================================================================================
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 5, 1999
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23983 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
================================================================================
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K
Index
Page
Number
------
Item 2. Acquisition or Disposition of Assets 3
Item 5. Other Events 6
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report 8
(Sierra Ridge Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Sierra Ridge Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Sierra Ridge Apartments)*
b. Pro Forma Statement of Operations 9
for the Year ended December 31, 1997
(unaudited)*
Pro Forma Statement of Operations
for the Nine Months ended September 30, 1998
(unaudited)*
Pro Forma Balance Sheet as of
September 30, 1998 (unaudited)*
c. Exhibits
10.1 Purchase Contract for Sierra Ridge Apartments
10.2 Property Management Agreement for
Sierra Ridge Apartments
10.3 Property Acquisition/Disposition
Agreement dated January 1, 1999
23.1 Consent of Independent Auditors*
- -----------------------
* To be filed by amendment.
2
<PAGE>
Item 2. Acquisition or Disposition of Assets
SIERRA RIDGE APARTMENTS
San Antonio, Texas
On January 5, 1999, Apple REIT Limited Partnership (together with its
parent companies, Apple Residential Income Trust, Inc., Apple General, Inc. and
Apple Limited, Inc., the "Company") purchased the Sierra Ridge Apartments
located at 1401 Patricia Drive, San Antonio, Texas (the "Property").
The Property comprises 230 apartment units. The purchase price for the
Property was $5,817,000. The seller was The Travelers Indemnity Company, a
Connecticut corporation, which is not affiliated with the Company, Apple
Residential Management Group, Inc. (the "Advisor") or their affiliates. The
purchase price was paid entirely in cash using proceeds from the sale of Common
Shares of the Company. Title to the Property was conveyed to the Company by
limited warranty deed.
Location. The Property is located off of Blanco Road in the northern part
of San Antonio, Texas within Bexar County.
The following information is based in part upon information provided by
the San Antonio Chamber of Commerce.
San Antonio is located in south central Texas, approximately 140 miles
northwest of the Gulf of Mexico. The San Antonio Metropolitan Statistical Area
consists of Bexar, Comal, Guadalupe and Wilson Counties, which comprise
approximately 3,338 square miles of area and have an aggregate population of
approximately 1,145,000 persons.
The largest employer in the area is the military, which has an estimated
annual economic impact of $4.5 billion. The second largest economic factor is
wholesale and retail trade, particularly with Mexico. San Antonio is
approximately 150 miles from the city of Laredo on the Mexican border. Because
of its proximity to Mexico, more than half of both United States exports to
Mexico and Mexican exports to the United States travel through San Antonio.
Other important economic factors include agribusiness (consisting of the
storing, processing and distribution of farm commodities and items made from
them), travel and tourism, and health care. San Antonio has recently been rated
in "Conde Nast Magazine" as one of the top ten visitor destinations in the world
and San Antonio has recently become popular as a retirement area.
San Antonio is a major railroad center and is served by Interstate
Highways 10, 35 and 37.
3
<PAGE>
The institutions of higher education in the area include the University of
Texas at San Antonio, Trinity University, Our Lade of the Lake University, and
St. Mary's University. Cultural and recreational attractions include the Alamo,
the River Walk, Market Square, the San Antonio Zoo and Aquarium, Sea World of
Texas, and Six Flags Fiesta Texas.
The Property is located near restaurants, businesses, schools and churches
in a neighborhood that includes other multi-family, residential, commercial and
retail development. Access to the Property is provided by Loop 410, Highway 281
and Interstate Highway 10/ Highway 87. The Property is an approximately
10-minute drive from the San Antonio International Airport and the north-central
business district, and an approximately 25-minute drive from downtown.
Description of the Property. The Property consists of 230 garden-style
apartment units in 20 two-story buildings on approximately 10.2 acres of land.
The Property was constructed in 1981. There are nine apartment unit types. The
unit mix and rents being charged new tenants as of January 1999 are as follows:
<TABLE>
<CAPTION>
Approximate Interior Monthly
Quantity Type Square Footage Rental
- -------- ---- -------------- -------
<S> <C> <C> <C> <C>
42 One bedroom, one bathroom 593 $420 - $430
54 One bedroom, one bathroom 667 455 - 470
42 One bedroom, one bathroom w/vaulted ceilings 667 465 - 480
45 Two bedrooms, two bathrooms 904 550 - 565
19 Two bedrooms, two bathrooms w/ vaulted ceilings 904 570 - 575
7 Two bedrooms, two bathrooms 901 555 - 565
9 Two bedrooms, two bathrooms w/ vaulted ceilings 901 565 - 580
8 Two bedrooms, two bathrooms 967 575 - 590
4 Two bedrooms, two bathrooms w/ vaulted ceilings 967 585 - 590
</TABLE>
The apartments provide a total of approximately 173,000 square feet of net
rentable area.
The Company believes that the Property has generally been well maintained
and is in good condition. However, the Company has budgeted approximately
$345,000 for repairs and
4
<PAGE>
improvements to the Property, to include clubhouse renovations, exterior
painting, minor foundation repairs and interior upgrades.
The following information is provided by the seller. Physical occupancy at
the Property averaged approximately 95% in 1994, 90% in 1995, 87% in 1996, 92%
in 1997, and 93% in 1998. 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-bathroom apartment unit (667 square
feet) rented for $415 in 1994, $420 in 1995, $440 in 1996, $440 in 1997, and
$440 in 1998. The average effective annual rental per square foot at the
Property for 1994 through 1998 was $7.16, $7.24, $7.59, $7.59, and $7.59,
respectively.
The Property has two outdoor swimming pools, a hot tub, two tennis courts
and a fitness center. There is also a clubhouse with a leasing office and ample
paved parking for the tenants.
The buildings are wood frame construction with exteriors consisting of a
combination of brick veneer and painted wood siding. The buildings are on
concrete slab foundations and roofs are pitched and covered with asphalt
shingles on plywood sheathing.
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 an individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. Each apartment unit has vertical blinds, ceiling fans,
washer/dryer connections, a balcony or patio, built-in bookcases and a
wood-burning fireplace. The owner of the Property pays for cold water, sewer
service, trash removal and gas for hot water. The residents pay for their
electricity usage, which includes cooking, lighting, heating and
air-conditioning.
There are at least nine apartment properties that 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 averaged
approximately 95% on December 31, 1998.
As of December 21, 1998, the Property was approximately 96% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons.
For 1998, the value of the Property for purposes of assessment of real
estate taxes was $4,805,000 and the tax rate was $2.93017, resulting in total
real estate taxes for the year of $140,794.62.
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $5,344,471) will be depreciated over 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 Internal Revenue Code of 1986, as amended (the
5
<PAGE>
"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:
1. The San Antonio area was perceived as being characterized by a
diverse, stable and steadily growing economy owing to such
factors as its importance as part of increased trade between
the United States and Mexico and its increased attractiveness
as a retirement area. It was believed that these factors would
support stable occupancy rates and reasonable increases in
rents at the Property.
2. The Property was perceived as being in a desirable rental
submarket of San Antonio with a location convenient to major
employment areas as well as cultural and recreational
attractions.
3. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained
and is in good condition, although the Advisor believes that
the planned repairs and improvements for the Property will
allow further increase in rents.
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 Cornerstone Realty Income Trust, Inc. a property
acquisition fee equal to 2% of the purchase price of the Property, or $116,340.
Cornerstone Realty Income Trust, Inc. will also 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.
The Company is not aware of any material adverse factors relating to the
Property not set forth in this report that will cause the financial information
contained in this report not to be necessarily indicative of future operating
results.
Item 5. Other Events
Before October 1, 1998, Cornerstone Realty Income Trust, Inc.
("Cornerstone") provided property management, advisory and real estate brokerage
services to the Company. The property management and advisory services were
provided by Cornerstone under subcontracts from Apple Residential Management
Group, Inc. ("ARMG") and Apple Residential Advisors, Inc. ("ARA"), the entities
that originally contracted with the Company for the providing of such services.
As to the real estate brokerage services, Cornerstone had
6
<PAGE>
previously purchased the assets of Apple Realty Group, Inc. ("ARG") - consisting
principally of the real estate brokerage agreement - and thereby succeeded to
ARG in providing such services to the Company.
Effective at the close of business on September 30, 1998, the subcontract
agreement with ARA described above was terminated, and ARA assigned to ARMG its
rights and responsibilities under the advisory agreement. Thus, beginning
October 1, 1998, advisory services to the Company were performed by ARMG using
employees leased from Cornerstone. Effective October 1, 1998, Cornerstone sold
to ARMG its rights in the real estate brokerage agreement. Beginning on such
date ARMG provided the services and became entitled to the compensation under
the real estate brokerage agreement. On such date, the Company and ARMG entered
into a restatement of the real estate brokerage agreement. Pursuant to an
amendment made in the restatement, the real estate brokerage agreement became
terminable by either party on two-weeks' notice.
Effective at the close of business on December 31, 1998, ARMG terminated
its real estate brokerage agreement with the Company. On January 1, 1999, the
Company and Cornerstone entered into a new real estate brokerage agreement. The
new real estate brokerage agreement has substantially the same terms as the
previous real estate brokerage agreement under which Cornerstone rendered
services to the Company except that it has a term of five years from January 1,
1999.
It is not expected that the restructuring of the relationships under which
the Company receives property management, advisory and real estate brokerage
services will have any material effect on the Company.
7
<PAGE>
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.
8
<PAGE>
ITEM 7.b.*
- --------------
* 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.
9
<PAGE>
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: January 20, 1999 By: /s/ Glade M. Knight
------------------------------
Glade M. Knight
President of Apple Residential
Income Trust, Inc.
10
<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K dated January 5, 1999
Exhibit Number Exhibit
- -------------- -------
10.1 Purchase Contract for Sierra Ridge Apartments
10.2 Property Management Agreement for Sierra Ridge
Apartments
10.3 Property Acquisition/Disposition Agreement dated January
1, 1999
23.1 Consent of Independent Auditors*
- -------------
* To be filed by amendment.
11
EXHIBIT 10.1
AGREEMENT FOR PURCHASE AND SALE
BETWEEN
THE TRAVELERS INDEMNITY COMPANY
AS SELLER
AND
CORNERSTONE REALTY INCOME TRUST, INC.,
AS PURCHASER
DATED: DECEMBER 16, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS ................................................................... 1
SECTION 1.1 DEFINITIONS. ........................................................... 1
"AGREEMENT" ................................................................... 1
"BANKRUPTCY CODE" ............................................................ 1
"BROKER" ...................................................................... 1
"CLOSING" ..................................................................... 1
"CLOSING DATE" ............................................................... 1
"CONTRACTS" ................................................................... 1
"CONVEYANCING DOCUMENTS" ..................................................... 1
"DUE DILIGENCE" .............................................................. 1
"DUE DILIGENCE TERMINATION DATE" .............................................. 1
"EARNEST MONEY" ............................................................... 1
"EARNEST MONEY TRUST AGREEMENT" ............................................... 2
"EFFECTIVE DATE" ............................................................ 2
"ENVIRONMENTAL LAWS" ......................................................... 2
"ESCROW AGENT" ............................................................... 2
"ESCROW AGREEMENT" ............................................................ 2
"EVALUATION MATERIALS" ....................................................... 2
"FINANCING" ................................................................... 2
"FIXTURES" .................................................................... 2
"GOVERNMENTAL AUTHORITY" ...................................................... 2
"INFORMATION" ................................................................. 2
"INSOLVENCY PROCEEDINGS" ...................................................... 2
"INSOLVENT" ................................................................... 3
"LEASES" ...................................................................... 3
"LEASE-UP COSTS" ............................................................. 3
"LIABILITIES" ................................................................. 3
"LITIGATION SCHEDULE" ......................................................... 3
"OBLIGATIONS" ................................................................. 3
"OTHER CONTRACTS" ............................................................ 3
"PERSON" ...................................................................... 3
"PERMITTED EXCEPTIONS" ........................................................ 3
"PERSONAL PROPERTY" ........................................................... 3
"PROPERTY" .................................................................... 4
"PROPERTY MANAGER" ............................................................ 4
"PROTEST PROCEEDINGS" ......................................................... 5
"PURCHASER" ................................................................... 5
"PURCHASER PARTIES" .......................................................... 5
"PURCHASE PRICE" .............................................................. 5
"PURCHASER'S CONDITIONS PRECEDENT" ............................................ 5
"RENTS" ....................................................................... 5
"RESERVED CLAIMS" ............................................................. 5
"SECURITIES LAWS" ............................................................. 5
"SECURITY(IES)" ............................................................... 5
"SELLER" ...................................................................... 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
"SELLER PARTIES" ............................................................. 6
"SELLER'S CONDITIONS PRECEDENT" .............................................. 6
"SETTLEMENT STATEMENT" ....................................................... 6
"TENANTS" .................................................................... 6
"TITLE POLICY" ............................................................... 6
"TRANSFER" ................................................................... 6
"UNCOLLECTED RENTS" .......................................................... 6
SECTION 1.2 RULES OF CONSTRUCTION. ................................................ 6
ARTICLE II PURCHASE AND SALE ......................................................... 7
SECTION 2.1 AGREEMENT TO PURCHASE AND SELL. ...................................... 7
SECTION 2.2 CONDITIONS PRECEDENT. ................................................ 7
(A) SELLER'S CONDITIONS PRECEDENT TO SALE OF PROPERTY. ................... 7
(B) PURCHASER'S CONDITIONS PRECEDENT TO PURCHASE OF PROPERTY. ............ 8
SECTION 2.3 DUE DILIGENCE PERIOD. ................................................ 9
SECTION 2.4 DUE DILIGENCE CONDITIONS. ............................................ 10
SECTION 2.5 PURCHASER'S INDEPENDENT INVESTIGATION. ............................... 12
SECTION 2.6 PROPERTY CONVEYED AS IS. ............................................. 13
SECTION 2.7 LEASING AND MANAGEMENT AGREEMENTS. ................................... 13
SECTION 2.8 NEW CONTRACTS. ....................................................... 14
SECTION 2.9 TERMINATION OF CONTRACTS, OTHER CONTRACTS AND/OR LEASES. ............. 15
SECTION 2.10 NO NEW ENCUMBRANCES. ................................................. 15
SECTION 2.11 ORDINARY COURSE OF BUSINESS. ......................................... 15
SECTION 2.12 CASUALTY/CONDEMNATION. ............................................... 16
ARTICLE III PURCHASE PRICE; CLOSING ADJUSTMENTS ...................................... 16
SECTION 3.1 EARNEST MONEY; PURCHASE PRICE. ....................................... 16
(A) EARNEST MONEY. ....................................................... 16
(B) PURCHASE PRICE. ...................................................... 16
(C) INDEPENDENT CONTRACT CONSIDERATION. .................................. 17
SECTION 3.2 CLOSING COSTS. ....................................................... 17
SECTION 3.3 PRORATIONS AND ADJUSTMENTS. .......................................... 17
(A) TAXES. ............................................................... 18
(B) INCOME. .............................................................. 18
(C) EXPENSES. ............................................................ 19
(D) UNCOLLECTED RENTS. ................................................... 19
(E) LEASE-UP COSTS. ...................................................... 19
(F) TAX PROTESTS. ........................................................ 20
SECTION 3.4 POST-CLOSING INSPECTION, VERIFICATION AND ADJUSTMENTS. ............... 20
(A) PURCHASER COOPERATION. ............................................... 20
(B) SELLER COOPERATION. .................................................. 20
(C) RESERVED CLAIMS. ..................................................... 21
(D) REMITTANCE OF FUNDS. ................................................. 21
SECTION 3.5 APPLICATION OF EARNEST MONEY. ........................................ 21
ARTICLE IV CLOSING; CONVEYANCING DOCUMENTS ............................................. 21
SECTION 4.1 CLOSING ESCROW. ...................................................... 21
SECTION 4.2 CONVEYANCING DOCUMENTS. .............................................. 21
(A) DEED. ................................................................ 22
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
(B) BILL OF SALE. ........................................................ 22
(C) ASSIGNMENT OF LEASES. ................................................ 22
(D) ASSIGNMENT OF CONTRACT RIGHTS. ....................................... 22
(E) SETTLEMENT STATEMENT. ................................................ 22
(F) TENANT NOTICES. ...................................................... 22
(G) FIRPTA AFFIDAVIT. .................................................... 22
(H) CONTRACTOR NOTICES. .................................................. 22
(I) SELLER'S AFFIDAVIT. .................................................. 22
(J) TRANSFER DECLARATIONS. ............................................... 22
(K) MISCELLANEOUS. ....................................................... 22
ARTICLE V REPRESENTATIONS AND WARRANTIES ............................................... 23
SECTION 5.1 REPRESENTATIONS AND WARRANTIES BY PURCHASER. ......................... 23
(A) CORPORATE STATUS. .................................................... 23
(B) POWER AND AUTHORITY. ................................................. 23
(C) AGREEMENT BINDING. ................................................... 23
(D) ACTIONS AGAINST PURCHASER. ........................................... 24
(E) NO CONFLICTING ORDERS. ............................................... 24
(F) SOLVENCY; NO FRAUDULENT CONVEYANCE. .................................. 24
SECTION 5.2 REPRESENTATIONS AND WARRANTIES BY SELLER. ............................ 24
(A) CORPORATE STATUS. .................................................... 24
(B) POWER AND AUTHORITY. ................................................. 25
(C) AGREEMENT BINDING. ................................................... 25
(D) ACTIONS AGAINST SELLER. .............................................. 25
(E) SELLER NOT A "FOREIGN PERSON." ....................................... 25
(F) SOLVENCY; NO FRAUDULENT CONVEYANCE. .................................. 25
(G) NO CONFLICTING ORDERS. ............................................... 25
(H) LEASES. .............................................................. 26
(I) GOVERNMENTAL NOTICES. ................................................ 26
(J) ASSIGNMENT OF LEASES. ................................................ 26
(K) ENVIRONMENTAL MATTERS. ............................................... 26
(L) OWNERSHIP. ........................................................... 26
ARTICLE VI DEFAULT REMEDIES ............................................................ 27
SECTION 6.1 BY PURCHASER. ........................................................ 27
SECTION 6.2 BY SELLER. ........................................................... 28
SECTION 6.3 POST-CLOSING DEFAULTS. ............................................... 29
SECTION 6.4 GENERAL PROVISIONS. .................................................. 29
ARTICLE VII MISCELLANEOUS .............................................................. 29
SECTION 7.1 ASSIGNMENT. .......................................................... 29
SECTION 7.2 NOTICES. ............................................................. 31
SECTION 7.3 NO THIRD PARTY BENEFICIARY. .......................................... 32
SECTION 7.4 SUCCESSORS AND ASSIGNS. .............................................. 32
SECTION 7.5 SEVERABILITY. ........................................................ 32
SECTION 7.6 MODIFICATION. ........................................................ 32
SECTION 7.7 GOVERNING LAW. ....................................................... 32
SECTION 7.8 CONSENT TO JURISDICTION. ............................................. 32
SECTION 7.9 HEADINGS. ............................................................ 33
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 7.10 ENTIRE AGREEMENT. .................................................... 33
SECTION 7.11 BROKER. .............................................................. 33
SECTION 7.12 NO PERSONAL/JOINT LIABILITY. ......................................... 33
SECTION 7.13 SURVIVAL. ............................................................ 34
SECTION 7.14 WAIVER OF TRIAL BY JURY. ............................................. 34
SECTION 7.15 TIME IS OF ESSENCE. .................................................. 34
SECTION 7.16 EFFECTIVE DATE. ...................................................... 34
SECTION 7.17 NO RECORDING. ........................................................ 34
SECTION 7.18 INFORMED CONSENT. .................................................... 34
SECTION 7.19 FURTHER ASSURANCES. .................................................. 35
SECTION 7.20 COUNTERPARTS. ........................................................ 35
SECTION 7.21 WAIVER OF CONSUMER PROTECTION/DECEPTIVE TRADE PRACTICES ACTS. ........ 35
SECTION 7.22 SECURITIES ACKNOWLEDGMENTS. .......................................... 36
SECTION 7.23 SECURITIES INDEMNITY. ................................................ 36
SECTION 7.24 LETTER OF UNDERSTANDING. ............................................. 37
SECTION 7.25 SPECIAL NOTICES. ..................................................... 37
SECTION 7.26 PURCHASER AS PUBLIC ENTITY. .......................................... 38
SECTION 7.27 CONFIDENTIALITY. ..................................................... 38
EXHIBITS:
Exhibit A - Legal Description of Property
Exhibit B - Earnest Money Trust Agreement
Exhibit C - Escrow Agreement
Exhibit D - Leasing Guidelines
Exhibit E - List of Leases
Exhibit F - Deed
Exhibit G - Bill of Sale
Exhibit H - Assignment of Leases
Exhibit I - Assignment of Contract Rights
Exhibit J - Settlement Statement
Exhibit K - Tenant Notices
Exhibit L - FIRPTA Affidavit
Exhibit M - Contractor Notices
Exhibit N - Seller's Affidavit
Exhibit O - Litigation Schedule
Exhibit P - List of Contracts To Be Assigned
Exhibit Q - List of Security Deposits
Exhibit R - Environmental Reports Schedule
Exhibit S - Personal Property
Exhibit T - Disclosure Documents Provided
Exhibit U - Disclosure Documents to be Made Available
Exhibit V Audit Letter Executed by First Worthing Company Limited
Exhibit W - Assignment and Assumption Agreement
</TABLE>
(iv)
<PAGE>
ADDENDA:
Addendum 1 - Notice Regarding Coastal Area Property
Addendum 2 - Texas Water Code Notice
Addendum 3 - Copy of the "Protect Your Family From Lead in Your Home"
Pamphlet
Addendum 4 - Lead Paint Disclosure Form
(v)
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
THIS AGREEMENT FOR PURCHASE AND SALE (as more particularly defined in
Section 1.1 below, this "Agreement") is made as of the 16th day of December,
1998 by and between THE TRAVELERS INDEMNITY COMPANY (as more particularly
defined in Section 1.1 below, "Seller") and CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation (as more particularly defined in Section 1.1 below,
"Purchaser").
