SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: January 28, 1997
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 333-10635 54-1816010
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
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APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Brookfield Apartments)*
Historical Statement of Income and
Direct Operating Expenses*
(Brookfield Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Brookfield Apartments)*
b. Independent Auditors' Report
(Eagle Crest I & II Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Eagle Crest I & II Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Eagle Crest I & II Apartments)*
c. Independent Auditors' Report
(Tahoe Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Tahoe Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Tahoe Apartments)*
d. Pro Forma Balance Sheet as of
December 31, 1996 (unaudited)*
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* To be filed by amendment.
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Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)*
e. Exhibits
10.1 Purchase Contract for Brookfield Apartments
10.2 Purchase Contract for Eagle Crest Apartments
10.3 Purchase Contract for Eagle Crest II Apartments
10.4 Purchase Contract for Tahoe Apartments
10.5 Modification to Agreement of Sale of Eagle Crest I
Apartments
10.6 Modification to Agreement of Sale of Eagle Crest
II Apartments
10.7 Property Management Agreement for Brookfield
Apartments
10.8 Property Management Agreement for Eagle Crest I &
II Apartments
10.9 Property Management Agreement for Tahoe Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
23.3 Consent of Independent Auditors*
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* To be filed by amendment.
<PAGE>
Item 2. Acquisition or Disposition of Assets
BROOKFIELD APARTMENTS
Dallas, Texas
On January 28, 1997, effective January 1, 1997, Apple Residential
Income Trust, Inc. (the "Company") purchased the Brookfield Apartments, a
232-unit apartment complex having an address of 4060 Preferred Place, Dallas,
Texas (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,458,485, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.
LOCATION. The following information is based in part upon information
provided by the Dallas Chamber of Commerce.
The Property is located in south Dallas, within the Dallas/Fort Worth
Consolidated Metropolitan Statistical area, or as it is called locally, "The
Metroplex." The Dallas/Fort Worth Metroplex is in the north-central part of
Texas and is composed of nine counties. The 1996 population of The Metroplex was
approximately 4,400,000. Dallas is the second largest city in the state, behind
Houston.
The economy of the Dallas/Fort Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J. C.
Penny, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,800 acres of land between the two cities. It is the largest commercial
airport in the United States in terms of land area, and is the fourth busiest
airport in the world, with 1,700 daily arrivals and departures.
The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
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The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.
The Property is located in a well-established area of Dallas near the
Red Bird Mall. The area is characterized by various retail centers, restaurants
and businesses. Downtown Dallas is an approximately 15 minute drive from the
Property. The Property is an approximately 25-minute drive from Dallas/Fort
Worth International Airport.
DESCRIPTION OF THE PROPERTY. The Property consists of 232 garden-style
apartments located in 15 two- and three-story buildings on approximately seven
acres of land. The Property was completed in 1984.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $232,000 of the proceeds of its offering of Shares for repairs and
improvements, including clubhouse renovation, painting, wood replacement, and
parking lot repair.
The Property offers seven different unit types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
39 One bedroom, one 578 $380
bath
9 One bedroom, one 578 390
bath (view)
36 One bedroom, one 658 405
bath w/sunroom
12 One bedroom, one 658 415
bath w/sunroom
(view)
24 One bedroom, one 669 430
bath w/WD
connections
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
48 One bedroom, one 661 440
bath w/WD
connections, FP,
bookshelves
64 Two bedrooms, two 913 565
baths w/WD
connections, FP,
bookshelves
The apartments provide a combined total of approximately 165,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have generally increased gradually.
As an example, a two-bedroom, two-bath apartment rented for $520 in 1992, $520
in 1993, $530 in 1994, $545 in 1995, and $565 in 1996. The average effective
annual rental per square foot at the Property for 1992, 1993, 1994, 1995 and
1996 was $7.11, $7.11, $7.24, $7.45 and $7.72, respectively.
The buildings are wood frame construction with a combination of brick
veneer and masonite hardboard exteriors on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles on plywood.
The Property has an outdoor swimming pool with a large deck, a hot tub,
a controlled access entrance and exit gate, and covered parking for
approximately 232 vehicles. The Property also includes a clubhouse with a
leasing office. There is also uncovered paved parking for residents.
Apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a television
hook-up, mini-blinds, drapes on sliding glass doors and individually controlled
heating and air-conditioning unit. Each kitchen is equipped with a
refrigerator/freezer with ice maker, electric range and oven, dishwasher and
garbage disposal. Also, as indicated in the table above, some units have a
woodburning fireplace, a utility area with washer/dryer connections,
bookshelves, ceiling fans or a sunroom. The owner of the Property pays for cold
water, sewer service, gas usage for hot water and trash removal. Tenants pay
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for their electricity service, which includes cooking, lighting, heating and
air-conditioning.
There are at least 10 apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are
generally higher when compared with those of the Property. Based on a recent
telephone survey, the Advisor estimates that occupancy in nearby competing
properties now averages approximately 90%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 92% in 1992, 93% in 1993, 93% in 1994, 94%
in 1995 and 97% in 1996. On January 1, 1997, the Property was 98% occupied. The
residents are a mix of blue-collar and white-collar workers, students and
retired persons.
The following table sets forth the 1996 real estate tax information on
the Property:
Assessed
Jurisdiction Value Rate Tax
- ------------ -------- ---- ---
County of Dallas $5,038,370 $0.46255 $ 23,304.98
City of Dallas 5,038,370 2.13063 107,349.02
Total $130,654.00
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $3,980,880 will be depreciated over a
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will be
continue to be adequately covered by property and liability insurance.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
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1. Dallas generally and the specific area in which the Property is located were
perceived as being characterized by a diverse, stable and steadily growing
economy. Accordingly, it was believed that such economy and its anticipated
growth and development would support stable occupancy rates and reasonable
increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the Advisor
believes that the Property has been well maintained and is generally in good
condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property is conveniently proximate to many retail centers, businesses,
restaurants and entertainment-related facilities. Accordingly, the Advisor
believes that the Company is and can continue to be perceived as a desirable
location for residents.
ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the property, the Company paid Apple Realty Group, Inc. a
property acquisition fee equal to 2% of the purchase price of the Property, or
$109,170. Apple Residential Management Group, Inc. will serve as property
manager for the Property and for its services will be paid by the Company a
monthly management fee equal to 5% of the gross revenues of the Property plus
reimbursement of certain expenses.
EAGLE CREST I & II APARTMENTS
Irving, Texas
On January 30, 1997, effective January 1, 1997, the Company purchased
the Eagle Crest I & II Apartments, a 484-unit apartment complex having an
address of 4013 West Northgate, Irving, Texas (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $15,650,000, which the Company paid entirely
in cash using proceeds from the sale of the Shares. Title to the Property was
conveyed to the Company by limited warranty deed.
LOCATION. See above under "Brookfield Apartments" for a description of
the greater Dallas/Fort Worth Consolidated Metropolitan Statistical Area, which
includes Irving, Texas.
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Irving is approximately eight miles west of the Dallas central business
district and approximately 25 miles east of downtown Fort Worth. Irving is a
relatively young city with a majority of its development occurring during the
latter half of this century. The location of Irving between Dallas and Fort
Worth, and near Dallas/Fort Worth International Airport, has enabled it to
garner a large portion of the area's recent commercial and industrial
development.
Irving is the site of Las Colinas, one of the nation's largest
master-planned real estate developments. The development occupies approximately
12,500 acres and includes residential developments, office space, research,
distribution and light industrial facilities, four golf courses, the Las Colinas
Sports Club and an equestrian center.
Las Colinas is targeted to large employers and is the home of numerous
regional and national businesses. The Irving employment sector is primarily
white-collar. Significant employers in Las Colinas include Exxon, GTE, Aetna,
Abbott Laboratories, Boeing, US Sprint, Computer Associates, Allstate Insurance,
Zale Jewelers and the Federal Home Loan Bank Board. In addition, Columbia/HCA
Health Care Corporation recently signed an agreement to buy approximately 28
acres in the development. The plans for the land include a community hospital
with medical office complex and a full-service acute-care facility.
Irving has a well-defined highway system. The city is connected to
Dallas by State Highway 114 on the northeast, State Highway 183 in its central
portion and Interstate 30 on the south.
The Property is located off of Belt line Road in Irving. The immediate
neighborhood includes other multi-family communities, and residential,
commercial and retail development. The Property is conveniently located near
restaurants, businesses, schools, and churches, and is readily accessible from
Highways 161 and 183. The Property is an approximately 5-minute drive from
Dallas/Fort Worth International Airport.
DESCRIPTION OF THE PROPERTY. The Property consists of 484 apartment
units in 31 two- and three-story buildings on approximately 18 acres of land.
There are 296 apartment units in Phase I, which was built in 1983, and 188
apartment units in Phase II, which was built in 1985.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $968,000 for repairs and
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improvements, including clubhouse renovations, structural repair of shrink/swell
soil conditions, painting, and wood replacement.
The Property offers a wide range of units types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
116 One bedroom, one 698 $480-$490
bath
120 One bedroom, one 796 515-525
bath
4 One bedroom, one 798 540-560
bath, sunroom, bar
48 One bedroom, one 896 580-590
bath
24 Two bedrooms, one 912 580-590
bath
63 Two bedrooms, two 1023 645-665
baths
80 Two bedrooms, two 1089 675-695
baths
1 Two bedrooms, two 1123 705
baths, sunroom
4 Two bedrooms, two 1189 735
baths, sunroom, bar
21 Two bedrooms, two 1124 715-725
baths
3 Two bedrooms, two 1224 785
baths, sunroom
The apartments provide a combined total of approximately 429,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have generally increased gradually.
As an example, a one-bedroom,
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one-bath apartment rented for $445 in 1992, $445 in 1993, $445 in 1994, $469 in
1995, and $485 in 1996. The average effective annual rental per square foot at
the Property for 1992, 1993, 1994, 1995 and 1996 was $7.17, $7.17, $7.17, $7.56
and $7.81, respectively.
The buildings are wood frame construction with a combination of brick
veneer and masonite hardboard siding on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles over plywood.
The Property has three outdoor swimming pools, two jacuzzis, three
laundry facilities, a fitness building, gas grills and ice machines. The
Property also has a clubhouse with a leasing office. There is ample paved
parking for residents.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, double stainless
steel sink, a dishwasher and garbage disposal. All apartment units include
washer/dryer connections for full-sized appliances. As indicated above, some
apartment units feature additional amenities, such as linen closets, a fireplace
with mantle, ceiling fans, a pantry closet, a dry bar, an entertainment center,
vaulted ceilings, a sunroom and greenhouse windows. The owner of the Property
pays for cold water, gas for hot water, sewer service, and trash removal. The
tenants pay for their electricity usage, which includes cooking, lighting,
heating and air-conditioning.
There are at least four apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 95%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 95% in 1992, 94% in 1993, 95% in 1994, 95%
in 1995 and 97% in 1996. On January 1, 1997, the Property was 95% occupied. The
tenants are a mix of white-collar and blue-collar workers.
The following tables set forth the 1996 real estate tax information on
the Property:
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Phase I
- -------
Assessed Tax
Jurisdiction Value Rate Tax
- ------------ -------- ---- ---
County of Dallas $7,900,000 $0.46255 $ 36,541.45
City of Irving 7,900,000 0.50860 40,179.40
Irving School District 7,900,000 1.66340 131,408.60
-----------
Total $208,129.45
Phase II
Assessed Tax
Jurisdiction Value Rate Tax
- ------------ -------- ---- ---
County of Dallas $5,119,340 $0.46255 $ 23,679.51
City of Irving 5,119,340 0.50860 26,036.96
Irving School District 5,119,340 1.66340 85,155.10
-----------
Total $134,871.57
Grand
Total $343,001.02
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $10,487,730) will be depreciated over a
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will be
continue to be adequately covered by property and liability insurance.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which the
Property is located were perceived as being characterized by a diverse, stable
and steadily growing economy. Accordingly, it was believed that such economy and
its
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anticipated growth and development would support stable occupancy rates and
reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the Advisor
believes that the Property has been well maintained and is generally in good
condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property is strategically located between Dallas and Fort Worth and is
not far from the Dallas/Fort Worth International Airport. The Advisor and the
Company believe that this location for the Property appeals and will continue to
appeal to workers in the area.
ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company paid Apple Realty Group, Inc. a
property acquisition fee equal to 2% of the purchase price of the Property, or
$313,000. Apple Residential Management Group, Inc. will serve as property
manager for the Property and for its services will be paid by the Company a
monthly management fee equal to 5% of the gross revenues of the Property plus
reimbursement of certain expenses.
TAHOE APARTMENTS
Arlington, Texas
On January 31, 1997, effective January 1, 1997, the Company purchased
the Tahoe Apartments, a 240-unit apartment complex having an address of 2308
Fair Oaks Drive, Arlington, Texas (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,625,000, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.
LOCATION. See above under "Brookfield Apartments" for a description of
the greater Dallas/Fort Worth Consolidated Metropolitan Statistical Area, which
includes Arlington, Texas.
The Property is located in the city of Arlington, which is located
between Dallas and Fort Worth. Arlington is approximately 13 miles east of the
Fort Worth Central Business
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district and approximately 20 miles west of the Dallas Central Business
District.
Owing in large part to its location between Dallas and Fort Worth,
Arlington has become a focus of business development in the area. Major
employers include General Motors, National Semiconductor, Johnson & Johnson,
Doskocil Manufacturing Company and Arlington Memorial Hospital. The area is also
the site of several large warehousing and distribution companies whose primary
market is the Metroplex.
The University of Texas at Arlington has an enrollment of approximately
23,000 students. Arlington also serves as a major medical center for its own
population and for residents of outlying communities as well. Arlington Memorial
Hospital has a staff of approximately 1,680 and HCA South Arlington Medical
Center has approximately 640 employees, making both of them among the largest
employers in the city.
The immediate area surrounding the Property consists of other
multifamily housing, residential, commercial and retail development. The
Property is conveniently located near restaurants, businesses, schools and
churches, and is readily accessible from Interstate 20 and Interstate 30.
DESCRIPTION OF THE PROPERTY. The Property consists of 240 garden-style
apartment units in 18 two- and three-story buildings on approximately 9.8 acres
of land. The Property was built in 1979.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $316,000 for repairs and improvements including exterior painting
and exterior siding replacement.
The Property offers five different unit types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
64 One bedroom, one 480 $370
bath
64 One bedroom, one 575 404
bath
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
- -------- ---- -------------- --------------
48 One bedroom, one 634 430
bath
32 Two bedrooms, two 941 584
baths
32 Two bedrooms, two 1,027 619
baths
The apartments provide a combined total of approximately 161,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have generally increased. As an
example, a one bedroom, one bath apartment rented for $320 in 1992, $345 in
1993, $365 in 1994, $394 in 1995, and $404 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$6.41, $6.91, $7.31, $7.89, and $8.09, respectively.
The buildings are wood frame construction with a combination of brick
veneer and masonite hardboard exteriors on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles over plywood.
The Property has an outdoor swimming pool, a hot tub, two laundry
facilities, a fitness center, a sand volleyball court and covered parking for
approximately 32 vehicles. The Property also has a clubhouse with a leasing
office. There is also uncovered paved parking for residents.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds, vertical blinds and an individually controlled heating and
air-conditioning unit. Each kitchen is equipped with a refrigerator/freezer with
icemaker, electric range and oven, dishwasher, microwave and garbage disposal.
Some units have a woodburning fireplace and washer/dryer connections. The owner
of the Property pays for cold water, sewer service, natural gas for hot water
and trash removal. Tenants pay for their electricity service, which includes
cooking, lighting, heating and air-conditioning.
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There are at least four apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are higher
when compared with those of the Property. Based on a recent telephone survey,
the Advisor estimates that occupancy in nearby competing properties now averages
approximately 95%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 94% in 1992, 93% in 1993, 95% in 1994, 89%
in 1995 and 94% in 1996. On February 11, 1997, the Property was 88% occupied.
The tenants are a mix of white-collar and blue-collar workers.
The following table sets forth the 1996 real estate tax information on
the Property:
Jurisdiction Assessed Value Tax Rate Tax
- ------------ -------------- -------- ---
County of Tarrant $4,500,000 $1.90619 $85,778.37
City of Arlington 4,500,000 0.64000 28,800.00
---------
Total $114,578.37
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $4,075,000 will be depreciated over a
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will
continue to be adequately covered by property and liability insurance.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
4. The Dallas/Fort Worth area generally and the specific area in which the
Property is located were perceived as being characterized by a diverse, stable
and steadily growing economy. Accordingly, it was believed that such economy and
its anticipated growth and development would support stable occupancy rates and
reasonable increases in rents at the Property.
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5. Based upon an engineering report and its own inspections, the Advisor
believes that the Property has been well maintained and is generally in good
condition, although the Advisor believes that the planned repairs and
improvements to be made will allow an increase in rents at the Property.
6. The Property is strategically located between Dallas and Fort Worth. In
addition, the City of Arlington has become a popular location for new business
development, owing in part to its location between the two larger cities and its
close proximity to Dallas/Fort Worth International Airport. The Advisor and the
Company believe that this location for the Property will continue to appeal to
workers in the area, which will support stable occupancy rates.
ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company paid Apple Realty Group, Inc. a
property acquisition fee equal to 2% of the purchase price of the Property, or
$112,500. Apple Residential Management Group, Inc. will serve as property
manager for the Property and for its service will be paid by the Company a
monthly management fee equal to 5% of the gross revenues of the Property plus
reimbursement of certain expenses.
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ITEM 7.a.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.b.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.c.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.d.*
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Apple Residential Income Trust, Inc.
Date: February 12, 1997 By: /s/ Glade M. Knight
___________________________
Glade M. Knight
President
of Apple Residential
Income Trust, Inc.
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EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated January 28, 1997
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for
Brookfield Apartments
10.2 Purchase Contract for
Eagle Crest I Apartments
10.3 Purchase Contract for
Eagle Crest II Apartments
10.4 Purchase Contract for
Tahoe Apartments
10.5 Modification to Agreement of
Sale of Eagle Crest I
Apartments
10.6 Modification to Agreement of
Sale of Eagle Crest II
Apartments
10.7 Property Management Agreement
for Brookfield Apartments
10.8 Property Management Agreement
for Eagle Crest I & II Apartments
10.9 Property Management Agreement for
Tahoe Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
23.3 Consent of Independent Auditors*
* To be filed by amendment.
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EARNEST MONEY CONTRACT
by and between
PARAGON GROUP L.P.,
as Seller
and
CORNERSTONE REALTY GROUP INCORPORATED,
as Purchaser
Premises: Brookfield Apartments
Dallas, Texas
Date: December 10, 1996
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TABLE OF CONTENTS
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Page
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Parties.................................................................... 1
ARTICLE I
Property
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Section 1.01. Property................................................... 1
ARTICLE II
Purchase Price
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Section 2.01. Purchase Price............................................. 2
Section 2.02. Earnest Money.............................................. 2
Section 2.03. Independent Contract Consideration......................... 3
ARTICLE III
Review Items
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Section 3.01. Survey..................................................... 3
Section 3.02. Title Commitment........................................... 4
Section 3.03. Other Review Items......................................... 4
Section 3.04. Inspection................................................. 6
Section 3.05. Insurance.................................................. 6
Section 3.06. Indemnity.................................................. 7
ARTICLE IV
Review Period
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Section 4.01. Review Period.............................................. 7
Section 4.02. Purchaser's Notice......................................... 7
Section 4.03. Seller's Notice............................................ 8
Section 4.04. Termination................................................ 9
(i)
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ARTICLE V
Good and Indefeasible Title
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Section 5.01. Conveyance................................................. 9
Section 5.02. Owner Policy............................................... 10
ARTICLE VI
Closing
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Section 6.01. Closing.................................................... 10
Section 6.02. Seller's Obligations....................................... 10
Section 6.03. Purchaser's Obligations.................................... 12
Section 6.04. Possession................................................. 12
ARTICLE VII
Closing Adjustments
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Section 7.01. General Prorations......................................... 12
Section 7.02. Specific Prorations........................................ 13
Section 7.03. Transaction Costs.......................................... 14
Section 7.04. Brokerage Commissions...................................... 15
Section 7.05. Survival................................................... 15
ARTICLE VIII
Termination and Remedies
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Section 8.01. Purchaser's Default........................................ 15
Section 8.02. Seller's Default........................................... 16
Section 8.03. Survival................................................... 16
(ii)
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ARTICLE IX
Representations, Warranties and Covenants
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Section 9.01. Disclaimer................................................. 16
Section 9.02. Seller's Representations................................... 18
Section 9.03. Purchaser's Representations................................ 19
Section 9.04. Discovery.................................................. 20
Section 9.05. Operating Covenants........................................ 20
ARTICLE X
Notices
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Section 10.01. Notices................................................... 22
ARTICLE XI
Risk of Loss
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Section 11.01. Minor Damage.............................................. 23
Section 11.02. Major Damage.............................................. 24
Section 11.03. Risk of Loss.............................................. 24
ARTICLE XII
Miscellaneous
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Section 12.01. Entire Agreement.......................................... 25
Section 12.02. No Recordation............................................ 25
Section 12.03. No Rule of Construction................................... 25
Section 12.04. Multiple Counterparts;
Governing Law............................................. 25
Section 12.05. Attorneys' Fees........................................... 25
Section 12.06. Assignment................................................ 25
Section 12.07. Interpretation............................................ 26
(iii)
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Section 12.08. Exhibits and Schedules.................................... 27
Section 12.09. Modifications; Reporting Person........................... 27
Section 12.10. Time of Essence........................................... 27
Section 12.11. No Publicity.............................................. 28
Section 12.12. Partial Invalidity........................................ 28
Section 12.13. Facsimile Signatures...................................... 28
Section 12.14. Section 1031 Exchange..................................... 28
Section 12.15. Seller's Investment Committee............................. 28
Section 12.16. Purchaser's Investment Committee.......................... 29
EXHIBITS
Schedule 1 - schedule of Personal Property
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Schedule 2 - schedule of Property Contracts
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Exhibit A - Legal Description
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Exhibit B - form of Deed
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Exhibit C - form of Assignment of Leases
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Exhibit D - form of Bill of Sale
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Exhibit E - form of Closing Memorandum
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Exhibit F - form of FIRPTA Affidavit
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Exhibit G - form of Tenant Letter
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Exhibit H - form of Representation Letter
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(iv)
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EARNEST MONEY CONTRACT
THE STATE OF TEXAS ss
ss KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS ss
THIS EARNEST MONEY CONTRACT (the "Contract") is made and entered into as
of this 10th day of December, 1996 (the "Effective Date") by and between PARAGON
GROUP L.P., a Delaware limited partnership ("Seller"), whose business address is
7557 Rambler Road, Suite 1200, Dallas, Texas, 75231 and CORNERSTONE REALTY GROUP
INCORPORATED, a Virginia corporation ("Purchaser"), whose business address is
306 East Main Street, Richmond, Virginia 23219.
ARTICLE I
Property
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Section 1.01. Property. Seller hereby agrees to sell and convey to
Purchaser, and Purchaser hereby agrees to purchase from Seller, upon the terms
and conditions set forth herein, the following properties and assets:
(a) That certain tract of real property located in Dallas County,
Texas, more particularly described in Exhibit A attached hereto and made a part
hereof for all purposes, together with all and singular the rights, privileges,
tenements, heriditaments, easements, appendages and appurtenances pertaining to
such real property (all of the foregoing being hereinafter collectively referred
to as the "Real Property").
