Execution Version of 8/27/97
Hilltop
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Gorn
Properties, Inc., a Maryland corporation (the "Transferor Corporation"), with an
address c/o Questar Properties, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, and Questar Investment
Corporation, a Maryland corporation (the "Transferor Agent"), with an address of
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇
▇. ▇▇▇▇ and BRI OP Limited Partnership, a Delaware limited partnership (the "BRI
Partnership") with an address c/o Berkshire Realty Company, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇.
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Corporation is the owner of the following:
a. that certain tract or parcel of land located in Baltimore City,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the ▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, commonly known as Hilltop
Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Corporation in and
to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway,
street, road, right-of-way or avenue, open or proposed, in, on, under,
across, in front of, abutting or adjoining the Land, and all right, title
and interest of the Transferor Corporation in and to any awards for damage
thereto by reason of a change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and
all the estate and rights of the Transferor Corporation in and to the Land
and the Improvements, as applicable, or otherwise appertaining to any of
the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed in
Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Corporation
and located on or in or used solely in connection with the Land and
Improvements (collectively, the "Personal Property"); and
f. all of the Transferor Corporation's interest in any intangible
property now or hereafter, owned by the Transferor Corporation and used
solely in connection with the Land, Improvements and Personal Property,
including without limitation the right to use any trade style or name now
used in connection with the same, any contract rights, escrow or security
deposits, utility agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined excepting (i) any
cash and escrow deposits (including escrow deposits and reserves set forth
on Schedule C) and other current assets relating to periods prior to
Closing and (ii) amounts, if any, due to the Transferor Corporation
pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Corporation desires to become a limited partner of
the BRI Partnership and in connection therewith to contribute the Property to
the BRI Partnership, and the BRI Partnership desires to admit the Transferor
Corporation as a limited partner in the BRI Partnership and to accept such
contribution from the Transferor Corporation; and
WHEREAS, in exchange for such contribution, the Transferor Corporation
desires to receive BRI Partnership Units in accordance with the terms of this
Agreement and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Corporation and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
-2-
1.01 Agreement to Contribute; Assignment. The Transferor Corporation
shall contribute to the BRI Partnership, and the BRI Partnership
shall accept from the Transferor Corporation, in exchange for BRI
Partnership Units and upon the terms and conditions set forth in
this Agreement, the Property. At the Closing (as defined in Section
3.01), the Transferor Corporation shall, contribute, assign,
transfer and deliver the Property to the BRI Partnership, or its
designees as provided in Section 18.01 hereof, by a Limited Warranty
Deed in the form of Exhibit III attached hereto (the "Deed").
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B
Owner's Title Insurance Policy (the "Commitment") from Lawyers Title
Insurance Corporation (the "Title Insurer") and copies of all
instruments and plans mentioned therein as exceptions to good and
marketable fee simple title, as well as copies of any instruments
referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title
Policy"). The BRI Partnership shall provide a copy of the Commitment
to the Transferor Corporation promptly after its receipt thereof.
The Commitment shall insure fee simple title to the Property in the
sole name of the BRI Partnership and shall be in the amount of the
Consideration Amount (as defined in Section 2.01(a) hereof). The
Commitment shall provide for a title insurance policy which shall
contain coverage against all mechanics' liens, shall have full
survey coverage, shall have deleted therefrom all "printed standard
exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement and such other endorsements as are reasonably required
by the BRI Partnership (provided, that the cost of any such other
endorsements shall be paid by the BRI Partnership) and are available
under the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Corporation on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Corporation of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Corporation
in writing of such fact as above provided, the Transferor Corporation shall have
thirty (30) days from the date the Transferor Corporation receives notice of
such unacceptable exceptions, at the option of the Transferor
-3-
Corporation, to remove or cure such exceptions, provided further, the Transferor
Agent may, but shall not be required to, make any monetary expenditures in
connection with the removal or cure of such exceptions. All mortgages and deeds
of trust, mechanics liens, tax liens, attachments and all other monetary liens
against the Property (other than liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Corporation at Closing.
The Transferor Corporation shall be deemed to have refused to cure any
unacceptable exceptions unless the Transferor Corporation, within ten (10) days
after receipt of notice from the BRI Partnership, shall notify the BRI
Partnership in writing that the Transferor Corporation will attempt to cure such
unacceptable exceptions. If the Transferor Corporation fails or refuses to cure
said unacceptable exceptions within the time period above provided, on or before
the earlier to occur of (A) ten (10) days after the Transferor Corporation
notifies the BRI Partnership that it refuses to cure such unacceptable
exceptions, and (B) Closing Date, the BRI Partnership may, in accordance with
the provisions of Section 13 hereof, (i) terminate this Agreement by giving
written notice to the Transferor Corporation or (ii) waive such exceptions and
accept title subject thereto, in which event there shall be a reduction in the
Consideration Amount (as defined in Section 2.01(a)) in an amount necessary to
enable the BRI Partnership to remove all Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the
"Survey") of the Land and the Improvements by a registered land
surveyor (the "Surveyor") acceptable to the BRI Partnership, which
Survey shall include (i) all existing buildings, improvements,
fences, encumbrances, encroachments, conflicts, party walls,
protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent
to the Land, or affecting the Land or the Improvements), and any
visible evidence of all water, sewer, gas, telephone and electric
lines, (ii) the exact area of the Land to the nearest hundredth of
an acre, (iii) all buildings set back and other restriction lines,
(iv) property corners and boundary lines of the Property (including
the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to
the monument from which it is fixed, (vi) recorded or otherwise
known easements (stating the recording book and page references in
the case of any such recorded easements), (vii) a metes and bounds
written description of the Land, and (viii) a notation of any
discrepancies between the Survey and the recorded legal description.
The BRI Partnership shall provide a copy of the Survey to the
Transferor Corporation promptly after its receipt
-4-
thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Corporation on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Corporation of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Corporation in writing of such fact as above provided, the Transferor
Corporation shall have thirty (30) days from the date the Transferor Corporation
receives notice of such unacceptable survey matters, at the option of the
Transferor Corporation, to cure such unacceptable survey matters. The Transferor
Corporation shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Corporation, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Corporation will attempt to cure such unacceptable survey
matters. If the Transferor Corporation fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Corporation notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Corporation or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including October 1,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Corporation, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property
-5-
with Environmental Laws (as defined in Section 5.21) and in connection therewith
to conduct such tests and observations and compile such information as the BRI
Partnership, in its sole discretion may deem appropriate (the "Environmental
Inspection"). The BRI Partnership shall provide a copy of any third party
environmental reports obtained by the BRI Partnership, without representation or
warranty, and subject to the limitations on use set forth therein, to the
Transferor Corporation promptly after its receipt thereof. No such inspection,
however, shall constitute a waiver or relinquishment on the part of the BRI
Partnership of its right to rely upon the covenants, representations, warranties
or agreements made by the Transferor Corporation in this Agreement. Should the
BRI Partnership decide, in its sole judgment, during the Due Diligence Period
that based upon the results of the Environmental Inspection, it no longer
desires to proceed with the transactions contemplated hereby, the BRI
Partnership shall have the right to terminate this Agreement by giving written
notice of its election to do so to the Transferor Corporation on or before the
last day of the Due Diligence Period, and upon the giving of such notice this
Agreement shall be of no further force or effect. If the BRI Partnership shall
fail to exercise such termination right within the Due Diligence Period, the BRI
Partnership shall be conclusively deemed to have waived any right it may have
had to terminate this Agreement pursuant to this Section 1.04(b). The BRI
Partnership shall pay when due all fees and expenses incurred in the performance
of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Corporation
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Corporation's books, financial records, Service
Contracts, Leases and tenant files pertaining to the operation of the Property
prior to the Closing. The BRI Partnership's agents and representatives shall be
permitted access to such records and files during regular business hours. To the
extent that any of the Transferor Corporation's financial records relating to
the Property have been audited, the Transferor Corporation agrees to deliver any
reports relating to such audits to the BRI Partnership. The Transferor
Corporation shall provide the BRI Partnership with such information as the
Transferor Corporation may have with respect to actual expenditures made for all
repairs, maintenance, operation and upkeep of the Property, including, without
limitation, to the extent in the possession of the Transferor Corporation, all
taxes and utility payments made within three (3) years prior to the Closing and
dates of construction, installation and major repairs to the Property. All
information obtained by the BRI Partnership or its agents and representatives
pursuant to this Section 1.04(c) shall be treated as confidential, shall not be
disclosed to others until and unless the Closing occurs, and if such information
is in written form, such information shall be returned to the Transferor
Corporation if the Closing does not occur.
