MASTER AGREEMENT
----------------------------
by and among
FAC Realty, Inc.,
Carolina FAC Limited Partnership,
and the other
signatories to this
Master Agreement
hereinafter contained
Dated as of October 1, 1997
----------------------
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
DOCUMENT USED IN CONNECTION WITH THE OFFERING AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO THE REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS...............................................................................................1
ARTICLE II THE TRANSACTIONS..........................................................................................4
2.1 General...................................................................................................4
2.2 Exchange Option Agreement.................................................................................4
2.3 Closing...................................................................................................4
ARTICLE III CONSIDERATION.............................................................................................5
3.1 Contribution Price........................................................................................5
3.2 Terms of Payment..........................................................................................5
3.3 Additional Closing Adjustments............................................................................5
3.4 Fluctuation...............................................................................................6
ARTICLE IV COVENANTS AND AGREEMENTS..................................................................................7
4.1 Operation of Business.....................................................................................7
4.2 No Brokers................................................................................................7
4.3 Section 754 Elections.....................................................................................7
4.4 Termination of Contracts..................................................................................7
4.5 Contributions of Assets...................................................................................7
4.6 Assignment of Warranties..................................................................................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS - GENERALLY................................................8
5.1 Consents..................................................................................................8
5.2 Disclosure................................................................................................8
5.3 Absence of Conflicts......................................................................................8
5.4 Certification of Constituent Financial Statements.........................................................8
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS............................................................9
6.1 Power and Authority of Contributors and Constituent Partnerships..........................................9
6.2 Rent Roll and Leases......................................................................................9
6.3 No Contracts.............................................................................................10
6.4 Liabilities; Indebtedness................................................................................10
6.5 Insurance................................................................................................10
6.6 Personal Property........................................................................................10
6.7 Claims or Litigation.....................................................................................10
6.8 Hazardous Substances.....................................................................................10
6.9 Compliance with Laws.....................................................................................11
6.10 Employees................................................................................................11
6.11 Condemnation and Moratoria...............................................................................11
6.12 Condition of Improvements................................................................................11
6.13 Taxes....................................................................................................12
6.14 Management Agreements....................................................................................12
6.15 Operating Agreements.....................................................................................12
6.16 Absence of Certain Changes...............................................................................12
6.17 Tradename................................................................................................13
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6.18 Title....................................................................................................13
6.19 Certain Liens............................................................................................13
ARTICLE VII CONDITIONS TO CLOSING AND DUE DILIGENCE INVESTIGATION....................................................13
7.1 Conditions to Closing of Properties.....................................................................13
7.2 Carolina Investigation/Due Diligence Period..............................................................14
7.3 Closing Documents........................................................................................15
ARTICLE VIII INDEMNITY................................................................................................16
8.1 Representations and Warranties of each of the Contributors...............................................16
8.2 Arbitration..............................................................................................16
ARTICLE IX MISCELLANEOUS............................................................................................16
9.1 Notices..................................................................................................16
9.2 Counterparts.............................................................................................16
9.3 Severability.............................................................................................16
9.4 Assigns..................................................................................................16
9.5 Public Announcement......................................................................................17
9.6 Confidentiality..........................................................................................17
9.7 Remedies.................................................................................................17
9.8 Captions.................................................................................................17
9.9 Exhibits and Schedules...................................................................................17
9.10 Merger Clause............................................................................................17
9.11 Amendments and Waiver....................................................................................17
9.12 Governing Laws...........................................................................................18
LIST OF SCHEDULES AND EXHIBITS..........................................................................................24
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MASTER AGREEMENT
This MASTER AGREEMENT (the "Master Agreement") is made as of the 1st day
of October, 1997, by and among FAC REALTY, INC., a Delaware corporation ("FAC"),
CAROLINA FAC LIMITED PARTNERSHIP, a Delaware limited partnership ("Carolina"),
and the other signatories to this Agreement hereinafter contained (each a
"Contributor" and collectively the "Contributors").
WHEREAS, Carolina is a Delaware limited partnership having FAC as its
sole general partner and FAC has elected to be qualified as a real estate
investment trust under the Code; and
WHEREAS, Contributors own the direct and indirect interests in certain
Properties and other real property, improvements, appurtenances and other
rights, interests and privileges appertaining thereto, set forth with more
particularity on Schedule 1 hereto and, as applicable, in certain partnerships,
limited liability companies or other ownership entities which own interests in
the Properties, as also set forth on Schedule 1;
WHEREAS, Carolina and the Contributors have entered into an Exchange
Option Agreement (as defined below), pursuant to which such Contributors have
irrevocably agreed to sell, transfer and assign to Carolina their interests;
NOW, THEREFORE, in consideration of the premises herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms shall have the following meanings for all
purposes of this Master Agreement and such meanings are equally applicable to
the singular and plural forms of the terms defined. The terms "hereof",
"hereto", "herein", "hereunder" and comparable terms refer to the entire
agreement with respect to which such terms are used and not to any particular
section, subsection, paragraph or other subdivision thereof.
"ADJUSTMENT CLOSING DATE" means October 1, 1997.
"AFFILIATE" means, as to any Person (as defined below), each of the
Persons (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control
with such Person; or (ii) which beneficially owns or holds 10% or more of
any class of the outstanding voting stock (or in the case of a Person
which is not a corporation, 10% or more of the equity interest) of such
Person; or (iii) 10% or more of any class of the outstanding voting stock
(or in the case of a Person which is not a corporation, 10% or more of
the equity interest) of which is beneficially owned or held by such
Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether by ownership of voting stock, by contract,
by close family relationships (i.e., parent, spouse, child or sibling) or
otherwise.
"BRINGDOWN CERTIFICATE" means a certificate executed by the Contributors
attesting and certifying as to the continuing truth and accuracy as of
the date of Closing of each and all of the representations and warranties
of the Contributors and the Constituent Parties under this Master
Agreement and Exchange Option Agreement.
"CAROLINA PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of Carolina FAC Limited Partnership, as amended through the
date hereof, including the amendment to admit the Contributors as
partners therein.
"CLOSING" means the closing and consummation of the transactions
contemplated by this Master Agreement relating to the Properties.
"CLOSING DATE" means the date upon which all the conditions for closing
and consummation of the transactions contemplated by this Master
Agreement relating to the Properties shall have been satisfied, which
date shall be no later than December 4, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSTITUENT FINANCIAL STATEMENTS" means the periodic income statement
and balance sheets provided to Carolina (including the schedules attached
thereto) for the Contributors or Constituent Partnerships, and the
Properties.
"CONSTITUENT PARTIES" means collectively Contributors and the
Constituent Partnerships, without duplication.
"CONSTITUENT PARTNERSHIPS" means, as to those Properties, if any, which
are owned by partnerships, limited liability companies or other entities
which are in turn owned by certain of the Contributors, such
partnerships, limited liability companies or other entities which may be
so owned by certain of the Contributors.