(b) All improvements, structures and fixtures with respect to and
situated on the Real Property, including without limitation that certain 232
unit apartment complex and related surface parking areas located on the Real
Property, commonly known as the "Brookfield Apartments" (all of the foregoing
being hereinafter collectively referred to as the "Improvements").
(c) All of Seller's right, title and interest, if any, in and to all
leases and occupancy agreements and all amendments, modifications and letter
agreements modifying or affecting said leases and occupancy agreements covering
all or any portion of the Real Property and/or the Improvements (the
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"Leases"), and all contract rights, licenses, condemnation proceeds or awards
now pending or hereafter made with respect to the Real Property and/or the
Improvements and all other intangible rights which are owned by Seller, if any,
and which are appurtenant to the Real Property and/or the Improvements,
including all right, title and interest of Seller, if any, in and to the name
"Brookfield Apartments" (all of the foregoing being hereinafter collectively
referred to as the "Intangible Property").
(d) All equipment, machinery, appliances, furniture, furnishings,
heating, ventilation and air conditioning systems and equipment and all other
tangible personal property now owned by Seller, if any, and situated on the Real
Property and used or to be used in connection therewith or with the Improvements
as listed on Schedule 1 attached hereto (all of the foregoing being hereinafter
collectively referred to as the "Personal Property").
All of the foregoing items purchased under this Contract shall be hereinafter
sometimes referred to collectively as the "Property".
ARTICLE II
Purchase Price
--------------
Section 2.01. Purchase Price. The purchase price ("Purchase Price") to be
paid by Purchaser to Seller shall be FIVE MILLION FOUR HUNDRED THOUSAND AND
NO/100 DOLLARS ($5,400,000.00). The Purchase Price shall be paid by Purchaser to
Seller at the Closing (as hereinafter defined) in cash or immediately available
wire transferred funds.
Section 2.02. Earnest Money. On or before the second (2nd) business day
following the Effective Date, Purchaser shall deposit the amount of ONE HUNDRED
THOUSAND AND NO/100 DOLLARS ($100,000.00) as earnest money hereunder (such
amount, together with all interest accrued thereon, is collectively referred to
as the "Earnest Money Deposit"), with American Title Company (the "Title
Company") whose business address is 6029 Belt Line Road, Suite 250, Dallas,
Texas 75240 Attention: Carol Badgett. The Earnest Money Deposit shall, at the
option of Purchaser, be in the form of cash, certified check, cashier's check or
other immediately available funds. The Title Company shall hold the Earnest
Money Deposit in an interest-bearing account at a bank designated by Seller,
with
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all interest being paid to Purchaser or Seller, as the case may be, in
accordance with the terms of this Contract. At the Closing, the Earnest Money
Deposit shall be applied toward the Purchase Price, but otherwise the Earnest
Money Deposit shall be held by the Title Company, returned to Purchaser, or
delivered to Seller, in accordance with the terms of this Contract.
Section 2.03. Independent Contract Consideration. In addition to the
Earnest Money Deposit, Purchaser shall, concurrently with its execution hereof,
deliver to Seller a check in the amount of FIFTY AND NO/100 DOLLARS ($50.00)
(the "Independent Contract Consideration") which amount Seller and Purchaser
agree has been bargained for as consideration for Seller's execution and
delivery of this Contract and Purchaser's right to inspect the Property pursuant
to Section 3.04. The Independent Contract Consideration is in addition to and
independent of any other consideration or payment provided for in this Contract
and is non-refundable in all events.
ARTICLE III
Review Items
------------
Section 3.01. Survey. Seller agrees to deliver, within ten (10) days from
the Effective Date, one (1) print of Seller's most recent survey of the
Property. Purchaser has the right, at Purchaser's expense, to obtain a new or
recertified survey of the Property (the "Survey"). Purchaser may instruct the
surveyor to (a) locate all easements, rights-of-way and building lines on the
Real Property (identified by recording data, if applicable); (b) show the
location and size of all Improvements on the Real Property and streets, roads
and utility lines on or immediately adjacent to the Real Property; (c) reflect
any encroachments and protrusions; (d) certify, if applicable, that no portion
of the Real Property lies within the 100 year flood plain or within a flood
prone area; (e) include an appropriate metes and bounds description of the Real
Property; and (f) include a certification by the surveyor to Seller, Purchaser
and the Title Company in form reasonably satisfactory to Purchaser and the Title
Company. Subject to approval of the Survey by Seller, Purchaser and the Title
Company, the metes and bounds description of the Real Property contained in the
Survey, if applicable, shall be the description of the Real Property used in the
Deed (as hereinafter defined).
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Section 3.02. Title Commitment. Seller agrees to deliver, within ten (10)
days from the Effective Date, to Purchaser a current commitment for a Texas
Owner's Policy of Title Insurance issued by the Title Company, as Agent for
Lawyers Title Insurance Corporation (the "Title Commitment"), which sets forth
the state of title of the Property and all exceptions, including easements,
restrictions, rights-of-way, covenants, reservations or other conditions or
matters affecting the Property which would appear in an owner's policy of title
insurance, together with legible copies of such easements, restrictions,
rights-of-way, covenants, reservations or other matters.
Section 3.03. Other Review Items. In addition to the Survey and the Title
Commitment, Seller will, to the extent available to and currently in Seller's
possession, make available to Purchaser the following:
(a) Copies of any hazardous materials reports in Seller's possession
prepared for Seller during the thirty (30) months preceding the Effective Date.
By providing copies of hazardous materials reports to Purchaser, Seller is not
making any representations or warranties, implied or otherwise, as to the
accuracy of the factual information provided or the conclusions formed by the
consultants who prepared the hazardous materials reports. Further, Seller is
making no representations or warranties as to the skill and care taken by the
consultant in preparing the hazardous materials reports. Seller will not be
responsible for conditions or consequences arising from relevant facts that were
concealed, withheld, or not fully disclosed by the consultant, any regulatory or
governmental agency, or from persons interviewed as part of the preparation of
the hazardous materials report. Purchaser also acknowledges that the facts and
conditions referenced in the hazardous materials report may change over time and
the conclusions and recommendations set forth therein are applicable only to the
facts and conditions as described in the hazardous materials report. Purchaser
should use good faith efforts in determining whether the hazardous materials
reports are accurate.
(b) Operating statements for the Property in the format customarily
prepared for Seller for the calendar year prior to the Effective Date and the
most recently available interim period, including, without limitation, records
of income, expenses, and capital expenditures.
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(c) Copies of all management, service, maintenance and other
contracts in force with respect to the Property (collectively, the "Property
Contracts") as listed on Schedule 2 attached hereto.
(d) Copies of all Leases and other occupancy agreements in force with
respect to the Property.
(e) Copies of the ad valorem and personal property tax statements
covering the Property for the current tax year (if available) and the tax year
immediately preceding the Effective Date.
(f) An original rent roll for the Property for the month preceding
the Effective Date in the format customarily prepared for Seller and showing
tenant names, vacant premises, expiration dates of all Leases, and a current
schedule of rent for each lease.
(g) A current schedule of all refundable security and other tenant
deposits paid by tenants at the Property under existing Leases.
(h) Copies of all insurance loss claims relating to the Property for
the thirty (30) months preceding the Effective Date.
(i) Seller has been advised by Purchaser that Purchaser is a public
entity and that it is required to furnish statements to the Securities and
Exchange Commission in connection with this acquisition. In the event Purchaser
closes and purchases the Property, Seller agrees to make the information
described in Section 3.03(a)-(h) above available for Purchaser to audit the last
twelve (12) months of operation of the Property so that a report can be
generated that is in compliance with accounting Regulation S-X of the Securities
and Exchange Commission. This Section 3.03(i) shall survive Closing.
Seller will instruct Seller's property manager to cooperate fully with Purchaser
with respect to the foregoing review items subject to the provisions of this
Section 3.0. Notwithstanding the foregoing, Purchaser shall have no right to
inspect (i) any internal memoranda or reports prepared by or on behalf of Seller
which Seller deems confidential, nor (ii) any appraisals of the Property
prepared by or on behalf of Seller. SUBJECT TO SECTION 9.02 HEREOF, PURCHASER
ACKNOWLEDGES AND AGREES THAT ANY AND ALL REPORTS, AGREEMENTS, LEASES AND OTHER
INFORMATION DELIVERED OR OTHERWISE MADE AVAILABLE TO PURCHASER UNDER THIS
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CONTRACT OR OTHERWISE HAVE BEEN DELIVERED AND MADE AVAILABLE BY OR ON SELLER'S
BEHALF WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, BY
SELLER - IT BEING AGREED THAT SELLER DOES NOT VERIFY THE ACCURACY THEREOF. In
the event this Contract shall terminate for any or no reason, Purchaser agrees
to return to Seller, no later than two (2) days after request, all documents and
other materials delivered to Purchaser hereunder.
Section 3.04. Inspection. Purchaser shall have the right, upon reasonable
notice to Seller, subject to the rights of tenants in possession, if any,
pursuant to the Leases, to conduct on-site physical inspections of the Property
(including, without limitation, termite inspections and environmental
assessments) during the Review Period (hereinafter defined), including, without
limitation, the right to enter and inspect all portions of the Property and all
of Seller's books and records at the Property relating solely to the Property.
Seller hereby directs the manager of the Property to reasonably cooperate with
Purchaser in the exercise of Purchaser's inspection rights, subject to the terms
of this Contract. A representative of Seller shall have the right to be present
during any physical tests, inspections and investigations at or about the
Property. Purchaser has no right to make any alterations to the Property without
Seller's prior written consent. Purchaser shall, at Purchaser's sole expense,
promptly fill and compact any holes and otherwise restore any damage to the
Property caused as a result of any test, inspection or investigation by or on
Purchaser's behalf. Any soil, waste or materials removed during any
environmental testing must be properly disposed of by Purchaser at Purchaser's
sole cost, even though Purchaser may elect to terminate the Contract. Purchaser
shall not permit any liens or encumbrances to arise against the Property in
connection with or as a result of such inspections, studies or investigations.
The foregoing obligations shall survive the termination of this Contract.
Section 3.05. Insurance. Purchaser has furnished Seller with evidence
acceptable to Seller that Purchaser maintains public liability insurance with
limits of at least $1,000,000 for bodily or personal injury or death, property
damage insurance in an amount of at least $500,000, and contractual liability
insurance with respect to Purchaser's indemnification obligations under Section
3.06(c) with respect to damage to the Property and/or injury to persons or
property. Purchaser agrees to maintain such insurance policies in effect for a
period of at least six (6) months following the earlier to occur of the Closing
or the date of termination of this Contract.
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Section 3.06. Indemnity. Purchaser shall (a) hold any and all materials
delivered to Purchaser under this Contract in confidence subject to the terms
hereof; (b) not unreasonably interfere with the operation of the Property, or
the business conducted by any tenant of the Property during any testing,
inspection or investigation performed with respect to the Property; and (c)
indemnify, protect, defend and hold Seller, its partners and their respective
officers, directors, trustees, employees, agents, affiliates, successors and
assigns harmless from and against any and all loss (including, without
limitation, damage to the Property or injury to persons or property), cost,
claim, liability or expense (including, without limitation, reasonable
attorneys' fees) arising or resulting, directly or indirectly, from any
unauthorized disclosure, test, investigation, inspection or contact made by
Purchaser, or anyone acting on behalf of Purchaser, pursuant to this Contract,
or otherwise. Seller agrees to promptly notify Purchaser of any claims as soon
as they are made. Notwithstanding anything to the contrary contained herein, the
provisions of this Section shall survive the termination of this Contract by
either Purchaser or Seller, and/or the Closing and delivery of the Deed for a
period of six (6) months following Closing. For purposes of this Section 3.06,
unauthorized disclosure shall be a disclosure of proprietary and confidential
information by Purchaser regarding the Property to a person or entity other than
Purchaser's lending sources, investors, third parties performing Purchaser's due
diligence review, and Purchaser's accountants, investment advisors and
attorneys.
ARTICLE IV
Review Period
-------------
Section 4.01. Review Period. Purchaser shall have from the date of this
Contract until 12:00 noon Dallas, Texas time, on the twenty first (21st) day
following the Effective Date (the "Review Period") to review the Survey, the
Title Commitment, and the items delivered by Seller to Purchaser under Section
3.03, and to conduct physical, mechanical, environmental and other inspections
of the Property.
Section 4.02. Purchaser's Notice. If for any reason Purchaser, in its sole
and absolute discretion, is not satisfied with the condition of the Property or
any portion thereof, or any matter in or pertaining to the items delivered or to
be delivered by Seller to Purchaser pursuant to Article III of this Contract, or
any other fact or situation with respect to the Property, then in such event
Purchaser shall
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have the right to terminate this Contract by giving Seller written notice
thereof (the "Purchaser's Notice"), and this Contract shall be immediately
terminated upon Purchaser's delivery of the Purchaser's Notice to Seller and
(except as otherwise provided below) the Earnest Money Deposit shall be returned
to Purchaser, as Purchaser's sole and exclusive remedy. The Purchaser's Notice
need not set forth the reason for such termination; provided, however, that if
Purchaser, in its sole and absolute discretion, desires to give Seller an
opportunity to cure Purchaser's dissatisfaction before Purchaser terminates this
Contract, then Purchaser may state such intention in the Purchaser's Notice and
shall set forth in reasonable detail the basis for any such dissatisfaction, in
which event this Contract shall not be immediately terminated and Seller shall
have the right, but not the obligation, to cure Purchaser's dissatisfaction or
reduce the Purchase Price as set forth in Section 4.03 below. In the event
Purchaser fails to deliver the Purchaser's Notice on or before the expiration of
the Review Period then this Contract shall be immediately terminated and the
Earnest Money Deposit shall be returned to Purchaser, as Purchaser's sale and
exclusive remedy.
Section 4.03. Seller's Notice. If Purchaser states in the Purchaser's
Notice its intention to give Seller an opportunity to cure Purchaser's
dissatisfaction before Purchaser terminates this Contract and includes therein
the basis for Purchaser's dissatisfaction, then Seller shall have the right, but
not the obligation, by delivery of written notice (the "Seller's Notice") to
Purchaser within five (5) business days after Seller's receipt of the
Purchaser's Notice, to elect either to (i) cure any such matter to the
reasonable satisfaction of Purchaser at Seller's sole cost and expense, (ii)
proceed to Closing, and reduce the Purchase Price by an amount equal to the cost
to Purchaser of any such cure, or (iii) terminate the Contract. In the event
Seller fails to deliver the Seller's Notice within such five (5) business day
period, Seller shall be deemed to have waived Seller's rights to cure; the
Earnest Money Deposit shall be returned to Purchaser, as Purchaser's sole and
exclusive remedy; and this Contract shall be deemed terminated. If Seller
delivers a Seller's Notice, Seller and Purchaser agree in good faith to
reasonably determine, within five (5) business days after delivery of the
Seller's Notice, the method, timing, cost and means to cure any such
objectionable item, or the cost to Purchaser of any such cure, as the case may
be. In the event Seller and Purchaser are unable, after the exercise of good
faith efforts, to agree in writing on the curative action required or the amount
to be reduced from the Purchase Price as a credit for the cost to cure, as the
case may be, within such five (5) business day period, then, this Contract shall
be deemed automatically terminated, and the Earnest Money Deposit shall be
returned to Purchaser, as Purchaser's sole and exclusive remedy.
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Section 4.04. Termination. In the event that Purchaser elects to terminate
this Contract in accordance with, and subject to the terms of this Article IV,
the parties hereto shall be relieved of all liabilities and obligations
hereunder (expressly, excluding, however, Purchaser's indemnity of Seller under
Section 3.06 which shall survive any termination of this Contract by either
party hereto) and the Earnest Money Deposit shall be refunded fully and promptly
to Purchaser as Purchaser's sole and exclusive remedy.
ARTICLE V
Good and Indefeasible Title
---------------------------
Section 5.01. Conveyance. At the Closing, Seller shall convey title to the
Real Property and the Improvements to Purchaser by the Deed, free and clear of
any and all deeds of trust, mortgages or other liens or indebtedness,
encumbrances, conditions, easements, rights-of-way, assessments and
restrictions, except for the following (collectively, the "Permitted
Exceptions"):
(a) Real estate taxes and assessments for the year in which the
Closing occurs and subsequent years not yet due and payable.
(b) All easements, restrictions, rights-of-way, party wall
agreements, encroachments, covenants, reservations, agreements, licenses,
conditions and other matters affecting all or any portion of the Property
to the extent (i) reflected on Schedule B to the Title Commitment and
approved or deemed approved by Purchaser; (ii) reflected on the Survey and
approved or deemed approved by Purchaser; and/or (iii) created by or
consented and agreed to in writing by Purchaser prior to or at the
Closing.
(c) All building restrictions, zoning regulations and other laws,
rules and regulations, now or hereafter in effect, to the extent adopted
by any municipal, governmental or other public authority and applicable to
all or any portion of the Property.
(d) The rights of tenants in possession as tenants only under the
Leases.
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Section 5.02. Owner Policy. At the Closing, Seller shall, at Seller's sole
cost and expense, purchase an Owner Policy of Title Insurance (the "Owner
Policy"), in the standard ALTA form, issued by the Title Company in Purchaser's
favor in an amount equal to the Purchase Price, insuring Purchaser's fee simple
title to the Property subject only to the Permitted Exceptions, and the standard
printed exceptions; provided, however, (a) the exception for restrictive
covenants shall, as applicable, be deleted or shall list only those restrictive
covenants as may be Permitted Exceptions; (b) any exception for parties in
possession of the Real Property or the Improvements shall be limited to the
rights of tenants in possession, as tenants only, pursuant to unrecorded leases;
(c) there shall be no general exception for visible and apparent easements,
roads and highways or any other matters which would be disclosed by a current
survey of the Property; and (d) at Purchaser's option and sole expense, the
"survey exception" regarding area and boundary lines, encroachments and
overlapping of improvements may be modified so as to refer only to "shortages in
area".
ARTICLE VI
Closing
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Section 6.01. Closing. The purchase and sale of the Property (the
"Closing") shall be held at the offices of the Title Company or at such other
place as shall be agreed upon by Seller and Purchaser, and shall occur, subject
to satisfaction of all conditions precedent set forth in this Contract, at 9:00
a.m. Dallas, Texas time on January 15, 1997, or such earlier date as may be
mutually agreeable to Seller and Purchaser (the "Closing Date").
Section 6.02. Seller's Obligations. At the Closing, Seller shall execute
and deliver to Purchaser, and/or cause the execution and delivery by all parties
other than Purchaser of, the following:
(a) That certain special warranty deed (the "Deed") in the form
attached hereto as Exhibit B and made a part hereof for all purposes, or
as approved by the Title Company.
(b) That certain assignment of leases (the "Assignment of Leases") in
the form attached hereto as Exhibit C and made a part hereof for all
purposes.
(c) That certain blanket conveyance, bill of sale and assignment
("Bill of Sale") in the form attached hereto as Exhibit D and made a part
hereof for all purposes.
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(d) That certain closing memorandum and indemnification agreement
(the "Closing Memorandum") in the form attached hereto as Exhibit E and
made a part hereof for all purposes.
(e) That certain affidavit (the "FIRPTA Affidavit") in the form
attached hereto as Exhibit F and made a part hereof for all purposes.
(f) That certain tenant notification letter (the "Tenant Letter") in
the form attached hereto as Exhibit G and made a part hereof for all
purposes.
(g) All keys to all locks on the Property and, to the extent in
Seller's possession, original counterparts of all Leases, Property
Contracts and other documents included within the Property. The items
referred to in this clause (g) may be delivered at the Property rather
than at the Closing.
(h) A current rent roll in the form described in Section 3.03(f)
certified by Seller as being true, correct and complete in all material
respects as of the date thereof.
(i) The Owner Policy, provided that the Title Company may deliver the
Owner Policy to Purchaser following the Closing in accordance with the
Title Company's customary practices.
(j) Appropriate evidence of Seller's authority to consummate the
transactions contemplated by this Contract.
(k) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(l) Seller shall provide a termination of management agreement
executed by Seller and Paragon Residential Services, Inc., without cost to
Purchaser.
(m) Such other documents as are normally transferred at Closing in
Texas or are reasonably requested by Purchaser or its counsel.
(n) A representation letter as normally required by auditors of a
public company in the form attached hereto as Exhibit H executed by
Seller. This clause shall survive Closing for one year.
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Section 6.03. Purchaser's Obligations. At the Closing, Purchaser shall
deliver the balance of the Purchase Price (the Earnest Money Deposit being
applied thereto) to Seller by wire transfer of immediately available funds, and
shall execute and deliver to Seller, and/or cause the execution and delivery by
all parties other than Seller of, the following:
(a) The Assignment of Leases.
(b) The Bill of Sale.
(c) The Closing Memorandum.
(d) The Tenant Letter.
(e) Appropriate evidence of Purchaser's authority to consummate the
transactions contemplated by this Contract.
(f) Such other documents as are normally transferred at Closing in
Texas or are reasonably requested by Seller or its counsel.
Section 6.04. Possession. Possession of the Property shall be delivered by
Seller to Purchaser at the Closing, subject to the Permitted Exceptions.