-6-
(d) The BRI Partnership shall indemnify the Transferor Corporation against
and from all damage to the Property and/or claims of tenants or other third
parties resulting from any entry on the Property by the BRI Partnership or any
agent, contractor, consultant or other representative of the BRI Partnership, or
any tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Corporation by
reason thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Corporation for any costs of remediation or clean-up, fines,
penalties, assessments or similar charges for any condition existing at the
Property solely by reason of the fact that the BRI Partnership or its agents,
contractors, consultants or other representatives discover the existence of such
condition during the course of conducting tests or other activities on the
Property. The provisions of this Section 1.04(d) shall survive the Closing or
any termination of this Agreement; provided, however, that no claim by the
Transferor Corporation under this Section 1.04(d) for damage to the Property
shall be made if (i) the Closing occurs or (ii) more than 90 days after the
termination of this Agreement if the Closing does not occur, except for damage
claims made by tenants as to which the time for asserting any such claim shall
be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Corporation by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Corporation hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Property by the Transferor Corporation to the BRI Partnership in
accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free
contribution to capital pursuant to Section 721 of the Internal
Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor
Corporation agree to report such transaction for federal and
applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
-7-
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Corporation and the BRI Partnership agree that, subject
to the prorations and adjustments as provided in this Agreement, the
consideration (the "Consideration") for the contribution of the Property by the
Transferor Corporation to the BRI Partnership pursuant to this Agreement shall
be $1,250,311, which shall consist of BRI Partnership Units, to be issued by the
BRI Partnership to the Transferor Corporation as of the Closing, equal in value
(as such value is determined at the time and in the manner provided hereinbelow)
to the excess of (X) $1,250,311, subject to the prorations and adjustments as
provided in this Agreement, (the "Consideration Amount") minus (Y) the amount
required to pay the Loan in full.
At the Closing, the BRI Partnership shall pay in full the outstanding
principal balance of the Note dated April 15, 1993, in the original principal
amount of $1,000,000 (the "Note") evidencing the loan (the "Loan") made to the
Transferor Corporation by Crestar Bank (successor to Loyola Federal Savings
Bank) ("Lender") and secured by the Loan Documents.
At Closing, the Transferor Corporation will receive BRI Partnership Units
which will be entitled to distributions from the date of issuance (the "BRI
Partnership Units").
At the Closing, the Transferor Agent shall deliver an investor
questionnaire in the form attached hereto as Exhibit 5 (the "BRI Questionnaire")
for the Transferor Corporation. In the event that the Transferor Corporation
would be entitled to a fractional BRI Partnership Unit, the number of BRI
Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent the BRI Partnership Confirmation evidencing the
issuance of the BRI Partnership Units to the Transferor Corporation. In
addition, if pursuant to Section 12, the BRI Partnership owes any amounts to the
Transferor Corporation as a result of prorations and apportionments (the "BRI
Additional Payment"), at Closing, the BRI Partnership shall pay the BRI
Additional Payment to the Transferor Agent in accordance with the election made
by the Transferor Corporation pursuant to Section 12.04. The Transferor Agent
shall be liable to distribute the BRI Partnership Units and if applicable, the
BRI Additional Payment to Transferor Corporation.
-8-
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement. At the time that the Transferor Corporation elects to
convert BRI Partnership Units to shares as provided in the BRI Partnership
Agreement, the holder of each BRI Partnership Unit shall have the right to have
the BRI Partnership Unit either (i) exchanged for one share of common stock of
BRI pursuant to the transfer provisions of the BRI Partnership Agreement, or
(ii) redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. The Transferor Corporation shall
have such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Corporation and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Corporation a certified copy of
the Registration Rights Agreement.
(c) The Transferor Corporation acknowledges and agrees that after the
execution hereof, the price of the common stock of BRI may increase or decrease
in value as the result of market fluctuations prior to the Public Offering, and
that any such fluctuations will have an impact on the value of the BRI
Partnership Units. Notwithstanding these fluctuations, once the value and number
of BRI Partnership Units have been established as provided in Section 2.01(a),
the BRI Partnership will not be required to increase or permitted to decrease
the number of BRI Partnership Units to be issued to the Transferor Corporation
in the event of a decrease or increase in the market value of the common stock
of BRI subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire
-9-
transfer.
2.03 Retention of Escrow. At the Closing, the Transferor Corporation
shall retain the escrow deposits set forth on Schedule C attached
hereto.
SECTION 3
CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the
delivery of all documents necessary for the closing of the
transactions contemplated by this Agreement (the "Closing") shall
take place in the offices of ▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the Transferor
Corporation and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the
parties but in any event not later than October 31, 1997 the
("Closing Date"). The "Time of Closing" shall be at such time as all
recordable instruments necessary for the closing of the transactions
contemplated by this Agreement shall be placed in escrow with the
Title Insurer, who will thereupon issue the Title Policy referred to
in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for the Transferor Corporation
granted under Section 19.04 of a so-called Gap Indemnity in the form
of Exhibit VI with respect to the gap in time period between policy
issuance and recording, all as provided in a letter of instruction
executed by counsel for the BRI Partnership and counsel for the
Transferor Corporation. It is agreed that time is of the essence of
this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Corporation has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any
memoranda of leases or other documents of record relating thereto.
In addition, the Transferor Corporation shall provide the BRI
Partnership with access on-site to the originals of all leases and
related lease files.
-10-
4.02 Permits. Copies of all material building permits, zoning variances
(if any), certificates of occupancy (if any), subdivision plats,
governmental permits, approvals, certificates and other licenses
lawfully required for the construction, use, occupancy and operation
of the Property and all other correspondence with governmental
authorities (including, without limitation, any default notices), to
the extent in the Transferor Corporation's possession.
4.03 Taxes. To the extent in the Transferor Corporation's possession, a
copy of real estate and personal property tax statements and special
assessments for the Property for the past three (3) years and, all
correspondence, notices or other written communication with taxing
authorities relating to the taxes currently assessed and/or to be
assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Corporation's possession, a copy of the plans and specifications,
and a copy of all unexpired guaranties and warranties made by any
person for the benefit of the Transferor Corporation with respect to
all or any part of the Property in connection with the construction
and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income
and expense records relating thereto for 1995 and 1996 and all
months of operation of 1997, and detailed operating statements for
1995 and 1996 and all months of operation of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related
documents and agreements in respect of all pending litigation, if
any, relating to the Property (excluding litigation commenced
against tenants in the ordinary course of business for evictions or
collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being
collected on each of the apartment units in the Improvements which
includes: apartment number, unit status, tenant name, commencement
and termination dates, lease rent, deposits and details of any
concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease
used in connection with the leasing of each unit of the
Improvements.
-11-
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance
and/or operation of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month
period (excluding bills for utilities which are directly metered and
sent to tenants) to the extent in the possession of the Transferor
Corporation, the Transferor Agent or any of Transferor Agent's
affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or
studies in the possession of the Transferor Corporation conducted
with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by
the Transferor Corporation which shall be attached hereto as
Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other
documents in connection with the Loan, together with any and all
modifications and amendments thereto as set forth on Schedule H
attached hereto (collectively, the "Loan Documents").
SECTION 5
REPRESENTATIONS AND WARRANTIES
OF TRANSFEROR CORPORATION
The Transferor Corporation represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Corporation. The
Transferor Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maryland. The Transferor Corporation has all requisite power to own
and operate the Property and to carry on its business as presently
being conducted and as proposed to be conducted. The Transferor
Corporation is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a material adverse
effect on the Transferor Corporation's business (a
-12-
"Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in
Section 5.05 hereof, the Transferor Corporation is not in violation
of any term contained in the Transferor Corporation's articles of
incorporation or bylaws or to the Transferor Corporation's knowledge
in any other material instrument or contract to which the Transferor
Corporation is a party relating to the Property, and to the
Transferor Corporation's knowledge the Transferor Corporation is not
in violation of any order, statute, rule or regulation applicable to
it, except for such violations which would not have a Material
Adverse Effect. Neither the execution, delivery and performance of
this Agreement by the Transferor Corporation, nor the contribution
of the Property by the Transferor Corporation hereunder, will result
in any Material Adverse Effect or be in conflict with or constitute
a default under the Transferor Corporation's articles of
incorporation or bylaws or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or
assets of the Transferor Corporation, except for Permitted
Exceptions.