"CONTRIBUTION PRICE" means the consideration to be paid by Carolina to
the Contributors for their Interests in the Properties as set forth in
Section 3.1.
"ENVIRONMENTAL LAW" means any and all federal, state and local laws,
regulations, ordinances and other requirements relating to pollution or
protection of the environment, including, without limitation, laws,
regulations and requirements relating to the ownership, possession,
storage and control of the Properties (as defined below) and to
emissions, discharges, releases or threatened releases of storm water,
pollutants, contaminants, toxic or hazardous substances, or solid or
hazardous wastes into the environment (including without limitation
ambient air, surface water, groundwater or land), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, toxic or
hazardous substances, or solid or hazardous wastes. The Environmental
Laws include, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OPTION AGREEMENT" means the agreement dated as of even date
herewith between Carolina, FAC and the Contributors pursuant to which
Units are to be exchanged for all of the Interests, as defined therein.
"IMPROVEMENTS" means all buildings, structures, streets, furnishings,
parking lots, landscaping, walls, ponds, culverts, fixtures, utilities,
fences, driveways, loading docks, security systems and other physical
features constructed or assembled on, at, upon or beneath any of the
Properties (whether finished or unfinished).
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"INDEBTEDNESS" means, without duplication, any obligations for borrowed
money and all obligations to trade creditors, whether heretofore, now or
hereafter owing, arising, due or payable to any person and howsoever
evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise and whether matured or
unmatured. Without in any way limiting the generality of the foregoing,
Indebtedness specifically includes the following: (a) all obligations or
liabilities of any person that are secured by any lien, claim,
encumbrance or security interest upon property; (b) all obligations or
liabilities created or arising under any capital lease of real or
personal property, or conditional sale or other title retention agreement
with respect to property, even though the rights and remedies of the
lessor, seller or lender thereunder are limited to repossession of such
property; (c) all unfunded pension fund, employee medical or welfare
obligations and liabilities; (d) deferred taxes; and (e) all obligations
under any indemnification agreements, guaranty agreements, letters of
credit or other documents creating such contingent liabilities.
"INDEPENDENT DIRECTOR" shall have the meaning set forth in the charter of
FAC, as it may be amended from time to time.
"INTERESTS" shall mean as defined in the Exchange Option Agreement.
"LIEN" means any interest in property securing an obligation owed to, or
a claim by, a person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including
but not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust
receipt or a lease consignment or bailment for security purposes. The
term Lien shall include reservations, exceptions, defects of any kind or
nature, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances
affecting property.
"NYSE" means the New York Stock Exchange.
"OUTSTANDING DEBT FINANCING" means the Indebtedness of the Properties as
described on SCHEDULE 3.2(I) attached hereto including any
indemnifications and guarantees related thereto.
"PERMITTED LIEN" means (i) liens for 1997 ad valorem taxes not yet due
and payable; (ii) restrictions, easements, covenants, reservations and
rights of way of record as do not detract from the value or interfere
with the present use of a parcel of property; (iii) zoning ordinances,
restrictions and other requirements imposed by governmental authority as
do not detract from the value or interfere with the present use of a
parcel of property; and (iv) such imperfections of title, liens and
encumbrances, if any, as do not detract from the value or interfere with
the present use of a parcel of property and which do not secure
obligations for borrowed money or the deferred purchase price of
property.
"PERSON" means any individual, joint venture, corporation, company,
voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of
entity.
"PROPERTY" or "PROPERTIES" shall mean, individually, the real property
together with any Improvements thereon and all personal property and
rights, privileges and interests appurtenant thereto and all of the
ownership interests therein owned by a Contributor or by a Constituent
Partnership or, collectively, by all of the Constituent Partnerships,
including but not limited to as more particularly described on SCHEDULE
1.
"REDEMPTION SHARES" means the shares of Common Stock of FAC into which
Units received by the Contributors in connection with the transactions
contemplated hereby are convertible into under
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certain circumstances at the election of FAC upon their tender for
redemption as provided in the Carolina Partnership Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES LAWS" means the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder.
"SHARES" means the duly authorized common stock of FAC.
"UNIT" means an undivided limited partnership interest of Carolina, which
is exchangeable by the Unit holder for either cash or Shares, whichever
may be elected by FAC, after one year from the Closing Date in accordance
with the Carolina Partnership Agreement and the Exchange Option
Agreement.
ARTICLE II
THE TRANSACTIONS
2.1 General. Subject to the terms, conditions, provisions and limitations
in this Master Agreement, on the Closing Date the parties shall cause the
transactions contemplated hereby to be consummated (the "Transactions"),
including, but not limited to:
(a) The closing under the Exchange Option Agreement, as described in Section 2.2 below;
(b) At the discretion of Carolina, the dissolution of the
Constituent Partnerships and any other partnerships or other entities
which are wholly-owned by the Contributors and all of the interests in
which shall have been contributed to Carolina, and, at FAC's option, the
transfer of the Properties to Carolina by deed or by operation of law.
2.2 Exchange Option Agreement. Carolina shall tender the consideration to
each Contributor as required by the Exchange Option Agreement such that each
"Closing," as defined in the Exchange Option Agreement, occurs under the terms
thereof.
2.3 Closing.
(a) The closing of the transactions contemplated by this Master
Agreement (the "Closing") shall take place at the offices of FAC on or
before the Closing Date, unless otherwise agreed in writing by Carolina.
The closing under the Exchange Option Agreement shall take place
simultaneously with and only if the Closing hereunder occurs.
(b) Carolina or FAC may terminate this Master Agreement without
liability and without waiving any of its rights at law or in equity by
giving notice to the Contributors at any time prior to the Closing:
(i) If any one of the Constituent Parties is in breach of
any representation, warranty, or covenant contained in
this Master Agreement or in the Exchange Option Agreement
in any material respect;
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(ii) If the Closing shall not have occurred on or before
the Closing Date by reason of any condition precedent in
this Master Agreement not being fulfilled or in the
Exchange Option Agreement (unless the failure results from
Carolina itself breaching any representation, warranty or
covenant contained in this Master Agreement or in the
Exchange Option Agreement); or
(iii) Pursuant to the terms of Section 7.2 hereof.
ARTICLE III
CONSIDERATION
3.1 Contribution Price. As consideration for the contribution of the
Properties, Carolina shall deliver to the Contributors the number of limited
partnership units ("Units") in Carolina provided in the Exchange Option
Agreement.
3.2 Terms of Payment.
(a) Generally. At the Closing, each Contributor shall receive the
number of Units allocated to such Contributor under the Exchange Option
Agreement in respect of the Properties to be acquired, subject to pro
rata adjustment for any changes in the amount of the Outstanding Debt
Financing as of the applicable Closing Date from the amounts projected to
be outstanding as of such dates as reflected on SCHEDULE 3.2 attached
hereto;
(b) Pro Rata Expenses. Each Contributor shall be responsible for
payment of his pro rata portion of legal fees associated with this
transaction, any contract termination fees and any prorations chargeable
to the Contributors under Section 3.3 hereof.
