DEVELOPMENT CONTRIBUTION AGREEMENT
(Avalon 2)
THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of the 25th day of August, 1997, by and between the individuals
and entities listed on Exhibit I attached hereto with an address c/o Questar
Properties, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (collectively, the "Transferor Members"), ▇▇▇▇▇▇▇
▇. ▇▇▇▇, individually, ▇▇▇▇ ▇. ▇▇▇▇▇▇, individually, and BRI OP Limited
Partnership, a Delaware limited partnership (the "BRI Partnership") with an
address c/o Berkshire Realty Company, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇.
BACKGROUND
WHEREAS, the Transferor Members are the legal and beneficial owners of
all of the membership interests, as set forth on Exhibit I, of Ironhorse
Associates, L.L.C., a Maryland limited liability company (the "Transferor
Company") pursuant to the Operating Agreement dated as of June 26, 1996, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Operating Agreement");
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 Company is the owner of the following:
a. that certain tract or parcel of land located in Baltimore
County, Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the approximately ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, commonly
known as Avalon Apartments, which contains related improvements, facilities,
amenities, structures, driveways, walkways, plumbing and heating pipes,
culverts, and mains, all of which have been constructed, are under construction
or are to be constructed on the Land (collectively, the "Improvements") pursuant
to certain plans and specifications that are to be prepared in accordance with
the provisions of Section 1.04 based upon certain engineering plans and
schematic plans listed on Schedule C hereto (the "Preliminary Plans and
Specifications");
c. all right, title and interest of the Transferor Company 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 Company 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 Company 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 Company 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 Company's interest in any intangible
property now or hereafter, owned by the Transferor Company 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 and
other current assets relating to periods prior to Closing and (ii) amounts, if
any, due to the Transferor Members 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 Members desire to contribute all of the
membership interests in the Transferor Company (collectively referred to as the
"Transferor Membership Interests") to the BRI Partnership, and the BRI
Partnership desires to admit the Transferor Members as limited partners in the
BRI Partnership and to accept such contribution from the Transferor Members; and
WHEREAS, in exchange for such contribution, the Transferor Members
desire to, at their election, either receive cash or BRI Partnership Units (as
hereinafter defined) 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 Members
and the BRI Partnership hereby covenant and agree as follows:
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SECTION 1
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CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE
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1.01 The Transferor Members shall contribute to the BRI Partnership,
and the BRI Partnership shall accept from the Transferor Members, in exchange
for either cash or BRI Partnership Units, and upon the terms and conditions set
forth in this Agreement, all of the Transferor Members' membership interests in
the Transferor Company (the "Transferor Membership Interests"). The percentage
of interest that each of the Transferor Members owns in the Transferor Company
is listed on Exhibit I. At the Closing (as defined in Section 3.01), the
Transferor Members shall, respectively, contribute, assign, transfer and deliver
the Transferor Membership Interests to the BRI Partnership, or its designees as
provided in Section 18.01 hereof, by an Assignment and Assumption of Membership
Interest in the form of Exhibit III attached hereto (the "Transferor
Assignment"). Immediately thereafter, the Transferor Members and the BRI
Partnership, or its designees, shall execute and deliver an Amended and Restated
Operating Agreement in the form of Exhibit IV attached hereto (the "Amended
Transferor Operating Agreement") and an Amended and Restated Articles of
Organization in the form of Exhibit V attached hereto (the "Amended Transferor
Company Articles") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Members shall withdraw, as the members of
the Transferor Company and be released of all liability thereunder, and the
terms of the Transferor Company shall be amended in accordance with the Amended
Transferor Operating Agreement.
1.02 Property Title. On or before September 22, 1997, the Transferor
Members shall deliver to the BRI Partnership a copy of the Transferor Company's
existing title insurance commitment or policy (the "Commitment") 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").
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 Company on or before October 1, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Company 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". Any easements or other agreements reasonably required
for the development and construction of the Property and the Improvements now or
hereafter entered into by the Transferor Company; including an agreement for the
shared use and the sharing of the operating expenses of the common recreational
facilities located on the Property and an easement declaration creating
cross-easements for the roads, storm water management ponds and the sewage
pumping station on the Property, all of which are consistent with the Plans and
Specifications and, in the reasonable discretion of the BRI Partnership, do not
materially interfere with the intended use of
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the Property nor materially affect the value of the Property, shall also
constitute Permitted Exceptions.
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at the BRI Partnership's sole cost, shall obtain a new
commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B
Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the
"Title Insurer"). The Updated Commitment shall insure fee simple title to the
Property in the sole name of the Transferor Company and shall be in the amount
of $15,419,635. The Updated 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, a
non-imputation endorsement and such other endorsements as are reasonably
required by the BRI Partnership and are available under the law of the state in
which the Property is located. If any new exceptions to title appear in the
Updated Commitment that do not constitute Permitted Exceptions and that are
unacceptable to the BRI Partnership, in its reasonable discretion, the BRI
Partnership may notify the Transferor Company within thirty (30) days after the
Completion Date Notice.
If any exceptions in the Commitment or the Updated Commitment are
unacceptable to the BRI Partnership in accordance with the foregoing provisions,
and the BRI Partnership timely notifies the Transferor Company in writing of
such fact as above provided, the Transferor Company shall have thirty (30) days
from the date the Transferor Company receives notice of such unacceptable
exceptions, at the option of the Transferor Company, to remove or cure such
exceptions, provided further, the Transferor Company 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
the liens for real estate taxes and current water and sewer charges for the
fiscal year in which Closing occurs, 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 Company at Closing. The
Transferor Company shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Company, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Company will attempt to cure such unacceptable exceptions.
If the Transferor Company 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 Company 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 Company or
(ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Purchase Price (as defined in Section 2.01(a))
in an amount necessary to enable the BRI Partnership to remove all Monetary
Liens.
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1.03 Survey. On or before September 22, 1997, the Transferor Company
shall provide to the BRI Partnership a copy of its existing survey (the
"Survey") of the Land and any Improvements.
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 Company on or before
October 1, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Company 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."
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at its sole cost and expense, shall obtain an updated
survey (the "Updated Survey") by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Updated 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
Updated Survey and the recorded legal description. The BRI Partnership shall
provide a copy of the Updated Survey to the Transferor Company promptly after
its receipt thereof. If any new matters appear on the Updated Survey that do not
constitute Permitted Exceptions, do not simply reflect the construction of the
Improvements in locations that do not encroach upon property lines, setback
lines or easements, and are unacceptable to the BRI Partnership in its
reasonable discretion, the BRI Partnership may notify the Transferor Company
within forty (40) days after the Substantial Completion Date Notice.
If any survey matters are unacceptable to the BRI Partnership in
accordance with the foregoing provisions, and the BRI Partnership timely
notifies the Transferor Company in writing of such fact as above provided, the
Transferor Company shall have thirty (30) days from the date the Transferor
Company receives notice of such unacceptable survey matters, at the option of
the Transferor Company, to cure such unacceptable survey matters. The Transferor
Company shall be deemed to have refused to cure any unacceptable survey matters
unless the Transferor Company, within ten (10) days
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after receipt of notice from the BRI Partnership, shall notify the BRI
Partnership in writing that the Transferor Company will attempt to cure such
unacceptable survey matters. If the Transferor Company 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 Company 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 Company 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 Construction and Inspection.
(a) Plans and Specifications. Prior to the date of this
Agreement, Transferor Company has delivered to BRI Partnership true, correct and
complete copies of the Preliminary Plans and Specifications for the construction
of the Improvements as set forth on Schedule C attached hereto. After the date
hereof, the Transferor Company, at its sole cost and expense, shall prepare
complete construction plans and specifications for the Improvements and submit
them to the BRI Partnership for approval, such approval not to be unreasonably
withheld. The Transferor Company shall prepare the construction plans and
specifications in good faith and so as to be in accordance with the Preliminary
Plans and Specifications, and the BRI Partnership shall act in good faith when
approving the construction plans and specifications and shall not disapprove any
aspects of the construction plans and specifications that are in accordance with
the Preliminary Plans and Specifications. BRI Partnership shall notify the
Transferor Company in writing of its approval or disapproval of the construction
plans and specifications within 30 days following receipt. If BRI Partnership
does not approve the construction plans and specifications, then the parties
shall work in good faith to resolve any differences, but, if within 30 days
after submittal, the parties have not agreed upon the construction plans and
specifications, then either party, by written notice to the other, may terminate
this Agreement, and, upon the giving of such notice, the Deposit shall be
returned to the BRI Partnership and neither party shall have any further rights
or obligations hereunder. Once agreed upon, the construction plans and
specifications shall be deemed the "Plans and Specifications" for all purposes
of this Agreement. BRI Partnership and the Transferor Company, as part of, or
prior to, the approval of the construction plans and specifications may mutually
agree upon changes to the quality or level of Improvements to that shown in the
Preliminary Plans and Specifications and, in such event, the parties shall also
agree upon an appropriate upward or downward adjustment in the Consideration
Amount.