5.03 Governmental Consent, etc. No consent, approval or authorization of,
or designation, declaration or filing with, any governmental agency,
commission, board or public authority is required on the part of the
Transferor Corporation in connection with the valid execution and
delivery of this Agreement by the Transferor Corporation and the
performance of the Transferor Corporation's obligations hereunder.
5.04 Corporate Documents. A true, correct and complete copy of the
Transferor Corporation's articles of incorporation and bylaws are
attached hereto as Exhibits I and II, respectively.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Corporation's knowledge,
proceeding or investigation pending or, to the Transferor
Corporation's knowledge, any threat thereof, against the Transferor
Corporation or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor
Corporation to enter into it, or which might result in or have,
either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Corporation as such is
presently contemplated; or (ii) the Property. During the period
commencing on the date hereof and ending on the Closing Date, the
Transferor Corporation will promptly inform the BRI Partnership in
writing of any material action, suit, proceeding or investigation
pending, or to the Transferor
-13-
Corporation's knowledge, threat thereof against the Transferor
Corporation or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including
all amendments thereto), oral or written, other than the Leases, to
which the Transferor Corporation is a party or to which any agent of
the Transferor Corporation is a party on behalf of the Transferor
Corporation or has entered into on behalf of the Transferor
Corporation, relating to the Property or otherwise affecting the
Property, including without limitation, all material management,
maintenance, brokerage, supply and service contracts and any
material contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the
Transferor Corporation for the Property (collectively "Service
Contracts"). Except as noted on Schedule E, each Service Contract is
cancelable on thirty (30) days notice. The Transferor Corporation
has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Corporation will
have paid all amounts due under each Service Contract, other than
payments for which an adjustment shall be made pursuant to Section
12 hereof.
5.07 Intentionally Deleted.
5.08 Title to Properties and Assets. The Transferor Corporation is the
sole owner of the Property.
5.09 License; Permits; etc. Except for licenses, permits or
authorizations previously obtained by the Transferor Corporation, no
other material license, permit or authorization is necessary to own
and operate the Transferor Corporation's business as such is
presently conducted and neither the conduct of the Transferor
Corporation's business nor any material portion thereof is dependent
on the issuance or obtaining of any other license, permit or
authorization.
5.10 Intentionally Deleted.
5.11 Intentionally Deleted.
5.12 Intentionally Deleted.
5.13 Intentionally Deleted.
-14-
5.14 Intentionally Deleted.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency
agreement with the Transferor Corporation with respect to the
Property.
5.16 Intentionally Deleted.
5.17 Ownership. The Transferor Corporation has not received any written
notice challenging the validity of the Transferor Corporation's
title to the Property. The Transferor Corporation has not granted
any rights, options, rights of first refusal or entered into other
agreements of any kind which are currently in effect for the
acquisition of the Property or any part thereof, except for the
rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy
agreements (written or verbal) which grant any possessory interest
in and to any space situated on or in the Improvements or that
otherwise give rights with regard to use of the Improvements other
than the leases (the "Leases") described in the Rent Roll attached
hereto as Schedule D (the "Rent Roll"). The Rent Roll is true,
accurate and correct in all material respects as of the date hereof.
Except as otherwise specifically set forth in the Rent Roll or
elsewhere in this Agreement:
(a) to the Transferor Corporation's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Corporation;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Corporation, except as set
-15-
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Corporation by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any
rent subsidies or rental assistance programs. To the best knowledge
of the Transferor Corporation, no apartment unit is subject to any
rent control law, ordinance or regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents.
True and complete copies of the Loan Documents, including each
modification and amendment thereof, have been furnished heretofore
to the BRI Partnership. There are no notes, instruments, agreements,
mortgages, deeds of trust or other documents evidencing any material
agreement or obligation of the Transferor Corporation to Lender or
any other lender with respect to the Property other than as listed
on Schedule H. The Loan Documents are in full force and effect and
none of the Loan Documents have been modified, amended or extended
except as disclosed on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"),
which Schedule sets forth a list of all material reports, studies,
analyses, notices from any governmental authority, or agreements
with any person or governmental authority and similar material
documents relating to environmental matters in the possession of the
Transferor Corporation, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property
(collectively, the "Environmental Reports"). The Transferor
Corporation has heretofore either furnished to the BRI Partnership
or made available to the BRI Partnership for inspection complete and
accurate copies of the Environmental Reports. Except as disclosed in
the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI
-16-
Environmental Reports"), the Transferor Corporation has not received
any written notice from any governmental entity or other person that
the Property, or current or former operations on the Property, are
not or have not been in material compliance with any Environmental
Laws or that the Transferor Corporation has any material liability
with respect thereto. To the Transferor Corporation's knowledge,
except as set forth in the Environmental Reports or in the BRI
Environmental Reports, there are no underground tanks for Hazardous
Materials, active or abandoned, at the Property and no Hazardous
Materials are present or have been released in a reportable
quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under the Property.
To the Transferor Corporation's knowledge, except as disclosed in
the Environmental Reports or in the BRI Environmental Reports,
neither the Transferor Corporation nor the Property is in violation
in any material respect of any Environmental Laws and there is no
asbestos, PCB's or lead paint on the Property or any part thereof.
For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.),
as amended by the Hazardous and Solid Waste Amendments of 1984; the
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. ss. 9601 et seq.), as amended by the Superfund Amendments
and Reauthorization Act of 1986; the Hazardous Materials
Transportation Act (49 U.S.C. ss. 1801 et seq.); the Toxic Substance
Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et
seq.); the Federal Insecticide, Fungicide and Rodenticide Act (7
U.S.C. ss. 136 et seq.); the Occupational Safety and Health Act (29
U.S.C. ss. 651 et seq.); and all other applicable federal, state and
local environmental laws (including, without limitation, obligations
under the common law), ordinances, orders, rules and regulations, as
any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control
of hazardous, toxic or dangerous substances, materials or wastes
(collectively, "Hazardous Materials"), or their handling, storage or
disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Corporation has not
received written notice, and the Transferor Corporation has no
actual knowledge, that (i) any approvals, consents, permits,
licenses or certificates of occupancy (whether governmental or
otherwise) required for the current use and operation of the
Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be
revoked; (ii) any fees and charges therefor have not been fully
paid; (iii) the Property, including the current use and
-17-
occupancy thereof, is in violation in any material respect of any
laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change
of grade or limitation on use of streets, a special assessment or
a change in zoning classification, that would adversely affect
the continued use and operation of the Property as currently used
and operated except, in the case of clauses (i), (ii), (iii) and
(iv) as would not have a Material Adverse Effect. To the
Transferor Corporation's knowledge the Property and the current
use thereof comply in all material respects with (a) all
applicable laws and (b) all restrictive covenants and title
encumbrances affecting the Property. The Transferor Corporation
holds all material licenses, permits and authorizations required
for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with
Environmental Laws shall be covered by Section 5.21 and not by
this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Corporation, all
utilities and all public and quasi-public improvements upon or
adjacent to the Property (including, without limitation, all
applicable electric lines, sewer and water lines, and telephone
lines) are adequate to service the requirements of the Property. To
the knowledge of the Transferor Corporation, all necessary
easements, permits, licenses and agreements in respect of any of the
foregoing are installed and operating and all installation and
connection charges, to the extent due and payable, have been paid
for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the
BRI Partnership pursuant to Section 4.03 hereof, to the knowledge of
the Transferor Corporation, no special assessments for public
improvements have been made against the Property which are unpaid,
including, without limitation, those for construction of sewer and
water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by
the Transferor Corporation to the BRI Partnership pursuant to
Section 4 or attached hereto as Schedules or Exhibits are true,
accurate and complete in all material respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or
other similar proceedings are pending or, to the Transferor
Corporation's knowledge, threatened against the Transferor
Corporation, nor are any of
-18-
such proceedings, against or by the Transferor Corporation,
anticipated or contemplated by the Transferor Corporation.
5.27 Liens. To the Transferor Corporation's knowledge, and subject to
such matters as may be disclosed by the Commitment, the Property
currently is free from mechanics' and materialmen's liens or other
liens other than the Permitted Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any
facilities (other than facilities covered by Permitted Exceptions or
facilities of municipalities or public or private utility and water
companies) located on any property not included in the Property to
fulfill any municipal or governmental requirement or for the
furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not
included in the Property relies for its operation, maintenance or
legal compliance on any facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Corporation, all
necessary curb cuts, access permits and other governmental approvals
required to provide such access have been issued and are in full
force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Corporation, there are no written or proposed plans to widen,
modify, or realign any street or highway or any existing or proposed
eminent domain proceedings which would affect the Property in any
way whatsoever. To the best knowledge of the Transferor Corporation,
there are no presently planned public improvements which would
result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Deleted.