3.3 Additional Closing Adjustments.
(a) Generally. All real estate taxes, charges and assessments
affecting a Property, all charges for water, sewer, electricity, gas and
all other utilities and operating expenses with respect to a Property, to
the extent not paid or payable by tenants under the Leases (as defined in
Section 6.2 below and as described on SCHEDULE 6.2A attached hereto),
shall be apportioned on a per diem basis as of midnight on the date
immediately preceding the Adjustment Closing Date. All such expenses for
the period preceding the Adjustment Closing Date shall be deemed expenses
of the applicable Contributors and all such expenses commencing as of the
Adjustment Closing Date with respect to such Property shall be deemed to
be expenses of Carolina. Amounts owed under this paragraph shall be paid
to the party to whom they are owed in cash at the Closing or in the
Post-Closing Adjustment Period (as defined below) in the same manner as
if the underlying real property were being sold. If any real estate
taxes, charges or assessments have not been finally assessed as of the
Closing Date for a Property for the then current calendar tax year, they
shall be adjusted at the Closing based upon the greater of (i) the most
recently issued bills therefor or (ii) the best reasonable estimate
therefor after consultations with the appropriate taxing officials.
(b) Rent. Except for delinquent rent, all rent under leases and
other income attributable to a Property shall be apportioned on a per
diem basis as of midnight on the date immediately preceding the
Adjustment Closing Date. All such rent and other income, including
commissions earned, for the period preceding the Adjustment Closing Date
shall be deemed to be property of the applicable Contributors, and all
rent and other income for any period commencing as of the Adjustment
Closing Date and thereafter shall be the property of Carolina for the
purpose of making the adjustments set
5
forth herein. Amounts owed under this paragraph shall be paid to the
party to whom they are owed in cash at the Closing or during the
Post-Closing Adjustment Period. Delinquent rent shall not be prorated,
but shall be deemed the property of the appropriate Contributors.
Payments received by Carolina from tenants from and after the Closing
with respect to a Property shall be applied first to rents and other
amounts then due Carolina from such tenant and then to such tenant's
delinquent rent as of the time of apportionment. Carolina shall use
reasonable efforts to collect delinquent rents for the benefit of the
Contributors but in no event shall be obligated to evict or xxx any
tenants in order to collect such rents and shall cooperate with the
Contributors in the collection of any delinquent amounts; provided,
however, that the Contributors shall not have any rights to evict such
tenants for such delinquent amounts. Any amounts received by Contributors
on account of rent or other income for the period after the Adjustment
Closing Date with respect to the Property and the related personal
property shall be turned over to Carolina for application in accordance
with the terms of this paragraph. All accounts receivable, notes, cash
and bank accounts of the Constituent Parties existing as of the
Adjustment Closing Date and relating to the Properties shall be
transferred at Closing to Carolina.
(c) Preclosing Expenses and Liabilities. The parties acknowledge
that not all invoices for expenses incurred with respect to the
Properties prior to the Adjustment Closing Date will be received by the
Closing and that a mechanism needs to be in place so that such invoices
can be paid as received. All of the prorations referred to above will be
done on an interim basis at the Closing and will be subject to final
adjustment in accordance with the provisions hereof within 90 days or
such other agreed upon period of time following Adjustment Closing Date
(the "Post-Closing Adjustment Period"). Upon receipt by Carolina after
Closing of an invoice for a Property's expenses which are attributable in
whole or in part to a period prior to the Adjustment Closing Date and
which were not apportioned at Closing, Carolina shall submit for the
Contributors a copy of such invoice with such additional supporting
information as Contributors shall reasonably request. Within 10 days of
receipt of such copy, each of the Contributors shall pay to Carolina
their pro rata share of an amount equal to the portion of such invoice
attributable to the period ending as of midnight on the date immediately
preceding the Adjustment Closing Date apportioned on a per diem basis.
(d) Security Deposits/Tenant Inducements. With respect to the
Property or Properties to be acquired at any Closing, the Constituent
Parties shall pay to Carolina in cash at such Closing an amount equal to
the sum of (i) the security deposits, if any, required to be held by the
landlord pursuant to the Leases, and (ii) any other deposits or advances
received by the Constituent Parties relating to services yet to be
provided by the Constituent Parties.
(e) Adjustment Closing Date. The parties acknowledge that,
irrespective of the fact that the Closing may take place substantially
later than the Adjustment Closing Date, the adjustment of all income,
revenues, costs, expenses and expenditures shall be made as of the
Adjustment Closing Date. The Adjustment Closing Date shall be a day of
income and expense for Carolina.
3.4 Fluctuation. EACH OF THE CONTRIBUTORS AND CAROLINA ACKNOWLEDGES AND
AGREES THAT AFTER THE EXECUTION OF THE EXCHANGE OPTION AGREEMENT, THE MARKET
VALUE OF THE FAC COMMON STOCK WHICH IS CURRENTLY OUTSTANDING MAY INCREASE OR
DECREASE IN VALUE AS THE RESULT OF MARKET FLUCTUATIONS, AND THAT ANY SUCH
FLUCTUATIONS MAY AFFECT THE VALUE OF THE UNITS. NOTWITHSTANDING THESE
FLUCTUATIONS, Carolina WILL NOT BE REQUIRED TO INCREASE THE NUMBER OF UNITS TO
BE ISSUED TO ANY CONTRIBUTOR IN THE EVENT OF A DECREASE IN THE MARKET VALUE OF
FAC COMMON STOCK PRIOR TO THIS AGREEMENT AND THE CLOSING. LIKEWISE, EACH
CONTRIBUTOR WHOSE PURCHASE PRICE IS BEING PAID IN UNITS WILL BE ENTITLED TO THAT
NUMBER OF UNITS SET FORTH
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IN THE EXCHANGE OPTION AGREEMENT NOTWITHSTANDING ANY INCREASE IN VALUE OF FAC
COMMON STOCK PRIOR TO THE CLOSING.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Operation of Business. Between the date hereof and the Closing Date,
each Contributor shall, and shall cause each Constituent Partnership to,
maintain and operate the Properties in a manner consistent with first-class
retail shopping centers, provided that they shall not enter into, or cause or
permit any Constituent Partnership to enter into, any contracts or other such
arrangements that would be binding upon Carolina or the Properties after the
Closing Date, unless such contract is terminable without payment of any
termination fee or other penalty on thirty (30) days' notice or less. Between
the date hereof and the Closing Date, neither any Contributor nor any
Constituent Partnership shall consent to any zoning changes or enter into any
covenants or other agreements that would be binding on Carolina or the
Properties. Between the date hereof and the Closing Date, the Contributors will
advise Carolina of any written notice from any governmental authority relating
to the violation of any law or ordinance regulating the condition or use of the
Properties and the Contributors shall notify Carolina of any violation of any
such law or ordinance of which the Contributors become aware.
