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: September 26, 1996
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23954 54-1589139
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 East Main Street
Richmond, Virginia 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
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CORNERSTONE REALTY INCOME TRUST, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 5. Other Events
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Sterling Chase Apartments)*
Historical Statement of Income and
Direct Operating Expenses*
(Sterling Chase Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Sterling Chase Apartments)*
b. Independent Auditors' Report
(Parkside at Woodlake Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Parkside at Woodlake Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Parkside at Woodlake Apartments)*
* To be filed by amendment.
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c. Pro Forma Statement of Operations for
the Nine Months ended September 30, 1996
(unaudited)*
Pro Forma Balance Sheet as of
September 30, 1996 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1995
(unaudited)*
d. Exhibits
10.1 Purchase Contract for Sterling Chase
Apartments
10.2 Purchase Contract for Parkside at Woodlake
Apartments
10.3 Purchase Contract for Highland Hills
Apartments
10.4 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Management Group, Inc. and
Cornerstone Realty Income Trust, Inc.
10.5 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Advisors, Inc. and Cornerstone
Realty Income Trust, Inc.
10.6 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Realty Group, Inc. and
Cornerstone Realty Income trust, Inc.
(Acquisition/Disposition Agreement).
10.7 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Realty Group, Inc. and
Cornerstone Realty Income Trust, Inc.
(Personal Property).
10.8 Employment Agreement dated September 1,
1996 between Cornerstone Realty Income
Trust, Inc. and Glade M. Knight.
* To be filed by amendment.
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10.9 Employment Agreement dated September 1,
1996 between Cornerstone Realty Income
Trust, Inc. and Debra A. Jones.
10.10 Employment Agreement dated September 1,
1996 between Cornerstone Realty Income
Trust, Inc. and Stanley J. Olander, Jr.
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
STERLING CHASE APARTMENTS
Charlotte, North Carolina
On September 26, 1996, effective September 1, 1996, Cornerstone Realty
Income Trust, Inc. (the "Company") purchased the Sterling Chase Apartments, a
272-unit apartment complex having an address of 5931 Providence Road, Charlotte,
North Carolina (the "Property").
The Seller was unaffiliated with the Company and its Affiliates. The
purchase price was $10,205,457. At closing, the Company paid the entire purchase
price in cash from the proceeds from the sale of Shares. The Company expects to
repay such borrowed amount with the proceeds from the sale of Shares. Title to
the Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon
information provided by the Charlotte Chamber of Commerce.
Based in part upon its fast rate of growth and a diversified economy,
Charlotte has in recent years come to national attention as an attractive
location for business and residential growth. According to the August, 1995,
Site Selection magazine, Charlotte's corporate popularity ranked second
nationally only to Dallas during the period between 1990 and 1994, being the
site of 474 significant new and expanded facilities.
Charlotte has developed into a major financial, distribution and
transportation center, with a metropolitan population of approximately 1.3
million and a population of approximately 5.6 million within a 100-mile radius.
Charlotte's growth is also attributable to its favorable year-round climate, a
moderate cost of living, excellent quality of life, educated work force, pro
business political climate, extensive transportation network, and strategic
geographic location.
According to the Charlotte Chamber of Commerce, during the first six
months of 1995, approximately 530 firms announced new or expanded businesses
which will provide approximately 6,200 new jobs in the area. Charlotte is home
to major offices of more than 225 of the Fortune 500 industrial firms and
approximately 300 of the Fortune 500 service firms.
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Charlotte is the leading financial center of the Southeast, serving as
corporate headquarters to NationsBank and First Union, with assets of
approximately $170 billion and $124 billion, respectively. The growth of
Charlotte's banking and financial communities has had a positive effect on the
growth of its supporting industries, such as insurance, accounting, legal
services, and real estate.
The city of Charlotte is located near the border of North Carolina and
South Carolina within Mecklenburg County. It is located at the intersection of
Interstates 77 and 85, the major north/south and east/west thoroughfares in the
region, which provide convenient access to all other regional areas.
The immediate area surrounding the Property consists of other
multi-family housing, commercial and retail development and single-family
housing. The Property is adjacent to Providence Square Shopping Center, which
features a Harris Teeter and Eckert Drug stores. The Property is approximately
four miles from the SouthPark Mall and approximately seven miles from the
Charlotte central business district via Providence Road.
Description of the Property. The Property consists of 272 garden-style
apartments located in 14 one- and two-story buildings on approximately 25.9
acres of land. The Property was constructed in 1980.
The Company believes that the Property has been well maintained and is
generally in good condition. However, the Company has budgeted approximately
$272,000 for repairs and improvements including clubhouse renovation, exterior
wood replacement, and renovation of apartment unit interiors.
The Property offers three unit types. The unit mix and rents currently
being charged new tenants are as follows.
<TABLE>
<CAPTION>
Quantity Type Approximate Monthly Rental
Interior
Square Footage
<S> <C>
40 1 bedroom, 1 505 $475
bath
116 1 bedroom, 1 619 495-565
bath
116 2 bedrooms, 2 847 585-680
baths
</TABLE>
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The apartments provide a combined total of approximately 190,000 square
feet of net rentable area. The monthly rental varies according to floor level
and amenities such as a washer and dryer or washer/dryer connections, microwave,
fireplace or bay window.
Leases at the Property are for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
two bedroom apartment rented for $385 in 1991, $385 in 1992, $405 in 1993, $490
in 1994, and $520 in 1995. The average effective annual rental per square foot
at the Property for 1991, 1992, 1993, 1994, and 1995 was $6.72, $6.72, $7.08,
$8.52, and $8.88, respectively.
The buildings are wood frame construction with pitched roofs covered
with composition asphalt shingles on concrete block footings or concrete slabs.
The exteriors are masonite hardboard, cedar siding and stucco. According to the
seller, since 1993, the entire property has been repainted and significant
wood/siding repairs and breezeway repairs have been made. Also according to the
seller, 55 apartment units were totally renovated (including bathroom and
kitchen renovation), 70 apartment units had complete bathroom renovations, new
carpet was installed in 227 apartment units, new vinyl floor coverings were
installed in 247 apartment units, new refrigerators were installed in 145
apartment units and new dishwashers were installed in 75 apartment units.
According to the seller, since the beginning of 1994 and before the Company's
acquisition of the Property, approximately $1,340,000 was spent in capital
improvements and repairs.
The Property has an outdoor swimming pool, two lighted tennis courts, a
fitness center with exercise equipment, two laundry facilities, a volleyball
court, a brick barbeque terrace and a horseshoe pit. The Property also includes
a newly renovated clubhouse with leasing office, which also offers a business
office for resident use. There is paved parking for approximately 430 vehicles.
All apartment units have 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 is equipped with a refrigerator/freezer, electric range and oven,
dishwasher and garbage disposal. The Property includes 48 apartment units with a
fireplace, 142 apartment units with bay windows, 44 apartment units with a
washer and a dryer, 68 apartment units with washer/dryer connections and 65
apartment units with microwaves. The owner of the Property supplies cold
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water, sewer service and trash removal. The tenants are responsible for
electricity, which includes heating, air conditioning, cooking, hot water and
lights.
There are at least five apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
higher when compared with those of the Property. Based on a recent telephone
survey, the Company estimates that occupancy in nearby competing projects now
averages approximately 97%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 93% in 1991, 92% in 1992, 90% in 1993, 80%
in 1994, and 91% in 1995. On October 1, 1996, the Property was 96% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons. The Company believes that approximately half of the current tenants
have household incomes between $20,000 and $35,000, with approximately one
quarter having household incomes in excess of $35,000.
The 1995 real estate tax rate applicable to the Property was
approximately $1.2558 per $100 of assessed value, and the real estate taxes for
1995 were calculated to be $104,986. The assessed value was $7,650,220. The
basis of the depreciable residential real property portion of the Property
(currently estimated at about $5,805,580) 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 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 Company believes 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 Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Charlotte, North Carolina area will
experience continued strong economic development and steady population increase,
and that such development and increase will support stable occupancy rates and
reasonable increases in rents at the Property.
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2. Based upon an engineering report and its own
inspections, the Company believes that the Property is in sound
condition.
3. The Property is conveniently located and proximate to
major employers and shopping.
4. The Company is very familiar with the Charlotte rental market. The
Company already owns other apartment complexes in the Charlotte area, which may
provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
PARKSIDE AT WOODLAKE APARTMENTS
DURHAM, NORTH CAROLINA
On September 30, 1996, effective September 1, 1996, the Company
purchased the Parkside at Woodlake Apartments, a 266-unit apartment complex
having an address of 1000 Lydia's Way, Durham, North Carolina ("Property").
The Company purchased the Property from a seller which is unaffiliated
with the Company and its Affiliates. The purchase price was $14,663,886. At
closing the entire purchase price was borrowed on an interim basis under the
Company's unsecured line of credit. The Company expects to repay such borrowed
amount with proceeds from the future sale of Shares. Title to the Property was
conveyed to the Company by limited warranty deed.
Location. The following information is based in part on
information provided by the Durham Chamber of Commerce.
Durham is located in the north central portion of North Carolina,
approximately equal distance between Atlanta and New York. The Blue Ridge
Mountains are approximately 150 miles to the west and the Atlantic Ocean is
approximately 150 miles to the east. Durham had a 1992 population of
approximately 144,400, and Durham County had a 1992 population of approximately
189,500.
The principal economic factors in the area are education, research and
industry. Durham is the home to Duke University and Research Triangle Park, both
of which are an approximately
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10-minute from the Property. The Property is also approximately the same
distance from North Carolina Central University and Raleigh/Durham International
Airport.
The immediate area surrounding the Property is characterized by retail
centers and restaurants. The Property has convenient access to downtown Durham
via Interstate 85.
Description of the Property. The Property consists of 266 garden-style
apartments located in 13 two- and three-story buildings on approximately 23
acres of land. The Property was constructed in 1996.
The Property offers five unit types. The unit mix and rents currently
being charged new tenants are as follows:
Approximate
Interior Monthly
Quantity Type Square Footage Rental
-------- ---- -------------- ------
56 1 bedroom, 1 bath 600 $565
36 1 bedroom, 1 bath 754 610 - 625
with fireplace
56 2 bedrooms, 1 bath 875 695 - 710
with fireplace
66 2 bedrooms, 2 958 725 - 740
baths with
fireplace
52 3 bedrooms, 2 1,100 895 - 910
baths with
fireplace
The apartments provide a combined total of approximately 230,200 square
feet of net rentable area.
The buildings are wood frame construction on concrete slabs
with pitched roofs covered with composition shingles. Exteriors
are a combination of brick and masonite siding.
The Property has an outdoor swimming pool, hot tub, putting
green, outside barbecue areas, a sand volleyball court, a
playground and a spacious clubhouse with a rental office. There
is ample paved parking for residents.
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All apartment units have 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. All
units have washer/dryer connections, miniblinds, and a patio or balcony. Some
units have a fireplace. Each kitchen has a refrigerator/freezer with ice maker,
an electric range and oven, a dishwasher and a garbage disposal. The owner of
the Property supplies cold water, sewer service and trash removal. The tenants
pay for their electricity use, which includes heating, air conditioning,
cooking, hot water and lights.
There are at least six apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
the same as those of the Property. Most of the competing properties are new and
are now in their initial lease-up stage.
As of October 1, 1996, the Property was 95% occupied. Leases have terms
of one year or less. The tenants are a mix of white-collar and blue-collar
workers and students. At October 1, 1996, approximately 38% of the residents are
employed as professionals, 21% are employed in other medical positions, 19% are
blue-collar workers and 8% are students. Approximately 30% of the tenants have
household incomes of less than $25,000, approximately 40% have household incomes
in the range between $25,000 and $40,000, and approximately 30% have household
incomes in excess of $40,000.
The 1996 real estate tax rate applicable to the Property is
approximately $1.6397 per $100 of assessed value, and the real estate taxes for
1996 are calculated to be $55,381. The assessed value is $3,377,500. The basis
of the depreciable residential real property portion of the Property (currently
estimated at about $2,686,000) 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 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 Company believes 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 Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
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1. The Company believes that the Durham, North Carolina area will
experience continued strong economic development and steady population increase,
and that such development and increase will support stable occupancy rates and
reasonable increases in rents at the Property.
2. The Property is conveniently located and proximate to
major employers and shopping.
3. The Company is very familiar with the Durham rental market. The
Company already owns other apartment complexes in the Durham area, which may
provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
HIGHLAND HILLS APARTMENTS
CARRBORO, NORTH CAROLINA
On September 27, 1996, effective the same day, the Company purchased
the Highland Hills Apartments, a 264-unit apartment complex having an address of
180 B.P.W. Club Road, Carrboro (near Durham), North Carolina (the "Property").
The seller was unaffiliated with the Company and its Affiliates. The
purchase price was $12,100,000. The entire purchase price was borrowed under the
Company's unsecured line of credit. The Company expects to repay the borrowing
with proceeds from the sale of Shares. Title to the Property was conveyed to the
Company by limited warranty deed.
Location. The Property is located within the township of Chapel Hill,
approximately 10 miles from Durham, North Carolina. For a description of Durham,
see "Parkside at Woodlake Apartments," elsewhere in this Report. Chapel Hill,
North Carolina is the site of the University of North Carolina ("UNC"). The
Property is located an approximately five-minute drive from UNC. The Property is
approximately six miles from Duke University, approximately 15 miles from
Research Triangle Park, and approximately seven miles from Durham Regional
Hospital.
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The immediate area surrounding the Property is characterized by retail
centers and restaurants. The Property has easy access to downtown Durham and the
Raleigh/Durham International Airport.
Description of the Property. The Property consists of 264 garden-style
and townhouse-style apartments located in 22 three- story buildings on
approximately 45 acres of land. The Property was built in 1987.
The Company believes that the Property is generally in good condition.
However the Company has budgeted approximately $650,000 for various repairs and
improvements, including residing, roof replacement, clubhouse renovations and
landscaping.
The Property offers eight different unit types. The unit mix and rents
currently being charged new tenants are as follows:
Approximate
Interior Monthly
Quantity Type Square Footage Rental
-------- ---- -------------- ------
12 1 bedroom, 1 bath 704 $535
40 1 bedroom, 1 bath with 742 555
dining room
80 2 bedrooms, 2 baths 904 655
40 2 bedrooms, 2 baths 904 675
with fireplace
12 2 bedrooms, 2 baths 1,190 695
(townhouse)
20 3 bedrooms, 2 baths 1,093 865
20 3 bedrooms, 2 baths 1,093 885
with fireplace
40 3 bedrooms, 2 1/2baths 1,487 935
(townhouse)
The apartments provide a combined total of approximately 264,000 square
feet of net rentable area.
Leases at the Property are generally for terms of one year or less.
Average rental rates for the past five years have remained steady or increased
slightly. As an example, a three bedroom, two and one-half bath apartment unit
rented for $677 in 1991, $677 in 1992, $677 in 1993, $710 in 1994, and $750 in
1995.
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The Property has an outdoor swimming pool, children's wading pool,
jacuzzi, lighted tennis court, laundry room, and clubhouse with an activity room
and a rental office. There is assigned parking for the residents with security
lighting.
The buildings are wood-framed construction on a combination of crawl
space and concrete slab or wooden pilings. Roofs are pitched and covered with
composition shingles. Exteriors are wood siding.
All apartment units have 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
apartment unit has ceiling fans, large walk-in closets with mirrored doors, and
a balcony or patio with an exterior storage area. All of the two-bedroom and
three-bedroom units have washer/dryer connections for full-sized appliances, and
all of the one-bedroom units have connections for stackable appliances.
Approximately 120 apartment units have a fireplace. Each kitchen is equipped
with a refrigerator/freezer, electric range and oven, microwave oven, dishwasher
and garbage disposal. The owner of the Property supplies cold water, sewer
service and trash removal. The tenants pay for their electricity usage, which
includes heating, air conditioning, cooking, hot water and lights.
There are at least four apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
the same as those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 87%.
According to information provided by the seller, physical occupancy of
the Property averaged approximately 82% in 1991, 88% in 1992, 92% in 1993, 93%
in 1994 and 95% in 1995. On October 1, 1996, the Property was 99% occupied. The
tenants are a mix of white-collar and blue-collar workers and students.
Approximately 85% of the tenants are either students at UNC or employed at UNC.
The 1995 real estate tax rate applicable to the Property was
approximately $1.9350 per $100 of assessed value, and the real
estate taxes for 1995 were calculated to be $164,808. The
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assessed value was $8,517,186. The basis of the depreciable residential real
property portion of the Property (currently estimated at about $7,706,106) 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 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 Company believes 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 Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Durham/Chapel Hill, North Carolina
area will experience continued strong economic development and steady population
increase, and that such development and increase will support stable occupancy
rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own
inspections, the Company believes that the Property is in sound
condition.
3. The Property is conveniently located and proximate to
major employers and shopping.
