Exhibit 10.1
SECOND AMENDMENT AND EXHIBIT
ACKNOWLEDGEMENT TO MASTER
FORMATION AND CONTRIBUTION
AGREEMENT
This SECOND AMENDMENT AND EXHIBIT
ACKNOWLEDGEMENT TO MASTER FORMATION AND CONTRIBUTION AGREEMENT
(this “ Amendment ”), dated as of
December 9, 2006, is entered into by and between, ARIZONA LAND
INCOME CORPORATION, an Arizona corporation (together with any
successor by merger, “ AZL ”), and POP VENTURE,
LLC, a Delaware limited liability company (“ POP
”).
A. The parties hereto have entered
into that certain Master Formation and Contribution Agreement,
dated as of October 3, 2006, and that certain Amendment and
Exhibit Acknowledgement to Master Formation and Contribution
Agreement dated November 2, 2006 (such agreement, as so
amended, the “ Master Agreement ”).
B. Capitalized terms used but not
otherwise defined in this Amendment shall have the meanings
respectively ascribed to them in the Master Agreement.
C. The Master Agreement provides
that various prorations and adjustments shall be made at Closing
and that, in certain instances, such adjustments may increase the
total consideration payable to the POP Members by AZL.
D. The Master Agreement governs
AZL’s right to declare and pay dividends on AZL Common
Stock.
E. The parties have agreed to
revised forms of UPREIT Agreement and Noncompetition
Agreement.
F. The parties hereto desire to
amend and modify the Master Agreement in accordance with the terms
and subject to the conditions set forth in this Amendment. As
amended and modified by this Amendment, the Master Agreement may be
referred to as the “ Agreement .”
NOW, THEREFORE, in consideration of
the mutual agreements hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as
follows:
1. Modification of
“Permitted Common Dividends .” The term
“Permitted Common Dividends,” and all references
thereto shall be stricken from the Agreement and the provisions of
the Agreement shall henceforth be interpreted mutatis
mutandis without such term. For the avoidance of doubt, AZL
shall not declare or pay any dividends with respect to AZL Common
Stock other than the Special Dividend of $1.00 per share prior to
Closing.
2. Amendment to
Section 6.3 of the Master Agreement . Section 6.3
of the Master Agreement is hereby deleted and replaced in its
entirety with the following:
“6.3 Declaration of
Special Dividend . AZL, acting through its Board of Directors,
shall, on December 1, 2006, declare the Special Dividend of
$1.00 per share in favor of and for the benefit of its shareholders
of record as of January 5, 2007, which Special Dividend shall
(i) be paid on January 26, 2007, (ii) constitute, to
the extent possible, a “capital gain dividend” within
the meaning of Section 857(b)(3)(C) of the Code and
(iii) be formally designated in accordance with such section
of the Code as being applicable to and shall be first applied to
entirely offset AZL’s net capital gain and other taxable
income (if any) arising from the Mortgage Prepayment and other
taxable income for the fiscal year ended December 31,
2006.”
3. Amendment to
Section 21(h) of the Master Agreement .
Section 21(h) of the Master Agreement is hereby deleted and
replaced in its entirety with the following:
“An option (a) granted by
POP (and all affiliates of POP, which shall be referred to as POP
for the purposes of this Section 21(h)) and
(b) exercisable by the UPREIT to cause POP to contribute to
the UPREIT those parcels of real property (i) identified as of
the Closing as being the subject matter of a prospective or
completed acquisition by POP and (ii) as to which the closing
of such acquisition shall have been completed prior to or after the
Closing, but not later than December 31, 2007 (collectively,
the “ Option Properties ”). The foregoing option
granted by POP to the UPREIT shall provide the UPREIT with the
right to acquire the Option Properties by the payment to POP of an
“ Option Properties Contribution Value ” equal
to the net investment incurred by POP in the acquisition and, if
applicable, the financing, joint venturing and sale of the Option
Properties in question, inclusive of all transaction fees, costs
and expenses and associated tax liabilities incurred by POP
allocable to the Option Properties. The Option Properties
Contribution Value shall be paid to POP, at the option of the
UPREIT, in cash or Common Units or shares of AZL Common Stock (such
Common Units or Common Stock being each valued at an amount equal
to the average closing price per share of AZL Common Stock reported
in the consolidated transaction reporting system during the ninety
(90) trading days immediately preceding the applicable
exercise of the option by the UPREIT). The remaining terms of the
contribution of any Option Property shall be substantially as set
forth in the Contribution Agreements, except that the UPREIT shall
have thirty (30) days following the exercise of its option
with respect to any Option Property to conduct a due diligence
investigation and to terminate such agreement and option without
damages if the results of such due diligence investigation are not
satisfactory to the UPREIT in its sole discretion.
The exercise by the UPREIT of its
option as to any given Option Property tendered by POP shall be
made within a period of thirty (30) days following such
tender, and such tender shall be made by POP within thirty
(30) days after the later of (i) the date on which POP
acquires the subject
2
Option Property or (ii) the
Closing Date. In addition, prior to tendering any Option Property
to the UPREIT, POP shall be entitled to finance the Option Property
with secured mortgage debt, “sell-down” its equity
position in the Option Property by forming a joint venture with a
financial partner, and/or sell or otherwise completely dispose of
properties acquired with Option Properties as a part of a portfolio
acquisition (“ Divested Properties ”). POP shall
be entitled to tender its then existing equity ownership interest
in the Option Properties to the UPREIT subject to such mortgage
financing and/or such joint venture relationship and to tender
Option Properties portfolios to the UPREIT which have been
diminished by the divestiture of Divested Properties. Any net
profit realized by POP on a cash basis in connection with an equity
sell-down of an Option Property or the sale of a Divested Property
shall be transferred to the UPREIT, in the form of a reduction of
the contribution price. Notwithstanding anything set forth above to
the contrary, any exercise of the option by the UPREIT shall
require that the consummation of its acquisition of the subject
Option Property take place not later than sixty (60) days
following such exercise, unless and to the extent consummation is
delayed through no fault of the UPREIT. Notwithstanding anything
herein contained or implied, any Opti