4.2 No Brokers. Each of the Contributors covenants, represents and
warrants to Carolina and FAC that no broker or finder or agent has been involved
or engaged by it in connection with the transactions contemplated hereby and,
each hereby agrees to indemnify and hold harmless Carolina and FAC from and
against any and all broker's or finder's fees, commissions or similar charges
incurred or alleged to have been incurred by the Contributors in connection with
the transactions contemplated hereby and any and all loss, liability, cost or
expense (including without limitation reasonable fees of counsel satisfactory to
Carolina) arising out of any claim that the indemnifying party incurred any such
fees, commissions or charges.
4.3 Section 754 Elections. Each of the Contributors agrees with respect
to such Constituent Parties as are being dissolved at Carolina's direction and
as to which Carolina has so requested, (i) to cause an election under Section
754 of the Code to be included in the closing federal partnership tax returns of
each of the Constituent Parties indicating Carolina as a partner; (ii) to
prepare, at their expense, and timely file closing partnership tax returns for
the period ending on the Closing Date for each of the Constituent Parties; and
(iii) to present such tax returns to Carolina for its approval, which shall not
be unreasonably withheld, sufficiently in advance of the filing of such returns.
4.4 Termination of Contracts. Unless otherwise specified by Carolina in
writing, all management, development, leasing or other contracts with respect to
any Property, if any, must be terminated as of the date of Closing with respect
to such Property so that Carolina or its designee shall have the exclusive right
to manage and lease such Property.
4.5 Contributions of Assets. All personal property used in the operation
and management of the Properties including but not limited to that listed on
SCHEDULE 4.6 will be transferred to Carolina in conjunction with the Closing and
as partial consideration for the transactions otherwise contemplated by this
Agreement.
4.6 Assignment of Warranties. Contributors agree, and shall cause the
Constituent Partnerships, to assign all warranties with respect to the
Properties to Carolina and will use their best efforts to cause the maker of
such warranties to consent to such assignment if necessary for such assignment
to be valid.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
CONTRIBUTORS - GENERALLY
To induce Carolina and FAC to enter into this Master Agreement and the
transactions contemplated hereby, unless otherwise indicated, each of the
Contributors represents and warrants that the statements contained in Article V
and Article VI are true, correct and complete on the date hereof and will be
true, correct and complete on the Closing Date. It is the express intention and
agreement of each of the Contributors that the representations and warranties
set forth in Article V and Article VI shall survive the consummation of the
transactions contemplated in this Master Agreement.
5.1 Consents. To the best knowledge of each Contributor, (i) no consents,
approvals, waivers, notifications, acknowledgments or permissions which have not
been obtained are required in order for any of the Constituent Parties to fully
perform its or his respective obligations under this Master Agreement or which,
if left unobtained at Closing and thereafter, would have a material adverse
affect on the value, operation, occupation, use or development of any Property,
and (ii) the execution and delivery of this Master Agreement by the Contributors
and the consummation of the transactions contemplated hereby, including without
limitation the execution of any related agreements, will not require the consent
of, or any prior filing with or notice to or payment to, any governmental
authority or other Person.
5.2 Disclosure. To the best knowledge of each of the Contributors, the
representations and warranties contained in this Master Agreement (including
Schedules and Exhibits and documents or instruments delivered in connection
herewith) or in any information, statement, certificate or agreement furnished
or to be furnished to Carolina by any of the Constituent Parties in connection
with the Closing pursuant to this Master Agreement or the Exchange Option
Agreement, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements and information
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
5.3 Absence of Conflicts. To the best knowledge of each Contributor, the
execution, delivery and performance of this Master Agreement by the Contributors
and the consummation of the transactions contemplated hereby, including without
limitation, the execution and delivery by the Contributors or the Constituent
Partnerships, as applicable, of any documents, instruments or agreements
contemplated hereby, will not (after a lapse of time, due notice or otherwise)
(a) conflict with, violate or result in any breach or default under (i) any
provision of any partnership agreement, operating agreement or certificate of
any of the Constituent Parties; (ii) any law, statute, rule or regulation of any
administrative agency or governmental body, or any judgment, order, writ,
stipulation, injunction, award or decree of any court, arbiter, administrative
agency or governmental body to which the Constituent Parties or the Properties
are subject; or (iii) any indenture, agreement, instrument or other contract to
which the Constituent Parties may be bound or relating to or affecting their
assets; or (b) result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under or result
in the creation or imposition of any Lien on the Properties or related assets in
accordance with the terms of this Master Agreement under any indenture,
mortgage, contract, agreement, lease, sublease, license, sublicenses, franchise,
permit, instrument of indebtedness, security agreement or other undertaking or
instrument to which the Constituent Parties may be bound or affected.
5.4 Certification of Constituent Financial Statements. The Constituent
Financial Statements are true, correct and complete in all material respects,
are prepared in accordance either with generally acceptable accounting
principles or federal income tax principles, consistently applied, and fairly
present the financial condition of each of the applicable Constituent Parties.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF CONTRIBUTORS AS TO THE
CONSTITUENT PARTNERSHIPS
Each of the Contributors jointly and severally represents and warrants to
Carolina and FAC as follows:
6.1 Power and Authority of Contributors and Constituent Partnerships.
Each of the Contributors and Constituent Partnerships, which is not an
individual, is a limited partnership or limited liability company, as the case
may be, duly formed and validly existing under the laws of the State of North
Carolina. To the best knowledge of each Contributor, each partner or member of
the Contributors and Constituent Partnerships which is not an individual has
been duly formed and is validly existing. All partnership interests in each
Contributor and Constituent Partnership, which is not an individual, have been
validly issued and fully paid. True, correct and complete copies of each of the
partnership agreements, operating agreements and other organizational documents,
as applicable, of the Contributors and Constituent Partnerships and all
amendments thereto, and the minutes of any meetings of the partners of the
Contributors and Constituent Partnerships, have been submitted to Carolina prior
to the date of this Master Agreement. Each of the documents and instruments
contemplated hereby and other instruments and documents to be executed and
delivered by the Contributors and Constituent Partnerships, as applicable,
hereunder will, when executed, constitute the legal, valid and binding
obligations of the Contributors and Constituent Partnerships, respectively,
enforceable against them in accordance with their respective terms. To the best
knowledge of each of the Contributors, the Closing of the Exchange Option
Agreement, and the Master Agreement will effectuate the transfer of all of the
ownership interests of each of the Constituent Parties in and to the Properties.