ARTICLE I DEFINITIONS
SECTION 2.1. DEFINITIONS. Seller and Purchaser hereby agree that the
following terms shall have the meanings hereinafter set forth, such definitions
to be applicable equally to the singular and plural forms, and to the masculine
and feminine forms, of such terms:
"AGREEMENT" shall mean this Agreement for Purchase and Sale, as amended
or supplemented from time to time in writing by the parties hereto in accordance
with the terms hereof.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, 11
U.S.C. ss.ss.101, et seq., as amended or supplemented from time to time.
"BROKER" shall mean collectively Lamm Real Estate, Ltd. and SGW Central
Inc., in their capacity as broker for the Purchaser, and their respective legal
representatives, successors and assigns.
"CLOSING" shall mean the consummation of the purchase and sale
transaction contemplated by this Agreement in accordance with Section 4.1, which
shall occur no later than 2:00 p.m., Eastern Time, on the Closing Date.
"CLOSING DATE" shall mean December 21, 1998, or such other date and
time as may be permitted under Sections 2.2(a) and 2.2(b) or agreed upon in
writing by Seller and Purchaser.
"CONTRACTS" shall mean those unexpired contracts shown on Exhibit P
relating to the Property as of the Closing Date, to the extent assignable.
"CONVEYANCING DOCUMENTS" shall have the meaning of the same defined
term set forth in Section 4.2.
"DUE DILIGENCE" shall have the meaning of the same defined term set
forth in Section 2.3.
"DUE DILIGENCE TERMINATION DATE" shall mean 5:00 p.m., Eastern Time, on
December 16, 1998.
"EARNEST MONEY" shall mean, collectively, the sum of One Hundred
Thousand United States Dollars ($100,000) required to be deposited by Purchaser
with Escrow Agent for the benefit of Seller in accordance with the terms of
Section 3.1(a) and the Earnest Money Trust Agreement, or so much thereof as has
actually been paid by Purchaser that may be remaining from time to time,
together with all interest earned thereon, all of which shall be applied and
disbursed in accordance with the terms of this Agreement and the Earnest Money
Trust Agreement.
<PAGE>
2
"EARNEST MONEY TRUST AGREEMENT" shall mean that certain Earnest Money
Trust Agreement of even date herewith executed or to be executed and delivered
by and among Purchaser, Seller and Escrow Agent, in the form attached as Exhibit
B, as the same may be amended or supplemented from time to time in writing by
the parties thereto in accordance with the terms thereof.
"EFFECTIVE DATE" shall mean the date on which each and all of the
conditions precedent to the effectiveness of this Agreement are satisfied in
accordance with Section 7.16.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 5.2(i)
"ESCROW AGENT" shall mean Commonwealth Land Title Insurance Company, 1700
Pacific Avenue, Suite 4740, Dallas, Texas 75201, Attention: Ms. Beverly Griesse,
as escrow agent and settlement agent, under the Escrow Agreement, or any
successor escrow agent mutually designated by Seller and Purchaser, and their
respective legal representatives, successors and assigns.
"ESCROW AGREEMENT" shall mean that certain Closing Escrow Agreement
executed or to be executed and delivered by and among Purchaser, Seller and
Escrow Agent, in the form attached as Exhibit C, as the same may be amended or
supplemented from time to time in writing by the parties thereto in accordance
with the terms thereof.
"EVALUATION MATERIALS" shall have the meaning of the same defined term
set forth in Section 2.4.
"FINANCING" shall mean, individually and collectively, any financing,
investment and/or other funding arrangements of any kind or nature whatsoever,
whether direct or indirect, private or public, interim or long term, structured
as debt or equity, secured or unsecured, pursuant to repurchase agreements or
reverse repurchase agreements, and whether for purposes of acquisition,
ownership, holding, warehousing, securitization or otherwise, together with the
rights and obligations of the holders thereof and payments and distributions
thereon and proceeds therefrom.
"FIXTURES" shall mean all of the right, title and interest of Seller in
and to the fixtures which are located at and affixed to any of the improvements
on the Property as of the Closing Date, but specifically excluding any fixtures
owned by the Tenants under the Leases.
"GOVERNMENTAL AUTHORITY" shall mean the United States, any State,
Commonwealth, District, Territory, municipality, foreign state, or other foreign
or domestic government, or department, agency, board, commission, or
instrumentality of any of the foregoing.
"INFORMATION" shall mean, individually and collectively, all documents,
reports, studies, materials and other information of any kind or nature
whatsoever, including the Evaluation Materials, whether relating to the Property
or otherwise, provided to any of the Purchaser Parties by any of the Seller
Parties, whether prior to, on or after the date hereof, in whatsoever form.
"INSOLVENCY PROCEEDINGS" shall mean any reorganization, liquidation,
dissolution, receivership or other actions or proceedings under the Bankruptcy
Code or any other federal, state or local laws affecting the rights of debtors
and/or creditors generally, whether voluntary or involuntary and including
proceedings to set aside or avoid any transfer of an interest in property or
obligations, whether denominated as a fraudulent conveyance, preferential
transfer or otherwise, or to recover the value thereof or to charge, encumber or
impose a lien thereon.
<PAGE>
3
"INSOLVENT" shall have the meaning of the same defined term set forth in
Section 101(32) of the Bankruptcy Code.
"LEASES" shall mean all unexpired leases and each amendment, renewal,
expansion and extension thereto, subleases, occupancy agreements, licenses and
any other agreements for or which relate to the use, possession, or occupancy of
the Property as of the Closing Date, together with the security deposits of
Tenants thereunder not applied in accordance with the terms thereof prior to
Closing.
"LEASE-UP COSTS" shall mean collectively, all locator fees, finder's
fees, referral fees and other leasing commissions and all tenant allowances and
concessions applicable to the Leases.
"LIABILITIES" shall mean, individually and collectively, any and all
claims, controversies, disputes, demands, losses, damages, liabilities, costs
and expenses (including reasonable attorneys' fees and expenses, whether
incurred in connection with nonjudicial action, prior to trial, at trial, or on
appeal or review or in settlement) incurred by or asserted against Purchaser
Parties or Seller Parties, as the case may be, whether grounded in contract,
statute (including the Securities Laws), tort or otherwise, at law or in equity.
"LITIGATION SCHEDULE" shall have the meaning set forth in Section 5.2(i).
"OBLIGATIONS" shall mean, individually and collectively, any and all
liabilities, obligations, duties, covenants or agreements of Seller or Purchaser
(as assignee of Seller pursuant to this Agreement) under or with respect to or
in any way arising out of or relating to the Property, including the Leases and
Contracts.
"OTHER CONTRACTS" shall mean all contracts relating to the Property,
including contracts for services, leased equipment, cable access, supplies,
maintenance, leasing, landscaping, repairs, construction and capital
improvements, the management agreement between Seller and Property Manager, any
insurance policies, any software and/or licensing agreements to which Seller is
a party, and any contracts to which Property Manager is a party, for and on
behalf of Seller, whether or not assignable, but specifically excluding the
Contracts and Leases.
"PERSON" shall mean an individual, estate, trust, trustee, receiver,
partnership, limited liability partnership, corporation, limited liability
company, depository institution (including federal or state savings banks,
saving and loan associations and credit unions), Governmental Authority, or
other legal entity.
"PERMITTED EXCEPTIONS" shall have the meaning set forth in Section
5.2(l).
"PERSONAL PROPERTY" shall mean: (a) all personal property listed on the
attached Exhibit S; and (b) all of the right, title and interest of Seller as of
the Closing Date in and to all furniture, equipment, machinery, and other
tangible property owned by Seller and installed in, located at, or situated on
the Property and all intangible assets of any nature owned by Seller and
relating solely to the Property for the period from and after the Closing Date,
to the extent assignable, including (i) all guaranties and warranties applicable
to the Property, (ii) all plans, specifications, engineering drawings and prints
relating to the construction of the improvements, (iii) all operating manuals
and books, data and records regarding the physical component systems of the
improvements at the Property, (iv) all tenant lists and tenant marketing
information and materials, (v) all goodwill associated with the Property, (vi)
all licenses, permits, certificates of occupancy and other approvals issued to
Seller by any Governmental Authority
<PAGE>
4
relating to the use, maintenance or operation of the Property, (vii) all logos,
designs, trademarks and trade names related to the Property, (viii) all
telephone exchange numbers identified with the Property, and all other
intangible property used by Seller solely in connection with the Property; but
specifically excluding, whether tangible or intangible, the following property:
(A) any personal property and fixtures owned, financed and/or leased by the
Tenants; (B) the names, trademarks and/or trade names of "Travelers," "The
Travelers Indemnity Company," and/or the Property Manager, in whatsoever form,
and any tangible personal property in which any of the foregoing are affixed or
incorporated, any or all of which shall be removed by Seller at its expense
prior to or within ten (10) days after Closing and (ix) 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 parcel of land described on Exhibit A, Purchaser and Seller
agree to cooperate in such removal and Purchaser acknowledges that such removal
may result in the removal of certain tangible personal property including such
names, trademarks and/or trade names which will not be replaced by Seller; (C)
any cash-on-hand, petty cash, bank accounts or other funds of Seller in
whatsoever form the same are held; (D) any and all Rents and Uncollected Rents,
all of which shall be separately adjusted between the parties pursuant to
Section 3.3; (E) all rights to refunds, accounts receivable, accrued and unpaid
claims, causes of action and rights of reimbursement from third parties (other
than amounts under the Contracts and Leases which shall be prorated pursuant to
Section 3.3), bonds (including payment and performance), and any other claims
for payment Seller may have, to the extent arising or relating to the period
prior to Closing and including, without limitation, the Reserved Claims; (F) all
of Seller's financial and corporate books and records, in whatsoever form or
nature, relating to the management, business, financing and operation of the
Seller or the Property, including tax returns and reporting information,
organizational documents, minutes, resolutions, and related corporate materials,
appraisals or valuations or other reports and studies (of whatsoever form or
nature and whether or not prepared by the Seller Parties or any other person) of
the Property, materials relating to the marketing of or market information
regarding the Property, including leasing (to the extent the same includes the
names, trademarks and/or trade names of "Travelers," "The Travelers Indemnity
Company," and/or the Property Manager, in whatsoever form) or sale of the
Property, internal analyses and communications (of whatsoever form or nature) of
the Seller Parties relating to the Property or any other matter (including
inspections, evaluations, approvals, work summaries and work product),
communications or other Information prepared by or exchanged with legal counsel
(whether internal or external) of the Seller Parties (including any work product
and any Information prepared in anticipation of litigation, other than
litigation with tenants who reside at the Property as of the Closing), financial
statements and related confidential information of the Seller Parties,
communications or other Information prepared by or exchanged with any current or
former lender of Seller (whether internal or external), and financial analyses,
budgets and projections (by whomsoever prepared) relating to the Property or
otherwise; and (G) all software of any kind or nature whatsoever, including
applications software and computer software, databases, programs, archive media,
backup media, electronic data, documentation, manuals and codes used by any of
Seller Parties in connection with the management, operation and maintenance of
the Property.
"PROPERTY" shall mean individually and collectively, that parcel of
land described on Exhibit A, together with the improvements thereon as of
Closing, and all of Seller's right, title and interest as of the Closing Date in
and to: (a) all privileges, rights, easements and appurtenances belonging to
such land; (b) all streets, alleys, passages and other rights-of-way or
appurtenances, included in, adjacent to, or used in connection with such land;
and (c) the Leases, Contracts, Fixtures, and Personal Property.
"PROPERTY MANAGER" shall mean First Worthing Company, in its capacity
as third party property manager for the Property, and its legal representatives,
successors and assigns.
<PAGE>
5
"PROTEST PROCEEDINGS" shall have the meaning set forth in Section
3.3(f).
"PURCHASER" shall mean Cornerstone Realty Income Trust, Inc., a
Virginia corporation, and its legal representatives, successors and the assigns
permitted in Section 7.1.
"PURCHASER PARTIES" shall mean, individually and collectively, jointly
and severally, Purchaser, and each and all of its officers, directors,
employees, shareholders, partners, agents, and contractors, and each and all of
the respective legal representatives, heirs, successors and assigns of any of
the foregoing.
"PURCHASE PRICE" shall have the meaning set forth in Section 3.1(b).
"PURCHASER'S CONDITIONS PRECEDENT" shall have the meaning of the same
defined term set forth in Section 2.2 (b).
"RENTS" shall mean collectively, all rents (whether denominated base
rent, fixed rent, additional rent, escalations or otherwise under the Leases),
advance rentals, fees, all reimbursements, and other sums payable by Tenants
under the Leases to Seller, but specifically excluding Uncollected Rents and
security deposits.
"RESERVED CLAIMS" shall have the meaning of the same defined term set
forth in Section 3.3(b).
"SECURITIES LAWS" shall mean, individually and collectively, the
Securities Act of 1933, the Securities Exchange Act of 1934, and any and all
other laws, regulations, rules, orders and decrees of any Governmental
Authorities governing the issuance, sale, marketing, exchange or disposition of
Securities, as any of the foregoing are amended from time to time.
"SECURITY(IES)"shall have the meaning of the same defined term in any
Securities Laws, including the meaning for such term set forth in section
77(b)(1) of the Securities Act of 1933 (15 U.S.C. ss. 77(b)(1)), section
3(a)(10) of the Securities Exchange Act of 1934 (15 U.S.C. ss. 78(c)(10)), and
Section 101(49)(A) of the Bankruptcy Code, and shall further include, without
limitation, individually and collectively: note; stock; treasury stock; share in
a corporation (whether or not transferable or denominated "stock" or similar
security); bond; debenture; evidence of indebtedness; collateral trust
certificate; pre-organization certificate or subscription; transferable share;
voting trust certificate; certificate of deposit; certificate of deposit for
security; investment contract; certificate of interest or participation in a
profit sharing agreement or trust or in a royalty, lease, contract or other
interest; interests in a partnership; any legal or beneficial interest in a
trust or pooling or custodial agreement; any claim, interest or instrument
commonly known as a "security" or otherwise defined as a "security" under any
Securities Laws; certificate of interest or participation in, temporary or
interim certificate for, guarantee of, receipt for, warrant or right to
subscribe to or purchase or sell any of the foregoing; whether in the nature of
debt or equity, and whether or not the subject of a registration statement filed
with the Securities and Exchange Commission or exempt under Securities Laws from
the requirement to file such a statement, together with the rights and
obligations of the holders thereof and the payments and distributions thereon
and the proceeds therefrom.
"SELLER" shall mean The Travelers Indemnity Company, a Connecticut
corporation, and its legal representatives, successors and assigns.
<PAGE>
6
"SELLER PARTIES" shall mean collectively, Seller, each and all of its
officers, directors, employees, shareholders, contractors and agents (including
Property Manager), and each and all of the legal representatives, heirs,
successors and assigns of any of the foregoing.
"SELLER'S CONDITIONS PRECEDENT" shall have the meaning of the same
defined term set forth in Section 2.2(a).
"SETTLEMENT STATEMENT" shall mean the Settlement Statement to be
executed by Purchaser and Seller in connection with the Closing of the
transactions contemplated hereby and delivered to Escrow Agent on or prior to
the Closing Date.
"TENANTS" shall mean each Person occupying or possessing, or having the
right to occupy or possess, all or any portion of the Property pursuant to the
Leases, including tenants and subtenants.
"TITLE POLICY" shall have the meaning set forth in Section 4.2.
"TRANSFER" shall mean, individually and collectively, any conveyance,
sale, assignment, transfer, lease (other than in the ordinary course of business
to Tenants), hypothecation, encumbrance, pledge, mortgage (including security
deed, deed of trust and security interest), charge or alienation of any kind or
nature whatsoever, or any offer or agreement to do any of the foregoing, whether
direct or indirect, private or public, voluntary or involuntary, by operation of
law or otherwise, with or without the consent of the Seller Parties.
"UNCOLLECTED RENTS" shall mean collectively, all Rents which are due or
past due under the Leases and have not been collected by Seller as of the
Closing Date (whether or not billed), but excluding security deposits.
SECTION 1.2 RULES OF CONSTRUCTION. Article and Section captions used
in this Agreement are for convenience only and shall not affect the construction
of the Agreement. All references to "Articles" and "Sections,"without reference
to a document other than this Agreement are intended to designate articles and
sections of this Agreement, and the words "herein," "hereof," "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article or Section, unless specifically designated otherwise. All
references to Seller's knowledge shall mean that no current officer, in his or
her capacity as an officer of Seller, has actual knowledge that such
representation or warranty is inaccurate or incomplete in any material respect,
without independent investigation (no obligation to do so being implied hereby)
other than a verbal or written inquiry of the Property Manager and further
without conducting any comparative analysis or review of Seller's files and
records or inspection of the Property. In no event shall the knowledge, acts or
omissions of Property Manager or any other person or entity be imputed to
Seller. The current property manager for the Property is First Worthing Company
Limited and Mr. Clint Warnick is the onsite property manager for the Property.
The use of the term: (a) "including" shall mean in all cases "including but not
limited to," unless specifically designated otherwise; and (b) "legal
representatives" shall mean any trustee, receiver, custodian and/or any other
person or entity appointed or authorized to act in a representative capacity by
a court or any other governmental or quasi-governmental entity, whether
appointed pursuant to the Bankruptcy Code or otherwise. No rules of construction
against the drafter of this Agreement shall apply in any interpretation or
enforcement of this Agreement, any documents or certificates executed pursuant
hereto, or any provisions of any of the foregoing.