(b) Transferor Company to Construct Improvements. Transferor
Company shall, at Transferor Company's expense, obtain all permits and construct
the Improvements on the Land in accordance with the Plans and Specifications, as
the same may be modified by change order in accordance with this Agreement. All
work shall be done in a good and workmanlike manner using new, good quality
materials, free of all defects and in compliance with all Codes (as defined in
Section 5.21), permits, approvals, title restrictions and insurance
requirements. Transferor Company shall obtain builder's risk insurance on the
Improvements in the amount of the construction cost of those buildings from time
to time for which construction has commenced. Transferor Company shall deliver a
certificate of such insurance to BRI
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Partnership. Transferor Company shall maintain such insurance in force and
effect through the course of construction and until Closing hereunder.
(c) Inspection of Construction; Correction of Defects. BRI
Partnership and its engineers, consultants and agents may inspect the
construction of the Improvements from time to time during the course of
construction upon reasonable notice to the Transferor Company. After receipt
from the Transferor Company of written notice that the requirements of Section
3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI
Partnership and its engineers, consultants and agents shall inspect the
construction of the Improvements upon reasonable notice to Transferor Company to
determine whether such construction is completed in accordance with the Plans
and Specifications. Within 30 days after the Inspection Notice, BRI Partnership
will give written notice to Transferor Company of any nonconformities with the
Plans and Specifications and defects or deficiencies in construction identified
by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership,
which disagreement shall be expressed by giving written notice to the BRI
Partnership stating the basis for said disagreements, within 10 days after such
BRI Partnership notice, Transferor Company, at Transferor Company's expense,
shall commence to correct, repair or replace any such nonconformities, defects
or deficiencies and shall diligently continue thereafter until completion of
such corrections, repairs or replacements, and, if such deficiencies are of such
a magnitude that Closing would not otherwise be required to occur under Section
3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies
are corrected. Any dispute shall be resolved by arbitration in accordance with
Section 3.02.
(d) Change Orders. The Transferor Company shall not change or
modify the Plans and Specifications without prior written approval of the BRI
Partnership, such approval not to be unreasonably withheld, provided, however
that the following changes shall not require BRI Partnership's approval: (i)
changes required by the construction lender or governmental authorities, and
(ii) changes in the design of the Improvements resulting in a decrease or
increase in construction cost by less than $100,000 for an individual change and
less than $250,000 in the aggregate. The Transferor Company shall give written
notice to BRI Partnership of all proposed changes to the Plans and
Specifications by sending a complete copy of the change, together with copies of
any plans or drawings related thereto. BRI Partnership shall give its written
approval or disapproval within five (5) business days thereafter. If BRI
Partnership disapproves any such change, the Transferor Company shall not
implement same.
(e) Completion. The Transferor Company shall diligently
attempt to complete construction of the Improvements in accordance with the
Plans and Specifications, as modified in accordance with this Agreement, and in
compliance with all Codes (as defined in Section 5.21 hereof) by December 31,
2003 (the "Scheduled Completion Date"). For purposes of this Agreement, the
"Completion Date" shall be the date upon which all of the Closing Conditions
shall have been satisfied as set forth in Section 3.02.
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(f) Force Majeure. In the event that the Transferor Company is
delayed in the commencement or completion of construction of the Improvements by
acts of God, war, civil commotion, fire, flood or other casualty, labor
difficulties, strikes, shortages of labor, materials or equipment, undue delay
in action by governmental authorities, governmental or utility company refusal
to issue building, construction, utility, occupancy or other permits or
approvals, water, sewer or other utility moratorium (including enforcement of
the requirements of any adequate public facilities ordinance) or other causes
beyond the Transferor Company's reasonable control (a "Force Majeure Event"),
the Scheduled Completion Date shall be extended for the period of delay, not to
exceed 12 months. If a Force Majeure Event continues in effect for a period in
excess of 12 months, during which construction is delayed, then the Transferor
Company may, by notice to BRI Partnership terminate this Agreement, in which
event the Deposit shall be returned to the BRI Partnership and neither party
shall have any further liability to the other hereunder. In addition,
simultaneously with closing under the Related Agreements, the Transferor Company
shall execute and deliver to BRI Partnership the Right of First Offer Agreement
attached hereto as Exhibit IX, which Right of First Offer Agreement shall
contain, among other provisions a Right of First Refusal which provides: (a)
that the BRI Partnership shall have a right of first refusal to purchase the
Property following the termination of this Agreement pursuant to this Section
1.04(f), (b) BRI Partnership shall have a period of 15 business days, following
receipt of a bona fide third party letter of intent to purchase the Property, to
agree to purchase the Property on the same terms and conditions as set forth in
the letter of intent, and (c) such Right of First Offer Agreement shall be
subordinate to any mortgage or deed of trust securing construction financing on
the Property.
1.05 Environmental Due Diligence Inspection.
(a) On or before September 22, 1997, the Transferor Company
shall deliver to the BRI Partnership a copy of its environmental report for the
Property (the "Initial Environmental Report"). Should the BRI Partnership
decide, in its sole judgment, during the period up to and including October 1,
1997 (the "Due Diligence Period") that the Initial Environmental Report is
unsatisfactory, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so 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. 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 the period expiring
30 days after the Substantial Completion Date Notice during regular business
hours and on reasonable prior notice to the Transferor Company, inspect the
Property to determine the presence of any Hazardous Materials (as defined in
Section 5.20) and the compliance of the Property with Environmental Laws (as
defined in Section 5.20) 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
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Transferor Company 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 Company in this Agreement. Should the BRI
Partnership decide, in its reasonable judgment, that there exists an
environmental risk with respect to the Property (excluding such items as
asbestos roof shingles, asbestos floor tile and mastic, PCBs in electric light
ballasts, HCFCs or CFSs in HVAC units, the presence of usual and customary
cleaning and maintenance supplies and similar items that are typically handled
through the adoption of appropriate operations policies), during the period
expiring 30 days after the Substantial Completion Date Notice 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 Company on or before 30 days after the Substantial
Completion Date, and upon the giving of such notice this Agreement shall be of
no further force or effect. Notwithstanding the foregoing, the BRI Partnership
may not disapprove or object to any matter disclosed by the Environmental
Inspection that was disclosed in the Initial Environmental Report. If the BRI
Partnership shall fail to exercise such termination right within any such
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 1.05.
The BRI Partnership shall pay when due all fees and expenses incurred in the
performance of the Environmental Inspection performed at its request.
(b) From and after the date of this Agreement, the Transferor
Company shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Company'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 Company's financial records relating to the Property
have been audited, the Transferor Company agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Company shall provide the
BRI Partnership with such information as the Transferor Company 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 Company, all taxes and utility payments made 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 1.05(b) 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 Company if the Closing does not occur.
(c) The BRI Partnership shall indemnify the Transferor Members
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
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Property by them, or any of them, together with all expenses incurred by the
Transferor Members 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 Members 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 1.05(c) shall survive
the Closing or any termination of this Agreement; provided, however, that no
claim by the Transferor Members under this Section 1.05(c) 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 Members 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 Members hereunder.
1.06 Tax Treatment. The parties intend that, to the extent the
Transferor Members receive BRI Partnership Units as the consideration for the
contribution of the Transferor Membership Interests by the Transferor Members to
the BRI Partnership in accordance with Section 1.01 of this Agreement, such
contribution shall 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 Members agree to
report such transaction for federal and applicable state income tax purposes
consistently with the intent set forth in this Section 1.06.
