to this Article 11 for the amount of
such Damages not covered by insurance.
ARTICLE 12
MISCELLANEOUS
12.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed sufficient upon
receipt, when delivered personally or by courier, overnight delivery service
or confirmed facsimile, or forty-eight (48) hours after being deposited in
the regular mail as certified or registered mail (airmail if sent
internationally) with postage prepaid, if such notice is addressed to the
party to be notified at such party's address or facsimile number as set
forth below, or as subsequently modified by written notice:
(a) if to Sellers Representative or any ARCap Seller:
AI Sellers Representative, L.L.C.
c/o ARCap REIT, Inc.
199 Elm Street
New Canaan, CT 06840
Attention: Leonard Cotton
Telecopy No.: 203-972-2987
with a copy to: Orrick, Herrington & Sutcliffe, LLP
666 Fifth Avenue
New York, NY 10013
Attention: Joseph Maloney, Esq.
Telecopy No.: 212-506-5151
with a copy to: ARCap REIT, Inc.
c/o Updike Kelly and Spellacy, P.C.
One State St.
Hartford, CT 06103
Attention: John D'Amico, Esq.
Telecopy No.: (860) 548-2680
77
(b) if to ARCap or ARCap REIT:
ARCap Investors, LLC
5221 North O'Connor Boulevard
Suite 600
Irving, TX 7503
Attention: Mr.
James L. Duggins
Telecopy No.: 972-868-5490
with a copy to: ARCap REIT, Inc.
c/o Updike Kelly and Spellacy, P.C.
One State St.
Hartford, CT 06103
Attention: John D'Amico, Esq.
Telecopy No.: (860) 548-2680
with a copy to: Orrick, Herrington & Sutcliffe, LLP
666 Fifth Avenue
New York, NY 10013
Attention: Joseph Maloney, Esq.
Telecopy No.: 212-506-5151
(c) if to CharterMac or Purchasers:
CharterMac
625 Madison Avenue
New York, NY 10022
Attention: Marc D. Schnitzer
Telecopy No.: (212) 593-5769
with a copy to: Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, NY 10022
Attention: Michael L. Zuppone
Telecopy No.: (212) 319-4090
12.2 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon a determination that any
term or other provision is invalid, illegal or incapable of being enforced,
Sellers Representative, CharterMac and Purchasers shall negotiate in good
faith to modify this Agreement (subject to Section 12.4) so as to effect
their original intent as closely as possible in an acceptable manner to the
end that the transactions contemplated hereby are fulfilled to the maximum
extent possible.
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12.3 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
including all exhibits and schedules attached hereto, and the
Confidentiality Agreement constitute the entire agreement and supersede any
and all other prior agreements and undertakings, both written and oral,
among the parties hereto, or any of them, with respect to the subject matter
hereof. This Agreement does not, and is not intended to, confer upon any
other Person any right, benefit or remedy hereunder, other than any right,
benefit or remedy set forth in Sections 7.11(b) and 7.11(c) (which are
intended to be for the benefit of the Persons covered thereby).
12.4 Amendment; Waiver. This Agreement maybe amended only in a
writing signed by all parties hereto; provided, however, that each ARCap
Seller hereby consents to (and agrees to be bound by) any changes,
modifications or supplements to any exhibit, annex, appendix, agreement,
instrument, schedule or other document attached to this Agreement to the
extent such change, modification or supplement is consented to by Sellers
Representative in accordance with Section 12.9(e). Any waiver of rights
hereunder must be set forth in writing. A waiver of any breach or failure to
enforce any of the terms or conditions of this Agreement shall not in any
way affect, limit or waive either party's rights at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
12.5 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors. Notwithstanding the foregoing, this
Agreement shall not be assigned by any party hereto by operation of Law or
otherwise without the express written consent of each of the other parties.
12.6 Disclosure Schedule. The Disclosure Schedule shall be construed
with and as an integral part of this Agreement to the same extent as if the
same had been set forth verbatim herein. Any matter disclosed pursuant to
the Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed. In the event
of any inconsistency between the statements in the body of this Agreement
and those on the Disclosure Schedule (other than an exception to a
representation, warranty or covenant set forth on the Disclosure Schedule,
to the extent that such exception is made with respect to a specific section
of this Agreement or it is otherwise reasonably apparent, on the face of
such disclosure, that such exception also applies to another section of the
Disclosure Schedule or another Section of this Agreement) the statements in
the body of this Agreement will control.