<PAGE>
7
ARTICLE II PURCHASE AND SALE
SECTION 2.1 AGREEMENT TO PURCHASE AND SELL. Subject to the conditions
set forth in Sections 2.2(a) and 2.2(b), Seller agrees to sell, and Purchaser
agrees to purchase, the Property on the Closing Date in accordance with the
terms and provisions hereof. In connection with such sale, Seller agrees to
transfer and assign, and Purchaser agrees to assume and perform, all of Seller's
right, title and interest in and to the Leases and Contracts and the Obligations
arising and/or accruing from and after Closing.
SECTION 2.2 CONDITIONS PRECEDENT.
(a) SELLER'S CONDITIONS PRECEDENT TO SALE OF PROPERTY. Seller's
obligation to sell the Property in accordance with Section 2.1 is hereby
conditioned upon full and complete satisfaction, or written waiver signed by
Seller, of each and all of the following conditions precedent (individually, the
"Seller's Condition Precedent" and collectively, the "Seller's Conditions
Precedent") on or prior to the dates specified below:
(i) on or before the Due Diligence Termination Date,
Purchaser shall have given notice to Seller of its election to proceed to
Closing strictly in accordance with the terms of Section 2.3 and deposited the
Earnest Money with Escrow Agent strictly in accordance with the terms of Section
3.1(a);
(ii) on or before the Closing Date, Purchaser shall have
executed and delivered to Escrow Agent, to be held pursuant to the terms of the
Escrow Agreement, the Escrow Agreement and each and all of the Conveyancing
Documents to be delivered by Purchaser pursuant to Section 4.2;
(iii) on or before the Closing Date, Purchaser shall have
delivered to Escrow Agent, to be held pursuant to the terms of the Escrow
Agreement, the full amount of the Purchase Price (taking into consideration the
Earnest Money and all prorations, credits and adjustments pursuant to the terms
of this Agreement), together with any and all other sums that are to be paid by
Purchaser at Closing pursuant to this Agreement, including the costs and
expenses identified in Sections 3.2 and 3.3 and any other amounts shown as
payable by Purchaser on the Settlement Statement;
(iv) the representations and warranties made by Purchaser in
Section 5.1 shall be true and correct in all material respects on and as of the
date made or deemed to be made and Purchaser shall have performed and complied
in all material respects with all covenants and obligations required to be
performed by it as of the Closing Date; and
(v) on and as of the Closing, each and all of the conditions
precedent to release of the Purchase Price and Conveyancing Documents from
escrow set forth in the Escrow Agreement to be performed by Purchaser shall have
been fully and completely satisfied, or waived in writing by Seller, strictly in
accordance with the terms of the Escrow Agreement.
Seller agrees that, as soon as Seller has notice of the failure of the Seller's
Condition Precedent set forth in (iv) above, Seller shall notify Purchaser
thereof and Purchaser shall have ten (10) business days after the giving of such
notice within which to cure such failure (no obligation to do so being implied
hereby) and, if required, the Closing Date shall automatically be extended to
the next business day occurring after such ten (10) business day period;
provided, however, in no event shall the Closing Date be further
<PAGE>
8
extended unless Seller and Purchaser agree in writing to such extension. In the
event each and all of the Seller's Conditions Precedent are not fully and
completely satisfied or waived on or before the dates specified above or, if
applicable, on the first business day occurring after the ten (10) business day
cure period mentioned in the immediately preceding sentence (which shall not be
further extended without Seller's and Purchaser's prior written agreement),
unless caused by a breach by Seller (in which case Purchaser shall have the
rights and remedies in Section 6.2 on account of such breach), Seller shall have
the option to: (A) waive all or any of such Seller's Conditions Precedent and
proceed with Closing; or (B) terminate Seller's obligation to sell the Property
by written notice at or prior to Closing, whereupon Seller's obligation to sell
and Purchaser's obligation to purchase the Property shall be deemed, without
additional notice, grace or further act of any party, to be automatically null
and void and of no force or effect, in which event neither Seller nor Purchaser
shall have any further rights or obligations hereunder or relating hereto,
except pursuant to such provisions hereof as survive termination of this
Agreement, and Purchaser shall be entitled to a refund of the Earnest Money in
accordance with Section 3.5 unless the failure of any of Seller's Conditions
Precedent to be satisfied is otherwise, or is caused by, a breach in any
material respect of any of Purchaser's express representations, warranties,
covenants or obligations set forth in this Agreement or the Escrow Agreement
existing beyond any applicable notice and cure period, in which case Seller
shall be entitled to the rights and remedies set forth in Section 6.1 on account
of such breach. Purchaser shall have no liability for failing to satisfy any of
the Seller's Conditions Precedent unless the failure to satisfy the same is
otherwise, or is caused by, a breach in any material respect of any of
Purchaser's express representations, warranties, covenants or obligations set
forth in this Agreement or the Escrow Agreement existing beyond any applicable
notice and cure period, whereupon Seller shall also be entitled to the rights
and remedies set forth in Section 6.1 on account thereof. The Seller's
Conditions Precedent set forth in this Section 2.2(a), and each of them, shall
inure solely to the benefit of Seller, and no other Person, including Purchaser,
shall have any right to waive or defer any of the conditions specified herein.
(b) PURCHASER'S CONDITIONS PRECEDENT TO PURCHASE OF PROPERTY.
Purchaser's obligation to purchase the Property in accordance with Section 2.1
is hereby conditioned upon full and complete satisfaction, or written waiver
signed by Purchaser, of each and all of the following conditions precedent
(individually, the "Purchaser's Condition Precedent" and collectively, the
"Purchaser's Conditions Precedent") on or prior to the dates specified:
(i) on or before the Closing Date, Seller shall have
executed and delivered to Escrow Agent, to be held pursuant to the terms of the
Escrow Agreement, the Escrow Agreement and each and all of the Conveyancing
Documents to be delivered by Seller pursuant to Section 4.2;
(ii) the representations and warranties made by Seller in
Section 5.2 shall be true and correct in all material respects on and as of the
date made or deemed to be made and Seller shall have performed and complied in
all material respects with all covenants and obligations required to be
performed by it as of the Closing Date;
(iii) each and all of the conditions precedent to release of
the Purchase Price and Conveyancing Documents from escrow set forth in the
Escrow Agreement to be performed by Seller shall have been fully and completely
satisfied, or waived in writing by Purchaser, strictly in accordance with the
terms of the Escrow Agreement;
(iv) as of the Closing Date, no adverse change in Seller's
title to the Property, including any new matters which would be revealed by a
survey, shall have occurred following the Due
<PAGE>
9
Diligence Termination Date, other than the Leases or Contracts (including any
amendment, renewal, expansion, extension or termination of any Lease or
Contract) entered into pursuant to Sections 2.8 or 2.9 or any change caused by
the Due Diligence or any other acts or omissions of the Purchaser Parties; and
(v) as of the Closing Date, no adverse change in the zoning
of the Property or the Property's compliance with the laws of any Governmental
Authority having jurisdiction thereof shall have occurred following the Due
Diligence Termination Date, other than any change caused by the Due Diligence or
any other acts or omissions of the Purchaser Parties.
Purchaser agrees that, as soon as Purchaser has notice of the failure of a
Purchaser's Condition Precedent, other than those Purchaser's Conditions
Precedent set forth in (i) and (ii) above, Purchaser shall notify Seller thereof
and Seller shall have ten (10) business days after the giving of such notice
within which to cure such failure (no obligation to do so being implied hereby)
and, if required, the Closing Date shall automatically be extended to the next
business day occurring after such ten (10) business day period; provided,
however, in no event shall the Closing Date be further extended unless Purchaser
and Seller agree in writing to such extension. In the event each and all of the
Purchaser's Conditions Precedent are not fully and completely satisfied or
waived on or before the dates specified above or, if applicable, on the first
business day occurring after the ten (10) business day cure period mentioned in
the immediately preceding sentence (which shall not be further extended without
Purchaser's and Seller's prior written agreement), unless caused by a breach by
Purchaser (in which case Seller shall have the rights and remedies in Section
6.1 on account of such breach), Purchaser shall have the option to: (A) waive
all or any of such Purchaser's Conditions Precedent and proceed with Closing; or
(B) terminate Purchaser's obligation to purchase the Property by written notice
at or prior to the Closing Date, as extended pursuant to this Section 2.2,
whereupon Purchaser's obligation to purchase and Seller's obligation to sell the
Property shall be deemed, without additional notice, grace or further act of any
party, to be automatically null and void and of no force or effect, in which
event neither Seller nor Purchaser shall have any further rights or obligations
hereunder or relating hereto, except pursuant to such provisions hereof as
survive termination of this Agreement and Purchaser shall be entitled to a
refund of the Earnest Money in accordance with Section 3.5 unless the failure of
any of Purchaser's Conditions Precedent to be satisfied is otherwise, or is
caused by, a breach in any material respect of any of Purchaser's express
representations, warranties, covenants or obligations set forth in this
Agreement or the Escrow Agreement existing beyond any applicable notice and cure
period, in which case Seller shall be entitled to the rights and remedies set
forth in Section 6.1 on account of such breach. Seller shall have no liability
for failing to satisfy any of the Purchaser's Conditions Precedent unless the
failure to satisfy the same is otherwise, or is caused by, a breach in any
material respect of any of Seller's express representations, warranties,
covenants or obligations set forth in this Agreement or the Escrow Agreement
existing beyond any applicable notice and cure period, whereupon Purchaser shall
also be entitled to the rights and remedies set forth in Section 6.2 on account
thereof. The Purchaser's Conditions Precedent set forth in this Section 2.2(b),
and each of them, shall inure solely to the benefit of Purchaser, and no other
Person, including Seller, shall have any right to waive or defer any of the
conditions specified herein.
SECTION 2.3 DUE DILIGENCE PERIOD. Subject to the provisions of Section
2.4 and prior to the Due Diligence Termination Date, Purchaser shall be entitled
to conduct such feasibility studies, due diligence activities, testing
(including invasive testing within walls and pipes), inspections,
investigations, tests and examinations of the Property, including the Leases and
Contracts, as it deems necessary or appropriate and to examine and investigate
to its full satisfaction all other facts, circumstances and
<PAGE>
10
matters as it deems relevant to the purchase and assumption of Seller's right,
title, interest and Obligations from and after the Closing Date in or relating
to the Property, including the Leases, Contracts, income and operating
performance of the Property, the condition of the Property (including the
physical condition and use of the Property, availability and adequacy of
utilities, access, zoning, compliance with applicable laws, credit worthiness of
Tenants, environmental conditions on and/or affecting the Property, and
engineering and structural matters), title, survey matters, and any other
matters it deems necessary or appropriate for purposes of entering into and
consummating the Agreement (all such studies, due diligence activities, reviews,
testing, inspections, investigations, tests and examinations, whether occurring
prior or subsequent to the date hereof, are collectively referred to herein as
the "Due Diligence"). Pursuant to the terms hereof and prior to entering into
this Agreement, Seller has provided to Purchaser copies of the documents listed
on the attached Exhibit T, receipt of which is hereby acknowledged by Purchaser.
Upon or prior to the Effective Date, if and to the extent in the possession of
Seller or Property Manager, Seller agrees to make available to Purchaser at the
offices of Property Manager and/or the Property, for inspection, copying and
review by the Purchaser Parties, at Purchaser's sole cost and expense, the
documents listed on the attached Exhibit U. Each and all of the documents listed
on the attached Exhibits T and U shall be deemed to be Evaluation Materials and
treated in accordance with the terms hereof. To the extent any document or
information listed on Exhibit U is not already in existence in the possession of
or maintained or prepared by or on behalf of Seller, Seller shall have no
obligation to cause such documents or information to be obtained, prepared
and/or maintained and provided to Purchaser. If Purchaser is satisfied with the
results of its Due Diligence, Purchaser shall give written notice to Seller of
its unqualified election to proceed to Closing on or before the Due Diligence
Termination Date. In the event Purchaser is not satisfied with the results of
its Due Diligence for any reason or no reason whatsoever, Purchaser' sole remedy
shall be to either: (a) waive such matters and elect to proceed to Closing,
without offset or adjustment (unless expressly agreed to in writing by a written
amendment to this Agreement fully executed by the Seller and Purchaser prior to
the Due Diligence Termination Date), or (b) terminate this Agreement by giving
notice of its election not to proceed to Closing or failing to give notice of
its election to proceed to Closing as aforesaid. In the event Purchaser gives
notice of its election not to proceed to Closing or fails to give notice of its
election to proceed to Closing as aforesaid, this Agreement shall automatically
terminate on the Due Diligence Termination Date without further notice or action
of either party, in which event neither Seller nor Purchaser shall have any
further rights or obligations hereunder or relating hereto, except pursuant to
such provisions hereof as survive termination of this Agreement, and Purchaser
shall be entitled to a refund of the Earnest Money in accordance with Section
3.5. Seller shall cooperate in making Information, individuals and materials
available, including all files (excluding: (i) materials, correspondence and
other documents provided to, received from, exchanged with or relating in any
way to prospective purchasers, prospective purchaser lists and marketing
information, valuations and appraisals, and internal analyses and communications
(of whatsoever form or nature) of the Seller Parties and other materials
relating to the marketing and possible sale of the Property, and (ii)
communications or other Information prepared by or exchanged with legal counsel
(whether internal or external) of the Seller Parties (including any work product
and any Information prepared in anticipation of litigation) and related
confidential information of the Seller Parties), in accordance with Section 2.4.
SECTION 2.4 DUE DILIGENCE CONDITIONS. Purchaser's right to conduct Due
Diligence is expressly conditioned upon, and Purchaser, for itself and the
Purchaser Parties, covenants and agrees that: (a) all Due Diligence shall be
conducted by the Purchaser Parties in a manner which is not disruptive in any
material respect to the Tenants or the normal operations of the Property; (b)
the Purchaser Parties shall not enter upon the Property except during regular
business hours for agreed upon purposes and subject to first coordinating such
entry and access with Seller by giving at least One (1) business day
<PAGE>
11
prior written notice in advance and detailing the scope of the Due Diligence to
be conducted, including any physically intrusive Due Diligence such as sampling
of soils, other media, building materials or the like and whether or not
Property Manager's presence is required; (c) the Purchaser Parties shall
coordinate with Seller and shall not contact any of the Tenants or any parties
to the Contracts or Other Contracts, without the prior consent of Seller and, at
Seller's option, the presence of Property Manager at all times, and access to
units occupied by Tenants shall be coordinated with Seller by giving at least
One (1) business day prior written notice in advance thereof and shall be
subject to the terms of the Tenants' respective Leases; (d) the Purchaser
Parties shall at all times strictly comply with any and all procedures agreed to
in this Section 2.4 for the Due Diligence and all laws, ordinances, rules and
regulations applicable to the Property and shall not engage in any activities
that would violate any permits, licenses, environmental, wetlands or other
regulations pertaining to the Property; (e) Purchaser shall promptly, and no
later than five (5) days after each entry on the Property, restore or repair, to
Seller's reasonable satisfaction, any damage caused by the Due Diligence or
other acts or omissions of any of the Purchaser Parties, provided however,
Purchaser shall cause any invasive testing, including testing within walls and
pipes, to be immediately repaired to Seller's satisfaction and shall
specifically coordinate such testing and repairs in advance with Seller; (f)
none of the Purchaser Parties shall engage in any activities that would cause
Seller's rights, title, interests or Obligations in or relating to the Property
to be adversely affected in any way, including, without limitation, the
assertion of any mechanic's liens, and Purchaser shall, without limitation,
immediately remove and bond over any liens, notices and claims of liens or other
matters affecting any of the foregoing which are caused by or arise out of the
acts or omissions of the Purchaser Parties; (g) Purchaser shall maintain
worker's compensation insurance covering all of its employees involved in such
activities, and shall cause the Purchaser Parties entering upon the Property to
maintain, at all times, comprehensive general liability insurance coverage in an
amount not less than One Million Dollars ($1,000,000) or such other reasonable
amount as Seller and Purchaser may agree upon from time to time, naming Seller
as an additional insured, and worker's compensation insurance covering all
employees involved in such activities, and shall prior to the date on which
access or entry to the Property first occurs, provide Seller with evidence of
such insurance coverage, which insurance shall be in a form and issued by a
company reasonably satisfactory in all respects to Seller and shall not limit in
any way Purchaser's obligations or liabilities hereunder; (h) all materials,
documents and other Information, of whatsoever kind or nature, obtained by any
of the Purchaser Parties in the course of conducting Due Diligence, whether or
not provided by Seller (collectively, the "Evaluation Materials"), shall be
treated as strictly confidential and shall not be disclosed, except (i) as may
be required by law or a governmental agency, (ii) is readily available to the
general public at the time of receipt by Purchaser, or (iii) subsequently
becomes known to the general public through no fault or omission by any Person,
to any Person without Seller's prior written consent, provided however,
Purchaser may make disclosures to the Purchaser Parties and Purchaser's agents,
professionals, consultants, investors, lenders, (including potential lenders),
and attorneys for purposes of evaluating the prospective purchase so long as
each such Person has first been advised of and agrees to respect the terms of
this confidentiality agreement; (i) in the event Purchaser does not elect to
proceed to Closing in accordance with Section 2.3 or terminates this Agreement
pursuant to Sections 2.2(b) or 2.12, Purchaser shall promptly, and no later than
five (5) days thereafter, return to Seller all Evaluation Materials provided to
any of the Purchaser Parties by any of the Seller Parties; and (j) Purchaser
shall bear all costs and expenses of its Due Diligence, including the Due
Diligence conducted by any of the Purchaser Parties, and Seller shall have no
obligation to pay for and/or reimburse any of the Purchaser Parties for any of
such costs and expenses, whether or not Closing occurs hereunder, except as may
be provided in Section 6.2. Purchaser hereby covenants and agrees to indemnify,
defend and hold harmless Seller Parties from and against any and all liability,
damage, loss, lien, expense, suit and claim, including reasonable attorneys'
fees (whether incurred in connection with nonjudicial action, prior to trial,
<PAGE>
12
at trial or on appeal or review, including any proceedings under the Bankruptcy
Code) and expenses, whether arising out of injury or death to persons or damage
to the Property or loss of any personal property or otherwise, caused by or
arising out of: (i) a breach by any of the Purchaser Parties of the conditions,
covenants and obligations set forth in this Section 2.4; and/or (ii) the Due
Diligence conducted by the Purchaser Parties or other acts or omissions of the
Purchaser Parties (but shall not be obligated to indemnify, defend or hold
harmless the Seller Parties for their own acts or omissions or pre-existing
conditions which Purchaser Parties have not contributed to or aggravated in any
way). Purchaser's indemnity obligations shall not be limited by any workmen's
compensation, benefits, disability or other similar laws.