4. The Company is very familiar with the Raleigh/Durham/Chapel Hill
rental markets. The Company already owns other apartment complexes in the area,
which may provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
Item 5. Other Events
Before September 1, 1996, the Company operated as an
"externally-advised" and "externally-managed" REIT. Cornerstone Advisors, Inc.
served as the advisor, Cornerstone Management Group, Inc. served as the Property
manager, and Property acquisition services were provided by Cornerstone Realty
Group,
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Inc. Glade M. Knight, Chairman and Chief Executive Officer of the Company, owned
all of the stock of Cornerstone Advisors, Inc., Cornerstone Management Group,
Inc. and Cornerstone Realty Group, Inc. (collectively, the "External
Companies"). By agreement among Mr. Knight, Stanley J. Olander, Jr. (Chief
Financial Officer of the Company) and Debra A. Jones (Chief Operating Officer of
the Company), Mr. Knight held part of the beneficial ownership of the External
Companies for the account and interest of each of Mr. Olander and Ms. Jones.
As of September 1, 1996, the Company agreed with the External Companies
on a series of related transactions, the effect of which would be to convert the
Company into a "self-administered" and "self-managed" REIT. The transactions
were unanimously approved by the Board of Directors, which relied in part upon a
"fairness opinion" issued by Arthur Andersen LLP. The conversion was approved
because it was determined to be in the best interests of the Company and the
Shareholders for Property acquisition, Property management and Company
administration to be performed by the Company's own officers and employees,
rather than through contracts with the External Companies.
To effect the conversion, the Company agreed to issue 1,400,000 Shares
to Cornerstone Management Group, Inc. in exchange for the assignment by such
company of all of its rights and interests in, to and under its management
agreements with the Company. On October 1, 1996, the Company issued 700,000
Shares, and the balance of such Shares will be issued on September 30, 1997. No
distributions are payable with respect to these Shares until they are issued.
However, there are no conditions to the issuance of the deferred Shares other
than the passage of time. The holders of these Shares have "piggyback"
registration rights with respect thereto.
In addition, the Company paid to Cornerstone Realty Group, Inc. and
Cornerstone Advisors, Inc. $1,325,100 in exchange for the assignment by them of
all of their rights and interests in, to and under their Property acquisition
agreement and advisory agreement with the Company. Also, the Company paid to
Cornerstone Realty Group, Inc. $100,000 and paid to Glade M. Knight,
individually, $350,000 for the personal property and building, respectively,
located at 306 East Main Street, Richmond, Virginia, which previously had served
as the principal executive offices of the External Companies. This space now
serves as the principal executive offices of the Company. Finally, the Company
paid approximately $138,000 to certain lenders, representing the balance owed on
certain automobile
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loans, in exchange for the conveyance by Cornerstone Realty Group, Inc. to the
Company of such automobiles.
Immediately following the assignment by each of the External Companies
of its rights and interests in, to and under its respective agreement with the
Company, the Company terminated each such agreement. Furthermore, as of
September 1, 1996, the Company entered into an employment agreement with each of
Glade M. Knight, Stanley J. Olander, Jr. and Debra A. Jones.
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ITEM 7.a.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.b.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.c.*
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: October 15, 1996 By: /s/ Stanley J. Olander, Jr.
___________________________
Stanley J. Olander, Jr.,
Chief Financial Officer
of Cornerstone Realty
Income Trust, Inc.
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EXHIBIT INDEX
Cornerstone Realty Income Trust
Form 8-K dated September 26, 1996
Exhibit Number Exhibit Page Number
10.1 Purchase Contract for
Sterling Chase Apartments
10.2 Purchase Contract for Parkside
at Woodlake Apartments
10.3 Purchase Contract for Highland
Hills Apartments
10.4 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Management Group, Inc. and
Cornerstone Realty Income Trust, Inc.
10.5 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Advisors, Inc. and Cornerstone
Realty Income Trust, Inc.
10.6 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Realty Group, Inc. and
Cornerstone Realty Income trust, Inc.
(Acquisition/Disposition Agreement).
10.7 Agreement and Bill of Transfer and
Assignment dated October 1, 1996 between
Cornerstone Realty Group, Inc. and
Cornerstone Realty Income Trust, Inc.
(Personal Property).
10.8 Employment Agreement dated September 1,
1996 between Cornerstone Realty Income
Trust, Inc. and Glade M. Knight.
10.9 Employment Agreement dated September 1,
1996 between Cornerstone Realty Income
Trust, Inc. and Debra A. Jones.
10.10 Employment Agreement dated September 1,
1996 between Cornerstone Realty Income
Trust, Inc. and Stanley J. Olander, Jr.
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23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
* To be filed by amendment.
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Exhibit 10.1
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this day of September 1996,
between CORNERSTONE REALTY GROUP INC. or its nominee, (hereinafter called
"Purchaser") and STERLING APARTMENTS LLC, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as STERLING CHASE APARTMENTS
located in CHARLOTTE, NC, with all buildings and improvements located thereon,
as more particularly described in the attached legal description in Exhibit A
including, but not limited to 272 individually heated and air conditioned
apartment units, with all appurtenances, together with all appliances, drapes,
carpeting, shrubbery and all other personal property (excluding clubhouse
and model furniture, accessories and paintings. However, Seller agrees to
permit Purchaser to use such excluded property for 30 days after closing) used
in connection with the premises, including, the inventory of personal property
to be supplied by Seller and attached hereto as Exhibit B (all such real and
personal property hereinafter collectively referred to as the "Property"
unless the context clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be TEN MILLION TWO
HUNDRED FIVE THOUSAND FOUR HUNDRED FIFTY SEVEN ($10,205,457) DOLLARS as
evidenced by cash or cash equivalent at closing.
2.2 Deposit. $100,000 to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with Title Insurance Corporation or its authorized agent as
an earnest money deposit which may be credited against the purchase price or
applied as per Article XI below.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and marketable title
by Special Warranty Deed, subject to general taxes for the current year not
yet due and payable and utility easements which do not interfere with the
present use of the Property.
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(A) Title shall be free from any and all liens or mortgages and Seller
shall be responsible for any prepayment penalties necessary to deliver such
free title.
3.2 Title Defects; Election to Cure. Seller shall furnish to Purchaser
evidence of a prior commitment for Title Insurance, (the commitment). If title
is not marketable, except as stated above in the preceding paragraph, Purchaser
shall give written notice of any defects in title to Seller's counsel within
ten (10) days after Purchaser's receipt of a title report which report shall
include copies of backup documents relating to any title exceptions, a current
survey, a flood zone certification letter and a Surveyor's Certification letter.
Seller may, at its option, elect whether to cure said defects or by written
notice to Purchaser indicate its intention not to cure.
3.3 Election Not to Cure Defects. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option, shall be void; each party shall
thereupon be released from all obligations hereunder; and all deposits shall
be immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on
a calendar-month basis, to the 1st day of the month of the closing: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume); and general and real
property taxes and personal and business property taxes for the year of closing
(based on the most recent assessment and the most recent levy).
4.2 Closing Costs. Purchaser and Seller shall pay their customary
share of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Purchaser
agrees to pay cost of title insurance. Seller shall pay any prepayment penalty
charged by the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually
paid by such tenants to Purchaser. Seller shall retain the right to commence
legal action against a tenant for any delinquent rent apportioned to the
Seller.
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4.4 Prior Lease Concessions. Seller represents that there are no rent
concessions which are not reflected in the actual rent collected as set forth
in the rent list attached hereto as Exhibit C.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 Possession. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing
leases and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction of the following conditions
precedent:
(A) Receipt by Purchaser of an engineering report of building and site
conditions, satisfactory to Purchaser in its sole discretion, said report to
include in part, a description of any hazardous waste sites, hazardous wastes
and/or hazardous materials affecting the property. Purchaser shall have ten
(10) days in which to review the reports set forth herein and exercise its
right to reject the Property based thereon or the right hereunder shall be
deemed waived.
(B) The receipt by Purchaser of Seller documents described in 7.2 below.
(C) On the condition that Sellers representations and warranties
described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or adverse changes
to the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and that it
is required to furnish financial statements to the Securities and Exchange
Commission in connection with this acquisition. Seller agrees to make the
information available for Purchaser to audit the last 12 months of operation of
the Property so that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Survey which shall show no encroachments onto the Land from any
adjacent property, no encroachments by or from the Land onto adjacent property
and no violation of or encroachments upon any recorded building lines,
restrictions or easements affecting the Property, except for an easement
for a one-family home. If the Survey discloses any such encroachment or
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violation, Seller shall have thirty (30) days from the date of delivery of
the Survey (with a commensurate extension of the closing date) to have the
Title Insurer issue its endorsement insuring against damage caused by such
encroachment or violation and to provide evidence thereof to Purchaser, and
if Seller fails to or is unable to have the same insured against within such
thirty (30) day period, Purchaser may elect, on or before the Closing Date,
to (i) terminate this Agreement (in which case the Earnest Money shall be
returned to Purchaser) and neither party shall have any further liability
or obligation to the other hereunder, or (ii) accept the property subject
to any such encroachment or violation.
6.2 Inspection. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following: The current rent roll
for the Property; detailed statements of income and expenses with respect to
the Property for the past two years; the most recent tax bills for the
Property; utility bills for the Property for the twelve (12) months previous
to the date hereof; all insurance policies applicable to the Property to
include loss runs for the last two (2) years; Plans and Specifications for
the Property, service contracts, Certificates of Occupancy, to the extent
reasonably available; a copy of the title policy and most recent survey for
the Property. A copy of any environmental or engineering reports on the
property. All these items shall be certified by Seller to be accurate and
complete to the best of its knowledge and belief.
6.2.2 Inspection of Books and Records; Access. Upon receipt by
Purchaser of all documents requested in the paragraph above, Purchaser,
its employees, agents and contractors shall have 14 days (the "Inspection
Period") to enter upon the Property subject to the rights of the tenants during
normal business hours for the purpose of making physical inspections thereof,
including but not limited to roofs, heating, cooling, electrical and
plumbing systems, swimming pool, appliances, and structural elements of the
buildings. Upon the conclusion of the Inspection Period this contract shall
be deemed to be a firm agreement of purchase and sale binding the parties
hereto, except as it may be terminated by other provisions and conditions
contained herein, including but not limited to the condition imposed by
Paragraph 6.1(A) above.
6.2.3 Right of Termination During Inspection Period. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the
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right to terminate this Agreement by giving written notice to Seller before the
end of the Inspection Period, and no party hereto shall have any further
liability to any other party hereto, and all deposits shall be returned to
Purchaser.
6.2.4 "Rent Ready". During the "Inspection Period", both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree
that said apartment shall be representative of a "rent ready" unit by which
all other units shall be judged for "rent ready" condition at closing. All
vacant apartment units, are to be in a "rent ready" condition (as defined
above), at the time of closing, containing, but not limited to the following
amenities, i.e., carpet, refrigerator, range, garbage disposal, heating,
plumbing and electrical systems.
6.2.5 Condition of Personal Property at Closing. All personal
property included in the sale and all mechanical, electrical, heating, air
conditioning, sewer, water and plumbing systems will be in the same
working order at the time of closing and in the same condition as at the
time of the initial inspection by Purchaser. If Seller fails to make reasonable
efforts to conserve the property, Purchaser shall have the option of waiving
such requirement, in writing, and proceeding to closing, or Purchaser may
void this Agreement and obtain a prompt return of its deposit.
ARTICLE VIII
CLOSING
7.1 Closing. Closing will be held on September 24, 1996 after the
completion of the Inspection Period at such place and at such time as the
parties may agree.
7.2 Seller's Deliveries. At closing, Seller shall execute and
deliver to Purchaser the Special Warranty Deed referred to in Paragraph 3
hereof and shall also execute, where necessary, and deliver to Purchaser,
the following:
(A) A Bill of Sale, with warranty of title transferring the personal
property (as shown in Schedule B) to Purchaser free of all liens, charges
and encumbrances.
(B) Originals or copies of all signed leases and rental agreements in
effect with tenants of the Property shall be provided on site.
(C) INTENTIONALLY OMITTED. There are no security deposits.
(D) An affidavit of Seller in such form as will cause the Title Company
to omit from the title insurance policy the exclusion relating to unrecorded
mechanic's and materialmen's liens.
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(E) A rent roll certified by Seller to be true and correct as of the
date of closing showing the name of, and the amount of monthly rental payable,
by each tenant of the Property, the apartment occupied by the tenant, the
date to which rent has been paid, any advance payment of rent, and the amount of
any escrow, or security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and
belief there are, on the date of closing, no unsatisfied judgments, creditor's
claims, tax liens, or pending bankruptcies involving Seller.
(G) Seller shall provide, a certificate from a licensed extermination
contractor, who is regularly engaged in the business of pest control, that all
buildings are free from any termite or other wood-boring insect infestation.
Said certificate shall be dated within 90 days of closing, bearing the
Contractor's name, contractors license number, the signature of the party
authorized to sign for the Contractor and the date of the inspection. Should
damage exist, Seller shall proceed to have any corrective work completed prior
to closing or Purchaser, at its option, may either proceed to settlement and
have such sums required for repairs deducted from Seller's proceeds, or
may in its sole discretion terminate this Agreement. Seller shall promptly
return Purchaser's deposit upon such termination.
(H) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property,
(2) the leases and rental agreements with tenants of the Property, and (3)
the existing Property telephone number.
(I) Assignments of all warranties and guarantees to the extent such are
still in effect and provide Purchaser with copies of all such warranties and
guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
(J) Evidence satisfactory to Purchaser that all water, sewer, gas,
electric, telephone, and drainage facilities and all other utilities required
by law or by the normal use and operation of the Property are and at the
time of closing will be installed to the property line, are and at the
time of closing will be connected pursuant to valid permits, and are and at the
time of closing adequate to service the Property and to permit full compliance
with all requirements of law and normal usage of the Property by the tenants
thereof and their licensees and invitees.
(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles or by-laws,
which may affect Seller's ability to convey marketable title.
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(L) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing.
(M) Satisfactory evidence of the power and authority of Seller to enter
into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory
to Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to
consummate this sale, without further consent of any other party.
(b) That the partner or officer can bind the
Partnership or Corporation.
(N) Affidavit that Seller has no actual knowledge of the presence of
asbestos and/or any other hazardous material at the Property.
(O) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the apartment complex as to
change of ownership in the form prepared by the Purchaser as approved and
signed by Seller.
(Q) All such other documents as are normally transferred at settlement
in the jurisdiction in which the property is located or are reasonably requested
by Purchaser or its counsel.
(R) A representation letter as normally required by auditors for a
public company in the form attached hereto as Exhibit D. This clause shall
survive closing for six months.
7.3 Purchaser's Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted for
the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any
other obligations specifically set forth herein.
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(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of
Purchaser, and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to
effectuate the transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which
warranties shall not survive settlement unless designated to the contrary)
that as of the date of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has the
power to convey same.
(B) That Seller is not subject to any other agreements or arrangements,
with the exception of those contained in any existing mortgage documents
which would prevent Seller from selling the Property to Purchaser. This warranty
shall survive for one year following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents.
This warranty shall survive for one year following closing.
(D) Seller has no actual knowledge and has not been advised in
writing that it is in default under any lease, rental agreement service or
equipment contract, or mortgage or other encumbrances relating to the Property.
This warranty shall survive for one year the following closing.
(E) INTENTIONALLY OMITTED.
(F) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for one year following closing.
(G) The Property abuts on and has direct vehicular access to a public
road.
(H) All building and other improvements at the Property are located
entirely within the boundary lines of the
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Property.
(I) Seller has no actual knowledge that any part of the Property or the
operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting
the Property, or that any governmental authority has expressed an intent to
condemn or to make special improvements for the benefit of the Property or any
part thereof. (The County has previously condemned and taken a strip of
property for the widening of Providence Road.)
(J) That to the best knowledge of the Seller, the drainage within
the project is satisfactory and complies in all respects with all
government regulation.
(K) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(L) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and this representation
shall survive for a period of six months.
(M) Seller covenants and agrees that, between this date and the date of
closing, Seller shall continue to maintain, operate and manage the Property in
a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of Purchaser.
If the leases of any tenants expire before thirty (30) days after the date of
closing, Seller shall, up to the date of closing and without cost to the
Purchaser, continue its normal course of operation with respect to causing
tenants to be obtained for apartments which are unrented.
8.2 Continuation of Representations, Warranties and Covenants to the
Date of Closing. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material
matters, this Agreement, at Purchaser's election, shall be terminated, Seller
shall return all payments made by Purchaser, or Purchaser may elect to
close the sale and waive failure of the warranties.
8.3 Breach of Representations, Warranties and
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Covenants. (A) Notwithstanding the provisions of 8.2 above, Seller shall
indemnify Purchaser for all reasonable costs incurred as a result of the failure
of any of Seller's representations, warranties or covenants contained herein to
remain true as of the date of closing.
(B) In the event that Purchaser shall breach any warranties, it agrees
to indemnify Seller for any reasonable costs and expenses that Seller may
have incurred.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property is
damaged by fire or other casualty to the extent of $50,000 or more, Seller shall
repair such damage before the date provided herein for closing. If such damage
cannot be repaired by such time, this Agreement may be canceled at the option
of the Purchaser. In the event of cancellation as aforesaid, this Agreement
shall become null and void and the parties shall be released and all payments
made shall be returned. Should Purchaser elect to carry out this Agreement
despite such damage Seller shall assign to Purchaser all insurance proceeds
arising from such damage and will compensate Purchaser for lost rent
collections to the extent of insurance proceeds received. Seller shall
promptly notify Purchaser in writing upon the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof.