SECTION 2
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CONSIDERATION
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The consideration for the Membership Interests (the "Consideration
Amount"), subject to the adjustments contained in Section 12 of this Agreement,
shall be determined pursuant to the provisions of Section 2.04, and shall be
paid by the the BRI Partnership to the Transferor Members in the following
manner:
2.01 Deposit.
(a) Simultaneously with the execution of this Agreement, the
the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the
"Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check
(subject to collection) as a Deposit to be held in an interest-bearing escrow
account on account of the Consideration Amount. Said sum, together with any
interest earned thereon, is hereinafter called the "Deposit."
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(b) At the Closing, the Deposit shall be returned by the
Escrow Agent to BRI Partnership.
2.02 Balance. At the Closing, the BRI Partnership shall deliver to the
Transferor Members the Base Consideration, plus, if then due, any Additional
Consideration Installments, subject to the adjustments described in Section 12
of this Agreement by federal wired funds. Prior to any delivery to the
Transferor Members of the Base Consideration, there shall be deducted from the
Base Consideration an amount equal to the sum required to pay off the
Construction Loan in full and to remove all other Monetary Liens and
simultaneously with the Closing, the BRI Partnership shall pay off the
Construction Loan. At the Transferor members' option, to be exercised
irrevocably by written notice to the BRI Partnership given at least 15 days
prior to the satisfaction of the Closing Conditions, all or a portion of the
Consideration Amount shall be delivered to the Transferor Members in the form of
BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise
such option, then the number of BRI Partnership Units, the rights and
limitations upon such units and the method by which the units are delivered to
the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b)
and (c) below. If the Transferor Members do not exercise the foregoing option in
a timely manner, all consideration payable under this Agreement shall be paid in
cash by federal wired funds and the following Sections of this Agreement shall
be, without further action by any party, null and void and without any further
force or effect upon the parties: 1.06, 2.02(a) through (c), 5.34, 6.03, 6.05,
6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04, 11.01(a) (ii), (iii)
and (iv) and 11.01(d) (last sentence only), 11.03 and 12.04.
(a) The number of BRI Partnership Units to be issued to the
Transferor Members at Closing shall be that number determined by dividing the
portion of the Consideration Amount to be paid in BRI Partnership Units to each
Transferor Member by the value of one BRI Partnership Unit. The parties agree
that, for purposes of this Agreement, the value of each BRI Partnership Unit
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 ten (10) business days prior to the day which
is five (5) business days before the Closing. If the calculation provided for
above results in a fraction of a BRI Partnership Unit to be delivered to a
Transferor Member, the number of BRI Partnership Units to be delivered shall be
rounded up or down to the nearest whole number of BRI Partnership Units.
Attached hereto as Exhibit I is a schedule (the "Transferor Allocation
Schedule") prepared by the Transferor Members setting forth (i) the name of each
Transferor Member, and (ii) the percentage interest of each Transferor Member,
together with an investor questionnaire in the form attached hereto as Exhibit 5
(the "BRI Questionnaire") for each Transferor Member. In the event that any
Transferor Member 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 Members all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Members
in accordance with the Transferor Allocation
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Schedule. In addition, if pursuant to Section 12, the BRI Partnership owes any
amounts to the Transferor Members 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 Members in accordance with the election
made by the Transferor Members pursuant to Section 2.02. The BRI Partnership
shall have no obligation or liability with respect to the preparation or
accuracy of the Transferor Allocation Schedule.
(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 any Transferor Member 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. Each Transferor Member 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 Members and Berkshire 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 Members a certified copy of the
Registration Rights Agreement.
(c) The Transferor Members, acknowledge and agree 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, 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 this Section, 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 Members in the event of a
decrease or increase in the market value of the common stock of BRI.
2.03 Payment of Monies. Any monies payable under this Agreement, unless
otherwise specified in this Agreement, shall be paid by wire transfer.
2.04 Calculation of Consideration Amount. The Consideration Amount for
the Transferor Membership Interests shall consist of a base consideration amount
("Base Consideration") plus additional consideration installments ("Additional
Consideration Installments").
(a) The Base Consideration for the Transferor Membership
Interests shall be Fifteen Million, Four Hundred Nineteen Thousand, Six Hundred
Thirty-Five Dollars ($15,419,635).
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(b) In addition to the Base Consideration, the BRI Partnership
shall pay one or more additional consideration installments (the "Additional
Consideration Installments"), if any, on a quarterly basis with the first
payment, if then due, on the date of Closing and on the first day of each
quarter (defined as a period of three full calendar months, plus, for the first
quarter, any partial calendar month after the date of Closing) thereafter for a
total of 18 full calendar months after the Closing (the "Earn Out Period). As
of the Closing and as of the first day of each quarter thereafter, Stabilized
NOI shall be determined as provided below, and each Additional Consideration
Installment, if any, will be equal to the Stabilized NOI divided by 10% (the
"Cap Rate") and then reduced by the Base Consideration and any prior Additional
Consideration Installments.
(c) Stabilized NOI shall be calculated for purposes of
determining the Additional Consideration Installments as follows: 12 times the
monthly actual income for the Property, (provided that if occupancy rates exceed
95%, then actual income shall be calculated as if the Property had an occupancy
rate of 95%) for the month preceding the payment date less Three Hundred
Ninety-Six Thousand, One Hundred Dollars ($396,100) (representing the
agreed-upon annual Projected Operating Expenses for the Property), provided
that, on the first anniversary of the date of Closing under this Agreement, the
Projected Operating Expenses shall be adjusted by the percentage change in the
CPI-U, U.S. Cities Average for the period from the date of Closing under this
Agreement until the anniversary date.
SECTION 3
---------
THE CLOSING
-----------
3.01 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
in Washington, D.C., or such other place as the Transferor Company and the BRI
Partnership shall mutually agree. The "Time of Closing" shall be on that date
specified in Section 3.02 at which 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
Members 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 Members. It is agreed that time is of the essence of this
Agreement.
3.02 Closing under this Agreement shall occur on the first business day
of the month after the Transferor Members have given to the BRI Partnership 60
days prior notice (the "Substantial Completion Date Notice") of the occurrence
of the last to occur of (a) the substantial completion of construction of the
Property excluding punch-list items not affecting occupancy (provided Transferor
Members shall thereafter complete all punch-list items at no expense to the BRI
Partnership within 30 days after Closing or within such additional time as may
be
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reasonably required) ("Completion Date") as evidenced by satisfaction of each of
the following conditions (the "Closing Conditions"): (i) final certificates of
occupancy issued by the appropriate governmental authority, and (ii) a
certificate of substantial completion issued by Questar Builders, Inc. or such
affiliate of Transferor Members as Transferor Members may designate to be the
general contractor for construction of the Improvements ("Questar Builders")
certifying that the Improvements have been substantially completed in accordance
with the Plans and Specifications and all Codes, as such may be modified from
time to time by the Transferor Company in accordance with this Agreement, or (b)
the Stabilization Date. If a dispute shall exist as to whether substantial
completion has occurred, the dispute shall be promptly submitted to binding
arbitration by a qualified third party mutually acceptable to the parties or, if
they are unable to agree upon a third party, then by arbitrators appointed
pursuant to the applicable rules of the American Arbitration Association.
3.03 The Stabilization Date for the Property shall be as follows:
The first day of that month which first occurs after 90% of the apartment units
in the Property have been leased for a period of 3 months to Qualified Tenants.
3.04 "Qualified Tenants" are those tenants with annual income equal to
not less than 3 times the annual rent who are in occupancy and have commenced
the payment of rent.
SECTION 4
---------
TRANSFEROR'S PRE-CLOSING DELIVERIES
-----------------------------------
At least thirty (30) days prior to the date of Closing, the Transferor
Company shall deliver or otherwise make 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 Company shall provide the BRI Partnership with access on-site to the
originals of all Leases and related lease files.
4.02 Certificates of Occupancy and Permits. Original, final
certificates of occupancy for all buildings in the Property and 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.
4.03 Taxes. To the extent in the Transferor Company'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.
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4.04 Plans and Specifications. A set of original Plans and
Specifications, and a copy of all guaranties and warranties made by any person
for the benefit of the Transferor Company 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 each completed year occurring at least 120 days
prior to Closing and each completed month of operation thereafter occurring at
least 75 days prior to Closing, and detailed operating statements for each
completed year occurring at least 120 days prior to Closing and each completed
month of operation thereafter occurring at least 75 days prior to Closing;
provided that all such statements and records shall be provided only for periods
after the Property was first leased and occupied by rent paying tenants.