SECTION 2.5 PURCHASER'S INDEPENDENT INVESTIGATION. Purchaser hereby
acknowledges and agrees that, in all cases except for the representations and
warranties expressly set forth in this Agreement or in the Conveyancing
Documents, the Seller makes no representations or warranties, express or
implied, regarding the adequacy, accuracy, completeness or content of any
Information or the suitability of such Information for any purpose and that the
Seller Parties shall have no liability to Purchaser Parties, or any other Person
claiming by, through or under any of them, arising out of the Information, or to
any Person to whom any of them has disclosed any of the Information, or
otherwise with respect thereto, and, except for the representations and
warranties expressly set forth in this Agreement or in the Conveyancing
Documents, neither the Purchaser Parties, any person or entity claiming by,
through or under any of them, nor any Person to whom any of such Information was
disclosed by any of the foregoing, shall have or make any claims against any of
the Seller Parties based upon any of the Information, including the adequacy,
accuracy, completeness or content of any Information or the suitability of such
Information for any purpose. Purchaser hereby acknowledges that, except for the
representations and warranties expressly set forth in this Agreement or in the
Conveyancing Documents, as of the Closing (i) it shall be deemed to have relied
solely on its own independent examination of the Property, including the Leases
and Contracts, and the Obligations, and Due Diligence in consummating the
purchase thereof in accordance with the terms of this Agreement, (ii) that
Purchaser is assuming the risk of future changes in the applicable laws, and
(iii) that Purchaser has not relied on, is not entitled to rely on, and shall
not rely on, and the Seller Parties are not liable for or bound by, any
warranties or representations (none being so implied), statements (verbal or
written), documents, reports, studies, Information or other materials made or
provided by any of the Seller Parties or any other Person representing or
purporting to represent or act on behalf of any of the Seller Parties. Further,
Purchaser acknowledges that, except for the representations and warranties
expressly set forth in this Agreement or in the Conveyancing Documents, no
representations or warranties, express or implied, have been or shall be deemed
to be made or provided by any of the Seller Parties, relating to any of the
Information, Due Diligence or the Property, including the Leases and Contracts,
the Obligations or otherwise, and Purchaser hereby acknowledges that no
representations or warranties, either express or implied, have been or shall be
deemed to be made by any of the Seller Parties (except as expressly set forth in
this Agreement or in the Conveyancing Documents) with respect to any of the
foregoing. To the extent any Person, including any surveyors, appraisers, title
agents, Escrow Agent, Tenants, parties to Contracts or Other Contracts, Property
Manager, Broker, attorneys or engineering or environmental consultants, any of
the Seller Parties or any other Person, made any representations or warranties
(except as expressly set forth in this Agreement or in the Conveyancing
Documents) or any other statements (verbal or written) to Purchaser, or provided
any documents, reports, studies, information or other materials, Purchaser
acknowledges it shall have no claim or right of action against any of the Seller
Parties arising therefrom, nor any right to rescind, revoke or terminate this
Agreement or any of the transactions contemplated hereunder on account thereof
except as expressly provided in Sections 2.3 and 6.2.
<PAGE>
13
SECTION 2.6 PROPERTY CONVEYED AS IS. In the event Purchaser elects to
proceed to Closing in accordance with Section 2.3, Purchaser shall be deemed to
be satisfied with and/or to have waived the results of the Due Diligence and to
have accepted the Property, including the Leases and Contracts, and Obligations
arising from and after Closing, "AS IS," "WHERE IS," and "WITH ALL FAULTS,"
including latent defects, without recourse to and without representation or
warranty by Seller (except as otherwise expressly set forth in Sections 5.2 and
7.11 and in the Conveyancing Documents), express or implied, whether statutory
or otherwise, and without any warranties of transfer (except as provided in
Sections 5.2 and 7.11 or the Conveyancing Documents), merchantability or fitness
for a particular, or Purchaser's intended, use or purposes. Provided Purchaser
elects to proceed to Closing and subject to waiver or satisfaction of the
condition precedent in Section 2.2(b)(iv), the Property, including the Leases
and Contracts, and Obligations shall be conveyed subject to all easements,
covenants, restrictions, title and survey exceptions and any matters affecting
the Property as of the Closing Date, subject to Section 2.10; provided however,
Seller shall deliver the Conveyancing Documents which it is required to deliver
in accordance with Section 4.2. WITHOUT LIMITATION AND EXCEPT AS EXPRESSLY SET
FORTH IN SECTIONS 5.2 AND 7.11 OR IN THE CONVEYANCING DOCUMENTS, SELLER HEREBY
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTIES OF TRANSFER, QUALITY, FITNESS, MERCHANTABILITY OR OTHERWISE, RELATING
TO THE PROPERTY, INCLUDING THE LEASES AND CONTRACTS, AND OBLIGATIONS TO BE
CONVEYED HEREUNDER AND ANY WARRANTIES ARISING UNDER ARTICLES 2 AND 3 (OR SIMILAR
SECTIONS) OF THE UNIFORM COMMERCIAL CODE IN EFFECT IN THE JURISDICTIONS IN WHICH
ANY OF THE PROPERTY IS LOCATED OR TO WHICH THIS AGREEMENT IS SUBJECT AND
INCLUDING ALL WARRANTIES SET FORTH IN SECTIONS 2.314, 2.315 AND 3.417 OF THE
TEXAS BUSINESS AND COMMERCE CODE AND/OR SECTIONS 2.314, 2.315 AND 3.417 OF TITLE
6 OF THE CONNECTICUT UNIFORM COMMERCIAL CODE. Except as otherwise expressly set
forth in Sections 5.2 and 7.11, none of the representations of Seller set forth
in this Agreement shall be deemed to survive Closing, and except as expressly
set forth in Sections 5.2 and 7.11 and in the Conveyancing Documents, upon
Closing, Purchaser shall be deemed to have accepted the Property, including the
Leases and Contracts, and Obligations, unconditionally and with any and all
(none being so implied) rights to rescind, set aside or avoid the transactions
contemplated hereby or to seek a reduction, adjustment, offset or recovery of
the Purchase Price (except for the adjustments and prorations required under
Article III hereof), on the grounds of redhibition or otherwise, waived and
relinquished. Except as otherwise provided in Sections 5.2, 6.2 and 6.3 or in
the Conveyancing Documents, from and after the Closing, Purchaser shall have no,
and hereby waives, any rights, claims and causes of action, whatsoever, against
any of the Seller Parties for any manner, cause or thing arising from or
relating to the Due Diligence, Information, Property, including the Leases and
Contracts, and Obligations.
SECTION 2.7 LEASING AND MANAGEMENT AGREEMENTS. Prior to Closing, and
subject to the prorations to be made pursuant to Section 3.3(e), Seller shall
terminate all leasing, brokerage and management agreements and Other Contracts
currently in effect at the Property, including the management agreement with
Property Manager, and shall timely pay and remain liable for payment of all
amounts owing or other Obligations arising thereunder, if any, and hereby agrees
to indemnify, hold harmless and defend Purchaser from and against any and all
liabilities, claims and expenses, including reasonable attorneys' fees, arising
from such termination or the Seller's failure to pay the same when due (except
for amounts or other Obligations that arise out of the Purchaser Parties' Due
Diligence or other acts or omissions of the Purchaser Parties, including for
example,
<PAGE>
14
separate agreements for services, copies, etc. reached between any of the
Purchaser Parties and Property Manager or other parties to the Contracts or
Other Contracts, any damages to the Property or property of any of the Property
Manager or other parties to the Contracts or Other Contracts, and injuries to
the Property Manager or other parties to the Contracts or Other Contracts).
SECTION 2.8 NEW CONTRACTS. For the period from the Effective Date to
the Closing Date, Seller agrees not to enter into any new contract, including
any contract for services or capital improvements, which shall survive Closing
without first providing Purchaser with a copy of the same for Purchaser's review
and approval, which approval prior to the Due Diligence Termination Date shall
not be unreasonably withheld, conditioned or delayed by Purchaser. Purchaser
shall be deemed automatically and irrevocably to have approved of any new
contract (including any new amendment, renewal, expansion, assignment, or
extension of an existing Contract) unless Purchaser notifies Seller in writing
of its objection thereto, stating with specificity the reasons for such
objection, within five (5) business days from Purchaser's receipt of a copy of
same and related supporting information which Seller obtains in the ordinary
course. For the period from the Effective Date to the Due Diligence Termination
Date, Seller shall be entitled to enter into new Leases (including any new
amendment, renewal, expansion, assignment, sublease or extension of an existing
Lease) and Contracts for any Lease-Up Costs associated therewith in the ordinary
course pursuant to Section 2.11, and Purchaser shall be deemed automatically and
irrevocably to have approved of any such new Leases (including any new
amendment, renewal, expansion, assignment, sublease or extension of an existing
Lease) and any Lease-Up Costs associated therewith. For the period from the Due
Diligence Termination Date to the Closing Date, Seller shall be entitled to
enter into new Leases (including any new amendment, renewal, expansion,
assignment, sublease or extension of an existing Lease) so long as such new
Leases are in accordance with the Leasing Guidelines set forth on the attached
Exhibit D, are for a term no greater than one (1) year from the Closing Date and
are for residential purposes, and Contracts for any Lease-Up Costs associated
therewith, and Purchaser shall be deemed automatically and irrevocably to have
approved of any such new Leases (including any new amendment, renewal,
expansion, assignment, sublease or extension of an existing Lease) and any
Lease-Up Costs associated therewith. During the period from the Due Diligence
Termination Date to the Closing Date, Seller agrees not to enter into any new
Leases (including any new amendment, renewal, expansion, assignment, sublease or
extension of an existing Leases) which are not in conformity with the Leasing
Guidelines set forth on the attached Exhibit D, without first providing
Purchaser with copies of the same for Purchaser's review and approval, and
Purchaser shall be deemed automatically and irrevocably to have approved of any
such new Leases (including any new amendment, renewal, expansion, assignment,
sublease or extension of an existing Leases), the Contracts for any Lease-Up
Costs associated therewith, and any Lease-Up Costs associated therewith, unless
Seller receives notice of Purchaser's objection thereto, stating with
specificity the reasons for such objection, within one (1) business day from
Purchaser's receipt of copies of same. All new contracts and Leases (including
any new amendment, renewal, expansion, assignment, sublease or extension of an
existing Contract or Lease) approved or deemed approved pursuant to this Section
shall automatically be deemed added to Exhibit P or Exhibit E, as applicable,
and all new contracts and Leases (including any new amendment, renewal,
expansion, assignment, sublease or extension of an existing Contract or Lease)
approved or deemed approved pursuant to this Section, including any Lease-Up
Costs associated therewith, shall be assigned to and assumed by Purchaser at
Closing. Purchaser further hereby specifically approves the Contracts identified
as "pending" on Exhibit P, if any. Seller may enter into Other Contracts
(including any amendment, renewal, expansion, assignment, sublease or extension
of Other Contracts) without restriction and such Other Contracts shall not be
assigned to or assumed by Purchaser and shall be terminated without cost or
liability to Purchaser, unless the parties otherwise agree in writing at
Closing. Further, if, prior to the Due Diligence Termination Date, Purchaser
objects to any new contract (including any new amendment, renewal, expansion,
assignment, or extension of an existing Contract) submitted for its review and
approval, Seller shall nonetheless be entitled to enter into the same prior to
expiration of the Due Diligence Termination Date and Purchaser's sole remedy
shall be to elect not to proceed to Closing in accordance with Section 2.3 and
receive a refund of the Earnest Money pursuant to Section 3.5. If, after the Due
Diligence
<PAGE>
15
Termination Date and provided Purchaser has elected to proceed to Closing in
accordance with Section 2.3, Purchaser objects to any new contract (including
any such new amendment, renewal, expansion, assignment, or extension of an
existing Contract) submitted for its review and approval, Seller shall not be
entitled to enter into the same for the period from the Due Diligence
Termination Date to the Closing Date, without the prior approval of the
Purchaser, which may be withheld, conditioned or delayed in Purchaser's sole
discretion.
SECTION 2.9 TERMINATION OF CONTRACTS, OTHER CONTRACTS AND/OR LEASES.
For the period from the Due Diligence Termination Date to the Closing Date,
Seller agrees: (a) not to terminate any Contracts or Leases, except in
accordance with the terms thereof, including upon default or expiration of the
stated term thereof, or pursuant to Section 2.8; and (b) to terminate the Other
Contracts at or prior to Closing, at no cost or expense to Purchaser.
SECTION 2.10 NO NEW ENCUMBRANCES. For the period from the Effective
Date to the Closing Date and except as otherwise provided in Sections 2.7
through 2.11, Seller shall not: (a) voluntarily convey all or any portion of the
Property or any rights or interests therein, (b) enter into any new security
document, easement or other agreement affecting title to all or any portion of
or interest in the Property, other than Leases, Contracts or Other Contracts
entered into pursuant to Sections 2.7, 2.8 and/or 2.9, or (c) amend any existing
agreement granting to any Person any rights with respect to all or any portion
of the Property or any interests therein (other than Leases, Contracts or Other
Contracts entered into pursuant to Sections 2.7, 2.8 and/or 2.9), without the
prior written approval of Purchaser, which approval shall not be unreasonably
withheld, delayed or conditioned by Purchaser in respect of the matters
referenced in (b) and (c) prior to the Due Diligence Termination Date and is in
Purchaser's sole discretion after the Due Diligence Termination Date, provided
Purchaser elects to proceed to Closing in accordance with Section 2.3. If prior
to the Closing Date, all or any portion of the Property or any rights therein
becomes subject to any monetary lien, including any judgment lien (but excluding
any condemnation or eminent domain proceeding), Seller agrees to pay or
discharge (including by bonding over the same) such monetary liens at or prior
to Closing, provided such liens are not caused by the Due Diligence or other
acts or omissions of the Purchaser Parties at Closing Escrow Agent shall cause
the issuance of the Title Policy (as herein defined) to insure against such
liens or otherwise exclude such liens on Schedule B of the Title Policy if such
coverage is available in the State of Texas.
SECTION 2.11 ORDINARY COURSE OF BUSINESS. For the period from the
Effective Date to the Closing Date and except as contemplated by Sections 2.3
and 2.4 or 2.7 through 2.12, Seller agrees: (a) to manage, operate and lease the
Property, or cause the Property to be managed, operated and leased, in the
ordinary and usual manner in which the Seller and Property Manager conducted
their business prior to entering into this Agreement, provided however, it is
understood and agreed that Seller shall not be obligated to undertake any
capital repairs (other than maintenance in the ordinary course) or improvements,
whether or not reflected in the budget for the Property; (b) to maintain its
existing insurance coverage and policy(ies) in place and provide to Purchaser
copies of the certificate(s) of insurance relating thereto; (c) not to dispose
of any portion of the Personal Property identified on Exhibit S (other than
inventory and supplies used or sold in the normal course of business), unless
replaced with an item of equal or greater value, quality or utility; (d) not to
take any affirmative actions
<PAGE>
16
to modify the zoning applicable to the Property; and (e) to promptly provide
Purchaser with copies of all written notices which it receives from and after
the date hereof from any Governmental Authorities of violations of any statutes,
laws, ordinances, rules or legal regulations applicable to the Property.
SECTION 2.12 CASUALTY/CONDEMNATION. In the event any condemnation or
eminent domain proceedings are initiated prior to the Closing which might result
in the taking of all or any portion of the Property or the use thereof or any
fire, flood, explosion, accident or other casualty occurs which damages or
destroys all or any material portion of the Property, then Purchaser may elect
to: (a) proceed to Closing without adjustment or offset to the Purchase Price
(except for an adjustment to the Purchase Price upon the occurrence of a
casualty in an amount equal to the lesser of (i) the estimated reasonable,
out-of-pocket cost to repair the physical damages to the Property caused by such
casualty, or (ii) the deductible under Seller's insurance policy relating to
such physical damages to the Property), in which event Seller shall assign at
Closing all of its right, title and interest in and to, and deliver at Closing
if received prior thereto or following Closing if and when received thereafter,
such insurance and/or condemnation proceeds, if any, as the same are paid or
payable on account of such condemnation or casualty, except that proceeds on
account of rental and/or business interruption coverage or losses shall be
prorated as of the Closing Date when collected, and less and except amounts
previously expended by Seller to repair such damages; or (b) terminate this
Agreement by written notice to Seller within ten (10) days after Purchaser
receives notice of any such casualty or condemnation (but no later than the
Closing Date), in which event neither Seller nor Purchaser shall have any
further rights or obligations hereunder or relating hereto, except pursuant to
such provisions hereof as survive termination of this Agreement, and Purchaser
shall be entitled to a refund of the Earnest Money in accordance with Section
3.5. In no event shall Seller have any obligation to repair or restore the
Property or any portion thereof. The term "material" as used herein shall mean a
casualty for which the cost to repair or restore the damage arising therefrom is
reasonably determined by Purchaser to be in excess of the deductible under
Seller's insurance policy relating to such damage or a condemnation which
Purchaser and Seller reasonably determine adversely affects the Property. In the
event of any condemnation or casualty which is not material, Purchaser shall be
deemed to have elected the rights and remedy in subparagraph (a) above.
ARTICLE III PURCHASE PRICE; CLOSING ADJUSTMENTS
SECTION 3.1 EARNEST MONEY; PURCHASE PRICE.
(a) EARNEST MONEY. As an express condition precedent to the
effectiveness of this Agreement, the Earnest Money shall be deposited by
Purchaser with Escrow Agent, to be held as Earnest Money for the benefit of
Seller, subject to the provisions of Section 3.5. The Earnest Money shall be
paid by Purchaser (and no other Person) in immediately available funds, in
lawful money of the United States of America, which shall be legal tender for
all debts and dues, public and private at the time of payment. The Earnest Money
shall be held and disbursed by Escrow Agent in accordance with the terms of the
Earnest Money Trust Agreement and this Agreement. The Earnest Money shall be
applied against payment of the Purchase Price on the Closing Date in accordance
with the terms of this Agreement, subject to Section 3.5.
(b) PURCHASE PRICE. In consideration of and as a condition
precedent to Seller's conveyance of the Property, Purchaser shall pay to Seller
the aggregate purchase price of FIVE MILLION EIGHT HUNDRED SEVENTEEN THOUSAND
AND NO/100 United States Dollars ($5,817,000) ("Purchase Price"), adjusted to
account for the Earnest Money and all prorations, credits and adjustments
<PAGE>
17
pursuant to the terms of this Agreement, together with any and all other sums
that are to be paid by Purchaser pursuant to this Agreement, including the costs
and expenses identified in Sections 3.2 and 3.3 and all other amounts shown as
payable by Purchaser on the Settlement Statement on the Closing Date. The
Purchase Price (subject to the adjustments and prorations in this Article III),
together with any and all other sums to be paid to Seller at Closing by
Purchaser in connection with this Agreement, shall be paid to Seller by
Purchaser (and no other Person other than Escrow Agent pursuant to the Escrow
Agreement) in immediately available funds, in lawful money of the United States
of America, which shall be legal tender for all debts and dues, public and
private, at the time of payment. All such funds shall be deposited by Purchaser
with Escrow Agent on or prior to the Closing Date, to be held in escrow and
disbursed pursuant to the terms of the Escrow Agreement.
(c) INDEPENDENT CONTRACT CONSIDERATION. Contemporaneously with
Purchaser's execution of this Agreement, Purchaser shall deliver directly to
Seller a check in the amount of One Hundred and No/100 United States Dollars
($100.00) (the "Independent Contract Consideration"), which amount the parties
have bargained for and agreed to as independent consideration for Seller's
execution and delivery of this Agreement. The Independent Contract Consideration
is in addition to and independent of any other consideration and payment
retained by Seller under any other provision of this Agreement, including,
without limitation, the Earnest Money. The Independent Contract Consideration is
fully vested in Seller immediately upon its receipt thereof and is nonrefundable
under all circumstances, notwithstanding any other provision of this Agreement.
