EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
among
AMERICA FIRST PM GROUP, INC.
AMERICA FIRST PROPERTIES MANAGEMENT COMPANY,
L.L.C.,
and
AMERICA FIRST COMPANIES, L.L.C.
Dated as of November 8, 2004
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into this
8th day of November, 2004 (the “Agreement”) by and
among AMERICA FIRST PM GROUP, INC., a Nebraska corporation (the
“Buyer”), and AMERICA FIRST PROPERTIES MANAGEMENT
COMPANY, L.L.C., a Delaware limited liability company (the
“Seller”) and AMERICA FIRST COMPANIES L.L.C., a
Delaware limited liability company (“America First”).
The Buyer, the Seller and America First are collectively referred
to as the “Parties.”
W I T N E S S E T H:
WHEREAS, the Buyer
is a wholly owned subsidiary of America First Apartment Investors,
Inc., a Maryland corporation (“APRO”) which currently
owns and operates 29 multifamily apartment complexes and one
commercial office/warehouse facility listed in Schedule A
hereto (the “APRO Properties”); and
WHEREAS, the
Seller has been in the business of providing real estate management
services on a contract basis for twelve years and presently manages
each of the APRO Properties as well as properties owned by other
parties listed on Schedule A (the “Non-APRO
Properties”) and has developed unique and proprietary fully
integrated business and accounting systems, operating procedures,
computer programs, business forms, sales and marketing techniques
and other “know how” relating to its business;
and
WHEREAS, pursuant
to the terms of a Management Services Agreement, dated
January 1, 1997, between the Buyer and the Seller, the Buyer
employs all on-site personnel at both the APRO Properties and the
Non-APRO Properties, including resident managers and various
maintenance, clerical and other personnel necessary to the day to
day operation of such properties and makes these employees
available to the Seller to serve in such capacities at the
properties managed by the Seller and the Seller causes the Buyer to
be reimbursed for the salaries, wages, withholding obligations and
other direct employment expenses for such employees directly from
the gross revenues of the respective properties; and
WHEREAS, certain
employees of Buyer identified in Schedule D hereto serve in
capacities as regional or district managers (“RDMs”)
for the Seller pursuant to the terms of various agreements (the
“Regional Manager Agreements”) by and among Seller and
such persons which provide for noncompete provisions that prevent
such persons from performing property management services with
respect to the properties managed by the Seller, including each of
the APRO Properties, in any capacity other than through the Seller
during the term of their agreements and for one year thereafter;
and
WHEREAS, America
First employs all of the officers and other key managerial
personnel of the Seller under employment agreements that provide
that such individuals shall serve exclusively in such roles for the
Seller until September 2007 and that further provide for
noncompete provisions that prevent such persons from performing
property management services with respect to the properties managed
by the Seller, including each of the APRO Properties, in any
capacity other than through the Seller during the term of their
agreements and for one year thereafter (the “Transferring
Employee Agreements”); and
WHEREAS, APRO, as
a public real estate investment trust desires to raise additional
capital through the offering of additional common or preferred
stock in the public equity markets and in order to position itself
to do so has concluded that it should internalize the management of
the APRO Properties, and of certain of the Non-APRO Properties
which it will manage on a fee basis, all of which are set forth in
Schedule A hereto (the “Transferred Properties”),
through the acquisition by its wholly-owned subsidiary of certain
assets from the Seller, including certain equipment, supplies and
other tangible assets, rights to the use of proprietary systems and
procedures developed by the Seller, rights and obligations under
the property management agreements related to the Transferred
Properties (the “Property Management Agreements”), the
Regional Manager Agreements between the Seller and the RDMs, and
the employment contracts of necessary management personnel from
America First and office space through a lease from America First;
and
WHEREAS, the
Seller is willing to sell and convey to the Buyer such assets to
the Buyer, to surrender its Regional Manager Agreement with each of
the RDMs to Buyer, and to surrender the Property Management
Agreements with respect to each of the Transferred Properties to
the Buyer, and America First is willing to assign to the Buyer the
Transferring Employee Agreements for the management personnel who
are assigned by the Seller to the management of the Transferred
Properties and to lease certain office space to the Buyer, all on
the terms and conditions set forth herein;
NOW, THEREFORE, in
consideration of the premises and the mutual representations,
promises and covenants therein contained and for other good and
valuable consideration, the receipt and legal sufficiency of which
are hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I
TRANSFER OF ASSETS AND RIGHTS
Section 1.01. Purchase and Sale of Property Management
Assets . Subject to the terms and conditions of this Agreement,
the Seller agrees to sell and deliver to the Buyer at the Closing,
free and clear of any and all liabilities, claims, security
interests, liens, restrictions on transfer and encumbrances, and
the Buyer agrees to purchase from the Seller, each of the tangible
and intangible assets listed on Schedule B hereto (the
“Property Management Assets”). All such assets are sold
by the Seller on an “as is” and “where is”
basis.