12.7 Governing Law. This Agreement shall be governed by and construed
in accordance with, the laws of the State of New York without regard to the
conflicts of laws provisions thereof (other than Sections 5-1401 and 5-1402
of the New York General Obligations Law).
79
12.8 Dispute Resolution; Mediation; Jurisdiction.
-------------------------------------------
(a) In the event of any dispute, controversy or claim
arising out of or relating to this Agreement or the breach,
termination or validity thereof, or the transactions contemplated
hereby (a "Dispute"), upon the written notice of either party hereto,
the parties hereto shall attempt to negotiate a resolution of the
Dispute. If the parties hereto are unable for any reason to resolve a
Dispute within 30 days after the receipt of such notice, the Dispute
shall be submitted to mediation in accordance with Section 12.8(b) of
this Agreement.
(b) Any Dispute not resolved pursuant to Section 12.8(a)
of this Agreement shall, at the request of either party hereto (a
"Mediation Request"), be submitted to non-binding mediation in
accordance with the then current International Institute for Conflict
Prevention and Resolution Mediation Procedure (the "Procedure"),
except as modified herein. The mediation shall be held in New York,
New York. The parties shall have 20 days from receipt by a party of a
Mediation Request to agree on a mediator. If no mediator has been
agreed upon by the parties within 20 days of receipt by a party (or
parties) of a Mediation Request, then any party may request (on
written notice to the other parties), that the International Institute
for Conflict Prevention and Resolution appoint a mediator in
accordance with the Procedure. All mediation pursuant to this clause
shall be confidential and shall be treated as compromise and
settlement negotiations, and no oral or documentary representations
made by the parties during such mediation shall be admissible for any
purpose in any subsequent proceedings. No party hereto shall disclose
or permit the disclosure of any information about the evidence adduced
or the documents produced by the other parties in the mediation
proceedings or about the existence, contents or results of the
mediation without the prior written consent of such other parties
except in the course of a judicial or regulatory proceeding or as may
be required by Law or requested by a Governmental Authority or
securities exchange. Before making any disclosure permitted by the
preceding sentence, the party intending to make such disclosure shall
give the other parties reasonable written notice of the intended
disclosure and afford the other parties a reasonable opportunity to
protect its interests. If the Dispute has not been resolved within 60
days of the appointment of a mediator, or within 90 days of receipt by
a party of a Mediation Request (whichever occurs sooner), or within
such longer period as the parties may agree to in writing, then any
party may file an action on the Dispute in any court having
jurisdiction in accordance with Section 12.8(c) of this Agreement.
(c) Each of the parties hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of
the courts of the State of New York and the courts of the United
States of America located in the City and County of the State of New
York for any litigation arising out of or relating to this Agreement
or the transactions contemplated hereby or any of the other
transactions contemplated hereby (and agrees not to commence any
80
litigation relating hereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 12.1 of
this Agreement, shall be effective service of process for any
litigation brought against it in any such court. Each of the parties
hereby irrevocably and unconditionally waives any objection to the
laying of venue of any litigation arising out of this Agreement or the
transactions contemplated hereby or any of the other transactions
contemplated hereby in the courts of the State of New York or the
courts of the United States of America located in the City and County
of the State of New York and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such litigation brought in any such court has been
brought in an inconvenient forum. Each of the parties hereto hereby
irrevocably and unconditionally waives any right it may have to trial
by jury in connection with any litigation arising out of or relating
to this agreement, the transactions contemplated hereby or any of the
other transactions contemplated hereby.
12.9 Sellers Representative.
----------------------
(a) The ARCap Sellers, by executing this Agreement and
approving the transactions contemplated hereby and thereby, hereby
irrevocably (i) appoint Sellers Representative as their agent and
attorney-in-fact, to execute and deliver the Escrow Agreement, deposit
the Escrow Shares with the Escrow Agent, act jointly for and on behalf
of the ARCap Sellers in connection with, and to facilitate the
consummation of the transactions contemplated by this Agreement and
the Escrow Agreement, and (ii) consent to the taking by Sellers
Representative of any and all actions and the making of any and all
decisions required or permitted to be taken by Sellers Representative
under the Escrow Agreement (including, without limitation, the
exercise of the power to authorize delivery to Purchasers of the
Purchaser 2 Escrow Cash and the Escrow Shares out of the Escrow
Account in satisfaction of Claims by any Purchasers Indemnitees).