ARTICLE VII
Closing Adjustments
-------------------
Section 7.01. General Prorations. The following shall be apportioned at
the Closing:
(a) rents, if any, as and when collected (the term "rents" as used
in this Contract including all rent and other payments due and payable
under any Lease) and all other revenue from the Property;
(b) taxes and other assessments (including personal property taxes on
the Personal Property on the basis customarily followed in the locality of
the Property), any apportionment of real estate taxes to be made with
respect to a tax year for which either the tax rate or assessed valuation
or both have not yet been fixed, to be upon the basis of the tax rate
and/or assessed valuation last fixed; provided that the parties hereto
agree that to the extent the actual
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taxes for the current year differ from the amount so apportioned at the
Closing, the parties hereto will make all necessary adjustments by
appropriate payments between themselves following the Closing, and this
provision shall survive delivery of the Deed;
(c) payments under any service and/or other contracts that are not
otherwise terminated at or prior to Closing;
(d) gas, electricity and other utility charges, if any, to be
apportioned on the basis of meter readings on the day immediately prior to
the Closing; and
(e) other operating expenses of the Property incurred during the
month in which the Closing occurs, including, without limitation, costs
due and payable by Seller under, or with respect to, any Lease of all or
any portion of the Property.
In making such apportionments, Purchaser shall be entitled to rents and other
income paid with respect to the day of the Closing, and Purchaser shall be
responsible for taxes and other expenses incurred with respect to the day of the
Closing. All such apportionments shall be subject to post-closing adjustments as
necessary to reflect later relevant information not available at the Closing and
to correct any errors made at the Closing with respect to such apportionments;
provided, however, that such apportionments shall in any event (i.e., regardless
of whether later relevant information becomes available or errors are
discovered) be deemed final and not subject to further post-closing adjustment
on the sixtieth (60th) day following the Closing Date. Seller and Purchaser
agree that, except as otherwise set forth herein, all costs and expenses
actually incurred in connection with the ownership, operation, leasing, repair,
maintenance or management of the Property shall, to the extent attributable to
the period prior to the Closing Date, be the sole responsibility of Seller, and
shall, to the extent attributable to the period from and after the Closing Date,
be the sole responsibility of Purchaser.
Section 7.02. Specific Prorations. Anything hereinabove contained to the
contrary notwithstanding:
(a) Seller and Purchaser agree that all rents received after the
Closing shall be applied first to any rent unpaid for the month of the
Closing, then to current rentals, if any, in the order of their
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maturity, and then to delinquent rentals in inverse order of maturity
(i.e., to be applied to the most recent delinquent rental first, and so
on, until the oldest delinquent rental has been paid), and Purchaser shall
promptly deliver to Seller any such delinquent rentals received after the
Closing which remain to be applied to rent obligations which accrued prior
to the Closing. Purchaser has no obligation to collect any past due rents
owed Seller as of the Closing Date. Seller may, at Seller's option,
institute an action to collect any delinquent rentals after the Closing
from tenants who are no longer in occupancy at the Closing, but not
otherwise.
(b) At the Closing, Seller shall credit to the account of Purchaser
against the Purchase Price any security and other tenant deposits paid by
tenants at the Property under then existing Leases, less any security
deposits previously applied by Seller to rents or other charges accruing
pursuant to the Leases.
(c) As to gas, electricity and other utility charges, Seller may
elect to pay one or more of said items accrued to the date hereinabove
fixed for apportionment directly to the person or entity entitled
thereunto and to the extent Seller so elects, such item shall not be
apportioned hereunder, and Seller's obligation to pay such item directly
in such case shall survive the Closing.
(d) At the Closing, Purchaser shall receive a credit from Seller in
an amount equal to $500 for each apartment unit which is not "rent ready"
as required by Section 9.05(e); provided, however, such aggregate credit
shall not exceed $5,000.
Section 7.03. Transaction Costs. With the exception of (a) any fees or
real estate commissions (which are subject to and governed by the provisions of
Section 7.04); (b) all attorneys' fees and expenses, if any, of counsel to
Purchaser (which shall be borne by Purchaser); (c) any inspection or other cost
incurred by Purchaser (which shall be borne by Purchaser); (d) all attorneys'
fees and expenses of counsel to Seller (which shall be borne by Seller); (e) the
cost of an update of the Survey (which shall be borne by Seller); and (f) the
cost of the Owner Policy (which shall be borne by Seller); all other transaction
costs actually incurred, including, without limitation, any escrow and other
charges of the Title Company, and recording fees shall be apportioned in
accordance with local custom in the State of Texas.
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Section 7.04. Brokerage Commissions. Seller agrees to pay to O'Boyle
Properties ("Broker") a real estate commission equal to two percent (2.00%) of
the purchase price if, and only if, the Closing occurs in accordance with this
Contract, but not otherwise. Except for Broker, Seller and Purchaser acknowledge
and agree that neither has dealt with any other real estate broker, agent or
salesman, and any other fees or real estate commissions occasioned by the
execution and/or consummation of this Contract shall be the sole responsibility
of the party contracting therefor, and such party agrees to indemnify and hold
harmless the other party for any and all losses or expenses attributable to such
other fees or real estate commissions. By its signature hereto, Broker
represents to Seller and Purchaser that such broker has not entered into any
arrangement with any other party whereby such other party is entitled to any
commission or finder's fee in connection with this transaction, and such broker
agrees that should any claim be made for brokerage commissions or finder's fees
by any other party claiming by, through or on account of any acts of such broker
or its representatives, such broker shall hold Purchaser and Seller free and
harmless from and against any and all loss, cost, damage and expense in
connection therewith. In the event the transaction envisioned hereby fails to
close for any reason, including without limitation either party's default,
neither party shall have any obligation for the payment to Broker or any other
person of any commission or similar type fee hereunder, or otherwise. Purchaser
has been and is hereby advised that Purchaser should have the abstract covering
the Property examined by an attorney of Purchaser's selection or Purchaser
should be furnished with a policy of title insurance.
Section 7.05. Survival. The terms of this Article shall survive the
Closing and delivery of the Deed or, if applicable, the earlier termination of
this Contract.
ARTICLE VIII
Termination and Remedies
------------------------
Section 8.01. Purchaser's Default. In the event that Purchaser should fail
to consummate this Contract for any reason, except Seller's default or the
permitted termination of this Contract by Purchaser or Seller as herein
expressly provided, Seller shall be entitled, as Seller's sole and exclusive
remedy, to terminate this Contract and receive the Earnest Money Deposit and
Seller's acceptance (by negotiation, deposit or otherwise) of the Earnest Money
Deposit shall conclusively operate to terminate this Contract and release and
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fully discharge Seller and Purchaser from any and all liability hereunder
(expressly excluding, however, Purchaser's indemnity of Seller under Section
3.06 which shall survive termination of this Contract by either party). Seller
and Purchaser acknowledge and agree that delivery of the Earnest Money Deposit
shall be deemed liquidated damages for Purchaser's breach of this Contract, it
being further agreed that the actual damages to Seller in the event of such
breach are impractical to ascertain and the amount of the Earnest Money Deposit
is a reasonable estimate thereof. Prior to delivery of the Earnest Money to
Seller, Seller shall give Purchaser seventy-two hours prior notice of same.
Section 8.02. Seller's Default. In the event that Seller should fail to
consummate this Contract for any reason, except Purchaser's default or the
permitted termination of this Contract by either Seller or Purchaser as herein
expressly provided, Purchaser shall be entitled, as Purchaser's sole and
exclusive remedies, to either (a) the return of the Earnest Money Deposit and
Purchaser's acceptance (by negotiation, deposit or otherwise) of the Earnest
Money Deposit shall conclusively operate to terminate this Contract and release
and fully discharge Seller and Purchaser from any and all liability hereunder
(expressly excluding, however, Purchaser's indemnity of Seller under Section
3.06 which shall survive any termination of this Contract by either party
hereto); or (b) enforce specific performance of Seller's obligations hereunder,
subject, however, to all conditions and termination rights set forth herein and
Purchaser shall be entitled to all costs or expenses (including reasonable
attorneys' fees) incurred by Purchaser in pursuing its remedy under this Section
8.02(b). Purchaser shall have no right to sue for or seek, whether at law, in
equity or otherwise, any monetary award or judgment and/or any consequential,
incidental or other damages against Seller, any officer, trustee, director,
employee or agent of Seller, or their respective successors and assigns all of
which are hereby knowingly, voluntarily and intentionally waived, released and
discharged by Purchaser.
Section 8.03. Survival. The terms of this Article shall survive the
Closing and delivery of the Deed or, if applicable, the earlier termination of
this Contract.
ARTICLE IX
Representations, Warranties and Covenants
-----------------------------------------
Section 9.01. Disclaimer. PURCHASER AGREES THAT PURCHASER IS BEING
AFFORDED THE RIGHT TO PERFORM EXAMINATIONS AND INVESTIGATIONS OF THE PROPERTY
PRIOR TO THE EXPIRATION OF THE REVIEW PERIOD, INCLUDING, WITHOUT LIMITATION,
EXAMINATION AND
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INVESTIGATION FOR THE PRESENCE OF ASBESTOS, PCB EMISSIONS, CLEANING SOLVENTS
(E.G., PCE), UNDERGROUND STORAGE TANKS AND HAZARDOUS WASTES ON ALL OR ANY
PORTION OF THE PROPERTY, AND FOR THE PROPERTY'S COMPLIANCE WITH ANY AND ALL
HANDICAPPED ACCESSIBILITY LAWS, RULES AND REGULATIONS (E.G., AMERICANS WITH
DISABILITIES ACT OF 1990, OR ANY OTHER LAW, RULE OR REGULATION). PURCHASER WILL
RELY SOLELY UPON SUCH EXAMINATIONS AND INVESTIGATIONS IN PURCHASING THE
PROPERTY. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, AND EXCEPT AS
PROVIDED IN SECTION 9.02, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT PURCHASER
IS ACQUIRING THE PROPERTY "AS IS" AND "WHERE IS", AND WITH ALL FAULTS AND THAT,
EXCEPT AS SET FORTH IN SECTION 9.02 AND THE DOCUMENTS TO BE DELIVERED AT THE
CLOSING, SELLER HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS OR
WARRANTIES, STATUTORY, EXPRESSED OR IMPLIED, WITH RESPECT TO THE QUALITY,
PHYSICAL CONDITION, EXPENSES, VALUE OF THE PROPERTY OR IMPROVEMENTS THEREON,
HANDICAPPED ACCESSIBILITY LAW COMPLIANCE, PRESENCE/ABSENCE OF HAZARDOUS
MATERIALS, ELECTROMAGNETIC FIELD EXPOSURE LEVELS OR ANY OTHER MATTER OR THING
AFFECTING OR RELATED TO THE PROPERTY OR THIS CONTRACT (INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF HABITABILITY, WARRANTIES OF MERCHANTABILITY AND/OR OF
FITNESS FOR A PARTICULAR PURPOSE), WHICH MIGHT BE PERTINENT IN CONSIDERING THE
MAKING OF THE PURCHASE OF THE PROPERTY OR THE ENTERING INTO OF THIS CONTRACT,
AND PURCHASER DOES HEREBY RELEASE AND FOREVER DISCHARGE SELLER, ITS OFFICERS,
TRUSTEES, DIRECTORS, AND THEIR RESPECTIVE AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS FROM ANY AND ALL CLAIM, OBLIGATION AND LIABILITY (WHETHER BASED IN TORT,
UNDER CONTRACT OR OTHERWISE) ATTRIBUTABLE, IN WHOLE OR IN PART, TO ANY SUCH
REPRESENTATION, EXCEPT FOR THOSE PROVIDED IN SECTION 9.02 AND THE DOCUMENTS TO
BE DELIVERED AT THE CLOSING, AND/OR ALLEGED REPRESENTATION, AND FURTHER
PURCHASER DOES HEREBY EXPRESSLY ACKNOWLEDGE THAT, EXCEPT AS SET FORTH IN SECTION
9.02 AND THE DOCUMENTS TO BE DELIVERED AT THE CLOSING, NO SUCH REPRESENTATIONS
HAVE BEEN MADE. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY WARRANTIES,
EITHER EXPRESSED OR IMPLIED, GUARANTEES, PROMISES, STATEMENTS, REPRESENTATIONS
OR INFORMATION PERTAINING TO THE PROPERTY MADE OR FURNISHED BY BROKER, OR ANY
AGENT, BROKER, EMPLOYEE, SERVANT OR OTHER PERSON REPRESENTING OR PURPORTING TO
REPRESENT SELLER. PURCHASER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES
SELLER FROM ANY AND ALL CLAIMS, DEMANDS AND CAUSES OF ACTION THAT PURCHASER MAY
HAVE AGAINST SELLER WITH RESPECT TO ANY COSTS, LOSSES, EXPENSES OR OTHER
LIABILITIES INCURRED IN CONNECTION WITH PROPERTY, INCLUDING, WITHOUT LIMITATION,
ANY RIGHT OF CONTRIBUTION, INDEMNITY OR REIMBURSEMENT PROVIDED UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980,
THE RESOURCE CONSERVATION AND RECOVERY ACT OR ANY OTHER FEDERAL, STATE OR LOCAL
ENVIRONMENTAL LAW, RULE OR REGULATION. THE TERMS OF THIS SECTION 9.01 SHALL BE
DEEMED INCORPORATED
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INTO EACH DOCUMENT EXECUTED BY SELLER AT THE CLOSING REGARDLESS OF WHETHER A
SPECIFIC REFERENCE TO THIS SECTION IS MADE THEREIN. FURTHER, THE TERMS OF THIS
SECTION 9.01 SHALL SURVIVE THE TERMINATION OF THIS CONTRACT AND/OR THE CLOSING
AND DELIVERY OF THE DEED. NOTHING CONTAINED IN THIS SECTION 9.01 SHALL LIMIT OR
IMPAIR THE SPECIAL WARRANTY OF TITLE SET FORTH IN THE DEED, EXCEPT WHERE
OTHERWISE AGREED UPON.
Section 9.02. Seller's Representations. Seller hereby represents and
warrants to Purchaser as follows:
(a) Seller has all requisite power and authority to carry on its
business as now conducted.
(b) Seller has the capacity and complete authority to enter into and
perform this Contract, and no consent, approval or other action by any
other person or entity (other than the persons signing this Contract on
behalf of Seller) will be needed thereafter to authorize Seller's
execution and performance of this Contract. The execution and performance
of this Contract is not prohibited by, and does not constitute a default
under, any agreement to which Seller is a party or by which Seller is
bound.
(c) Seller is not a "foreign person", "foreign partnership", nor a
"foreign corporation" as those terms are defined in Section 7701 of the
Internal Revenue Code of 1986, as amended.
(d) To Seller's knowledge, there is no pending litigation filed with
respect to the Property.
(e) To Seller's knowledge, Seller has not received written notice
from any governmental authority reflecting eminent domain or condemnation
proceedings covering the Property.
(f) To Seller's knowledge, Seller has not received written notice
from any governmental authority that the Property is currently-in
violation of any zoning, building, fire or health statute, ordinance or
regulation.
(g) To Seller's knowledge, Seller has not received written notice
from any governmental, or regulatory authority reflecting an existing
environmental hazard on the Property.
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<PAGE>
(h) To Seller's knowledge, the items delivered to Purchaser under
Section 3.03(b), (c), (d), (e), (f), (g) and (h) are true and correct in
all material respects.
(i) The Personal Property is owned by Seller free and clear of any
liens or encumbrances subject to the Permitted Exceptions.
(j) To the best of Seller's knowledge, there are no unsatisfied
judgments or pending bankruptcies against Seller with respect to the
Property.
References to the "knowledge" of Seller above shall refer only to the
actual knowledge (as opposed to constructive, deemed or imputed knowledge) of
Brenda Meetze and shall not be construed, by imputation or otherwise, to refer
to the knowledge of Seller, or any affiliate of Seller, to any property manager,
or to any officer, agent, manager, representative or employee of Seller or any
affiliate thereof or to impose upon Brenda Meetze any duty to investigate the
matter to which such actual knowledge, or the absence thereof, pertains. Seller
represents that Brenda Meetze is a Vice President of Paragon Residential
Services, Inc., the current manager of the Property.
Section 9.03. Purchaser's Representations. Purchaser hereby represents and
warrants to Seller as follows:
(a) Purchaser is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Virginia, has duly
qualified to conduct business in the State of Texas, and has all requisite
power and authority to carry on its business as now conducted.
(b) Purchaser has the capacity and complete authority to enter into
and perform this Contract, and no consent, approval or other action by any
person or entity (other than the person signing this Contract on behalf of
Purchaser) will be needed thereafter to authorize Purchaser's execution
and performance of this Contract. The execution and performance of this
Contract is not prohibited by, and does not constitute a default under,
any agreement to which Purchaser is a party or by which Purchaser and its
assets may be bound.
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<PAGE>
(c) Purchaser has knowledge and experience in financial and business
matters that enables it to analyze the merits and risks of the
transactions contemplated hereby, and Purchaser is not in a significantly
disparate bargaining position with respect to Seller or such transaction.
Section 9.04. Discovery. In the event that either Seller or Purchaser
discovers, prior to or at the Closing, that any representation or warranty of
the other party under this Article IX is false, misleading or inaccurate in any
material respect, the discovering party may, at its option, terminate this
Contract and the parties hereto shall be relieved of all liabilities and
obligations hereunder (expressly excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto) and (a) if Purchaser discovers that a representation or
warranty made by Seller under Section 9.02 is materially false, misleading or
inaccurate, Purchaser shall have the right to pursue its rights and remedies
under Section 8.02 of this Contract, but (b) if Seller discovers that a
representation or warranty made by Purchaser under Section 9.03 is materially
false, misleading or inaccurate, Seller shall be entitled to pursue its remedies
under Section 8.01 of this Contract. Neither Seller nor Purchaser shall have the
right to rely on any representation or warranty of the other party set forth
herein, in any document delivered at the Closing, or otherwise, to the extent
that the relying party, on the Closing Date, knows that such representation or
warranty is false, misleading or inaccurate. Representations and warranties
under this Article IX shall fully survive the Closing and the delivery of the
Deed, but to the extent that neither Seller nor Purchaser has made any claim as
to the breach of any such representation or warranty within six (6) months after
the Closing Date, such representations and warranties will terminate and be of
no further force and effect. In the event Purchaser discovers after the Closing
that any representation or warranty is false, misleading or inaccurate in any
material respect, Purchaser shall have no right to request a rescission of this
Contract for failure of a condition precedent nor to otherwise pursue an action
against Seller for punitive, treble or other damages, if any, incurred by
Purchaser as a result thereof, but Purchaser shall otherwise be entitled to
pursue an action against Seller for actual damages incurred by Purchaser, if
any, as a result thereof.
Section 9.05. Operating Covenants. Seller agrees to operate and maintain
or cause to be operated and maintained the Property prior to the Closing in a
prudent and reasonable manner consistent with its current operating procedures.
In connection with the foregoing, Seller covenants for so long as this Contract
remains in effect as follows:
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(a) Seller shall not create nor permit to exist any lien, encumbrance
or charge on the Real Property or the Improvements, other than liens or
encumbrances either noted in the Title Commitment or those which shall be
released at Closing at Seller's expense; provided, however, Seller shall
have the right to contest any such liens and encumbrances so long as a
bond is posted by Seller and/or other procedures reasonably acceptable to
the Title Company and Purchaser, so as to permit the Title Company to
issue the Owner Policy without exception to any such lien or encumbrance,
and in such event Purchaser shall have no right to terminate this Contract
as a result of any such lien or encumbrance.
(b) Seller shall neither transfer nor remove any Personal Property or
fixtures from the Property subsequent to the date hereof, except in the
ordinary course of business or for purposes of replacement thereof, in
which case such replacements shall be promptly installed prior to Closing
and shall be reasonably comparable in quantity and quality to the item(s)
being replaced.
(c) Seller shall conduct its leasing activities substantially
consistent with its normal, customary and ordinary leasing practice.
Seller covenants to Purchaser that there are no authorized rent
concessions with respect to the Leases except as set forth in the Rent
Roll or the Leases.
(d) Seller shall keep the Property insured at all times prior to the
Closing under Seller's existing blanket-type insurance policy.
(e) All vacant apartment units at Closing, other than apartment units
vacated within five (5) days prior to Closing, will be "rent ready".
Seller and Purchaser agree that during the Review Period, both Seller and
Purchaser will inspect an apartment unit at the Property and mutually
agree that said apartment unit shall be representative or a "rent ready"
unit by which all other units shall be judged for "rent ready" condition
at Closing. In the event Seller and Purchaser can not mutually agree prior
to expiration of the Review Period as to a representative apartment for
purposes of defining "rent ready", either party shall have the right to
terminate the Contract upon notice to the other and upon such event, the
Contract shall terminate and the Earnest Money shall be returned to
Purchaser, as Purchaser's sole and exclusive remedy.
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Notwithstanding the foregoing, Seller has no obligation, express or implied, to
make or otherwise pay for any capital improvements to all or any portion of the
Property, including, without limitation, any parking lot repairs, painting,
handicapped accessibility modifications, Personal Property repair or
replacement, roof repair or replacement or any deferred maintenance item;
provided, however, Seller will perform all of Seller's routine maintenance
obligations.
ARTICLE X
Notices
-------
Section 10.01. Notices. Any notice, demand or other communication which
may or is required to be given under this Contract shall be in writing and shall
be: (a) personally delivered; (b) transmitted by United States postage prepaid
mail, registered or certified mail, return receipt requested; (c) transmitted by
reputable overnight courier service, such as Federal Express; or (d) transmitted
by legible facsimile (with answer back confirmation) to Purchaser and Seller as
listed below. Except as otherwise specified herein, all notices and other
communications shall be deemed to have been duly given on (i) the date of
receipt if delivered personally, (ii) two (2) calendar days after the date of
posting if transmitted by registered or certified mail, return receipt
requested, (iii) the first (1st) business day after the date of deposit, if
transmitted by reputable overnight courier service, or (iv) the date of
transmission with confirmed answer back if transmitted by facsimile, whichever
shall first occur. A notice or other communication not given as herein provided
shall only be deemed given if and when such notice or communication and any
specified copies are actually received in writing by the party and all other
persons to whom they are required or permitted to be given. Purchaser and Seller
may change its address for purposes hereof by notice given to the other parties
in accordance with the provisions of this Section, but such notice shall not be
deemed to have been duly given unless and until it is actually received by the
other parties. Notices hereunder shall be directed as follows:
If to Purchaser: Cornerstone Realty Group Incorporated
306 East Main Street
Richmond, Virginia 23219
Attention: Gus G. Remppies
Telecopy: (804) 782-9302
with copies at the
the same time to: Zuckerbrod & Taubenfeld
575 Chesnut St., P.O. Box 488
Cedarhurst, New York 11516
Attention: Harry S. Taubenfeld
Telecopy: (516) 374-3490
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<PAGE>
and
Brown McCarroll & Oaks Hartine
300 Crescent Court,
Suite 1400
Dallas, Texas 75201
Attn: Robert E. Morrison
Telecopy: (214) 999-6170
If to Seller: Paragon Group L.P.