6.2 Rent Roll and Leases. The schedule of leases attached hereto as
SCHEDULE 6.2A (the "Schedule of Leases") is a true, correct and complete
schedule of all leases, subleases and rights of occupancy in effect with respect
to each of the Properties, respectively (the "Leases"), and there have been no
material changes to the Leases. Except as set forth on the Schedule of Leases,
there are no other leases, subleases, tenancies or other rights of occupancy in
effect with respect to the Properties other than the Leases. True, correct and
complete copies of the Leases, together with all amendments and supplements
thereto and all other documents and correspondence relating thereto, have been
delivered or made available to Carolina and its agents. SCHEDULE 6.2A includes
the rent roll information and is, as of the date shown thereon, true and correct
in all material respects. To the best knowledge of each of the Contributors, the
Schedule of Leases sets forth, as of such date, (i) a list of all tenants under
the Leases, (ii) all arrearages owing from such tenants under such Leases
(listed on delinquency and default reports attached to and made a part thereof),
(iii) the expiration date of the term of such Leases, (iv) the rent the tenant
under such Lease is currently obligated to pay, (v) the amount of any concession
given in connection with any such Lease at any time, (vi) the current
outstanding balances of any security deposits held pursuant to any Leases, (vi)
any prepayments of rent by any tenant under any Lease of more than one (1) month
in advance (excluding security deposits which are delineated on the list
attached to the Schedule of Leases and made a part thereof) and (viii) each
Contributor represents that to his best knowledge, there are no rental
concessions or abatements under a Lease applicable to any period subsequent to
the Closing. Except as set forth on the Schedule of Leases, to the best
knowledge of the Contributors, all such Leases are valid and enforceable and
presently in full force and effect, and none of the Leases have been assigned.
Except as set forth on SCHEDULE 6.2B attached hereto, none of the Constituent
Parties, or to the best knowledge of each Contributor, any lessee under any
Lease, is in default under such Lease, and to the best knowledge of each
Contributor, there is no event which, but for the passage of time or the giving
of notice, or both, would constitute a default under such Leases, except such
defaults that would not have a material adverse effect on the condition,
financial or otherwise or on the earnings, business affairs or business
prospects of
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any of the Constituent Parties or the Properties. Except as disclosed on
SCHEDULE 6.2B attached hereto, to the best knowledge of each of the
Contributors, the consummation of the transactions contemplated by this Master
Agreement will not give rise to any breach, default or event of default under
any of the Leases. Each of the Leases is assignable by the applicable
Constituent Party and, except as disclosed on SCHEDULE 6.2C attached hereto,
none of the Leases requires the consent or approval of any party in connection
with the transactions contemplated by this Master Agreement.
6.3 No Contracts. No agreements, undertakings or contracts (the
"Contracts") affecting the Properties or the Constituent Parties, written or
oral, will be in existence as of the Closing, except as has been disclosed to
Carolina in writing.
6.4 Liabilities; Indebtedness. Except for the Outstanding Debt Financing
and the Leases, and those liabilities disclosed to Carolina in writing on
SCHEDULE 6.4 hereto, the Constituent Parties have not incurred any Indebtedness
related to the Properties except in each instance for trade payables and any
other customary and ordinary expenses in the ordinary course of business that
will be paid and discharged in full by the Constituent Parties, respectively, as
of the Closing.
6.5 Insurance. Each of the Constituent Parties currently maintains or
causes to be maintained all of the public liability, casualty and other
insurance coverage with respect to the Properties and their respective
businesses as has been disclosed to Carolina and FAC, and such insurance is
adequate for the full coverage of the Properties. All such insurance coverage
shall be maintained in full force and effect through the Closing and all
premiums due and payable thereunder have been, and shall be, fully paid when
due.
6.6 Personal Property. All equipment, fixtures and personal property
located at or on any of the Properties, respectively, which is owned or leased
by Contributors or the Constituent Partnerships shall remain at the Properties
and shall not be removed prior to the Closing, except for equipment that becomes
obsolete or unusable, which may be disposed of or replaced in the ordinary
course of business. The personal property of Contributors or the Constituent
Partnerships is not subject to any Liens except for Permitted Liens.
6.7 Claims or Litigation. Except as set forth on SCHEDULE 6.7 attached
hereto, none of the Contributors or Constituent Parties has received notice of
any claim, demand, suit or unfiled lien against the Contributors or Constituent
Parties or the Properties nor to any of the Contributors' best knowledge has any
proceeding or litigation of any kind, pending or outstanding, been filed before
any court or administrative, governmental or regulatory authority, agency or
body, domestic or foreign, and, to the best knowledge of any of the
Contributors, no order, judgment, injunction or decree of any court, tribunal or
other governmental authority has been filed against any of the Constituent
Parties or any of the Properties or, to the best knowledge of any of the
Contributors, threatened, or likely to be made or instituted, which would have a
materially adverse affect on the business or financial condition of any of the
Constituent Parties or any of the Properties or in any way be binding upon
Carolina or affect or limit Carolina's full use and enjoyment of any of the
Properties.
6.8 Hazardous Substances. Each of the Contributors represents, to his
best knowledge, that (x) as of the date hereof and (y) except as set forth in
the environmental audit reports provided to Carolina by the Constituent Parties,
as of the Closing Date, the Constituent Parties have not generated, stored,
released, discharged or disposed of hazardous substances or hazardous wastes at,
upon or from any of the Properties in violation of any Environmental Law, order,
judgment or decree or permit, or in connection with which remedial action would
be required under any Environmental Law, order, judgment, decree or permit. To
the best knowledge of each of the Contributors, (x) as of the date hereof and
(y) except as set forth in the environmental audit reports provided to Carolina
by the Constituent Parties, as of the Closing Date, no
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hazardous substances or hazardous wastes have otherwise been generated, stored,
released, discharged or disposed of from, at or upon any of the Properties in
violation of any Environmental Law. To the best knowledge of each of the
Contributors, (x) as of the date hereof and (y) except as set forth in the
environmental audit reports provided to Carolina by the Constituent Parties, as
of the Closing Date, no underground storage tanks are located on any of the
Properties. As used in this Master Agreement, the terms "hazardous substances"
and "hazardous wastes" shall have the meanings set forth in the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and the
regulations thereunder, the Resource Conservation and Recovery Act, as amended,
and the regulations thereunder, and the Federal Clean Water Act, as amended, and
the regulations thereunder, and such terms shall also include asbestos,
petroleum products, radioactive materials and any regulated substances under any
Environmental Law, regulation or ordinance.