SECTION 3.2 CLOSING COSTS. Purchaser shall pay all costs and expenses
incurred by it and/or the Purchaser Parties associated with the Due Diligence
and any other investigations of the Purchaser Parties, and/or the purchase and
sale contemplated hereunder, including any and all environmental assessments and
reports, amounts owed to Broker, structural and engineering inspections,
surveys, title updates and insurance premiums (including the cost of any special
endorsements relating thereto, including, without limitation, any charge for
"survey deletion" coverage but excluding the "base" title policy insurance
premium), Purchaser's attorneys' fees and expenses, and all costs and expenses
of obtaining any Financing that Purchaser may elect to obtain (including any
fees, financing costs, and transfer and recordation taxes and recording fees in
connection therewith and all escrow, settlement, handling and/or other fees and
expenses to be paid to Escrow Agent in connection with any Financing); provided
however, Seller agrees to pay at Closing the base title insurance premium for
issuance of an owner's title policy in the amount of the Purchase Price, on the
standard form in use in the State of Texas, and one-half (1/2) of the cost to
update the existing survey. Seller shall pay all costs and expenses incurred by
it and/or the Seller Parties associated with the purchase and sale contemplated
hereunder, including Seller's attorneys' fees and expenses. Seller shall also
pay one-half (1/2) of the cost to update the existing survey. Purchaser and
Seller shall each pay one-half (1/2) of all state and local transfer and
recordation taxes (whether grantor or grantee), if any, and recording fees
applicable to the sale and one-half (1/2) of any escrow, settlement, handling
and/or other fees and expenses to be paid to Escrow Agent in connection with the
Escrow Agreement and the Earnest Money Trust Agreement. All such costs and
expenses shall be paid in full on or prior to the Closing Date, unless otherwise
agreed to and specified by the parties in the Settlement Statement.
SECTION 3.3 PRORATIONS AND ADJUSTMENTS. Prorations and adjustments
shall be made between Purchaser and Seller, and shall be set forth in the
Settlement Statement agreed to by the parties on or prior to the Closing Date,
in accordance with Sections 3.3(a) through (e) below, to the extent
ascertainable at or prior to Closing. To the extent not so ascertainable,
Purchaser and Seller shall
<PAGE>
18
estimate at Closing and finalize prorations and adjustments to the Purchase
Price after Closing in the case of the prorations and adjustments described in:
(i) Sections 3.3(a) through (e), to the extent reasonably ascertainable, by no
later than six (6) months from the date hereof, and (ii) Section 3.3(f), to the
extent reasonably ascertainable, no later than one (1) year from the date
hereof. Notwithstanding the foregoing, the parties understand and agree that
finalizing prorations and adjustments to the Purchase Price as aforesaid shall
not be deemed to relieve any party for obligations and liabilities retained,
assumed or assigned pursuant to this Agreement or in any of the Conveyancing
Documents, including the respective obligations and liabilities under this
Section or Section 3.4. Unless otherwise stated hereafter, all prorations and
adjustments shall be made on a per diem basis, with Seller responsible for the
number of days in the applicable period up to the Closing Date and Purchaser
responsible for the Closing Date and all days thereafter. Any amount which
Purchaser is obligated to pay in accordance with the prorations provided below:
(A) which has been paid by Seller as of the Closing Date, or will be paid
outside Closing by Seller in the event the invoices for same are received by
Seller after five (5) business days prior to the Closing Date, at Seller's
election, shall be reimbursed by Purchaser or treated as a credit in favor of
Seller on the Closing Date, and thereafter Seller shall be solely responsible
for making such payment; or (B) which has not been and will not be paid by
Seller as of the Closing Date as set forth in this Agreement or otherwise agreed
upon between Seller and Purchaser shall be assumed by and become the sole
responsibility of Purchaser and no adjustment shall be made at Closing for same.
Any amount which Seller is obligated to pay in accordance with the prorations
provided below which has not been paid as of the Closing Date shall: (1) be
treated as a credit in favor of Purchaser on the Closing Date and Purchaser
shall assume and be solely responsible for making such payment; or (2) at
Seller's option in the event the invoices for same are received by Seller after
five (5) business days prior to the Closing Date, shall be paid by Seller
outside Closing and Seller shall be solely responsible for timely making such
payment. Each party agrees to provide the other with written evidence of payment
of such amounts upon request.
(a) TAXES. All real estate taxes, municipal charges (including
front foot benefit, utility, vault, water, sewer and service charges or fees)
and installments of special assessments, whether assessed by the state, county,
township, school district or any other Governmental Authority having
jurisdiction over the Property, payable (whether or not prepaid by Seller) shall
be prorated as of the Closing Date between Purchaser and Seller based on actual
bills for 1997 and/or, to the extent available, 1998, with a final adjustment of
the foregoing impositions for 1998, if necessary, to be made following Closing
upon receipt of actual bills for 1998. Any discount arising from any prepayment
of such taxes and/or assessments shall be prorated as of the Closing Date
between Seller and Purchaser.
(b) INCOME. All Rents and any other prepaid income (specifically
excluding any insurance and/or condemnation proceeds but including income
generated from service contracts) collected by Seller prior to Closing shall be
prorated as of the Closing Date between Purchaser and Seller, with Seller
entitled to all Rents and other prepaid income allocable to the period prior to
the Closing Date and Purchaser entitled to all Rents and other prepaid income
allocable to the Closing Date and all days thereafter. With respect to security
deposits, Purchaser shall receive at Closing a credit for all outstanding
security deposits under the Leases as of the Closing Date (and not previously
applied by Seller under the Leases), together with such interest, if any, as may
be due thereon to Tenants as of the Closing Date under the express terms of the
Leases or, if greater and required, applicable law. From and after Closing, all
such security deposits so credited to Purchaser shall thereafter be deemed
transferred to Purchaser and Purchaser shall assume and be solely responsible
for the payment of such security deposits to Tenants in accordance with the
Leases and applicable law. Seller shall be entitled to retain, and/or if
assigned to Purchaser receive a credit for, any utility deposits and any
deposits with third parties
<PAGE>
19
under any of the Contracts and Other Contracts. Notwithstanding any provision of
this Agreement or any of the Conveyancing Documents executed and delivered
pursuant hereto, Seller shall retain all rights to refunds, accounts receivable,
accrued and unpaid claims, causes of action and rights of reimbursement from
third parties (other than amounts under the Contracts and Rents under the Leases
which shall be prorated as aforesaid), and any other claims for payment Seller
may have to the extent arising or relating to the period prior to Closing
(collectively, the "Reserved Claims").
(c) EXPENSES. All payments under the Contracts and payments for
utilities, common area and other operating and maintenance expenses and charges,
fuel oil, expenses and charges, permit fees, if assignable, license fees, if
assignable, and any accrued or prepaid expenses relating to the Property
(excluding insurance premiums) shall be prorated as of the Closing Date between
Purchaser and Seller. Purchaser shall make arrangements, at its sole expense, to
have all utilities, other than those utilities in the names of Tenants,
transferred directly to its account as of the Closing Date, and Seller shall
cooperate with Purchaser in arranging such transfer.
(d) UNCOLLECTED RENTS. All Uncollected Rents allocable to the
period prior to Closing shall remain the property of Seller, and Purchaser shall
be entitled to all Uncollected Rents allocable to the period from and after
Closing. No proration with respect to Uncollected Rents shall be made at
Closing, provided however, Purchaser shall use reasonable efforts to collect the
same (which efforts need not include litigation, arbitration or administrative
proceedings and shall not obligate Purchaser to incur any out-of-pocket costs)
and all Uncollected Rents collected by Purchaser following Closing shall be
prorated as of the Closing Date, as and when collected as hereinafter provided.
In the event Purchaser collects any Rents (including in the definition thereof
for purposes of this subparagraph, Uncollected Rents) after Closing from a
Tenant that owes Uncollected Rents, Purchaser shall be entitled first to deduct
therefrom (i) reasonable costs of collection, (ii) unpaid Rents attributable to
the month in which such Rents are received, and (iii) any delinquent Rents owed
by such Tenant to Purchaser, in reverse order of delinquency, and then shall
remit the amount of the Uncollected Rents due to Seller, which are attributable
to the period prior to the Closing Date, within thirty (30) days after receipt.
Upon request, Purchaser shall advise Seller of all Purchaser's efforts to bill
for and collect Uncollected Rents. From and after Closing, Seller agrees not to
commence any litigation against any Tenants for purposes of collecting
Uncollected Rents or to seek to dispossess any Tenants; provided however, Seller
shall be fully entitled to pursue and defend any legal actions (including
commencing litigation and/or actions for reimbursement, contribution, defense
and indemnity) against any Tenant in connection with any claim, demand, suit or
other legal action of Purchaser, any third party and/or any Governmental
Authority and/or concerning any matters unrelated to the Property in its name
and not in the name of Purchaser.
(e) LEASE-UP COSTS. Purchaser shall assume and be solely
responsible for all Lease-Up Costs allocable to the period from and after
Closing (prorated and determined on the basis of the remaining term of the
Lease) for Leases (including any amendments, renewals, expansions or extensions
of existing Leases) that are executed by Seller in accordance with the
provisions of Section 2.8 from and after the Effective Date, including any
Contracts, leasing agreements and brokerage agreements relating to same (whether
or not such Contracts or agreements are terminated or assigned to Purchaser) and
notwithstanding that the Lease to which such amendment, renewal, expansion,
option or extension relates was executed prior to the Effective Date but in any
event said Purchaser responsibility described in this sentence shall not exceed
$2,000.00. Seller shall supply, on or before the Closing Date, invoices and
statements for all Lease-Up Costs for which it is entitled to receive a credit
at Closing. From and after Closing, Purchaser shall be solely responsible for
the payment of all Lease-Up Costs payable in connection with any Leases
(including any amendments, renewals, expansions or
<PAGE>
20
extensions of existing Leases) occurring or arising under the Leases, whether
executed before (but limited to said $2,000 amount) or after the Closing Date.
To the extent of any inconsistency with the provisions of Section 2.7, the terms
of this provision shall control.
(f) TAX PROTESTS. Notwithstanding any provision in this Agreement
to the contrary, any tax refunds or proceeds (including interest thereon) on
account of a favorable determination resulting from a challenge, protest, appeal
or similar proceeding relating to taxes and assessments relating to the Property
("Protest Proceedings"): (i) for all tax periods occurring prior to the
applicable tax period in which Closing occurs, shall be retained by and paid
exclusively to Seller; and (ii) for the applicable tax period in which Closing
occurs, shall be prorated as of the Closing Date after reimbursement to Seller
and Purchaser, as applicable, for all fees, expenses and costs (including
reasonable attorneys' and consultants' fees) incurred by Seller or Purchaser, as
applicable, in connection with the Protest Proceedings, such that Seller shall
retain and be paid that portion of such tax refunds or proceeds as is applicable
to the portion of the applicable tax period prior to the Closing Date and
Purchaser shall retain and be paid that portion of such tax refunds or proceeds
as is applicable to the portion of the applicable tax period from and after the
Closing Date. Neither Seller nor Purchaser shall settle any Protest Proceedings
in which taxes for the tax period for which the other party is responsible are
being adjudicated without the consent of such party, which consent shall not be
unreasonably withheld, conditioned or delayed. Purchaser and Seller shall
cooperate in the pursuit of any Protest Proceedings and in responding to
reasonable requests of the other for information concerning the status of, and
otherwise relating to, such Protest Proceedings, provided however, neither party
shall be obligated to incur any non-de minimis out-of-pocket fees, costs and
expenses in responding to the requests of the other. Notwithstanding anything to
the contrary, Purchaser shall not be responsible for any fees incurred by Seller
in connection with any Protest Proceedings.
Seller and Purchaser shall endeavor to prepare a statement detailing
the prorations and adjustments estimated to be due as of the Closing Date
pursuant to this Section no later than five (5) days prior to the Closing Date.
Purchaser and Seller hereby acknowledge and agree that, except for the
adjustments being made pursuant to this Section 3.3, the sums to be paid
pursuant to Section 3.2 and the adjustments, if any, to be made pursuant to
Section 2.12 upon the occurrence of a casualty or condemnation prior to Closing,
no other adjustments shall be made to the Purchase Price.
SECTION 3.4 POST-CLOSING INSPECTION, VERIFICATION AND ADJUSTMENTS.
(a) PURCHASER COOPERATION. On or before February 16, 1999,
Purchaser shall deliver or cause to be delivered a detailed certified
statement(s) verifying collections and remittances required pursuant to this
Agreement relating to Seller's prior ownership of the Property certified by the
current property manager of the Property that the contents in such statement(s)
are in all respects true and correct. The Seller Parties shall keep all
information obtained pursuant to this Section in confidence, except to the
extent required to defend or prosecute any litigation arising out of or related
to their prior ownership of the Property (including Protest Proceedings and the
Reserved Claims) or for purposes of disclosure to investors or otherwise
required by law.
(b) SELLER COOPERATION. Following Closing and until February 16,
1999, the Seller Parties shall, upon request, give the Purchaser Parties and
their respective agents and contractors, reasonable access to Seller's books and
records, at Seller's offices, for purposes of verifying collections and
remittances required pursuant to this Agreement, at reasonable times and upon
reasonable advance notice to Seller (recognizing such books and records may be
in storage). The Purchaser Parties shall
<PAGE>
21
keep all information obtained pursuant to this Section in confidence, except to
the extent required to defend or prosecute any litigation arising out of or
related to the collections and remittances required pursuant hereto or for
purposes of disclosure to investors or lenders (both existing and prospective)
or otherwise required by law.
(c) RESERVED CLAIMS. Notwithstanding any other provisions of this
Agreement, Seller hereby reserves and retains, exclusively for itself, the
Reserved Claims, and all rights, title and interests therein and benefits
thereof, at law and/or in equity, and nothing herein shall be deemed to limit or
impair in any respect Seller's rights and entitlement to independently enforce
any of the Reserved Claims by such means as Seller deems necessary or
appropriate, which may include the commencement of legal proceedings (other than
against Tenants for purposes of collecting Uncollected Rents). Purchaser is not
entitled to, and Purchaser agrees that it shall not, waive, discharge or modify
any of the rights, title, interests, benefits and other provisions of the
Reserved Claims, or attempt to do any of the foregoing.
(d) REMITTANCE OF FUNDS. Following Closing, each of Seller and
Purchaser agrees to promptly remit any amounts collected or received by it to
which the other may be entitled under the terms of Sections 3.3 and 3.4(c),
whether or not such amounts consist of Uncollected Rents (including accounts
receivable) or Reserved Claims.
SECTION 3.5 APPLICATION OF EARNEST MONEY. The Earnest Money shall be
held and disbursed and/or credited against the Purchase Price in accordance with
the terms of the Earnest Money Trust Agreement and the provisions of this
Agreement, including the provisions of this Agreement. Seller, Purchaser and
Escrow Agent shall execute the Earnest Money Trust Agreement contemporaneously
with the execution of this Agreement and Purchaser's deposit of the Earnest
Money with Escrow Agent.
ARTICLE IV CLOSING; CONVEYANCING DOCUMENTS
SECTION 4.1 CLOSING ESCROW. On or prior to the Closing Date, all
Conveyancing Documents and funds required for Closing, including the Purchase
Price, shall be placed in escrow pursuant to the terms of the Escrow Agreement.
Closing shall not be deemed to have occurred and the Conveyancing Documents
placed in escrow shall not be deemed effective unless and until: (a) each and
all of the Seller's Conditions Precedent and Purchaser's Conditions Precedent
have been fully and completely satisfied or waived, strictly in accordance with
the terms hereof; and (b) the Conveyancing Documents have been delivered out of
escrow and the funds disbursed, including payment of the Purchase Price to
Seller, by Escrow Agent in accordance with the terms of the Escrow Agreement.
Closing shall occur on or prior to the Closing Date at the offices of Andrews &
Kurth L.L.P., 1717 Main Street, Suite 3700, Dallas, Texas or such other place as
may be mutually agreed to by the parties. The risk of loss of the Property shall
be borne by the Seller until the release of the Conveyancing Documents from
escrow at Closing, except as otherwise specifically set forth in this Agreement.
SECTION 4.2 CONVEYANCING DOCUMENTS. On or prior to the Closing Date,
the following documents necessary for Closing (collectively, the "Conveyancing
Documents") shall be executed and/or delivered to Escrow Agent or as otherwise
hereinafter provided by the applicable parties designated in Sections 4.2(a)
through (k) below, to be held in escrow pursuant to the terms of the Escrow
Agreement. All Conveyancing Documents shall be substantially in the forms of the
Exhibits referenced hereinafter.
<PAGE>
22
(a) DEED. Deed, in the form attached as Exhibit F, shall be
properly executed and delivered into escrow by Seller, in recordable form, for
purposes of conveying the Property (other than the Leases, Contracts and
Personal Property) to Purchaser as contemplated hereunder.
(b) BILL OF SALE. Bill of Sale, in the form attached as Exhibit
G, shall be properly executed and delivered into escrow by Seller for purposes
of conveying the Personal Property to Purchaser as contemplated hereunder.
(c) ASSIGNMENT OF LEASES. Assignment of Leases, in the form
attached as Exhibit H, shall be properly executed and delivered into escrow by
Seller, as assignor, and by Purchaser, as assignee, for purposes of the
assignment to and assumption by Purchaser of the Leases (including security
deposits) as contemplated hereunder.
(d) ASSIGNMENT OF CONTRACT RIGHTS. Assignment of Contract Rights,
in the form attached as Exhibit I, shall be properly executed and delivered into
escrow by Seller, as assignor, and by Purchaser, as assignee, for purposes of
the assignment to and assumption by Purchaser of the Contracts as contemplated
hereunder.
(e) SETTLEMENT STATEMENT. The Settlement Statement, on the basic
format attached hereto as Exhibit J, shall be properly executed and delivered
into escrow by Seller and Purchaser, setting forth the Purchase Price, all
prorations and other adjustments to be made pursuant to the terms hereof, and
the funds required for Closing as contemplated hereunder.
(f) TENANT NOTICES. A Tenant Notice, in the form attached as
Exhibit K, shall be properly executed and delivered into escrow by Seller and
Purchaser for purposes of notifying all Tenants of the assignment to and
assumption by Purchaser of the Leases as contemplated hereunder.
(g) FIRPTA AFFIDAVIT. A FIRPTA Affidavit, in the form attached as
Exhibit L, shall be properly executed and delivered into escrow by Seller.
(h) CONTRACTOR NOTICES. A Contractor Notice, in the form attached
as Exhibit M, shall be properly executed and delivered into escrow by Seller and
Purchaser for purposes of notifying all parties under the Contracts of the
assignment to and assumption by Purchaser of the Contracts as contemplated
hereunder.
(i) SELLER'S AFFIDAVIT. A Seller's Affidavit, in the form
attached as Exhibit N, shall be properly executed and delivered into escrow by
Seller.
(j) TRANSFER DECLARATIONS. All transfer tax statements,
declarations and filings as may be necessary or appropriate for purposes of
recordation of the deed shall be properly executed and delivered into escrow by
Seller and/or Purchaser, as applicable.
(k) MISCELLANEOUS. Such other documents and instruments as the
parties may agree in writing shall be executed and/or delivered into escrow.
At the Closing, Seller will cause to be delivered to Purchaser (i) a dated and
executed commitment for the issuance of an owner's policy of the title insurance
in the amount of the purchase price referenced on settlement statements approved
by Seller and Purchaser and on the standard form in use in the State
<PAGE>
23
of Texas insuring good and indefeasible fee simple title to the parcel of land
described on Exhibit A, subject to the standard printed exceptions and the
Permitted Exceptions (as herein defined), (ii) "Bills Paid Affidavit" on the
Escrow Agent's standard form, as revised by Seller and in form and substance
acceptable to Seller verifying to Seller's knowledge that there are no unpaid
bills or claims for labor performed or materials furnished to the Property prior
to the Closing Date other than those incurred in the ordinary course of
business,(iii) a rent roll report in the form of that certain "Rent Roll Report"
referenced in Exhibit T, and (iv) Audit Letter executed by First Worthing
Company Limited in the form of Exhibit V.
Immediately following Closing, Seller shall deliver possession of the
Property and all keys to the Property (to the extent in the possession of Seller
or Property Manager) to Purchaser. Originals or, if originals are not available,
copies, of all Leases and Contracts, together with the additional documents, if
any, mutually agreed to by Seller and Purchaser, to the extent in Seller's
possession or under its control, shall be held at the Property and delivered
with possession of the Property. Promptly following Closing, Purchaser shall be
responsible for delivering all Contractor Notices to parties to the Contracts
and Tenant Notices to Tenants and shall within five (5) business days after
Closing deliver copies thereof to Seller. Promptly following Closing, Seller
shall deliver copies of terminations of the Other Contracts to the extent such
terminations are accomplished by Seller by written notice to the parties thereto
and Seller shall deliver copies thereof to Purchaser at Closing.