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" which consists of 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, in the form attached hereto as Schedule D.
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.
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).
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 Company 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 Company which shall be attached hereto as Schedule B.
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SECTION 5
---------
A. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR COMPANY
-------------------------
The Transferor Company represents, warrants and covenants to the BRI
Partnership, as of the date hereof, as follows:
5.01 Organization and Standing of the Transferor Company. The
Transferor Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Transferor Company 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 Company 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 Company's business (a "Material Adverse
Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in
Section 5.05 hereof, the Transferor Company is not in violation of any term
contained in the Transferor Operating Agreement, or to the Transferor Company's
knowledge in any other material instrument or contract to which the Transferor
Company is a party relating to the Property, and to the Transferor Company's
knowledge the Transferor Company 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 Members, nor the contribution of the Transferor
Membership Interests by the Transferor Members hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Operating Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Company, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended
Transferor Company Articles to reflect the transactions contemplated hereby, 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 Members or the Transferor Company in connection
with the valid execution and delivery of this Agreement by the Transferor
Members and the performance of the Transferor Members' obligations hereunder.
5.04 Company Capitalization. The Transferor Operating Agreement (i) is
the only agreement among the members relating to the organization, operation, or
management of the Transferor Company, (ii) is in full force and effect and (iii)
has not been amended or modified. Exhibit I sets forth an accurate and complete
list of the names and residence addresses of all of the Transferor Members of
the Transferor Company, and the Transferor Members' respective membership
interests in the Transferor Company. Except as set forth on Exhibit I, no other
person or party owns any membership interest in the Transferor Company. No
Transferor
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Member is in default with respect to any capital contribution required to be
paid by him or it pursuant to the Transferor Operating Agreement. A true,
correct and complete copy of the Transferor Operating Agreement is attached
hereto as Exhibit II. The Transferor Company has no commitment to issue any
right to purchase or acquire or to issue or distribute to any of the Transferor
Members, any evidences of indebtedness or assets; and the Transferor Company has
no obligation, contingent or otherwise, to purchase, redeem or otherwise acquire
any interest in the Transferor Company or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Company's knowledge, proceeding or
investigation pending or, to the Transferor Company's knowledge, any threat
thereof, against the Transferor Members, the Transferor Company or the Property
or any part thereof which questions the validity of this Agreement or the right
of the Transferor Members 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 Company as such is presently contemplated; or (ii)
the rights represented by the Transferor Membership Interests. During the period
commencing on the date hereof and ending on the Closing Date, the Transferor
Company will promptly inform the BRI Partnership in writing of any material
action, suit, proceeding or investigation pending, or to the Transferor
Company's knowledge, threat thereof against the Transferor Members, the
Transferor Company 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 Company
is a party or to which any agent of the Transferor Company is a party on behalf
of the Transferor Company or has entered into on behalf of the Transferor
Company, relating to the Transferor Company or all or a portion of the Property
or otherwise affecting the Property, including without limitation, all material
management, maintenance, brokerage, supply and service contracts (collectively
"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
Company. Except as noted on Schedule E, each Service Contract is cancelable on
thirty (30) days notice. Transferor Company has no knowledge of any material
breach or material default under any Service Contract. As of Closing, the
Transferor Company 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 Financial Statements. Attached hereto as Schedule F are financial
statements of the Transferor Company, including balance sheets, statements of
operations and statements of partners' capital (collectively, the "Financial
Statements") for the fiscal year ended December 31, 1996 (the "Statement Date").
The Financial Statements fairly present the financial condition of the
Transferor Company as of the Statement Date in accordance with generally
accepted accounting principles consistently applied, and reflect all
liabilities, fixed, contingent or
-17-
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles.
5.08 Title to Properties and Assets. The Transferor Company is the sole
owner of the Property. Except as disclosed in Section 18.01, the Transferor
Company does not own, or otherwise hold any interest in, any material assets
other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or
authorizations previously obtained by the Transferor Company or to be obtained
by the Transferor Company prior to Closing, no other material license, permit or
authorization is necessary to own and operate the Transferor Company's business
as such is presently conducted and neither the conduct of the Transferor
Company's business nor any material portion thereof is dependent on the issuance
or obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the indebtedness for borrowed money
incurred or to be incurred to acquire and construct the Property (collectively,
the "Construction Loan"), the Transferor Company has no indebtedness for
borrowed money and the Transferor Company has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. No Transferor Member,
nor any affiliate of any Transferor Member nor any employee of the Transferor
Company is presently indebted to the Transferor Company for borrowed money and,
except for the Construction Loan, the Transferor Company is not presently
indebted for borrowed money to any of the foregoing persons. As of the Closing
Date, the Transferor Company shall have no liabilities or obligations (absolute
or contingent) of any kind, other than (a) liabilities and obligations incurred
in the ordinary course of the Transferor Company's business which are either (i)
in the aggregate, not in excess of $50,000, or (ii) approved by BRI Partnership
in writing; and (b) liabilities resulting from or incurred in the ordinary
course of business arising under the Service Contracts. The Transferor Company
has conducted its business only in the ordinary course and, except for the
Construction Loan, the Transferor Company has not:
(a) created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in
excess of $10,000 (whether or not covered by insurance) to any assets or
properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete
list of all insurance policies of the Transferor Company (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Company has done nothing to reduce or impair the insurance afforded
by the Insurance Policies. To the Transferor Company's knowledge, there are no
material disputes with underwriters of any such Insurance Policies and there are
no pending or threatened terminations with respect to any of such policies.
-18-
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Transferor
Company or for which the Transferor Company may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, 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 Transferor Company. All taxes due
with respect to completed and settled examinations or concluded litigation have
been paid.
(b) The Transferor Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The Transferor Company does not know of (A) any audit or
investigation of the Transferor Company with respect to any liability for taxes
relating to the Transferor Company for which any Transferor Member may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Company.
5.13 Employees. The Transferor Company has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Company has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for those given to the holder of the
Construction Loan, as provided in the Construction Loan Documents, no person
holds a power of attorney from or agency agreement with the Transferor Company.
5.16 Bank Accounts. On or before Closing, the Transferor Company shall
have closed every bank account and safe deposit box of the Transferor Company
for which the Transferor Members or their representatives are signatories, and
no representative of the Transferor Members shall be a signatory on any other
account or safe deposit box of the Transferor Company or shall have the power to
borrow, discount debt obligations, cash or draw checks, or otherwise act on
behalf of the Transferor Company in any dealings with any banks or other
financial institutions.
5.17 Ownership. The Transferor Company has not received any written
notice challenging the validity of the Transferor Company's title to the
Property. The Transferor Company has not granted any rights, options, rights of
first refusal or entered into other
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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 Stabilization Date, there shall be 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, to
be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and
correct in all material respects as of the Stabilization Date. Except as
otherwise specifically set forth in the Rent Roll or elsewhere in this
Agreement:
(a) to the Transferor Company'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 Company;
(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 Company, except as
set forth on Schedule 5.18 hereof, no action or proceeding instituted against
the Transferor Company 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, except as provided in (c) above.
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 Company,
no apartment unit is subject to any rent control law, ordinance or regulation.
-20-
5.20 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 Company or any of the Transferor Members'
affiliates, with respect to the Property (collectively, the "Environmental
Reports"). The Transferor Company 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 1.05 hereof (the "BRI Environmental Reports"), the
Transferor Company 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 Company has any material liability with respect
thereto. To the Transferor Company'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
Company's knowledge, except as disclosed in the Environmental Reports or in the
BRI Environmental Reports, neither the Transferor Company 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. s. 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. s. 9601 et seq.), as amended by the Superfund
Amendments and Reauthorization Act of 1986; the Hazardous Materials
Transportation Act (49 U.S.C. s. 1801 et seq.); the Toxic Substance Control Act
(15 U.S.C. s. 2601 et seq.; the Clean Air Act (42 U.S.C. s. 9402 et seq.); the
Clean Water Act (33 U.S.C. s. 1251 et seq.); the Federal Insecticide, Fungicide
and Rodenticide Act (7 U.S.C. s. 136 et seq.); the Occupational Safety and
Health Act (29 U.S.C. s. 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.