Section 1.02. License of Certain Business Systems and
Procedures .
(a) Subject to the
terms and conditions of this Agreement, the Seller agrees to grant
and deliver to the Buyer at the Closing, a perpetual,
non-exclusive, non-transferable enterprise-wide license to use the
proprietary business systems, procedures and practices of the
Seller relating to the management of residential and commercial
real estate, including, but not limited to, all software, manuals,
handbooks, business forms, and other manifestations thereof (the
“Systems”) and agrees to deliver usable copies thereof
to the Buyer at the Closing in such quantities as the Buyer may
request for its legitimate business purposes. The Buyer may use the
Systems, including any software relating to
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same,
at any site at which the Buyer conducts property management
operations either currently or in the future. Prior to Closing, the
Seller will obtain such consents from any third party which owns
any software or other intellectual property licensed by the Seller
that is included as a component of the Systems as may be necessary
to allow the granting of a sublicense to the Buyer.
(b) The Buyer
acknowledges and agrees that the Seller shall retain all
proprietary rights, including patent, copyright, trade secret,
trademark and other proprietary rights, in and to the Systems and
any revisions, enhancements, updates or other modifications thereto
made by the Seller. In addition, the Buyer agrees that it will
conduct all of its property management and other business
operations under its own name and not the name of the
Seller.
(c) Without the
prior written permission of the Seller, the Buyer shall not permit
any competitor of the Seller, or other third party with which the
Buyer does not have an enforceable property management contract, (a
“Third Party”) to use the Systems.
(d) To the extent
the Systems consist of software, the Buyer has tested the software
for compliance with its needs and specifications and has
accepted the software and the conditions of its use. The Buyer
s hall, at its sole cost, arrange for the purchase or lease,
installation, testing and maintenance of adequate hardware for use
with respect therewith, including certain hardware included in the
Property Management Assets acquired from the Seller. The Buyer
shall be solely responsible for hardware maintenance, including
periodic inspections, adjustments and repair and the cost
thereof.
(e) The Seller
also agrees to provide to the Buyer, at no additional cost, for a
period of twelve (12) months after the Closing Date such
enterprise support services, including assistance with software
functionality, as are necessary to allow the Buyer to effectively
use the Systems to perform its property management services for
APRO and its other customers.
Section 1.03. Assignment and Assumption of Property
Management Agreements . At the Closing, the Seller shall assign
to the Buyer, and the Buyer will assume from the Seller, each
Property Management Agreement for each of the Transferred
Properties. As a result, the Buyer will assume all liabilities and
obligations of the Seller under such Property Management Agreements
which arise on or after the Closing Date and will agree to perform
all obligations of the Seller under such Property Management
Agreements which are to be performed on or after the Closing Date.
The Seller (in cooperation with the Buyer, as necessary) will
obtain such consents from the owner or lender of each such
Transferred Property (other than APRO) as may be necessary to allow
the assignment of such Property Management Agreements and the
assumption by the Buyer of the property management duties
thereunder. Upon the conveyance of such Property Management
Agreements, the Seller shall deliver to the Buyer all original
business books and records, accounts, and other information
relating to the Transferred Properties as are necessary for the
Buyer to fully assume the management of the Transferred
Properties.
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Section 1.04. Assignment and Assumption of Region Manager
Agreements . At the Closing, Seller shall assign to the Buyer,
and the Buyer will assume from Seller, the Regional Manager
Agreements between the Seller and each of the RDMs.
Section 1.05. Assignment and Assumption of Transferring
Employment Agreements . At the Closing, America First shall
assign to the Buyer, and the Buyer will assume from America First,
the Transferring Employee Agreements for each America First
employee identified on Schedule D hereto (the
“Transferring Employees”), each of whom shall become a
full-time employee of the Buyer as a result thereof. America First
will obtain such consents as may be necessary from each such
individual to allow the assignment of such Transferring Employee
Agreements, including, if requested by the Buyer, an agreement to
enter into a new employment agreement with the Buyer at or after
the time of the Closing.
Section 1.06. Lease of Office Space. America First
agrees to lease to the Buyer, and the Buyer agrees to lease from
America First on the Closing Date, a total of 2,669 square feet of
office space in the building owned by America First at 1004 Farnam
Street, Omaha, NE for use as the Buyer’s headquarter offices
on the terms and conditions of a commercial real estate lease in
the form attached hereto as Exhibit 1 (the
“Lease”).
Section 1.07. Limited Services Agreement. The Buyer
agrees to enter into an agreement with the Seller under which the
Buyer will provide certain limited services to the Seller and/or
permit certain personnel of Buyer to perform certain limited
services on behalf of the Buyer (the “Limited Services
Agreement”) in the form set for as Exhibit 2
hereto.