ARTICLE V REPRESENTATIONS AND WARRANTIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser
hereby makes the following representations and warranties for the benefit of
Seller as of the date hereof and the Closing Date, each of which representations
and warranties shall survive Closing of the transactions contemplated hereby:
(a) CORPORATE STATUS. Purchaser is a corporation duly organized
and validly existing under the laws of the State of Virginia and is in good
standing and duly qualified to do business in the States of Virginia and Texas.
(b) POWER AND AUTHORITY. Purchaser has full power and authority
to enter into and perform this Agreement, the documents and certificates to be
executed and delivered by Purchaser pursuant hereto, and each and all of the
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof. Purchaser has, by all necessary action, validly authorized the
execution, delivery and performance of this Agreement, the documents and
certificates to be executed and delivered by Purchaser in connection herewith,
and the transactions contemplated hereby and thereby in accordance with the
terms hereof and thereof, and the performance and assumption by Purchaser of
each and all of Purchaser's covenants, obligations, liabilities and duties under
and with respect to the Leases and Contracts pursuant hereto in accordance with
the respective terms thereof. The individual(s) executing this Agreement, and
each of the other documents and certificates to be executed and delivered in
connection herewith, on behalf of Purchaser ("Authorized Signatories") is(are)
competent, duly appointed and authorized officer(s) and/or agents of Purchaser,
with full legal capacity, power and authority, acting alone, to act on behalf of
and bind Purchaser in all respects.
(c) AGREEMENT BINDING. This Agreement and each of the documents
and certificates executed or to be executed and delivered by Purchaser, and/or
the Authorized Signatories
<PAGE>
24
in connection herewith are, or will be when executed and delivered, the legal,
valid and binding obligations of and enforceable against Purchaser in accordance
with the terms hereof and thereof.
(d) ACTIONS AGAINST PURCHASER. Purchaser has no actual knowledge
of any action, proceeding, investigation or Insolvency Proceeding pending or
threatened in writing against Purchaser or any of the other Purchaser Parties
before any Governmental Authority which would affect or impair in any respect
Purchaser's ability to consummate the transactions contemplated hereby.
(e) NO CONFLICTING ORDERS. The execution, delivery and
performance by Purchaser of this Agreement and each of the documents and
certificates to be executed and delivered by Purchaser pursuant hereto do not
violate any of the terms, conditions or provisions of any judgment, order,
injunction or decree of any Governmental Authority to which Purchaser is
subject. No consent, waiver or approval of any Person, which has not already
been obtained, is required in connection with the execution, delivery and
performance by Purchaser of this Agreement and each of the documents and
instruments to be executed and delivered by Purchaser pursuant hereto, except as
may be set forth in the Contracts or Leases.
(f) SOLVENCY; NO FRAUDULENT CONVEYANCE. Purchaser is not
Insolvent and will not become Insolvent as a result of entering into and
consummating this Agreement and the purchase of the Property, including the
Leases and Contracts, and the Obligations in accordance with the terms hereof,
nor are the transfers to be made hereunder or obligations incurred in connection
herewith made or incurred by Purchaser with any intent to hinder, delay or
defraud any creditors to which Purchaser is or becomes indebted. Purchaser is
not engaged in business or any transactions, including the transactions
contemplated hereunder, or about to engage in any business or transactions, for
which any remaining property of Purchaser is unreasonably small capital, nor
does Purchaser intend to incur or believe that it will incur, debts that would
be beyond its ability to pay as such debts matured. Purchaser acknowledges that
it is receiving new, fair, reasonably equivalent value in exchange for the
transfers and obligations contemplated by this Agreement, and affirmatively
represents that its entry into this Agreement and consummation of the
transactions contemplated hereby does not constitute a fraudulent conveyance or
preferential transfer under the Bankruptcy Code or any other federal, state or
local laws affecting the rights of creditors generally.
SECTION 5.2 REPRESENTATIONS AND WARRANTIES BY SELLER. Seller hereby
makes the representations and warranties in Sections 5.2(a) through (g) for the
benefit of Purchaser as of the date hereof and the Closing Date, each of which
shall be deemed to survive the Closing of the transactions contemplated hereby.
Seller further hereby makes the representations and warranties in Sections
5.2(h) through 5.2(k) as of the date hereof or the date referenced therein only,
and likewise such representations and warranties shall not be or be deemed to be
continuing. A representation or warranty in Sections 5.2(h) through 5.2(k) (or
portion thereof) shall survive Closing for the Survival Period (hereinafter
defined) if and only to the extent that Purchaser could not determine the truth
or accuracy of such representation or warranty (or applicable portion thereof)
prior to Closing and otherwise shall not survive, and shall be deemed terminated
as of, the Closing:
(a) CORPORATE STATUS. Seller is a corporation, duly organized and
validly existing under the laws of the State of Connecticut and is in good
standing and licensed to do business under the laws of the State of Connecticut
and Texas.
<PAGE>
25
(b) POWER AND AUTHORITY. Seller has full power and authority to
enter into and perform this Agreement, the documents and certificates to be
executed and delivered by Seller pursuant hereto, and each and all of the
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof. Seller has, by all necessary action, validly authorized the
execution, delivery and performance of this Agreement, the documents and
certificates to be executed and delivered by Seller in connection herewith, and
the transactions contemplated hereby and thereby in accordance with the terms
hereof and thereof, and the performance and assignment by Seller of each and all
of Seller's covenants, obligations, liabilities and duties under and with
respect to the Leases and Contracts pursuant hereto in accordance with the
respective terms thereof. The individual(s) executing this Agreement, and each
of the other documents and certificates to be executed and delivered in
connection herewith, on behalf of Seller is(are) competent, duly appointed and
authorized officer(s) of Seller, with full legal capacity, power and authority,
acting alone, to act on behalf of and bind Seller in all respects.
(c) AGREEMENT BINDING. This Agreement and each of the documents
and certificates executed or to be executed and delivered by Seller in
connection herewith are, or will be when executed and delivered, the legal,
valid and binding obligations of and enforceable against Seller in accordance
with the terms hereof and thereof.
(d) ACTIONS AGAINST SELLER. To Seller's knowledge, there is no
action, proceeding, investigation or Insolvency Proceeding pending or threatened
in writing against Seller or any of the other Seller Parties before any
Governmental Authority relating to the Property or which would affect or impair
in any respect Seller's ability to consummate the transactions contemplated
hereby.
(e) SELLER NOT A "FOREIGN PERSON." Seller is not a "foreign
person" within the meaning of Section 1445 of the Internal Revenue Code, as
amended, and the regulations promulgated thereunder, or Seller shall otherwise
comply with the provisions thereof.
(f) SOLVENCY; NO FRAUDULENT CONVEYANCE. Seller is not Insolvent
and will not become Insolvent as a result of entering into and consummating this
Agreement and the sale of the Property, including the Leases and Contracts, and
the Obligations in accordance with the terms hereof, nor are the transfers to be
made hereunder or obligations incurred in connection herewith made or incurred
by Seller with any intent to hinder, delay or defraud any creditors to which
Seller is or becomes indebted. Seller is not engaged in business or any
transactions, including the transactions contemplated hereunder, or about to
engage in any business or transactions, for which any remaining property of
Seller is unreasonably small capital, nor does Seller intend to incur or believe
that it will incur, debts that would be beyond its ability to pay as such debts
matured. Seller acknowledges that it is receiving new, fair, reasonably
equivalent value in exchange for the transfers and obligations contemplated by
this Agreement, and affirmatively represents that its entry into this Agreement
and consummation of the transactions contemplated hereby does not constitute a
fraudulent conveyance or preferential transfer as to Seller under the Bankruptcy
Code or any other federal, state or local laws affecting the rights of creditors
generally.
(g) NO CONFLICTING ORDERS. The execution, delivery and
performance by Seller of this Agreement and each of the documents and
certificates to be executed and delivered by Seller pursuant hereto do not
violate any of the terms, conditions or provisions of any judgment, order,
injunction or decree of any Governmental Authority to which Seller is subject.
No consent, waiver or approval of any Person, which has not already been
obtained, is required in connection with the
<PAGE>
26
execution, delivery and performance by Seller of this Agreement and each of the
documents and instruments to be executed and delivered by Seller pursuant
hereto.
(h) LEASES. To Seller's knowledge, Exhibit E attached hereto is a
true and complete list of all Leases in effect as of the date thereof. To
Seller's knowledge, true and complete copies of the Leases have been or will be
delivered to Purchaser as part of the Evaluation Materials. To Seller's
knowledge, Exhibit Q attached hereto is a list of all security deposits held by
Seller for the Leases in effect as of the date thereof.
(i) GOVERNMENTAL NOTICES. Except as disclosed by the Litigation
Schedule attached as Exhibit O ("Litigation Schedule"), to Seller's knowledge,
Seller has not received, as of the date hereof, any written notices from any
Governmental Authority of any existing, pending or threatened investigation or
inquiry by any Governmental Authority or any remedial actions by any
Governmental Authority under, or any violations of any applicable law, statute,
ordinance, rule, regulation, order, determination of any Governmental Authority
or judicial court, or any restrictive covenant, deed restriction or zoning or
building ordinance or classification affecting the Property pertaining to
health, public safety, or the environment ("Environmental Laws"), which have not
been complied with in all material respects. Except as disclosed on the
Litigation Schedule, to Seller's knowledge, Seller has not received any written
notice of any existing, pending or threatened litigation (including, without
limitation, any condemnation or notice of condemnation) affecting or related to
the Property or any of the Leases.
(j) ASSIGNMENT OF LEASES. As of Closing, none of the landlord's
interest in the Leases and none of the rents or other amounts payable thereunder
to landlord will be subject to any assignment (other than the Assignment of
Leases to be delivered by Seller at Closing), pledge, or other encumbrance
created by Seller.
(k) ENVIRONMENTAL MATTERS. Except as may be disclosed by the
Litigation Schedule or the matters set forth on the Environmental Reports
Schedule attached as Exhibit R, to Seller's knowledge: (i) the real property
constituting a portion of the Property has not been contaminated by or used for
the storage or disposal of any hazardous substances, hazardous materials or
petroleum, other than the storage and use of cleaning products, office supplies,
and other substances and materials used in the normal operations and maintenance
of the Property and in compliance with applicable Environmental Laws; (ii)
neither such real property or the improvements constructed thereon contain any
building material having asbestos-containing materials as a component part or
any underground storage tanks which are required to be removed by Seller; or
(iii) no environmental conditions that exceed actionable limits or require
remediation under applicable Environmental Laws by Seller that have not been
resolved as of the date hereof.
(l) OWNERSHIP. Seller has good and indefeasible fee simple title
to the parcel of land described on Exhibit A subject to (i) all matters
disclosed by documents in the possession or control of Purchaser relating to any
portion of the Property, (ii) all matters of public record, (iii) all matters
that would be revealed by a physical inspection or survey (including, without
limitation, any and all the surveys prepared in connection with this Agreement)
of all or any portion of the Property, (iv) all rights-of-way and easements, (v)
all matters common to any plat of subdivision in which the Property is located,
(vi) all leases, tenancies, licenses or other rights of occupancy or use for any
portion of the Property and all obligations arising thereunder or any assignment
or sublet thereunder including, without limitation, all Contracts, Leases, other
Contracts, (vii) all commitments, contracts, options or other agreements of any
kind in any way relating to the repair, maintenance, use, operation,
construction, design, ownership, lease
<PAGE>
27
or service of any portion of the Property, (viii) all rights of parties in
possession of any portion of the Property, (ix) all matters validly existing and
affecting title to the Property, including, without limitation, all taxes,
assessments and public charges on the Property for current and subsequent years,
zoning laws, building laws, regulations and ordinances of municipal and other
governmental authorities affecting the Property and all encumbrances of any kind
whatsoever affecting the Property, including, without limitation, all
encumbrances, exceptions and the like described or contemplated by any and all
title insurance abstracts, commitments, updates or policies issued in connection
herewith, (x) all restrictive covenants and agreements affecting any portion of
the Property, (xi) any discrepancies, conflicts or shortages in area or boundary
lines or any encroachments or protrusions or any overlapping of improvements,
and all encumbrances, exceptions and the like described or contemplated by any
and all title insurance, abstracts, commitments or policies issued in connection
herewith, and (xii) all reservations and/or exceptions of all oil, gas and other
minerals in, on, under or that may be produced from or otherwise affect any
portion of the Property (collectively, the "Permitted Exceptions").
Purchaser hereby acknowledges that, in making the foregoing representations and
warranties, Seller has relied entirely and solely on the information and
schedules prepared by Property Manager (without independent verification or
undertaking any review of its files or the materials assembled by Property
Manager), and Property Manager has been unwilling to confirm the accuracy and
completeness of the information and schedules which it has provided to Seller.
Seller has no obligation to perform any investigation or due diligence to
confirm the accuracy and completeness of the information and schedules provided
by Property Manager and no knowledge, acts or omissions of Property Manager
shall be imputed to Seller hereunder.
If and to the extent a representation and warranty set forth in Sections 5.2(h)
through 5.2(k) (or portion thereof) survives Closing, such representation or
warranty (or portion thereof) is expressly limited to and shall automatically be
deemed to expire and terminate on the date which is 90 days from the Closing
Date ("Survival Period"), except for claims for which Purchaser has given
written notice as set forth below prior to the expiration of the Survival
Period, whereupon Purchaser shall have the rights and remedies set forth in
Article VI. Notwithstanding the foregoing, no rights or remedies shall be deemed
to accrue on account of a breach of any such representations or warranties
unless and until: (1) Purchaser shall have given Seller written notice
specifying in reasonable detail any alleged breach prior to the expiration of
the Survival Period; and (2) Seller shall have failed to cure (which may include
bonding over a defect in a manner reasonably agreed to by Purchaser) any breach
within thirty (30) days, or such longer period of time as is reasonable under
the circumstances if such breach is susceptible to cure, not to exceed one
hundred and twenty (120) days after receipt of notice from Purchaser, provided
Seller is continuously and diligently pursuing a cure of such breach. Nothing
herein shall be deemed to modify or extend the Survival Period for the
representations and warranties set forth in Sections 5.2(h) through 5.2(k).
ARTICLE VI DEFAULT REMEDIES
SECTION 6.1 BY PURCHASER. If prior to Closing, Purchaser breaches in
any material respect any of its covenants, obligations, liabilities or duties
hereunder without such breach being cured within applicable notice and cure
periods, or in any documents or certificates executed and delivered by any of
the Purchaser Parties in connection herewith, or if any of Purchaser's
representations and warranties prove to be false in any material respect as of
the date deemed to be made, then Seller shall be entitled to elect one of the
following options: (a) terminate its obligation to sell and Purchaser's
obligation to purchase the Property and not proceed with Closing, whereupon
Seller shall be entitled to prompt receipt
<PAGE>
28
of the Earnest Money from Escrow Agent pursuant to the Earnest Money Trust
Agreement and/or Purchaser, as applicable, and retain the Earnest Money as its
sole and exclusive remedy and as liquidated damages for Purchaser's breach of
this Agreement, any and all other claims for losses, damages, costs and expenses
being deemed waived hereby, provided however, the recovery of reasonable
attorneys' fees (whether incurred in connection with nonjudicial action, prior
to trial, at trial or on appeal or review, including any proceedings under the
Bankruptcy Code) and expenses as hereinafter provided and any indemnification
obligations set forth in this Agreement shall not be limited hereby; or (b) in
the event Closing occurs, exercise the rights and remedies set forth in Section
6.3. Further, in the event Seller elects not to proceed to Closing and receives
and retains the Earnest Money as provided herein, and because the actual damages
suffered by Seller as a result of such breach by Purchaser would be
impracticable or extremely difficult or impossible to determine, Purchaser and
Seller agree that the amount of the Earnest Money shall be the amount of damages
to which Seller is entitled in such event and that the amount of such liquidated
damages is reasonable and does not constitute a penalty. Upon full receipt of
the Earnest Money by Seller pursuant to (a) above, this Agreement, including the
purchase and sale obligations of Purchaser and Seller hereunder, shall be deemed
automatically terminated, and the parties shall have no further rights,
obligations or liabilities hereunder, provided however, the recovery of
reasonable attorneys' fees (whether incurred in connection with nonjudicial
action, prior to trial, at trial or on appeal or review, including any
proceedings under the Bankruptcy Code) and expenses as hereinafter provided and
any indemnification obligations set forth in this Agreement shall not be limited
hereby. If Purchaser hinders, delays, contests or interferes with Seller's
receipt or retention of the Earnest Money (or attempts to do any of the
foregoing), then in any action brought thereon, the prevailing party shall be
entitled to recover reasonable attorney's fees and expenses (whether incurred in
connection with nonjudicial action, prior to trial, at trial or on appeal or
review, including any proceedings under the Bankruptcy Code). If Seller is the
prevailing party, such amounts shall be in addition to retention of the Earnest
Money, and if Purchaser is the prevailing party, such amounts shall be in
addition to the return of the Earnest Money by Seller.
SECTION 6.2 BY SELLER. If prior to Closing, Seller breaches in any
material respect any of its covenants, obligations, liabilities or duties
hereunder without such breach being cured within applicable notice and cure
periods, or in any documents or certificates executed and delivered by any of
the Seller Parties, or if any of Seller's representations and warranties prove
to be false in any material respect as of the date deemed to be made, Purchaser
shall be entitled to elect one of the following options: (a) terminate its
obligations to purchase and Seller's obligations to sell the Property and not
proceed with Closing, whereupon Purchaser shall be entitled to a prompt return
of the Earnest Money from Escrow Agent (to the extent actually paid by
Purchaser) pursuant to the Earnest Money Trust Agreement and, as its sole and
exclusive remedy, to recover from Seller its reasonable, out-of pocket Due
Diligence costs and expenses actually incurred, the aggregate amount of such
costs and expenses not to exceed the total amount of the Earnest Money, any and
all other claims for losses, damages, costs and expenses being deemed waived
hereby; provided however, the recovery of reasonable attorneys' fees (whether
incurred in connection with nonjudicial action, prior to trial, at trial or on
appeal or review, including any proceedings under the Bankruptcy Code) and
expenses as hereinafter provided and any indemnification obligations set forth
in this Agreement shall not be limited hereby; (b) seek specific performance of
Seller's obligation to sell the Property, and if the Purchaser prevails in
obtaining such specific performance, Purchaser shall be entitled to recover its
reasonable legal fees and costs actually incurred in obtaining the decree for
specific performance (at trial but not on appeal) and otherwise Seller shall be
entitled to recover its reasonable legal fees and costs in connection therewith;
and (c) proceed with Closing and in the event Closing occurs, exercise the
rights and remedies set forth in Section 6.3. If Seller hinders, delays,
contests or interferes with Purchaser's receipt or retention of the Earnest
Money
<PAGE>
29
pursuant to (a) above (or attempts to do any of the foregoing), then in any
action brought thereon, the prevailing party shall be entitled to recover
reasonable attorney's fees and expenses (whether incurred in connection with
nonjudicial action, prior to trial, at trial or on appeal or review, including
any proceedings under the Bankruptcy Code. The prevailing party in any such
action for damages, or in the event Purchaser must pursue an action to recover
the Earnest Money, shall be entitled to recover reasonable attorney's fees and
expenses (whether incurred in connection with nonjudicial action, prior to
trial, at trial or on appeal or review, including any proceedings under the
Bankruptcy Code).