Upon a taking of a material part of the Property (any part of the building
or more than 5% of the parking area), Purchaser may elect to either (a)
terminate this Agreement, in which event the Deposit shall be immediately
returned to Purchaser and all other rights and obligations of the parties
hereunder shall terminate immediately, or (b) to waive its right to terminate
this Agreement and proceed to closing, in which event all proceeds, awards
and other payments arising out of such condemnation or sale (actual or
threatened) shall be paid to the Purchaser at closing, if such payment has
been received or Seller shall assign to Purchaser the rights to such payments.
Notwithstanding the previous condemnation to facilitate the widening of
Providence Road.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by
every casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Purchaser agrees to pay a
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brokerage fee to FIRST UNION MORTGAGE CORPORATION of Richmond, VA, and Seller
agrees to pay a brokerage fee to FIRST UNION MORTGAGE CORPORATION of Charlotte,
NC, pursuant to separate agreements between the parties. Said brokerage
fees shall be deemed earned if, and only if, settlement occurs hereunder, and
shall not be deemed earned even if Purchaser and/or Seller wrongfully fail(s)
to consummate the purchase and sale herein contemplated. Seller and Purchaser
represent and warrant to each other that no other brokerage fees are or shall
be owing in connection with this transaction or in any way with the Apartments
and Seller and Purchaser hereby indemnify and hold the other harmless from any
and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions
and covenants contained herein, however, it shall not be an event of default
for either party to exercise its rights to terminate this contract as contained
in other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or (2)
cancel this Agreement and obtain a prompt return of the deposit, in which
case this Agreement shall be terminated and the parties released from all
obligations hereunder, or (3) the Purchaser may waive such defaults and
proceed to settlement. Seller shall indemnify Purchaser for any reasonable
costs incurred by Purchaser if Purchaser elects to pursue its option (1)
noted above, to include reasonable attorney fees and billed at their normal
hourly rate.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement
shall be terminated and both parties released from all obligations hereunder,
and the deposit shall be retained by the Seller as liquidated damages.
Seller shall have no other remedy against Purchaser in the event of Purchaser's
default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified
except in writing.
12.2 Assignment. Purchaser may assign this Agreement without the
consent of Seller.
12.3 Severability. If any provision, sentence, phrase
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or word of this Agreement or the application thereof to any person or
circumstance shall be held invalid, the remainder of this Agreement or the
application of such provision, sentence, phrase, or word to persons or
circumstances, other than those as to which it is held invalid, shall
remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that
it shall be binding upon and inure to the benefit of their respective
heirs, representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights
and liabilities of the parties shall be determined in accordance with the
provisions of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each
counterpart hereof, and it shall be sufficient that the signature on behalf
of both parties hereto appear on one or more such counterparts. All
counterparts shall collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
of the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address
set forth below (or such other address as may be hereafter specified in
writing):
To Seller: Sterling Apartments LLC
c/o Gordon Grubb, Esq.
4011 West Chase Boulevard - Suite 120
Raleigh, NC 27607
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To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
-and-
Ted Oliver, Esq.
Manning, Fulton & Skinner, P.A.
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, NC 27612
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered
to a reliable overnight courier. Notices sent in any other manner shall be
deemed given only when actually delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
STERLING APARTMENTS LLC
By: Grubb Properties, Inc., Manager
By: /s/ R. Gordon Grubb
---------------------
Its: Vice President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
---------------------
Its: Senior Vice President
13
Exhibit 10.2
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this __ day of April 1996, between
CORNERSTONE REALTY GROUP INC. or its nominee, (hereinafter called "Purchaser")
and WOODLAKE COMPANY LIMITED PARTNERSHIP, (hereinafter called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and Purchaser
agrees to purchase, Seller's real property known as WOODLAK APARTMENTS located
in DURHAM, NC, with all buildings and improvements located thereon, as more
particularly described in the attached legal description in Exhibit A including,
but not limited to 266 individually heated and air conditioned apartment units,
with all appurtenances, together with all appliances, drapes, carpeting,
shrubbery and all other personal property used in connection with the premises,
including, the inventory of personal property to be supplied by Seller and
attached hereto as Exhibit B (all such real and personal property hereinafter
collectively referred to as the "Property" unless the context clearly indicates
otherwise).
1.2 Complete Construction. It is understood that all of the units to be
transferred as set forth in Paragraph 1.1 have not as yet been completed. The
Seller agrees to complete the construction as per the attached Plans and
Specifications and as laid out in the approval of the municipality prior to
December 15, 1996.
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be FOURTEEN MILLION
FIVE HUNDRED FIFTY THOUSAND ($14,550,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. $100,000 to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow in an interest-bearing account with The Title Company of North
Carolina in Raleigh or its authorized agent as an earnest money deposit which
may be credited against the purchase price or applied as per Article XI below.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and marketable title by
General Warranty Deed, subject only to general taxes for the current year not
yet due and payable and utility easements which could never interfere with the
present use of the Property.
(A) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any prepayment penalties necessary to deliver
such free title.
(B) Attached hereto as Exhibit C is a copy of a title report
setting forth the permitted exceptions which Purchaser will take subject to.
3.2 Title Defects; Election to Cure. Seller shall furnish to Purchaser a
commitment for Title Insurance, (the commitment). If title is not marketable,
except as stated above in the preceding paragraph, Purchaser shall give written
notice of any defects in title to Seller's counsel within fifteen (15) days
after Purchaser's receipt of a title report which report shall include copies of
backup documents relating to any title exceptions. Seller may, at its option,
elect whether to cure said defects or by written notice to Purchaser indicate
its intention not to cure. The commitment shall be furnished without cost to
Purchaser, except and unless Purchaser obtains a policy. Seller will provide
Purchaser with an "as built" Survey to the extent available to Seller without
incurring additional cost.
3.3 Election Not to Cure Defects. Should Seller elect not to cure title
defects, this Agreement, at Purchaser's option, shall be void; each party shall
thereupon be released from all obligations hereunder; and all deposits shall be
immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be prorated, on
a calendar-month basis, to date of delivery of deed: rents and other income from
the Property; operating expenses (on such service contracts and other
obligations as Purchaser may agree to assume); and general and real property
taxes and personal and business property taxes for the year of closing (based on
the most recent assessment and the recent levy).
4.2 Closing Costs. Purchaser and Seller shall pay their customary share
of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Purchaser
agrees to pay cost of title insurance. Seller shall pay any prepayment penalty
charged by the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to Closing
shall be prorated as agreed in 4.1 above. Purchaser shall apply rents received
after Closing first to payment of the current rent due to Purchaser, then to
delinquent rents due to Purchaser, and last to rents due to Seller as of the
Closing but uncollected prior to settlement. Purchaser agrees to use its best
efforts in good faith to collect the amount of any rental arrears from tenants
and Purchaser agrees to remit promptly to Seller any such arrears actually paid
by such tenants to Purchaser. Seller shall retain the right to commence legal
action against a tenant for any delinquent rent apportioned to the Seller.
4.4 Prior Lease Concessions. Seller shall pay to Purchaser, in a lump
sum at closing, all future monetary concessions which Seller has given to
tenants under leases existing at the time of closing.
ARTICLE V
POSSESSION OF THE PROPERTY
5.1 Possession. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements as set forth herein.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Purchaser's obligation to purchase shall be
subject to and contingent upon the satisfaction of the following conditions
precedent:
(A) Receipt by Purchaser at Purchaser's sole cost and expense
within fifteen (15) days after substantial completion of the Project of an
engineering report of building and site conditions, satisfactory to Purchaser in
its sole discretion, said report to include in part, a description of any
hazardous waste sites, hazardous wastes and/or hazardous materials affecting the
property. Purchaser shall have fifteen (15) days in which to review the reports
set forth herein and exercise its right to reject the Property based thereon or
the right hereunder shall be deemed waived, except for those conditions which
are specifically set forth hereinafter.
(B) Completion by the Seller of the construction of the premises
as per the Plans and Specifications attached hereto as Exhibit D.
(C) The receipt by Purchaser of Seller documents described in
7.2 below.
(D) On the condition that Sellers representations and warranties
described in Article VIII below remain true and correct.
(E) On the condition that there have been no material or adverse
changes to the property or leases.
(F) Seller acknowledges that Purchaser is a public entity and
that it is required to furnish financial statement to the Securities and
Exchange Commission in connection with this acquisition. Seller agrees, to the
extent available, to make the information available for Purchaser to audit the
last 12 months of operation of the Property so that a report can be generated
that is in compliance with accounting Regulation S-X of the Securities and
Exchange Commission.
(G) Survey which shall show no encroachments onto the Land from
any adjacent property, no encroachments by or from the Land onto adjacent
property and no violation of or encroachments upon any recorded building
lines, restrictions or easements affecting the Property. If the
Survey discloses any such encroachment or violation, Seller shall have thirty
(30) days from the date of delivery of the Survey (with a commensurate extension
of the closing date) to have the Title Insurer issue its endorsement insuring
against damage caused by such encroachment or violation and to provide evidence
thereof to Purchaser, and if Seller fails to or is unable to have the same
insured against within such thirty (30) day period, Purchaser may elect as its
sole options, on or before the Closing Date, to (i) terminate this Agreement (in
which case the Earnest Money shall be returned to Purchaser) and neither party
shall have any further liability or obligation to the other hereunder, or (ii)
accept the property subject to any such encroachment or violation.
6.2 Inspection. This Agreement shall be further subject to and
contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this Agreement,
Seller shall deliver to Purchaser copies of the following: The current rent
roll, to the extent available, for the Property; detailed statements of income
and expenses with respect to the Property for the past two years; the most
recent tax bills for the Property; utility bills for the Property for the twelve
(12) months previous to the date hereof; all contract, mortgages, and other
documents creating liens of security interest on the Property, or any part
thereof and all promissory notes secured thereby; all insurance policies
applicable to the Property to include loss runs for the last five (5) years;
Plans and Specifications for the Property, service contracts, Certificates of
Occupancy, to the extent reasonably available; a copy of the title policy and
most recent survey for the Property. A copy of any environmental or engineering
reports on the property. All these items shall be certified by Seller to be
accurate and complete to the best of its knowledge and belief.
6.2.2 Inspection of Books and Records; Access. Upon receipt by Purchaser
of all documents requested in the paragraph above, Purchaser, its employees,
agents and contractors shall have 14 days (the "Inspection Period") to enter
upon the Property subject to the rights of the tenants during normal business
hours for the purpose of making physical inspections thereof, including but not
limited to roofs, heating, cooling, electrical and plumbing systems, swimming
pool, appliances, and structural elements of the buildings. Upon the conclusion
of the Inspection Period this contract shall be deemed to be a firm agreement of
purchase and sale binding the parties hereto, except as it may be terminated by
other provisions and conditions contained herein, including but not limited to
the condition imposed by Paragraph 6.1(A) above.
6.2.3 Right of Termination During Inspection Period. Purchaser shall
also be permitted to review all original leases, expense records, tenant cards
and occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability to
any other party hereto, and all deposits shall be returned to Purchaser.
6.2.4 "Rent Ready". During the "Inspection Period", both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, are to be in a "rent ready" condition (as defined above), at
the time of closing, containing, but not limited to the following amenities,
i.e., carpet, refrigerator, range, garbage disposal, heating, plumbing and
electrical systems.
6.2.5 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection by
Purchaser, normal wear and tear excepted. If Seller fails to make reasonable
efforts to conserve the property, Purchaser shall have the option of waiving
such requirement, in writing, and proceeding to closing, or Purchaser may void
this Agreement and obtain a prompt return of its deposit.
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6.2.6. New Leases. Seller agrees to submit a monthly report to Purchaser
setting forth all new leases entered into attaching a copy of all such new
leases and showing that all minimum lease qualifications have been adhered to as
set forth in the attached Exhibit E. Purchaser's sole remedy for Seller's
failure to comply will be a ground for cancellation of this Agreement by the
Purchaser with the return of the Deposit.
Article VII
Closing
7.1 Closing.
(A) Closing shall take place within fifteen (15) days after the
following conditions shall have occurred:
(i) Occupancy of the premises shall be no less than ninety
(90%) percent under the terms and conditions as set forth in the aforesaid
Exhibit C.
(ii) All of the occupied units shall be leased at such rents
and without any rental concessions which carry future monetary value and said
rent shall be no less than as set forth in Exhibit C.
(iii) The rent roll shall indicate that the gross annual
potential rent shall not be less than $2,159,400.
(iv) All tenants executing a lease subsequent to the date of
this Agreement shall have been qualified for rental using credit qualifications
that are not less than those outlined in Exhibit C.
(B) In the event that all of the occurrences do not transpire, which
would trigger the closing date as set forth above, the Purchaser may grant an
extension or series of extensions to allow the events to transpire, or the
Purchasers may waive any or all of the conditions and give fifteen (15) days
notice for a closing date. However, in the event that the Purchaser does not
waive the conditions and occurrences set forth above prior to 12/1/96, either
party may terminate this purchase agreement, without penalty, and the deposit
will be returned to the Purchaser.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the General Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following:
(A) A Bill of Sale, with warranty of title transferring the personal
property (as shown in Schedule B) to Purchaser free of all liens, charges and
encumbrances.
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(B) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property.
(C) All security deposits made by such tenants. Seller will give the
tenants the required notice of such transfer in compliance with the laws of
North Carolina.
(D) An affidavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(E) A rent roll certified by Seller to be true and correct as of the
date of closing showing the name of, and the amount of monthly rental payable,
by each tenant of the Property, the apartment occupied by the tenant, the date
to which rent has been paid, any advance payment of rent, and the amount of any
escrow, or security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and
belief there are, on the date of closing, no unsatisfied judgments, creditor's
claims, tax liens, or pending bankruptcies involving Seller.
(G) Seller shall provide, a certificate from a licensed
extermination contractor, who is regularly engaged in the business of pest
control, that all buildings are free from any termite or other wood-boring
insect infestation. Said certificate shall be dated within 90 days of closing,
bearing the Contractor's name, contractors license number, the signature of the
party authorized to sign for the Contractor and the date of the inspection.
Should damage exist, Seller shall proceed to have any corrective work completed
prior to closing or Purchaser, as its sole option, may either proceed to
settlement and have such sums required for repairs deducted from Seller's
proceeds up to $5,000, or may in its sole discretion terminate this Agreement.
Seller' shall promptly return Purchaser's deposit upon such termination.
(H) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property, (2)
the leases and rental agreements with tenants of the Property, (3) the existing
Property telephone number and (4) the business and trade name as set forth in
Par. 1.1.
(I) Assignments of all warranties and guarantees to the extent such
are still in effect and provide Purchaser with copies of all such warranties and
guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
(J) Evidence satisfactory to Purchaser that all
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water, sewer, gas, electric, telephone, and drainage facilities and all other
utilities required by law or by the normal use and operation of the Property are
and at the time of closing will be installed to the property line, are and at
the time of closing will be connected pursuant to valid permits, and are and at
the time of closing adequate to service the Property and to permit full
compliance with all requirements of law and normal usage of the Property by the
tenants thereof and their licensees and invitees.
(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles or by-laws,
which may affect Seller's ability to convey marketable title.
(L) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing.
(M) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory to
Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the Partnership or
Corporation.
(N) Affidavit that Seller has no actual knowledge of the presence of
asbestos and/or any other hazardous material at the Property.
(O) Seller shall provide a satisfactory and valid written
termination of the management agreement executed by the existing management and
rental agent for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser.
(Q) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(R) A representation letter as normally required by auditors for a
public company. This clause shall survive closing for one year.
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(S) Seller shall deliver an assignment of all the warranties by the
contractor, pursuant to the requirements of Paragraph E on Page 8 attached
hereto as Exhibit F, for the period stated in said paragraph, which shall be
assigned to the Purchaser.
7.3 Purchaser's Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted
for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate the
transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing mortgage
documents which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for six months following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents. This
warranty shall survive for six months following closing.
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(D) Seller has no actual knowledge and has not been advised in
writing that it is in default under any lease, rental agreement service or
equipment contract, or mortgage or other encumbrances relating to the Property.
This warranty shall survive for one year the following closing.
(E) Seller has no actual knowledge of any patent or latent defect in
the Property or any part thereof. This warranty shall survive for six months
following closing.
(F) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the Property. This warranty
shall survive for six months following closing.
(G) Seller has entered into a contract for the construction of the
premises and has received warranties as set forth in Paragraph E on Page 8,
which is attached hereto as Exhibit F, and warrants to the Purchaser that said
warranties and guarantees are assignable to the Purchaser.
(H) The Property abuts on and has direct vehicular access to a
public road.
(I) All building and other improvements at the Property are located
entirely within the boundary lines of the Property.
(J) Seller has no actual knowledge that any part of the Property or
the operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting the
Property, or that any governmental authority has expressed an intent to condemn
or to make special improvements for the benefit of the Property or any part
thereof. This warranty shall survive for six months following closing.
(K) That to the best knowledge of the Seller, the drainage within
the project is satisfactory and complies in all respects with all government
regulation. This warranty shall survive for six months following closing.
(L) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(M) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and will furnish to
Purchaser an affidavit confirming same.
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(N) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not enter into a lease for a period
of more than one (1) year with any tenant and under no other terms other than
the normal rental agreement. If the leases of any tenants expire before thirty
(30) days after the date of closing, Seller shall, up to the date of closing and
without cost to the Purchaser, continue its normal course of operation with
respect to causing tenants to be obtained for apartments which are unrented.