Sellers Representative hereby agrees to negotiate, enter into
settlements and compromises of Claims and Third-Party Claims to comply
with orders of courts and awards of arbitrators with respect to such
Claims and Third-Party Claims, resolve any Claims and Third-Party
Claims made pursuant to this Agreement, take all actions necessary in
his judgment for the accomplishment of the foregoing, and hereby
accepts his appointment as Sellers Representative in connection with,
and to facilitate the consummation of the transactions contemplated by
this Agreement. Purchasers shall be entitled to deal exclusively with
Sellers Representative on all matters relating to this Agreement and
the Escrow Agreement, including any Claim or Third-Party Claim made
pursuant to Article 11, and shall be entitled to rely conclusively
(without further evidence of any kind whatsoever) on any document
executed or purported to be executed on behalf of ARCap Sellers by
Sellers Representative, and on any other action taken or purported to
be taken on behalf of any ARCap Seller by Sellers Representative, as
fully binding upon such ARCap Seller.
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(b) Sellers Representative shall not be liable for any
act done or omitted hereunder as Sellers Representative while acting
in good faith and in the exercise of reasonable judgment. The ARCap
Sellers shall severally indemnify Sellers Representative and hold
Sellers Representative harmless against any loss, liability or expense
incurred without gross negligence, bad faith or willful misconduct on
the part of Sellers Representative and arising out of or in connection
with the acceptance or administration of Sellers Representative's
duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by Sellers Representative, as set forth in
Section 12.9(d) below.
(c) Sellers Representative shall be entitled to rely
upon any order, judgment, certificate, demand, notice, instrument or
other writing delivered to him hereunder without being required to
investigate the validity, accuracy or content thereof nor shall
Sellers Representative be responsible for the validity or sufficiency
of this Agreement. In all questions arising under this Agreement,
Sellers Representative may rely on the advice of counsel, and for
anything done, omitted or suffered in good faith by Sellers
Representative based on such advice, Sellers Representative shall not
be liable to anyone.
(d) The reasonable expenses incurred by Sellers
Representative while acting on behalf of the ARCap Sellers under the
authorization granted in this Section 12.9 shall be payable out of the
Escrow Account in accordance with the Escrow Agreement; provided,
however, that all payments (other than reimbursements payable pursuant
to Section 11.4(d)) to Sellers Representative out of the Escrow
Account pursuant to this Section 12.9(d) shall not exceed $50,000, and
further provided, that all payments shall be made to Sellers
Representative on the dates upon which the Escrow Amount is scheduled
to be distributed to ARCap Sellers in accordance with the terms,
conditions and procedures set forth in the Escrow Agreement. Sellers
Representative shall not be obligated to incur any cost or expense
unless such cost or expense has been advanced to Sellers
Representative by one or more ARCap Sellers or Sellers Representative
is otherwise satisfied, as determined by Sellers Representative in its
sole discretion, that funds available for reimbursement thereof shall
be available out of the Escrow Amount in accordance with this Section
12.9(d). Sellers Representative shall not be obligated to take any
act, whether or not at the direction of one or more ARCap Sellers,
unless the conditions in this Section 12.9(d) have been satisfied.
(e) Each ARCap Seller hereby consents to any changes,
modifications or supplements determined by Sellers Representative to
be in the interest of ARCap Sellers as a whole or otherwise required
by the terms of this Agreement or necessary in order to effect the
transactions contemplated hereby, with respect to the form and
substance of any exhibit, annex, appendix, agreement, instrument,
schedule or other document attached to this Agreement and required
hereunder to be executed, delivered or completed at or prior to the
Closing Date; provided, however, that Sellers Representative shall not
have the
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authority to consent to any change, modification or supplement to this
Agreement or the Escrow Agreement that (i) reduces the Cash
Consideration, (ii) increases the Escrow Amount, (iii) extends any of
the dates upon which the Escrow Amount is to be released pursuant to
the Escrow Agreement or (iv) would result in an increase in the
maximum liability of any individual ARCap Seller for Damages beyond
that portion of the Escrow Amount which would otherwise become
distributable to such ARCap Seller.