7557 Rambler Road,
Suite 1200
Dallas, Texas 75231
Attention: John Berry
Telecopy: (214) 891-2065
with copies at
the same time to: Stutzman & Bromberg,
A Professional Corporation
2323 Bryan Street, Suite 2200
Dallas, Texas 75201
Attention: Aguinaldo Valdez
Telecopy: (214) 969-4999
and
Paragon Residential Services, Inc.
7557 Rambler Road,
Suite 1200
Dallas, Texas 75231
Attention: Lynn T. Caldwell
Telecopy: (214) 891-2065.
ARTICLE XI
Risk of Loss
------------
Section 11.01. Minor Damage. In the event of "minor" loss or damage (being
defined for the purpose of this Contract as damage to the Property which is such
that the Property could be repaired or restored, in the opinion of an
architect reasonably satisfactory to both Seller and Purchaser, to a condition
substantially identical to that of the Property immediately prior to the event
of damage at a cost equal to or less than $250,000.000), this Contract shall
continue in full force and effect and Seller shall assign all of Seller's right,
title and interest to any claims and proceeds Seller may have with respect to
any casualty insurance policies, including, rental
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interruption insurance proceeds, or condemnation awards relating to the Property
and Purchaser shall receive a credit against the Purchase Price in an amount
equal to the deductible under any such insurance policy to the extent such
deductible is applicable to any such minor loss or damage, but not otherwise.
Section 11.02. Major Damage. In the event of a "major" loss or damage
(being defined as any loss or damage which is not "minor" as defined hereinabove
or a condemnation not minor and of a portion of the Property whereby five
percent (5%) or more of the parking spaces on the Property are lost), Purchaser
shall have the option of either: (a) terminating this Contract by written notice
to Seller, in which event the Earnest Money Deposit shall, to the extent
delivered to the Title Company, be returned to Purchaser as Purchaser's sole and
exclusive remedy, and Seller and Purchaser shall be released from any and all
liability hereunder (expressly excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto); or (b) proceeding with the Closing, provided Seller
shall assign all of Seller's right, title and interest to any claims and
proceeds Seller may have with respect to any casualty insurance policies,
including, rental interruption insurance proceeds, or condemnation awards
relating to the Property and Purchaser shall receive a credit against the
Purchase Price in an amount equal to the deductible under any such insurance
policy to the extent such deductible is applicable to any such major loss or
damage, but not otherwise. Seller agrees to furnish Purchaser written notice of
any such damage or loss, including any claims adjuster's estimate, within ten
(10) days after the occurrence of any such damage or loss. In the event
Purchaser fails to deliver written notice to Seller of Purchaser's election
hereunder, within ten (10) days after Purchaser's receipt of written notice from
Seller of the occurrence of a "major" loss or damage, Purchaser shall be deemed
to have elected the option set forth under subparagraph (a) of this Section.
Section 11.03. Risk of Loss. Prior to Closing, full risk of loss with
respect to the Property shall remain with Seller. Upon the Closing, full risk of
loss with respect to the Property shall pass to Purchaser. There shall be no
reduction in the Purchase Price as a result of any loss or damage except as
expressly set forth in Section 11.01 or Section 11.02.
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ARTICLE XII
Miscellaneous
-------------
Section 12.01. Entire Agreement. This Contract constitutes the entire
agreement between the parties hereto and supersedes any prior understanding or
written or oral agreements between the parties concerning the Property.
Section 12.02. No Recordation. Neither this Contract nor any memorandum of
the terms hereof shall be recorded or otherwise placed of public record and any
breach of this covenant shall, unless the party not placing same of record is
otherwise in default hereunder, entitle the party not placing same of record to
pursue its rights and remedies under Article VIII.
Section 12.03. No Rule of Construction. This Contract has been drafted by
both Seller and Purchaser and no rule of construction shall be invoked against
either party with respect to the authorship hereof or of any of the documents to
be delivered by the respective parties at the Closing.
Section 12.04. Multiple Counterparts; Governing Law. This Contract may be
executed in multiple counterparts each of which shall be deemed an original but
together shall constitute one and the same instrument, and shall be construed
and interpreted under the laws of the State of Texas and all obligations of the
parties created hereunder are performable in Dallas County, Texas.
Section 12.05. Attorneys' Fees. In the event of any litigation or other
proceeding brought by either party hereunder, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and costs of suit, and in
addition to the foregoing, the non-prevailing party shall, if the dispute
involves the return of the Earnest Money Deposit, be solely obligated, without
contribution, to pay all reasonable attorneys' fees, costs and expenses incurred
by, or asserted against, the Title Company.
Section 12.06. Assignment. Purchaser may not assign, without the consent
of Seller, any of Purchaser's rights and obligations under this Contract, but
Purchaser may assign this Contract, without Seller's consent, to Apple
Residential Income Trust, Inc. or an entity controlled by one or more of
Purchaser's affiliates and/or any of Purchaser's principals. Except as provided
in the preceding sentence, Purchaser has no right to assign this Contract and no
interest held, directly or indirectly, in Purchaser may be sold, transferred or
otherwise
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<PAGE>
conveyed without in each instance the prior written consent of Seller. No such
assignment, however, shall release or otherwise relieve Purchaser from its
obligations hereunder and under the documents to be executed at the Closing.
This Contract and all rights hereunder shall inure to and be binding upon the
respective heirs, executors, successors and permitted assigns of Seller and
Purchaser.
Section 12.07. Interpretation. This Contract shall, unless otherwise
specified herein, be subject to the following rules of interpretation: (a) the
singular includes the plural and the plural the singular; (b) words importing
any gender include the other genders; (c) references to persons or entities
include their permitted successors and assigns; (d) words and terms which
include a number of constituent parts, things or elements, including the terms
Improvements, Permitted Exceptions, Personal Property, Intangible Property and
Property, shall be construed as referring separately to each constituent part,
thing or element thereof, as well as to all of such constituent parts, things or
elements as a whole; (e) references to statutes are to be construed as including
all rules and regulations adopted pursuant to the statute referred to and all
statutory provisions consolidating, amending or replacing the statute referred
to; (f) references to agreements and other contractual instruments shall be
deemed to include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms; (g) the words "approve" or
"consent" or "agree" or derivations or said words or words of similar import
mean, unless otherwise expressly provided herein or therein, the prior approval,
consent, or agreement in writing of the person holding the right to approve,
consent, or agree with respect to the matter in question, and the words
"require" or "judgment" or "satisfy" or derivations of said words or words of
similar import mean the requirement, judgment or satisfaction of the person who
may make a requirement or exercise judgment or who must be satisfied, which
approval, consent, agreement, requirement, judgment or satisfaction shall,
unless otherwise expressly provided herein or therein, be in the reasonable
discretion of the person holding the right to approve, consent or agree or who
may make a requirement or judgment or who must be satisfied; (h) the words
"include" or "including" or words of similar import shall be deemed to be
followed by the words "without limitation"; (i) the words "hereto" or "hereby"
or "herein" or "hereof" or "hereunder," or words of similar import, refer to
this Contract in its entirety; (j) references to sections, articles, paragraphs
or clauses are to the sections, articles, paragraphs or clauses of this
Contract; and (k) numberings and headings of sections, articles, paragraphs and
clauses are inserted as a matter of convenience only and shall not affect the
construction of this Contract.
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<PAGE>
Section 12.08. Exhibits and Schedules. The following exhibits and
schedules attached hereto shall be deemed to be an integral part of this
Contract and are hereby incorporated for all purposes:
Schedule 1 - list of Personal Property
Schedule 2 - list of Property Contracts
Exhibit A - legal description of the Real Property
Exhibit B - form of Deed
Exhibit C - form of Assignment of Leases
Exhibit D - form of Bill of Sale
Exhibit E - form of Closing Memorandum
Exhibit F - form of FIRPTA Affidavit
Exhibit G - form of Tenant Letter
Exhibit H - form of Representation Letter
Section 12.09. Modifications: Reporting Person. This Contract cannot be
changed orally, and no executory agreement shall be effective to waive, change,
modify or discharge it in whole or in part unless such executory agreement is in
writing and is signed by the parties against whom enforcement of any waiver,
change, modification or discharge is sought. Neither Broker nor the Title
Company shall be necessary signatories to any such written agreement. Purchaser
and Seller hereby designate the Title Company as the "reporting person" pursuant
to the provisions of Section 6045(e)) of the Internal Revenue Code, as amended.
Section 12.10. Time of Essence. Time is of the essence to both Seller
and Purchaser in the performance of this Contract, and they have agreed that
strict compliance by both of them is required as to any date and/or time set out
herein, including, without limitation, the dates and times set forth in Article
IV of this Contract. If the final day of any period of time set out in any
provision of this Contract falls upon a Saturday, Sunday or a holiday observed
by federally insured banks in the State of Texas or by the United States Postal
Service, then and in such event, the time of such period shall be extended to
the next day which is not a Saturday, Sunday or holiday. Unless otherwise
specified, in computing any period of time described
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<PAGE>
in this Contract, the day of the act or event after which the designated period
of time begins to run is not to be included and the last day of the period so
computed is to be included, unless such last day is a Saturday, Sunday or
holiday in which event the period shall run until the end of the next day which
is neither a Saturday, Sunday or holiday. Notwithstanding the foregoing,
Purchaser shall have a one-time right to extend the Closing Date for up to
thirty (30) days upon five (5) days prior written notice to Seller.
Section 12.11. No Publicity. Purchaser agrees that, prior to divulging
the transactions described in this Contract or publicizing them in any way, it
will secure the prior written consent of Seller; provided that the foregoing
does not require Seller's consent to any disclosures by Purchaser to Purchaser's
lenders, equity owners, attorneys and other advisors.
Section 12.12. Partial Invalidity. If any term, provision, condition or
covenant of this Contract or the application thereof to any party or
circumstance shall, to any extent, be held invalid or unenforceable, the
remainder of this Contract, or the application of such term, provision,
condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable shall not be affected thereby, and
each term and provision of this Contract shall be valid and enforceable to the
fullest extent permitted by law, and said invalid or unenforceable term,
provision, condition or covenant shall be substituted by a term, provision,
condition or covenant as near in substance as may be valid and enforceable.
Section 12.13. Facsimile Signatures. The parties hereto hereby agree
that facsimile signatures by any party shall be fully binding upon and
enforceable against such party.
Section 12.14. Section 1031 Exchange. Purchaser agrees to cooperate with
Seller in effecting a Section 1031 exchange, including executing documents
required by the exchange trustee or intermediary, provided, however, such
cooperation shall be at no cost or liability to Purchaser. Seller agrees to hold
Purchaser harmless from any claims resulting from said Section 1031 exchange,
including reasonable attorneys' fees. This Section 12.14 shall survive Closing.
Section 12.15. Seller's Investment Committee. Notwithstanding anything
to the contrary contained herein, this Contract and Seller's obligation under
this Contract are expressly conditioned upon obtaining the consent and approval
of this Contract and the transactions contemplated hereby by Seller's Investment
Committee and Seller's Board of Directors. Seller agrees to obtain such approval
within ten (10) days of the Effective Date.
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<PAGE>
Section 12.16. Purchaser's Investment Committee. Notwithstanding
anything to the contrary contained herein, this Contract and Purchaser's
obligation under this Contract are expressly conditioned upon obtaining the
consent and approval of this Contract and the transactions contemplated hereby
by Purchaser's Board of Directors. Purchaser agrees to obtain such approval
prior to the expiration of the Review Period.
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<PAGE>
IN WITNESS WHEREOF, this Contract has been executed by Purchaser and
Seller on the dates written below.
SELLER:
PARAGON GROUP L.P.,
a Delaware limited partnership
By: Paragon Group
GP Holdings, Inc.,
a Delaware corporation
By: /s/ John Berry
-----------------------
Name: John Berry
-----------------------
Title: S.V.P.
-----------------------
PURCHASER:
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia corporation
By: /s/ S. J. Olander
-------------------------
Name: S. J. Olander
-------------------------
Title: S.V.P.
-------------------------
- 30 -
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the
20th day of January, 1997, by and between Cornerstone Realty Group Incorporated,
a Virginia corporation ("Purchaser"), and Northgate Drive Limited Partnership,
an Illinois limited partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to
sell at the price of NINE MILLION SEVEN HUNDRED EIGHTY-FIVE THOUSAND ONE HUNDRED
TWENTY-FOUR AND NO/100 Dollars ($9,785,124.00) (the "Purchase Price"), that
certain property commonly known as Eagle Crest I Apartments, Irving, Texas,
legally described on Exhibit A attached hereto and consisting of 296 units (the
"Property"). Included in the Purchase Price is all of the personal property set
forth on Exhibit B attached hereto (the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as
follows:
2.1. Upon the execution of this Agreement, the sum of SEVENTY-FIVE
THOUSAND AND NO/100 Dollars ($75,000.00) (the "Earnest Money") to be held in
escrow by and in accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit C; and
2.2. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by
federally wired "immediately available" funds, on or before 12:00 p.m. Chicago
time.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Chicago Title Insurance
Company (hereinafter referred to as "Title Insurer") dated September 9, 1996 for
the Property (the "Title Commitment"). For purposes of this Agreement,
"Permitted Exceptions" shall mean: (a) the general printed exceptions
contained in the standard title policy to be issued by Title Insurer based on
the Title Commitment; ((b)) general real estate taxes, association assessments,
special district taxes and related charges not yet due and payable; (c) matters
shown on the "Existing Survey" (hereinafter defined); (d) matters caused by
the actions of Purchaser; and (e) the title exceptions set forth in Schedule B
of the Title Commitment as Numbers 9(B) through 9(N) inclusive, to the
extent that same effect the Property. All other exceptions to title shall be
referred to as "Unpermitted Exceptions". The Title Commitment shall be
conclusive evidence of good title as therein shown as to all matters to be
insured by the title policy, subject only to the exceptions therein stated. On
the Closing Date, Title Insurer shall deliver to Purchaser a standard title
policy in conformance with the previously delivered Title Commitment, subject to
Permitted Exceptions and Unpermitted Exceptions waived by Purchaser (the "Title
Policy"). Seller shall pay for all of the costs of the Title Commitment and
Title Policy and Purchaser shall pay the cost of any endorsements to, or
extended coverage on, the Title Policy.
<PAGE>
3.2. Purchaser has received a survey of the Property prepared by
Landmark Associates, dated May 1, 1996 (the "Existing Survey"). Seller shall
pay for the costs of the Existing Survey and updating the Existing Survey and
Seller shall deliver the updated survey (the "Updated Survey") to Purchaser
prior to Closing. Purchaser hereby acknowledges that all matters disclosed by
the Existing Survey are acceptable to Purchaser.
3.3. The obligation of Purchaser to pay various costs set forth in
Paragraphs 3.1 and 3.2 shall survive the termination of this Agreement.
4. PAYMENT OF CLOSING COSTS.
4.1. Seller shall pay for the costs of the documentary or transfer
stamps to be paid with reference to the "Deed" (hereinafter defined) and
Purchaser shall pay, the costs of all other stamps, intangible, recording,
sales tax and surtax imposed by law with reference to any other sale
documents delivered in connection with the sale of the Property to Purchaser
and all other charges of the Title Insurer in connection with this transaction
except the cost of the Title Commitment and Title Policy as referenced in
Paragraph 3.1.
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to
the Title Commitment or the Updated Survey discloses any new Unpermitted
Exception, Seller shall have thirty (30) days from the date of the
date-down to the Title Commitment or the Updated Survey, as applicable, at
Seller's expense, to (i) bond over, cure and/or have any Unpermitted
Exceptions which, in the aggregate, do not exceed $100,000.00 (a "Minor
Unpermitted Exception"), removed from the Title Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions, or (ii) have the right, but not the obligation,
to bond over, cure and/or have any Unpermitted Exceptions which, in the
aggregate, equal or exceed $100,000.00, removed from the Title Commitment or
to have the Title Insurer commit to insure against loss or damage that may be
occasioned by such Unpermitted Exceptions. In such event, the time of Closing
shall be delayed, if necessary, to give effect to said aforementioned time
periods. If Seller fails to cure or have said Unpermitted Exception removed
or have the Title Insurer commit to insure as specified above within said
thirty (30) day period or if Seller elects not to exercise its rights under
(ii) in the preceding sentence, Purchaser may terminate this Agreement
upon notice to Seller within seven (7) days after the expiration of said
thirty (30) day period provided, however, and notwithstanding
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<PAGE>
anything contained herein to the contrary, if the Unpermitted Exception which
gives rise to Purchaser's right to terminate was recorded against the Property
as a result of the affirmative, willful action of Seller (and not by any
unrelated third party) with the intention to prevent the sale of the Property in
accordance with the terms hereof or if Seller is able to bond over, cure or
remove a Minor Unpermitted Exception for a cost not to exceed $100,000 or the
Title Insurer is willing to insure over a Minor Unpermitted Exception for a cost
not to exceed $100,000 in accordance with the terms hereof and Seller fails to
expend said funds in either case, then Purchaser shall have the additional
rights contained in Paragraph 11 herein. Absent notice from Purchaser to Seller
in accordance with the preceding sentence, Purchaser shall be deemed to have
elected to take title subject to said Unpermitted Exception. If Purchaser
terminates this Agreement in accordance with the terms of this Paragraph 5.1,
this Agreement shall become null and void without further action of the parties
and all Earnest Money theretofore deposited into the escrow by Purchaser
together with any interest accrued thereon, shall be returned to Purchaser, and
neither party shall have any further liability to the other, except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7.
5.2. Seller agrees to convey fee simple title to the Property to
Purchaser by special warranty deed (the "Deed") in recordable form subject
only to the Permitted Exceptions and any Unpermitted Exceptions waived by
Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in
Paragraph 7.1 of this Agreement, Seller shall bear all risk of loss with
respect to the Property up to the earlier of the dates upon which either
possession or title is transferred to Purchaser in accordance with this
Agreement. Notwithstanding the foregoing, in the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of
which would cost less than or equal to $100,000.00 (as determined by Seller's
insurance adjuster) Purchaser shall not have the right to terminate its
obligations under this Agreement by reason thereof, but Seller shall have
the right to elect to either repair and restore the Property (in which case the
Closing Date shall be extended until completion of such restoration) or to
assign and transfer to Purchaser on the Closing Date all of Seller's right,
title and interest in and to all insurance proceeds paid or payable to Seller on
account of such fire or casualty, including proceeds of loss of rent insurance
for any period of time arising after the Closing Date, and Seller shall pay
to Purchaser at the Closing the amount of Seller's insurance deductible.
Within ten (10) days of such an occurrence, Seller shall notify Purchaser in
writing of any such fire or other casualty and Seller's determination of the
cost to repair the damage caused thereby. In the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of
which would cost in excess of $100,000.00 (as determined by Seller's insurance
adjuster), then this Agreement may be terminated at the option of Purchaser,
which option shall be exercised, if at all, by Purchaser's written notice
thereof to Seller within seven (7) business days after Purchaser receives
written notice of such fire or other casualty and Seller's determination of the
amount of such damages, and upon the exercise of such option by Purchaser this
Agreement shall become null and void, the Earnest Money deposited by Purchaser
shall be returned to Purchaser
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<PAGE>
together with interest thereon, and neither party shall have any further
liability or obligations hereunder. In the event that Purchaser does not
exercise the option set forth in the preceding sentence, the Closing shall take
place on the Closing Date and Seller shall assign and transfer to Purchaser on
the Closing Date all of Seller's right, title and interest in and to all
insurance proceeds paid or payable to Seller on account of the fire or casualty,
including proceeds of loss of rent insurance for any period of time arising
after the Closing Date, and Seller shall pay to Purchaser at the Closing the
amount of Seller's insurance deductible.
6.2. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated which
might result in the taking of any part of the Property or the taking or closing
of any right of access to the Property, Seller shall immediately notify
Purchaser of such occurrence. In the event that the taking of any part of the
Property shall: (i) impair access to the Property; (ii) cause any non-compliance
with any applicable law, ordinance, rule or regulation of any federal, state
or local authority or governmental agencies having jurisdiction over the
Property or any portion thereof; or (iii) and adversely impair the use
of the Property as it is currently being operated (hereinafter collectively
referred to as a "Material Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in which
event the Earnest Money deposited by Purchaser, together with interest thereon,
shall be returned to Purchaser and all rights and obligations of the parties
hereunder with respect to the closing of this transaction will cease; or
6.2.2. proceed with the Closing, in which event Seller shall assign to
Purchaser all of Seller's right, title and interest in and to any award made in
connection with such condemnation or eminent domain proceedings.
6.3. Purchaser shall then notify Seller, within seven (7) business
days after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be
delayed, if necessary, until Purchaser makes such election. If Purchaser
fails to make an election within such seven (7) business day period, Purchaser
shall be deemed to have elected to exercise its rights under Paragraph 6.2.2.
If between the date of this Agreement and the Closing Date, any condemnation
or eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which
event Seller shall assign to Purchaser all of Seller's right, title and
interest in and to any award made in connection with such condemnation or
eminent domain proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on December 26, 1996 and ending at
5:00 p.m. Chicago time on January 21, 1997 (said period being herein referred
to as the "Inspection Period"), Purchaser and the agents, engineers,
employees, contractors and surveyors retained by Purchaser may enter upon the
Property, at any reasonable time and upon reasonable prior notice to Seller, to
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<PAGE>
inspect the Property, including a review of leases located at the Property, and
to conduct and prepare such studies, tests and surveys as Purchaser may deem
reasonably necessary and appropriate. In connection with Purchaser's review
of the Property, Seller agrees to deliver to Purchaser copies of the current
rent roll for the Property, the most recent tax and insurance bills, utility
account numbers and service contracts.