8.2 Continuation of Representations, Warranties and Covenants to the
Date of Closing. If each of the warranties set forth in this section does not
remain true up to and including the time of closing as to any material matters,
this Agreement, at Purchaser's election, shall be terminated, Seller shall
return all payments made by Purchaser, or Purchaser may elect to close the sale
and waive failure of the warranties.
8.3 Breach of Representations, Warranties and Covenants. Notwithstanding
the provisions of 8.2 above, Seller shall indemnify Purchaser for all reasonable
direct, out of pocket costs incurred as a result of the willful failure of any
of Seller's representations, warranties or covenants contained herein to remain
true as of the date of closing, but in no event shall Seller's liability exceed
the amount of $25,000.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, the Property is damaged by
fire or other casualty to an extent exceeding $150,000, Seller shall repair such
damage before the date provided herein for closing. If such damage cannot be
repaired by such time, this Agreement may be canceled at the option of the
Purchaser. In the event of cancellation as aforesaid, this Agreement shall
become null and void and the parties shall be released and all payments made
shall be returned. Should Purchaser elect to carry out this Agreement despite
such damage Seller shall assign to Purchaser all insurance proceeds arising from
such damage and will compensate Purchaser for deductible and lost rent
collections to the extent of insurance proceeds received. Seller shall promptly
notify Purchaser in writing upon the occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon a
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taking of a material part of the Property (any part of the building or more than
5% of the parking area), Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Seller agrees to pay a brokerage fee to DRUCKER & FALK,
pursuant to a separate agreement between Seller and Brokers. Said brokerage fee
shall be deemed earned if, and only if, settlement occurs hereunder, and shall
not be deemed earned even if Purchaser and/or Seller wrongfully fail(s) to
consummate the purchase and sale herein contemplated. Purchaser shall not be
obligated for any brokerage fees to any broker, and Seller agrees to hold
Purchaser harmless in connection with such fees. Seller and Purchaser represent
and warrant to each other that no other brokerage fees are or shall be owing in
connection with this transaction or in any way with the Apartments and Seller
and Purchaser hereby indemnify and hold the other harmless from any and all
claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions and
covenants contained herein, however, it shall not be an event of default for
either party to exercise its rights to terminate this contract as contained in
other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election and as its sole remedies, may either (1) require specific performance
of Seller, (2) cancel this Agreement and obtain a prompt return of the deposit,
in which case this Agreement shall be terminated and the parties released from
all obligations hereunder, or (3) the Purchaser may waive such defaults and
proceed to settlement. Seller shall indemnify Purchaser up to a maximum amount
of $50,000 for any reasonable, direct, out of pocket costs incurred by Purchaser
if Purchaser
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elects to pursue its option (1) above, to include reasonable attorney fees.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement shall
be terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Seller shall have
no other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire
understanding between the parties; it supersedes all previous agreements and
representations which are deemed merged herein and may not be modified except in
writing.
12.2 Assignment. Purchaser may not assign this Agreement without the
consent of Seller except to Cornerstone Realty Income Trust, Inc.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstances shall be
held invalid, the remainder of this Agreement or the application of such
provision, sentence, phrase, or word to persons or circumstances, other than
those as to which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 Headings. The headings of the Articles and
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sections hereof are inserted for convenience only and shall not be deemed
to constitute a part of the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address
set forth below (or such other address as may be hereafter specified in
writing):
To Seller: WOODLAKE COMPANY LIMITED PARTNERSHIP
c/o Drucker & Falk
7200 Stonehenge Drive
Suite 211
Raleigh, NC 27613
With a copy to
Seller's Attorneys: Howard P. Satisky, Esq.
900 Ridgefield Drive
Suite 250
Raleigh, NC 27609
To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
and
, NC
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by
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overnight express mail shall be deemed given when deposited in the United
States Mail, postage prepaid, or delivered to a reliable overnight courier.
Notices sent in any other manner shall be deemed given only when actually
delivered at the specified address.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
WOODLAKE COMPANY LIMITED PARTNERSHIP
By: D&F,C, Real Estate Co., Woodlake, Inc., its general partner
By: /s/ David C. Falk, Sr.
- -----------------------------
David C. Falk, Sr.
Its: President
PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
- -----------------------------
Its: Senior Vice President
15
Exhibit 10.3
Highland Hills
Carrboro, NC
35117/55895
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made by and
between Condor One, Inc., a Delaware corporation ("Seller"), and Cornerstone
Realty Income Trust, a Virginia corporation ("Purchaser").
In consideration of the mutual covenants and representations herein
contained, and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, Seller and Purchaser agree as follows:
1.
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell and convey to Purchaser, and
Purchaser, and Purchaser hereby agrees to purchase from Seller, all of the
Seller's assignable and transferable right, title and interest in and to the
following described property (herein collectively called the "Property"):
(a) Land. That certain tract of land (the "Land") located
in the City of Carrboro, Orange County, North Carolina, being more particularly
described on Exhibit A attached hereto and made a part hereof.
(b) Easements. All easements, if any, benefiting the Land
or the Improvements (as hereinafter defined).
(c) Rights and Appurtenances. All rights and appurtenances
pertaining to the Land, including any right, title and interest of Seller
in and to adjacent streets, alleys or rights-of-way.
(d) Improvements. All improvements and related amenities known
as "Highland Hills Apartments" (the "Improvements") in and on the Land,
containing 264 units and having an address of 180 E. BPW Club Road, Carrboro,
North Carolina 27510.
(e) Leases. All leases (the "Leases") of space in the Property,
concession leases, and all tenant security deposits held by Seller on the
Closing Date (as hereinafter defined).
(f) Tangible Personal Property. All appliances, fixtures,
equipment, machinery, furniture, carpet, drapes and other personal
property, if any, owned by
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Seller and located on or about the Land and the Improvements (the "Tangible
Personal Property").
(g) Contracts. To the extent assignable without the consent of
third parties, the Contracts (as hereinafter defined).
(h) Intangible Property. To the extent assignable without the
consent of third parties, all intangible property (the "Intangible Property"),
if any, owned by Seller and pertaining to the Land, the Improvements, or the
Tangible Personal Property including, without limitation, transferable utility
contracts, transferable telephone exchange numbers, plans and specifications,
engineering plans and studies, floor plans and landscape plans.
2.
PURCHASE PRICE
2.1 Purchase Price. The purchase price (the "Purchase Price") for the
Property shall be TWELVE MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($12,100,000.00) and shall be paid in cash by Purchaser to Seller at
the Closing (as defined herein) by wire transfer in accordance with wire
transfer instructions to be provided by Seller.
3.
ACKNOWLEDGMENTS BY PURCHASER
3.1 Delivery of Due Diligence Items. Purchaser acknowledges that Seller
has previously delivered the following:
(a) Contracts. Copies of all contracts pertaining to the
Property, and not cancelable on thirty (30) days notice without penalty
or premium (the "Contracts"), including, but not limited to, management
contracts, service contracts, equipment leases and maintenance contracts,
to the extent in the possession of GE Capital Realty Group, Inc. ("GECRG").
(b) Rent Roll. A certified rent roll describing (i) all
Leases of space in the Improvements as of the last month GECRG has
received such information from the property manager of the Property and (ii)
reflect the security deposits being held on account of the Leases.
(c) Commitment for Owner's Policy. A Commitment for Owner's
Policy of the Title Insurance (the "Title Commitment") with respect to
the Property, issued by the Title Company, and legible copies of any
restrictive covenants, easements, and other items listed as title
exceptions therein; and
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(d) Current Survey. A copy of the as-built survey of the
Property (the "Survey") showing the location of all of the Improvements,
prepared by Philip Post & Associates dated August 7, 1987 and updated
September 18, 1996.
3.1.1 Purchaser's Satisfaction. Purchaser acknowledges the
following to Seller:
(a) Purchaser's satisfaction, in Purchaser's sole discretion,
that the Property is suitable for Purchaser's intended uses; and
(b) Purchaser's being satisfied, in Purchaser's sole
discretion, with the items listed above in Section 4.1(a) through Section 4.1(d)
above, including the information reflected therein.
3.1.2 Permitted Encumbrances. The term "Permitted Encumbrances"
as used herein includes: (i) any easement, right of way, encroachment, conflict,
discrepancy, overlapping of improvements, protrusion, lien, encumbrance,
restriction, condition, convenant, exception or other matter with respect
to the Property that is reflected or addressed on the Survey of the Title
Commitment.
3.1.3 Limitations of Seller's Obligations. Notwithstanding anything
contained herein to the contrary, Seller shall have no obligation to take
any steps, bring any action or proceeding or incur any effort of expense
whatsoever to eliminate, modify or cure any objection Purchaser may have
pursuant to Section 3.1.1, Section 3.1.2, or Section 3.2.
3.2 Inspection. Purchaser acknowledges that Purchaser has inspected,
tested, and surveyed: (a) the Property, (b) all financial records pertaining
to the operations of the Property, and (c) photocopies of all Leases and
Contracts in the possession of GECRG. The said inspections of the Property
are deemed satisfactory to Purchaser and Purchaser shall be deemed to have
agreed to assume all obligations from and after the date of Closing with
respect to the Leases and the Contracts. All information provided
by Seller to Purchaser or obtained by Purchaser relating to the Property
in the course of Purchaser's review, including, without limitation,
any environmental assessment of audit (collectively, the "Reports") shall
be treated as confidential information by Purchaser and Purchaser shall
instruct all of its employees, agents, representatives and contractors
as to the confidentiality of all such information. Purchaser shall restore the
Property to its condition existing immediately prior to Purchaser's
inspection thereof, and Purchaser shall be liable for all damage or
injury to any person or property resulting from, relating to or
arising out of any such inspection, whether occasioned by the acts of Purchaser
or any of its employees, agents, representatives or contractors, and
Purchaser shall indemnify and hold harmless Seller and its agents, employees,
officers, directors, affiliates and asset managers from any liability
resulting therefrom. This indemnification by Purchaser shall survive the
Closing.
3.3 Purchaser's Representations and Warranties. Purchaser
represents and warrants to Seller that (a) Purchaser is a partnership or
corporation, duly organized and in good standing under the laws of the
State of Virginia, is qualified to do business in the State of North Carolina
and has the power to enter into this Agreement and to execute and
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deliver this Agreement and to perform all duties and obligations imposed upon it
hereunder, and Purchaser has obtained all necessary partnership and corporate
authorizations required in connection with the execution, delivery and
performance contemplated by this Agreement and has obtained the consent of all
entities and parties necessary to bind Purchaser to this Agreement, and (b)
neither the execution nor the delivery of this Agreement, nor the consummation
of the purchase and sale contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement conflict with or will
result in the breach of any of the terms, conditions, or provisions of any
agreement or instrument to which Purchaser, or any partner or related entity or
affiliate of Purchaser, is a party or by which Purchaser, any partner or related
entity or affiliate of Purchaser, or any of Purchaser's assets is bound, and (c)
neither Purchaser nor any partner, related entity of affiliate of Purchaser is
in any way affiliated with GE Capital Realty Group, Inc., General Electric
Capital Corporation, General Electric Realty Advisors, Inc., General Electric
Company or any affiliate of General Electric Company, and (d) that, with respect
to each source of funds to be used by its to purchase the Property
(respectively, the "Source"), at least one of the following statements shall be
accurate as of the Closing Date: (i) the Source does not include the assets of
(A) and "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject
to Title I of ERISA, or (B) a "plan" as defined in Section 4975(a) of the
Internal Revenue Code of 1986, as amended ("Code"), or (ii) the Source includes
the assets of (A) an "employee benefit plan" as defined in Section 3(3) of ERISA
or (B) a "plan" as defined in Section 4975 of the Code (each of which has been
identified to the Seller in writing pursuant to this Section 3.3 at least ten
(10) business days prior to the Closing Date), but the use of such Source to
purchase the Property will not result in a nonexempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code. The Purchaser's
representations and warranties set forth in this Section 3.3 shall survive the
Closing or termination of this Agreement. Purchaser's representations and
warranties contained herein must be true and correct through the Closing Date,
and Purchaser's failure to notify Seller prior to the Closing Date of any
inaccuracies shall be a default by Purchaser under this Agreement.
3.4 Seller's Representations and Warranties. Seller represents and
warrants the following to Purchaser:
(a) Seller has the full partnership/corporate right, power,
and authority, without the joinder of any other person or entity, to enter
into, execute and deliver this Agreement, and to perform all duties and
obligations imposed on Seller under this Agreement;
(b) Neither the execution nor the delivery of this Agreement,
nor the consummation of the purchase and sale contemplated hereby, nor
the fulfillment of or compliance with the terms and conditions of this
Agreement conflict with or will result in the breach of any of the terms,
conditions, or provisions of any agreement of instrument to which Seller is a
party or by which Seller or any of Seller's assets is bound;
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(c) To the best of Seller's knowledge, Seller has not been
served with process in any lawsuit which would affect the consummation of the
transaction contemplated hereby;
(d) To the best of Seller's knowledge, there is not
condemnation proceeding pending against the Property; and
(e) To the best of Seller's knowledge, the leases listed
in the Rent Roll constitute all or the written and oral agreements of any kind,
for the leasing, rental or occupancy of any portion of the Property,
and the Seller has received no written notice from any tenant of the Property
of a default by Seller under such leases.
(f) To Seller's knowledge, Seller has not received any
written citation or other written notice from a governmental authority
of a presently existing violation of any laws which are applicable
to Seller's ownership, maintenance and operation of the Property;
3.5 Knowledge Defined. As used in Section 3.4, the term "to the best of
Seller's knowledge" (a) shall mean and apply to the actual knowledge
of Mr. A.T. Wolf, the asset manager of the Property, and not to any other, it
being understood and acknowledged that (i) Mr. Wolf, in many instances,
is not involved in the day-to-day operations of the Property and (ii)
Mr. Wolf is not charged with knowledge of all of the acts
and/or omissions of the predecessors in title to the Property or with
knowledge of all of the acts and/or omissions of Seller's agents or employees,
and (b) shall not apply to or be construed to apply to information or
material which may be in the possession of Seller generally or
incidentally, but which is not actually know to Mr. Wolf.
3.6 Termination of Management Agreement. Seller and Insignia
Management Group ("Manager") have entered into a management agreement for
the management of the Property (the "Management Agreement"), which Management
Agreement shall be terminated as of the Closing Date.
3.7 Survival; Liability.
(a) Any and all of the representations, warranties and covenants
of Seller as contained in this Agreement and to be performed prior to Closing
shall be void and of no further force or effect whatsoever from and after the
six (6) month anniversary of the Closing and any claim for breach of any
representation, warranty or covenant must be brought during such period.
Consequently, after such 6-month anniversary, Purchaser shall not have the
right to commence any action with respect to any alleged breach and/or
violation of any of such representations, warranties and/or covenants of Seller.
If Purchaser becomes aware prior to Closing of any breach and/or violation of
any Seller's representations, warranties or covenants as set forth herein,
Purchaser shall give Seller written notice of any such breach or violation,
and during the fifteen (15) day period after such notice, Seller shall have the
right, but not the obligation to
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cure any such breach or violation to the reasonable satisfaction of
Purchaser. If Purchaser becomes aware of any breach and/or violation
of any of Seller's representations, warranties and/or covenants
herein prior to Closing and thereafter proceeds to Closing, such
breach shall be deemed waived by Purchaser. If Purchaser timely commences
any action(s) under the Section 3.7 to enforce any alleged breach and/or
violation of any of the representations, warranties and/or covenants of
Seller as set forth in this Agreement, then Purchaser's sole remedy shall be
to seek recovery of its actual damages (but not any special, consequential,
punitive or other damages), in the aggregate (with respect to all such
breaches and/or violations) not to exceed One Hundred Thousand and No/100
Dollars ($100,000.00) per event, which sum shall include all of
Purchaser's attorneys' fees, costs, expert witness fees and court costs.
4.
NO REPRESENTATIONS OR WARRANTIES BY SELLER;
ACCEPTANCE OF PROPERTY
4.1 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.4 ABOVE,
PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND
SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (OTHER THAN
THE SPECIAL WARRANTY OF TITLE AS SET OUT IN THE DEED, AS DEFINED BELOW),
PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER
WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR
FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY
OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND
GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF
THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER OR ANY TENANT
MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION
WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL
AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY,
PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (F) THE
MANNER QUALITY OF THE CONSTRUCTION OF MATERIALS, IF ANY, INCORPORATED INTO THE
PROPERTY, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE
PROPERTY, OR (H) COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND
USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN
OR ON THE PROPERTY OF HAZARDOUS MATERIALS (AS DEFINED BELOW) OR (I) ANY OTHER
MATTER WITH RESPECT TO THE PROPERTY ADDITIONALLY, NO PERSON ACTING ON BEHALF OF
SELLER IS AUTHORIZED TO MAKE, AND BY EXECUTION HEREOF OF PURCHASER ACKNOWLEDGES
THAT NO PERSON HAS MADE, ANY REPRESENTATION, AGREEMENT, STATEMENT, WARRANTY,
GUARANTY OR PROMISE REGARDING THE
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PROPERTY OR THE TRANSACTION CONTEMPLATED HEREIN; AND NO SUCH REPRESENTATION,
WARRANTY, AGREEMENT, GUARANTY, STATEMENT OR PROMISE IF ANY, MADE BY ANY PERSON
ACTING ON BEHALF OF SELLER SHALL BE VALID OR BINDING UPON SELLER UNLESS
EXPRESSLY SET FORTH HEREIN. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING
SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION
PROVIDED OR TO BE PROVIDED BY SELLER AND AGREES TO ACCEPT THE PROPERTY AT THE
CLOSING AND WAIVE ALL OBJECTIONS OR CLAIMS AGAINST SELLER (INCLUDING, BUT NOT
LIMITED TO, ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE
PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH
RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER
HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION
AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY, TRUTHFULNESS OR COMPLETENESS OF
SUCH INFORMATION. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR
WRITTEN STATEMENT, REPRESENTATION OR INFORMATION PERTAINING TO THE PROPERTY, OR
THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, CONTRACTOR, AGENT,
EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS
PROVIDED FOR HEREIN IS MADE ON ANY "AS IS" CONDITION AND BASIS WITH ALL FAULTS.