Section 1.08. Excluded Assets . The Seller and America
First, as the case may be, shall retain and not sell and deliver to
the Buyer, and the Buyer shall not purchase from the Seller or
America First, any and all other assets not specifically delineated
herein. Specifically, and without limitation, the following
properties and assets of the Seller that are not being sold or
conveyed to the Buyer under this Agreement:
(a) the corporate
charters, qualifications to conduct business as foreign entities,
arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, interest transfer books, and other documents relating
to the organization, maintenance and existence of the Seller and
America First and any other books and records, financial or
otherwise, of the Seller or America First which do not directly and
solely relate to the management of the Transferred
Properties;
(b) All other
properties of the Seller or America First of whatever kind,
character or description, owned, used or held for use (whether or
not exclusively) in connection with the Seller’s or America
First’s business, wherever located and whether or not related
to the management of the Transferred Properties; and
(c) Any of the
rights of the Seller or America First under this Agreement,
including the Purchase Price to be paid to the Seller and America
First.
Section 1.09. Excluded Liabilities . Except for those
liabilities accruing after the Closing Date under the Property
Management Agreements for the Transferred Properties,
the
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Regional Manager Agreements, the
Transferring Employee Agreements, the liabilities set forth in the
Lease or any additional liability associated with the Purchased
Assets that are specifically set forth on Schedule E hereto,
Buyer does not assume and shall not be deemed to have assumed, and
Seller and America First shall remain solely responsible for, any
liability or obligation of Seller or America First existing on the
Closing Date. In addition, the Parties hereto acknowledge and agree
that the consummation of the transactions described in this
Agreement, including the conveyance of the Purchased Assets to the
Buyer, is not intended to modify or eliminate any of the advisory
services provided to APRO by America First Apartment Advisory
Corporation pursuant to the terms of that certain Second Amended
and Restated Advisory Agreement, dated June 3, 2004 or to
otherwise change the obligations of the parties thereto.
ARTICLE II
PURCHASE PRICE AND CLOSING
Section 2.01. Purchase Price for Purchased Assets . The
purchase price to be paid for the assets sold, assigned or conveyed
to the Buyer pursuant to Sections 1.01 through 1.05 hereof,
and the right to lease space as provided under Section 1.06
hereof (collectively, the “Purchased Assets”) shall be
$6,750,000.00 (the “Purchase Price”), payable as
provided in Section 2.03 hereof.
Section 2.02. Closing . Subject to the satisfaction or
waiver of the conditions set forth in Article VII hereof, the
Closing with respect to the transactions contemplated herein (the
“Closing”) shall take place on at 9:00 a.m. on
November 8, 2004, at the law offices of Kutak Rock LLP, 1650
Farnam Street, Omaha, Nebraska, or at such other time and at such
place as the Parties may mutually agree in writing (the
“Closing Date”). All management, revenue, expenses,
liability and responsibility with respect to the Purchased Assets
shall pass to the Buyer as of the close of business on the Closing
Date for its use free and clear of all liabilities, security
interests, liens, charges, claims, licenses, rights, encumbrances
and restrictions on transfers, except those expressly retained by
the Seller or America First hereunder or that may arise from acts
of the Buyer.
Section 2.03. Payment of Purchase Price . The Buyer
shall pay to the Seller and America First the sum of $6,500,000.00
(the “Initial Payment”) at the Closing. The Buyer shall
pay to the Seller and America First the sum of $250,000.00 (the
“Final Payment”) within three (3) Business Days
following Buyer’s receipt of (a) those consents
contemplated by Section 1.03 which are required of the Seller,
and (b) a legal opinion from counsel to the Seller and America
First providing that no other consents of any governmental or
regulatory agencies or any other third parties are required of the
Seller. Each payment shall be made by the Buyer when due in
immediately available funds via wire transfer to such account as
shall be identified to the Buyer not less than 24 hours prior to
the date on which such payment is due.
Section 2.04. Allocation of Purchase Price . The
Purchase Price shall be allocated among the Purchased Assets as
mutually agreed upon by the Buyer and the Seller within ninety
(90) days following the Closing Date. The Buyer and the Seller
agree to use such allocation for all tax and reporting purposes,
including but not limited to the preparation of Internal Revenue
Service Form 8594 and not to take any contrary position with
respect thereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND AMERICA FIRST
The
Seller and America First each represent and warrant, jointly and
severally, to the Buyer that the statements contained in this
Article III are correct and complete as of the date of this
Agreement and shall be correct and complete as of the Closing Date,
except as set forth in Annex I. The Disclosure Schedule in Annex I
will be arranged in paragraphs corresponding to the lettered and
numbered sections contained in this Article III.