All of the foregoing tests, investigations and studies to be
conducted under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole
cost and expense and Purchaser shall restore the Property to the condition
existing prior to the performance of such tests or investigations by or on
behalf of Purchaser. Purchaser shall defend, indemnify and hold Seller and
any affiliate, parent of Seller, and all shareholders, employees, officers
and directors of Seller or Seller's affiliate or parent (hereinafter
collectively referred to as "Affiliate of Seller") harmless from any and all
liability, cost and expense (including without limitation, reasonable
attorney's fees, court costs and costs of appeal) suffered or incurred by Seller
or Affiliates of Seller for injury to persons or property caused by
Purchaser's investigations and inspection of the Property. Seller shall notify
Purchaser if Seller receives written notice of threatened, or actually
instituted claims, for injury to persons or property caused by Purchaser's
investigations and inspection of the Property. Purchaser shall undertake
its obligation to defend set forth in the preceding sentence using attorneys
selected by Seller, in Seller's sole discretion.
Prior to commencing any such tests, studies and investigations,
Purchaser shall furnish to Seller a certificate of insurance evidencing
comprehensive general public liability insurance insuring the person, firm or
entity performing such tests, studies and investigations and listing Seller and
Purchaser as additional insured thereunder.
If Purchaser is dissatisfied with the results of the tests,
studies or investigations performed or information received pursuant to this
Paragraph 7.1, Purchaser shall have the right to terminate this Agreement by
giving written notice of such termination to Seller at any time prior to the
expiration of the Inspection Period. If written notice is not received by
Seller pursuant to this Paragraph 7.1 prior to the expiration of the Inspection
Period, then the right of Purchaser to terminate this Agreement pursuant to
this Paragraph 7.1 shall be waived. If Purchaser terminates this Agreement by
written notice to Seller prior to the expiration of the Inspection Period: (i)
Purchaser shall promptly deliver to Seller copies of all studies, reports and
other investigations obtained by Purchaser in connection with its due
diligence during the Inspection Period; and (ii) the Earnest Money deposited
by Purchaser shall be immediately paid to Purchaser, together with any
interest earned thereon, and neither Purchaser nor Seller shall have any right,
obligation or liability under this Agreement, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in this Paragraph 7.1. Notwithstanding anything contained herein to
the contrary, the terms of this Paragraph 7.1, shall survive the Closing and the
delivery of the Deed and termination of this Agreement.
7.2. Purchaser acknowledges and agrees that it will be purchasing the
Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that Purchaser
will be purchasing the Property and the Personal Property
-5 -
<PAGE>
"AS IS" and "WITH ALL FAULTS", based upon the condition of the
Property and the Personal Property as of the date of this Agreement, wear and
tear and loss by fire or other casualty or condemnation excepted. Without
limiting the foregoing, Purchaser acknowledges that, except as may otherwise
be specifically set forth elsewhere in this Agreement, neither Seller nor
its consultants, brokers or agents have made any representations or
warranties of any kind upon which Purchaser is relying as to any matters
concerning the Property or the Personal Property, including, but not limited
to, the condition of the land or any improvements comprising the Property, the
existence or non-existence of "Hazardous Materials" (as hereinafter defined),
economic projections or market studies concerning the Property, any
development rights, taxes, bonds, covenants, conditions and restrictions
affecting the Property, water or water rights, topography, drainage, soil,
subsoil of the Property, the utilities serving the Property or any zoning or
building laws, rules or regulations or "Environmental Laws" (hereinafter
defined) affecting the Property. Seller makes no representation or warranty
that the Property complies with Title III of the Americans with Disabilities
Act or any fire code or building code. Purchaser hereby releases Seller and
the Affiliates of Seller from any and all liability in connection with any
claims which Purchaser may have against Seller or the Affiliates of Seller,
and Purchaser hereby agrees not to assert any claims for contribution, cost
recovery or otherwise, against Seller or the Affiliates of Seller, relating
directly or indirectly to the existence of asbestos or Hazardous
Materials on, or environmental conditions of, the Property, whether known or
unknown. As used herein, "Environmental Laws" means all federal, state and
local statutes, codes, regulations, rules, ordinances, orders, standards,
permits, licenses, policies and requirements (including consent decrees,
judicial decisions and administrative orders) relating to the protection,
preservation, remediation or conservation of the environment or worker health or
safety, all as amended or reauthorized, or as hereafter amended or reauthorized,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss.
6901 et seq., the Emergency Planning and Community Right-to-Know Act
("Right-to-Know Act"), 42 U.S.C. ss. 11001 et seq., the Clean Air Act ("CAA"),
42 U.S.C. ss. 7401 et seq., the Federal Water Pollution Control Act ("Clean
Water Act"), 33 U.S.C. ss. 1251 et seq., the Toxic Substances Control Act
("TSCA"), 15 U.S.C. ss. 2601 et seq., the Safe Drinking Water Act ("Safe
Drinking Water Act"), 42 U.S.C. ss. 300f et seq., the Atomic Energy Act
("AEA"), 42 U.S.C. ss. 2011 et seq., the Occupational Safety and Health
Act ("OSHA"), 29 U.S.C. ss. 651 et seq., and the Hazardous Materials
Transportation Act (the "Transportation Act"), 49 U.S.C. ss. 1802 et seq. As
used herein, "Hazardous Materials" means: (1) "hazardous substances," as
defined by CERCLA; (2) "hazardous wastes," as defined by RCRA; (3) any
radioactive material including, without limitation, any source, special nuclear
or by-product material, as defined by AEA; (4) asbestos in any form or
condition; (5) polychlorinated biphenyls; and (6) any other material, substance
or waste to which liability or standards of conduct may be imposed under any
Environmental Laws. Notwithstanding anything contained herein to the contrary,
Purchaser's obligations, as more fully set forth in this Paragraph 7.2 shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
Purchaser's Initials (ILLEGIBLE) Seller's Initials (ILLEGIBLE).
___________ ____________
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<PAGE>
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at
Purchaser's request solely as illustrative material. Seller makes no
representation or warranty that such material is complete or accurate or
that Purchaser will achieve similar financial or other results with respect
to the operations of the Property, it being acknowledged by Purchaser that
Seller's operation of the Property and allocations of revenues or expenses may
be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
inquiry with respect to the operation of the Property and releases Seller and
the Affiliates of Seller from any liability with respect to such historical
information. Notwithstanding anything contained herein to the contrary,
Purchaser's obligations, as more fully set forth in this Paragraph 7.3 shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
Purchaser's Initials (ILLEGIBLE) Seller's Initials (ILLEGIBLE).
___________ ____________
7.4. Seller has provided to Purchaser the following existing report:
Phase I Environmental Assessment prepared by Gaiatech Incorporated, Report No.
1688-60, May 24, 1996 ("Existing Report"). Seller makes no representation or
warranty concerning the accuracy or completeness of the Existing Report.
Purchaser hereby releases Seller and the Affiliates of Seller from any liability
whatsoever with respect to the Existing Report, or, including, without
limitation, the matters set forth in the Existing Report, and the accuracy
and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, Purchaser's obligations, as more fully set forth in this Paragraph
7.4 shall survive the Closing and the delivery of the Deeds and termination
of this Agreement.
Purchaser's Initials (ILLEGIBLE) Seller's Initials (ILLEGIBLE).
___________ ____________
8. CLOSING.
The closing of this transaction (the "Closing") shall be on January
29, 1997 (the "Closing Date"), at the office of Title Insurer, Irving, Texas,
at which time Seller shall deliver possession of the Property to
Purchaser. This transaction shall be closed through an escrow with Title
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in North Carolina, or
at the option of either party, the Closing shall be a "New York style"
closing at which the Purchaser shall wire the Purchase Price to Title
Insurer on the Closing Date and prior to the release of the Purchase Price to
Seller, Purchaser shall receive the Title Policy or marked up commitment dated
the date of the Closing Date. In the event of a New York style closing, Seller
shall deliver to Title Insurer any customary affidavit in connection with a New
York style closing. All closing and escrow fees shall be divided equally
between the parties hereto.
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<PAGE>
9. CLOSING DOCUMENTS
9.1. On the Closing Date, Seller and Purchaser shall execute and
deliver to one another a joint closing statement. In addition, Purchaser
shall deliver to Seller the balance of the Purchase Price, an assumption of
the documents set forth in Paragraph 9.2.3 and 9.2.4 and such other documents as
may be reasonably required by the Title Insurer in order to consummate the
transaction as set forth in this Agreement.
9.2. On the Closing Date, Seller shall deliver to Purchaser the
following:
9.2.1. the Deed (in the form of Exhibit E attached hereto),
subject to Permitted Exceptions and those Unpermitted Exceptions waived
by Purchaser;
9.2.2. a bill of sale conveying the Personal Property (in
the form of Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the
form attached hereto as Exhibit G), including, without limitation,
the service contracts listed in Exhibit H;
9.2.4. an assignment and assumption of leases and security
deposits (in the form attached hereto as Exhibit I);
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases affecting the
Property in Seller's possession;
9.2.7. all documents and instruments reasonably required by the
Title Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser;
9.2.9. evidence of the termination of the management agreement;
9.2.10. notice to the tenants of the Property of the transfer of
title and assumption by Purchaser of the landlord's obligation under the
leases and the obligation to refund the security deposits (in the form
of Exhibit K); and
9.2.11. a certified updated rent roll.
-8-
<PAGE>
10. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S
DAMAGES.
PURCHASER AND SELLER AGREE THAT A DEFAULT BY PURCHASER UNDER ANY OF THE
TERMS OR CONDITIONS OF THE COMPANION CONTRACT (AS HEREINAFTER DEFINED) SHALL BE
DEEMED A DEFAULT OF PURCHASER UNDER THIS AGREEMENT. IN ADDITION, PURCHASER
AND SELLER AGREE THAT A DEFAULT BY PURCHASER UNDER THIS AGREEMENT SHALL BE
DEEMED A DEFAULT OF PURCHASER UNDER THE COMPANION CONTRACT. IF THE TRANSACTION
CONTEMPLATED BY THE COMPANION CONTRACT FAILS TO CLOSE FOR ANY REASON WHATSOEVER,
PURCHASER SHALL NOT BE ENTITLED TO ANY RIGHTS OF SETOFF UNDER THIS AGREEMENT IN
CONNECTION WITH ANY LIABILITY ARISING UNDER THE COMPANION CONTRACT.
Purchaser's Initials (ILLEGIBLE) Seller's Initials (ILLEGIBLE).
_________ ___________
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN BECOME
NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER LIABILITY
TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS TO
INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN PARAGRAPH
7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL, DOCUMENTED
THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS DUE DILIGENCE
HEREUNDER AND THE PREPARATION OF THIS AGREEMENT, NOT TO EXCEED $25,000.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S
DEFAULT IS (I) ITS (AND NOT AN UNRELATED THIRD PARTY'S) AFFIRMATIVE, WILLFUL
ACTION WHICH RESULTS IN THE RECORDING OF AN ENCUMBRANCE AGAINST THE PROPERTY
WITH THE INTENTION TO PREVENT THE SALE OF THE PROPERTY IN ACCORDANCE WITH THE
TERMS HEREOF AND WHICH GIVES RISE TO PURCHASER'S RIGHT TO TERMINATE THIS
AGREEMENT PURSUANT TO PARAGRAPH 5 HEREOF; (II) ITS FAILURE TO EXPEND UP TO
$100,000 IF (A) SELLER IS ABLE TO BOND OVER, CURE OR REMOVE A MINOR
UNPERMITTED EXCEPTION FOR A COST NOT TO EXCEED $100,000 OR (B) THE TITLE
INSURER IS WILLING TO INSURE OVER A MINOR UNPERMITTED EXCEPTION FOR A COST NOT
TO EXCEED $100,000 IN ACCORDANCE WITH THE TERMS HEREOF OR (III) ITS WILLFUL
REFUSAL TO DELIVER THE DEED, THEN PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC
PERFORMANCE.
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<PAGE>
PURCHASER AND SELLER AGREE THAT A DEFAULT BY IRVING ASSOCIATES, AN
ILLINOIS LIMITED PARTNERSHIP, UNDER ANY OF THE TERMS OR CONDITIONS OF THE
COMPANION CONTRACT SHALL BE DEEMED A DEFAULT OF SELLER UNDER THIS AGREEMENT. IN
ADDITION, SELLER AND PURCHASER AGREE THAT A DEFAULT BY SELLER UNDER THIS
AGREEMENT SHALL BE DEEMED A DEFAULT OF IRVING ASSOCIATES UNDER THE COMPANION
CONTRACT.
Purchaser's Initials (ILLEGIBLE) Seller's Initials (ILLEGIBLE).
___________ ___________
12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents, but including prepaid
rents); refundable security deposits (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); water and other utility
charges; fuels; prepaid operating expenses; incentive fees paid pursuant
to any laundry contract; provided, however, such fee shall only be
prorated if actually received by Seller and only to the extent any fee was
not used to improve the laundry facilities at the Property; real and personal
property taxes and other similar items shall be adjusted ratably as of 11:59
p.m. on the Closing Date, and credited to the balance of the cash due at
Closing. Assessments payable in installments which are due subsequent to
the Closing Date shall be paid by Purchaser. If the amount of any of the
items to be prorated is not then ascertainable, the adjustments thereof
shall be on the basis of the most recent ascertainable data. All prorations
will be final except as to delinquent rent referred to in Paragraph 12.2 below.
12.2. All basic rent paid following the Closing Date by any
tenant of the Property who is indebted under a lease for basic rent for any
period prior to and including the Closing Date shall be deemed a "Post-Closing
Receipt" until such time as all such indebtedness is paid in full. Within
ten (10) days following each receipt by Purchaser of a Post-Closing Receipt,
Purchaser shall pay such Post-Closing Receipt to Seller. Purchaser shall use
its best efforts to collect all amounts which, upon collection, would
constitute Post-Closing Receipts hereunder. Within 120 days after the Closing
Date, Purchaser shall deliver to Seller a reconciliation statement of
Post-Closing Receipts through the first 90 days after the Closing Date. Upon
the delivery of the Post-Closing Receipts reconciliation, Purchaser shall
deliver to Seller any Post-Closing Receipts owing to Seller and not
previously delivered to Seller in accordance with the terms hereof. Seller
retains the right to conduct an audit, at reasonable times and upon
reasonable notice, of Purchaser's books and records to verify the accuracy of
the Post-Closing Receipts reconciliation statement and upon the verification
of additional funds owing to Seller,
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<PAGE>
Purchaser shall pay to Seller said additional Post-Closing Receipts and
the cost of performing Seller's audit. Paragraph 12.2 of this Agreement shall
survive the Closing and the delivery and recording of the deed.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its
interest in this Agreement without the prior written consent of the Seller. Any
assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10 hereof. Notwithstanding the
foregoing, Purchaser may assign its interest in this Agreement without the
consent of Seller to Apple Residential Trust Inc. provided that Purchaser
remains liable for and the assignee assumes the obligations of Purchaser
hereunder.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Cushman & Wakefield of Texas, Inc. (to be paid by Seller).
Seller's commission to Cushman & Wakefield of Texas, Inc. shall only be payable
out of the proceeds of the sale of the Property in the event the transaction
set forth herein closes. Purchaser and Seller shall indemnify, defend and
hold the other party hereto harmless from any claim whatsoever (including
without limitation, reasonable attorney's fees, court costs and costs of
appeal) from anyone claiming by or through the indemnifying party any fee,
commission or compensation on account of this Agreement, its negotiation or
the sale hereby contemplated other than to Cushman & Wakefield of Texas, Inc.
The indemnifying party shall undertake its obligations set forth in this
Paragraph 15 using attorneys selected by the indemnifying party and
reasonably acceptable to the indemnify party. The provisions of this
Paragraph 15 will survive the Closing and delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any
matter or thing shall only mean such knowledge or notice that has actually been
received by Elizabeth Goldstein (the "Seller's Representative"), and any
representation or warranty of the Seller is based upon those matters of
which the Seller's Representative has actual knowledge. Any knowledge or
notice given, had or received by any of Seller's agents, servants or
employees shall not be imputed to Seller, the general partner or limited
partners of Seller, the subpartners of the general partner or limited partners
of Seller or Seller's Representative.
16.2. Subject to the limitations set forth in Paragraph 16.1,
Seller hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge and which shall,
subject to Paragraph 16.4, be remade at Closing: (i) Seller has no knowledge
of any pending or threatened litigation, claim, cause of action or
administrative proceeding concerning the Property; (ii) Seller has the power to
execute this
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<PAGE>
Agreement and consummate the transactions contemplated herein; (iii)
the rent roll (which includes a list of actual security deposits) attached
hereto as Exhibit L which Seller will update as of the Closing Date is accurate
as of the date set forth thereon; (iv) Seller has not received written notice
from any governmental agency that the Property is in violation of any
government statute or regulation; (v) except as may be set forth in the Existing
Report, Seller has not received any notice from any governmental authority
having jurisdiction over the Property of any uncured violation of any
Environmental Law with respect to the Property; and (vi) except as may be set
forth on the rent roll, Seller has not delivered any coupons or similar items
to any of the tenants at the Property which would allow any such tenant to
remit to the owner of the Property following the Closing such coupon or
similar item in complete or partial satisfaction of said tenant's monthly
rental obligation.
16.3. Purchaser hereby represents and warrants to Seller that Purchaser
has the full right, power and authority to execute this Agreement and
consummate the transactions contemplated herein.
16.4. If at any time after the execution of this Agreement, either
Purchaser or Seller become aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question
to become untrue in any material respect, said party shall not be in default
under this Agreement and the sole remedy of the other party shall be to
terminate this Agreement. Notwithstanding anything contained herein to the
contrary, if the status of any of the tenancies changes from the date of the
rent roll attached hereto and the date of the rent roll delivered at Closing,
provided the change in status is not caused by a breach of Seller's covenants
contained in Article 16 herein, then Purchaser shall not have the right to
terminate this Agreement or make any claim for a breach of a representation or
warranty hereunder involving the rent roll or tenancies thereunder. Purchaser
and Seller are prohibited from making any claims against the other party
hereto after the Closing with respect to any breaches of the other party's
representations and warranties contained in this Agreement that the claiming
party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein shall
survive Closing for a period of sixty (60) days (i.e., the claiming party shall
have no right to make any claims against the other party for a breach
of a representation or warranty after the expiration of sixty (60) days
immediately following Closing).
16.6. Seller covenants to operate and manage the Property in the
same manner that it has managed, maintained and operated the Property during
the period of Seller's ownership, subject to reasonable wear and tear and
casualty.
17. LIMITATION OF LIABILITY. Neither Seller, nor any of its respective
beneficiaries, shareholders, partners, officers, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any matter or thing whatsoever under,
-12-
<PAGE>
in connection with, arising out of or in any way related to this Agreement and
the transactions contemplated herein, and Purchaser hereby waives for itself and
anyone who may claim by, through or under Purchaser any and all rights to sue or
recover on account of any such alleged personal liability.
18. TIME OF ESSENCE. Time is of the essence of this Agreement.
19. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James E. Mendelson
(708) 317-4360
(708) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Cornerstone Realty Group Incorporated
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Gus Remppies and Mr. Jay Olander
(804) 643-1761
(804) 782-9302 (FAX)
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<PAGE>
and one copy to: Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, New York 11516
Attention: Harry Taubenfeld, Esq.
(516) 374-3133
(516) 374-3490 (FAX)
and one copy to: Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, Texas 75201
Attention: Robert E. Morrison, Esq.
(214) 999-6103
(214) 999-6170 (FAX)
subject to the right of either party to designate a different address for itself
by notice similarly given. Any notice or demand so given shall be deemed to be
delivered or made on the next business day if sent by overnight courier, or the
same day as given if sent by facsimile transmission and received by 5:00 p.m.
Chicago time or on the 4th business day after the same is deposited in the
United States Mail as registered or certified matter, addressed as above
provided, with postage thereon fully prepaid. Any such notice, demand or
document not given, delivered or made by registered or certified mail, by
overnight courier or by facsimile transmission as aforesaid shall be deemed to
be given, delivered or made upon receipt of the same by the party to whom the
same is to be given, delivered or made. Copies of all notices shall be served
upon the Escrow Agent.
20. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement
and forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward the
following to the Escrow Agent:
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the
parties with a direction to execute two (2) copies of the Escrow Agreement and
deliver a fully executed copy to each of the Purchaser and the Seller.
21. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Texas, except that with respect to the retainage of the
Earnest Money as liquidated damages the laws of the State of Illinois shall
govern.
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<PAGE>
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
23. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
24. CAPTIONS. Paragraph titles or captions contained herein are inserted as
a matter of convenience and for reference, and in no way define, limit, extend
or describe the scope of this Agreement or any provision hereof.
25. AUDIT. Seller will make available to Purchaser such books, accounts
and records necessary for Purchaser to conduct an audit of the Property's
preceding fiscal year. This audit will be conducted solely at Purchaser's
expense for the purpose of satisfying its requirements as a publicly held
entity. Seller agrees to execute and deliver a disclosure letter prepared by
the auditors of Purchaser in substantially the form attached hereto as
Exhibit M. The terms of this Paragraph 25 shall survive the Closing for a
period of one (1) year from the Closing Date.
26. LITIGATION COSTS. In the event of any action or proceeding at law or
in equity between Seller and Purchaser to enforce any provision of this
Agreement or to protect or establish any right or remedy of either party
hereunder, the unsuccessful party to such litigation shall pay the
prevailing party all litigation costs and expenses, including reasonable
attorneys' fees incurred therein by such prevailing party, and if such
prevailing party shall recover judgment in any such action or proceeding, such
costs and expenses (including such attorneys' fees) shall be included in and as
a part of such judgment.
27. CONSIDERATION. On or before the execution of this Agreement, Purchaser
shall deliver to Seller One Hundred And No/100 Dollars ($100.00) cash
(the "Independent Contract Consideration"), which amount has been bargained
for and agreed to as consideration for Purchaser's right to purchase the
Property pursuant to this Agreement and for Seller's execution and delivery
of this Agreement. The Independent Contract Consideration is in addition
to and independent of all other consideration provided in this Agreement,
and is nonrefundable in all events.
28. WAIVER OF DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT.
Purchaser waives its rights under the Deceptive Trade Practices-Consumer
Protection Act, Section 17.41 et seq., Business & Commerce Code, a law that
gives consumers special rights and protections. After consultation with
an attorney/legal counsel of Purchaser's own selection, Purchaser voluntarily
consents to this waiver. Purchaser covenants, represents and warrants that
such attorney/legal counsel was not directly or indirectly identified,
suggested, or selected by Seller or an agent of Seller.