SECTION 6.3 POST-CLOSING DEFAULTS. If, following Closing, any party
hereto breaches any of its covenants, obligations, liabilities, indemnities or
duties hereunder, or in any documents or certificates executed and delivered by
it, or if any of its representations and warranties which survive Closing prove
to be false in any material respect as of the date deemed to be made, the other
party shall be entitled to recover from such defaulting party any and all
damages (excluding any special, consequential and/or lost profit damages and
subject to the limitations set forth in Sections 5.2, 6.1 and 6.2), costs and
expenses, including reasonable attorneys' fees (whether incurred in connection
with nonjudicial action, prior to trial, at trial or on appeal or review,
including any proceedings under the Bankruptcy Code) and expenses suffered or
incurred by such other party as a result of such breach.
SECTION 6.4 GENERAL PROVISIONS. All rights and remedies in favor of the
parties in this Agreement are the sole and exclusive rights and remedies
available to the parties and exclusive of any other rights and remedies
available at law or in equity. The rights and remedies in favor of the parties
hereunder are cumulative and may be exercised successively or concurrently as
determined by such parties in their sole discretion, except as otherwise
provided herein to the contrary (including in Sections 5.2, 6.1 and 6.2). Except
as provided herein to the contrary, the exercise of any one right or remedy
shall not be a waiver of the right to exercise at the same time or thereafter
any other right or remedy and no delay in exercising or failing to exercise any
rights or remedies hereunder (subject to the limitations set forth herein) shall
constitute, or be deemed to constitute, a waiver of the right to exercise any
such rights or remedies at any time thereafter or a release, satisfaction or
discharge of the terms hereof, all such rights and remedies remaining
continuously in force. This Article VI, including without limitation, the
liquidated damages provisions and waivers set forth in Sections 6.1 and 6.2,
shall not limit or impair in any way, and shall be in addition to, the rights
and remedies any party hereto may have by virtue of any specific indemnities
granted herein (including Sections 2.4, 7.1, 7.11, 7.17 and 7.23) or in any
documents or certificates executed and delivered by any of the parties to the
other.
ARTICLE VII MISCELLANEOUS
SECTION 7.1 ASSIGNMENT. Seller and Purchaser hereby acknowledge that
this Agreement is a contract to extend certain financial accommodations and is
personal to Seller and Purchaser and neither party shall have any right to
assign this Agreement or any of its rights or obligations hereunder (including
any representations and warranties included herein) without the prior written
consent of the other party, which consent may be withheld, conditioned or
delayed in Seller's or Purchaser's, as the case may be, sole and absolute
discretion, except as hereinafter provided. Any assignment or attempted
assignment by either party of this Agreement or such party's rights and
obligations hereunder, except in strict accordance with the terms of this
Section 7.1, shall constitute a breach by such party under this Agreement and
shall entitle the other party to exercise any and all of their rights and
remedies hereunder. Seller will consent to a one time only assignment by
Purchaser of this Agreement and its rights and benefits hereunder, prior to
Closing, to any Person which is owned or controlled, directly or indirectly, by
Purchaser or any of its equity holders, subsidiaries or affiliates, and/or
<PAGE>
30
to any Person which owns or controls, directly or indirectly, Purchaser or any
of its equity holders, subsidiaries or affiliates, any Person that may succeed
to the interests of Purchaser by merger, consolidation or other business
combination, or any Person who acquires all or substantially all of Purchaser's
assets or any of its equity holders, affiliates or subsidiaries, provided that
as a condition precedent to the effectiveness of and prior to any such
assignment: (a) Purchaser shall give Seller at least ten (10) days prior written
notice of its intent to assign this Agreement; and (b) Purchaser and such
assignee shall have executed and delivered to Seller an amendment to this
Agreement, in form and content reasonably satisfactory to Seller, wherein the
assignee expressly assumes and agrees to pay and perform all of the Purchaser's
covenants, representations, warranties, obligations and liabilities hereunder
(whether arising prior or subsequent to such assignment) and under all documents
and certificates executed and delivered or to be executed and delivered by the
Purchaser or such permitted assignee in connection herewith, and Purchaser
agrees to remain jointly and severally liable with such assignee for the payment
and performance of all of such covenants, obligations, liabilities,
representations and warranties. Purchaser will consent to a one time only
assignment after the Closing Date by Seller of this Agreement and its rights and
benefits hereunder to any Person which is owned or controlled, directly or
indirectly, by Seller or any of its equity holders, subsidiaries or affiliates,
and/or to any Person which owns or controls, directly or indirectly, Seller or
any of its equity holders, subsidiaries or affiliates, any Person that may
succeed to the interests of Seller by merger, consolidation, liquidation, or
other business combination or reorganization, or any Person who acquires all or
substantially all of Seller's assets or any of its equity holders, affiliates or
subsidiaries, including The Travelers Group, Inc., provided that as a condition
precedent to the effectiveness of and prior to any such assignment: (i) Seller
shall give Purchaser at least ten (10) days prior written notice of its intent
to assign this Agreement; and (ii) Seller and such assignee shall have executed
and delivered to Purchaser an amendment to this Agreement, in form and content
reasonably satisfactory to Purchaser, wherein the assignee expressly assumes and
agrees to pay and perform all of the Seller's remaining covenants,
representations, warranties, obligations and liabilities hereunder (whether
arising prior or subsequent to such assignment) and under all documents and
certificates executed and delivered or to be executed and delivered by the
Seller or such permitted assignee in connection herewith, and Seller agrees to
remain jointly and severally liable with such assignee for the payment and
performance of all of such covenants, obligations, liabilities, representations
and warranties. Any assignment or other Transfer, or attempted or purported
assignment or other Transfer, by Seller or Purchaser, as the case may be, of
this Agreement, or any of its rights and benefits hereunder, shall be NULL AND
VOID, unless made with the prior written consent of the other and strictly in
accordance with the terms hereof. Any such permitted assignee shall be deemed
the "Purchaser" or "Seller,"as the case may be, for all purposes hereunder from
and after the assignment by Purchaser or Seller, as applicable, of this
Agreement and its rights, benefits and obligations in accordance with the terms
hereof; provided, however, the original named Purchaser and Seller, as the case
may be, herein shall remain jointly and severally liable after such assignment
with its respective permitted assignee for the performance of all covenants,
obligations, duties, liabilities, representations and warranties of Purchaser or
Seller, respectively, under this Agreement and all documents and certificates
executed and delivered or to be executed and delivered by Purchaser or Seller or
their respective permitted assignees in connection herewith. Purchaser hereby
agrees to indemnify, defend and hold the Seller Parties harmless from and
against any Liabilities arising out of or relating to any assignment of or
attempt by Purchaser to assign this Agreement or its rights and obligations
hereunder. Seller hereby agrees to indemnify, defend and hold the Purchaser
Parties harmless from and against any Liabilities arising out of or relating to
any assignment of or attempt by Seller to assign this Agreement or its rights
and obligations hereunder. Notwithstanding the foregoing, so long as 7.1(ii)
above is satisfied, Purchaser shall be entitled to assign this Agreement to an
entity which is controlled by Apple Residential Income Trust, Inc. upon three
(3) business days prior written
<PAGE>
31
notification by Purchaser to Seller and Seller's counsel of its intent to
assign, which such date of notification shall be not later than three (3)
business days prior to the Closing Date and such assignment and assumption shall
be in the form of Exhibit W and delivered at Closing to Seller, but no
additional assignment shall be permitted.
SECTION 7.2 NOTICES. All notices, demands, requests and other
communications required hereunder shall be in writing and shall be deemed to
have been given and/or received: (a) upon delivery if personally delivered; (b)
three (3) days after deposit in the United States Mail when delivered, postage
pre-paid, by certified or registered mail; (c) the next business day after
deposit with a nationally recognized overnight delivery service marked for
delivery on the next business day; or (d) upon completion of transmission (which
is confirmed by telephone or a statement generated by the transmitting machine)
if sent by facsimile to compatible equipment in the possession of the recipient,
addressed to the party for whom it is intended at its address hereinafter set
forth:
(a) IF TO SELLER: The Travelers Indemnity Company
One Tower Square
9PBA
Hartford, Connecticut 06183-2030
Attn: Mr. Steve Kalmin
(860) 954-1186 (Facsimile)
WITH A COPY TO: The Travelers Group
One Tower Square
9PBA
Hartford, Connecticut 06183-2030
Attn: Ellen N. Derrig, Esquire
(860) 954-2620 (Facsimile)
WITH A COPY TO: Kathleen J. Wu, Esquire
Andrews & Kurth L.L.P.
A Registered Limited Liability Partnership
1717 Main Street, Suite 3700
Dallas, Texas 75201
(214) 659-4401 (Facsimile)
(b) IF TO PURCHASER: Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Gustav Rempies, III
(804) 782-9302 (Facsimile)
WITH A COPY TO: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
5575 Chestnut Street
P.O. Box 488
Cedarhurst, New York 11516
(516) 374-3490 (Facsimile)
<PAGE>
32
WITH A COPY TO: Robert E. Morrison, Esq.
Brown, McCarroll & Oaks Hartline
300 Crescent Court
Suite 1400
Dallas, Texas 75201-6929
(214) 999-6170 (Facsimile)
Any party may designate a change of address by written notice to the other,
given at least ten (10) days before such change of address is to become
effective.
SECTION 7.3 NO THIRD PARTY BENEFICIARY. The provisions of this
Agreement are solely for the benefit of Purchaser and Seller, and their
successors and permitted assigns. No provision of this Agreement or of any of
the documents and certificates executed in connection herewith shall be
construed as creating in any Person other than Purchaser and Seller, and their
successors and permitted assigns, any rights of any nature whatsoever.
SECTION 7.4 SUCCESSORS AND ASSIGNS. Subject to the provisions of
Sections 7.1 and 7.3, all of the terms, covenants and conditions contained
herein and in the other documents and certificates executed in connection
herewith shall apply to and be binding upon, and inure to the benefit of, the
successors and permitted assigns of Purchaser and Seller, respectively.
SECTION 7.5 SEVERABILITY. If any provision in this Agreement is found
by a court of competent jurisdiction to be in violation of any applicable law,
and if such court should declare such provision of this Agreement to be
unlawful, void, illegal or unenforceable in any respect, the remainder of this
Agreement shall be severable, and the rights, obligations and interests of the
parties hereto under the remainder of this Agreement shall continue in full
force and effect. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part or provision of this Agreement
shall deprive any party of the economic benefit intended to be conferred by this
Agreement, the parties shall negotiate, in good faith, to develop a structure,
the economic effect of which is nearly as possible the same as the economic
effect of this Agreement without regard to such invalidity.
SECTION 7.6 MODIFICATION. This Agreement and the terms hereof may not
be changed, waived, modified, canceled, discharged or terminated orally, but
only by an instrument or instruments in writing signed by Purchaser and Seller.
SECTION 7.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
TEXAS, EXCLUDING CONFLICTS OF LAW PRINCIPLES.
SECTION 7.8 CONSENT TO JURISDICTION. Each of Purchaser and Seller
hereby consents to the exercise of personal jurisdiction over it by the federal
court in the Northern District of Texas or any state circuit or district courts
in Dallas County, and consents to the laying of venue in any such federal or
state courts.
<PAGE>
33
SECTION 7.9 HEADINGS. The Article headings and the Section and
Subsection titles hereof are inserted for convenience of reference only, are not
intended to modify the terms hereof, and shall not be construed in any way to
limit or define the content, scope or intent of the provisions hereof.
SECTION 7.10 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto,
each of which is incorporated herein by this reference, together with the
documents and certificates executed and delivered in connection herewith set
forth the entire agreement between Purchaser and Seller relating to the
transactions contemplated hereby, and all prior or contemporaneous agreements,
understandings, representations or statements, oral or written, are superseded
hereby and thereby.
SECTION 7.11 BROKER. Purchaser hereby represents and warrants to Seller
that it has not engaged any finder, broker or other agent with respect to any of
the transactions described by this Agreement or otherwise relating to the
acquisition of all or any portion of the Property, other than Broker whose
commission shall be paid by Purchaser under a separate agreement between
Purchaser and Broker in accordance with the terms thereof, and none of the
Purchaser Parties, including Broker, shall assert any claims against any of the
Seller Parties or the Property (or any portion thereof) for any brokerage or
sales commissions, finder's fees, consultant's fees or any other similar fees or
compensation of any kind or nature whatsoever, irrespective of the termination
of this Agreement and whether or not Closing occurs hereunder. Seller hereby
represents and warrants to Purchaser that it has not engaged any finder, broker
or other agents with respect to any of the transactions described by this
Agreement or otherwise relating to the sale of all or any portion of the
Property, and none of the Seller Parties shall assert any claims against the
Purchaser Parties for any brokerage or sales commissions, finder's fees,
consultant's fees or any other similar fees or compensation of any kind or
nature whatsoever, irrespective of the termination of this Agreement and whether
or not the Closing occurs hereunder. Purchaser hereby covenants and agrees to
indemnify, defend and hold harmless the Seller, and Seller covenants and agrees
to indemnify, defend and hold harmless the Purchaser, from and against any and
all liability, damage (including special and consequential), loss, lien,
expense, suit and claim (including reasonable attorneys' fees and expenses at
trial and appellate levels) caused by or arising out of: (a) a breach of the
aforesaid representations and warranties of the indemnifying party; and/or (b)
any claims for any brokerage or sales commissions, finder's fees, consultant's
fees or any other similar fees or compensation of the indemnifying party or any
person claiming to have dealt with, on behalf of, through or under such
indemnifying party. Notwithstanding anything to the contrary, Purchaser and
Seller hereby acknowledge and agree that Purchaser shall be responsible and
shall pay to Broker any brokerage or sales commissions, finder's fees,
consultant's fees or any other similar fees or compensation of any kind or
nature whatsoever, in connection with the transactions described by this or
contemplated by this Agreement.
SECTION 7.12 NO PERSONAL/JOINT LIABILITY. This Agreement and all
documents, agreements, understandings and arrangements relating hereto and to
the transactions contemplated hereby have been negotiated, executed and
delivered on behalf of Seller and Purchaser by their respective partners and/or
officers in their representative capacities and not individually, and bind only
the assets of Seller and Purchaser (including any assignee), respectively, and
no officer, director, employee, partner, agent or shareholder of either the
Seller Parties or Purchaser Parties shall be bound or held to any personal
liability or responsibility in connection with the agreements, obligations and
undertakings of Seller or Purchaser, as the case may be, hereunder. Any Person
dealing with Seller and/or Purchaser in connection herewith shall look solely to
the assets of Seller and Purchaser (including any assignee), respectively, for
the payment of any claim or for the performance of any of its agreements,
obligations or undertakings hereunder. Each party acknowledges and agrees that
each agreement and other
<PAGE>
34
document executed by the other party in accordance with or in respect of this
Agreement and the transactions contemplated hereby shall be deemed and treated
to include in all respects and for all purposes the provisions of this Section
7.12.
SECTION 7.13 SURVIVAL. All representations and warranties (subject to
the limitations in Section 5.2), covenants, obligations, indemnities and
provisions of this Agreement shall survive the Closing of the transactions
contemplated hereby and/or termination of this Agreement.
SECTION 7.14 WAIVER OF TRIAL BY JURY. SELLER AND PURCHASER HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION BROUGHT ON, UNDER OR BY VIRTUE OF OR RELATING IN ANY
WAY TO THIS AGREEMENT OR ANY OF THE DOCUMENTS OR CERTIFICATES EXECUTED IN
CONNECTION HEREWITH, OR ANY CLAIMS, DEFENSES, RIGHTS OF SET-OFF OR OTHER ACTIONS
PERTAINING HERETO OR THERETO.
PURCHASER'S INITIALS:/s/ GGR SELLER'S INITIALS:/s/ LML
-------- --------
SECTION 7.15 TIME IS OF ESSENCE. TIME IS OF THE ESSENCE under this
Agreement, each and all of the other documents and certificates executed in
connection herewith, and each and every term, covenant, condition and provision
hereof and thereof. Notwithstanding the foregoing, Purchaser shall have a one
time right to extend the Closing Date to 10:00 a.m., Dallas, Texas time on
January 6, 1999 (but Purchaser shall have the right to close before such date
provided Seller shall receive three (3) business days prior written notice from
Purchaser of such earlier date), provided, however, Purchaser shall only have
this one time right if Escrow Agent is in actual receipt of the full amount of
the Purchase Price in cash or other immediately available funds, which amount
shall be held by Escrow Agent pursuant to the terms of the Earnest Money Trust
Agreement and shall be deemed earned in and vested in Seller and nonrefundable
in all respects, except in the event of Sellers' breach hereunder (after the
giving of notice and expiration of any applicable cure period), and Purchaser
shall be prohibited from later claiming otherwise.
SECTION 7.16 EFFECTIVE DATE. Notwithstanding the fact that this
Agreement may have been executed on a date prior or subsequent thereto, this
Agreement shall be deemed effective on the date on which each and all of the
following conditions precedent to effectiveness are satisfied (but not prior
thereto): (a) Purchaser shall have executed and delivered this Agreement to
Seller and the Earnest Money Trust Agreement to Escrow Agent and Seller; (b)
concurrently with the execution and delivery by Purchaser of this Agreement and
the Earnest Money Trust Agreement, the Earnest Money shall have been deposited
and paid in full in accordance with the provisions of Section 3.1(a); and (c)
Seller shall have executed and delivered this Agreement and the Earnest Money
Trust Agreement to Purchaser and Escrow Agent. Any calculation of time periods
within which Purchaser or Seller must act or respond which refer in any way to
the date of this Agreement shall mean and refer to the Effective Date and not
the date set forth on the first page hereof. Each party agrees to confirm in
writing, upon request, the Effective Date hereof.
SECTION 7.17 NO RECORDING. Purchaser and Seller hereby agree that
neither this Agreement nor any memorandum hereof shall be recorded. Each party
hereby agrees to indemnify and hold harmless the other for all liabilities,
losses, damages, liens, suits, claims, costs and expenses (including reasonable
attorneys' fees) incurred by the other by reason of a breach of the foregoing
covenant.
SECTION 7.18 INFORMED CONSENT. Each of Purchaser and Seller hereby
acknowledges for the benefit of the other that: it has thoroughly read and
reviewed the terms and provisions of this Agreement and each of the other
documents and certificates to be executed in connection herewith and is familiar
with same; the terms and provisions hereof and thereof are clearly understood
and have been fully consented to; it has had the full benefit and advice of
counsel of its own selection, in regard to understanding the terms and
provisions hereof and thereof, the meaning and effect of this Agreement and each
of the other documents and certificates to be executed in connection herewith,
and otherwise
<PAGE>
35
as desired; and all such documents have been entered into freely, voluntarily,
in good faith, with full knowledge of the consequences thereof and without
duress.
SECTION 7.19 FURTHER ASSURANCES. Seller and Purchaser hereby agree,
upon reasonable request of the other party, to do, execute, acknowledge and
deliver, or to cause to be done, executed, acknowledged and delivered, all such
further acts and instruments as may be reasonably required to effectuate the
transactions contemplated hereby. All costs and expenses incurred by either
party in connection with this Section shall be paid by the party making the
request pursuant hereto.
SECTION 7.20 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which
together shall constitute but one original. This Agreement shall not be
effective unless and until executed and delivered by Purchaser and Seller in one
or more counterparts.