5.32 Intentionally Deleted.
5.33 Intentionally Deleted.
5.34 Intentionally Deleted.
5.35 Investment Representations and Warranties. The Transferor
Corporation represents, warrants, acknowledges and agrees as
follows:
-19-
(a) The Transferor Corporation is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) The Transferor Corporation understands that the BRI Partnership Units
to be issued to it will not be registered under the Act, or the securities laws
of any state ("Blue Sky Laws") by reason of a specific exemption or exemptions
from registration under the Act and applicable Blue Sky Laws and that BRI's and
the BRI Partnership's reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and warranties of the
Transferor Corporation.
(c) The Transferor Corporation acknowledges and agrees that, for the
reasons set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units
(or shares of common stock issued upon exchange of the BRI Partnership Units)
may not be offered, sold, transferred, pledged, or otherwise disposed of by the
Transferor Corporation except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a
no-action letter issued by the Securities and Exchange Commission to the effect
that a proposed transfer of the BRI Partnership Units (or shares of common stock
issued upon exchange of the BRI Partnership Units) may be made without
registration under the Act, together with either registration or an exemption
under applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the
case may be, receiving an opinion of counsel knowledgeable in securities law
matters (and which opinion and counsel shall be reasonably acceptable to both
the BRI Partnership and BRI) to the effect that the proposed transfer is exempt
from the registration requirements of the Act and any applicable Blue Sky Laws,
and that, accordingly, the Transferor Corporation must bear the economic risk of
an investment in the BRI Partnership Units (and the shares of common stock
issued upon exchange of the BRI Partnership Units) for an indefinite period of
time. The Transferor Corporation acknowledges, represents and agrees that (i)
its economic circumstances are that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its
-20-
affiliates or its other legal counsel and advisors for any explanation of the
application of the various United States or state securities laws or tax laws
with regard to its acquisition of the BRI Partnership Units. The Transferor
Corporation further acknowledges and represents that it has made its own
independent investigation of the BRI Partnership and the business conducted or
proposed to be conducted by the BRI Partnership.
(d) The Transferor Corporation is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
(e) The Transferor Corporation understands that an investment in the BRI
Partnership and BRI involves substantial risks. The Transferor Corporation
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) The Transferor Corporation acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws,
-21-
receipt of a no-action letter issued by the Securities and
Exchange Commission (together with either registration or an,
exemption under applicable state securities laws) or an opinion
of counsel (which opinion and which counsel shall be acceptable
to Berkshire Realty Company, Inc.) that the proposed transaction
will be exempt from registration under the Act and its applicable
state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in the first paragraph of this Agreement is the
address of the Transferor Corporation's principal place of business, and the
Transferor Corporation has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. The Transferor Corporation has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Corporation as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the
Transferor Agent prior to the execution of this Agreement, is a
true, correct and complete copy of said BRI Partnership Agreement as
amended to date. The BRI Partnership Agreement, as so delivered or
made available, has not been modified and is in full force and
effect in accordance with its terms as of the date hereof.
-22-
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing
under the laws of the State of Delaware with full power and
authority to carry on its business; (ii) the BRI Partnership has the
right, power and authority to issue the BRI Partnership Units and to
operate its properties and to carry on its business as is presently
being conducted and to enter into and perform all of the agreements
and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto;
(iii) this Agreement and the documents to be executed and delivered
by the BRI Partnership at Closing, upon execution and delivery will
have been duly and validly authorized and executed by the BRI
Partnership and will constitute the valid and binding obligations of
the BRI Partnership, enforceable in accordance with their respective
terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors
theretofore or hereafter enacted to the extent that the same may be
constitutionally applied; and (iv) assuming compliance with the
terms of this Agreement and the BRI Partnership Agreement by the
parties hereto and thereto other than the BRI Partnership, the
execution and delivery by the BRI Partnership of the BRI Partnership
Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of
its obligations hereunder and thereunder do not and will not
constitute a default under, or conflict with or violate, any
provision of the BRI Partnership Agreement or any other material
agreement to which the BRI Partnership is a party or by which the
BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to
the Transferor Corporation true and complete copies of the Annual
Report on Form 10-K (and those portions of the Annual Report to
Stockholders which are incorporated by reference therein) of the
general partner of the BRI Partnership for the fiscal year ended
December 31, 1996, as filed with the Securities and Exchange
Commission, and all Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed by the general partner of the Partnership
with the Securities and Exchange Commission since December 31, 1996
(the "SEC Filings"). The financial statements of the general partner
of the BRI Partnership included or incorporated by reference in the
SEC Filings and the PPM have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the
-23-
consolidated assets, liabilities and financial position of the
general partner of the BRI Partnership as of the dates thereof and
the consolidated results of its operations and changes in cash flow
for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no
consent, approval or authorization of, or designation, declaration
or filing with, any governmental agency, commission, board or public
authority is required on the part of the BRI Partnership in
connection with the valid execution and delivery of this Agreement
by the BRI Partnership and the performance of the BRI Partnership's
obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization,
operation, or management of the BRI Partnership, (ii) is in full
force and effect and (iii) has not been amended or modified. A true,
correct and complete copy of the BRI Partnership Agreement is
attached hereto as Exhibit 1. Except as contemplated hereby or set
forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to
any of the owners of partnership interests in the BRI Partnership
(the "BRI Partners"), any evidences of indebtedness or assets and
the BRI Partnership has no obligation, contingent or otherwise, to
purchase, redeem or otherwise acquire any interest in the BRI
Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership
Units shall be vested in the Transferor Corporation free and clear
of any lien, claim, charge, pledge encumbrance, limitation,
agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
-24-
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Corporation a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or
other similar proceedings are pending or, to the BRI Partnership's
knowledge, threatened against the BRI Partnership, nor are any of
such proceedings anticipated or contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue
statement of material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of
operation has enabled and to BRI's knowledge should enable it to
meet the requirements for qualification and taxation as a "real
estate investment trust" under the Internal Code of 1986, as
amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior
to Closing will provide, for the issuance of the BRI Partnership
Units. The BRI Partnership Units to be issued in connection with the
transactions herein contemplated have been, or prior to their
issuance will have been, duly authorized for issuance by the BRI
Partnership to the Transferor Corporation, and on the date of their
issuance pursuant to the terms and conditions hereof will be validly
issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares
of common stock of BRI exchangeable for BRI Partnership Units issued
in connection with the transactions herein contemplated will be duly
authorized, validly issued, fully paid and non-
-25-
assessable, free and clear of any liens, pledges and encumbrances of
any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions
exempt from the registration provisions of applicable federal and
state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto
(unless it has notified the Transferor Corporation otherwise in
writing) and represents that there are no other documents known to
the BRI Partnership which are required to be delivered hereunder
which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge,
proceeding or investigation pending or, to the BRI Partnership's
knowledge, any threat thereof, against the BRI Partners, the BRI
Partnership or its properties or any part thereof which questions
the validity of this Agreement and the transactions contemplated
hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a
material adverse effect on the business of the BRI Partnership as
such is presently conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC
Filings with good title to its properties as described in the SEC
Filings, subject to such financings, easements, restrictions and
other matters which do not have a material adverse effect on the
operation of such properties in accordance with the BRI
Partnership's past practices. Except as disclosed in the SEC
Filings, the BRI Partnership does not own, or otherwise hold any
interest in, any other material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has
not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the
payment of any material amount of borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a
material adverse effect on the BRI Partnership and BRI is not in
material violation of any Environmental Laws to such an extent that
it would have
-26-
a material adverse effect on the BRI Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that
(i) any material approvals, consents, permits, licenses or
certificates of occupancy (whether governmental or otherwise)
required for the current use and operation of any of its properties
have not been granted, effected, renewed or performed and completed
(as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of
its properties, including the current use and occupancy thereof are
in violation in any material respect of any laws or (iv) any
governmental authority has a current plan that would adversely
affect the continued use and operation of any of its properties as
currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Corporation shall maintain its present insurance on the Property
which insurance in respect of fire and casualty shall be covered by
a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to
the BRI Partnership upon written request by the BRI Partnership.