IT IS UNDERSTOOD AND AGREED THAT THE PURCHASE PRICE HAS BEEN ADJUSTED BY PRIOR
NEGOTIATION TO REFLECT THAT ALL OF THE PROPERTY IS SOLD BY SELLER AND PURCHASED
BY PURCHASER, SUBJECT TO THE FOREGOING. PURCHASER HEREBY AGREES TO INDEMNIFY,
PROTECT, DEFEND, SAVE AND HOLD HARMLESS SELLER FROM AND AGAINST ANY AND ALL
DEBTS, DUTIES, OBLIGATIONS, LIABILITIES, SUITS, CLAIMS, DEMANDS, CAUSES OF
ACTION, DAMAGES, LOSSES, FEES AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES AND EXPENSES AND COURT COSTS) IN ANY WAY RELATING TO, OR IN
CONNECTION WITH OR ARISING OUT OF PURCHASER'S ACQUISITION, OWNERSHIP, LEASING,
USE, OPERATION, MAINTENANCE AND MANAGEMENT OF THE PROPERTY. THE PROVISIONS OF
THIS SECTION 4 SHALL SURVIVE THE CLOSING OR ANY TERMINATION HEREOF.
4.2 Hazardous Materials. "Hazardous Materials" shall mean any substance
which is or contains (i) any "hazardous substance" as now or hereafter defined
in (Section)101(14) of the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amend (42 U.S.C. (Section)9601 et seq.)
("CERCLA") or any regulations promulgated under CERCLA; (ii) any "hazardous
waste" as now or hereafter defined in the Resource Conservation and Recovery
Act (42 U.S.C. (Section)6901 et seq.) ("RCRA") or regulations promulgated
under RCRA; (iii) any substance regulated by the Toxic Substances Control
Act (15 U.S.C. (Section)2601 et seq.); (iv) gasoline, diesel fuel, or other
petroleum hydrocarbons;
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(v) asbestos and asbestos containing materials, in any form, whether friable
or non-friable; (vi) polychlorinated biphenyls; (vii) radon gas; and (viii)
any additional substances or materials which are now or hereafter classified
or considered to be hazardous or toxic under Environmental Requirements (as
hereinafter defined) or the common law, or any other applicable laws relating to
the Property. Hazardous Materials shall include, without limitation, any
substance, the presence of which on the Property, (A) requires reporting,
investigation or remediation under Environmental Requirements; (B) causes or
threatens to cause a nuisance on the Property or adjacent property or poses or
threatens to pose a hazard to the health or safety of persons on the Property or
adjacent property; or (C) which, if it emanated or migrated from the Property,
could constitute a trespass.
4.3 Environmental Requirements. "Environmental Requirements" shall mean
all laws, ordinances, statutes, codes, rules, regulations, agreements,
judgments, orders, and decrees, now or hereafter enacted, promulgated, or
amended, of the United States, the states, the counties, the cities, or any
other political subdivisions in which the Property is located, and any other
political subdivision, agency or instrumentality exercising jurisdiction over
the owner of the Property, the Property, or the use of the Property, relating to
pollution, the protection or regulation of human health, natural resources, or
the environment, or the emission, discharge, release or threatened release of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or waste or Hazardous Materials into the environment (including,
without limitation, ambient air, surface water, ground water or land or soil).
5.
CLOSING
5.1 Closing. The Closing (the "Closing") shall be held at the offices of
Chicago Title Insurance Company (the "Title Company") at One Exchange Plaza,
Suite 707, Raleigh, North Carolina 27601, Attention: Becky Goodwin, at a date
designated by Seller and Purchaser on or before September 30, 1996 (the "Closing
Date"), unless the parties mutually agree in writing upon another place, time or
date.
5.2 Possession. Possession of the Property shall be delivered to
Purchaser at the Closing, subject to the Permitted Encumbrances.
5.3 Proration. All rents, other amounts payable by the tenants under the
Leases, income, utilities and all other operating expenses with respect to the
Property for the month in which the Closing occurs, and real estate and personal
property taxes and other assessments with respect to the Property for the year
in which the Closing occurs, shall be prorated to the date Seller receives the
Purchase Price in immediately available funds with Seller receiving the benefits
and burdens of ownership on the Closing Date.
(a) If the Closing shall occur before rents and all other
amounts payable by the tenants under the Leases and all other income
from the Property have actually been paid for the month in which the
Closing occurs, the apportionment of such rents and other amounts and
other income shall be upon
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the basis of such rents, other amounts and other income actually
received by Seller. Subsequent to the Closing, if any such rents and
other income are actually received by Purchaser, all such amounts shall
first be applied to post-closing rents due to Purchaser which are past
due and the balance shall be immediately paid by Purchaser to Seller.
Purchaser shall make a good faith effort and attempt to collect any such
rents and other amounts and other income not apportioned at the Closing
for the benefit of Seller, however, Purchaser shall not be required to
expend any funds or institute any litigation in its collection efforts.
Nothing in this paragraph shall restrict Seller's right to collect
delinquent rents directly from a tenant by any legal means.
(b) If the Closing shall occur before the tax rate or the
assessed valuation of the Property is fixed for the then current year,
the apportionment of taxes shall be upon the basis of the tax rate for
the preceding year applied to the latest assessed valuation. Subsequent
to the Closing, when the tax rate and the assessed valuation of the
Property is fixed for the year in which the Closing occurs, the parties
agree to adjust the proration of taxes and, if necessary, to refund or
repay such sums as shall be necessary to effect such adjustment. If the
Property is not assessed as a separate parcel for tax or assessment
purposes, then such taxes and assessments attributable to the Property
shall be determined by Purchaser and Seller. If, as of the Closing, the
Property is not being treated as a separate tax parcel, then within
thirty (30) days after the Closing, Purchaser shall, at its sole cost
and expense, have the Property assessed separately for tax and
assessment purposes.
(c) If the Closing shall occur before the actual amount of
utilities and all other operating expenses with respect to the Property
for the month in which the Closing occurs are determined, the
apportionment of such utilities and other operating expenses shall be
upon the basis of an estimate by Seller of such utilities and other
operating expenses for such month. Subsequent to the Closing, when the
actual amount of such utilities and other operating expenses with
respect to the Property for the month in which the Closing occurs are
determined, the parties agree to adjust the proration of such utilities
and other operating expenses and, if necessary, to refund or repay such
sums as shall be necessary to effect such adjustment.
The agreements of Seller and Purchaser set forth in this Section 5.3 shall
survive the Closing.
5.4 Closing Costs. Except as otherwise expressly provided herein,
Seller shall pay, on the Closing Date, one-half (1/2) of any escrow fees, deed
stamps and other customary charges of the Title Company, and Purchaser shall
pay, on the Closing Date, the title insurance premium for the Owner's Policy (as
defined in Section 5.6(b)), all recording costs, the cost of the survey,
one-half (1/2) of any escrow fees and other customary charges of the Title
Company. Except as otherwise provided herein, each party shall pay its own
attorneys' fees.
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5.5 Seller's Obligations at the Closing. At the Closing, Seller
shall deliver to Purchaser the following:
(a) Deed. Special Warranty Deed (the "Deed") conveying the
Land and the Improvements to Purchaser subject to no exceptions other
than the Permitted Encumbrances, in the form attached to this Agreement
as Exhibit B.
(b) Evidence of Authority. Such organizational and
authorizing documents of Seller as shall be reasonably required by the
Title Company to evidence Seller's authority to consummate the
transactions contemplated by this Agreement.
(c) Foreign Person. An affidavit of Seller certifying that
Seller is not a "foreign person," as defined in the federal Foreign
Investment in Real Property Tax Act of 1980, and the 1984 Tax Reform
Act, as amended.
(d) Leases. The originals of all of the Leases and all
security deposits, if any, in the possession of GECRG on the Closing
Date. Purchaser shall receive a credit to the Purchase Price at Closing
for the amount of security deposit obligations outstanding under the
Leases as of the Closing Date.
(e) Contracts. The originals of all of the Contracts, if
any, in the possession of GECRG.
5.6 Purchaser's Obligations at the Closing. At the Closing, Purchaser
shall deliver to Seller the following:
(a) Purchase Price. The Purchase Price by wire transfer of
immediately available funds.
(b) Evidence of Authority. Such organizational and
authorizing documents of purchaser as shall be reasonably required by
Seller and/or the Title Company authorizing Purchaser's acquisition of
the Property pursuant to this Agreement and the execution of this
Agreement and any documents to be executed by Purchaser at the Closing.
(c) Taxpayer I.D. Certification, if the form attached to
Agreement as Exhibit D.
(d) Cost for Survey. Payment for all costs incurred in
connection with the Survey.
Purchaser shall be responsible for obtaining an Owner's Policy of Title
Insurance in ALTA standard form (the "Owner's Policy"), naming Purchaser as
insured, in the amount of the Purchase Price, insuring that Purchaser owns good
and indefeasible fee simple title to the Property, subject only to the Permitted
Encumbrances. Purchaser, at Purchaser's sole
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expense, may elect to cause the Title Company to amend the survey exception to
read "any shortages in area."
5.7 Documents to be executed by Seller and Purchaser. At the Closing,
Seller and Purchaser shall also execute and deliver the following:
(a) Tenant Notices. Signed statements or notices to all
tenants of the Property notifying such tenants that the Property has
been transferred to Purchaser and that Purchaser is responsible for
security deposits (specifying the amounts of such deposits), and, if
applicable, otherwise complying with the North Carolina Property Code.
(b) Assignment and Assumption of Personal Property, Service
Contracts, Warranties and Leases. Assignment in the form attached to
this Agreement as Exhibit C.
6.
RISK OF LOSS
6.1 Condemnation. If, prior to the Closing, action is initiated to
take any of the Property by eminent domain proceedings or by deed in lieu
thereof, Purchaser may either at or prior to Closing (a) terminate this
Agreement, or (b) consummate the Closing, in which latter event all of Seller's
assignable right, title and interest in and to the award of the condemning
authority shall be assigned to Purchaser at the Closing and there shall be no
reduction in the Purchase Price.
6.2 Casualty. Except as provided in Sections 3.2 and 4.1 of this
Agreement, Seller assumes all risks and liability for damages to or injury
occurring to the Property by fire, storm, accident, or any other casualty or
cause until the Closing has been consummated. If the Property, or any part
thereof, suffers any damage in excess of $500,000 prior to the Closing from fire
or other casualty, which Seller, at its sole option, does not elect to repair,
Purchaser may either at or prior to Closing (a) terminate this Agreement, or (b)
consummate the Closing, in which latter event all of Seller's right, title and
interest in and to the proceeds of any insurance covering such damage (less an
amount equal to any expenses and costs incurred by Seller to repair or restore
the Property and any portion of such proceeds paid or to be paid on account of
the loss of rents or other income from the Property for the period prior to and
including the Closing Date, all of which shall be payable to Seller), to the
extent the amount of such insurance does not exceed the Purchase price, shall be
assigned to Purchaser at the Closing. If the Property, or any part thereof,
suffers any damage less than $500,000 prior to the Closing, Purchaser agrees
that it will consummate the Closing and accept the assignment of the proceeds of
any insurance covering such damage plus an amount equal to Seller's deductible
under its insurance policy and there shall be no reduction in the Purchase
Price.
6.3 Existing Insurance Claims. Purchaser and Seller acknowledge
a portion of the Property has been damaged as a consequence of weather
conditions existing with
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Hurricane Fran in September of 1996, and requires certain repair (the "Damaged
Property"). Seller agrees to submit a claim under Claim No. 23P227431 (date of
casualty, September 6, 1996) ("Claim") to Cigna Property and Casualty ("Cigna")
in connection with the Damaged Property on a replacement cost basis. Seller also
agrees to undertake good faith efforts to collect on such Claim and will assign
to Purchaser any proceeds Seller receives with respect to such Claim (except for
any loss rental proceeds applicable to the period prior to the Closing Date).
If, (a) after Closing, Purchaser discovers additional Damaged Property other
than what was included and contemplated in the original Claim, Seller shall
submit a supplement to the Claim (such supplement to be prepared and documented
by Purchaser in good faith) to Cigna or (b) the amount of insurance paid by
Cigna in connection with the Claim is not satisfactory to Purchaser, Purchaser
shall provide Seller with supporting evidence that such proceeds are not
acceptable, and Seller shall resubmit same to Cigna, provided, however, Seller
shall not be obligated to submit or resubmit pursuant to the terms of the policy
any claims in connection with the Damaged Property to Cigna after 120 days from
the Closing Date. Purchaser shall, at Purchaser's expense, be entitled to
pursue any remedies available to Seller under Seller's Policy (but only to the
extent such policy applies to an individual claim and not an action under the
policy as a whole) in order to contest any payment made on behalf of the Claim.
In addition, Purchaser shall be entitled to any rent loss proceeds received by
either Seller or Purchaser for the period after the Closing Date with respect to
the Claim in accordance with the provisions under Seller's insurance policy.
Within ten (10) calendar days after receipt of the Claim amount, Purchaser shall
provide Seller with a written statement that Purchaser has received the
appropriate amount of insurance proceeds and releasing Seller from any further
obligations under this Section 6.3. Attached as Exhibit E is a memorandum
detailing the coverage of Seller's policy.
7.
DEFAULT
7.1 Breach by Seller. Except as Purchaser's remedies may otherwise
be expressly limited by the terms of this Agreement (including, without
limitation, the terms of Section 4.4):
(a) In the event that Seller shall breach any of its
representations, warranties or covenants in this Agreement which by the
express terms of this Agreement survive the Closing, Purchaser, as its
sole and exclusive remedy, and subject to the provisions of Section 3.7
and Subsection 7.1(b) below and, may pursue Seller for actual damages
incurred by Purchaser as a result of such breach.
(b) Notwithstanding the foregoing, in no event shall the
aggregate amount of actual damages which Purchaser may be entitled to
recover against Seller pursuant to Subsections 7.1(a) above exceed One
Hundred Thousand and No/100 Dollars ($100,000) and in no event shall
Seller be liable to Purchaser for any punitive, speculative or
consequential damages or to the remedy of specific performance.
<PAGE>
7.2 Breach by Purchaser.
(a) If Purchaser fails to comply with any provision of
this Agreement other than Section 3.3, Seller may terminate this
Agreement and thereupon shall be entitled to sue for One Hundred
Thousand Dollars ($100,000) as liquidated damages (and not as a
penalty) and as Seller's sole remedy and relief hereunder
(except for the Surviving Obligations). Seller and Purchaser
have made this provision for liquidated damages bacause it would
be difficult to calculate, on the date hereof, the amount of
actual damages for such breach, and Seller and Purchaser agree
that these sums represent reasonable compensation to Seller for
such breach.
(b) In the event of any default ro breach of any
representation or warranty made by Purchaser under Section 3.3
of this Agreement, Seller shall have any and all rights and
remedies available at law or in equity without limitation by
reason of such default.
The provisions of this Section 7.2 shall not limit or affect any
of Purchaser's indemnities as provided in other Sections of this
Agreement.
8.
MISCELLANEOUS
8.1 Notices. All notices, demands and requests which may be
given or which are required to be given by either party to the other,
and any exercise of a right of termination provided by this Agreement,
shall be in writing and shall be deemed effective either: (a) on the date
personally delivered to the address below, as evidenced by written receipt
therefore, whether or not actually received by the person to whom addressed; (b)
on the third (3rd) business day after being sent, by certified or registered
mail, return receipt requested, addressed to the intended recipient at the
address specified below; (c) on the first (1st) business day after being
deposited into the custody of a nationally recognized overnight delivery service
such as Federal Express Corporation, Emery or Purolator, or (d) via facsimile
transmission with confirmation of receipt, addressed to such party at the
address specified below. For purposes of this Section 8.1, the addresses of the
parties for all notices are as follows (unless changed by similar notice in
writing given by the particular person whose address is to be changed):
If to Seller: Condor One, Inc.
c/o GE Capital Realty Group, Inc.
16479 Dallas Parkway, Suite 400
Dallas, Texas 75248-2605
Attention: Brian Selbo
Tel: (214) 447-2605
Fax: (214) 447-2667
13
<PAGE>
with a copy to: Locke Purnell Rain Harrell
(A Professional Corporation)
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
Attention: Brian R. Forbes
Tel: (214) 740-8467
Fax: (214) 740-8800
If to Purchaser: Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Attention: Gus G. Remppies
Tel: (804) 643-1761
Fax: (804) 782-9302
with a copy to: Harry Taubenfeld
Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, NY 11516
Tel: (516) 374-3133
Fax: (516) 378-3490
with additional Ted Oliver, Esq.
copy to: Manning, Fulton & Slunner, P.A.