SECTION 7.21 WAIVER OF CONSUMER PROTECTION/DECEPTIVE TRADE PRACTICES
ACTS. PURCHASER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT: (I) IT SEEKS TO
ACQUIRE AND WILL BE ACQUIRING THE PROPERTY, INCLUDING THE LEASES AND CONTRACTS,
AND OBLIGATIONS FOR COMMERCIAL PURPOSES ONLY, AND NOT FOR PERSONAL, FAMILY OR
HOUSEHOLD PURPOSES; (II) PURCHASER IS EXPERIENCED AND HAS PREVIOUSLY ENGAGED IN
THE ACQUISITION OF PROPERTY AND OTHER TRANSACTIONS OF THE TYPE CONTEMPLATED
HEREUNDER; AND (III) NEITHER THIS AGREEMENT NOR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREUNDER, INCLUDING THE PURCHASE AND SALE OF THE PROPERTY,
INCLUDING THE LEASES AND CONTRACTS, AND OBLIGATIONS, IS A CONSUMER TRANSACTION
AND/OR GOVERNED, OR INTENDED TO BE GOVERNED, BY ANY CONSUMER PROTECTION, UNFAIR
OR DECEPTIVE, TRADE OR CONSUMER FRAUD ACTS IN THE JURISDICTION IN WHICH THE
PROPERTY IS LOCATED OR TO WHICH THIS AGREEMENT IS SUBJECT, INCLUDING, WITHOUT
LIMITATION, ANY CONSUMER PROTECTION AND/OR DECEPTIVE OR UNFAIR TRADE PRACTICES
ACTS ENACTED IN THE STATE OF DELAWARE, INCLUDING THE UNIFORM DECEPTIVE TRADE
PRACTICES ACT AS ENACTED IN THE STATE OF DELAWARE IN TITLE 6, SECTIONS 2531, ET
SEQ., AND/OR IN THE STATE OF TEXAS, INCLUDING THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE
CODE ("DTPA"), AND PURCHASER HEREBY WAIVES UNCONDITIONALLY AND IRREVOCABLY ALL
RIGHTS, BENEFITS, PROTECTIONS, REMEDIES AND OTHER PROVISIONS THEREOF AND
THEREUNDER.
WAIVER OF CONSUMER RIGHTS
PURCHASER HEREBY ACKNOWLEDGES, FOR ITSELF (INCLUDING ALL PERSONS
CLAIMING BY AND THROUGH PURCHASER) AND ITS AND THEIR LEGAL REPRESENTATIVES,
SUCCESSORS AND ASSIGNS, THAT THE DTPA IS NOT APPLICABLE TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREUNDER. PURCHASER ACKNOWLEDGES, REPRESENTS
AND WARRANTS TO SELLER THAT: (I) THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
INVOLVE TOTAL CONSIDERATION BY PURCHASER OF MORE THAN $500,000 AND THIS
AGREEMENT DOES NOT INVOLVE PURCHASER'S RESIDENCE; (II) IN NEGOTIATING THIS
AGREEMENT (INCLUDING THE WAIVERS SET FORTH HEREIN) AND IN THE TRANSACTIONS
CONTEMPLATED HEREBY, PURCHASER HAS BEEN REPRESENTED BY LEGAL COUNSEL WHO IS NOT
DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY SELLER OR AN AGENT
OF SELLER; (III) PURCHASER HAS KNOWLEDGE AND EXPERIENCE
<PAGE>
38
IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO ANALYZE THE MERITS AND RISKS
OF THE TRANSACTIONS CONTEMPLATED HEREBY; (IV) PURCHASER IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION; AND (V) PURCHASER IS A BUSINESS
CONSUMER (TO THE EXTENT IT IS A CONSUMER AND WITHOUT ACKNOWLEDGING THAT ANY OF
THE TRANSACTIONS HEREUNDER INVOLVE THE SALE OF GOODS OR SERVICES) THAT HAS
ASSETS OF $25 MILLION OR MORE OR THAT IS OWNED OR CONTROLLED BY A CORPORATION OR
ENTITY WITH ASSETS OF $25 MILLION OR MORE. MOREOVER, PURCHASER, FOR ITSELF
(INCLUDING ALL PERSONS CLAIMING BY AND THROUGH PURCHASER) AND ITS AND THEIR
LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS, HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY, AFTER ADVICE OF COMPETENT COUNSEL, WAIVES AND RELEASES,
UNCONDITIONALLY AND IRREVOCABLY, ANY AND ALL BENEFITS, CLAIMS, RIGHTS AND
REMEDIES ANY OF THEM MAY HAVE UNDER THE DTPA, A LAW THAT GIVES CONSUMERS SPECIAL
RIGHTS AND PROTECTIONS, INCLUDING SPECIFICALLY AND WITHOUT LIMITATION, ALL
RIGHTS AND REMEDIES RESULTING FROM OR ARISING OUT OF ANY AND ALL ACTS OR
PRACTICES OF SELLER AND ANY OTHER PERSON IN CONNECTION WITH THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHETHER SUCH ACTS OR
PRACTICES OCCUR BEFORE, ON OR AFTER EXECUTION OF THIS AGREEMENT. AFTER
CONSULTATION WITH AN ATTORNEY OF PURCHASER'S OWN SELECTION, PURCHASER
VOLUNTARILY CONSENTS TO THIS WAIVER. THIS SECTION AND WAIVER SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
HEREBY, AND THE TRANSFER OF THE PROPERTY AND THE TRANSFER OF THE SPECIAL
WARRANTY DEED CONTEMPLATED HEREBY.
SECTION 7.22 SECURITIES ACKNOWLEDGMENTS. Purchaser, for itself and each
of the Purchaser Parties, hereby represents and acknowledges the following:
(a) notwithstanding any Information, cooperation or assistance of
any kind by any of the Seller Parties from time to time, none of the Seller
Parties is intended to be or shall be construed as a party to or a participant
in any transaction entered into by Purchaser in connection with any Transfer or
Financing entered into by the Purchaser Parties of or for any of the Property or
any Securities in or relating to any of the foregoing, which Financing, Transfer
and/or Securities transactions are acknowledged to be, insofar as the Seller
Parties are concerned, for the sole benefit of Purchaser and/or the other
Purchaser Parties; and,
(b) none of the Seller Parties shall have any disclosure, other
responsibilities or Liabilities in connection with any Transfer or Financing
entered into by the Purchaser Parties of or for any of the Property or any
Securities in or relating to any of the foregoing, including the completeness or
accuracy of any Information and any decisions to include or exclude any
Information, or any inclusion or failure to include any other information, in
any offering materials prepared, used or disseminated in connection with any of
the foregoing. Nothing herein is intended to diminish or eliminate either
party's express representations and warranties to the other party set forth in
this Agreement or in the Conveyancing Documents.
SECTION 7.23 SECURITIES INDEMNITY. Purchaser hereby agrees to
indemnify, defend and hold harmless the Seller Parties from and against all
Liabilities arising out of or relating in any way to: (a) any Securities issued,
offered, solicited or sold in or relating to the Property and/or any Financing
or Transfer thereof by any of the Purchaser Parties, including non-compliance
with any Securities Laws applicable thereto; and (b) any breach of any of the
acknowledgments, representations and agreements set forth
<PAGE>
37
in Sections 7.22 of this Agreement, each of which shall be deemed continuing.
Nothing herein is intended to diminish either party's rights or remedies under
Section 6.3.
SECTION 7.24 LETTER OF UNDERSTANDING. Purchaser and Seller acknowledge
and agree that any and all letters of understanding and all prior and subsequent
letters or expressions of intent between Seller and Purchaser (or Broker), if
any, are hereby deemed terminated, of no further force and effect, and
superseded by the terms of this Agreement.
SECTION 7.25 SPECIAL NOTICES.
(a) The Property may adjoin and share a common boundary with the
tidally influenced submerged lands of the state. Purchaser acknowledges that
Section 33.135 of the Texas Natural Resources Code requires any Purchaser of
property that adjoins and shares a common boundary with the tidally influenced
submerged lands of the state to sign and deliver a statutory notice from Seller
in substantially the form of Addendum 1 attached hereto and incorporated herein
for all purposes. Purchaser hereby (i) acknowledges receipt of the notice
contained in this Section and this Agreement, (ii) waives any other rights
Purchaser may have under this Agreement or applicable law with respect to notice
that the Property adjoins and shares a common boundary with the tidally
influenced submerged lands of the state, or the existence thereof, and (iii)
agrees to execute and deliver such statutory notice contemporaneously with
Purchaser's execution of this Agreement and at or prior to the Closing, if
requested by Seller.
(b) SELLER DOES NOT HAVE ANY REASON TO BELIEVE THAT ANY OF THE
PROPERTY IS LOCATED IN A DISTRICT CREATED BY THE STATE OF TEXAS PROVIDING OR
PROPOSING TO PROVIDE, AS THE DISTRICT'S PRINCIPAL FUNCTION, WATER, SEWER,
DRAINAGE, AND FLOOD CONTROL OR PROTECTION FACILITIES OR SERVICES. HOWEVER, IF
AFTER THE EFFECTIVE DATE ANY OF THE PROPERTY IS DETERMINED TO BE LOCATED IN OR
BECOMES PART OF SUCH DISTRICT, SUCH DISTRICT SHALL HAVE TAXING AUTHORITY
SEPARATE FROM ANY OTHER TAXING AUTHORITY, AND MAY ISSUE BONDS AND/OR LEVY
ADDITIONAL TAXES TO PROVIDE UTILITY FACILITIES AND/OR SERVICES WITHIN THE
DISTRICT. SUCH DISTRICTS ALSO HAVE AUTHORITY TO ADOPT AND IMPOSE STANDBY FEES ON
PROPERTY IN THE DISTRICT. A DISTRICT MAY EXERCISE AUTHORITY WITHOUT HOLDING AN
ELECTION ON THE MATTER. Purchaser acknowledges that Chapter 50 of the Texas
Water Code requires Seller to deliver and Purchaser to sign and deliver a
statutory notice relating to the tax rate, bonded indebtedness, or standby fee
of the district prior to final execution of this Agreement in substantially the
form of Addendum 2 attached hereto and incorporated herein for all purposes.
Purchaser hereby (i) acknowledges receipt of the notice contained in this
Section and this Agreement, (ii) waives any other rights Purchaser may have
under this Agreement or applicable law with respect to notice that the Property
is situated in utility or other statutorily created district providing water,
sewer, drainage or flood control facilities and services, and (c) agrees to
execute and deliver such statutory notice contemporaneously with Purchaser's
execution of this Agreement and at or prior to the Closing, if requested by
Seller.
(c) LEAD BASED PAINT DISCLOSURE. By execution of this Agreement,
Purchaser acknowledges and agrees as follows, which shall survive the Closing or
termination of this Agreement:
(1) to Seller's knowledge, each Property was built after
1978;
<PAGE>
38
(2) Seller has no knowledge of lead-based paint hazards in
any of the Properties;
(3) Seller has no reports or records pertaining to
lead-based paint and/or lead-based paint hazards in any of the
Properties;
(4) Purchaser has received the pamphlet "Protect Your Family
from Lead in Your Home", a copy of which is attached hereto as
Addendum "3" and incorporated herein by reference for all
purposes;
(5) Purchaser has the opportunity during the Inspection
Period to conduct a risk assessment or inspection for the
presence of lead-based paint and/or lead-based paint hazards in
each Property; and
(6) Purchaser has signed, initialed, dated and delivered to
Seller, the disclosure form, a copy of which is attached hereto
as Addendum "4" and incorporated herein by reference for all
purposes.
SECTION 7.28 PURCHASER AS PUBLIC ENTITY. Seller acknowledges that
Purchaser has advised that it is a public entity and that it is required to
furnish financial statements to the Securities and Exchange Commission in
connection with this acquisition. Nonetheless, Purchaser acknowledges that it is
expressly unwilling to agree that it will provide any or all information
necessary for Purchaser's reports to the Securities Exchange Commission, but
Seller will agree to use reasonable efforts to make certain nonconfidential and
nonprivileged information available at location(s) acceptable to Seller which
Seller customarily and ordinarily retains and for the period(s) of time it
generally retains same, but in no event not later than the first anniversary of
the Closing Date, provided, Seller shall not be obligated to incur any cost or
expense in connection with its agreement herein. This provision will survive
until the first anniversary of the Closing Date.
SECTION 7.29 CONFIDENTIALITY. The parties shall keep confidential the
existence of this Agreement, the transactions described herein, and all
information obtained from the other party both during and subsequent to the
transaction. However, the covenants contained in this paragraph shall not apply
in respect to any information which (a) was already known to either party when
such information was received from the other, (b) was readily available to the
general public at the time of such receipt, (c) subsequently becomes known to
the general public through no fault or omission by the other party, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, or (e) is required to be disclosed by law or a governmental
agency. This clause shall survive Closing.
<PAGE>
39
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first written above.
PURCHASER:
----------
CORNERSTONE REALTY INCOME TRUST, INC., a
Virginia corporation
By:/s/ Gus G. Remppies
--------------------------------------------
Name: Gus G. Remppies
------------------------------------------
Title: Vice President, Director of Acquisitions
-----------------------------------------
SELLER:
-------
THE TRAVELERS INDEMNITY COMPANY, a
Connecticut corporation
By:/s/ Lynn M. Latham
--------------------------------------------
Name: Lynn M. Latham
------------------------------------------
Title: Vice President
-----------------------------------------
EXHIBIT 10.2
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 5th day of January, 1999
by and between Apple REIT Limited Partnership, a Virginia limited partnership
(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 Sierra Ridge 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 cancelled 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;
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
<PAGE>
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.
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.
<PAGE>
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 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 cancelling 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
OWNER:
APPLE REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple General, Inc., general partner
By:/s/ S. J. Olander
---------------------------------------
Title: Secretary
------------------------------------
<PAGE>
MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By:/s/ S. J. Olander
---------------------------------------
Title: Secretary
------------------------------------
EXHIBIT 10.3
PROPERTY ACQUISITION/DISPOSITION AGREEMENT
THIS PROPERTY ACQUISITION/DISPOSITION AGREEMENT (this "Agreement") is
made and entered into as of the 1st day of January, 1999, by and between Apple
Residential Income Trust, Inc., a Virginia corporation (the "Owner"), and
Cornerstone Realty Income Trust, Inc., a Virginia corporation (the "Agent").
RECITALS
A. The Owner conducts business as a "real estate investment trust," and,
in connection therewith, plans to, from time to time, acquire and
dispose of real property, including particularly residential apartment
complexes (hereinafter referred to individually as a "Property" and
collectively as the "Properties").
B. The Owner desires to use the services of Agent as a broker in
connection with the acquisition and disposition of the Properties on
the terms set forth in this Agreement.
C. The Owner and the Agent 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 agree as follows:
1. Engagement of Agent as Broker for the Properties. The Owner hereby
engages the Agent as a broker in connection with the purchase and sale of the
Properties, upon the conditions and for the term and compensation herein set
forth. All or any portion of the services being performed by the Agent may be
contracted or subcontracted by the Agent to another company, provided that such
company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. Subject to Section 2(b), this Agreement
shall be valid for an initial term of five (5) years beginning January 1, 1999.
Unless either party by written notice sent to the other party at least sixty
(60) days before the end of any 5-year term hereof elects not to renew this
Agreement, this Agreement shall renew automatically for successive terms of five
(5) years on the same terms as contained herein.
3. Acceptance of Engagement. The Agent hereby accepts its engagement as
a broker for the purchase and sale of the Properties and agrees to perform all
services necessary to effectuate such purchases and sales which are customarily
provided by commercial real estate brokers, and, without limitation, the Agent
agrees:
<PAGE>
(a) To supervise, on behalf of the Owner, the preparation of
contracts of purchase or sale for each Property, on such terms as are specified
by the Owner or its duly authorized representatives, and all other documents
related thereto or required to effectuate such purchase or sale;
(b) To coordinate the activities of, and act as liaison
between the Owner and independent professionals connected with the purchase or
sale of a Property, including attorneys, appraisers, engineers, inspectors,
lenders, if any, and others;
(c) To assist the Owner and its authorized representatives in
satisfying any conditions precedent to the purchase or sale of a Property, which
shall include contracting on behalf of the Owner with any third parties whose
services are required to close any such purchase or sale;
(d) To represent the Owner at the closing of the purchase or
sale of a Property, to coordinate the activities of professionals and other
third persons connected with such closing, and to supervise the compliance by
the Owner with all requirements and customary actions associated with such
purchase or sale, including, without limitation, the obtaining of property title
insurance, the delivery and recordation of deeds and other instruments of
conveyance, and the delivery and recordation, as required, of any documents
evidencing loans obtained or made by the Owner;
(e) Generally to act on behalf of the Owner in connection with
such purchase or sale as a commercial real estate broker would customarily act
with respect to such transaction, including the provision of such additional
services as would normally be provided by such a person.
4. Indemnification. The Owner hereby agrees to indemnify and hold
harmless the Agent 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 the Agent by reason of or in connection
with the engagement of the Agent hereunder, the performance by the Agent 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 the Agent shall be
made, and the Agent shall indemnify and hold the 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 the Agent.
5. Compensation of Agent. The Owner shall pay to the Agent a real
estate commission in connection with each purchase of a Property in an amount
equal to two percent (2%) of the gross purchase price of the Property (which
does not include amounts budgeted for repairs and improvements), in
consideration of the Agent (or any person with whom the Agent subcontracts or
contracts hereunder) performing the services provided for in this Agreement in
connection with the purchase of the Property, provided, that if indebtedness is
assumed or
2
<PAGE>
incurred in connection with the acquisition, the fee that would have been
payable with respect to the portion of the purchase price represented by such
indebtedness shall not be payable until such time, if ever, that such
indebtedness is repaid with the proceeds of the sale of the Owner's common
shares or other equity financing. In consideration of the Agent (or any person
with whom the Agent subcontracts or contracts hereunder) performing the services
provided for in this Agreement in connection with the sale of a Property, the
Owner shall pay to the Agent the following: a real estate commission in
connection with the sale of a Property in an amount equal to two percent (2%) of
the gross sales price of the Property, if, but only if, the sales price of the
Property exceeds the sum of (A) the Company's cost for the Property (consisting
of the original purchase price plus all capitalized costs and expenditures
connected with the Property), without any reduction for depreciation, and (B)
ten percent (10%) of such cost. If the sales price of the Property does not
equal such amount, the Agent shall be entitled only to payment by the Company of
its "direct costs" incurred in marketing such property (where "direct costs"
refers to a reasonable allocation of all costs, including salaries of personnel,
overhead and utilities), allocable to services in marketing such property. If
the two percent (2%) real estate commission is payable in connection with sale
of a Property, the Agent shall not also be paid the reimbursement of its "direct
costs" as described in the preceding sentence. If the person from whom the Owner
purchases or to whom the Owner sells a Property pays any fee to the Agent, such
amount shall decrease the amount of the Owner?s obligation to the Agent.
Furthermore, the Agent shall not be entitled to any real estate commission in
connection with a sale of a Property by the Owner to Cornerstone Realty Income
Trust, Inc. or any Affiliate or the Agent (where ?Affiliate? has the meaning
specified in the Prospectus of the Owner dated November 16, 1996), but the Agent
will, in such case, be entitled to payment by the Owner of its direct costs in
such regard.
6. Power of Attorney. The Owner hereby makes, constitutes and appoints
the Agent 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 contracts for purchase or sale of a
Property, promissory notes, mortgages, deeds of trust or other documents or
instruments which would bind the Owner to purchase or sell a Property, result or
evidence the incurrence of debt by the Owner, or encumber a Property) necessary
to perform or effect the duties and obligations of the Agent under the terms of
this Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It shall terminate when this Agreement terminates as
provided herein.
7. Relationship of Parties. The parties agree and acknowledge that the
Agent is and shall operate as an independent contractor in performing its duties
under this Agreement, and shall not be deemed an employee of the Owner.
8. 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.
9. Governing Law. This Agreement shall be construed in accordance with
and be governed by the laws of the Commonwealth of Virginia.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
-------------------------------
Title: President
-----------------------------
THE AGENT:
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ S. J. Olander
--------------------------------
Title: CFO
-----------------------------