Subject to the provisions of Section 7.02, the risk of loss in and
to the Property shall remain vested in the Transferor Corporation
until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement
cost equal to or in excess of $100,000.00) are damaged or destroyed
by fire or casualty, or if any material part of the Property is
subject to any eminent domain notice or proceeding by any
governmental entity (which shall mean for purposes of this Section
7.02 a proceeding which affects any units, parking spaces or
material amenities), then the BRI Partnership shall have the option,
exercisable by written notice given to the Transferor Corporation at
or prior to the Time of Closing, either to (a) terminate this
Agreement, whereupon all obligations of all parties hereto shall
cease, and this Agreement shall be void and without recourse to the
parties hereto except for provisions which are expressly stated to
survive such
-27-
termination; or (b) proceed with the contribution and transfer of
the Property, and in such case, unless the Transferor Corporation
shall have previously restored the Property to its condition
prior to the occurrence of any such damage or destruction, the
Transferor Corporation shall pay over or assign to the BRI
Partnership, on behalf of the Transferor Corporation, all amounts
received or due (plus an amount equal to any deductible under any
insurance policy covering the Property) from, and all claims
against, any insurance company or governmental entity as a result
of such destruction or taking and there shall be no adjustment to
the Consideration hereunder. If prior to the Time of Closing, any
such damage or destruction shall occur having a replacement cost
of less than $100,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material
portion of the Property, the BRI Partnership shall proceed to
accept the contribution and transfer of the Property in
accordance with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations
of Law"), which are issued or sent prior to the Closing Date by any
governmental department, agency or bureau having jurisdiction as to
conditions affecting the Property shall, to the extent reasonably
practical be removed or complied with by the Transferor Corporation,
at the expense of the Transferor Corporation, but in any event not
to exceed $25,000.00, prior to the Closing Date; provided, however,
that if Transferor Corporation is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with
such notices by the Closing Date, the BRI Partnership shall have the
option to (i) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease and this Agreement shall be void and
without recourse to the parties hereto, except for provisions which
are expressly stated to survive such termination, or (ii) proceed
with the transaction contemplated hereby in which event there shall
be a reduction in the Consideration Amount in an amount necessary to
enable the BRI Partnership to remove such Violations of Law,
provided such reduction shall not in any event exceed $25,000.00,
and the obligations of the Transferor Corporation with respect to
such violations shall cease.
-28-
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Corporation covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Corporation shall not,
without the BRI Partnership's prior written consent (a) enter into
any new lease for an apartment unit with a first-time tenant unless
the lease is for a period of no more than one year and the rent
shall be not less than the amount of the market rent noted on the
Rent Roll for the respective apartment; or (b) amend any Lease for
an apartment unit with an existing tenant, or (c) renew or extend
any Lease for an apartment unit with an existing tenant unless the
lease is for a period of not more than one year and that the rent
for the amended, renewal or extension term shall not be less than
the amount of rent noted on the Rent Roll, for the respective
apartment; or (d) terminate any Lease except in the ordinary course
of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by
applicable law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units
on the Property which become vacant shall be maintained in
accordance with the Transferor Corporation's usual and customary
practice without regard to the Closing contemplated by this
Agreement. Except as otherwise specifically provided herein, the BRI
Partnership acknowledges and agrees that all properties with units
will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Corporation shall
not modify or amend any Service Contract or enter into any new
service contract for the Property, without the prior written consent
of the BRI Partnership which consent shall not be unreasonably
withheld or delayed, provided no consent shall be required with
respect to any of the foregoing so long as such service contract is
terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the
same is replaced with similar items of at least equal quality prior
to the Closing Date.
-29-
9.05 Tax Procedure. Except as to the proceedings, if any, noted on
Schedule 9.05 attached hereto, the Transferor Corporation shall not
withdraw, settle or otherwise compromise any protest or reduction
proceeding affecting real estate taxes assessed against the Property
for any fiscal period in which the Closing Date is to occur or any
subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the
Closing Date which are attributable to (i) the fiscal tax year
during which the Closing occurs shall be apportioned between the
Transferor Corporation and the BRI Partnership, based upon the
relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Corporation, in either case after
deducting the expenses of collection thereof, which obligation shall
survive the Closing.
9.06 Loan Compliance. The Transferor Corporation shall (a) make all
payments of interest and principal and, if applicable, tax escrow,
insurance escrow and other amounts required under the Note and other
Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply with all of
the material terms and provisions of the Loan Documents up to the
Closing, and (c) not alter or amend the Loan Documents, or seek or
accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06
attached hereto.
9.07 Property Maintenance. The Transferor Corporation, in accordance with
its normal practices and procedures, shall continue to maintain and
to make all repairs and replacements to the Property so as to keep
the Property in substantially its present condition, subject to the
provisions of Section 7 hereof, and the Transferor Corporation shall
operate and manage the Property in the same manner as it has
operated the Property prior to the date hereof.
9.08 Intentionally Deleted.
9.09 Conduct of Business. Except with the prior written consent of BRI
-30-
Partnership, on and after the date hereof the Transferor Corporation
shall conduct its business only in the ordinary course as heretofore
conducted and do the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Corporation in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Corporation shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Corporation will give the BRI
Partnership and their attorneys, accountants, and other
representatives reasonable access to Transferor Corporation's
personnel and all properties, documents, contracts, books, and
records of the Transferor Corporation, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI
Partnership with copies of such documents (certified by the
Transferor Corporation if so requested) and with such information
with respect to the affairs of the Transferor Corporation as the BRI
Partnership may from time to time reasonably request.
9.11 Audited Financial Statements. In connection with the Public Offering
and
-31-
the Private Placement (each as defined in Section 17.04 hereof)
the Transferor Corporation shall provide the BRI Partnership such
additional documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR CORPORATION'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Corporation shall deliver the following to the BRI
Partnership (the "Transferor Corporation Closing Documents"):
(a) Deed. The Deed and a General Assignment and ▇▇▇▇ of Sale, in form
reasonably satisfactory to the parties' respective counsel, duly executed and
acknowledged, which together convey the Property to the BRI Partnership, subject
only to the Permitted Exceptions.
(b) Assignment and Assumption of Leases and Security Deposits. An
Assignment and Assumption of the Leases and an Assignment and Assumption of the
Security Deposits in form reasonably satisfactory to the parties' respective
counsel.
(c) Assignment and Assumption of Service Contracts. An Assignment and
Assumption of the Service Contracts in form reasonably satisfactory to the
parties' respective counsel.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Corporation has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that the Transferor Corporation Closing Documents have been duly executed and
delivered and as to such other matters as are customarily required in Baltimore,
Maryland in connection with the transactions contemplated under this Agreement.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Corporation and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by the Transferor Corporation.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
-32-
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Corporation. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Corporation at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Corporation, original copies (or photocopies if
original copies are unavailable to the Transferor Corporation) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Corporation shall also deliver, to the extent in the
possession of the Transferor Corporation: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from the Transferor
Corporation executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibit VIII as required by the Title
Insurer in order to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Corporation's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Property to the BRI Partnership and directing that all rents
and other payments thereafter becoming due under the Leases be sent as the BRI
Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by
-33-
the Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Corporation set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Corporation.
(n) Non-Foreign Affidavit. The Transferor Corporation shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Corporation with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Intentionally Deleted.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Corporation with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Corporation and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Corporation are required to deliver to the BRI Partnership
pursuant to any other provisions of this Agreement or which the BRI Partnership
may, either at or subsequent to the Closing, deem reasonably necessary in order
to consummate the transactions contemplated by this Agreement or to better vest
in the BRI Partnership title to the Property. The provisions of this Section
10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Corporation's Expenses. The Transferor Corporation
shall pay one-half of all: (i) Title Insurance and Survey costs,
(ii) escrow and recording costs, and (iii) UCC Search costs. The
Transferor Corporation shall also pay all transfer taxes and
documentary stamps, if any. The Transferor Corporation also shall
pay its pro rata share of the fees and expenses attributable to the
transactions contemplated by this Agreement in accordance with the
provisions of Section 19.03 and all of the fees and expenses of its
own separate legal, tax or other advisors.