5.21 Permits and Compliance with Laws. Upon completion of construction
of the Improvements, all approvals, consents, permits, licenses or certificates
of occupancy (whether governmental or otherwise) required for the use, operation
and occupancy of the Property shall have been granted to the Transferor Company
and shall be in full force and effect, and any fees and charges shall have been
fully paid. Upon completion of construction of the Improvements, the Property
shall be in compliance in all material respects with all zoning, building,
health,
-21-
traffic, fire safety, flood control, handicap and other laws, regulations and
ordinances of all governmental authorities having jurisdiction over the Property
(collectively "Codes"). To the Transferor Members' knowledge, no 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 as would
not have a Material Adverse Effect. The parties agree that all matters relating
to compliance with Environmental Laws shall be covered by Section 5.20 and not
by this Section 5.21.
5.22 Utilities. Upon completion of construction of the Improvements,
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) shall be installed, and shall comply
in all material respects with the requirements of the Plans and Specifications
and all applicable Codes, and all necessary easements, permits, licenses and
agreements in respect of any of the foregoing shall be installed and operating
and all installation and connection charges, to the extent due and payable,
shall have been paid for in full.
5.23 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 Company, 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.
5.24 Pre-Closing Deliveries Accurate. All of the materials to be
delivered by the Transferor Company to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits when delivered, will be true,
accurate and complete in all material respects.
5.25 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the Transferor Company's knowledge,
threatened against the Transferor Company, nor are any of such proceedings,
against or by the Transferor Company, anticipated or contemplated by the
Transferor Company.
5.26 Liens. The Transferor Company agrees to keep the Property free
from mechanics and materialmen's liens or other liens or encumbrances occasioned
by the actions of the Transferor Company or its contractors or subcontractors
and agrees to indemnify and save BRI Partnership harmless from any such liens or
encumbrances and all attorneys' fees and other costs and expenses incurred by
reason thereof.
5.27 Essential Facilities. Except as set forth in Schedule 5.27, 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
-22-
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
5.27, no property not included in the Property relies for its operation,
maintenance or legal compliance on any facilities located on the Property.
5.28 Legal Access. There is, or prior to Closing will be, direct legal
access from a public way to the Property. Upon completion of construction of the
Improvements, all necessary curb cuts, access permits and other governmental
approvals required to provide such access shall have been issued and shall be in
full force and effect.
5.29 Public Improvements. To the best knowledge of the Transferor
Company and except as shown on the Plans and Specifications, 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 that would have a Material Adverse Effect. To the best
knowledge of the Transferor Company, there are no presently planned public
improvements which would result in the creation of a special improvement or
similar lien upon the Property.
5.30 Condition of Improvements. The Property, including, without
limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical,
HVAC systems and equipment, plumbing, drainage and heating systems and other
mechanical systems, shall at the time of Closing be in good order and operating
condition, subject to normal wear and tear, and will be constructed
substantially in accordance with (i) the Plans and Specifications, (ii) all
applicable Codes, permits, approvals, title encumbrances and insurance
requirements and (iii) accepted standards of good materials and workmanship. As
of the time of Closing, there will be no physical or mechanical defects having a
Material Adverse Effect on the use or marketability of the Property and no
condition which impairs or could impair, the structure of the Property or
renders it in noncompliance with the requirements of this Agreement. No fire or
other casualty shall have occurred on any of the Property, the damage related to
which has not been repaired or restored to the condition the Property was in
prior to such fire or other casualty.
B. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR MEMBERS
-------------------------
Each of the Transferor Members on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof,
as follows:
5.31 Authorization. Such Transferor Member has full power and authority
to enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Members Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Member under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Members
Closing
-23-
Documents will constitute valid and binding obligations, enforceable against
such Transferor Member in accordance with their respective terms.
5.32 Additional Authorization. No approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Member of
the Transferor Membership Interests held by such Transferor Member and the
performance of such Transferor Member's obligations under this Agreement.
5.33 Membership Interest. Except as provided in this Agreement and the
Transferor Operating Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Membership Interests held by such Transferor Member is
authorized or outstanding. Except as disclosed on Schedule 5.33, such Transferor
Member owns and holds the Transferor Membership Interests set forth opposite its
name on Exhibit I beneficially and of record free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.33 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Membership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.33 shall survive the Closing indefinitely.
5.34 Investment Representations and Warranties. Each Transferor Member
for itself, severally and not jointly, represents, warrants, acknowledges and
agrees as follows:
(a) Such Transferor Member 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) Such Transferor Member understands that the BRI
Partnership Units to be issued to each Transferor Member 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 such Transferor Member.
(c) Such Transferor Member acknowledges and agrees that, for
the reasons set forth in Sections 5.34(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 such Transferor Member except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a
no-
-24-
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, such Transferor Member 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.
Such Transferor Member acknowledges, represents and agrees that (i) its economic
circumstances are such 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, its 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. Such Transferor Member 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) Such Transferor Member is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Act.
(e) Such Transferor Member understands that an investment in
the BRI Partnership and BRI involves substantial risks. Such Transferor Member
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) Such Transferor Member acknowledges and agrees that:
-25-
(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, 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 Exhibit I is the address of such
Transferor Member's principal residence or principal place of business, and such
Transferor Member 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 5.34 shall survive the
Closing indefinitely.
5.35 Receipt of Documents. Such Transferor Member has received all
Exhibits and Schedules described herein as attached hereto.
-26-
SECTION 6
---------
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
-------------------------------------------------
The BRI Partnership represents, and warrants and covenants to the
Transferor Members 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
Members 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.
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 Company 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
-27-
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 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 ended 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 Members 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 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
-28-
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 Company 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, 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 Members, 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-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 Company 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
-29-
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 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
Company 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
-30-
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 Members 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 $750,000.00) are damaged or destroyed by fire or casualty and
are not restored by the Transferor Company prior to the Time of Closing, 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 Members 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 termination; or (b) proceed with the contribution and transfer
of the Transferor Membership Interests, and in such case, unless the Transferor
Members shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Members shall
pay over or assign to the BRI Partnership, on behalf of the Transferor Company,
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 $750,000.00, or if any such damage or destruction
shall occur and be restored by the Transferor Company prior to the Time of
Closing, 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 Transferor Membership
Interests 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 be removed or complied with by the Transferor Company, at the
expense of the Transferor Company, prior to the Closing Date.
SECTION 9
---------
OBLIGATIONS PRIOR TO CLOSING
----------------------------
The Transferor Company covenants that between the date of this
Agreement and the Closing Date:
-31-
9.01 Condition of Units. Up to the Time of Closing, all apartment units
on the Property which become vacant shall, if necessary, be repaired or
otherwise maintained in accordance with the Transferor Company's usual and
customary practice without regard to the Closing contemplated by this Agreement.
9.02 Service Contracts. The Transferor Company shall not 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.
9.03 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.
9.04 Tax Procedure. Except as to real property tax assessment appeal
proceedings now or hereafter filed by the Transferor Company to reduce real
property tax assessments, the Transferor Company 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 Transferor Members 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 Members, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.05 Property Operating and Maintenance. The Transferor Company shall
lease, manage, maintain and operate the Improvements in the ordinary course of
business. Without limiting the generality of the foregoing, the Transferor
Company shall perform all ordinary maintenance and repair of the mechanical,
electrical and plumbing facilities and equipment within the Improvements so as
to keep such facilities in good operating condition and repair, taking into
account ordinary wear and tear; and to the extent any such facilities or
equipment have heretofore been serviced under a Service Contract, the Transferor
Company shall keep such Service Contracts in full force and effect up to
Closing. For purposes hereof, the parties agree that the Transferor Company has
retained or will retain the BRI Partnership or its affiliate (the "Management
Company") as the manager for the Property pursuant to the Management Agreement
attached hereto as Exhibit 7. The parties agree that the Management Agreement
shall remain in effect until the expiration of the Earn Out Period and, until
then, may not be modified, amended or terminated without the consent of both
parties. Notwithstanding that the BRI Partnership is or will become the owner of
the Management Company, until the expiration of the Earn Out Period, the
Transferor Members shall have control over the activities of the Management
Company and its personnel (including both on-site and managerial) with respect
to
-32-
the Property, including but not limited to, appointment, hiring, firing,
supervision and compensation (both base and incentive, of personnel, operation,
marketing, promotions and advertising, hours of operation and all other
decisions as to the Property and its leasing and management; provided that such
control shall be exercised in a commercially reasonable manner as compared with
comparable properties in comparable locations. To facilitate this continued
control, BRI Partnership agrees that ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, currently a vice
president of The Questar Management Company, shall remain employed by the
Management Company until the expiration of the Earn Out Period, his principal
place of employment shall remain at the principal regional office of the
Transferor Company and he shall devote such efforts to the Property as the
Transferor Members shall require. Notwithstanding the foregoing, if the
employment agreement of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ is terminated by BRI Partnership, then
the Transferor Members at their option, may elect (a) to terminate the
management agreement with BRI Partnership and either manage, lease and operate
the Property on their own behalf or retain such other persons or entities to do
so as they deem appropriate on substantially the same terms (including, but not
limited to, the same management fee) as are provided in the management agreement
with BRI Partnership, and (b) to attempt to recruit ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as their
full-time employee.