500 UCB Plaza
3605 Glenwood Avenue
Raleigh, North Carolina 27612
Tel: (919) 787-8880
Fax: (919) 781-0811
If to Title
Company: Chicago Title Insurance
One Exchange Plaza, Suite 207
Raleigh, North Carolina 27601
Attention: Becky Goodwin
Tel: (919) 833-6900
Fax: (919) 833-6905
With a copy to: Newsom Graham Hedrick Kennon
Suite 1200, University Tower
3100 Tower Boulevard
Durham, North Carolina 27717-1519
Attention: Robert O. Belo
Tel: (919) 490-0500
Fax: (919) 490-0873
14
<PAGE>
8.2 Real Estate Commissions. Seller shall pay to CB Commercial
(hereinafter called "Agent" whether one or more) upon the Closing of the
transaction contemplated hereby, and not otherwise, a cash commission in the
amount agreed on in a separate listing agreement between Seller and Agent.
Purchaser shall pay to John Schelpfeffer ("Schelpfeffer") upon the Closing of
the transaction contemplated hereby, and not otherwise a cash commission in the
amount agreed on in a separate listing agreement between Purchaser and
Schelpfeffer. Said commission shall in no event be payable unless and until the
transaction contemplated hereby is closed in accordance with the terms of this
Agreement; if such transaction is not closed for any reason, including, without
limitation, failure of title or default by Seller of Purchaser or termination of
this Agreement pursuant to the terms hereof, then such commission will be deemed
not to have been earned and shall not be due or payable. Except as set forth
above with respect to Agent and Schelpfeffer, neither Seller nor Purchaser has
authorized any broker or finder to act on Purchaser's behalf in connection with
the sale and purchase hereunder and neither Seller nor Purchaser has dealt with
any broker or finder purporting to act on behalf of any other party. Purchaser
agrees to indemnify and hold harmless Seller from and against any and all
claims, losses, damages, costs or expenses of any kind or character arising out
of or resulting from any agreement, arrangement or understanding alleged to have
been made by Purchaser or on Purchaser's behalf with any broker or finder in
connection with this Agreement or the transaction contemplated hereby. Seller
agrees to indemnify and hold harmless Purchaser from and against any and all
claims, losses, damages, costs or expenses of any kind or character arising out
of or resulting from any agreement, arrangement or understanding alleged to have
been made by Seller or on Seller's behalf with any broker or finder in
connection with this Agreement or the transaction contemplated hereby.
Notwithstanding anything to the contrary contained herein, this Section 8.2
shall survive the Closing or any earlier termination of this Agreement.
8.3 Entire Agreement. This Agreement embodies the entire agreement
between the parties relative to the subject matter hereof, and there are no oral
or written agreements between the parties, nor any representations made by
either party relative to the subject matter hereof, which are not expressly set
forth herein.
8.4 Amendment. This Agreement may be amended only by a written
instrument executed by the party or parties to be bound thereby.
8.5 Headings. The captions and headings used in this Agreement are for
convenience only and do not in any way limit, amplify, or otherwise modify the
provisions of this Agreement.
8.6 Time of Essence. Time is of the essence of this Agreement; however,
if the final date of any period which is set out in any provision of this
Agreement falls on a Saturday, Sunday or legal holiday under the laws of the
United States or the State of North Carolina, then, in such event, the time of
such period shall be extended to the next day which is not a Saturday, Sunday or
legal holiday.
8.7 Governing Law. This Agreement shall be governed by the laws of the
State of North Carolina and the laws of the United States pertaining to
transactions in such State.
15
<PAGE>
8.8 Successors and Assigns; Assignment. This Agreement shall bind and
inure to the benefit of Seller and Purchaser and their respective heirs,
executors, administrators, personal and legal representatives, successors and
permitted assigns. Purchaser shall not assign Purchaser's rights under this
Agreement.
8.9 Invalid Provision. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable; this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part of
this Agreement; and, the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by such illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
8.10 Attorneys' Fees. In the event it becomes necessary for either
party to file suit to enforce this Agreement or any provision contained herein,
the party prevailing in such suit shall be entitled to recover, in addition to
all other remedies or damages, as provided herein, reasonable attorneys' fees
incurred in such suit.
8.11 Multiple Counterparts. This Agreement may be executed in a number
of identical counterparts which, taken together, shall contstitute collectively
one (1) agreement; in making proof of this Agreement, it shall not be necessary
to produce or account for more than one such counterpart with each party's
signature.
8.12 Effective Date. As used herein in the term "Effective Date" shall
mean September 27, 1996.
8.13 Exhibits. The following exhibits are attached to this Agreement
and are incorporated into this Agreement by this reference and made a part
hereof for all purposes:
(a) Exhibit A, the legal description of the Land.
(b) Exhibit B, the form of the Deed.
(c) Exhibit C, the form of the Assignment and Assumption of
Personal Property, Service Contracts, Warranties and Leases.
(d) Exhibit D, the form of the Taxpayer I.D. Certification.
Exhibit E, Memorandum of Insurance Coverage.
8.14 No Recordation. Seller and Purchaser hereby acknowledge that
neither this Agreement nor any memorandum or affidavit thereof shall be recorded
of public record in Orange County, North Carolina or any other county. Should
Purchaser ever record or attempt to record this Agreement, or a memorandum or
affidavit thereof, or any other similar document, then, notwithstanding anything
herein to the contrary, said recordation or attempt at recordation shall
constitute a default by Purchaser hereunder, and, in addition to the other
remedies provided for herein, Seller shall have the express right to terminate
this Agreement by filing a notice of said termination in the county in which the
Land is located.
16
<PAGE>
8.15 Merger Provision. Except as otherwise expressly provided herein,
any and all rights of action of Purchaser for any breach by Seller of any
representation, warranty or covenant contained in this Agreement shall merge
with the Deed and other instruments executed at Closing, shall terminate at
Closing and shall not survive Closing.
8.16 Jury Waiver. TO THE EXTENT PERMITTED BY LAW, PURCHASER AND SELLER
DO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RIGHT TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, OR UNDER
OR IN CONNECTION WITH THIS AGREEMENT, THE DOCUMENTS DELIVERED BY PURCHASER AT
CLOSING OR SELLER AT CLOSING, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ANY ACTIONS OF EITHER PARTY ARISING
OUT OF OR RELATED IN ANY MANNER WITH THIS AGREEMENT OR THE PROPERTY (INCLUDING
WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT AND ANY
CLAIMS OR DEFENSES ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS
OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR SELLER TO
ENTER INTO AND ACCEPT THIS AGREEMENT AND THE DOCUMENTS DELIVERED BY PURCHASER AT
CLOSING AND SHALL SURVIVE THE CLOSING OF TERMINATION OF THIS AGREEMENT.
REMAINDER OF THIS DOCUMENT INTENTIONALLY LEFT BLANK
17
<PAGE>
PURCHASER:
Date of Execution CORNERSTONE REALTY INCOME TRUST, INC.,
by Purchaser: a Virginia corporation
9-27-96 By: /s/ S. J. Olander
- ----------------- ---------------------
Name: S. J. Olander
Its: Vice President
18
<PAGE>
SELLER:
Date of Execution CONDOR ONE, INC.,
by Seller: a Delaware corporation
- ----------------- By:
Name:
Title:
19
Exhibit 10.4
AGREEMENT AND
BILL OF TRANSFER AND ASSIGNMENT
This AGREEMENT AND BILL OF TRANSFER AND ASSIGNMENT ("Bill of Transfer")
is made as of this 1st day of October, 1996, between Cornerstone Management
Group, Inc., a Virginia corporation (the "Company"), and Cornerstone Realty
Income Trust, Inc., a Virginia corporation (the "Acquiror").
RECITALS
A. The Company was engaged to serve as property manager to the Acquiror
pursuant to various management agreements listed on Exhibit A, each between the
Company and the Acquiror and dated various dates (the "Management Agreements")
in exchange for payment by the Acquiror of monthly management fees and the
reimbursement of certain expenses.
B. The Company has agreed to transfer all of the assets of the Company
to the Acquiror for 1,400,000 shares of common stock of the Acquiror.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged:
1. The Company hereby transfers, conveys, assigns and delivers to the
Acquiror all of the material assets of the Company as follows: All of the
Company's rights and interests in, to and under the Management Agreements
(collectively, the "Transferred Assets"). The Company hereby represents, and the
Acquiror hereby acknowledges, that the Transferred Assets are
1
<PAGE>
free of all liens and other encumbrances and comprise all of the material assets
of the Company. Further, the Company acknowledges that it is entitled only to
management fees and expense reimbursements under the Management Agreements
earned during the period preceding September 1, 1996.
2. In exchange for the Transferred Assets, the Acquiror agrees to
transfer to the Company 1,400,000 shares of common stock of the Acquiror (the
"REIT Common Stock"). The REIT Common Stock shall be issued as follows: 700,000
shares at closing, and 700,000 shares one year less one day later. No dividends
shall be payable with respect to the REIT Common Stock until such shares are
issued. There are no conditions to the issuance of the deferred REIT Common
Stock other than the passage of time.
3. The right to be issued the REIT Common Stock may be distributed by
the Company to its shareholders, but shall not otherwise be voluntarily assigned
or transferred.
4. The holders of the REIT Common Stock shall have "piggyback"
registration rights with respect thereto which are reasonable and customary. The
Acquiror shall pay the reasonable and customary expenses of any such piggyback
registration.
5. Except as set forth in Paragraph 6 below, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon any person,
firm or corporation other than the parties hereto any remedy or claim.
6. The provisions of this Agreement are intended to be binding upon the
Company, its successors and permitted assigns,
2
<PAGE>
and are for the benefit of the Acquiror, its successors and
assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement and Bill
of Transfer and Assignment as of the date set forth above.
The Company:
CORNERSTONE MANAGEMENT GROUP, INC.
By: /s/ Glade M. Knight
- ------------------------
Title: President
The Acquiror:
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ S. J. Olander, Jr.
- --------------------------
Title: Vice President
3
<PAGE>
Exhibit A
List of Management Agreements between Cornerstone Management
Group, Inc. and Cornerstone Realty Income Trust, Inc.:
Date of Agreement Property Covered
----------------- ----------------
1. June 1, 1993 The Hollows
2. June 1, 1993 Polo Club
3. October 1, 1993 Mayflower Seaside Tower
4. December 7, 1993 Stone Ridge
5. December 15, 1993 County Green
6. February 1, 1994 Wimbledon Chase
7. April 29, 1994 Harbour Club
8. August 1, 1994 Chase Mooring
9. December 9, 1994 The Trestles
10. April 1, 1995 Wind Lake
11. June 21, 1995 Breckinridge
12. June 29, 1995 Magnolia Run
13. July 18, 1995 Bay Watch Pointe
14. August 22, 1995 Hanover Landing
15. September 22, 1995 Mill Creek
16. October 26, 1995 Glen Eagles
17. November 1, 1995 Osprey Landing
18. November 1, 1995 Tradewinds
19. November 1, 1995 Sailboat Bay
20. February 25, 1996 The Meadows
21. March 1, 1996 West Eagle Greens
22. March 1, 1996 Ashley Park
23. March 1, 1996 Arbor Trace
24. April 1, 1996 Longmeadow
25. April 1, 1996 Trophy Chase
26. May 1, 1996 Beacon Hill
27. May 1, 1996 Summer Walk
28. May 1, 1996 Willow Creek
29. May 31, 1996 Meadow Creek
30. June 26, 1996 Lexington Towers
31. July 1, 1996 Oak Park
32. July 19, 1996 Paces Glen
4
Exhibit 10.5
AGREEMENT AND
BILL OF TRANSFER AND ASSIGNMENT
This AGREEMENT AND BILL OF TRANSFER AND ASSIGNMENT ("Bill of Transfer")
is made as of this 1st day of October, 1996, between Cornerstone Advisors, Inc.,
a Virginia corporation (the "Company"), and Cornerstone Realty Income Trust,
Inc., a Virginia corporation (the "Acquiror").
RECITALS
A. The Company was engaged to serve as "Advisor" to the Acquiror
pursuant to an Advisory Agreement dated July 1, 1994 between the Company and the
Acquiror (the "Advisory Agreement") in exchange for payment by the Acquiror of
quarterly asset management fees.
B. The Company has agreed to transfer all of the material assets of the
Company (consisting of the Company's rights and interests in, to and under the
Advisory Agreement) to the Acquiror for $100.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged:
1. The Company hereby transfers, conveys, assigns and delivers to the
Acquiror all of the material assets of the Company as follows: All of the
Company's rights and interests in, to and under the Advisory Agreement
(collectively, the "Transferred Assets"). The Company hereby represents, and the
Acquiror hereby acknowledges, that the Transferred Assets are
1
<PAGE>
free of any liens and other encumbrances and comprise all of the material assets
of the Company. Further, the Company acknowledges that it is entitled only to
asset management fees under the Advisory Agreement earned during the period
preceding September 1, 1996.
2. In exchange for the Transferred Assets the Acquiror shall pay the
Company $100 in cash.
3. Except as set forth in Paragraph 4 below, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon any person,
firm or corporation other than the parties hereto any remedy or claim.
4. The provisions of this Agreement are intended to be binding upon the
Company, its successors and permitted assigns, and are for the benefit of the
Acquiror, its successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement and Bill
of Transfer and Assignment as of the date set forth above.
The Company:
CORNERSTONE ADVISORS, INC.
By: /s/ Glade M. Knight
- -----------------------
Title: Chairman
2
<PAGE>
The Acquiror:
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ Glade M. Knight
- ------------------------
Title: President
3
Exhibit 10.6
AGREEMENT AND
BILL OF TRANSFER AND ASSIGNMENT
This AGREEMENT AND BILL OF TRANSFER AND ASSIGNMENT ("Bill of Transfer")
is made as of this 1st day of October, 1996, between Cornerstone Realty Group,
Inc., a Virginia corporation (the "Company"), and Cornerstone Realty Income
Trust, Inc., a Virginia corporation (the "Acquiror").
RECITALS
A. The Company was engaged to serve as acquisition agent and real
estate broker to the Acquiror pursuant to a Property Acquisition/Disposition
Agreement dated July 1, 1994 between the Company and the Acquiror (the
"Acquisition/Disposition Agreement") in exchange for payment by the Acquiror of
certain acquisition and disposition fees.
B. The Company has agreed to transfer all of the Company's rights and
interests in the Acquisition/Disposition Agreement to the Acquiror for cash in
the amount of $1,325,000 to be paid by the Acquiror.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged:
1. The Company hereby transfers, conveys, assigns and delivers to
the Acquiror all of the Company's rights and interests in, to and under the
Acquisition/Disposition Agreement (collectively, the "Transferred Assets"). The
Company acknowledges that it is entitled only to acquisition and
1
<PAGE>
disposition fees under the Acquisition/Disposition Agreement earned during the
period preceding September 1, 1996.
2. In exchange for the Transferred Assets the Acquiror shall pay to the
Company cash in the amount of $1,325,000.
3. Except as set forth in Paragraph 4 below, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon any person,
firm or corporation other than the parties hereto any remedy or claim.
4. The provisions of this Agreement are intended to be binding upon the
Company, its successors and permitted assigns, and are for the benefit of the
Acquiror, its successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement and Bill
of Transfer and Assignment as of the date set forth above.
The Company:
CORNERSTONE REALTY GROUP, INC.
By: /s/ Glade M. Knight
- -------------------------
Title: President
The Acquiror:
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ S. J. Olander, Jr.
- -----------------------------
Title: Vice President
2
Exhibit 10.7
AGREEMENT AND
BILL OF TRANSFER AND ASSIGNMENT
This AGREEMENT AND BILL OF TRANSFER AND ASSIGNMENT ("Bill of
Transfer") is made as of this 1st day of October, 1996, between
Cornerstone Realty Group, Inc., a Virginia corporation (the
"Company"), and Cornerstone Realty Income Trust, Inc., a Virginia
corporation (the "Acquiror").
RECITALS
A. The Acquiror is converting from an "externally-advised" to a
"self-managed" REIT. This conversion involves, among other things, the
acquisition by the Acquiror of certain assets of Cornerstone Management Group,
Inc., Cornerstone Advisors, Inc., Cornerstone Realty Group, Inc. and Glade M.
Knight.
B. In connection with the foregoing, the Acquiror desires to purchase
and the Company desires to sell, certain tangible assets located at 306 East
Main Street in Richmond, Virginia, as more particularly described below.
C. The Company has agreed to sell such assets of the Company to the
Acquiror in exchange for the payment by the Acquiror to the Company of cash in
the amount of up to $100,000 and the payment by the Acquiror of certain
liabilities of the Company, as described in Section 2 hereof.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged:
1. The Company hereby transfers, conveys, assigns and delivers to the
Acquiror the property more fully described on Exhibit A hereto (collectively,
the "Transferred Assets"). The
<PAGE>
Company represents that it has good title to all of the Transferred Assets, free
of any liens or encumbrances except for the liens of certain automobile loans
referred to in Section 2 of this Agreement.