6.9 Compliance with Laws. The Constituent Parties possess such
certificates, authorities or permits issued by the appropriate state or federal
regulatory agencies or bodies necessary to conduct the business to be conducted
by them (other than any environmental certification, authorities or permits
required by state or federal agencies to be obtained by tenants of the
Properties) and none of the Constituent Parties has received any written notice
of proceedings relating to the revocation or modification of any such
certificate, authority or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
business affairs or business prospects of any of the Constituent Parties or any
of the Properties, as applicable. Except as otherwise disclosed to Carolina in
writing, to the best knowledge of each of the Contributors, there is no existing
violation of any federal, state, county or municipal law, ordinance, order,
code, regulation or requirement affecting any of the Constituent Parties or the
Properties that would have a material, adverse effect on the financial
condition, business or prospects of any of the Constituent Parties. Except as
otherwise disclosed to Carolina in writing, to the best knowledge of each of the
Contributors, there has been no material misstatement of a fact or
misrepresentation of a fact herein or in any other written document submitted by
any of the Constituent Parties to Carolina. Except as otherwise disclosed to
Carolina in writing, to the best knowledge of each of the Contributors, there
are no zoning, environmental or other land use regulation proceedings instituted
against any of the Properties. To the best knowledge of each of the
Contributors, each of the Constituent Parties has obtained all material
licenses, permits, certificates and authorization necessary to conduct its
business.
6.10 Employees. None of the Constituent Parties presently has any
employees nor have any of the Constituent Parties ever had any such employees.
6.11 Condemnation and Moratoria. Except as set forth on SCHEDULE 6.11, to
the best knowledge of each of the Contributors, there are (i) no pending or
threatened condemnation or eminent domain proceedings, or negotiations for
purchase in lieu of condemnation, which affect or would affect any portion of
any of the Properties; (ii) no pending or threatened moratoria on utility or
public sewer hook-ups or the issuance of permits, licenses or other inspections
or approvals necessary in connection with the construction or reconstruction of
improvements, including without limitation tenant improvements, which affect or
would affect any portion of any of the Properties; and (iii) no pending or
threatened proceeding to change adversely the existing zoning classification as
to any portion of any of the Properties. No portion of any of the Properties is
a designated historic property or located within a designated historic area or
district, and to the best knowledge of each of the Contributors, there are no
graveyards or burial grounds located within any of the Properties. Carolina
shall be entitled to all compensation received from any governmental authority
relating to the proceedings or negotiations described on SCHEDULE 6.11.
6.12 Condition of Improvements. To the best knowledge of each of the
Contributors after reasonable inquiry, (x) as of the date hereof and (y) except
as otherwise disclosed to Carolina during the due diligence process related to
the Properties by its independent engineers or others conducting such due
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diligence, as of any Closing Date, there is no material defect in the condition
of (i) any of the Properties, (ii) the improvements thereon, (iii) the roof,
foundation, load-bearing walls or other structural elements thereof, (iv) any
drainage or soil condition of any nature, or (v) the mechanical, electrical,
plumbing and safety systems therein, nor any material damage from casualty or
other cause, nor any soil condition of any nature that will not support all of
the Improvements currently thereon without the need for unusual or new
subsurface excavations, fill, footings, caissons or other installations.
6.13 Taxes. Except as set forth on SCHEDULE 6.13 attached hereto and the
ad valorem taxes assessed on the Properties, (i) all tax or information returns
required to be filed on or before the date hereof by or on behalf of the
Constituent Parties or the Properties have been filed and all such tax or
information returns required to be filed hereafter will be filed on or before
the date due in accordance with all applicable laws prior to the incurrence of
any penalties or interest thereon and all taxes shown to be due on any returns
have been paid or will be paid when due; and (ii) to the best knowledge of each
of the Contributors, there is no action, suit or proceeding pending against or
threatened with respect to any Constituent Party or any of the Properties in
respect of any tax, nor is any claim for additional tax asserted by any taxing
authority. None of the Constituent Parties nor any of their respective federal,
state and local income or franchise tax returns are the subject of any audit or
examination by any taxing authority. None of the Constituent Parties has
executed or filed with the Internal Revenue Service or any other taxing
authority any agreement now in effect extending the period for assessment or
collection of any income or other taxes.
6.14 Management Agreements. All management, leasing, development or
service and similar agreements in effect relating to the Properties and certain
other properties owned or controlled by Contributors and which have been
specified by FAC or Carolina (collectively, the "Management and Leasing
Agreements") shall be terminated as of the Closing Date and thereafter shall be
void and of no further force and effect.
6.15 Operating Agreements. True, complete and correct copies of all
agreements pertaining to the operation of the Properties as of the date hereof
(collectively, the "Existing Operating Agreements") have been provided or made
available to Carolina. The Existing Operating Agreements are, to the best
knowledge of each of the Contributors, in full force and effect, no Constituent
Party is in default of any of its material obligations under any of such
Existing Operating Agreements, and except for those set forth on SCHEDULE 6.15
attached hereto, all Existing Operating Agreements are terminable on not more
than thirty (30) days prior written notice and without payment of any penalty.
At the Closing with respect to each of the Properties, true, complete and
correct copies of such Existing Operating Agreements shall have been provided or
made available to Carolina and, to the best knowledge of each of the
Contributors, the Existing Operating Agreements shall be, unless otherwise
described in writing to Carolina or except as otherwise provided herein, (i) in
full force and effect and (ii) free from any default by the appropriate
Constituent Party of any of its material obligations under any of them. The
Contributors shall advise Carolina immediately of any default by any party to an
Existing Operating Agreement. Carolina does not assume any obligation under any
Existing Operating Agreement for acts or omissions which occur prior to Closing.
6.16 Absence of Certain Changes. Since December 31, 1996, except as
otherwise set forth in this Master Agreement, to the best knowledge of each of
the Contributors, there has not been with respect to itself or any of the
Constituent Partnerships:
(a) any material adverse change in the financial condition of any
of such Constituent Parties;
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(b) any adverse change in the condition of the property, business
or liabilities of any of such Constituent Parties except normal and usual
changes in the ordinary course of business which have not been materially
adverse;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business
of any of the Constituent Parties;
(d) any sale, abandonment or other disposition by any of the
Constituent Parties of any interest in the Properties, or of any personal
property owned by a Constituent Party, other than in the ordinary course
of such Constituent Party's business;
(e) any change in the accounting methods or practices by any of the
Constituent Parties or in depreciation or amortization policies
theretofore used or adopted;
(f) any material contractual liability incurred by any of the
Constituent Parties, contingent or otherwise, other than for operating
expenses, obligations under executory contracts incurred for fair
consideration and taxes accrued with respect to operations during such
period, all incurred in the ordinary course of business; or
(g) any other material adverse change in the business, operations
or liabilities of any of the Constituent Parties or any of the
Properties.
6.17 Tradename. There have never been any Liens or pending or threatened
third-party claims for infringement or unlawful use of the tradename used by any
Constituent Party, and to the best knowledge of each of the Contributors each of
the Constituent Parties has the right to sell, transfer, assign and convey the
Tradename to Carolina, provided, however, no party has filed for any protection
under federal or state trademark laws and no Constituent Party has taken any
steps other than use to secure any common law proprietary interest in the
Tradename.
6.18 Title. The Contributors or Constituent Partnerships, as applicable,
have good and marketable fee simple title to the Properties, and as of Closing
there will be no mechanics' liens, contractors' claims, unpaid bills for
material or labor pertaining to the Properties, nor any other similar liens
which might adversely affect such Contributors' or Constituent Partnerships'
title to the Properties, except for current ad valorem real estate taxes.