9.06 Lease Amendments. The Transferor Company shall not amend, alter,
modify or vary the terms and provisions of any of Leases except in the ordinary
course of business, without first obtaining the written consent of the BRI
Partnership, which consent shall not be unreasonably withheld or delayed.
9.07 New Leases. From and after the date hereof, the Transferor Company
shall not make, execute nor permit any new Lease for any apartment in the
Property without first obtaining the written consent of the BRI Partnership,
unless such Lease (i) is on the form lease provided to the BRI Partnership, and
(ii) is with a Qualified Tenant.
9.08 Preservation of Partnership Business. On and after the date
hereof, except with the prior written consent of the BRI Partnership or as
otherwise provided in this Agreement, the Transferor Company shall not cause,
acquiesce in, or agree to:
(a) a material amendment, modification, termination or
cancellation of the Transferor Operating Agreement without the prior written
consent of the BRI Partnership, which shall not be unreasonably withheld or
delayed, provided that such amendment modification, termination or cancellation
does not adversely affect the BRI Partnership's rights under this Agreement;
(b) any willful action by the Transferor Company which would
render any of representations and warranties contained in Section 5 hereof
untrue in any respect at and as of the Closing Date with the same effect as
though such representations and warranties had been made at and as of the
Closing Date;
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and, except with the prior written consent of the BRI Partnership, the
Transferor Company shall not cause, acquiesce in or agree to any action allowing
the Transferor Company taking or agreeing to take any of the following actions:
(c) merge or consolidate with any other entity or permit any
other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets of
any other person, partnership, corporation, or business organization;
(d) except in the ordinary course of business and consistent
with past practices, enter into any contract, transaction or agreement which
shall survive the Closing (except as permitted by Section 9.02); or
(e) enter into any agreement, transaction or arrangement with
any affiliate that will survive the Closing; or
(f) subject any portion of the Property to any option contract
or sales contract.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Company shall conduct
its business only in the ordinary course 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, including up
to the Closing Date; and
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(f) Pay or cause to be paid all material debts, and other
material obligations incurred by the Transferor Company in connection with the
use and ownership of the Property up to the date of Closing.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Company will give the BRI Partnership and their
attorneys, accountants, and other representatives reasonable access to
Transferor Company's personnel and all properties, documents, contracts, books,
and records of the Transferor Company, relating to the consummation of the
transactions contemplated hereunder and will furnish the BRI Partnership with
copies of such documents (certified by the Transferor Company if so requested)
and with such information with respect to the affairs of the Transferor Company
as the BRI Partnership may from time to time reasonably request.
SECTION 10
----------
TRANSFEROR MEMBERS' CLOSING OBLIGATIONS AND
-------------------------------------------
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
---------------------------------------------------
10.01 Closing, Deliveries and Obligations. At or prior to the Closing,
the Transferor Members shall deliver the following to the BRI Partnership (the
"Transferor Members Closing Documents"):
(a) Assignment of Transferor Membership Interests. An
assignment of the Transferor Membership Interests from each of the respective
Transferor Members to the BRI Partnership in the form of the Transferor
Assignment attached hereto as Exhibit III, duly executed and delivered by each
of the Transferor Members, which shall transfer the Transferor Membership
Interests to the BRI Partnership free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party.
(b) UCC Search - Transferor Members. A Uniform Commercial Code
lien search for each of the Transferor Members, indicating that the membership
interest of each Transferor Partner in the Transferor Company is unencumbered by
any security interest therein and the cost of which shall be paid by BRI
Partnership.
(c) Amended Transferor Operating Agreement and Articles. The
Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended
and Restated Transferor Company Articles in the form of Exhibit V hereto duly
executed and delivered by the Transferor Members, pursuant to which the
Transferor Members shall withdraw as members from the Transferor Company.
(d) Opinion. An opinion of counsel satisfactory to the BRI
Partnership to the effect that the Transferor Company has been duly formed in
accordance with Maryland law and is validly existing and in good standing under
such laws, that the Transferor Members are all of
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the members of the Transferor Company, that no state transfer taxes, sales tax,
excise tax or transfer stamps are required to consummate the transactions
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 such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Members.
(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 Members and a BRI Questionnaire, in the form of
Exhibit 5 attached hereto, duly executed by each of the Transferor Members.
(f) Occupancy Permit. Final Certificates of Occupancy from the
local authority having jurisdiction over the construction and occupancy of the
Improvements.
(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, which are due and
payable at the Closing have been paid unless contested in good faith and
reasonable reserves are established therefor.
(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 Company. 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 Company 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 and Licenses. An as-built set of
original Plans and Specifications together with original copies (or photocopies
if original copies are unavailable to the Transferor Company) 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 Company shall also deliver: 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 each
Transferor Member in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and to omit from its title insurance policy all exceptions for (i) judgments,
bankruptcies or other returns against persons or entities whose names are the
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same as or similar to the Transferor Company'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 Members, advising the tenants under the Leases of the transfer
of ownership of the Transferor Company 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 the Transferor Members to the effect that, to its knowledge, all
of the representations and warranties of the Transferor Company 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 Company.
(n) Non-Foreign Affidavit. The Transferor Members 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 Members with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Construction Contract Retentions. Final mechanics' lien
waivers from the general contractor and subcontractors covering at least 95% of
the construction cost, together with an amount equal to 125% of all unpaid
retentions and disputed amounts under the Construction Contract, which amount
shall be placed in an escrow account with the Escrow Agent to be released on a
monthly basis to pay amounts coming due under the Construction Contract to the
general contractor, all subcontractors and material suppliers; provided that any
request for payment shall be accompanied by all documentation required as a
prerequisite to payment under the Construction Contract, including lien waivers,
and further provided that payment of any retention shall be subject to receipt
of final lien waivers and acknowledgments of payment in full executed by the
general contractors, all subcontractors and material suppliers. In any event,
the Transferor Members shall remain liable for payment of all such unpaid
retentions and disputed amounts to the extent not covered by the escrow, which
obligation shall survive Closing.
(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 Company
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 by the
BRI Partnership.
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(q) Certificate of Completion. The original certificate of
substantial completion required under Section 3.02.
(r) Questar Builders Warranty. An original one year
construction warranty for the Improvements to be provided by Questar Builders,
Inc., which construction warranty shall be identical to that required under the
standard AIA Construction Contract substantially in the form of Exhibit X
hereto.
(s) Warranties and Guarantees. Originals of all warranties and
guarantees provided by subcontractors and material suppliers for the
Improvements.
(t) Other Documents. Such other documents, instruments or
agreements which the Transferor Members 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 Transferor Membership
Interests. The provisions of this Section 10.01(t) shall survive the Closing
indefinitely.
10.02 The Transferor Members' Expenses. The Transferor Members shall
pay all of the fees and expenses of their own separate legal, tax or other
advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor
Member agrees that such Transferor Member will notify the Transferor Company in
writing on or prior to the Closing Date if any of the representations and
warranties of such Transferor Member cease to be true and correct on and as of
the Closing Date. Each Transferor Member further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Company, the
representations and warranties of such Transferor Member shall be deemed to be
true and correct on and as of the Closing Date and that the BRI Partnership and
the Transferor Company shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Members. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor Member,
hereby agrees that until the tenth (10th) day following the first anniversary of
the Closing:
(a) each Transferor Member shall continue to own and hold, and
shall not assign, transfer, distribute to its partners 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) no Transferor Member shall transfer or exchange the BRI
Partnership Units for shares of common stock of BRI;
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(c) except for the pledge of BRI Partnership Units by ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ given to the BRI Partnership pursuant
to the Pledge Agreement (described on Schedule K), no Transferor Member shall
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 10.04 shall survive the
Closing indefinitely.