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<PAGE>
29. COMPANION PROPERTY. Notwithstanding anything contained in this
Agreement to the contrary, it is a condition precedent to Seller's and
Purchaser's obligations to perform under this Agreement that Purchaser acquire
that certain property commonly known as the Eagle Crest II Apartments (the
"Other Property") in accordance with the terms of that certain Agreement of
Sale (the "Companion Contract") by and between Irving Associates, an Illinois
limited partnership, an affiliate of Seller, and Purchaser of even date
herewith for the sale of the Other Property to Purchaser. If this Agreement
is terminated pursuant to Paragraph 7 hereof or pursuant to any other section
of this Agreement, then the Companion Contract shall also be deemed terminated.
Similarly, if the Companion Contract is terminated pursuant to Paragraph 7
thereof or pursuant to any other paragraph of the Companion Contract, then
this Agreement shall also be deemed terminated. Nothing contained in this
Paragraph 29 shall be deemed to circumvent the terms of Paragraph 10 if this
Agreement is terminated as a result of a default of Purchaser and nothing
in this Paragraph 29 shall be deemed to circumvent the terms of Paragraph 11
if this Agreement is terminated as a result of a default of Seller.
[EXECUTION PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of the
date first set forth above.
PURCHASER:
CORNERSTONE REALTY GROUP INCORPORATED, a Virginia corporation
By: /s/ S. J. OLANDER
------------------------------
Name: S. J. OLANDER
------------------------------
Its: SENIOR VICE PRESIDENT
-------------------------------
SELLER:
NORTHGATE DRIVE LIMITED PARTNERSHIP,an Illinois limited partnership
Northgage Drive of Illinois, Inc., an Illinois corporation, its
general partner
By: /s/ JAMES E. MENDELSON
--------------------------------
Name: JAMES E. MENDELSON
-------------------------------
Its: AUTHORIZED REPRESENTATIVE
--------------------------------
-17-
[EAGLE CREST II]
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the
____ day of January, 1997, by and between Cornerstone Realty Group Incorporated,
a Virginia corporation ("Purchaser"), and Irving Associates, an
Illinois limited partnership ("Seller").
WITNESSETH:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to
sell at the price of SIX MILLION TWO HUNDRED FOURTEEN THOUSAND EIGHT
HUNDRED SEVENTY-SIX AND NO/100 Dollars ($6,214,876.00) (the "Purchase
Price"), that certain property commonly known as Eagle Crest II Apartments,
Irving, Texas, legally described on Exhibit A attached hereto and consisting
of 188 units (the "Property"). Included in the Purchase Price is all of the
personal property set forth on Exhibit B attached hereto (the "Personal
Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as
follows:
2.1. Upon the execution of this Agreement, the sum of SEVENTY-FIVE
THOUSAND AND NO/100 Dollars ($75,000.00) (the "Earnest Money") to be held in
escrow by and in accordance with the provisions of the Escrow Agreement
("Escrow Agreement") attached hereto as Exhibit C; and
2.2. On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally
wired "immediately available" funds, on or before 12:00 p.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by Chicago Title Insurance
Company (hereinafter referred to as "Title Insurer") dated September 9, 1996
for the Property (the "Title Commitment"). For purposes of this Agreement,
"Permitted Exceptions" shall mean: (a) the general printed exceptions
contained in the standard title policy to be issued by Title Insurer
based on the Title Commitment; (b) general real estate taxes, association
assessments, special district taxes and related charges not yet due and
payable; (c) matters shown on the "Existing Survey" (hereinafter defined); (d)
matters caused by the actions of Purchaser; and (e) the title exceptions set
forth in Schedule B of the Title Commitment as Numbers 9(B) through 9(S)
inclusive, to the extent that same effect the Property. All other exceptions
to title shall be referred to as "Unpermitted Exceptions". The Title
Commitment shall be conclusive evidence of good title as therein shown as to all
matters to be insured by the title policy, subject only to the exceptions
therein stated. On the Closing Date, Title Insurer shall deliver to Purchaser a
standard title policy in conformance with the previously delivered Title
Commitment, subject to Permitted Exceptions and Unpermitted Exceptions waived
by Purchaser (the "Title Policy"). Seller shall pay for all of the costs of
the Title Commitment and Title Policy and Purchaser shall pay the cost
of any endorsements to, or extended coverage on, the Title Policy.
<PAGE>
3.2. Purchaser has received a survey of the Property prepared by
Landmark Associates, dated May 14, 1996 (the "Existing Survey"). Seller
shall pay for the costs of the Existing Survey and updating the Existing
Survey and Seller shall deliver the updated survey (the "Updated Survey") to
Purchaser prior to Closing. Purchaser hereby acknowledges that all matters
disclosed by the Existing Survey are acceptable to Purchaser.
3.3. The obligation of Purchaser to pay various costs set forth in
Paragraphs 3.1 and 3.2 shall survive the termination of this Agreement.
4. PAYMENT OF CLOSING COSTS.
4.1. Seller shall pay for the costs of the documentary or transfer
stamps to be paid with reference to the "Deed" (hereinafter defined) and
Purchaser shall pay, the costs of all other stamps, intangible, recording,
sales tax and surtax imposed by law with reference to any other sale
documents delivered in connection with the sale of the Property to Purchaser
and all other charges of the Title Insurer in connection with this transaction
except the cost of the Title Commitment and Title Policy as referenced in
Paragraph 3.1.
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to
the Title Commitment or the Updated Survey discloses any new Unpermitted
Exception, Seller shall have thirty (30) days from the date of the
date-down to the Title Commitment or the Updated Survey, as applicable, at
Seller's expense, to (i) bond over, cure and/or have any Unpermitted
Exceptions which, in the aggregate, do not exceed $100,000.00 (a "Minor
Unpermitted Exception"), removed from the Title Commitment or to have the
Title Insurer commit to insure against loss or damage that may be occasioned by
such Unpermitted Exceptions, or (ii) have the right, but not the obligation,
to bond over, cure and/or have any Unpermitted Exceptions which, in the
aggregate, equal or exceed $100,000.00, removed from the Title Commitment or
to have the Title Insurer commit to insure against loss or damage that may be
occasioned by such Unpermitted Exceptions. In such event, the time of Closing
shall be delayed, if necessary, to give effect to said aforementioned time
periods. If Seller fails to cure or have said Unpermitted Exception removed
or have the Title Insurer commit to insure as specified above within said
thirty (30) day period or if Seller elects not to exercise its rights under
(ii) in the preceding sentence, Purchaser may terminate this Agreement
upon notice to Seller within seven (7) days after the expiration of said
thirty (30) day period provided, however, and notwithstanding anything
contained herein to the contrary, if the Unpermitted Exception which gives rise
to Purchaser's right to terminate was recorded against the Property as a result
of the affirmative, willful action of Seller (and not by any unrelated third
party) with the intention to prevent the sale of the Property in accordance
with the terms hereof or if Seller is able to bond over, cure or remove
a Minor Unpermitted Exception for a cost not to exceed $100,000 or the Title
Insurer is willing to insure over a Minor Unpermitted Exception for a cost
not to exceed $100,000 in accordance with the terms hereof and Seller fails
to expend said funds in either case, then Purchaser shall have the additional
rights contained in Paragraph 11 herein. Absent notice from Purchaser to
Seller in accordance with the preceding sentence, Purchaser shall be deemed
to have elected to take title subject to said Unpermitted Exception. If
Purchaser terminates this Agreement in accordance with the terms of this
Paragraph 5.1, this Agreement shall become null and void without further
action of the parties and all Earnest Money theretofore deposited into the
escrow by Purchaser together with any interest accrued thereon, shall be
returned to Purchaser, and neither party shall have any further liability to
the other, except for Purchaser's obligation to indemnify Seller and restore
the Property, as more fully set forth in Paragraph 7.
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<PAGE>
5.2. Seller agrees to convey fee simple title to the Property to
Purchaser by special warranty deed (the "Deed") in recordable form subject
only to the Permitted Exceptions and any Unpermitted Exceptions waived by
Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in
Paragraph 7.1 of this Agreement, Seller shall bear all risk of loss with
respect to the Property up to the earlier of the dates upon which either
possession or title is transferred to Purchaser in accordance with this
Agreement. Notwithstanding the foregoing, in the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of
which would cost less than or equal to $100,000.00 (as determined by Seller's
insurance adjuster) Purchaser shall not have the right to terminate its
obligations under this Agreement by reason thereof, but Seller shall have
the right to elect to either repair and restore the Property (in which case the
Closing Date shall be extended until completion of such restoration) or to
assign and transfer to Purchaser on the Closing Date all of Seller's right,
title and interest in and to all insurance proceeds paid or payable to Seller on
account of such fire or casualty, including proceeds of loss of rent insurance
for any period of time arising after the Closing Date, and Seller shall pay
to Purchaser at the Closing the amount of Seller's insurance deductible.
Within ten (10) days of such an occurrence, Seller shall notify Purchaser in
writing of any such fire or other casualty and Seller's determination of the
cost to repair the damage caused thereby. In the event of damage to the
Property by fire or other casualty prior to the Closing Date, repair of
which would cost in excess of S100,000.00 (as determined by Seller's insurance
adjuster), then this Agreement may be terminated at the option of Purchaser,
which option shall be exercised, if at all, by Purchaser's written notice
thereof to Seller within seven (7) business days after Purchaser receives
written notice of such fire or other casualty and Seller's determination of the
amount of such damages, and upon the exercise of such option by Purchaser this
Agreement shall become null and void, the Earnest Money deposited by Purchaser
shall be returned to Purchaser together with interest thereon, and neither party
shall have any further liability or obligations hereunder. In the event that
Purchaser does not exercise the option set forth in the preceding sentence,
the Closing shall take place on the Closing Date and Seller shall assign and
transfer to Purchaser on the Closing Date all of Seller's right, title
and interest in and to all insurance proceeds paid or payable to Seller on
account of the fire or casualty, including proceeds of loss of rent insurance
for any period of time arising after the Closing Date, and Seller shall pay
to Purchaser at the Closing the amount of Seller's insurance deductible.
-3-
<PAGE>
6.2. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated which
might result in the taking of any part of the Property or the taking or closing
of any right of access to the Property, Seller shall immediately notify
Purchaser of such occurrence. In the event that the taking of any part of the
Property shall: (i) impair access to the Property; (ii) cause any non-compliance
with any applicable law, ordinance, rule or regulation of any federal, state
or local authority or governmental agencies having jurisdiction over the
Property or any portion thereof; or (iii) and adversely impair the use
of the Property as it is currently being operated (hereinafter collectively
referred to as a "Material Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in which
event the Earnest Money deposited by Purchaser, together with interest thereon,
shall be returned to Purchaser and all rights and obligations of the parties
hereunder with respect to the closing of this transaction will cease; or
6.2.2. proceed with the Closing, in which event Seller shall assign to
Purchaser all of Seller's right, title and interest in and to any award made in
connection with such condemnation or eminent domain proceedings.
6.3. Purchaser shall then notify Seller, within seven (7) business
days after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall
be delayed, if necessary, until Purchaser makes such election. If Purchaser
fails to make an election within such seven (7) business day period, Purchaser
shall be deemed to have elected to exercise its rights under Paragraph 6.2.2. If
between the date of this Agreement and the Closing Date, any condemnation or
eminent domain proceedings are initiated which do not constitute a Material
Event, Purchaser shall be required to proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made in connection with such condemnation or eminent domain
proceedings.
-4-
<PAGE>
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on December 26, 1996 and ending at
5:00 p.m. Chicago time on January 21, 1997 (said period being herein referred
to as the "Inspection Period"), Purchaser and the agents, engineers,
employees, contractors and surveyors retained by Purchaser may enter upon the
Property, at any reasonable time and upon reasonable prior notice to Seller,
to inspect the Property, including a review of leases located at the Property,
and to conduct and prepare such studies, tests and surveys as Purchaser may
deem reasonably necessary and appropriate. In connection with Purchaser's
review of the Property, Seller agrees to deliver to Purchaser copies of the
current rent roll for the Property, the most recent tax and insurance bills,
utility account numbers and service contracts.
All of the foregoing tests, investigations and studies to be
conducted under this Paragraph 7.1 by Purchaser shall be at Purchaser's sole
cost and expense and Purchaser shall restore the Property to the condition
existing prior to the performance of such tests or investigations by or on
behalf of Purchaser. Purchaser shall defend, indemnify and hold Seller and
any affiliate, parent of Seller, and all shareholders, employees, officers
and directors of Seller or Seller's affiliate or parent (hereinafter
collectively referred to as "Affiliate of Seller") harmless from any and all
liability, cost and expense (including without limitation, reasonable
attorney's fees, court costs and costs of appeal) suffered or incurred by Seller
or Affiliates of Seller for injury to persons or property caused by
Purchaser's investigations and inspection of the Property. Seller shall notify
Purchaser if Seller receives written notice of threatened, or actually
instituted claims, for injury to persons or property caused by Purchaser's
investigations and inspection of the Property. Purchaser shall undertake
its obligation to defend set forth in the preceding sentence using attorneys
selected by Seller, in Seller's sole discretion.
Prior to commencing any such tests, studies and investigations,
Purchaser shall furnish to Seller a certificate of insurance evidencing
comprehensive general public liability insurance insuring the person, firm or
entity performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests,
studies or investigations performed or information received pursuant to this
Paragraph 7.1, Purchaser shall have the right to terminate this Agreement by
giving written notice of such termination to Seller at any time prior to the
expiration of the Inspection Period. If written notice is not received by
Seller pursuant to this Paragraph 7.1 prior to the expiration of the Inspection
Period, then the right of Purchaser to terminate this Agreement pursuant to
this Paragraph 7.1 shall be waived. If Purchaser terminates this Agreement by
written notice to Seller prior to the expiration of the Inspection Period: (i)
Purchaser shall promptly deliver to Seller copies of all studies, reports and
other investigations obtained by Purchaser in connection with its due
diligence during the Inspection Period; and (ii) the Earnest Money deposited
by Purchaser shall be immediately paid to Purchaser, together with any
interest earned thereon, and neither Purchaser nor Seller shall have any right,
obligation or liability under this Agreement, except for Purchaser's
obligation to indemnify Seller and restore the Property, as more fully set
forth in this Paragraph 7.1. Notwithstanding anything contained herein to
the contrary, the terms of this Paragraph 7.1, shall survive the Closing and the
delivery of the Deed and termination of this Agreement.
7.2. Purchaser acknowledges and agrees that it will be purchasing the
Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that Purchaser
will be purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal
-5-
<PAGE>
Property as of the date of this Agreement, wear and tear and loss by fire or
other casualty or condemnation excepted. Without limiting the foregoing,
Purchaser acknowledges that, except as may otherwise be specifically set forth
elsewhere in this Agreement, neither Seller nor its consultants, brokers or
agents have made any representations or warranties of any kind upon which
Purchaser is relying as to any matters concerning the Property or the Personal
Property, including, but not limited to, the condition of the land or any
improvements comprising the Property, the existence or non-existence of
"Hazardous Materials" (as hereinafter defined), economic projections or market
studies concerning the Property, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property, water or water
rights, topography, drainage, soil, subsoil of the Property, the utilities
serving the Property or any zoning or building laws, rules or regulations or
"Environmental Laws" (hereinafter defined) affecting the Property. Seller makes
no representation or warranty that the Property complies with Title III of the
Americans with Disabilities Act or any fire code or building code. Purchaser
hereby releases Seller and the Affiliates of Seller from any and all liability
in connection with any claims which Purchaser may have against Seller or the
Affiliates of Seller, and Purchaser hereby agrees not to assert any claims for
contribution, cost recovery or otherwise, against Seller or the Affiliates of
Seller, relating directly or indirectly to the existence of asbestos or
Hazardous Materials on, or environmental conditions of, the Property, whether
known or unknown. As used herein, "Environmental Laws" means all federal, state
and local statutes, codes, regulations, rules, ordinances, orders, standards,
permits, licenses, policies and requirements (including consent decrees,
judicial decisions and administrative orders) relating to the protection,
preservation, remediation or conservation of the environment or worker health or
safety, all as amended or reauthorized, or as hereafter amended or reauthorized,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss.
6901 et seq., the Emergency Planning and Community Right-to-Know Act
("Right-to-Know Act"), 42 U.S.C. ss. 11001 et seq., the Clean Air Act ("CAA"),
42 U.S.C. ss. 7401 et seq., the Federal Water Pollution Control Act ("Clean
Water Act"), 33 U.S.C. ss. 1251 et seq., the Toxic Substances Control Act
("TSCA"), 15 U.S.C. ss. 2601 et seq., the Safe Drinking Water Act ("Safe
Drinking Water Act"), 42 U.S.C. ss. 300f et seq., the Atomic Energy Act
("AEA"), 42 U.S.C. ss. 2011 et seq., the Occupational Safety and Health Act
("OSHA"), 29 U.S.C. ss. 651 et seq., and the Hazardous Materials
Transportation Act (the "Transportation Act"), 49 U.S.C. ss. 1802 et seq. As
used herein, "Hazardous Materials" means: (1) hazardous substances," as
defined by CERCLA; (2) "hazardous wastes," as defined by RCRA; (3) any
radioactive material including, without limitation, any source, special nuclear
or by-product material, as defined by AEA; (4) asbestos in any form or
condition; (5) polychlorinated biphenyls; and (6) any other material, substance
or waste to which liability or standards of conduct may be imposed under any
Environmental Laws. Notwithstanding anything contained herein to the contrary,
Purchaser's obligations, as more fully set forth in this Paragraph 7.2 shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
Purchaser's Initials ILLEGIBLE Seller's Initials ILLEGIBLE .
--------------- --------------------
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<PAGE>
7.3. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at
Purchaser's request solely as illustrative material. Seller makes no
representation or warranty that such material is complete or accurate or
that Purchaser will achieve similar financial or other results with respect
to the operations of the Property, it being acknowledged by Purchaser that
Seller's operation of the Property and allocations of revenues or expenses may
be vastly different than Purchaser may be able to attain. Purchaser
acknowledges that it is a sophisticated and experienced purchaser of real
estate and further that Purchaser has relied upon its own investigation and
inquiry with respect to the operation of the Property and releases Seller and
the Affiliates of Seller from any liability with respect to such historical
information. Notwithstanding anything contained herein to the contrary,
Purchaser's obligations, as more fully set forth in this Paragraph 7.3 shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
Purchaser's Initials ILLEGIBLE Seller's Initials ILLEGIBLE .
-------------- ----------------
7.4. Seller has provided to Purchaser the following existing report:
Phase I Environmental Assessment prepared by Gaiatech Incorporated, Report No.
1688-60, May 24, 1996 ("Existing Report"). Seller makes no representation or
warranty concerning the accuracy or completeness of the Existing Report.
Purchaser hereby releases Seller and the Affiliates of Seller from any liability
whatsoever with respect to the Existing Report, or, including, without
limitation, the matters set forth in the Existing Report, and the accuracy
and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, Purchaser's obligations, as more fully set forth in this Paragraph
7.4 shall survive the Closing and delivery of the Deeds and termination of this
Agreement.
Purchaser's Initials ILLEGIBLE Seller's Initials ILLEGIBLE.
--------- ---------
8. CLOSING.
The closing of this transaction (the "Closing") shall be on January
29, 1997 (the "Closing Date"), at the office of Title Insurer, Irving, Texas,
at which time Seller shall deliver possession of the Property to
Purchaser. This transaction shall be closed through an escrow with Title
Insurer, in accordance with the general provisions of the usual and customary
form of deed and money escrow for similar transactions in North Carolina, or
at the option of either party, the Closing shall be a "New York style" closing
at which the Purchaser shall wire the Purchase Price to Title Insurer on the
Closing Date and prior to the release of the Purchase Price to Seller, Purchaser
shall receive the Title Policy or marked up commitment dated the date of the
Closing Date. In the event of a New York style closing, Seller shall deliver to
Title Insurer any customary affidavit in connection with a New York style
closing. All closing and escrow fees shall be divided equally between the
parties hereto.
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<PAGE>
9. CLOSING DOCUMENTS.
9.1. On the Closing Date, Seller and Purchaser shall execute and
deliver to one another a joint closing statement. In addition, Purchaser
shall deliver to Seller the balance of the Purchase Price, an assumption of
the documents set forth in Paragraph 9.2.3 and 9.2.4 and such other documents as
may be reasonably required by the Title Insurer in order to consummate the
transaction as set forth in this Agreement.
9.2. On the Closing Date, Seller shall deliver to Purchaser the
following:
9.2.1. the Deed (in the form of Exhibit E attached hereto), subject to
Permitted Exceptions and those Unpermitted Exceptions waived by Purchaser;
9.2.2. a bill of sale conveying the Personal Property (in the form of
Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the form
attached hereto as Exhibit G), including, without limitation, the service
contracts listed in Exhibit H;
9.2.4. an assignment and assumption of leases and security deposits (in
the form attached hereto as Exhibit I);
9.2.5. non-foreign affidavit (in the form of Exhibit J attached hereto);
9.2.6. original, and/or copies of, leases affecting the Property in
Seller's possession;
9.2.7. all documents and instruments reasonably required by the Title
Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser;
9.2.9. evidence of the termination of the management agreement;
9.2.10. notice to the tenants of the Property of the transfer of title
and assumption by Purchaser of the landlord's obligation under the leases and
the obligation to refund the security deposits (in the form of Exhibit K); and
9.2.11. a certified updated rent roll.
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<PAGE>
10. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW IS TO
SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND UNDERTAKINGS
UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER UNDER THE
PROVISIONS OF THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND
THE INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY
AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE AGREED THAT SELLER'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S
DAMAGES.
PURCHASER AND SELLER AGREE THAT A DEFAULT BY PURCHASER UNDER ANY OF THE
TERMS OR CONDITIONS OF THE COMPANION CONTRACT (AS HEREINAFTER DEFINED) SHALL BE
DEEMED A DEFAULT OF PURCHASER UNDER THIS AGREEMENT. IN ADDITION, PURCHASER
AND SELLER AGREE THAT A DEFAULT BY PURCHASER UNDER THIS AGREEMENT SHALL BE
DEEMED A DEFAULT OF PURCHASER UNDER THE COMPANION CONTRACT. IF THE TRANSACTION
CONTEMPLATED BY THE COMPANION CONTRACT FAILS TO CLOSE FOR ANY REASON WHATSOEVER,
PURCHASER SHALL NOT BE ENTITLED TO ANY RIGHTS OF SETOFF UNDER THIS AGREEMENT IN
CONNECTION WITH ANY LIABILITY ARISING UNDER THE COMPANION CONTRACT.