-34-
10.03 Accuracy of Representations and Warranties. The Transferor
Corporation agrees that the Transferor Corporation will notify the
BRI Partnership in writing on or prior to the Closing Date if any of
the representations and warranties of the Transferor Corporation
cease to be true and correct on and as of the Closing Date. The
Transferor Corporation further agrees that, subject to Section
10.05(g), if no such notice is given to the BRI Partnership, the
representations and warranties of the Transferor Corporation shall
be deemed to be true and correct on and as of the Closing Date and
that the BRI Partnership shall be entitled to rely on the agreements
contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Corporation. In order to
induce the BRI Partnership to enter into this Agreement, the
Transferor Corporation hereby agrees that until the tenth (10th) day
following the first anniversary of the Closing:
(a) the Transferor Corporation shall continue to own and hold, and shall
not assign, transfer, distribute to its shareholders or otherwise dispose of any
of the BRI Partnership Units received by it pursuant to this Agreement except to
the extent permitted under Section 9 of the BRI Partnership Agreement;
(b) the Transferor Corporation shall not transfer or exchange the BRI
Partnership Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), the
Transferor Corporation shall not mortgage, pledge, create a security interest in
or lien on or otherwise hypothecate or encumber any of such BRI Partnership
Units except as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Corporation's Indemnity. In the event the parties
proceed to Closing, the Transferor Corporation agrees to indemnify and hold the
BRI Partnership harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the BRI Partnership subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the Transferor Corporation set forth in Section 5
or (B) resulting from any breach or default
-35-
by the Transferor Corporation of any obligation of the Transferor Corporation
under this Agreement or (ii) from liabilities for borrowed money incurred by the
Transferor Corporation or the Property prior to the Closing; provided that the
Transferor Corporation shall not be required to indemnify the BRI Partnership
for any amounts in excess of 50% of the fair market value of the BRI Partnership
Units received by the Transferor Corporation as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of the Transferor Corporation in Section 5.34, which shall be
limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by the Transferor
Corporation) (collectively, the "Cap"); and provided further that to the extent
the Transferor Corporation has any indemnification obligation to the BRI
Partnership, the Transferor Corporation may elect to satisfy such
indemnification obligation by directing the BRI Partnership to cancel such
amount of BRI Partnership Units acquired by the Transferor Corporation pursuant
to this Agreement having a fair market value (measured at the time such BRI
Partnership Units are returned or cancelled) equal to the indemnification
obligation of the Transferor Corporation.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Corporation harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the Transferor Corporation, subsequent
to the Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Property after
the Closing (except for such liabilities resulting from a breach or default by
the Transferor Corporation for which the BRI Partnership is indemnified under
Section 10.05(a) above); provided that the BRI Partnership shall not be required
to indemnify the Transferor Corporation under Section 10.05(b)(i) for any
amounts in excess of 50% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
the Transferor Corporation (except for indemnification obligations with respect
to Sections 6.10 and 11.03 which shall be limited to 100% of the fair market
value as of the date such indemnification obligation is satisfied of the BRI
Partnership Units received by the Transferor Corporation).
(c) The indemnification obligations of the Transferor Corporation and the
BRI Partnership, respectively, with respect to any representation or warranty,
shall be limited to claims made prior to the last date of survival thereof set
forth in Section 16. No such claim for indemnification shall be deemed due and
payable unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
-36-
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor the Transferor Corporation shall have
any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Corporation for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Corporation or the Property.
(g) Each of the Transferor Corporation and the BRI Partnership acknowledge
and agree that, unless otherwise agreed to in writing by all the parties, from
and after the Closing, each of the parties hereto will be deemed to have waived
any right to seek indemnification hereunder from the other party for any breach
or default of a representation, warranty or obligation hereunder by such other
party to the extent that the party seeking indemnification had actual knowledge
of such breach or default by such other party on or prior to Closing.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Corporation (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmation in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights
-37-
Agreement in the form attached hereto as Exhibit 4 duly executed by BRI.
(b) Assumption. Deliver to the Transferor Corporation signed counterparts
of the Assignment and Assumption of Leases, the Assignment and Assumption of
Security Deposits and the Assignment and Assumption of Service Contracts.
(c) Record Deed. Cause the Deed to be recorded with the appropriate
recording office.
(d) Opinion. An opinion of counsel satisfactory to the Transferor
Corporation to the effect that the BRI Partnership has been duly formed in
accordance with Delaware law and is validly existing and in good standing under
such laws, that the BRI Partnership Amendment has been duly executed and
delivered, that no state transfer taxes, sales tax, excise tax or transfer
stamps are required in connection with the issuance of the BRI Partnership Units
to the Transferor Corporation as contemplated by this Agreement and as to such
other matters as are customarily required in Baltimore, Maryland in connection
with the transactions contemplated under this Agreement. The opinion shall also
provide that, based solely on a certification of BRI, commencing with BRI's
taxable year ending December 31, 1991, BRI has been organized in conformity with
the requirements for qualifications as a "real estate investment trust" and its
method of operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Corporation a certificate by the BRI Partnership to the effect that
all of the representations and warranties of the BRI Partnership set forth in
this Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Corporation a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor
-38-
Corporation pursuant to any other provisions of this Agreement or which the
Transferor Corporation may, either at or subsequent to the Closing, deem
reasonably necessary in order to consummate the transactions contemplated by
this Agreement or to better vest in the Transferor Corporation title to the BRI
Partnership Units. The provisions of this Section 11.01(h) shall survive the
Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and one-half of all (i) Title Insurance and Survey
costs, (ii) escrow and recording costs and (iii) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Corporation, in its
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Corporation has not dissolved, terminated or liquidated, the right to
receive the Property as a distribution in kind in satisfaction of the Transferor
Corporation's distribution rights under Section 8.2 of the BRI Partnership
Agreement. If the Property is contributed by the BRI Partnership to a Subsidiary
Entity (as defined in the BRI Partnership Agreement), the BRI Partnership shall
cause such Subsidiary Entity, to take such actions as may be necessary to
effectuate the foregoing right granted by the BRI Partnership to the Transferor
Corporation.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Corporation redeemed all
of the BRI Partnership Units received by the Transferor Corporation hereunder
for cash or for shares of BRI common stock or (II) seven (7) years from the
Closing Date, neither the BRI Partnership nor BRI shall allow the sale or
transfer of the Property, except for (i) transfers that are fully tax-free to
partnerships in which the BRI Partnership has an interest, (ii) exchanges that
are fully tax-free pursuant to Section 1031 of the Code and (iii) involuntary
transfers which shall include, without limitation, a foreclosure, a deed-in-lieu
of foreclosure, a condemnation or a liquidation of the BRI Partnership or BRI,
provided that in the event of a condemnation, the BRI Partnership shall use
reasonable efforts to reinvest the net condemnation proceeds in accordance with
Section 1033 of the Code and hold the same until the expiration of the No
Transfer Period.
(c) Intentionally Deleted.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
the Property or any interest therein.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
-39-
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
Apportionments. The following apportionments shall be made between the parties
on the Closing Date as of the close of the business day prior to the Closing
Date and the net amount of such prorations and apportionments shall be settled
in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that
-40-
if there is a water meter on the Property, apportionment on the Closing Date
shall be based on the last available reading, subject to adjustment after the
Closing on a per diem basis, when the next reading is available;
(c) intentionally deleted;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. The
Transferor Agent and the BRI Partnership shall cooperate in the furnishing of
all information and documentation necessary to prepare such calculations.
Subject to Section 12.04, all cash shall be used by the Transferor
Corporation to pay amounts payable by the Transferor Corporation and/or
distributed to the Transferor Corporation prior to Closing, and if any of such
cash applicable to pre-closing periods is not removed from the Transferor
Corporation prior to Closing, all such cash shall remain the property of the
Transferor Corporation.
12.01 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Corporation
shall retain the right to receive such rent. The BRI Partnership
shall act as agent for the Transferor Corporation in collecting such
rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month
in which the Closing occurred; (b) then to any month or months
following the month in which the Closing occurred until all
-41-
unpaid rents have been paid in full; and (c) then to the period
prior to the month in which the Closing occurred. After Closing, the
BRI Partnership shall use reasonable efforts to collect delinquent
rents attributable to the period prior to the month in which Closing
occurred, provided such efforts shall not require the commencement
of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Corporation or the BRI
Partnership after the Closing are payable to the other party by
reason of this allocation or otherwise, the appropriate sum shall be
paid to the other party within thirty (30) days from the receipt
thereof, which obligation shall survive the Closing.
12.02 Security Deposits. The Transferor Corporation shall assign and
deliver to the BRI Partnership all of the tenant security deposits,
including interest accrued thereon at the rate of 4% as required by
applicable state law or at such higher rate, if any, as required by
the terms of the leases, for each tenant as shown on the Rent Roll
and the BRI Partnership, or its designee, shall assume all liability
with respect to the tenant security deposits under applicable state
law and/or the terms of the Leases.