10.05 Indemnification.
(a) The Transferor Members' Indemnity. In the event the
parties proceed to Closing, each Transferor Member agrees, severally and not
jointly, 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
Company set forth in Section 5A or of such Transferor Member set forth in
Section 5B or (B) resulting from any breach or default by the Transferor Company
or such Transferor Member of any obligation of the Transferor Company or such
Transferor Member under this Agreement or (ii) from liabilities for borrowed
money incurred by the Transferor Company or the Property prior to the Closing;
provided that no Transferor Member shall 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 such Transferor Member as of the date such
indemnification obligation is satisfied (except for indemnification obligations
with respect to representations of each of the Transferor Members in Section
5.33, 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 such Transferor Member) (collectively, the "Cap"); and provided
further that to the extent any of the Transferor Members have any
indemnification obligation to the BRI Partnership, the Transferor Members may
elect to satisfy such indemnification obligation by directing the BRI
Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Member pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or canceled) equal
to the indemnification obligation of such Transferor Member.
(b) The BRI Partnership's Indemnity. In the event the parties
proceed to Closing, the BRI Partnership agrees to indemnify and hold the
Transferor Members harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the Transferor Members, 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 Transferor
Company or the Property after the Closing (except for such liabilities resulting
from a breach or default by the Transferor Members or the Transferor Company for
which the BRI Partnership is indemnified under Section 10.05(a) above); provided
that the BRI Partnership shall not be required to indemnify any Transferor
Member under this Section 10.05(b)(i) for any amounts in excess of 50% of the
fair market value as of the date such
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indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Member (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 such Transferor Member).
(c) The indemnification obligations of the Transfer Members
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.
(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 any of the Transferor
Members 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 Members 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 Company or the Property.
(g) Each of the Transferor Members, the Transferor Company 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.
10.06 Post-Closing Tax Matters. As a result of the Closing, the
Transferor Company shall terminate for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code and its tax year shall close on the Closing
Date. The Transferor Members shall prepare and timely file any federal, state,
local and foreign tax or information returns due after Closing that are required
to be filed by or on behalf of the Transferor Company with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Members
shall prepare and timely file the terminating tax returns for the Transferor
Company resulting from the consummation of the transactions contemplated under
this Agreement, provided, however, that such tax returns shall be prepared in
accordance with the terms and provisions of this Agreement and provided further,
that prior to the filing thereof the Transferor Members shall submit the
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terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Members in obtaining such data and information regarding
the Transferor Company to permit the Transferor Members to prepare such returns
or to respond to any audits or assessments for the periods covered by such
returns.
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 Members (i) the Base Consideration and, if applicable, the
Additional Consideration Installments, 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 Confirmations 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 Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended
Transferor Operating Agreement and Amended Transferor Company Articles. Deliver
to the Transferor Members (i) the Transferor Assignments duly executed by the
BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended
Transferor Company Articles duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Company.
(c) Record Amended Transferor Company Articles. Cause the
Amended Transferor Company Articles to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the
Transferor Members 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 Members 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
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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 Members 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
Members 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
Members pursuant to any other provisions of this Agreement or which the
Transferor Members 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 Members title to the BRI Partnership Units.
The provisions of this Section 11.01(h) shall survive the Closing indefinitely.
11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC
search costs and (v) all other Closing costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Members,
in their capacity as a limited partner of the BRI Partnership and so long as the
Transferor Company has not dissolved, terminated or liquidated, the right to
receive the Transferor Membership Interests as a distribution in kind in
satisfaction of the Transferor Members' distribution rights under Section 8.2 of
the BRI Partnership Agreement. If the Transferor Membership Interests are
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 Members.
(b) Until the expiration of the period (the "No Transfer
Period") ending on the earlier of (I) such time as all of the Transferor Members
have redeemed all of the BRI Partnership Units received by the Transferor
Members hereunder for cash or for shares of BRI
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common stock or (II) seven (7) years from the Closing Date, neither the BRI
Partnership nor BRI shall allow the sale or transfer of either the Transferor
Membership Interests or 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 (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; and (iv) voluntary transfers arising in
connection with any financing or refinancing of the Property, which shall
include, without limitation, a mortgage, deed of trust, or any other related
financing liens or security interests, the parties affirmatively acknowledging
that there shall be no restriction on the financing or refinancing of the
Property by the BRI Partnership.
(c) The provisions of this Section 11.03 shall survive the
Closing indefinitely.
SECTION 12
----------
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
-----------------------------------------------
12.01 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 paid in cash at Closing by the party owing such amount
to the other party unless the Transferor Members have made an election to
receive BRI Partnership Units, in which event such proration 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 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) charges or prepayments under transferable Service
Contracts; and
(d) 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
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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
Members 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 Members and the BRI Partnership shall cooperate in
the furnishing of all information and documentation necessary to prepare such
calculations. If the Transferor Members have elected to receive BRI Partnership
Units pursuant to Section 2.02, then prior to Closing, the Transferor Members
shall deliver to the BRI Partnership the final Transfer Allocation Schedule (the
"Transfer Allocation Schedule"), which shall be based upon the Preliminary
Transfer Allocation Schedule, shall incorporate all adjustments and prorations
to be made pursuant to Section 12 and shall set forth (i) the name of each
Transferor Member, and (ii) the number of BRI Partnership Units to be received
by each Transferor Member. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transferor Allocation Schedule or the Transfer Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Members and the Transferor Members hereby release
the BRI Partnership from any such obligation or liability.
Subject to Section 12.04, all cash (including any escrow deposits)
shall be used by the Transferor Company to pay amounts payable by the Transferor
Company and/or distributed to the Transferor Members prior to Closing, and if
any of such cash applicable to preclosing periods is not removed from the
Transferor Company prior to Closing, the BRI Partnership shall hold such cash as
agent for the Transferor Members and refund such cash to the Transferor Members
subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Company shall distribute the
right to receive such rent to the Transferor Members immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Members in
collecting such rents. 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 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 cause the Transferor Company to 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 Members or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
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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.
12.03 Security Deposits. The Transferor Company 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.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Members owe an amount
to the BRI Partnership, the Transferor Members shall have the right to elect to
adjust for such amounts owing by the Transferor Members 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 Members, such amount shall be paid
in the form of BRI Partnership Units rather than cash, if the Transferor Members
have elected under Section 2.02 to receive BRI Partnership Units. The Transferor
Members shall notify the BRI Partnership at least seven (7) business days prior
to the Closing Date of the manner in which the Transferor Members shall have
elected to settle adjustments under this Section 12.
SECTION 13
----------
FAILURE TO PERFORM
------------------
13.01 Defective Title or Condition. If the Transferor Members are
unable to give title or to contribute and transfer the Transferor Membership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Membership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Members 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 Members can deliver to the Transferor Membership
Interests and the Property in its then condition and to deliver in exchange
therefor the Consideration Amount then required to be paid subject to reduction
of the Consideration Amount by the amounts required to remove all Monetary
Liens.
13.03 Transferor Default. If the Transferor Company or any of the
Transferor Members default in the performance of their obligations under this
Agreement, or if any representation or warranty of the Transferor Company or the
Transferor Members is false or misleading (a
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"Transferor Default"), the BRI Partnership shall be entitled to exercise any or
all remedies as may be available at law or in equity on account thereof,
including, but not limited to, an action for specific performance or an action
for money damages. By their execution hereof, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
("Guarantors") hereby guarantee the performance by the Transferor Company of all
of its obligations hereunder and, as part of such guaranty, shall be jointly and
severally liable with the Transferor Company of the payment of all damages to
which BRI Partnership may be entitled.
13.04 The BRI Partnership's Default. If the BRI Partnership defaults in
performing any of its obligations hereunder, then the Transferor Members shall
be entitled to exercise any or all remedies as may be available at law or in
equity on account thereof, including, but not limited to, an action for specific
performance or an action for money damages.
SECTION 14
----------
BROKERAGE FEES
--------------
14.01 Brokerage Fees. The Transferor Company 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 Company 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 QPI and the Related
Entities in accordance with the provisions of the Related Agreements. 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 or the Transferor Company have any obligation to pay any
commission to APC.