6.19 Certain Liens. All labor and services performed and materials
furnished to the Properties have been paid for in full and to the best of the
Contributors' knowledge, there exists no basis for which a mechanic's,
materialman's or similar lien can properly be claimed against the Properties or
any part thereof.
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ARTICLE VII
CONDITIONS TO CLOSING AND
DUE DILIGENCE INVESTIGATION
7.1 Conditions to Closing of Properties. In addition to the other
pre-conditions detailed herein, each of the following shall be a condition as
described below to the obligation to close the transactions contemplated hereby
with respect to the Properties:
(a) FAC Shareholder Approval. If it is determined by FAC that the
completion of the transactions contemplated hereby requires the approval
of FAC's shareholders, then (i) such approval shall be a condition to
close the transaction contemplated hereby and (ii) FAC agrees that it
shall in good faith promptly begin the process of preparing and filing
with the SEC any necessary proxy material and will call for and hold a
shareholder meeting as soon as is reasonably practicable to vote on such
matter. If such approval is required and the shareholders of FAC do not
approve the transactions contemplated hereby, this Agreement shall be
terminated.
(b) Refinancing of Loans. Carolina shall have no obligation to
close the transactions contemplated hereby if Carolina determines that it
is unable to obtain the consent of the holders of the Outstanding Debt
Financing to the assignment of the Interests or sale of the Properties on
terms reasonably acceptable to the Board of Directors of FAC, including
non-recourse provisions satisfactory to FAC in FAC's sole discretion.
(c) Termination of Management Contracts. Carolina shall have no
obligation to close the transactions contemplated hereby if Carolina does
not have the unconditional right, as of the Closing Date, to manage all
of the Properties and such other properties owned or controlled by
Contributors as Carolina and FAC shall require. Any costs associated with
terminating any existing contracts shall be at the Contributors' expense.
(d) No Material Adverse Change to Properties. Carolina shall have
no obligation to close the transactions contemplated hereby if there has
been a material adverse change in the condition, financial or otherwise,
of any of the Properties, or the business prospects of any of the
Properties from the date hereof.
(e) Title and Survey. Carolina shall have no obligation to close
the transactions contemplated hereby if the Contributors do not convey
good and marketable title to the Properties, which shall be free and
clear of all liens, defects and encumbrances, except "Permitted Liens."
Carolina shall be responsible for ordering the ALTA survey at Carolina's
cost. Additionally, Carolina and the Contributors are each responsible
for their respective legal fees. Any fees associated with the assumption,
consent or assignment or the prepayment or retirement of debt encumbering
any of the Properties, property transfer and documentary taxes, all other
costs related to the transfer of the Properties and escrow fees shall be
paid by the Contributors.
(f) Opinion to Carolina. Carolina shall have no obligation to close
the transactions contemplated hereby if Carolina and FAC have not
received an opinion of counsel to the Contributors and Constituent
Parties which is satisfactory to Carolina and FAC in form and substance.
(o) Zoning. No actual or threatened easement, zoning ordinance or
use regulation, statute, ordinance, law, juridical decision, official or
unofficial policy, restriction or reservation or proposed shall prohibit
or impair (and there shall be no pending or threatened litigation which
may prohibit or impair) Carolina's use and operation of the Properties.
14
(p) Representations and Warranties. All of the representations and
warranties of the parties hereto shall be true and correct in all
material respects as of the Closing Date and the Contributors shall have
delivered to Carolina and FAC the Bringdown Certificate in respect
thereof.
7.2 Carolina Investigation/Due Diligence Period. For a period commencing
upon the execution date of this Agreement and continuing through and including
the Closing Date ("Investigation/Due Diligence Period"), Carolina, at its own
expense, shall have the right, but not the obligation, to perform due diligence
on the Properties and the Constituent Parties, including but not limited to the
following procedures:
(a) Physical. Inspect all physical aspects of the Properties,
including inspections of all apartment units at each Property and
including all systems, components and service contracts. Contributor
agrees to supply Carolina with "as-built" plans, specifications and
surveys with respect to all Properties.
(b) Regulatory. Investigate all zoning, code and governmental
requirements, including the review of certificates of occupancy and
licenses, all which shall be provided by the Constituent Parties.
(c) Environmental. Review and perform Phase I and Phase II audits
and other environmental studies.
(d) Title. Review preliminary title reports and surveys.
(e) Lease and Tenant Information. Review copies of leases, rental
agreements and contracts, together with any modifications or amendments
therein pertaining to the operation of the Properties.
(f) Books and Records. Obtain the Constituent Financial Statements;
verify financial information from all accounting books and records since
the inception of the Contributors' ownership; review any other
information and documents in the Contributors' possession or control and
pertaining to the Contributors' ownership and operation of the Properties
including all tax records (collectively, the "Records").
Each Contributor covenants and agrees that it shall provide Carolina with
access to all Records in the Constituent Parties' possession and control.
Carolina shall conduct all of its property inspections in a manner intended to
accommodate the tenants or to the operation of the Properties.
After its investigation, if Carolina, in its sole discretion determines
that any Property or Interests are not satisfactory for purchase or operation,
then Carolina may terminate this Master Agreement as to such Property or
Interests. Such termination shall have no effect upon the parties' respective
obligations with respect to Properties or Interests as to which this Master
Agreement has not been so terminated.
The Constituent Parties and each Contributor will cooperate with Carolina
before and after Closing in providing such information as Carolina may
reasonably require to prepare its proxy material and Form 8-K filings and such
other reports and filings as may be required by any governmental authority, NYSE
or applicable exchange.
7.3 Closing Documents. At Closing the Contributors and, as applicable,
the Constituent Partnerships shall execute and deliver the following documents
to Carolina:
15
(a) Title Insurance Affidavit. Any affidavit required by the title
company to remove the standard printed exceptions from the title policy
and the loan policy. Additionally, Constituent Parties shall discharge in
full any and all indebtedness underlying such exceptions at or before the
Closing.
(b) Letters to Tenants. Letters addressed to the Tenants and signed
by the Contributors or, if applicable, the Constituent Partnerships,
advising the Tenants of the Closing of the Transactions and Carolina's
right to receive the rents under their respective Leases.
(c) Bringdown Certificate. The Bringdown Certificate.
(d) Other Documents. Such other documents as may be reasonably
required to close the Transactions contemplated by this Master Agreement.
ARTICLE VIII
INDEMNITY
8.1 Representations and Warranties of each of the Contributors. Each of
the Contributors hereby agrees, for himself and his successors and assigns, to
indemnify, defend and hold both Carolina and FAC harmless from and against any
and all damage, cause of action, action, proceeding, expense, loss, cost, claim
or liability (each a "Claim") suffered or incurred by either Carolina or FAC as
a result of any of the following: any untruth, inaccuracy or breach of any of
the representations, warranties or covenants made by himself or any Constituent
Party controlled by such Contributor in this Master Agreement, or in the
Exchange Option Agreement, the Bringdown Certificate or any other document,
certificate or exhibit delivered in connection therewith. It is the express
intention and agreement of the parties that the foregoing indemnity shall
survive the consummation of the transactions contemplated in this Master
Agreement.