12.10 Construction. The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. The language used in this Agreement is the
language chosen by the parties to express their mutual intent, and no rule
of strict construction shall be applied against any party.
12.11 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts (including by facsimile or electronic pdf
submission), and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
CHARTERMAC
By: /s/ Marc D. Schnitzer
-----------------------------------------
Name: Marc D. Schnitzer
Title: Chief Executive Officer and President
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
CHARTER MAC CORPORATION
By: /s/ Marc D. Schnitzer
-----------------------------------------
Name: Marc D. Schnitzer
Title: Chief Executive Officer and President
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
CM ARCAP INVESTORS LLC
By: /s/ Marc D. Schnitzer
-----------------------------------------
Name: Marc D. Schnitzer
Title: Chief Executive Officer and President
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
AI SELLERS REPRESENTATIVE, L.L.C.
By: /s/ Leonard W. Cotton
-----------------------------------------
Name: Leonard W. Cotton
Title: Sole Member
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
ARCAP INVESTORS, LLC
By: /s/ Leonard W. Cotton
-----------------------------------------
Name: Leonard W. Cotton
Title: Chairman
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
ARCAP REIT, INC.
By: /s/ Leonard W. Cotton
-----------------------------------------
Name: Leonard W. Cotton
Title: Chairman
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
[SELLERS]
By: _________________________________________
Name: _______________________________________
Title: _____________________________________
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
[SELLERS]
By: ________________________________________
Name: ______________________________________
Title: ____________________________________
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
[SELLERS]
By: _________________________________________
Name: _______________________________________
Title: _____________________________________
[Signatures Continued on Following Page]
Signature Page to Securities Purchase Agreement
[SELLERS]
By: _________________________________________
Name: _______________________________________
Title: _____________________________________
Signature Page to Securities Purchase Agreement
TABLE OF CONTENTS
Page
ARTICLE 1 CERTAIN DEFINITIONS; INTERPRETATION.............2
1.1 Certain defined terms........................................2
1.2 Other Interpretive Provisions...............................15
ARTICLE 2 PURCHASE AND SALE OF ASI STOCK AND SELLER
UNITS........................................16
2.1 Purchase and Sale of ASI Stock and Seller Units.............16
2.2 Closing Date................................................19
2.3 Closing Obligations.........................................19
2.4 Working Capital Adjustment..................................24
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ARCAP
SELLERS RELATING TO ARCAP SELLERS...........25
3.1 Authority...................................................25
3.2 No Conflict; Government Authorizations......................25
3.3 Ownership...................................................26
3.4 Legal Proceedings; Orders...................................26
3.5 Brokers or Finders..........................................27
3.6 Investment Intent...........................................27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES of ARCAP........27
4.1 No Conflict; Government Authorizations......................27
4.2 Corporate Status............................................28
4.3 Authority; Binding Effect...................................28
4.4 Capitalization..............................................29
4.5 Financial Statements; Projections...........................30
4.6 Taxes.......................................................31
4.7 Intellectual Property.......................................33
4.8 Information Systems.........................................34
4.9 Legal Proceedings...........................................35
4.10 Compliance with Laws; Permits...............................36
4.11 Environmental and Safety and Health Matters.................38
4.12 Employee Matters and Benefit Plans..........................38
4.13 Affiliate Arrangements......................................41
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4.14 Finder's Fee................................................41
4.15 Books and Records...........................................41
4.16 Other Agreements............................................41
4.17 No Undisclosed Liabilities..................................41
4.18 Fund Entities...............................................42
4.19 Investment Company; Investment Advisor......................42
4.20 Offering Memoranda..........................................42
4.21 Fund Reports................................................43
4.22 REIT........................................................43
4.23 Contracts; No Defaults......................................44
4.24 Insurance...................................................45
4.25 Leases......................................................45
4.26 Partnership Treatment.......................................46
4.27 Registration................................................46
4.28 Servicing...................................................46
4.29 Serviced Loan Schedule......................................47
4.30 ERISA.......................................................47
4.31 Disclosure..................................................47