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 Members or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No. ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier No. 617-526-5000
If to the Transferor Members c/o Questar Properties, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05
and the covenant and agreements of the BRI Partnership contained in Sections
2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing
indefinitely and an action based thereon may be brought at any time after the
Closing Date. The representations, warranties, covenants and other obligations
of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and
including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04,
10.05, 12 and 14 and the representations and warranties,
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covenants and other obligations of the BRI Partnership contained in Sections
1.05(c), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 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
Members or the BRI Partnership set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after Closing.
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.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Operating Agreement by the Transferor Members (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Members, 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 Members and the Transferor Company shall have
performed or complied with, in all material respects, all of their respective
covenants, agreements and obligations under this Agreement, (ii) the Transferor
Members shall have delivered the Transferor Members Closing Documents and (iii)
all of the representations and warranties of the Transferor Company and the
Transferor Members set forth in this Agreement shall be true and correct, in all
material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of notice of
satisfaction of the Closing Conditions, there shall not have occurred any
material adverse change in the financial condition, business, properties, assets
or liabilities of the Transferor Company;
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
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(d) Title to Membership Interests. The Transferor Membership
Interests shall, as of the Closing Date, be transferred and assigned to the BRI
Partnership, or its designees, respectively, and shall be free and clear of any
liens, pledges and encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Company 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) Construction. The Transferor Company shall have completed
construction of the Improvements in accordance with the Plans and
Specifications, as modified in accordance with this Agreement, and in compliance
with all Codes all to the extent required under Sections 3.02 and 5.30, and, if
such completion shall have occurred prior to the occurrence of the Stabilization
Date, then, in addition to the foregoing, as of the Closing, the Improvements
shall remain completed to the extent required under Sections 3.02 and 5.30 and
shall be in substantially the same condition (subject to the provisions of
Section 7.02 and to any damage to the Improvements caused by tenants) as they
were in at the time of the BRI Partnerships' inspection pursuant to Section
1.04(c) with all identified construction deficiencies corrected.
In the event that any condition set forth in Section 17.01(a) through
Section 17.07(e) 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 Members 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 Members contained herein, the obligation of the
Transferor Members 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 Members 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. After the date of any election by the
Transferor Members to accept BRI Partnership Units, there shall not have
occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
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(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 Members 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
Members in writing, on or before the Closing Date, the Transferor Members 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 Related Agreements. Simultaneously herewith, the BRI Partnership
has entered into with various parties (the "Related Entities") 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 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 Questar Investment Corporation 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, this Agreement shall terminate automatically simultaneously
with the termination of any such Related Agreement 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
provisions of this Section 17.03 shall be of no further force or effect once
closing occurs under any one or more of the Related Agreements.
SECTION 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.01. Assignment. Except as hereinafter provided, this Agreement may
not be assigned prior to Closing by either party hereto. The BRI Partnership
shall have the right to designate an entity affiliated with the BRI Partnership
to accept title to some of the Membership Interests, but the BRI Partnership
shall remain fully liable for the performance of all of its obligations
hereunder. The Transferor Members and the Transferor Company shall have the
right to collaterally assign their interests under this Agreement to a
construction lender providing construction financing for the Improvements (the
"Lender"). This Agreement shall be automatically subject and subordinate to the
mortgage, deed of trust and all other loan documents
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now or hereafter entered into evidencing the loan and security of the Lender. If
the Transferor Members and Transferor Company so assign this Agreement, then the
the BRI Partnership agrees to enter into an agreement with the Lender (the "Tri
Party Agreement") providing that: (a) the BRI Partnership agrees to provide the
Lender with reasonable notice and opportunity to cure any default by the
Transferor Members or the Transferor Company hereunder; (b) the BRI Partnership
agrees not to modify or amend this Agreement without the prior written consent
of Lender, (c) the BRI Partnership, at the written request of Lender upon a
default under the loan, will pay the Base Consideration or such lesser amount as
is required to satisfy the loan directly to Lender provided that all of the
conditions to Closing provided herein have been satisfied; (d) the Lender agrees
to recognize the rights of BRI Partnership under this Agreement; (e) the BRI
Partnership will permit Lender to perform any obligations of the Transferor
Company and Transferor Members hereunder and will agree to recognize Lender as
the Transferor Company and the Transferor Members hereunder should Lender
succeed to the interest of the Transferor Company and Transferor Members,
provided, however, that, in such event, Lender's liability under this Agreement
shall be limited to its interest in the Transferor Company and the Property; and
further provided that (f) the BRI Partnership will have no liability for payment
of the Lender's loan or the performance of any obligations under any of the loan
documents other than the Tri-Party Agreement; and (g) the amount to be paid to
Lender shall be payable in cash only and not in BRI Partnership Units and shall
be limited to the amount provided in clause (c). The parties acknowledge and
agree that the Transferor Company is currently the owner of land in addition to
the Land (the "Additional Avalon Land") which is the subject of a separate
Development Contribution Agreement (the "Other Avalon Agreement") between the
BRI Partnership and the Transferor Company and Transferor Members. To facilitate
the transactions contemplated hereby and by the Other Avalon Agreement, prior to
the commencement of construction, the Transferor Company will transfer either or
both of the Land and the Additional Land to a newly-formed limited
partnership(s) or limited liability company(s) such that the Land will be owned
by one entity and the Additional Land will be owned by another entity. At said
time, the newly-formed entity(s) and its owners will assume all of the
obligations of either this Agreement or the Other Avalon Agreement (whichever is
applicable to the land it then owns) and the original Transferor Company and
Transferor Members shall be released from all liability thereunder, and pursuant
to instruments in form reasonably satisfactory to all parties.
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 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 Members,
Transferor Company and the BRI Partnership consent to the personal jurisdiction
of the federal and state
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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 Members have the right to
assign or transfer their right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Members and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Members 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 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 Members 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
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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.
SECTION 19
----------
ADDITIONAL PROVISIONS RELATING TO
---------------------------------
THE TRANSFEROR MEMBERS
----------------------
19.01 Transferor Allocation Schedule. Each Transferor Member
acknowledges and agrees that the Transferor Allocation Schedule attached hereto
as Exhibit I is true, correct and complete in all respects as it relates to such
Transferor Member.
19.02 Time of Effectiveness. The Transferor Members acknowledge and
agree 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under their respective hands and seals as of the day and year first above
written.
WITNESS:
------------------------------ ----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------ ----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
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------------------------------ ----------------------------
▇▇▇▇▇▇ ▇▇▇▇
- Transferor Members -
BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
General Partner
____________________________ By: _________________________
Name:
Title:
- the BRI Partnership -
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, individually, and ▇▇▇▇ ▇. ▇▇▇▇▇▇, individually, join herein in
accordance with the provisions of Section 13.03.
------------------------------ --------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------ --------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
- the Guarantors-
RECEIPT BY ESCROW AGENT
The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by
certified check to be held as the Deposit pursuant to this Agreement.
WITNESS: LAWYERS TITLE INSURANCE
CORPORATION
________________________ By: _______________________
Name:
Title:
Date:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - List of Preliminary Plans and Specifications
Schedule D - Form of Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 3.03 - Pro Forma Rents
Schedule 5.05 - Litigation
Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants
Schedule 5.27 - Shared Facilities/Utilities
Schedule 5.33 - Liens on Membership Interests
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
Exhibit 7 - BRI Management Agreement
Transferor Exhibits
-------------------
Exhibit I - List of Transferor Members (with address and membership
interest of each member)
Exhibit II - Transferor Operating Agreement
Exhibit III - Assignment of Transferor Membership Interests
Exhibit IV - Amended and Restated Operating Agreement of Transferor Company
Exhibit V - Amended and Restated Articles of Organization of Transferor
Company
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Right of First Offer Agreement
Exhibit X - AIA Construction Warranty
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Schedule 5.27 - Shared Facilities/Utilities
(Avalon 2)
1. Recreational Facilities Agreement relating to the use of pool and clubhouse
facilities on ▇▇▇▇▇▇ ▇, 3, 4, by tenants of Avalon 2, and the sharing of costs
associated with these facilities.
2. Easement Agreement relating to the sewage pumping station and storm water
basin #2 servicing ▇▇▇▇▇▇ ▇, 3, 4 and Avalon 2, and the sharing of costs
associated with these facilities.