8.2 Arbitration. Any dispute, claim or controversy between Carolina and
any Contributor as to liability of any Contributor above shall be settled by
arbitration in accordance with this Section. Each of Carolina and the
Contributors (by a vote of majority thereof) shall appoint an arbitrator, and
the two arbitrators so appointed shall promptly select a third arbitrator.
Within thirty (30) days of the completion of such appointments, the parties
shall submit to arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The place of arbitration shall be Cary,
North Carolina. Notwithstanding anything to the contrary herein, the arbitrators
are not empowered to award damages in excess of compensatory damages and each
party hereby irrevocably waives any right to recover such damages with respect
to any dispute or controversy resolved by arbitration under this Section.
Judgment on the award rendered by the arbitrators may be entered in any court of
competent jurisdiction and shall be binding upon the parties.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and demands which any party is required or
desires to give to the other shall be given in the manner and at the addresses
set forth in the Exchange Option Agreement.
9.2 Counterparts. This Master Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16
9.3 Severability. Any provision of this Master Agreement which is
prohibited or unenforceable in any jurisdiction shall as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision on any other jurisdiction.
9.4 Assigns. This Master Agreement shall be binding upon and inure to the
benefit of any and all successors, assigns, or other successors in interest of
FAC and Carolina. This Master Agreement shall be binding upon and inure to the
benefit of any and all respective successors, assigns, personal representatives,
executors, or other successors in interest of the Contributors; provided,
however, that none of the Contributors shall assign its rights or delegate its
obligations hereunder without the prior written consent of Carolina, which may
be withheld for any reason. This Master Agreement shall not confer any rights or
remedies upon any person or entity other than Carolina, FAC, the Contributors
and their respective successors and permitted assigns.
9.5 Public Announcement. Except as otherwise required by law, the
Contributors shall not make public announcements with respect to the
transactions contemplated by this Master Agreement without the approval of the
other parties, which approval may be withheld for any reason.
9.6 Confidentiality Each party hereto shall ensure that all confidential
information which such party or any of its respective officers, directors,
employees, counsel, agents or accountants may now possess or may hereafter
create or obtain relating to the financial condition, results of operations,
business, properties, assets, liabilities or future prospects of the other
party, any Affiliate or subsidiary of the other party or any tenant, customer or
supplier of such other party, or any such Affiliate or subsidiary, shall not be
published, disclosed or made accessible by any of them to any other person or
entity at any time or used by any of them, in each case without the prior
written consent of the other party; provided, however, that the restrictions of
this sentence shall not apply: (i) to the extent that disclosure may otherwise
be required by law; (ii) to the extent such information shall have otherwise
become publicly available; or (iii) to disclosure by or on its behalf to its
lender(s) for the purpose of obtaining financing in connection with the
acquisition of the Properties. In the event this Master Agreement is terminated,
each party promptly will deliver or certify destruction to the other party all
documents, work papers and other material (and any reproductions thereof)
obtained by each party or on its behalf from such other party or its Affiliates
or subsidiaries in connection with the subject transaction, whether so obtained
before or after the execution hereof, and will itself not use any information so
obtained and will use its good faith and diligent efforts to have any
information so obtained kept confidential and not used in any way detrimental to
such other party, subject to the limitations set forth in this Section above.
9.7 Remedies. In the event that any party defaults or fails to perform
any of the conditions or obligations of such party under this Master Agreement
or any other agreement, document or instrument executed in connection with this
Master Agreement, or in the event that any such party's representations or
warranties contained herein or in any such other agreement, document or
instrument are not true and correct as of the date hereof and as of the Closing
Date, any other party shall be entitled to exercise any and all rights and
remedies available to it by or pursuant to this Master Agreement, documents or
instruments contemplated hereby or at law (statutory or common) or in equity
subject to the limitation on liability set forth herein; provided, however, that
in the event of a Closing of the transactions contemplated by this Master
Agreement, the rights and remedies of each party shall be limited to the rights
contained in Article X of this Master Agreement.
9.8 Captions. The captions and headings set forth in this Master
Agreement are for convenience of reference only and shall not be construed as a
part of this Master Agreement.
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9.9 Exhibits and Schedules. All exhibits and schedules referred to in
this Master Agreement and attached hereto shall be deemed and construed as part
of this Master Agreement and for all purposes all such exhibits and schedules
are hereby specifically incorporated herein by reference.
9.10 Merger Clause. This Master Agreement and the Exchange Option
Agreement contain the final, complete and exclusive statement of the agreement
among the parties with respect to the transactions contemplated herein and
therein, and all prior or contemporaneous oral and all prior written agreements
with respect to the subject matter hereof are merged herein.
9.11 Amendments and Waiver. No change, amendment, qualification,
cancellation or termination hereof shall be effective unless in writing and duly
executed by each of the parties hereto. No failure of any party to enforce any
provisions hereof or to resort to any remedy or to exercise any one or more of
alternate remedies and no delay in enforcing, resorting to or exercising any
remedy shall constitute a waiver by that party of its right subsequently to
enforce the same or any other provision hereof or to resort to any one or more
of such rights or remedies on account of any such ground then existing or which
may subsequently occur.
9.12 Governing Laws. This Master Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware and of
the United States of America.
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their hands and under seal affixed hereto as of the date and year first above
written.
FAC REALTY, INC.
By:
-------------------------------------
Name:
---------------------------------
Title:
--------------------------------
CAROLINA FAC LIMITED PARTNERSHIP
By: FAC Realty, Inc.,
General Partner
By:
-----------------------
Title:
----------------------
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Separate signature page to Master Agreement.
[SEAL]
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XXX X. XXXXXXX
19
Separate signature page to Master Agreement.
[SEAL]
----------------------
XXXXXXX X. XXXXXX
20
Separate signature page to Master Agreement.
[SEAL]
--------------------------
XXXX X. XXXX
21
Separate signature page to Master Agreement.
[SEAL]
-------------------------
XXXXXXXX XXXXX
22
Separate signature page to Master Agreement.
[SEAL]
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XXXX X. XXXXXX
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LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Properties and Constituent Partnerships
Schedule 3.2 Outstanding Debt Financing
Schedule 4.6 Personal Property of Constituent Parties
Schedule 6.2A Schedule of Leases
Schedule 6.2B Lease Defaults
Schedule 6.2C Lease Consents
Schedule 6.4 Liabilities
Schedule 6.7 Claims or Litigation
Schedule 6.11 Condemnation and Moratoria
Schedule 6.13 Taxes
Schedule 6.15 Operating Agreements - Exceptions to Termination
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