Purchaser's Initials ILLEGIBLE Seller's Initials ILLEGIBLE.
_________ _________
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF SELLER'S
DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST MONEY
TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S
OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY
IN PARAGRAPH 7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL,
DOCUMENTED THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS DUE DILIGENCE
HEREUNDER AND THE PREPARATION OF THIS AGREEMENT, NOT TO EXCEED $25,000.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT
IS (I) ITS (AND NOT AN UNRELATED THIRD PARTY'S) AFFIRMATIVE, WILLFUL ACTION
WHICH RESULTS IN THE RECORDING OF AN ENCUMBRANCE AGAINST THE PROPERTY WITH THE
INTENTION TO PREVENT THE SALE OF THE PROPERTY IN ACCORDANCE WITH THE TERMS
HEREOF AND WHICH GIVES RISE TO PURCHASER'S RIGHT TO TERMINATE THIS AGREEMENT
PURSUANT TO PARAGRAPH 5 HEREOF; (II) ITS FAILURE TO EXPEND
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UP TO $100,000 IF (A) SELLER IS ABLE TO BOND OVER, CURE OR REMOVE A MINOR
UNPERMITTED EXCEPTION FOR A COST NOT TO EXCEED $100,000 OR (B) THE TITLE INSURER
IS WILLING TO INSURE OVER A MINOR UNPERMITTED EXCEPTION FOR A COST NOT TO EXCEED
$100,000 IN ACCORDANCE WITH THE TERMS HEREOF OR (III) ITS WILLFUL REFUSAL
TO DELIVER THE DEED, THEN PURCHASER WILL BE ENTITLED TO SUE FOR
SPECIFIC PERFORMANCE.
PURCHASER AND SELLER AGREE THAT A DEFAULT BY NORTHGATE DRIVE LIMITED
PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP, UNDER ANY OF THE TERMS OR
CONDITIONS OF THE COMPANION CONTRACT SHALL BE DEEMED A DEFAULT OF SELLER UNDER
THIS AGREEMENT. IN ADDITION, SELLER AND PURCHASER AGREE THAT A DEFAULT BY SELLER
UNDER THIS AGREEMENT SHALL BE DEEMED A DEFAULT OF IRVING ASSOCIATES UNDER THE
COMPANION CONTRACT.
Purchaser's Initials ILLEGIBLE Seller's Initials ILLEGIBLE.
_________ _________
12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents, but including prepaid
rents); refundable security deposits (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); water and other utility
charges; fuels; prepaid operating expenses; incentive fees paid pursuant
to any laundry contract; provided, however, such fee shall only be
prorated if actually received by Seller and only to the extent any fee was
not used to improve the laundry facilities at the Property; real and personal
property taxes and other similar items shall be adjusted ratably as of 11:59
p.m. on the Closing Date, and credited to the balance of the cash due at
Closing. Assessments payable in installments which are due subsequent to
the Closing Date shall be paid by Purchaser. If the amount of any of the
items to be prorated is not then ascertainable, the adjustments thereof
shall be on the basis of the most recent ascertainable data. All prorations
will be final except as to delinquent rent referred to in Paragraph 12.2 below.
12.2. All basic rent paid following the Closing Date by any
tenant of the Property who is indebted under a lease for basic rent for any
period prior to and including the Closing Date shall be deemed a "Post-Closing
Receipt" until such time as all such indebtedness is paid in full. Within
ten (10) days following each receipt by Purchaser of a Post-Closing Receipt,
Purchaser shall pay such Post-Closing Receipt to Seller. Purchaser shall use its
best efforts to collect all amounts which, upon collection, would
constitute Post-Closing Receipts hereunder. Within 120 days after the Closing
Date, Purchaser shall deliver to Seller a reconciliation statement of
Post-Closing Receipts through the first 90 days after the Closing Date. Upon
the delivery of the Post-Closing Receipts reconciliation, Purchaser shall
deliver to Seller any Post-Closing Receipts owing to Seller and not previously
delivered to Seller in accordance with the terms hereof. Seller retains the
right to conduct an audit, at reasonable times and upon reasonable notice,
of Purchaser's books and records to verify the accuracy of the Post-Closing
Receipts reconciliation statement and upon the verification of additional
funds owing to Seller,
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<PAGE>
Purchaser shall pay to Seller said additional Post-Closing Receipts and the cost
of performing Seller's audit. Paragraph 12.2 of this Agreement shall survive the
Closing and the delivery and recording of the deed.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its
interest in this Agreement without the prior written consent of the Seller. Any
assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10 hereof. Notwithstanding the
foregoing, Purchaser may assign its interest in this Agreement without the
consent of Seller to Apple Residential Trust Inc. provided that Purchaser
remains liable for and the assignee assumes the obligations of Purchaser
hereunder.
15. BROKER. The parties hereto represent and warrant that no broker
commission or finder fee is due and payable in connection with this transaction
other than to Cushman & Wakefield of Texas, Inc. (to be paid by Seller).
Seller's commission to Cushman & Wakefield of Texas, Inc. shall only be payable
out of the proceeds of the sale of the Property in the event the transaction
set forth herein closes. Purchaser and Seller shall indemnify, defend and
hold the other party hereto harmless from any claim whatsoever (including
without limitation, reasonable attorney's fees, court costs and costs of
appeal) from anyone claiming by or through the indemnifying party any fee,
commission or compensation on account of this Agreement, its negotiation or
the sale hereby contemplated other than to Cushman & Wakefield of Texas, Inc.
The indemnifying party shall undertake its obligations set forth in this
Paragraph 15 using attorneys selected by the indemnifying party and
reasonably acceptable to the indemnified party. The provisions of this Paragraph
15 will survive the Closing and delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any
matter or thing shall only mean such knowledge or notice that has actually been
received by Elizabeth Goldstein (the "Seller's Representative"), and any
representation or warranty of the Seller is based upon those matters of
which the Seller's Representative has actual knowledge. Any knowledge or
notice given, had or received by any of Seller's agents, servants or
employees shall not be imputed to Seller, the general partner or limited
partners of Seller, the subpartners of the general partner or limited partners
of Seller or Seller's Representative.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller
hereby makes the following representations and warranties, which
representations and warranties are made to Seller's knowledge and which
shall, subject to Paragraph 16.4, be remade at Closing: (i) Seller has no
knowledge of any pending or threatened litigation, claim, cause of action or
administrative proceeding concerning the Property; (ii) Seller has the power to
execute this
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<PAGE>
Agreement and consummate the transactions contemplated herein; (iii) the rent
roll (which includes a list of actual security deposits) attached hereto as
Exhibit L which Seller will update as of the Closing Date is accurate as of the
date set forth thereon; (iv) Seller has not received written notice from any
governmental agency that the Property is in violation of any government statute
or regulation; (v) except as may be set forth in the Existing Report, Seller has
not received any notice from any governmental authority having jurisdiction over
the Property of any uncured violation of any Environmental Law with respect to
the Property; and (vi) except as may be set forth on the rent roll, Seller has
not delivered any coupons or similar items to any of the tenants at the Property
which would allow any such tenant to remit to the owner of the Property
following the Closing such coupon or similar item in complete or partial
satisfaction of said tenant's monthly rental obligation.
16.3. Purchaser hereby represents and warrants to Seller that Purchaser
has the full right, power and authority to execute this Agreement and
consummate the transactions contemplated herein.
16.4. If at any time after the execution of this Agreement, either
Purchaser or Seller become aware of information which makes a representation
and warranty contained in this Agreement to become untrue in any material
respect, said party shall promptly disclose said information to the other party
hereto. Provided the party making the representation or warranty did not take
any deliberate actions to cause the representation or warranty in question
to become untrue in any material respect, said party shall not be in default
under this Agreement and the sole remedy of the other party shall be to
terminate this Agreement. Notwithstanding anything contained herein to the
contrary, if the status of any of the tenancies changes from the date of the
rent roll attached hereto and the date of the rent roll delivered at Closing,
provided the change in status is not caused by a breach of Seller's covenants
contained in Article 16 herein, then Purchaser shall not have the right to
terminate this Agreement or make any claim for a breach of a representation or
warranty hereunder involving the rent roll or tenancies thereunder. Purchaser
and Seller are prohibited from making any claims against the other party
hereto after the Closing with respect to any breaches of the other party's
representations and warranties contained in this Agreement that the claiming
party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein shall
survive Closing for a period of sixty (60) days (i.e., the claiming party shall
have no right to make any claims against the other party for a breach
of a representation or warranty after the expiration of sixty (60) days
immediately following Closing).
16.6. Seller covenants to operate and manage the Property in the
same manner that it has managed, maintained and operated the Property during
the period of Seller's ownership, subject to reasonable wear and tear and
casualty.
17. LIMITATION OF LIABILITY. Neither Seller, nor any of its respective
beneficiaries, shareholders, partners, officers, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any matter or thing whatsoever under,
-12-
<PAGE>
in connection with, arising out of or in any way related to this Agreement and
the transactions contemplated herein, and Purchaser hereby waives for itself and
anyone who may claim by, through or under Purchaser any and all rights to sue or
recover on account of any such alleged personal liability.
18. TIME OF ESSENCE. Time is of the essence of this Agreement.
19. NOTICES. Any notice or demand which either party hereto is required or
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight courier
such as Federal Express, by facsimile transmission or made by United States
registered or certified mail addressed as follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James E. Mendelson
(708) 317-4360
(708) 317 4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Cornerstone Realty Group Incorporated
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Gus Remppies and Mr. Jay Olander
(804) 643-1761
(804) 782-9302 (FAX)
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and one copy to: Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, New York 11516
Attention: Harry Taubenfeld, Esq.
(516) 374-3133
(516) 374-3490 (FAX)
and one copy to: Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, Texas 75201
Attention: Robert E. Morrison, Esq.
(214) 999-6103
(214) 999-6170 (FAX)
subject to the right of either party to designate a different address for itself
by notice similarly given. Any notice or demand so given shall be deemed to be
delivered or made on the next business day if sent by overnight courier, or the
same day as given if sent by facsimile transmission and received by 5:00 p.m.
Chicago time or on the 4th business day after the same is deposited in the
United States Mail as registered or certified matter, addressed as above
provided, with postage thereon fully prepaid. Any such notice, demand or
document not given, delivered or made by registered or certified mail, by
overnight courier or by facsimile transmission as aforesaid shall be deemed to
be given, delivered or made upon receipt of the same by the party to whom the
same is to be given, delivered or made. Copies of all notices shall be served
upon the Escrow Agent.
20. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two
(2) copies of this Agreement and three (3) copies of the Escrow Agreement
and forward them to Seller for execution, accompanied with the Earnest
Money payable to the Escrow Agent set forth in the Escrow Agreement. Seller
will forward one (1) copy of the executed Agreement to Purchaser and will
forward the following to the Escrow Agent:
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the
parties with a direction to execute two (2) copies of the Escrow Agreement and
deliver a fully executed copy to each of the Purchaser and the Seller.
21. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the State of Texas, except that with respect to the retainage of the
Earnest Money as liquidated damages the laws of the State of Illinois shall
govern.
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22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
23. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
24. CAPTIONS. Paragraph titles or captions contained herein are inserted as
a matter of convenience and for reference, and in no way define, limit, extend
or describe the scope of this Agreement or any provision hereof.
25. AUDIT. Seller will make available to Purchaser such books, accounts
and records necessary for Purchaser to conduct an audit of the Property's
preceding fiscal year. This audit will be conducted solely at Purchaser's
expense for the purpose of satisfying its requirements as a publicly held
entity. Seller agrees to execute and deliver a disclosure letter prepared by
the auditors of Purchaser in substantially the form attached hereto as
Exhibit M. The terms of this Paragraph 25 shall survive the Closing for a
period of one (1) year from the Closing Date.
26. LITIGATION COSTS. In the event of any action or proceeding at law or
in equity between Seller and Purchaser to enforce any provision of this
Agreement or to protect or establish any right or remedy of either party
hereunder, the unsuccessful party to such litigation shall pay the
prevailing party all litigation costs and expenses, including reasonable
attorneys' fees incurred therein by such prevailing party, and if such
prevailing party shall recover judgment in any such action or proceeding, such
costs and expenses (including such attorneys' fees) shall be included in and as
a part of such judgment.
27. CONSIDERATION. On or before the execution of this Agreement, Purchaser
shall deliver to Seller One Hundred And No/100 Dollars ($100.00) cash
(the "Independent Contract Consideration"), which amount has been bargained
for and agreed to as consideration for Purchaser's right to purchase the
Property pursuant to this Agreement and for Seller's execution and delivery
of this Agreement. The Independent Contract Consideration is in addition
to and independent of all other consideration provided in this Agreement,
and is nonrefundable in all events.
28. WAIVER OF DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT.
Purchaser waives its rights under the Deceptive Trade Practices-Consumer
Protection Act, Section 17.41 et seq., Business & Commerce Code, a law that
gives consumers special rights and protections. After consultation with
an attorney/legal counsel of Purchaser's own selection, Purchaser voluntarily
consents to this waiver. Purchaser covenants, represents and warrants that
such attorney/legal counsel was not directly or indirectly identified,
suggested, or selected by Seller or an agent of Seller.
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29. COMPANION PROPERTY. Notwithstanding anything contained in this
Agreement to the contrary, it is a condition precedent to Seller's and
Purchaser's obligations to perform under this Agreement that Purchaser acquire
that certain property commonly known as the Eagle Crest I Apartments (the
"Other Property") in accordance with the terms of that certain Agreement of
Sale (the "Companion Contract") by and between Northgate Drive Limited
Partnership, an Illinois limited partnership, an affiliate of Seller, and
Purchaser of even date herewith for the sale of the Other Property to Purchaser.
If this Agreement is terminated pursuant to Paragraph 7 hereof or pursuant
to any other section of this Agreement, then the Companion Contract shall
also be deemed terminated. Similarly, if the Companion Contract is
terminated pursuant to Paragraph 7 thereof or pursuant to any other paragraph
of the Companion Contract, then this Agreement shall also be deemed terminated.
Nothing contained in this Paragraph 29 shall be deemed to circumvent the terms
of Paragraph 10 if this Agreement is terminated as a result of a default of
Purchaser and nothing in this Paragraph 29 shall be deemed to circumvent the
terms of Paragraph 11 if this Agreement is terminated as a result of a default
of Seller.
[EXECUTION PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of the
date first set forth above.
PURCHASER:
CORNERSTONE REALTY GROUP
INCORPORATED, a Virginia corporation
By: /s/ S. J. Olander
---------------------------------
Name: S. J. Olander
--------------------------------
Its: Senior Vice President
---------------------------------
SELLER:
IRVING ASSOCIATES, an Illinois limited
partnership
By: Eagle Crest Associates, an Illinois limited
partnership, its general partner
By: Balcor Realty Partners-IV, Inc., a
Delaware corporation, its general
partner
By: /s/ JAMES E. MENDELSON
------------------------
Name: JAMES E. MENDELSON
-------------------------
Its: AUTHORIZED REPRESENTATIVE
-------------------------
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PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 12th day of December 1996 (the
"Effective Date"), between CORNERSTONE REALTY GROUP, INC. or its nominee,
(hereinafter called "Purchaser") and TAHOE GREENWAY LLP, a Texas Limited
Liability Partnership, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as TAHOE APARTMENTS located in
ARLINGTON, TX, with all buildings and improvements located thereon, as more
particularly described in the attached legal description in EXHIBIT A including,
but not limited to 240 individually heated and air conditioned apartment units,
with all appurtenances, together with all appliances, drapes, carpeting,
shrubbery and all other personal property used in connection with the premises,
including, the inventory of personal property to be supplied by Seller and
attached hereto as EXHIBIT B (all such real and personal property hereinafter
collectively referred to as the "Property" unless the context clearly indicates
otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be FIVE MILLION SEVEN
HUNDRED THOUSAND ($5,700,000) DOLLARS as evidenced by cash or cash equivalent at
closing.
2.2 Deposit. TWENTY FIVE THOUSAND ($25,000) DOLLARS to be placed in
escrow upon full execution of this contract. Said deposit shall be placed in
escrow with Commonwealth Land Title Insurance Corporation or its authorized
agent (the "Title Company") as an earnest money deposit which may be credited
against the purchase price or applied as per Article XI below.
2.3 Independent Contract Consideration. Purchaser shall, concurrently
with its execution hereof, deliver to Seller a check in the amount of FIFTY
($50) DOLLARS (the "Independent Contract Consideration"), which amount Seller
and Purchaser agree has been bargained for as consideration for Seller's
execution and delivery of this Contract and Purchaser's right to inspect the
Property. The Independent Contract Consideration is in addition to and
independent of any other consideration or payment provided for in this Contract
and is non-refundable in all events.
<PAGE>
ARTICLE III
TITLE MATTERS
3.1 Title. Seller, shall convey good and indefeasible title by Special
Warranty Deed, subject only to general taxes for the current year not yet due
and payable and utility easements which do not interfere with the present use of
the Property, and the "Permitted Exceptions". "Permitted Exceptions" are those
title exceptions listed in the title commitment, which are not objected to
pursuant to section 3.2 below.
(A) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any prepayment penalties necessary to deliver
such free title.
3.2 Title Defects; Election to Cure. Seller shall furnish to Purchaser
at Seller's expense a commitment for Title Insurance from the Title Company,
(the "Commitment" or the "Title Report") within ten (10) days after the
Effective Date, covering the Property binding the Title Company to issue a Texas
Owner Policy of Title Insurance (the "Title Policy") on the standard form
prescribed by the Texas State Board of Insurance at the Closing, in the full
amount of the Purchase Price, insuring Purchaser's fee simple title to the
Property to be good and indefeasible, together with true and correct copies of
all instruments listed on Schedule B to the Commitment (as well as any other
documents or instruments listed therein which will not be released at closing).
If the title commitment shows any exceptions, which are not acceptable to
Purchaser in Purchaser's sole discretion, Purchaser shall give written notice of
such defects in title to Seller's counsel during the Inspection Period. Seller
may, at its option, elect whether to cure said defects or by written notice to
Purchaser indicate its intention not to cure.
3.3 Election Not to Cure Defects. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option (exercised within five (5) days
of the notice by Seller that it will not cure the objections), shall be void;
each party shall thereupon be released from all obligations hereunder; and all
deposits shall be immediately returned to Purchaser.
3.4 Survey. As soon as reasonably possible, and in any event within ten
(10) days after the Effective Date , Seller shall, at Seller's expense, deliver
or cause to be delivered to the Seller, the Title Company, and to Purchaser a
current or updated on-the-ground perimeter survey (the "Survey") of the Property
prepared by a Registered Professional Land Surveyor reasonably acceptable to the
Purchaser. The Survey shall show the location and size of all of the following
on or adjacent to the Property, if any:
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buildings, buildings lines, improvements,
streets, pavements, easements, rights-of-way,
protrusions, encroachments, fences, 100-year
flood plain, apparent public utilities, and
recording information of easements.
The Survey shall show the gross land area and the Net Land Area. The Survey
shall be in a form and of a date acceptable to Purchaser and to the Title
Company, and in acceptable form in order to allow the Title Company to delete
the survey exception from the Title Policy. The term "Net Land Area" means the
gross land area of the Property less the land area included in utility
easements, drainage easements, ingress/egress easements, rights-of-way, 100-year
flood plain and encroachments on or across the Property. The area within the
100-year flood plain shall be as defined by the Federal Emergency Management
Agency or other applicable governmental authority.
3.5 The Survey shall show no encroachments onto the Land from any
adjacent property, no encroachments by or from the Land onto adjacent property
and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property. If the Survey discloses any
such encroachment or violation, Seller shall have thirty (30) days from the date
of delivery of the survey (with a commensurate extension of the closing date) to
have the Title Insurer issue its endorsement insuring against damage caused by
such encroachment or violation and to provide evidence thereof to Purchaser, and
if Seller fails to or is unable to have the same insured against within such
thirty (30) day period, Purchaser may elect, on or before the expiration of the
Inspection Period, to (i) terminate this Agreement (in which case the Earnest
Money shall be returned to Purchaser) and neither party shall have any further
liability or obligation to the other hereunder, or (ii) accept the property
subject to any such encroachment or violation, as "Permitted Exceptions".
3.6 Purchaser agrees to deliver to Seller, within the Inspection Period,
notice as to which items on the title report or the Survey are objectionable.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on
a calendar-month basis, to the 1st day of the month of the closing: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume); and general and real
property taxes and personal and business property taxes for the year of closing
(based on the most recent assessment and the most recent levy).
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4.2 Closing Costs. Purchaser and Seller shall pay their customary share
of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Seller
agrees to pay cost of title insurance. Seller shall pay any prepayment penalty
charged by the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller shall pay to Purchaser, in a lump
sum at closing, all future monetary concessions which Seller has given to
tenants under leases existing at the time of closing.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 Possession. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.l Conditions Precedent. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction of the following conditions
precedent:
(A) Receipt by Purchaser of an engineering report of building and
site conditions, satisfactory to Purchaser in its sole discretion, said report
to include in part, a description of any hazardous waste sites, hazardous wastes
and/or hazardous materials affecting the property. Purchaser shall have fifteen
(15) days in which to review the reports set forth herein and exercise its right
to reject the Property based thereon or the right hereunder shall be deemed
waived.
(B) The receipt by Purchaser of Seller documents described in 7.2
below.
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(C) On the condition that Sellers representations and warranties
described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or adverse
changes to the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and that it
is required to furnish financial statements to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser to audit the last 12 months of operation of
the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Purchaser determining during the Inspection Period that all
water, sewer, gas, electric, telephone, and drainage facilities and all other
utilities required by law or by the normal use and operation of the Property are
and at the time of closing will be installed to the property line, are and at
the time of closing will be connected pursuant to valid permits, and are and at
the time of closing will be adequate to service the Property and to permit full
compliance with all requirements of law and normal usage of the Property by the
tenants thereof and their licensees and invitees.