2. In exchange for the Transferred Assets the Acquiror shall pay to the
Company cash in the amount of $100,000 and shall pay liabilities incurred to
acquire the Purchased Automobiles (as defined on Exhibit A), which have a
remaining aggregate outstanding balance of approximately $138,000 (and the
Company's liability for such loans shall not exceed such amount).
3. Except as set forth in Paragraph 4 below, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon any person,
firm or corporation other than the parties hereto any remedy or claim.
4. The provisions of this Agreement are intended to be binding upon the
Company, its successors and permitted assigns, and are for the benefit of the
Acquiror, its successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement and Bill
of Transfer and Assignment as of the date set forth above.
The Company:
CORNERSTONE REALTY GROUP, INC.
By: /s/ Glade M. Knight
- -----------------------
Title: President
2
<PAGE>
The Acquiror:
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ Glade M. Knight
- ------------------------
Title: President
3
<PAGE>
Exhibit A
Transferred Assets of Cornerstone
Realty Group, Inc.
1. All of the tangible personal property owned by Cornerstone
Realty Group, Inc. and located within the building at 306
East Main Street, Richmond, Virginia 23219, including all
office furniture, office supplies and wall hangings, but
less and except the following:
a. Mr. Knight's desk, desk chair and credenza;
b. All artwork in Mr. Knight's office, whether in the form
of wall hangings, sculptures or otherwise;
c. All files, documents, papers and other materials
(whether in paper form, on computer disk or diskette,
in other electronic medium or form, or otherwise)
pertaining to any entity other than the REIT,
Cornerstone Realty Group, Inc., Cornerstone Advisors,
Inc. or Cornerstone Management Group, Inc.
d. Any property which is the individual personal property
of any employee of Cornerstone Realty Group, Inc.
2. The following automobiles (the "purchased Automobiles")
Vehicle
Description I.D. No. Pay-off Amount
'94 Red Ford Probe 1ZVCT20A6P5202666 $ 6,804.62
'94 Oldsmobile Cutlass 1G3WH55MIRD421257 12,065.70
'94 Oldsmobile Cutlass 1G3AG55M3R6435887 11,420.81
'94 Oldsmobile Cutlass 1G3WH55M9RD398603 12,083.64
'96 Jeep 1J4GZ58SXTC166997 30,580.88
'95 Jeep 1J4GZ5836SC876472 25,299.75
'94 Jeep 1J4GZ58S1RC355630 18,660.01
'94 Jeep 1J4GZ58Y2RC351297 20,420.66
-------------
$ 137,336.07
4
Exhibit 10.8
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of September 1,
1996, between CORNERSTONE REALTY INCOME TRUST INC.,(the "Company"), and GLADE M.
KNIGHT (the "Employee").
RECITALS
A. The Company is in the business of buying and managing commercial and
residential real estate properties.
B. The Employee has extensive knowledge in various aspects of this
business, and has been employed by the Company for some time.
C. The Company wishes to continue its relationship with the Employee,
and both parties desire to reduce their agreement concerning employment to
writing.
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as Chief
Executive Officer, and the Employee hereby accepts such employment for a period
of five (5) years beginning on September 1, 1996 and terminating on August 31,
2001 or unless terminated sooner as provided herein.
2. Duties. During his employment the Employee shall hold such positions
and perform such services as may be assigned to him from time to time by the
Chairman of the Board or the Board of Directors of the Company. The Employee
shall report to the Board of Directors or such other officer as may be
designated from time to time by the Board of Directors. The Employee shall
devote as much of his attention and energies to the business of the Company as
is reasonably required in his judgment and that of the Board of Directors.
3. Compensation.
(a) The Employee shall be compensated on the basis of an
annual salary of $210,000, which shall be payable in monthly or more frequent
installments in accordance with the Company's standard payroll practices. The
Company shall review the Employee's performance at the end of each fiscal year
of the Company and, in its sole discretion and based on the Employee's
performance and/or the financial condition of the Company, may either maintain
or increase his salary. Any such change in the salary of the Employee shall not
affect the other terms and conditions of this Agreement, which shall remain in
full force and effect.
1
<PAGE>
(b) In addition to the salary set forth in Section 3(a), the
Employee shall be eligible to receive an annual bonus to be determined by the
Board of Directors in accordance with the incentive compensation program or
stock award or stock option program as may be in effect from time to time during
the term of the Employee's employment for which he is eligible.
4. Benefits. The Company shall provide the Employee with vacation,
group life insurance, group medical insurance and other such benefits as may be
consistent with the Company's policies applicable to those employees of similar
rank and position. The Company may from time to time add to, reduce, eliminate
or otherwise modify those benefits at its discretion as provided by law.
5. Business Expenses. The Company shall reimburse the Employee for
reasonable and necessary business expenses, ancillary expenses for travel and
similar items, incurred or expended by the Employee in the performance of his
duties hereunder. Such reimbursement shall be in accordance with the Company's
policy and procedures governing reimbursement of such expenses, which may be
altered or modified from time to time in the Company's sole discretion.
6. Covenant Not to Compete or Interfere.
(a) The Employee agrees that during the term of his employment
and for a period of one (1) year thereafter if the Employee terminates his
employment, he will not:
(i) directly or indirectly, in the same or a
similar capacity as that with the Company, be employed by, affiliated with,
direct the business of, or act on behalf of, a business that competes with the
Company in Virginia, North Carolina, or South Carolina.
(ii) solicit, sell or attempt to sell any product
involved in the Company's business to any customer or prospect of the Company
with whom the Employee had dealings or material contact during the course of his
employment with the Company; or
(iii) solicit, induce or attempt to solicit or
induce, any person employed by the Company to leave such employment for
employment with a competing business.
(b) It is the intention of the parties that this Agreement
provide the Company the maximum protection possible in the geographic areas in
which the Company does business and therefore has legitimate business interests.
However, the parties in no way intend to include a provision which contravenes
the public policy of any state. If, at the time of enforcement of this
paragraph, a court should hold the duration, scope or
2
<PAGE>
area of restriction stated herein unreasonable under the circumstances then
existing, the parties agree that the court may enforce the restrictive covenant
set forth in Section 6(a) to the extent it deems reasonable.
(c) Notwithstanding the above provisions of this Section 6,
the Employee shall have the right to perform his duties as General Partner of
various real estate partnerships in which he is currently a partner as of the
date of this Agreement and to pursue other ventures, including real estate
ventures with David Lerner Associates, Inc. (other than ventures that compete
with the Company in Virginia, North Carolina, or South Carolina).
7. Confidentiality. The Employee agrees that, during the term of his
employment and thereafter, he will not use or allow others to use any
confidential or proprietary information of the Company (in whatever form
received or proposed to be used) in any business or venture if the use would or
could be expected to have any material detrimental effect on the Company or its
business, results of operations, financial condition, reputation or affairs,
whether immediately or at any time in the future.
8. Termination. This Agreement shall terminate automatically on August
31, 2001 and may be sooner terminated as follows:
(a) The Company may terminate the Employee's employment and
its obligations under this Agreement in the event of the disability of the
Employee. For purposes of this Agreement, "disability" means the inability of
the Employee to perform the essential functions of his position, after
reasonable accommodation in accordance with the Americans with Disabilities Act,
because of a medically determinable physical or mental impairment which can be
expected to result in death or to continue for a period of at least six
consecutive months, or because any such condition has continued for a period of
six consecutive months. The Company shall give the Employee or his
representative 30 days prior written notice of its decision to terminate his
employment pursuant to this provision, and upon any such termination the Company
shall pay the Employee or his representative, as the case may be, an amount
equal to his then existing annual salary in a one time lump sum payment.
Thereafter, the Company shall have no further obligations to the Employee under
this Agreement other than for such benefits as it may be required to provide
under an applicable benefits policy.
(b) The Company may terminate the Employee's employment and
its obligations under this Agreement at any time without notice for cause. For
purposes of this Agreement, "cause" means (i) the Employee's continued or
deliberate neglect of his duties;(ii) willful misconduct by the Employee
injurious to the Company, whether monetary or otherwise; (iii) the
3
<PAGE>
Employee's violation of any code or standard of ethics generally applicable to
employees of the Company; (iv) the Employee's active disloyalty to the Company;
(v) the Employee's conviction of a felony; (vi) the Employee's habitual
drunkenness or drug abuse; (vii) the Employee's excessive absenteeism unrelated
to a disability as described above; or (viii) the Employee's breach of this
Agreement. If the Company terminates the Employee's employment pursuant to this
provision, it shall have no further obligation to the Employee under this
Agreement other than for such benefits as it may be required to provide under an
applicable benefits policy.
(c) This Agreement shall terminate automatically upon the
Employee's death. In this event, the Company shall pay the Employee's personal
representative an amount equal to his then existing annual salary in a one-time
lump sum payment within 30 days of his death. The Company shall have no further
obligations to the Employee under this Agreement other than for such benefits as
it may be required to provide under an applicable benefits policy.
9. Survival of Obligations. The obligations of the Employee under
Sections 6 and 7 of this Agreement shall survive the termination of his
employment and this Agreement, regardless of the reason for or method of
termination. Each of the provisions in these Sections shall be enforceable
independently of every other provision, and the existence of any claim or cause
of action the Employee may have against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
these Sections by the Company.
10. Enforcement and Severability.
(a) In the event of a breach or threatened breach by the
Employee of any of the provisions of this Agreement, the Company shall be
entitled to an injunction restraining the Employee from breaching the same.
Nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from the Employee. The Employee agrees
to pay the Company all its attorney fees incurred in enforcing its rights under
this Agreement.
(b) If any provision of this Agreement is deemed void or
unenforceable, such provision shall not be deemed part of this Agreement, which
otherwise shall remain in full force and effect.
(c) A waiver by the Company of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a waiver of
any subsequent breach by the Employee.
4
<PAGE>
11. GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA.
(b) THE PARTIES AGREE THAT ANY AND ALL CAUSES OF ACTION
ARISING UNDER THIS AGREEMENT BY AND BETWEEN THEM SHALL ONLY HAVE JURISDICTION
AND VENUE IN THE CIRCUIT COURT OF HENRICO COUNTY, COMMONWEALTH OF VIRGINIA. THE
PARTIES FURTHER CONSENT TO THE JURISDICTION AND VENUE OF THAT COURT FOR THE
RESOLUTION OF SUCH CAUSES OF ACTION UPON PROPER SERVICE OF PROCESS.
(c) THE PARTIES DESIRE TO AVOID THE ADDITIONAL TIME AND
EXPENSE RELATED TO A JURY TRIAL OF ANY DISPUTES ARISING UNDER THIS AGREEMENT.
THEREFORE, THE PARTIES WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS AGREEMENT. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS
WAIVER IS KNOWINGLY, FREELY AND VOLUNTARILY GIVEN, IS DESIRED BY BOTH PARTIES,
AND IS IN THE INTEREST OF BOTH PARTIES.
12. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and given by telex, fax, telegram,
telecopy, hand-delivery or by first class mail, in the case of the Employee, to
either his office or personal residence, or in the case of the Company, to the
Chief Executive Officer or Chairman.
13. Assignment. This Agreement is personal in nature and may not be
assigned by the Company without the written consent of the Employee. In the
event of the sale to any person, partnership, corporation or other entity of
substantially all the assets of the Company, the Employee may, at his option,
consent to the assignment of this Agreement or receive at closing a lump sum
payment equal to three times his then current annual compensation to terminate
this Agreement.
14. Parachute Tax.
(a) In the event that the Employee would, except for this
paragraph, be subject to a tax pursuant to Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), as a result of receiving "parachute
payments" (as defined in Section 280G(b)(2)(A) and (d)(3) of the Code) pursuant
to this Agreement or any other arrangements between the Company and the
Employee, or a deduction would not be allowed to the Company for all or any part
of such payments by reason of Section 280G(a) of the Code, such payments shall
be reduced so that the aggregate "present value" (as defined in Section
280G(d)(4) of the Code) of such payments is an amount equal to one dollar less
than an amount equal to three times the Employee's "base amount," (as
5
<PAGE>
defined in Section 280G(b)(3)(a) and (d)(1) and (2) of the Code). To achieve
such required reduction in aggregate present value, the Employee shall determine
which parachute payments shall be reduced and the amount of each reduction. To
enable the Employee to make such determination, the Company shall provide the
Employee with such information as is reasonably necessary for such
determination.
(b) Prior to making any payment under this Section 14, either
party may request a determination as to whether such payment would constitute a
"parachute payment," and, if so, the amount by which the payment must be reduced
in accordance herewith. If such a determination is requested, it shall be made
promptly, at the Company's expense, by independent tax counsel selected by the
Company and approved by the Employee (which approval shall not unreasonably be
withheld). The determination of such tax counsel shall be conclusive and binding
on the parties. The Company shall provide such information as tax counsel may
reasonably request, and such counsel may engage accountants or other experts at
the Company's expense to the extent that they deem necessary or advisable to
enable them to reach a determination.
15. Entire Agreement. This instrument contains the entire agreement of
the parties, supersedes any prior employment or consulting agreement between the
parties and may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought. Both parties acknowledge that they have read these terms,
have had the opportunity to consult counsel, and fully understand and freely and
voluntarily agree to the provisions set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first above written.
CORNERSTONE REALTY INCOME
TRUST, INC.
By: /s/ Glade M. Knight
--------------------
Name: Glade M. Knight
Title: Chairman
/s/ Glade M. Knight
---------------------
Employee
6
Exhibit 10.9
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of September 1,
1996, between CORNERSTONE REALTY INCOME TRUST INC.,(the "Company"), and DEBRA A.
JONES (the "Employee").
RECITALS
A. The Company is in the business of buying and managing commercial and
residential real estate properties.
B. The Employee has extensive knowledge in various aspects of this
business, and has been employed by the Company for some time.
C. The Company wishes to continue its relationship with the Employee,
and both parties desire to reduce their agreement concerning employment to
writing.
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as Chief
Operating Officer, and the Employee hereby accepts such employment for a period
of five (5) years beginning on September 1, 1996 and terminating on August 31,
2001 or unless terminated sooner as provided herein.
2. Duties. During her employment the Employee shall hold such positions
and perform such services as may be assigned to her from time to time by the
Chief Executive Officer or the Board of Directors of the Company. The Employee
shall report to the Chief Executive Officer or such other officer as may be
designated from time to time by the Board of Directors. The Employee shall
devote her attention and energies, and shall use her best efforts, to advance
the business and welfare of, the Company on a full-time basis.
3. Compensation.
(a) The Employee shall be compensated on the basis of an
annual salary of $120,000, which shall be payable in monthly or more frequent
installments in accordance with the Company's standard payroll practices. The
Company shall review the Employee's performance at the end of each fiscal year
of the Company and, in its sole discretion and based on the Employee's
performance and/or the financial condition of the Company, may either maintain
or increase her salary. Any such change in the salary of the Employee shall not
affect the other terms and conditions of this Agreement, which shall remain in
full force and effect.
1
<PAGE>
(b) In addition to the salary set forth in Section 3(a), the
Employee shall be eligible to receive an annual bonus to be determined by the
Board of Directors in accordance with the incentive compensation program or
stock award or stock option program as may be in effect from time to time during
the term of the Employee's employment for which she is eligible.
4. Benefits. The Company shall provide the Employee with vacation,
group life insurance, group medical insurance and other such benefits as may be
consistent with the Company's policies applicable to those employees of similar
rank and position. The Company may from time to time add to, reduce, eliminate
or otherwise modify those benefits at its discretion as provided by law.
5. Business Expenses. The Company shall reimburse the Employee for
reasonable and necessary business expenses, ancillary expenses for travel and
similar items, incurred or expended by the Employee in the performance of her
duties hereunder. Such reimbursement shall be in accordance with the Company's
policy and procedures governing reimbursement of such expenses, which may be
altered or modified from time to time in the Company's sole discretion.
6. Covenant Not to Compete or Interfere.
(a) The Employee agrees that during the term of her employment
and for a period of one (1) year thereafter if the Employee terminates her
employment, she will not:
(i) directly or indirectly, in the same or a
similar capacity as that with the Company, be employed by, affiliated with,
direct the business of, or act on behalf of, a business that competes with the
Company in Virginia, North Carolina, or South Carolina.
(ii) solicit, sell or attempt to sell any product
involved in the Company's business to any customer or prospect of the Company
with whom the Employee had dealings or material contact during the course of her
employment with the Company; or
(iii) solicit, induce or attempt to solicit or
induce, any person employed by the Company to leave such employment for
employment with a competing business.
(b) It is the intention of the parties that this Agreement
provide the Company the maximum protection possible in the geographic areas in
which the Company does business and therefore has legitimate business interests.
However, the parties in no way intend to include a provision which contravenes
the public policy of any state. If, at the time of enforcement of this
paragraph, a court should hold the duration, scope or
2
<PAGE>
area of restriction stated herein unreasonable under the circumstances then
existing, the parties agree that the court may enforce the restrictive covenant
set forth in Section 6(a) to the extent it deems reasonable.
7. Confidentiality. The Employee agrees that, during the term of his
employment and thereafter, he will not use or allow others to use any
confidential or proprietary information of the Company (in whatever form
received or proposed to be used) in any business or venture if the use would or
could be expected to have any material detrimental effect on the Company or its
business, results of operations, financial condition, reputation or affairs,
whether immediately or at any time in the future.