4.32 No Material Adverse Change..................................47
4.33 Intercompany Accounts.......................................48
4.34 Disclaimer of Other Representations and Warranties..........48
4.35 Disclosure Schedule.........................................48
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ARCAP
REIT.........................................48
5.1 No Conflict; Government Authorizations......................48
5.2 Corporate Status............................................49
5.3 Authority; Binding Effect...................................49
5.4 Ownership...................................................49
5.5 Legal Proceedings; Orders...................................50
5.6 Brokers or Finders..........................................50
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5.7 Disclosure..................................................50
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF
CHARTERMAC AND PURCHASERS....................51
6.1 Corporate Status............................................51
6.2 Authority...................................................51
6.3 No Conflict; Required Filings...............................51
6.4 Legal Proceedings...........................................52
6.5 Finder's Fee................................................52
6.6 No Reliance.................................................52
6.7 Special Common Interests....................................53
6.8 Restricted Common Shares....................................53
6.9 SEC Documents; Financial Statements.........................53
6.10 Absence of Undisclosed Liabilities..........................54
6.11 Absence of Certain Changes..................................54
6.12 Investment Intent...........................................55
ARTICLE 7 COVENANTS......................................55
7.1 Interim Operations of the Companies.........................55
7.2 Filings with Governmental Authorities.......................57
7.3 Consents....................................................58
7.4 Confidentiality.............................................58
7.5 Publicity...................................................58
7.6 Books and Records...........................................59
7.7 Further Action..............................................59
7.8 Expenses....................................................59
7.9 Notification of Certain Matters.............................60
7.10 Employee Matters and Employee Benefit Plans.................60
7.11 Insurance Matters...........................................61
7.12 Access and Information......................................62
7.13 CharterMac Appointments.....................................63
7.14 AMAC Appointments...........................................63
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7.15 ARCap REIT Advisory Committee; ARCap REIT Appointments......63
7.16 Preparation of Financial Statements.........................63
7.17 Balance Sheet Assets........................................64
7.18 Specially Serviced Loan Schedule............................64
ARTICLE 8 CLOSING CONDITIONS.............................64
8.1 Conditions to Obligations of Sellers and Purchasers.........64
8.2 Additional Conditions to Obligations of Purchasers..........65
8.3 Additional Conditions to Obligations of Sellers.............66
ARTICLE 9 CERTAIN TAX MATTERS............................68
9.1 Tax Returns.................................................68
9.2 Certain Taxes...............................................69
ARTICLE 10 TERMINATION....................................69
10.1 Termination.................................................69
10.2 Effect of Termination and Abandonment.......................70
ARTICLE 11 SURVIVAL; ESCROW; INDEMNIFICATION..............71
11.1 Survival Limitation.........................................71
11.2 Indemnification by ARCap Sellers............................71
11.3 Indemnification by Purchasers...............................73
11.4 Defense of Third-Party Claims...............................73
11.5 Exercise of Remedies; Tax Treatment.........................75
11.6 Exclusive Remedy; Limitations; Threshold Amount.............75
11.7 Distributions; Voting.......................................76
11.8 Indemnification Claim.......................................76
11.9 Release of Escrow Amount....................................76
11.10 Contribution................................................76
11.11 Adjustment for Insurance....................................77
ARTICLE 12 MISCELLANEOUS..................................77
12.1 Notices.....................................................77
12.2 Severability................................................78
12.3 Entire Agreement; No Third-Party Beneficiaries..............79
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12.4 Amendment; Waiver...........................................79
12.5 Binding Effect; Assignment..................................79
12.6 Disclosure Schedule.........................................79
12.7 Governing Law...............................................79
12.8 Dispute Resolution; Mediation; Jurisdiction.................80
12.9 Sellers Representative......................................81
12.10 Construction................................................83
12.11 Counterparts................................................83
INDEX OF SCHEDULES
Schedule I ARCap Investors, LLC Member List
Schedule II CharterMac Units
Schedule III Cash Units
Schedule IV Exchange Units
Schedule V Non-Cash Consideration
Schedule VI Restricted Common Shares
Schedule VII Disclosure Schedule
Schedule VIII Final Fund Documents
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