Section 3.01. Organization and Authorization . Both the
Seller and America First are duly organized and validly existing as
limited liability companies under the laws of the State of Delaware
and each of them has all power and authority to enter into this
Agreement and to sell, transfer and assign the Purchased Assets to
the Buyer pursuant to the terms hereof and to perform their
respective other obligations under this Agreement and the Lease.
The execution, delivery and performance of this Agreement by the
Seller and America First have been duly authorized by all necessary
action on the part of the Seller and America First.
Section 3.02. Enforceability and Noncontravention .
This Agreement constitutes the valid and legally binding obligation
of the Seller and America First, and when executed and delivered by
the Buyer in accordance with the terms hereof, will constitute a
valid and legally binding obligation of the Seller and America
First enforceable against each of them in accordance with its terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of
creditors’ rights generally or by equitable principles
relating to enforceability (regardless of whether considered in a
proceeding at law or in equity). Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any
government, governmental agency or court to which either the Seller
or America First is subject or any provision of the Articles of
Organization or Operating Agreement of either the Seller or America
First or (b) conflict with, result in a breach of, constitute
a default under, result in the acceleration of or create in any
party the right to accelerate, terminate, modify or cancel any
agreement, contract, lease, license, credit facility or similar
banking agreement, instrument or other arrangement to which either
the Seller or America First is a party or by which either of them
is bound or to which any of their assets are subject, including the
assets sold to Buyer hereunder. Neither the Seller nor America
First is required to give any notice to, make any filing with or
obtain any authorization, consent or approval of any governmental
or regulatory agency or any other third party in order for the
Parties to consummate the transactions contemplated by this
Agreement, other than those which shall be identified to the Buyer
in writing, and obtained, prior to the Closing Date, and other than
the contemplated by Sections 1.03 and 1.05 (which consents may
be obtained or otherwise resolved after the Closing).
Section 3.03. Litigation . There is no claim, action,
order, writ, judgment or decree outstanding or suit, litigation or
proceeding pending or, to the Knowledge of the Seller or America
First, threatened, against either the Seller or America First with
respect to the Purchased
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Assets or the execution of this
Agreement or the consummation of the transaction contemplated
thereby.
Section 3.04. Compliance with Laws . The Seller and
America First are each in material compliance with, and are not in
material violation of, and, to the their Knowledge, are not under
investigation with respect to any suspected or alleged violation
of, any laws applicable to the management of the Transferred
Properties.
Section 3.05. Title . The Seller or America First, as
the case may be, own good and transferable title to the Purchased
Assets. The Purchased Assets are held by the Seller or America
First, as the case may be, and will be transferred to the Buyer,
free and clear of all liabilities, security interest, liens,
charges, claims, licenses, rights, encumbrances and restrictions on
transfers, and no financing statement covering all or any portion
of the Purchased Assets and naming the Seller or America First as
debtor has been filed in any public office, which has not been
released. The Purchased Assets are sold as is and where is as to
their physical condition. The cost of acquiring or developing the
Systems was borne by the Seller or America First and none of such
costs were charged or otherwise borne by the Buyer.
Section 3.06. Sufficiency. The Property Management
Assets, Systems, Property Management Agreements, Regional Manager
Agreements, Transferring Employee Agreements and office space to be
made available under the Lease constitute all of the assets,
tangible and intangible, and rights, of any nature whatsoever,
necessary for the Buyer to manage the Transferred Properties in the
manner presently managed by the Seller.
Section 3.07. Financial Statements. Seller has
delivered to Buyer balance sheets of Seller as of December 31,
2003 and August 31, 2004 and the respective related statements
of income for the year then ended and the eight months then ended
(the “Historical Financial Statements”). Seller has
delivered to Buyer a pro forma projected statement of income (the
“Pro Forma Financial Statement”), with adjustments that
appropriately eliminate from the Seller’s corresponding
Historical Financial Statement the Excluded Assets and the results
of business that will not be acquired by Buyer pursuant to this
Agreement, for the eight months ended August 31, 2004 and
annualized for the twelve month period ending December 31,
2004. The information contained in the Historical Financial
Statements is true and correct in all material respects and fairly
presents the financial condition and the results of operations of
Seller at the respective dates of and for the periods referred to
in such Historical Financial Statements in all material respects.
The Pro Forma Financial Statement fairly presents in all material
respects the results of operations of Seller for the eight month
period ended August 31, 2004, as adjusted to reflect the
transactions contemplated by this Agreement, and then annualized
for the twelve month period ending December 31, 2004. Seller
does not have any properties, assets, liabilities, revenues or
expenses except as set forth in the Historical Financial
Statements. Since August 31, 2004, the Seller has managed the
Transferred Properties only in the ordinary course
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