12.03 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor
Corporation owe an amount to the BRI Partnership, the Transferor
Corporation shall have the right to elect to adjust for such amounts
owing by the Transferor Corporation to the BRI Partnership in the
form of BRI Partnership Units rather than cash. In addition, if as a
result of the prorations and apportionments set forth in Section
12.01, the BRI Partnership owes an amount to the Transferor
Corporation, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have
the right to elect to adjust for amounts owing to the Transferor
Corporation or the BRI Partnership, as the case may be, in the form
of cash and/or BRI Partnership Units. The Transferor Agent shall
notify the BRI Partnership at least seven (7) business days prior to
the Closing Date of the manner in which the Transferor Corporation
shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Corporation is
unable to give title or to contribute and transfer the Property, or
to satisfy all of the
-42-
terms and conditions precedent to closing as set forth in this
Agreement, all as herein stipulated, or if on the scheduled closing
the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor
Agent on or before the Closing Date either (a) to take title as
provided in Section 13.02, or (b) to terminate this Agreement as
provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right
to elect, in its sole discretion, on the Closing Date, to accept
such title as the Transferor Corporation can deliver to the Property
in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by
the amounts required to remove all Monetary Liens.
13.03 Transferor Corporation's Default. If on the Closing Date, the
Transferor Corporation has failed to perform all of the material
obligations of the Transferor Corporation under this Agreement, the
Transferor Corporation shall be in default under this Agreement and
the BRI Partnership shall be entitled to terminate this Agreement by
written notice given to the Transferor Agent within seven (7) days
after the Closing Date and thereafter this Agreement shall be void
and without recourse to any party hereunder except for provisions
which are expressly stated to survive termination of this Agreement.
In addition to the foregoing, if the BRI Partnership desires to
accept the contribution and transfer of the Property in accordance
with the terms of this Agreement and the Transferor Corporation
willfully refuses to perform the Transferor Corporation's
obligations hereunder, the BRI Partnership, at its option, shall
have the right to compel specific performance by the Transferor
Corporation hereunder, in which event the BRI Partnership shall have
the right to recover from the Transferor Corporation the amount of
all reasonable legal fees, court costs and other litigation expenses
incurred by the BRI Partnership in connection with the exercise of
its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in
equity of the BRI Partnership in the event of a default by the
Transferor Corporation in lieu of all other rights and remedies
which the BRI Partnership may have against the Transferor
Corporation at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of
the BRI Partnership under this Agreement, the BRI Partnership shall
be in default under this Agreement and the Transferor Agent shall be
entitled to terminate this
-43-
Agreement by written notice given to the BRI Partnership within
seven (7) days after the Closing Date and thereafter this Agreement
shall be void and without recourse to any party hereunder except for
provisions which are expressly stated to survive termination of this
Agreement. In addition to the foregoing, if the Transferor
Corporation desires to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI
Partnership willfully refuses to perform the BRI Partnership's
obligations hereunder, the Transferor Corporation, at its option,
shall have the right to compel specific performance by the BRI
Partnership hereunder, in which event the Transferor Corporation
shall have the right to recover from the BRI Partnership the amount
of all reasonable legal fees, court costs and other litigation
expenses incurred by the Transferor Corporation in connection with
the exercise of its right of specific performance. The remedies
provided in this Section 13.04 shall be the sole and exclusive
remedies at law or in equity of the Transferor Corporation in the
event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Corporation may have
against the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN PREPAYMENT
14.01 Brokerage Fees. The Transferor Corporation and the BRI Partnership
mutually represent and warrant that neither of them has retained a
broker, finder or similar agent who might have a claim or right to
claim a commission or fee in connection with this transaction. The
Transferor Corporation understands that American Property
Consultants ("APC") had entered into a fee arrangement with Questar
Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that
a commission or fee is owed to APC, it shall be the obligation of
the Transferor Corporation and QPI in accordance with the provisions
of Section 19 hereof. In no event shall any commission be due unless
and until Closing has occurred and the transactions contemplated
hereby have been consummated and in no event shall the BRI
Partnership have any obligation to pay any commission to APC.
14.02 Loan Prepayment. The Transferor Corporation shall pay any prepayment
or other penalty and all other amounts required to repay the Loan in
full at Closing.
-44-
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with
original by first class mail, sent by Federal Express or other
reputable overnight delivery service, or sent by prepaid registered
or certified mail, return receipt requested, addressed as follows
(or to such address as the Transferor Agent or the BRI Partnership
shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No. ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier No. ▇▇▇-▇▇▇-▇▇▇▇
-45-
If to the Transferor Corporation Questar Investment Corporation
c/o the Transferor Agent: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier No. ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Lenrow, ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
Seven ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No. ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No. ▇▇▇-▇▇▇-▇▇▇▇
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.35, 10.01(q), 10.04,
10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI
Partnership contained in Sections 6.02, 6.05, 6.10, 10.05 (subject
to the provisions of Section 10.05(c)) and 11.03 shall survive the
Closing indefinitely and an action based thereon may be brought at
any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the
expiration of the applicable statute of limitations. The
representations, warranties, covenants and other obligations of the
Transferor Corporation set forth in Sections 4, 5.01 through and
including 5.36 (except for 5.02 and 5.35), 9, 10 (except for
10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
-46-
warranties, covenants and other obligations of the BRI Partnership
contained in Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09
and 6.10), 10 (except 10.05), 11 (except 11.03), 12 and 14 shall
survive until twelve (12) months after the Closing Date and
thereafter during the pendency of any claim based upon a breach
thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise
specifically provided in this Agreement, no other representations,
warranties, covenants or other obligations of the Transferor
Corporation or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced
after Closing.
16.02 Merger. The delivery of the Deed by the Transferor Corporation
(subject to the provisions of Section 12 hereof), and the acceptance
and filing thereof by the BRI Partnership and the delivery of the
BRI Confirmation and the acceptance thereof by the Transferor
Corporation, shall be deemed the full performance and discharge of
every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except
as provided in Section 16.01 and except for such other obligations
which are expressly provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI
Partnership to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the
fulfillment of each of the conditions listed below as of the Closing
Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Corporation shall have performed or complied with, in all
material respects, all of its covenants, agreements and obligations under this
Agreement, (ii) the Transferor Corporation shall have delivered the Transferor
Corporation Closing Documents and (iii) all of the representations and
warranties of the Transferor Corporation set forth in this Agreement shall be
true and correct, in all material respects, as of the Closing Date.
-47-
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the condition of the Property.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) Intentionally Deleted.
(e) Property Title. The Transferor Corporation shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Corporation shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(f) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Corporation contained herein, the
obligation of the Transferor Corporation to proceed with the Closing
of the transactions contemplated by this Agreement is expressly
conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived,
only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
-48-
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Corporation and
shall be free and clear of any liens, pledges and encumbrances of any kind
whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Corporation
shall be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Intentionally Deleted.