8. Termination. This Agreement shall terminate automatically on August
31, 2001 and may be sooner terminated as follows:
(a) The Company may terminate the Employee's employment and
its obligations under this Agreement in the event of the disability of the
Employee. For purposes of this Agreement, "disability" means the inability of
the Employee to perform the essential functions of her position, after
reasonable accommodation in accordance with the Americans with Disabilities Act,
because of a medically determinable physical or mental impairment which can be
expected to result in death or to continue for a period of at least six
consecutive months, or because any such condition has continued for a period of
six consecutive months. The Company shall give the Employee or her
representative 30 days prior written notice of its decision to terminate her
employment pursuant to this provision, and upon any such termination the Company
shall pay the Employee or her representative, as the case may be, an amount
equal to her then existing annual salary in a one time lump sum payment.
Thereafter, the Company shall have no further obligations to the Employee under
this Agreement other than for such benefits as it may be required to provide
under an applicable benefits policy.
(b) The Company may terminate the Employee's employment and
its obligations under this Agreement at any time without notice for cause. For
purposes of this Agreement, "cause" means (i) the Employee's continued or
deliberate neglect of her duties;(ii) willful misconduct by the Employee
injurious to the Company, whether monetary or otherwise; (iii) the Employee's
violation of any code or standard of ethics generally applicable to employees of
the Company; (iv) the Employee's active disloyalty to the Company; (v) the
Employee's conviction of a felony; (vi) the Employee's habitual drunkenness or
drug abuse; (vii) the Employee's excessive absenteeism unrelated to a disability
as described above; or (viii) the Employee's breach of this Agreement. If the
Company terminates the Employee's employment pursuant to this provision, it
shall have no further
3
<PAGE>
obligation to the Employee under this Agreement other than for such benefits as
it may be required to provide under an applicable benefits policy.
(c) This Agreement shall terminate automatically upon the
Employee's death. In this event, the Company shall pay the Employee's personal
representative an amount equal to her then existing annual salary in a one-time
lump sum payment within 30 days of her death. The Company shall have no further
obligations to the Employee under this Agreement other than for such benefits as
it may be required to provide under an applicable benefits policy.
9. Survival of Obligations. The obligations of the Employee under
Sections 6 and 7 of this Agreement shall survive the termination of her
employment and this Agreement, regardless of the reason for or method of
termination. Each of the provisions in these Sections shall be enforceable
independently of every other provision, and the existence of any claim or cause
of action the Employee may have against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
these Sections by the Company.
10. Enforcement and Severability.
(a) In the event of a breach or threatened breach by the
Employee of any of the provisions of this Agreement, the Company shall be
entitled to an injunction restraining the Employee from breaching the same.
Nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from the Employee. The Employee agrees
to pay the Company all its attorney fees incurred in enforcing its rights under
this Agreement.
(b) If any provision of this Agreement is deemed void or
unenforceable, such provision shall not be deemed part of this Agreement, which
otherwise shall remain in full force and effect.
(c) A waiver by the Company of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a waiver of
any subsequent breach by the Employee.
11. GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA.
(b) THE PARTIES AGREE THAT ANY AND ALL CAUSES OF
ACTION ARISING UNDER THIS AGREEMENT BY AND BETWEEN THEM SHALL
4
<PAGE>
ONLY HAVE JURISDICTION AND VENUE IN THE CIRCUIT COURT OF HENRICO COUNTY,
COMMONWEALTH OF VIRGINIA. THE PARTIES FURTHER CONSENT TO THE JURISDICTION AND
VENUE OF THAT COURT FOR THE RESOLUTION OF SUCH CAUSES OF ACTION UPON PROPER
SERVICE OF PROCESS.
(c) THE PARTIES DESIRE TO AVOID THE ADDITIONAL TIME AND
EXPENSE RELATED TO A JURY TRIAL OF ANY DISPUTES ARISING UNDER THIS AGREEMENT.
THEREFORE, THE PARTIES WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS AGREEMENT. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS
WAIVER IS KNOWINGLY, FREELY AND VOLUNTARILY GIVEN, IS DESIRED BY BOTH PARTIES,
AND IS IN THE INTEREST OF BOTH PARTIES.
12. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and given by telex, fax, telegram,
telecopy, hand-delivery or by first class mail, in the case of the Employee, to
either her office or personal residence, or in the case of the Company, to the
Chief Executive Officer or Chairman.
13. Assignment. This Agreement is personal in nature and may not be
assigned by the Company without the written consent of the Employee. In the
event of the sale to any person, partnership, corporation or other entity of
substantially all the assets of the Company, the Employee may, at her option,
consent to the assignment of this Agreement or receive at the closing of the
sale a lump sum payment equal to three times her then current annual
compensation to terminate this Agreement.
14. Parachute Tax.
(a) In the event that the Employee would, except for this
paragraph, be subject to a tax pursuant to Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), as a result of receiving "parachute
payments" (as defined in Section 280G(b)(2)(A) and (d)(3) of the Code) pursuant
to this Agreement or any other arrangements between the Company and the
Employee, or a deduction would not be allowed to the Company for all or any part
of such payments by reason of Section 280G(a) of the Code, such payments shall
be reduced so that the aggregate "present value" (as defined in Section
280G(d)(4) of the Code) of such payments is an amount equal to one dollar less
than an amount equal to three times the Employee's "base amount," (as defined in
Section 280G(b)(3)(a) and (d)(1) and (2) of the Code). To achieve such required
reduction in aggregate present value, the Employee shall determine which
parachute payments shall be reduced and the amount of each reduction. To enable
the Employee to make such determination, the Company shall provide the Employee
with such information as is reasonably necessary for such determination.
5
<PAGE>
(b) Prior to making any payment under this Section 14, either
party may request a determination as to whether such payment would constitute a
"parachute payment," and, if so, the amount by which the payment must be reduced
in accordance herewith. If such a determination is requested, it shall be made
promptly, at the Company's expense, by independent tax counsel selected by the
Company and approved by the Employee (which approval shall not unreasonably be
withheld). The determination of such tax counsel shall be conclusive and binding
on the parties. The Company shall provide such information as tax counsel may
reasonably request, and such counsel may engage accountants or other experts at
the Company's expense to the extent that they deem necessary or advisable to
enable them to reach a determination.
15. Entire Agreement. This instrument contains the entire agreement of
the parties, supersedes any prior employment or consulting agreement between the
parties and may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought. Both parties acknowledge that they have read these terms,
have had the opportunity to consult counsel, and fully understand and freely and
voluntarily agree to the provisions set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first above written.
CORNERSTONE REALTY INCOME
TRUST, INC.
By: /s/ Glade M. Knight
----------------------
Name: Glade M. Knight
Title: Chairman
/s/ Debra A. Jones
----------------------
Employee
6
<PAGE>
Exhibit 10.10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of September 1,
1996, between CORNERSTONE REALTY INCOME TRUST INC.,(the "Company"), and STANLEY
J. OLANDER(the "Employee").
RECITALS
A. The Company is in the business of buying and managing commercial and
residential real estate properties.
B. The Employee has extensive knowledge in various aspects of this
business, and has been employed by the Company for some time.
C. The Company wishes to continue its relationship with the Employee,
and both parties desire to reduce their agreement concerning employment to
writing.
NOW, THEREFORE, in consideration of the foregoing and the agreements
contained herein, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee as Chief
Financial Officer, and the Employee hereby accepts such employment for a period
of five (5) years beginning on September 1, 1996 and terminating on August 31,
2001 or unless terminated sooner as provided herein.
2. Duties. During his employment the Employee shall hold such positions
and perform such services as may be assigned to him from time to time by the
Chief Executive Officer or the Board of Directors of the Company. The Employee
shall report to the Chief Executive Officer or such other officer as may be
designated from time to time by the Board of Directors. The Employee shall
devote his attention and energies, and shall use his best efforts, to advance
the business and welfare of, the Company on a full-time basis.
3. Compensation.
(a) The Employee shall be compensated on the basis of an
annual salary of $120,000, which shall be payable in monthly or more frequent
installments in accordance with the Company's standard payroll practices. The
Company shall review the Employee's performance at the end of each fiscal year
of the Company and, in its sole discretion and based on the Employee's
performance and/or the financial condition of the Company, may either maintain
or increase his salary. Any such change in the salary of the Employee shall not
affect the other terms and conditions of this Agreement, which shall remain in
full force and effect.
1
<PAGE>
(b) In addition to the salary set forth in Section 3(a), the
Employee shall be eligible to receive an annual bonus to be determined by the
Board of Directors in accordance with the incentive compensation program or
stock award or stock option program as may be in effect from time to time during
the term of the Employee's employment for which he is eligible.
4. Benefits. The Company shall provide the Employee with vacation,
group life insurance, group medical insurance and other such benefits as may be
consistent with the Company's policies applicable to those employees of similar
rank and position. The Company may from time to time add to, reduce, eliminate
or otherwise modify those benefits at its discretion as provided by law.
5. Business Expenses. The Company shall reimburse the Employee for
reasonable and necessary business expenses, ancillary expenses for travel and
similar items, incurred or expended by the Employee in the performance of his
duties hereunder. Such reimbursement shall be in accordance with the Company's
policy and procedures governing reimbursement of such expenses, which may be
altered or modified from time to time in the Company's sole discretion.
6. Covenant Not to Compete or Interfere.
(a) The Employee agrees that during the term of his employment
and for a period of one (1) year thereafter if the Employee terminates his
employment, he will not:
(i) directly or indirectly, in the same or a
similar capacity as that with the Company, be employed by, affiliated with,
direct the business of, or act on behalf of, a business that competes with the
Company in Virginia, North Carolina, or South Carolina.
(ii) solicit, sell or attempt to sell any product
involved in the Company's business to any customer or prospect of the Company
with whom the Employee had dealings or material contact during the course of his
employment with the Company; or
(iii) solicit, induce or attempt to solicit or
induce, any person employed by the Company to leave such employment for
employment with a competing business.
(b) It is the intention of the parties that this Agreement
provide the Company the maximum protection possible in the geographic areas in
which the Company does business and therefore has legitimate business interests.
However, the parties in no way intend to include a provision which contravenes
the public policy of any state. If, at the time of enforcement of this
paragraph, a court should hold the duration, scope or
2
<PAGE>
area of restriction stated herein unreasonable under the circumstances then
existing, the parties agree that the court may enforce the restrictive covenant
set forth in Section 6(a) to the extent it deems reasonable.
7. Confidentiality. The Employee agrees that, during the term of his
employment and thereafter, he will not use or allow others to use any
confidential or proprietary information of the Company (in whatever form
received or proposed to be used) in any business or venture if the use would or
could be expected to have any material detrimental effect on the Company or its
business, results of operations, financial condition, reputation or affairs,
whether immediately or at any time in the future.
8. Termination. This Agreement shall terminate automatically on August
31, 2001 and may be sooner terminated as follows:
(a) The Company may terminate the Employee's employment and
its obligations under this Agreement in the event of the disability of the
Employee. For purposes of this Agreement, "disability" means the inability of
the Employee to perform the essential functions of his position, after
reasonable accommodation in accordance with the Americans with Disabilities Act,
because of a medically determinable physical or mental impairment which can be
expected to result in death or to continue for a period of at least six
consecutive months, or because any such condition has continued for a period of
six consecutive months. The Company shall give the Employee or his
representative 30 days prior written notice of its decision to terminate his
employment pursuant to this provision, and upon any such termination the Company
shall pay the Employee or his representative, as the case may be, an amount
equal to his then existing annual salary in a one time lump sum payment.
Thereafter, the Company shall have no further obligations to the Employee under
this Agreement other than for such benefits as it may be required to provide
under an applicable benefits policy.
(b) The Company may terminate the Employee's employment and
its obligations under this Agreement at any time without notice for cause. For
purposes of this Agreement, "cause" means (i) the Employee's continued or
deliberate neglect of his duties;(ii) willful misconduct by the Employee
injurious to the Company, whether monetary or otherwise; (iii) the Employee's
violation of any code or standard of ethics generally applicable to employees of
the Company; (iv) the Employee's active disloyalty to the Company; (v) the
Employee's conviction of a felony; (vi) the Employee's habitual drunkenness or
drug abuse; (vii) the Employee's excessive absenteeism unrelated to a disability
as described above; or (viii) the Employee's breach of this Agreement. If the
Company terminates the Employee's employment pursuant to this provision, it
shall have no further
3
<PAGE>
obligation to the Employee under this Agreement other than for such benefits as
it may be required to provide under an applicable benefits policy.
(c) This Agreement shall terminate automatically upon the
Employee's death. In this event, the Company shall pay the Employee's personal
representative an amount equal to his then existing annual salary in a one-time
lump sum payment within 30 days of his death. The Company shall have no further
obligations to the Employee under this Agreement other than for such benefits as
it may be required to provide under an applicable benefits policy.
9. Survival of Obligations. The obligations of the Employee under
Sections 6 and 7 of this Agreement shall survive the termination of his
employment and this Agreement, regardless of the reason for or method of
termination. Each of the provisions in these Sections shall be enforceable
independently of every other provision, and the existence of any claim or cause
of action the Employee may have against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
these Sections by the Company.
10. Enforcement and Severability.
(a) In the event of a breach or threatened breach by the
Employee of any of the provisions of this Agreement, the Company shall be
entitled to an injunction restraining the Employee from breaching the same.
Nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of damages from the Employee. The Employee agrees
to pay the Company all its attorney fees incurred in enforcing its rights under
this Agreement.
(b) If any provision of this Agreement is deemed void or
unenforceable, such provision shall not be deemed part of this Agreement, which
otherwise shall remain in full force and effect.
(c) A waiver by the Company of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a waiver of
any subsequent breach by the Employee.
11. GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA.
(b) THE PARTIES AGREE THAT ANY AND ALL CAUSES OF
ACTION ARISING UNDER THIS AGREEMENT BY AND BETWEEN THEM SHALL
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ONLY HAVE JURISDICTION AND VENUE IN THE CIRCUIT COURT OF HENRICO COUNTY,
COMMONWEALTH OF VIRGINIA. THE PARTIES FURTHER CONSENT TO THE JURISDICTION AND
VENUE OF THAT COURT FOR THE RESOLUTION OF SUCH CAUSES OF ACTION UPON PROPER
SERVICE OF PROCESS.
(c) THE PARTIES DESIRE TO AVOID THE ADDITIONAL TIME AND
EXPENSE RELATED TO A JURY TRIAL OF ANY DISPUTES ARISING UNDER THIS AGREEMENT.
THEREFORE, THE PARTIES WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS AGREEMENT. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS
WAIVER IS KNOWINGLY, FREELY AND VOLUNTARILY GIVEN, IS DESIRED BY BOTH PARTIES,
AND IS IN THE INTEREST OF BOTH PARTIES.
12. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and given by telex, fax, telegram,
telecopy, hand-delivery or by first class mail, in the case of the Employee, to
either his office or personal residence, or in the case of the Company, to the
Chief Executive Officer or Chairman.
13. Assignment. This Agreement is personal in nature and may not be
assigned by the Company without the written consent of the Employee. In the
event of the sale to any person, partnership, corporation or other entity of
substantially all the assets of the Company, the Employee may, at his option,
consent to the assignment of this Agreement or receive at the closing of the
sale a lump sum payment equal to three times his then current annual
compensation to terminate this Agreement.
14. Parachute Tax.
(a) In the event that the Employee would, except for this
paragraph, be subject to a tax pursuant to Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), as a result of receiving "parachute
payments" (as defined in Section 280G(b)(2)(A) and (d)(3) of the Code) pursuant
to this Agreement or any other arrangements between the Company and the
Employee, or a deduction would not be allowed to the Company for all or any part
of such payments by reason of Section 280G(a) of the Code, such payments shall
be reduced so that the aggregate "present value" (as defined in Section
280G(d)(4) of the Code) of such payments is an amount equal to one dollar less
than an amount equal to three times the Employee's "base amount," (as defined in
Section 280G(b)(3)(a) and (d)(1) and (2) of the Code). To achieve such required
reduction in aggregate present value, the Employee shall determine which
parachute payments shall be reduced and the amount of each reduction. To enable
the Employee to make such determination, the Company shall provide the Employee
with such information as is reasonably necessary for such determination.
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(b) Prior to making any payment under this Section 14, either
party may request a determination as to whether such payment would constitute a
"parachute payment," and, if so, the amount by which the payment must be reduced
in accordance herewith. If such a determination is requested, it shall be made
promptly, at the Company's expense, by independent tax counsel selected by the
Company and approved by the Employee (which approval shall not unreasonably be
withheld). The determination of such tax counsel shall be conclusive and binding
on the parties. The Company shall provide such information as tax counsel may
reasonably request, and such counsel may engage accountants or other experts at
the Company's expense to the extent that they deem necessary or advisable to
enable them to reach a determination.
15. Entire Agreement. This instrument contains the entire agreement of
the parties, supersedes any prior employment or consulting agreement between the
parties and may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought. Both parties acknowledge that they have read these terms,
have had the opportunity to consult counsel, and fully understand and freely and
voluntarily agree to the provisions set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first above written.
CORNERSTONE REALTY INCOME
TRUST, INC.
By: /s/ Glade M. Knight
---------------------
Name: Glade M. Knight
Title: Chairman
/s/ S. J. Olander, Jr.
------------------------
Employee
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