6.2 Inspection. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following: The current rent roll
for the Property; detailed statements of income and expenses with respect to the
Property for the past two years; the most recent tax bills for the Property;
utility bills for the Property for the twelve (12) months previous to the date
hereof; all contract, mortgages, and other documents creating liens of security
interest on the Property, or any part thereof and all promissory notes secured
thereby; all insurance policies applicable to the Property to include loss runs
for the last five (5) years; Plans and Specifications for the Property, service
contracts, Certificates of Occupancy, to the extent reasonably available; a copy
of title policy (together with true and correct copies of the instruments listed
thereon which evidence exceptions to title, except those which will be released
at and as a condition of closing) and most recent survey for the Property. A
copy of any environmental or engineering reports on the property. All these
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items shall be certified by Seller to be accurate and complete to
the best of its knowledge and belief.
6.2.2 Inspection of Books and Records; Access. Purchaser, its employees,
agents and contractors shall have thirty (30) days (the "Inspection Period", as
the same may be extended) to enter upon the Property (subject to the rights of
the tenants) during normal business hours for the purpose of making physical
inspections thereof, including but not limited to roofs, heating, cooling,
electrical and plumbing systems, swimming pool, appliances, and structural
elements of the buildings. Upon the conclusion of the Inspection Period this
contract shall be deemed to be a firm agreement of purchase and sale binding the
parties hereto, except as it may be terminated prior to the end of the
Inspection Period and subject to the other provisions and conditions contained
herein, including but not limited to the condition imposed by Paragraph 6.1(A)
above. The Inspection Period shall be extended by one (1) day for each day
beyond ten (10) days from the Effective Date delivery of the Survey and title
commitment are delayed.
6.2.3 Right of Termination During Inspection Period. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, and all deposits shall be returned to Purchaser.
6.2.4 "Rent Ready". During the Inspection Period, both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, are to be in a "rent ready" condition (as defined above), at
the time of closing, containing, but not limited to the following amenities,
i.e., carpet, refrigerator, range, garbage disposal, heating, plumbing and
electrical systems.
6.2.5 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection by
Purchaser. If Seller fails to make reasonable efforts to conserve the property,
Purchaser shall have the option of waiving such requirement, in writing, and
proceeding to closing, or Purchaser may void this Agreement and obtain a prompt
return of its deposit.
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ARTICLE VII
CLOSING
7.1 Closing. Closing will be held on or about seven (7) days after the
completion of the Inspection Period, at such place and at such time as the
parties may agree.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the General Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following in a form
reasonably acceptable to Purchaser:
(A) A Bill of Sale, with special warranty of title transferring
the personal property (as shown in Schedule B) to Purchaser free of all liens,
charges and encumbrances.
(B) The Title Policy issued by the underwriter for the Title
Company pursuant to the Title Commitment, subject only to the Permitted
Exceptions, in the full amount of the Purchase Price, dated as of the date of
Closing.
(C) Originals or copies of all signed leases and rental
agreements in effect with tenants of the Property not for more than one (1)
year.
(D) All security and cleaning deposits made by such tenants.
Seller will give the tenants the required notice of such transfer in compliance
with the laws of TEXAS.
(E) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(F) A rent roll certified by Seller to be true and correct as of
the date of closing showing the name of, and the amount of monthly rental
payable, by each tenant of the Property, the apartment occupied by the tenant,
the date to which rent has been paid, any advance payment of rent, and the
amount of any escrow, or security deposit of tenant.
(G) An affidavit of Seller that to the best of its information
and belief there are, on the date of closing, no unsatisfied judgments,
creditor's claims other than in the course of business, tax liens, or pending
bankruptcies involving Seller.
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(H) Seller shall provide, a certificate from a licensed
extermination contractor, who is regularly engaged in the business of pest
control, that all buildings are free from any termite or other wood-boring
insect infestation. Said certificate shall be dated within 90 days of closing,
bearing the Contractor's name, contractors license number, the signature of the
party authorized to sign for the Contractor and the date of the inspection.
Should damage exist, Seller may, but shall not be obligated to proceed to have
any corrective work completed prior to closing. If Seller does not make the
repairs prior to closing, Purchaser, at its option, may either proceed to
settlement and have such sums required for repairs deducted from Seller's
proceeds, or may in its sole discretion terminate this Agreement. Seller shall
promptly return Purchaser's deposit upon such termination.
(I) Assignments of all Seller's interest in the following: (1)
all assignable licenses, and permits relating to the operation of the Property,
(2) the leases and rental agreements with tenants of the Property, (3) the
existing Property telephone number and (4) the business and trade name as set
forth in Par. 1.1.
(J) Assignments without recourse of all warranties and
guarantees to the extent such are still in effect and provide Purchaser with
copies of all such warranties and guarantees without limitation for all
appliances, dishwashers, disposals, refrigerators, heating and air conditioning
units, washers and dryers.
(K) Consent of the Seller's authorized officer to the sale of
the Property and any other approvals required under Seller's articles, by-laws
or other organizational documents, which may affect Seller's ability to convey
marketable title.
(L) Provide documents for the transfer of the telephone,
electric, water and sewer, and gas utilities, as may be required by the utility,
for execution at closing.
(M) Satisfactory evidence of the power and authority of Seller
to enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form reasonably
satisfactory to Purchaser, stating that:
(a) The individual(s) executing the deed and
related documents are duly authorized to do all such acts as are necessary to
consummate this sale, without further consent of any other party.
(b) That the partner or officer can bind the
Partnership or Corporation.
(N) Affidavit that Seller has received no notice of the presence
of asbestos and/or any other hazardous material at the Property.
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(O) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the apartment
complex as to change of ownership in the form prepared by the Purchaser.
(Q) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(R) A representation letter as normally required by auditors for
a public company in the form attached hereto as EXHIBIT C. This clause shall
survive closing for one year.
(S) Closing Memorandum and Indemnification Agreement in the form
attached hereto as EXHIBIT D.
7.3 Purchaser's. Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price,
adjusted for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under
leases, securities, any contracts which may be accepted by the Purchaser and
any other obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed
and delivered by the Purchaser and is a valid and binding agreement of
Purchaser, and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
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ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date hereof and as of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing mortgage
documents which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not been advised in
writing that it is in default under any lease, rental agreement service or
equipment contract, or mortgage or other encumbrances relating to the Property.
This warranty shall survive for one year the following closing.
(E) Seller has no actual knowledge of any patent or latent defect in
the Property or any part thereof. This warranty shall survive for one year
following closing.
(F) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
(G) The Property abuts on and has direct vehicular access to a public
road.
(H) All building and other improvements at the Property are located
entirely within the boundary lines of the Property.
(I) Seller has no actual knowledge that any part of the Property or
the operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for one year following closing.
(J) That to the best knowledge of the Seller, the drainage within the
project is satisfactory and complies in all respects with all government
regulation. This warranty shall survive for one year following closing.
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(K) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(L) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and will furnish to
Purchaser an affidavit confirming same.
(M) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of Purchaser.
If the leases of any tenants expire before thirty (30) days after the date of
closing, Seller shall, up to the date of closing and without cost to the
Purchaser, continue its normal course of operation with respect to causing
tenants to be obtained for apartments which are unrented.
8.2 Continuation of Representations, Warranties and Covenants to the
Date of Closing. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 Breach of Representations, Warranties and Covenants. Notwithstanding
the provisions of 8.2 above, Seller shall indemnify Purchaser for all reasonable
costs incurred as a result of the failure of any of Seller's representations,
warranties or covenants contained herein to remain true as of the date of
closing.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property is
damaged by fire or other casualty, Seller shall repair such damage before the
date provided herein for closing. If such damage cannot be repaired by such
time, this Agreement may be canceled at the option of the Purchaser. In the
event of cancellation as aforesaid, this Agreement shall become null and
11
<PAGE>
void and the parties shall be released and all payments made shall be returned.
Should Purchaser elect to carry out this Agreement despite such damage Seller
shall assign to Purchaser all insurance proceeds and any deductible arising from
such damage and will compensate Purchaser for lost rent collections to the
extent of insurance proceeds received. Seller shall promptly notify Purchaser in
writing upon the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
taking of a material part of the Property (any part of the building or more than
5% of the parking area), Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Seller agrees to pay a brokerage fee, if any, pursuant
to a separate agreement. Said brokerage fee shall be deemed earned if, and only
if, settlement occurs hereunder, and shall not be deemed earned even if
Purchaser and/or Seller wrongfully fail(s) to consummate the purchase and sale
herein contemplated. Seller and Purchaser represent and warrant to each other
that no other brokerage fees are or shall be owing in connection with this
transaction or in any way with the Apartments and Seller and Purchaser hereby
indemnify and hold the other harmless from any and all claims of any other
person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
12
<PAGE>
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or pursue its
other remedies at law or equity, (2) cancel this Agreement and obtain a prompt
return of the deposit, in which case this Agreement shall be terminated and the
parties released from all obligations hereunder, or (3) the Purchaser may waive
such defaults and proceed to settlement. Seller shall indemnify Purchaser for
any reasonable costs incurred by Purchaser if Purchaser elects to pursue its
option (1) noted above, to include reasonable attorney fees.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement shall
be terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Seller shall have
no other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 Assignment. Purchaser may assign this Agreement without the consent
of Seller.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
13
<PAGE>
12.7 Incorporation by Reference. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: Tahoe Greenway LLP
With a copy to
Seller's Attorneys:
To Purchaser: Mr. Gus Remppies
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
Fax: (804) 782-9302
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
Fax: (516) 374-3490
14
<PAGE>
-and
Robert E. Morrison, Esq.
Brown McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, TX 75201
Fax: (214) 999-6170
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered to
a reliable overnight courier or by fax. Notices sent in any other manner shall
be deemed given only when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
TAHOE GREENWAY LLP
By: TEXAS GREENWAY INC.
General Partner
By: /s/ Robert S. Green
---------------------
Its: President
---------------------
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. OLANDER
---------------------
Its: Senior Vice President
---------------------
15
MODIFICATION TO AGREEMENT OF SALE
This Modification to Agreement of Sale ("Modification") is made and entered
into this 27th day of January 1997 between Cornerstone Realty Group Incorporated
("Purchaser") and Northgate Drive Limited Partnership ("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated the
20th day of January 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning as
ascribed to them in the Agreement.
2. Section 1, PURCHASE AND PRICE, is hereby amended to read:
"...price of NINE MILLION FIVE HUNDRED EIGHT THOUSAND AND NO/100 DOLLARS
($9,508,000)..."
3. Section 12, PRORATIONS, Paragraph 12.1, is hereby amended to read:
"...shall be adjusted as of the 1st day of the month of the closing date
(January 1, 1997) based upon the most recently ascertainable
information..."
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
5. In the event there is any conflict in the terms of this Modification and
the terms of the Agreement, the terms of this Modification shall govern.
6. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
<PAGE>
agreement on the date first above written.
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia Corporation
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
NORTHGATE DRIVE LIMITED PARTNERSHIP,
an Illinois Limited Partnership
By: Northgate Drive of Illinois, Inc.,
an Illinois Corporation, its General
Partner
By: /s/ Mark Satuno
------------------------------------
Name: Mark Satuno
------------------------------------
Its: Authorized Representative
------------------------------------
<PAGE>
MODIFICATION TO AGREEMENT OF SALE
This Modification to Agreement of Sale ("Modification") is made and entered
into this 27th day of January 1997 between Cornerstone Realty Group Incorporated
("Purchaser") and Northgate Drive Limited Partnership ("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated the
20th day of January 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning as
ascribed to them in the Agreement.
2. Section 1, PURCHASE AND PRICE, is hereby amended to read:
"...price of NINE MILLION FIVE HUNDRED EIGHT THOUSAND AND NO/100 DOLLARS
($9,508,000)..."
3. Section 12, PRORATIONS, Paragraph 12.1, is hereby amended to read:
"...shall be adjusted as of the 1st day of the month of the closing date
(January 1, 1997)..."
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
5. In the event there is any conflict in the terms of this Modification and
the terms of the Agreement, the terms of this Modification shall govern.
6. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
<PAGE>
agreement on the date first above written.
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia Corporation
By: /s/ S. J. Olander
------------------------------------
Name: S. J. Olander
------------------------------------
Its: Senior Vice President
------------------------------------
NORTHGATE DRIVE LIMITED PARTNERSHIP,
an Illinois Limited Partnership
By: Northgate Drive of Illinois, Inc.,
an Illinois Corporation, its General
Partner
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
MODIFICATION TO AGREEMENT OF SALE
This Modification to Agreement of Sale ("Modification") is made and entered
into this 27th day of January 1997 between Cornerstone Realty Group Incorporated
("Purchaser") and Irving Associates ("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated the
20th day of January 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning as
ascribed to them in the Agreement.
2. Section 1, PURCHASE AND PRICE, is hereby amended to read:
"...price of SIX MILLION ONE HUNDRED FORTY-TWO THOUSAND AND NO/100
DOLLARS ($6,142,000)..."
3. Section 12, PRORATIONS, Paragraph 12.1, is hereby amended to read:
"...shall be adjusted as of the 1st day of the month of the closing date
(January 1, 1997) based upon the most recently ascertainable
information..."
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
5. In the event there is any conflict in the terms of this Modification and
the terms of the Agreement, the terms of this Modification shall govern.
6. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
<PAGE>
agreement on the date first above written.
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia Corporation
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
IRVING ASSOCIATES,
an Illinois Limited Partnership
By: Balcor Realty Partners-IV, Inc.,
a Delaware Corporation, its General
Partner
By: /s/ Mark Satuno
------------------------------------
Name: Mark Satuno
------------------------------------
Its: Authorized Representative
------------------------------------
<PAGE>
MODIFICATION TO AGREEMENT OF SALE
This Modification to Agreement of Sale ("Modification") is made and entered
into this 27th day of January 1997 between Cornerstone Realty Group Incorporated
("Purchaser") and Irving Associates ("Seller").
WHEREAS, Purchaser and Seller entered into an Agreement of Sale dated the
20th day of January 1997 ("Agreement"); and
WHEREAS, Purchaser and Seller now desire to modify and amend the Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, Seller and Purchaser agree as follows:
1. All terms not specifically defined herein shall have the same meaning as
ascribed to them in the Agreement.
2. Section 1, PURCHASE AND PRICE, is hereby amended to read:
"...price of SIX MILLION ONE HUNDRED FORTY-TWO THOUSAND AND NO/100
DOLLARS ($6,142,000)..."
3. Section 12, PRORATIONS, Paragraph 12.1, is hereby amended to read:
"...shall be adjusted as of the 1st day of the month of the closing date
(January 1, 1997)..."
4. Except as herein modified, the terms and provisions of the Agreement
shall remain in full force and effect.
5. In the event there is any conflict in the terms of this Modification and
the terms of the Agreement, the terms of this Modification shall govern.
6. This Modification may be executed in separate counterparts, each of
which shall be deemed an original and all of which taken together will
constitute one agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
<PAGE>
agreement on the date first above written.
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia Corporation
By: /s/ S. J. Olander
------------------------------------
Name: S. J. Olander
------------------------------------
Its: Senior Vice President
------------------------------------
IRVING ASSOCIATES,
an Illinois Limited Partnership
By: Balcor Realty Partners-IV, Inc.,
a Delaware Corporation, its General
Partner
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
Exhibit 10.7
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1996, by and between Apple Residential Income Trust, Inc., a Virginia
corporation (hereinafter referred to as "Owner"), and Apple Residential
Management Group, Inc., a Virginia corporation (hereinafter referred to as
"Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of Brookfield Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the Property,
provided that nothing herein contained shall constitute a guarantee by Manager
of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas, electricity and
other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the cost
of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented by
procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents
(other than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries of
all receipts and expenditures, which books of account shall be the property of
Owner and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property inspection
letters regarding repairs necessary to avoid mortgage loan defaults. The
furnishing monthly of a detailed statement of all receipts and disbursements for
that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by canceled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and i shall be paid for by Owner
pursuant to the terms of this Agreement;
2
<PAGE>
j. The furnishing of annual reports to Owner which shall contain a
composite financial report of the monthly statements provided in accordance with
paragraph i, plus a statement by Manager as to the operations of the Property
during the previous year and recommendations, if any, as to necessary policy
changes or improvements which should be implemented in the forthcoming year,
which recommendations shall be accompanied by an estimated budget for such
items;
k. The furnishing from time to time, at least semi-annually, of a
tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary to
operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
3
<PAGE>
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
7. Compensation of Manager for Managing the Property. Owner shall pay to
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month
4
<PAGE>
covered by the budget, to place sufficient funds in a bank account, or to permit
Manager to transfer Owner's funds to such account, to make up the budgeted
operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire understanding
between the parties hereto with regard to the transactions described herein and
may only be amended by a written instrument signed by the party against whom
enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ GLADE M. KNIGHT
--------------------------------
Title: Chairman
---------------------------------
5
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ GLADE M. KNIGHT
--------------------------------
Title: Chairman
---------------------------------
6
Exhibit 10.8
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1996, by and between Apple Residential Income Trust, Inc., a Virginia
corporation (hereinafter referred to as "Owner"), and Apple Residential
Management Group, Inc., a Virginia corporation (hereinafter referred to as
"Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of Eagle Crest Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the Property,
provided that nothing herein contained shall constitute a guarantee by Manager
of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas, electricity and
other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the cost
of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented by
procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents
(other than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries of
all receipts and expenditures, which books of account shall be the property of
Owner and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property inspection
letters regarding repairs necessary to avoid mortgage loan defaults. The
furnishing monthly of a detailed statement of all receipts and disbursements for
that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by canceled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h and i shall be paid for by Owner
pursuant to the terms of this Agreement;
2
<PAGE>
j. The furnishing of annual reports to Owner which shall contain a
composite financial report of the monthly statements provided in accordance with
paragraph i, plus a statement by Manager as to the operations of the Property
during the previous year and recommendations, if any, as to necessary policy
changes or improvements which should be implemented in the forthcoming year,
which recommendations shall be accompanied by an estimated budget for such
items;
k. The furnishing from time to time, at least semi-annually, of a
tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary to
operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
3
6. Indemnification. Owner hereby agrees to indemnify and hold
harmless Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
7. Compensation of Manager for Managing the Property. Owner shall pay to
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category
labeled "Reserve for Capital Items." Owner agrees to place rents and other
income in a bank account, or to permit Manager to transfer Owner's funds to such
account, in sufficient amounts to meet the needs reflected in such budget. Such
funds shall be placed in the account on a monthly basis as reflected in the
budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month
4
<PAGE>
covered by the budget, to place sufficient funds in a bank account, or to permit
Manager to transfer Owner's funds to such account, to make up the budgeted
operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire understanding
between the parties hereto with regard to the transactions described herein and
may only be amended by a written instrument signed by the party against whom
enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginla.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ GLADE M. KNIGHT
-----------------------------
Title: Chairman
-----------------------------
5
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ GLADE M. KNIGHT
-----------------------------
Title: Chairman
-----------------------------
6
Exhibit 10.9
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1996, by and between Apple Residential Income Trust, Inc., a Virginia
corporation (hereinafter referred to as "Owner"), and Apple Residential
Management Group, Inc., a Virginia corporation (hereinafter referred to as
"Manager").
W I T N E S S E T H :
WHEREAS, Owner is the owner of Tahoe Apartments (hereinafter referred to
as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and for
other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate upon the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the Property,
provided that nothing herein contained shall constitute a guarantee by Manager
of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment, tools,
appliances, materials, supplies and uniforms necessary for the maintenance or
operation of the Property;
<PAGE>
c. The contracting on behalf of Owner for water, gas, electricity
and other services necessary for the operation and maintenance of the Property;
d. The advertising for the rental of space in the Property, the
cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property rented by
procuring tenants for the Property and negotiating and executing on behalf of
Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returns and other documents
(other than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager shall also file returns and reports, and
pay from Owner's funds, all sums as may from time to time be required by the
state or locality in which the Property is located;
h. The maintenance of full books of account with correct entries of
all receipts and expenditures, which books of account shall be the property of
Owner and shall at all times be open to the inspection of Owner or any of its
employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by canceled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h
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<PAGE>
and i shall be paid for by Owner pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall contain a
composite financial report of the monthly statements provided in accordance with
paragraph i, plus a statement by Manager as to the operations of the Property
during the previous year and recommendations, if any, as to necessary policy
changes or improvements which should be implemented in the forthcoming year,
which recommendations shall be accompanied by an estimated budget for such
items;
k. The furnishing from time to time, at least semi-annually, of a
tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review of
lease negotiations; (3) annual analysis of leases; and (4) schedule of capital
improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary to
operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits on
keys and other income from the Property, shall be deposited from time to time as
collected by Manager to the credit of Owner in such bank or banks as may from
time to time be designated by Owner. Such funds shall be disbursed only in
accordance with the terms of each individual lease and in accordance with any
applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.
3
<PAGE>
6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any and every kind incurred
by or asserted against Manager by reason of or in connection with the employment
of Manager hereunder, the performance by Manager of the services described
herein or the occurrence or existence of any event or circumstance which results
or is alleged to have resulted in death or injury to any person or destruction
of or damage to any property and any suit, action or proceeding (whether
threatened, initiated or completed) by reason of the foregoing; provided,
however, that no such indemnification of Manager shall be made, and Manager
shall indemnify and hold Owner harmless against, and to the extent of, any loss
that a court of competent jurisdiction shall, by final adjudication, determine
to have resulted from willful misconduct, gross negligence or fraud by or on the
part of Manager.
7. Compensation of Manager for Managing the Property. Owner shall pay to
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income
received by Owner (for such month) which has been obtained by such date. If
additional gross revenues are received by Owner after the day Manager is paid,
the sum due to Manager on account of such additional income shall be paid to
Manager when Manager is paid its fees for the next succeeding month.
8. Reimbursement of Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in a
bank account, or to permit Manager to transfer Owner's funds to such account, in
sufficient amounts to meet the needs reflected in such budget. Such funds shall
be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month
4
<PAGE>
covered by the budget, to place sufficient funds in a bank account, or to permit
Manager to transfer Owner's funds to such account, to make up the budgeted
operating deficit. These funds must be placed in such account at least
forty-five (45) days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire understanding
between the parties hereto with regard to the transactions described herein and
may only be amended by a written instrument signed by the party against whom
enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ GLADE M. KNIGHT
-------------------------------------
Title: CHAIRMAN
----------------------------------
5
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ GLADE M. KNIGHT
-------------------------------------
Title: CHAIRMAN
----------------------------------
6