17.04 Public Offering Condition. BRI has informed the Transferor
Corporation that in connection with the consummation of the various
Related Transactions (as defined in Section 17.05 hereof), BRI
intends to undertake either or both of (i) a public offering of
common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other
equity securities of BRI (the "Private Placement"). The Transferor
Corporation shall supply any documentation and additional
information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private
Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the successful completion of the Public
Offering and the Private Placement raising a minimum of
$75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of
$75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement
effective as of the Closing Date, and, thereafter this Agreement
shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this
Agreement, for the conveyance of partnership interests or property
interests or other assets and for the making of certain secured
loans, which
-49-
agreements are more particularly described on Schedule K attached
hereto (collectively the "Related Agreements"). (The transactions
described in the Related Agreements, including this Agreement, are
collectively the "Related Transactions"). Except to the extent the
parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the
Transferor Agent attached hereto as Exhibit 6 (the "Kickout
Agreement"), in the event that any of the Related Agreements is
terminated pursuant to any termination provision of any other
Related Agreement or does not become effective due to the failure
of all of the other parties to the Related Agreement to execute
the Related Agreement on or before September 22, 1997, this
Agreement shall terminate automatically simultaneously with the
termination of any such Related Agreement or upon the failure of
all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, whereupon this
Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the
termination of this Agreement. The Closing under this Agreement
shall be simultaneous with the closings under the Related
Agreements. Except as provided in the Kickout Agreement, in the
event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be
cancelled or postponed.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor
Corporation shall assign all or any portion of its interest under
this Agreement without the prior written consent of the other party
hereto; provided that the BRI Partnership shall be permitted to
designate any one or more subsidiary entities, which are wholly
owned by the BRI Partnership or BRI, to receive title to the
Property as its designee, provided further that notwithstanding any
such designation, the BRI Partnership shall continue to remain
liable for the performance of all of its obligations under this
Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties
with respect to the transactions contemplated herein, and all prior
agreements, understandings, representations and statements, oral or
written, are merged into this Agreement. Neither this Agreement nor
any provision
-50-
hereof may be waived, modified, amended, discharged or terminated
except by an instrument signed by the party against whom the
enforcement of such waiver, modification, amendment, discharge or
termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor
Corporation, Transferor Agent and the BRI Partnership consent to the
personal jurisdiction of the federal and state courts of the State
of Maryland and agree that service of process may be made upon each
of them by certified mail, return receipt requested or in any other
manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or
limit the scope or intent of this Agreement or any of the provisions
hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of
and shall be enforceable by the parties hereto and their respective
successors and permitted assigns. In no event shall the Transferor
Corporation have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Transferor Corporation and
the BRI Partnership. The delivery by the BRI Partnership to the
Transferor Corporation of an executed counterpart of this Agreement
shall constitute an offer which may be accepted by the delivery to
the BRI Partnership of a duly executed counterpart of this Agreement
and the satisfaction of all conditions under which such offer is
made, but such offer may be revoked by the BRI Partnership by
written notice given at any time prior to such acceptance and
satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the
plural and the plural shall include the singular, as the context may
require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed
in any manner to
-51-
modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be
to the specified Section or paragraph of this Agreement, unless
stated to the contrary, and all references to Schedules and
Exhibits shall be to the specified Schedules and Exhibits annexed
hereto. All Schedules and Exhibits annexed hereto are made a part
hereof. All terms defined herein shall have the same meanings in
the Schedules and Exhibits, except as otherwise provided therein.
All references in this Agreement shall be deemed to include the
Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Corporation or
the BRI Partnership issue any press release or otherwise communicate
to any third party any information regarding this Agreement or the
transactions contemplated hereby unless the other party has
consented thereto and to the form and substance of any such
statement, announcement or release; provided, however, that nothing
herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated
hereby to the accountants, attorneys or other authorized agents of
such party or as such party deems necessary or desirable pursuant to
any court or governmental order or applicable securities regulations
or financial reporting requirements, nor shall the BRI Partnership
or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any
securities laws or in connection with the Public Offering or Private
Placement, or from filing this Agreement, the Exhibits hereto and
the Schedules as exhibits to any filings by the BRI Partnership or
BRI required by any securities laws. Notwithstanding the foregoing,
no party hereunder shall have any liability by reason of the details
of the transactions contemplated hereby becoming known by means
beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth
herein, the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01,
5.07, 17.03 and 17.05 may be extended only by the mutual written
agreement of the Transferor Agent and the BRI Partnership, in each
case, to a date no later than November 30, 1997.
-52-
SECTION 19
ADDITIONAL PROVISIONS RELATING TO TRANSFEROR CORPORATION
19.01 Intentionally Deleted.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the
administrative activities to be performed under this Agreement,
including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners and the Transferor Partnership,
preparing the Transferor Allocation Schedule, waiving conditions to
closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the
Transferor Agent) and/or effecting or refraining to effect a
termination of this Agreement pursuant to the terms hereof and the
Kickout Agreement, agreeing to extend any of the dates by which
certain events must occur in accordance with Section 18.11,
calculation of apportionment amounts under Section 12, electing on
behalf of the Transferor Partners which pro-rations will be adjusted
with cash and/or BRI Partnership Units and acting as distribution
agent with respect to the apportionments and adjustments under
Section 12 hereof and such other administrative activities as are
described in this Agreement.
19.03 Allocation of Transaction Costs. The Transferor Corporation hereby
acknowledges and agrees that a portion of the amount due to the
Transferor Corporation will be used to pay the fees and expenses
attributable to the transaction contemplated by this Agreement. The
Transferor Corporation hereby agrees that the fees and expenses
attributable to this transaction will be divided into two
categories: (i) those fees which can be specifically allocated to
the Transferor Corporation due to said fees solely benefiting it
("Direct Costs") and (ii) those fees which cannot be so allocated
("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, the
Transferor Corporation hereby agrees that: (i) QPI shall be entitled
to an aggregate administrative fee of $200,000 in connection with
the concurrent contribution of up to eighteen (18) properties and
the management companies, as described in the PPM, by the other
Transferor Partnerships and related entities (collectively, the
"Related Entities"), which shall be
-53-
Indirect Costs; (ii) to the extent it is determined that APC is
due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back
in an escrow account by the Transferor Agent until such time as
the amount of such fee, if any, is determined) shall be included
as Indirect Costs, with any such fee in excess of $1,000,000 to
APC being the sole responsibility of QPI; and (iii) all legal and
accounting fees of counsel and advisors to the Transferor Agent
and the Related Entities shall also be Indirect Costs. The
Transferor Corporation acknowledges and agrees that any and all
Indirect Costs shall be allocated among the Transferor
Corporation and the Related Entities at Closing based on the pro
rata number of BRI Partnership Units allocated at Closing to each
of them. The Transferor Corporation further acknowledges and
agrees that the Transferor Agent shall be authorized to determine
the allocations of the transaction costs and expenses to be
allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, the Transferor Corporation
hereby irrevocably constitutes and appoints the Transferor Agent
with unrestricted power of substitution and resubstitution, as the
attorney-in-fact for the undersigned, coupled with an interest, with
power and authority to act in its name and on its behalf to execute,
acknowledge, deliver, swear to, file, or record in the appropriate
public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry
out the provisions of this Agreement and the transactions
contemplated hereby including, without limitation, execution of such
title affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Corporation acknowledges and
agrees that this Agreement and the agreements attached as Exhibits
hereto will not be binding and effective unless and until all of the
parties hereto and thereto have executed counterparts to such
agreements and, to the extent that any agreements or documents
relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the
Transferor Agent is authorized on behalf of the Transferor
Corporation to hold all such agreements in escrow pending the
Closing, at which time the Transferor Agent shall be authorized to
deliver such documents on behalf of the Transferor Corporation to
the BRI Partnership.
19.06 Release and Indemnification by and between the Transferor
Corporation,
-54-
the Transferor Agent and certain Affiliates thereof. By executing
this Agreement, the Transferor Corporation (i) consents to the
transactions contemplated by this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this
Agreement set forth in the organizational documents of Transferor
Corporation, (iii) except as set forth in Schedule 19.06 and
except as specifically provided herein or in any of the Closing
documents implementing the transactions contemplated hereby,
releases the Transferor Agent and ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇ and their affiliated entities and spouses
(collectively, the "GGC Parties") from any and all liability
arising out of the transactions contemplated hereby and the
operation of Transferor Corporation prior to the Closing,
including, but not limited to, all matters relating to the
management of the property owned by the Transferor Partnership by
the management company for the Transferor Partnership and any
affiliated persons or entities thereto, and (iv) agrees, subject
to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and
against any and all costs, damages, fees, and expenses, including
reasonable attorney's fees, that the Transferor Agent and/or the
GGC Parties may incur in carrying out its, his, or their
responsibilities in good faith and in accordance with the terms
of this Agreement; provided that the indemnity granted under this
Section 19.06 shall not extend to any act of gross negligence or
willful malfeasance on the part of the Transferor Agent and/or
the GGC Parties.
[This Space Intentionally Left Blank]
-55-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR CORPORATION:
WITNESS: GORN PROPERTIES, INC.
_________________________ By:_______________________________________
Name:
Title:
-56-
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
By:______________________________________
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By:Berkshire Apartments, Inc.
Its General Partner
By:________________________________
Name:
Title:
WITNESS:
_________________________________________
▇▇▇▇▇▇ ▇▇▇▇, solely for the purposes of
Section 19.06
-57-
_________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇, solely for the purposes of
Section 19.06
_________________________________________
▇▇▇▇ ▇▇▇▇▇▇, solely for the purposes of
Section 19.06
-58-
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Corporation 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.05 - Litigation
Schedule 5.18 - Litigation Pending Against Transferor Corporation by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Corporation Exhibits
Exhibit I - Articles of Incorporation
Exhibit II - Bylaws
Exhibit III - Limited Warranty Deed
Exhibit IV - Intentionally Deleted
Exhibit V - Intentionally Deleted
Exhibit VI - Gap Indemnity
Exhibit VII - Intentionally Deleted
-59-
Exhibit VIII - Title Affidavit
-60-